Exhibit
        4.37
 
 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: October 27, 2005
 Original
        Conversion Price (subject to adjustment herein): **$0.82**
 
 $500,000
 
 
 **6%
        SECURED CONVERTIBLE DEBENTURE**
 **DUE
        JANUARY 27, 2007**
 
 THIS
        DEBENTURE of Generex Biotechnology Company, a Delaware corporation, having
        a
        principal place of business at 33 Harbour Square, Suite 202, Toronto, Ontario
        Canada M5J2G2 (the “ Company ”),
        is
        designated as its 6% Convertible Debenture, due January 27, 2007 (the
“ Debenture ”).
 
 FOR
        VALUE
        RECEIVED, the Company promises to pay to **Omicron
        Master Trust** or its
        registered assigns (the “ Holder ”),
        the
        principal sum of $500,000 on January 27, 2007 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 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 Amendment, or if not found therein,
        the
        Purchase Agreement and (b) the following terms shall have the following
        meanings:
 
 “ 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).
 
 1
 “ 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 33% of the voting securities of the
        Company, or (ii) a replacement at one time or within a three year period
        of more
        than one-half of the members of the Company’s board of directors which is not
        approved by a majority of those individuals who are members of the board
        of
        directors on the date hereof (or by those individuals who are serving as
        members
        of the board of directors on any date whose nomination to the board of directors
        was approved by a majority of the members of the board of directors who are
        members on the date hereof), or (iii) 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) or (ii).
 
 “ Common
        Stock ”
        means
        the common stock, par value $0.001 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).
 
 “ Conversion
        Price ”
        shall
        have the meaning set forth in Section 4(b).
 
 “ Conversion
        Shares ”
        means
        the shares of Common Stock issuable upon conversion of Debentures or as payment
        of interest in accordance with the terms.
 
 “ Debenture
        Register ”
        shall
        have the meaning set forth in Section 2(c).
 
 “ Dilutive
        Issuance ”
        shall
        have the meaning set forth in Section 5(b).
 
 “ Dilutive
        Issuance Notice ”
        shall
        have the meaning set forth in Section 5(b).
 
 “ Effectiveness
        Period ”
        shall
        have the meaning given to such term in the Registration Rights Agreement
        and the
        Purchase Agreement Amendment.
 
 “ 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, if any,
        (ii)
        all liquidated damages and other amounts owing in respect of the Debentures
        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) all of the
        shares
        issued or issuable pursuant to the transaction proposed would not violate
        the
        limitations set forth in Section 4(c), (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, and (ix) the Holder is not then in possession of what could
        be
        deemed material, non-public information, in the reasonable determination
        of the
        Holder.
 
 2
 “ Event
        of Default ”
        shall
        have the meaning set forth in Section 8.
 
 “ Exchange
        Act ”
        means
        the Securities Exchange Act of 1934, as amended.
 
 “ 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) 90%
        of
        the average of the 20 VWAPs immediately prior to the applicable Interest
        Payment
        Date.
 
 “ Interest
        Payment Date ”
        shall
        have the meaning set forth in Section 2(a).
 
 “ Late
        Fees ”
        shall
        have the meaning set forth in Section 2(d).
 
 “ Mandatory
        Prepayment Amount ”
        for any
        Debentures shall equal the sum of (i) the greater of: (A) 130% of the principal
        amount of Debentures to be prepaid, plus all accrued and unpaid interest
        thereon, or (B) the principal amount of Debentures to be prepaid, plus all
        other
        accrued and unpaid interest hereon, divided by the Conversion 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 VWAP 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.
 
 “ 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, $38,461.54 1 ,
        or such
lesser
        principal amount of this Debenture then outstanding.
 
 “ Monthly
        Redemption Date ”
        means
        the first Trading Day of every month, commencing on January 1, 2006 and ending
        on the date when there is no principal amount of this Debenture
        outstanding.
  1 the
          original principal amount of this Debenture divided by 13
 3
 “ 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 October 27, 2005 regardless of the number of transfers of the Debenture
        and
        regardless of the number of instruments which may be issued to evidence the
        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 November 10, 2004, to which
        the
        Company and the original Holder are parties, as amended, modified or
        supplemented from time to time in accordance with its terms.
 
 “ Purchase
        Agreement Amendment ”
        means
        Amendment No. 1 to Securities Purchase Agreement and Registration Rights
        Agreement dated June 17, 2005, 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 Nasdaq SmallCap Market, the American
        Stock Exchange, the New York Stock Exchange or the Nasdaq National
        Market.
 
 4
 “ Transaction
        Documents ”
        shall
        have the meaning set forth in the Purchase Agreement.
 
 “ VWAP ”
        means,
        for any date, the price determined by the first of the following clauses
        that
        applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
        the daily volume weighted average price of the Common Stock for such date
        (or
        the nearest preceding date) on the Trading Market on which the Common Stock
        is
        then listed or quoted as reported by Bloomberg Financial L.P. (based on a
        Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b) 
        if
        the Common Stock is not then listed or quoted on a Trading Market and if
        prices
        for the Common Stock are then quoted on the OTC Bulletin Board, the volume
        weighted average price of the Common Stock for such date (or the nearest
        preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not
        then
        listed or quoted on the OTC Bulletin Board and if prices for the Common Stock
        are then reported in the “Pink Sheets” published by the National Quotation
        Bureau Incorporated (or a similar organization or agency succeeding to its
        functions of reporting prices), the most recent bid price per share of the
        Common Stock so reported; or (c) in all other cases, the fair market
        value
        of a share of Common Stock as determined by an independent appraiser selected
        in
        good faith by the Holders and reasonably acceptable to the Company.
 
 Section
        2 . Interest .
  a)  Payment
        of Interest in Cash or Kind .
        The
        Company shall pay interest to the Holder on the aggregate unconverted and
        then
        outstanding principal amount of this Debenture at the rate of 6% per annum,
        payable quarterly on March 31, June 30, September 30 and December 31, beginning
        on the first such date after the Original Issue Date and on each Conversion
        Date
        (as to that principal amount then being converted) 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 in an amount equal to the amount of interest
        then
        due and owing divided by the Interest Conversion Rate, or a combination thereof; provided , however ,
        payment
        in shares of Common Stock may only occur if during the 20 Trading Days
        immediately prior to the applicable Interest Payment Date all of the Equity
        Conditions have been met and the Company shall have given the Holder notice
        in
        accordance with the notice requirements set forth below.
  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. Not less than 20 Trading Days 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 (the Company
        may
        indicate in such notice that the election contained in such notice shall
        continue for later periods until revised). Within 20 Trading Days prior to
        an
        Interest Payment Date, 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.
 
 5
 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 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 Debentures
        (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, then such payment
        shall be distributed ratably among the Holders based upon the principal amount
        of Debentures held by each Holder.
  d)  Late
        Fee .
        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
        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.
  e)  Prepayment .
        Except
        as otherwise set forth in this Debenture, the Company may not prepay any
        portion
        of the principal amount of this Debenture without the prior written consent
        of
        the Holder.
 
 Section
        3. Registration
        of Transfers and Exchanges .
  a)  Different
        Denominations .
        This
        Debenture is exchangeable for an equal aggregate principal amount of Debentures
        of different authorized denominations, as requested by the Holder surrendering
        the same. No service charge will be 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.
 
 6
 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 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 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 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 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 Debentures 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 2 Business Days
        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.
  b)  Conversion
        Price .
        The
        conversion price in effect on any Conversion Date shall be equal to **$0.82** (subject
        to adjustment herein) (the “ Conversion
        Price ”).
 
 c)  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 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), beneficial ownership shall be
        calculated in accordance with Section 13(d) of the Exchange Act. 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. For purposes
        of this Section 4(c), 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-Q or Form 10-K, 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 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.
  7
  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 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
        Debentures (including, if so timely elected by the Company, shares of Common
        Stock representing the payment of accrued interest) and (B) a bank check
        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 commercially reasonable 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.
  8
 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, in which event the Company shall
        immediately return the certificates representing the principal amount of
        Debentures tendered for conversion; provided that if as a result of the
        limitations set forth in Section 4(c) hereof, such failure by the Company
        is for
        a portion of the Securities for which a Notice of Conversion has been delivered,
        the Holder shall be permitted to rescind solely that portion not so converted.
  iv.  Obligation
        Absolute; Partial Liquidated Damages .
        Subject
        to the limitations set forth in Section 4(c) hereof, 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 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
        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 Holders from seeking to enforce damages pursuant to
        any
        other Section hereof or under applicable law.
  9
 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, other than as a result of the limitations set forth in Section
        4(c)
        hereof, 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 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(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 Debentures 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.
        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 certificates 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(d)(iv) in respect of the certificates resulting in such
        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 the Debentures and payment of interest on the
        Debenture, 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 restrictions of Section 5) 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 Registration Statement is then effective
        under
        the Securities Act, registered for public sale in accordance with such
        Registration Statement.
 
 10
 vii.  Fractional
        Shares .
        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 VWAP at such time. If the Company elects not, or is unable,
        to make such a cash payment, the Holder shall be entitled to receive, in
        lieu of
        the final fraction of a share, one whole share of Common Stock.
 
 viii.  Transfer
        Taxes .
        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.
 
 Section
        5 . Certain
        Adjustments .
  a)  Stock
        Dividends and Stock Splits .
        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 (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) subdivide outstanding shares of Common
        Stock
        into a larger number of shares, (C) combine (including by way of reverse
        stock
        split) outstanding shares of Common Stock into a smaller number of shares,
        or
        (D) issue by reclassification of shares of the Common Stock any shares of
        capital stock of the Company, then the Conversion Price shall be multiplied
        by a
        fraction of which the numerator shall be the number of shares of Common Stock
        (excluding treasury shares, if any) outstanding before such event and of
        which
        the denominator shall be the number of shares of Common Stock outstanding
        after
        such event. Any adjustment made pursuant to this Section shall become effective
        immediately after the record date for the determination of stockholders entitled
        to receive such dividend or distribution and shall become effective immediately
        after the effective date in the case of a subdivision, combination or
        re-classification.
  11
 b)  Subsequent
        Equity Sales .
        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 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
        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),
        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. 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. Notwithstanding
        the foregoing, no adjustment will be made hereunder in respect of (i) an
        Exempt
        Issuance other
        than an Exempt Issuance that involves an MFN Transaction or a Variable Rate
        Transaction for which the adjustment provisions of Section 5 shall be
        applicable, or (ii) issuances of up to, in the aggregate, the first 1,500,000
        shares of Common Stock or Common Stock Equivalents (subject to adjustment
        for
        reverse and forward stock splits, stock dividends, stock combinations and
        other
        similar transactions of the Common Stock that occur after the date of this
        Agreement) to consultants of the Company in any 12 month period pursuant
        to any
        resolution duly adopted by a majority of the non-employee members of the
        Board
        of Directors of the Company or a majority of the members of a committee of
        non-employee directors established for such purpose.
  c)  Pro
        Rata Distributions .
        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 Conversion Price shall be determined 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 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.
  12
 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 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 Holder shall have the
        right to receive, for each Conversion 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 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
        (c) 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. The number of shares of Common
        Stock outstanding at any given time shall not include shares of Common Stock
        owned or held by or for the account of the Company, and the description of
        any
        such shares of Common Stock shall be considered on issue or sale of Common
        Stock. 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.
 
 13
 f)  Notice
        to Holders .
 
 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), or the lowest possible adjustment price in the case
        of an
        MFN 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 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.
  Section
        6 . Monthly
        Redemptions .
 
 14
 a)  Monthly
        Redemption .
        On each
        Monthly Redemption Date, the Company shall redeem the Monthly Redemption
        Amount
        plus accrued but unpaid interest, the sum of all liquidated damages and any
        other amounts then owing to the Holder in respect of this Debenture. The
        Monthly
        Redemption Amount due on each Monthly Redemption Date shall, except as provided
        in this Section, be paid in cash. As to any Monthly Redemption and upon 20
        Trading Days’ prior written irrevocable notice, in lieu of a cash redemption
        payment the Company may elect to pay 100% of a Monthly Redemption in Conversion
        Shares based on a conversion price equal to the lesser of (i) 90% of the
        average
        of the 20 VWAPs immediately prior to the applicable Monthly Redemption Date
        (subject to adjustment for any stock dividend, stock split, stock combination
        or
        other similar event affecting the Common Stock during such 20 Trading Day
        period), and (ii) the Conversion Price. The Holders 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 directed
        by
        the Holder in the applicable Notice of Conversion, any portion of this Debenture
        converted during any 20 day period until the date the Monthly Redemption
        Amount
        is paid shall be first applied to the principal amount of Debenture subject
        to
        the Monthly Redemption and such Holder’s cash payment of the Monthly Redemption
        Amount on such Monthly Redemption Date shall be reduced accordingly. The
        Company
        covenants and agrees that it will honor all Notice of Conversions tendered
        up
        until such amounts are paid in full.
 
 b)  Redemption
        Procedure .
        The
        payment of cash and/or issuance of Common Stock, as the case may be, pursuant
        to
        a Monthly Redemption shall be made on the Monthly Redemption Date. 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 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. Notwithstanding anything to the contrary in this
        Section 6, the Company’s determination to redeem in cash or shares of Common
        Stock shall be applied ratably among the Holders of Debentures based upon
        the
        principal amount of Debentures initially purchased by each Holder, adjusted
        upward ratably in the event all of the principal amount of any Holder are
        no
        longer outstanding. The
        Holder may elect to convert the outstanding principal amount of this Debenture
        pursuant to Section 4 prior to actual payment in cash for any redemption
        under
        this Section 6 by fax delivery of a Notice of Conversion to the
        Company.
 
 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 or suffer to exist any indebtedness or liens
        of any
        kind, on or with respect to any of its property or assets (including, without
        limitation, in respect to any of the Secured Proceeds as that terms is defined
        in the Custodial Agreement) now owned or hereafter acquired or any interest
        therein or any income or profits therefrom that is
        senior
        to, or pari  passu with, in
        any respect, the Company’s obligations under the Debentures ;
 
 15
 b)  amend
        its
        certificate of incorporation, bylaws or to the charter documents so as to
        adversely affect any rights of the Holder;
 
 c)  other
        than redemption payments with respect to the Company's Special Voting Rights
        Preferred Stock not to exceed $5,000 in the aggregate and repurchases of
        the
        Company's Series A Convertible Preferred Stock to the extent that the cash
        payments in respect of any such repurchases does not exceed, in the aggregate,
        $50,000, repay,
        repurchase or offer to repay, repurchase or otherwise acquire more than a de
        minimis number
        of shares of its Common Stock or other equity or debt securities 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;
        or
 
 d)  enter
        into any agreement with respect to any of the foregoing .
  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, in each case 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) 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 of the other Transaction Documents (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 (xii)
        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
        Holde r
        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 other than the Debentures, or (B) any other material
        agreement, lease, document or instrument to which the Company or any Subsidiary
        is bound;
 
 iv.  any
        representation or warranty 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;
 
 16
 v.  (i)
        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 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 against the Company or any Subsidiary
        thereof
        any such bankruptcy, insolvency or other proceeding 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.  the
        Company shall be a party to any Change of Control Transaction or Fundamental
        Transaction, shall agree to sell or dispose of 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 its outstanding shares of Common Stock or other equity
        securities of the Company (other than redemption
        payments with respect to the Company's Special Voting Rights Preferred Stock
        not
        to exceed $5,000 in the aggregate during
        the term of this Debenture);
 
 17
 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 30 consecutive Trading Days or 60 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
        Company shall be permitted an additional 10 consecutive Trading during any
        12
        month period relating to such an event;
 
 x.  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 Registration Statement
        to be
        declared effective by the Commission on or prior to the Effectiveness Date
        (as
        defined in the Registration Rights Agreement), which shall be covered by
        Section
        8(a)(ix);
 
 xi.  the
        Company shall fail for any reason, other than as a result of the limitations
        set
        forth in Section 4(c) hereof, to deliver certificates to a Holder prior to
        the
        fifth 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;
 
 xii.  the
        Company shall fail for any reason to pay in full the amount of cash due pursuant
        to a Buy-In within 5 Trading Days after notice therefor is delivered hereunder
        or shall fail to pay all amounts owed on account of an Event of Default within
        five days of the date due;
 
 xiii.  any
        Person shall breach the agreements delivered to the initial Holders pursuant
        to
        Section 2.2(a)(iv) of the Purchase Agreement.
 
 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 Prepayment 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. All Debentures for which the full Mandatory Prepayment Amount
        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. 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.
 
 18
 Section
        9 . Miscellaneous .
  a)  Notices .
        Any and
        all notices or other communications or deliveries to be provided by the Holders
        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 416-364-9363 **,
        Attn: Anna E. Gluskin, President,** 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 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
        5:00 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 5:00 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 and,
        pursuant to the Cusotdial Agreement dated the date hereof by and between
        the
        Company and the Purchasers (as defined therein), is secured by a first priority
        security interest in certain Secured Proceeds (as defined in the Custodial
        Agreement) for the benefit of the Holder. 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.
 
 19
 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 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
        Debenture, and the Company (to the extent it may lawfully do so) hereby
        expressly waives all benefits or advantage of any such law, and covenants
        that
        it will not, by resort to any such law, hinder, delay or impeded the execution
        of any power herein granted to the Holder, but will suffer and permit the
        execution of every such as though no such law has been enacted.
  g)  Next
        Business Day .
        Whenever any payment or other obligation hereunder shall be due on a day
        other
        than a Business Day, such payment shall be made on the next succeeding Business
        Day.
 
 h)  Headings .
        The
        headings contained herein are for convenience only, do not constitute a part
        of
        this Debenture and shall not be deemed to limit or affect any of the provisions
        hereof.
 
 20
  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.
  **GENEREX
                BIOTECHNOLOGY CORPORTION**By:
              /s/
                Mark A. FletcherName:
                Mark A. Fletcher
                Title:
                  Executive Vice-President, General Counsel
 21
 **ANNEX
        A**
  **NOTICE
        OF CONVERSION**
 
 The
        undersigned hereby elects to convert principal under the 6% Convertible
        Debenture of Generex Biotechnology Company, a Delaware corporation (the
“ Company ”),
        due
        on January 27, 2006 , into shares of common stock, par value $0.001 per share
        (the “ Common
        Stock ”),
        of
        the Company according to the conditions hereof, as of the date written below.
        If
        shares are to be issued in the name of a person other than the undersigned,
        the
        undersigned will pay all transfer taxes payable with respect thereto and
        is
        delivering herewith such certificates and opinions as reasonably requested
        by
        the Company in accordance therewith. No fee will be charged to the holder
        for
        any conversion, except for such transfer taxes, if any.
 
 By
        the
        delivery of this Notice of Conversion the undersigned represents and warrants
        to
        the Company that its ownership of the Common Stock does not exceed the amounts
        determined in accordance with Section 13(d) of the Exchange Act, specified
        under
        Section 4 of this Debenture.
 
 The
        undersigned agrees to comply with the prospectus delivery requirements under
        the
        applicable securities laws in connection with any transfer of the aforesaid
        shares of Common Stock.
 
 Conversion
        calculations:
 Date
        to
        Effect Conversion:
 
 Principal
        Amount of Debentures to be Converted:
 
 Payment
        of Interest in Common Stock __ yes __ no
 If
        yes,
        $_____ of Interest Accrued on Account
 of
        Conversion at Issue.
 
 Is
        conversion to be applied against next Monthly
 Redemption
        Payment and if so, what portion? (note
 failure
        to answer deemed entire portion to be applied) $_________
  Number
        of
        shares of Common Stock to be issued:
  Signature:
  Name:
  Address:
 
 22
 **Schedule
        1**
  **CONVERSION
        SCHEDULE**
 
 The
        6%
        Convertible Debentures due on January 27, 2007, in the aggregate principal
        amount of $____________ issued by Generex Biotechnology Company. 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 Conversion
                (or
                  original Principal Amount)
              Company
                  Attest
 
 
 23