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                                                                  EXHIBIT 10.59

NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
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. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN SECURED BY SUCH SECURITIES.

                                             Date of Issuance: January __, 2003

                                                                      $____,000

                         SECURED CONVERTIBLE DEBENTURE
                          DUE _______________ __, 2005

THIS DEBENTURE is one of a series of duly authorized and issued debentures of
Viragen, Inc., a Delaware corporation, having a principal place of business at
865 S.W. 78th Avenue, Suite 100, Plantation, Florida 33324 (the "Company"),
designated as its Secured Convertible Debentures, due _______________ ___, 2005
in the aggregate principal amount of up to [$2,138,842] (the "Debentures").

         FOR VALUE RECEIVED, the Company promises to pay to ___________________
or its registered assigns (the "Holder"), the principal sum of $_____________
on January __, 2005 or such earlier date as the Debentures are 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 at the rate of 0% per annum until January
__, 2004 and 6% per annum thereafter, payable semi-annually on June 1 and
December 1, beginning on June 1, 2004 and on each Conversion Date (as defined
herein) and on the Maturity Date (each such date, an "Interest Payment Date"),
in cash or shares of Common Stock (as defined in Section 5) at the Interest
Conversion Rate; provided, however, payment in shares of Common Stock may only
occur if: (i) there is an effective Underlying Shares Registration Statement
pursuant to which the Holder is permitted to utilize the prospectus thereunder
to resell all of the


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shares of Common Stock to be issued in lieu of cash (and the Company believes,
in good faith, that such effectiveness will continue uninterrupted for the
foreseeable future), (ii) the Common Stock is listed for trading on a Principal
Market (and the Company believes, in good faith, that trading of the Common
Stock on a Principal Market will continue uninterrupted for the foreseeable
future), (iii) there is a sufficient number of authorized but unissued and
otherwise unreserved shares of Common Stock for the issuance of all of the
share issuable pursuant to the Transaction Documents, including the shares to
be issued for interest in lieu of cash and (iv) the Company shall have obtained
Shareholder Approval to exceed the Issuable Maximum. The Company may not prepay
any portion of the principal amount or interest on this Debenture without the
prior written consent of the Holder, other than as provided herein. 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.
Not less than twenty Trading Days (as defined in Section 5) prior to each
Interest Payment Date, the Company shall provide the Holder with written notice
of its election to pay interest hereunder either in cash or shares of Common
Stock pursuant to the terms of Section 4 (the Company may indicate in such
notice that the election contained in such notice shall continue for later
periods until revised). 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 Conversion Date in cash. Interest shall be
calculated on the basis of a 360-day year and shall accrue daily commencing on
the Original Issue Date (as defined in Section 5) 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. Interest hereunder will be paid
to the Person (as defined in Section 5) in whose name this Debenture is
registered on the records of the Company regarding registration and transfers
of Debentures (the "Debenture Register"). All overdue accrued and unpaid
interest to be paid hereunder shall entail a late fee at the rate of 18% per
annum (or such lower maximum amount of interest permitted to be charged under
applicable law) ("Late Fee") which will accrue daily, from the date such
interest is due hereunder through and including the date of payment.

         This Debenture is subject to the following additional provisions:

         Section 1.     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.

         Section 2.     This Debenture has been issued subject to certain
investment representations of the original Holder set forth in the Purchase
Agreement (as defined in Section 5) and may be transferred or exchanged only in
compliance with the Purchase Agreement. Prior to due presentment to the Company
for transfer of this Debenture, the Company and any agent of the Company may
treat the Person (as defined in Section 5) in whose name this Debenture is duly
registered on the Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Debenture is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.


                                       2
<PAGE>

         Section 3.     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)      upon 1 Trading Day's notice from the
                  Holder, any default in the payment of the principal of,
                  interest (including any Late Fees) on or liquidated damages,
                  including but not limited to, the Standard Liquidated Damages
                  Amount due under the Purchase Agreement, in respect of, any
                  Debentures, free of any claim of subordination, as and when
                  the same shall become due and payable (whether on a
                  Conversion Date or the Maturity Date or by acceleration or
                  otherwise);

                           (ii)     upon 1 Trading Day's notice from the
                  Holder, the Company shall fail to observe or perform any
                  other covenant, agreement or warranty contained in, or
                  otherwise commit any breach of any of the Transaction
                  Documents (as defined in Section 5) or the Company shall have
                  failed to amend the Company's certificate or articles of
                  incorporation to increase the number of authorized but
                  unissued shares of Common Stock to at least the Required
                  Minimum on or prior to April 1, 2003;

                           (iii)    the Company or any of its subsidiaries
                  shall commence, or there shall be commenced against the
                  Company or any such subsidiary a case under any applicable
                  bankruptcy or insolvency laws as now or hereafter in effect
                  or any successor thereto, or the Company commences any other
                  proceeding under any reorganization, arrangement, adjustment
                  of debt, relief of debtors, dissolution, insolvency or
                  liquidation or similar law of any jurisdiction whether now or
                  hereafter in effect relating to the Company or any subsidiary
                  thereof or there is commenced against the Company or any
                  subsidiary thereof any such bankruptcy, insolvency or other
                  proceeding which remains undismissed for a period of 60 days;
                  or the Company or any subsidiary thereof is adjudicated
                  insolvent or bankrupt; or any order of relief or other order
                  approving any such case or proceeding is entered; or the
                  Company or any subsidiary 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 the Company or any subsidiary thereof
                  makes a general assignment for the benefit of creditors; or
                  the Company shall fail to pay, or shall state that it is
                  unable to pay, or shall be unable to pay, its debts generally
                  as they become due; or the Company or any subsidiary thereof
                  shall call a meeting of its creditors with a view to
                  arranging a composition, adjustment or restructuring of its
                  debts; or the Company or any subsidiary thereof shall by any
                  act or failure to act expressly indicate its consent to,
                  approval of or acquiescence in any of the foregoing; or any
                  corporate or other action is taken by the Company or any
                  subsidiary thereof for the purpose of effecting any of the
                  foregoing;


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<PAGE>

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

                           (v)      the Common Stock shall not be listed for
                  trading on the American Stock Exchange, or Nasdaq SmallCap
                  Market, the New York Stock Exchange, the Nasdaq National
                  Market or the OTC Bulletin Board (each, a "Principal Market")
                  and shall not again be eligible for and quoted or listed for
                  trading thereon within five Trading Days;

                           (vi)     the Company shall be a party to any Change
                  of Control Transaction (as defined in Section 5), shall agree
                  to sell or dispose all or in excess of 33% of its assets in
                  one or more transactions (whether or not such sale would
                  constitute a Change of Control Transaction), or shall redeem
                  or repurchase more than a de minimis number of shares of
                  Common Stock or other equity securities of the Company (other
                  than redemptions of Underlying Shares (as defined in Section
                  5)); provided, however, where the Company is the surviving
                  corporation in a Change of Control Transaction, provided the
                  Holder provides the Company with prior written consent of
                  such transaction, which consent shall not be unreasonably
                  withheld, such a Transaction shall entitle the Holder to the
                  same remedies as if an Event of Default shall have occurred
                  however such an event shall not be deemed an "Event of
                  Default" under this Debenture;

                           (vii)    an Underlying Shares Registration Statement
                  (as defined in Section 5) shall not have been declared
                  effective by the Commission (as defined in Section 5) on or
                  prior to the 150th calendar day after the Original Issue
                  Date;

                           (viii)   if, during the Effectiveness Period (as
                  defined in the Registration Rights Agreement (as defined in
                  Section 5)), the effectiveness of the Underlying Shares
                  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
                  Underlying Shares Registration Statement, in either case, for
                  more than 10 consecutive Trading Days or 20 non-consecutive
                  Trading Days during any 12 month period;


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<PAGE>

                           (ix)     an Event (as defined in the Registration
                  Rights Agreement) shall not have been cured to the
                  satisfaction of the Holder prior to the expiration of thirty
                  days from the Event Date (as defined in the Registration
                  Rights Agreement) relating thereto (other than an Event
                  resulting from a failure of an Underlying Shares Registration
                  Statement to be declared effective by the Commission on or
                  prior to the 150th calendar day after the Original Issue
                  Date, which shall be covered by Section 3(a)(vii));

                           (x)      the Company shall fail for any reason to
                  deliver certificates to a Holder prior to the fifth Trading
                  Day after a Conversion Date pursuant to and in accordance
                  with Section 4(b) 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; or

                           (xi)     upon 1 Trading Day's notice, the Company
                  shall fail for any reason to deliver the payment in cash
                  pursuant to a Buy-In (as defined herein) within five days
                  after notice thereof is delivered hereunder.

                  (b)      If any Event of Default occurs and is continuing,
         the full principal amount of this Debenture (and, at the Holder's
         option, all other Debentures then held by such Holder), 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 sum of: (i) the Mandatory Prepayment
         Amount (as defined in Section 5) plus (ii) the product of (A) the
         number of Underlying Shares issued in respect of conversions hereunder
         within thirty days of the date of a declaration of an Event of Default
         and then held by the Holder and (B) the Closing Bid Price (as defined
         in Section 5) on the date prepayment is due or the date the full
         prepayment price is paid, whichever is greater. Interest shall accrue
         on the prepayment amount hereunder from the 5th day after such amount
         is due (being the date of an Event of Default) through the date of
         prepayment in full thereof in an amount equal to the Late Fee, to
         accrue daily from the date such payment is due hereunder through and
         including the date of payment. All Debentures and Underlying Shares
         for which the full prepayment price hereunder shall have been paid in
         accordance herewith shall promptly be surrendered 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; provided, however, the
         Holder shall have the right to waive any Event of Default which has
         occurred and such waivers shall be retroactive to the date such Event
         of Default occurred. 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.


                                       5
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         Section 4.     Conversion.

                  (a)      (i)      At any time after the Closing Date, 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(a)(ii) hereof). The Holder shall
                  effect conversions by delivering to the Company the form of
                  conversion notice attached hereto as Annex A (a "Conversion
                  Notice"), specifying therein the principal amount of
                  Debentures 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 Conversion Notice, the
                  Conversion Date shall be the date that such Conversion Notice
                  is provided hereunder. To effect conversions hereunder, the
                  Holder shall not be required to physically surrender
                  Debentures to the Company unless the entire principal amount
                  of this Debenture has been so converted. Conversions
                  hereunder shall have the effect of lowering the outstanding
                  principal amount of this Debenture plus all accrued and
                  unpaid interest thereon 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, in a form substantially similar to Schedule 1
                  attached hereto. 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.

                           (ii)     A Holder may not convert Debentures or
                  receive shares of Common Stock as payment of interest
                  hereunder to the extent such conversion or receipt of such
                  interest payment would result in the Holder, together with
                  its affiliates, beneficially owning (as determined in
                  accordance with Section 13(d) of the Exchange Act and the
                  rules promulgated thereunder) in excess of 4.999% of the then
                  issued and outstanding shares of Common Stock, including
                  shares issuable upon conversion of, and payment of interest
                  on, the Debentures held by such Holder after application of
                  this Section. To ensure compliance with this restriction, the
                  Holder will be deemed to represent to the Company each time
                  it delivers a Conversion Notice that such Conversion Notice
                  has not violated the restrictions set forth in this
                  paragraph. If the Holder has delivered a Conversion Notice
                  for a principal amount of Debentures that, without regard to
                  any other shares that the Holder or its affiliates may
                  beneficially own, would result in the issuance in excess of
                  the permitted amount hereunder, the Company shall notify the
                  Holder of this fact and shall honor the conversion for the
                  maximum principal amount permitted to be converted on such
                  Conversion Date in accordance with the periods described in
                  Section 4(b) and, at the option of the Holder, either retain
                  any principal amount tendered for conversion in excess of the
                  permitted amount hereunder for future conversions or return
                  such excess principal


                                       6
<PAGE>

                  amount to the Holder. In the event of a merger or
                  consolidation of the Company with or into another Person,
                  this paragraph shall not apply with respect to a
                  determination of the number of shares of common stock
                  issuable upon conversion in full of the Debentures if such
                  determination is necessary to establish the Securities or
                  other assets which the holder of Common Stock shall be
                  entitled to receive upon the effectiveness of such merger or
                  consolidation. The provisions of this Section 4(a)(ii) may be
                  waived by the Holder upon, at the election of the Holder, not
                  less than 61 days' prior notice to the Company, and the
                  provisions of this Section 4(a)(iii) 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).

                           (iii)    If the Company has not obtained Shareholder
                  Approval, then the Company may not issue, pursuant to the
                  Transaction Documents, in the aggregate, in excess of 19.999%
                  of the number of shares of Common Stock outstanding on the
                  Original Issue Date (such number of shares, the "Issuable
                  Maximum"). Each Holder shall be entitled to a portion of the
                  Issuable Maximum equal to the quotient obtained by dividing
                  (x) the aggregate principal amount of the Debenture(s) issued
                  and sold to such Holder on the Original Issue Date by (y) the
                  aggregate principal amount of all Debentures issued and sold
                  by the Company on the Original Issue Date. If any Holder
                  shall no longer hold the Debenture(s), then such Holder's
                  remaining portion of the Issuable Maximum shall be allocated
                  pro-rata among the remaining Holders. Within 60 days of the
                  Original Issue Date, the Company shall obtain the vote of
                  shareholders (the "Shareholder Approval") as may be required
                  by the applicable rules and regulations of the Principal
                  Market (or any successor entity) applicable to approve the
                  issuance of shares of Common Stock in excess of the Issuable
                  Maximum pursuant to the Transaction Documents. If the Company
                  shall have not obtained the Shareholder Approval on or before
                  60 days from the Original Issue Date, then the Company shall
                  issue to the Holder, upon conversion of this Debenture, a
                  number of shares of Common Stock equal to such Holder's
                  pro-rata portion (which shall be calculated pursuant to the
                  terms hereof) of the Issuable Maximum and, with respect to
                  the remainder of the aggregate principal amount of the
                  Debentures (including any interest that shall have been added
                  to the principal amount then held by such Holder) for which a
                  conversion in accordance with the applicable conversion price
                  would result in an issuance of shares of Common Stock in
                  excess of such Holder's pro-rata portion (which shall be
                  calculated pursuant to the terms hereof) of the Issuable
                  Maximum (the "Excess Principal"), the Company shall, by the
                  fifth Trading Day following such conversion, pay cash to the
                  converting Holder in an amount equal to the Mandatory
                  Prepayment Amount with respect to such Excess Principal. If
                  the Company fails to pay the Mandatory Prepayment Amount for
                  the Excess Principal in full pursuant to this Section after
                  the date payable, the Company will pay interest thereon at a
                  rate of 18% per annum or such lesser maximum amount that is
                  permitted to be paid by applicable law, to the converting
                  Holder, accruing daily from the date such payment is due
                  until such amount, plus all such interest


                                       7
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                  thereon, is paid in full. The Company and the Holder
                  understand and agree that shares of Common Stock issued to
                  and then held by the Holder as a result of conversions of
                  Debentures shall not be entitled to cast votes on any
                  resolution to obtain Shareholder Approval pursuant hereto.

                           (iv)     Underlying Shares Issuable Upon Conversion
                  and Pursuant to Interest.

                                    (A)      The number of shares of Common
                           Stock issuable upon a conversion hereunder shall be
                           determined by adding the sum of: (1) the quotient
                           obtained by dividing (x) the outstanding principal
                           amount of this Debenture to be converted by (y) the
                           Set Price, and (2) the amount equal to (x) the
                           product of (I) the outstanding principal amount of
                           this Debenture to be converted and (II) the product
                           of (aa) the quotient obtained by dividing the
                           applicable interest rate on this Debenture by 360
                           and (bb) the number of days for which such principal
                           amount was outstanding, divided by (y) the lesser of
                           the Set Price and the Interest Conversion Rate on
                           the Conversion Date, provided, that if the Company
                           shall have elected to pay the interest due on a
                           Conversion Date in cash pursuant to the terms
                           hereof, subsection (2) shall not be used in the
                           calculation of the number of shares of Common Stock
                           issuable upon a conversion hereunder.

                                    (B)      Notwithstanding anything to the
                           contrary contained herein, if on any Conversion
                           Date:

                                             (1)      the number of shares of
                                    Common Stock at the time authorized,
                                    unissued and unreserved for all purposes,
                                    or held as treasury stock, is insufficient
                                    to pay interest hereunder in shares of
                                    Common Stock;

                                             (3)      the Common Stock shall
                                    fail to be listed or quoted for trading on
                                    a Principal Market; or

                                             (4)      the conversion would
                                    otherwise violate Section 4(a)(iii).

                                    then, at the option of the Holder, the
                           Company, in lieu of delivering shares of Common
                           Stock pursuant to this Section 4, shall deliver,
                           within three Trading Days of each applicable
                           Conversion 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 such Conversion Date and the highest Closing
                           Bid Price during the period commencing on the
                           Conversion Date and ending on the Trading Day prior
                           to the date such payment is made.


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                  (b)      (i)      Not later than three Trading Days after any
                  Conversion Date, the Company will deliver to the Holder (A)
                  the number of shares of Common Stock being acquired upon
                  conversion of the Debenture (the "Conversion Shares") in the
                  form of a certificate or certificates 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 Debentures and (B) a bank check in the amount
                  of accrued and unpaid interest (if the Company has timely
                  elected or is required to pay accrued interest in cash).
                  Provided the Registration Statement is then effective, the
                  Company shall, upon request of the Holder, if available,
                  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. If in the case of any Conversion Notice such
                  Conversion Shares 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
                  Conversion Shares, to rescind such conversion, in which event
                  the Company shall, if applicable, immediately return the
                  certificates representing the principal amount of Debentures
                  tendered for conversion.

                  (ii)     If the Company fails for any reason to deliver to
                  the Holder the Conversion Shares pursuant to Section 4(b)(i)
                  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 $5,000 of principal
                  amount being converted, $50 per Trading Day (increasing to
                  $100 per Trading Day after 3 Trading Days and increasing to
                  $200 per Trading Day 6 Trading Days after such damages begin
                  to accrue) for each Trading Day after such third Trading Day
                  until such Conversion Shares are delivered. In the event a
                  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 of 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 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 3 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



                                       9
<PAGE>

                  any such rights shall not prohibit the Holders from seeking
                  to enforce damages pursuant to any other Section hereof or
                  under applicable law.

                  (iii)    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(b)(i) by the fifth Trading Day after the Conversion Date,
                  and if after such third Trading Day the Holder purchases (in
                  an open market transaction or otherwise) Common Stock to
                  deliver in satisfaction of a sale by such Holder of the
                  Underlying 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 market price of
                  the Common Stock at the time of the sale giving rise to such
                  purchase obligation and (B) at the option of the Holder,
                  either reissue Debentures in 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(b)(i). 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 Debentures with respect to which the
                  market price of the Underlying Shares on the date of
                  conversion 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. Notwithstanding anything
                  contained herein to the contrary, if a Holder requires the
                  Company to make payment in respect of a Buy-In for the
                  failure to timely deliver Conversion Shares hereunder and the
                  Company timely pays in full such payment, the Company shall
                  not be required to pay such Holder liquidated damages under
                  Section 4(b)(ii) in respect of the Conversion Shares
                  resulting in such Buy-In.

                  (c)      (i)      The conversion  price in effect on any
                  Conversion Date shall be equal to $0.085 (subject to
                  adjustment herein)(the "Set Price").

                  (ii)     If the Company, at any time while the Debentures are
                  outstanding: (A) shall pay a stock dividend or otherwise make
                  a distribution or distributions on shares of its Common Stock
                  or any other equity or equity equivalent securities payable
                  in shares of Common Stock, (B) subdivide outstanding shares
                  of Common Stock into a larger number of shares, (C) combine
                  (including by way of reverse stock split) outstanding shares
                  of Common Stock into a smaller number of shares, or (D) issue
                  by reclassification of shares of the Common Stock any shares
                  of capital stock of the Company, then the Set Price shall be
                  multiplied by a fraction of which the numerator


                                      10
<PAGE>

                  shall be the number of shares of Common Stock (excluding
                  treasury shares, if any) outstanding before such event and of
                  which the denominator shall be the number of shares of Common
                  Stock outstanding after such event. Any adjustment made
                  pursuant to this Section shall become effective immediately
                  after the record date for the determination of stockholders
                  entitled to receive such dividend or distribution and shall
                  become effective immediately after the effective date in the
                  case of a subdivision, combination or re-classification.

                  (iii)    If the Company, at any time while Debentures are
                  outstanding, shall issue rights, options or warrants to all
                  holders of Common Stock (and not to Holders) entitling them
                  to subscribe for or purchase shares of Common Stock at a
                  price per share less than the Closing Bid Price at the record
                  date mentioned below, then the Set Price shall be multiplied
                  by a fraction, of which the denominator shall be the number
                  of shares of the Common Stock (excluding treasury shares, if
                  any) outstanding on the date of issuance of such rights or
                  warrants plus the number of additional shares of Common Stock
                  offered for subscription or purchase, and of which the
                  numerator shall be the number of shares of the Common Stock
                  (excluding treasury shares, if any) outstanding on the date
                  of issuance of such rights or warrants plus the number of
                  shares which the aggregate offering price of the total number
                  of shares so offered would purchase at such Closing Bid
                  Price. Such adjustment shall be made whenever such rights or
                  warrants are issued, and shall become effective immediately
                  after the record date for the determination of stockholders
                  entitled to receive such rights, options or warrants.

                  (iv)     If the Company or any subsidiary thereof, as
                  applicable, at any time while Debentures are 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 any equity or equity equivalent securities
                  (including any equity, debt or other instrument that is at
                  any time over the life thereof convertible into or
                  exchangeable for Common Stock) (collectively, "Common Stock
                  Equivalents") entitling any Person to acquire shares of
                  Common Stock, at a price per share less than the Set Price
                  (if the holder of the Common Stock or Common Stock Equivalent
                  so issued shall at any time, whether by operation of purchase
                  price adjustments, reset provisions, floating conversion,
                  exercise or exchange prices or otherwise, or due to warrants,
                  options or rights per share which is issued in connection
                  with such issuance, be entitled to receive shares of Common
                  Stock at a price per share which is less than the Set Price,
                  such issuance shall be deemed to have occurred for less than
                  the Set Price), then, the Set Price shall be adjusted for
                  such conversions as Holders shall indicate in its Conversion
                  Notices to equal the conversion, exchange or purchase price
                  for such Common Stock or Common Stock Equivalents (including
                  any reset provisions thereof) at issue. Such adjustment shall
                  be made whenever such Common Stock or Common Stock
                  Equivalents are issued. The Company shall notify


                                      11
<PAGE>

                  the Holder in writing, no later than the business day
                  following the issuance of any Common Stock or Common Stock
                  Equivalent subject to this section, indicating therein the
                  applicable issuance price, or of applicable reset price,
                  exchange price, conversion price and other pricing terms.

                  (v)      If the Company, at any time while Debentures are
                  outstanding, shall distribute to all holders of Common Stock
                  (and not to Holders) evidences of its indebtedness or assets
                  or rights or warrants to subscribe for or purchase any
                  security, then in each such case the Set Price shall be
                  determined by multiplying such 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 Closing Bid
                  Price determined as of the record date mentioned above, and
                  of which the numerator shall be such Closing Bid Price 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 Holders 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.

                  (vi)     In case of any reclassification of the Common Stock
                  or any compulsory share exchange pursuant to which the Common
                  Stock is converted into other securities, cash or property,
                  the Holders shall have the right thereafter to, at their
                  option, (A) convert the then outstanding principal amount,
                  together with all accrued but unpaid interest and any other
                  amounts then owing hereunder in respect of this Debenture
                  only into the shares of stock and other securities, cash and
                  property receivable upon or deemed to be held by holders of
                  the Common Stock following such reclassification or share
                  exchange, and the Holders of the Debentures shall be entitled
                  upon such event to receive such amount of securities, cash or
                  property as the shares of the Common Stock of the Company
                  into which the then outstanding principal amount, together
                  with all accrued but unpaid interest and any other amounts
                  then owing hereunder in respect of this Debenture could have
                  been converted immediately prior to such reclassification or
                  share exchange would have been entitled or (B) require the
                  Company to prepay the aggregate of its outstanding principal
                  amount of Debentures, plus all interest and other amounts due
                  and payable thereon, at a price determined in accordance with
                  Section 3(b). The entire prepayment price shall be paid in
                  cash. This provision shall similarly apply to successive
                  reclassifications or share exchanges.

                  (vii)    All calculations under this Section 4 shall be made
                  to the nearest cent or the nearest 1/100th of a share, as the
                  case may be.


                                      12
<PAGE>

                  (viii)   Whenever the Set Price is adjusted pursuant to any
                  of Section 4(c)(ii) - (v), the Company shall promptly mail to
                  each Holder a notice setting forth the Set Price after such
                  adjustment and setting forth a brief statement of the facts
                  requiring such adjustment.

                  (ix)     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 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 the Debentures, and shall cause to
                  be mailed to the Holders at their last addresses as they
                  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. Holders are entitled to convert Debentures
                  during the 20-day period commencing the date of such notice
                  to the effective date of the event triggering such notice.

                  (x)      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


                                      13
<PAGE>

                  compulsory share exchange pursuant to which the Common Stock
                  is effectively converted into or exchanged for other
                  securities, cash or property (in any such case, a
                  "Fundamental Transaction"), then upon any subsequent
                  conversion of this Debenture, the Holder shall have the right
                  to receive, for each Underlying Share that would have been
                  issuable upon such conversion absent 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
                  Set 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 Set 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 (c) and insuring that this Debenture (or any such
                  replacement security) will be similarly adjusted upon any
                  subsequent transaction analogous to a Fundamental
                  Transaction. If any Fundamental Transaction constitutes or
                  results in a Change of Control Transaction, then at the
                  request of the Holder delivered before the 90th day after
                  such Fundamental Transaction, the Company (or any such
                  successor or surviving entity) will purchase the Debenture
                  from the Holder for a purchase price, payable in cash within
                  five Trading Days after such request (or, if later, on the
                  effective date of the Fundamental Transaction), equal to the
                  Black-Scholes value of the remaining unconverted portion of
                  this Debenture on the date of such request, which value shall
                  in no event exceed 150% of the principal amount outstanding
                  of this Debenture.

                  (d)      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
         the Debentures and payment of interest on the Debentures, each as
         herein provided, free from preemptive rights or any other actual
         contingent purchase rights of persons other than the Holders, not less
         than such number of shares of the Common Stock as shall (subject to
         any additional requirements of the Company as to reservation of such
         shares set forth in the Purchase Agreement) be issuable (taking into
         account the adjustments and


                                      14
<PAGE>

         restrictions of Section 4(b)) upon the conversion of the outstanding
         principal amount of the Debentures and payment of interest hereunder.
         The Company covenants that all shares of Common Stock that shall be so
         issuable shall, upon issue, be duly and validly authorized, issued and
         fully paid, nonassessable and, if the Underlying Shares Registration
         Statement has been declared effective under the Securities Act,
         registered for public sale in accordance with such Underlying Shares
         Registration Statement.

                  (e)      Upon a conversion hereunder the Company shall not be
         required to issue stock certificates representing fractions of shares
         of the Common Stock, but may if otherwise permitted, make a cash
         payment in respect of any final fraction of a share based on the
         Closing Bid Price at such time. If the Company elects not, or is
         unable, to make such a cash payment, the Holder shall be entitled to
         receive, in lieu of the final fraction of a share, one whole share of
         Common Stock.

                  (f)      The issuance of certificates for shares of the
         Common Stock on conversion of the Debentures shall be made without
         charge to the Holders thereof 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 such Debentures 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.

                  (g)      Any and all notices or other communications or
         deliveries to be provided by the Holders hereunder, including, without
         limitation, any Conversion Notice, shall be in writing and delivered
         personally, by facsimile, sent by a nationally recognized overnight
         courier service or sent by certified or registered mail, postage
         prepaid, addressed to the Company, at the address set forth above,
         facsimile number (954) 233-1412, Attn: Dennis Healey or such other
         address or facsimile number as the Company may specify for such
         purposes by notice to the Holders 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 or sent by certified or registered mail, postage
         prepaid, 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
         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


                                      15
<PAGE>

         date and earlier than 11:59 p.m. (New York City time) on such date,
         (iii) four days after deposit in the United States mail, (iv) the
         Business Day following the date of mailing, if sent by nationally
         recognized overnight courier service, or (v) upon actual receipt by
         the party to whom such notice is required to be given.

         Section 5.        Definitions. Capitalized terms not defined in this
Section 5 or elsewhere in this Debenture shall have the meanings ascribed to
them in the Purchase Agreement. For the purposes hereof, the following terms
shall have the following meanings:

                  "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.

                  "Change of Control Transaction" means the occurrence 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 33% of the voting securities of the
         Company, (ii) a replacement at one time or over 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),
         (iii) the merger of the Company with or into another entity that is
         not wholly-owned by the Company, consolidation or sale of 50% or more
         of the assets of the Company in one or a series of related
         transactions, or (iv) 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), (ii) or (iii).

                  "Commission" means the Securities and Exchange Commission.

                  "Common Stock" means the common stock, $0.01 par value per
         share, of the Company and stock of any other class into which such
         shares may hereafter have been reclassified or changed.

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

                  "Exchange Act" means the Securities Exchange Act of 1934, as
         amended.

                  "Interest Conversion Rate" means 90% of the lesser of (i) the
         average of the 5 Closing Bid Prices immediately prior to the
         applicable Interest Payment Date and (ii) the average of the 5 Closing
         Bid Prices immediately prior to the date the applicable interest
         payment shares are issued and delivered if after the Interest Payment
         Date.


                                      16
<PAGE>

                  "Issuable Maximum" shall have the meaning set forth in
         Section 4(a)(iii).

                  "Mandatory Prepayment Amount" for any Debentures shall equal
         the sum of (i) the greater of: (A) 135% of the principal amount of
         Debentures to be prepaid, plus all accrued and unpaid interest
         thereon, plus all other accrued and unpaid amounts due hereunder, and
         (B) the principal amount of Debentures to be prepaid, plus all accrued
         and unpaid interest thereon, plus all other accrued and unpaid amounts
         due hereunder, divided by the Set Price on (x) the date the Mandatory
         Prepayment Amount is demanded or otherwise due or (y) the date the
         Mandatory Prepayment Amount is paid in full, whichever is less,
         multiplied by the Closing Bid Price on (x) the date the Mandatory
         Prepayment Amount is demanded or otherwise due or (y) the date the
         Mandatory Prepayment Amount is paid in full, whichever is greater, and
         (ii) all other amounts, costs, expenses and liquidated damages due in
         respect of such Debentures.

                  "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 the Original Issue Date, 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 Original Issue Date, to which the Company
         and the original Holder are parties, as amended, modified or
         supplemented from time to time in accordance with its terms.

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

                  "Set Price" shall have the meaning set forth in Section
         4(c)(i).

                  "Shareholder Approval" shall have the meaning set forth in
         Section 4(a)(iii).

                  "Trading Day" means (a) a day on which the shares of Common
         Stock are traded on a Principal Market on which the shares of Common
         Stock are then listed or quoted, or (b) if the shares of Common Stock
         are not quoted on a Principal Market, a day on which the shares of
         Common Stock are quoted in the over-the-counter market as reported by
         the National Quotation Bureau Incorporated (or any similar
         organization or agency succeeding its functions of reporting prices);
         provided, that in the event that the shares of Common Stock


                                      17
<PAGE>

         are not listed or quoted as set forth in (a), (b) and (c) hereof, then
         Trading Day shall mean a Business Day.

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

                  "Underlying Shares" means the shares of Common Stock issuable
         upon conversion of Debentures or as payment of interest in accordance
         with the terms hereof.

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

         Section 6.        Redemption.

                  (a)      Optional Redemption by the Company. The Company
         shall have the right, at any time after the Effective Date, upon 20
         Trading Days' prior written notice to the Holder (an "Optional
         Redemption Notice" and the date such notice is received by the Holder,
         the "Notice Date"), to redeem no less than the entire principal amount
         of this Debenture then held by the Holder, at a cash price equal to
         the 125% of the principal amount outstanding plus interest and any
         fees owing thereon (the "Optional Redemption Price"). The Company may
         only effect an Optional Redemption Notice if each of the following
         shall be true: (i) the Company shall have duly honored all conversions
         occurring by virtue of one or more Conversion Notices prior to the
         Optional Redemption Notice, (ii) there is an effective Underlying
         Shares Registration Statement pursuant to which the Holder is
         permitted to utilize the prospectus thereunder to resell all of the
         Underlying Shares issued to the Holder and all of the Underlying
         Shares as are issuable to the Holder upon conversion in full of this
         Debenture subject to the Optional Redemption Notice (and the Company
         believes, in good faith, that such effectiveness will continue
         uninterrupted for the foreseeable future), (iii) the Common Stock is
         listed for trading on a Principal Market (and the Company believes, in
         good faith, that trading of the Common Stock on a Principal Market
         will continue uninterrupted for the foreseeable future), (iv) all
         liquidated damages and other amounts owing in respect of the
         Debentures and Underlying Shares shall have been paid or will,
         concurrently with the issuance of the Underlying Shares, be paid in
         cash; (v) there is a sufficient number of authorized but unissued and
         otherwise unreserved shares of Common Stock for the issuance of all
         the Underlying Shares as are issuable to the Holder upon conversion in
         full of the Debentures subject to the Optional Redemption Notice; (vi)
         no Event of Default nor any event that with the passage of time would
         constitute an Event of Default has occurred and is continuing; (vii)
         no public announcement of a pending or proposed Change of Control
         Transaction or Fundamental Transaction has occurred that has not been
         consummated and (viii) the Company shall have obtained Shareholder
         Approval to exceed the Issuable Maximum. If any of the foregoing
         conditions shall cease to be in effect


                                      18
<PAGE>

         during the period between the Notice Date and the date the Optional
         Redemption Price is paid in full, then the Holders subject to such
         redemption may elect, by written notice to the Company given at any
         time after any of the foregoing conditions shall cease to be in
         effect, to invalidate ab initio such redemption, notwithstanding
         anything herein contained to the contrary. In any case, the Holders
         may convert any portion of the outstanding principal amount of the
         Debentures subject to an Optional Redemption Notice prior to the date
         that the Optional Redemption Price is due and paid in full.

                  (b)      Conditional Redemption at Election of Holder. On any
         Conversion Date after the earlier of the Effective Date or the 90th
         day after the Closing Date, if the Closing Bid Price for the 20
         consecutive Trading Day period prior to such date is less than 120% of
         the Set Price then in effect, the Holder shall have the right to cause
         the Company to, at the election of the Company, either (i) redeem the
         portion of this Debenture then subject to the Conversion Notice
         applicable to such Conversion Date based on a redemption price equal
         to 125% of the principal amount of such principal amount (the
         "Conditional Redemption Price") or (ii) in lieu of a cash redemption
         payment, issue Conversion Shares based on a conversion price equal to
         75% of the average of the last 5 Closing Bid Prices during such 20 day
         period; provided, however, if, on the applicable Conversion Date,
         there is an effective Registration Statement pursuant to which the
         prospectus thereunder is available to resell Conversion Shares issued
         to the Holder, the Company must first issue shares registered pursuant
         to such Registration Statement. Notwithstanding anything to the
         contrary herein, the Company acknowledges and agrees that, to the
         extent the Company exceeds the Issuable Maximum, it must pay any
         Conditional Redemption Price in cash until Shareholder Approval is
         obtained. The Company must notify the Holder of its election to pay
         the Conditional Redemption Price in cash or shares of Common Stock
         within 24 hours after notification from the Holder that the Holder
         elects to exercise its right to a redemption hereunder. All
         conversions hereunder shall be made as if pursuant to Section 4 and
         the other sub-sections relating thereto, including but not limited to,
         liquidated damages and fees for late delivery of Conversion Shares.
         Nothing herein shall preclude the Holder from converting this
         Debenture to the extent this Debenture remains unpaid and unconverted
         after the Mandatory Redemption Date.

                  (c)      Redemption Procedure. The Optional Redemption Price
         is due on the 10th Trading Day following the Notice Date and the
         Conditional Redemption Price is due on the 10th Trading Day following
         the Conversion Date unless otherwise paid in shares of Common Stock.
         If any portion of the Optional Redemption Price or Conditional
         Redemption Price shall not be paid by the Company by expiration of
         such 10th Trading Day, interest shall accrue thereon at the rate of
         18% per annum (or the maximum rate permitted by applicable law,
         whichever is less) until such redemption price plus all such interest
         is paid in full. In addition, if any portion of the Optional
         Redemption Price or Conditional Redemption Price remains unpaid after
         such date, the Holders subject to such redemption 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 a Holder elects to invalidate


                                      19
<PAGE>

         such redemption the Company shall promptly, and, in any event, not
         later than 3 Trading Days from receipt of such Holder's notice of such
         election, return to such Holder all of the Debentures for which the
         Optional Redemption Price or Conditional Redemption Price shall not
         have been paid in full.

         Section 7. 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 obligation of
the Company and is secured by a floating charge in all of the assets of Viragen
(Scotland) Ltd. as set forth in that certain Bond and Floating Charge, dated as
of the date of the Purchase Agreement. This Debenture ranks pari passu with all
other Debentures now or hereafter issued under the terms set forth herein. As
long as there are Debentures outstanding, the Company shall not and shall cause
it subsidiaries not to, without the consent of the Holders, (a) amend its
certificate of incorporation, bylaws or other charter documents so as to
adversely affect any rights of the Holders; (b) repay, repurchase or offer to
repay, repurchase or otherwise acquire shares of its Common Stock or other
equity securities other than as to the Underlying Shares to the extent
permitted or required under the Transaction Documents; or (c) enter into any
agreement with respect to any of the foregoing.

         Section 8. 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.

         Section 9. The Company will not and will not permit any of its
subsidiaries to, directly or indirectly, enter into, create, incur, assume or
suffer to exist any indebtedness of any kind, on or with respect to any of its
property or assets now owned or hereafter acquired or any interest therein or
any income or profits therefrom that is senior in any respect to the Company's
obligations under the Debentures.

         Section 10. 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


                                      20
<PAGE>

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 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.

         Section 11. 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.

         Section 12. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder shall violate
applicable laws governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.
The Company covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law or other law
which would prohibit or forgive the Company from paying all or any portion of
the principal of or interest on the Debentures 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.

         Section 13. Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day.

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


                                      21
<PAGE>

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


                                    VIRAGEN, INC.



                                    By:
                                       ------------------------------
                                       Name:
                                       Title:


<PAGE>

                                    ANNEX A

                              NOTICE OF CONVERSION

The undersigned hereby elects to convert principal and, if specified, interest
under the Convertible Debenture of Viragen, Inc., (the "Company") due on
_______________ __, 2004, into shares of common stock, $0.01 par value 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 Company's 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.

Conversion calculations:

                         Date to Effect Conversion:

                         Principal Amount of Debentures to be Converted

                         Payment of Interest in Kind [ ] Yes     [ ] No
                              If yes, $_______ of Interest Accrued on Account of
                              Conversion at Issue

                         Number of shares of Common Stock to be Issued:

                         Applicable Set Price:

                         Applicable Interest Conversion Rate:

                         Signature:

                         Name:

                         Address:


<PAGE>

                                   SCHEDULE 1

                              CONVERSION SCHEDULE

Convertible Secured Debentures due on _______________ __, 2004, in the
aggregate principal amount of $____________ issued by Viragen, Inc. This
Conversion Schedule reflects conversions made under Section 4 of the above
referenced Debenture.

                                       Dated:

<TABLE>
<CAPTION>
================================================================================================================
                                                    Aggregate
                                                    Principal
                                                      Amount
                                                    Remaining
     Date of                                       Subsequent to
    Conversion                                      Conversion
   (or for first                                    (or original
   entry, Original             Amount of             Principal
     Issue Date)              Conversion               Amount)             Company Attest
----------------------------------------------------------------------------------------------------------------
   <S>                        <C>                  <C>                     <C>

----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------

================================================================================================================
</TABLE>


                                      24