**Exhibit 10.24**

 

**CONVERTIBLE DEBENTURE**

**DUE NOVEMBER 17, 2012**

THIS CONVERTIBLE DEBENTURE is the duly authorized and validly issued Convertible Debenture of AccentiaBiopharmaceuticals, Inc., a Florida corporation (the “Company”), having its principal place of business at 324 South Hyde Park Ave., Suite 350, Tampa, Florida 33606, designated as its Convertible Debenture due November 17, 2012(this debenture, the “Debenture” and, collectively with the other debentures issued under Article 5.10.1.1 of the Plan, the “Debentures”). This Debenture and the Conversion Shares issuable upon conversion of thisDebenture are issued by the Company, pursuant to Section 1145 of the Bankruptcy Code and Article 5.10.1.1 of the Plan, in exchange for the Holder’s claims against the Company, and are exempt from the requirements of Section 5 of theSecurities Act and state and local securities laws and requirements by virtue of Section 1145 of the Bankruptcy Code. This Debenture and the Conversion Shares may be transferred, sold or resold by the Holder or any holders thereof withoutregistration or restriction; provided that the transfer, sale or resale of this Debenture and the Conversion Shares by any recipient thereof would not be exempted under Section 1145 of the Bankruptcy Code if such recipient is deemed to be anunderwriter. 

FOR VALUE RECEIVED, the Company promises to pay to                              or its registered assigns (the “Holder”), or shallhave paid pursuant to the terms hereunder, the principal sum of $             on November 17, 2012 (the “Maturity Date”) or such earlier date as this Debentureis required or permitted to be repaid as provided hereunder, 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 thisDebenture, the following terms shall have the following meanings: 

“Affiliate”means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act. 

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

“Bankruptcy Case” means, collectively, the cases of the Company and itsSubsidiaries pending before the Bankruptcy Court under Chapter 11 of the Bankruptcy Code, and jointly administered under Case No. 8:08-bk-17795-KRM. 

“Bankruptcy Code” means title 11 of the United States Code, 11 U.S.C. §§ 101etseq.

“Bankruptcy Court” means the United States BankruptcyCourt for the Middle District of Florida, Tampa Division. 

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

“Beneficial Ownership Limitation” shall have the meaning set forth in Section 4(c).

“Board of Directors” means the board of directors of the Company. 

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

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

“Change of Control Transaction” means the occurrence after the date hereof of any of(a) 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 capitalstock of the Company, by contract or otherwise) of in excess of 40% of the voting securities of the Company (other than by means of conversion or exercise of the Debentures), (b) the Company merges into or consolidates with any other Person, orany Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 66% of the aggregate voting power of the Company or thesuccessor entity of such transaction, (c) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders of the Company immediately prior to such transaction own less than 66% of the aggregatevoting power of the acquiring entity immediately after the transaction, (d) a replacement at one time or within a three year period of more than one-half of the members of the Board of Directors which is not approved by a majority of

 
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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 theBoard of Directors was approved by a majority of the members of the Board of Directors who are members on the date hereof), or (e) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providingfor any of the events set forth in clauses (a) through (d) above. 

“Commission” means the United States Securities and Exchange Commission. 

“Common Stock” means the common stock, par value $.001 per share, of the Company andstock of any other class of securities into which such securities may hereafter be reclassified or changed into. 

“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, withoutlimitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock. 

“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 Schedule” means the Conversion Schedule in the form of Schedule 1attached hereto. 

“Conversion Shares” means, collectively, the shares ofCommon Stock issuable upon conversion or redemption of this Debenture in accordance with the terms hereof. 

“Debenture Register” means the records of the Company regarding registration and transfers of the Debentures. 

“Equity Conditions” means, during the period in question, (a) the Company shall haveduly honored all conversions and redemptions scheduled to occur or occurring by virtue of one or more Notices of Conversion of the Holder, if any, (b) the Company shall have paid all liquidated damages and other amounts owing and then due tothe Holder in respect of this Debenture, (c) the Common Stock is 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),(d) 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 Debentures, (e) there is no existing Event of Default or no existingevent which, with the passage of time or the giving of notice, would constitute an Event of Default, (f) the issuance of the shares in question to the Holder would not violate the limitations set forth in Section 4(c) herein,(g) there has been no public announcement of a pending or proposed Fundamental Transaction or Change of Control Transaction that has not been consummated, and (h) the Holder is not 

 
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in possession of any information provided by the Company that constitutes, or may constitute, material non-public information. 

“Event of Default” shall have the meaning set forth in Section 8(a). 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules andregulations promulgated thereunder. 

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

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

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

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

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

“GAAP” means United States generally accepted accounting principles applied on aconsistent basis during the periods involved. 

“Indebtedness” means(x) any liabilities for borrowed money or amounts owed in excess of $150,000 (other than trade accounts payable incurred in the ordinary course of business), (y) all guaranties, endorsements and other contingent obligations in respect ofindebtedness of others, whether or not the same are or should be reflected in the Company’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions inthe ordinary course of business and (z) the present value of any lease payments in excess of $150,000 due under leases required to be capitalized in accordance with GAAP. 

“Mandatory Default Amount” means the sum of (a) the greater of (A) 130% of theoutstanding principal amount of this Debenture, or (B) the outstanding principal amount of this Debenture, divided by the Conversion Price on the date the Mandatory Default Amount is either (A) demanded (if demand or notice is required tocreate an Event of Default) or otherwise due or (B) paid in full, whichever has a lower Conversion Price, multiplied by the VWAP on the date the Mandatory Default Amount is either (x) demanded or otherwise due or (y) paid in full,whichever has a higher VWAP, and (b) all other amounts, costs, expenses and liquidated damages due in respect of this Debenture. 

“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” means the date of the first issuance of this Debenture as set forth above, regardless of any transfers of this Debenture and regardless of the number of instrumentswhich may be issued to evidence this Debenture. 

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

“Plan” means the First Amended Joint Plan of Reorganization of AccentiaBiopharmaceuticals, Inc., Analytica International, Inc., TEAMM Pharmaceuticals, Inc., AccentRx, Inc., and Accentia Specialty Pharmacy, Inc. under Chapter 11 of Title 11, United States Code dated as of August 16, 2010, as modified by the FirstModification to First Amended Joint Plan of Reorganization of Accentia Biopharmaceuticals, Inc., Analytica International, Inc., TEAMM Pharmaceuticals, Inc., AccentRx, Inc., and Accentia Specialty Pharmacy, Inc. under Chapter 11 of Title 11, UnitedStates Code dated as of October 25, 2010 and as further modified from time to time, as filed in the Bankruptcy Case. 

“Pre-Redemption Conversion Shares” shall have the meaning set forth in Section 6(a). 

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

“Quarterly Redemption Amount” means, as to a Quarterly Redemption,one-eighth (1/8th) of the original principal balanceof this Debenture, plus accrued but unpaid liquidated damages and any other amounts then owing to the Holder in respect of this Debenture. 

“Quarterly Redemption Date” means the Original Issue Date and each of the following seven (7) quarterly anniversaries of the Original Issue Date. 

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

“Quarterly Redemption Price” shall have the meaning set forth inSection 6(a). 

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

“Share DeliveryDate” shall have the meaning set forth in Section 4(d)(ii). 

“Subsidiary” means any subsidiary of the Company as of the Original Issue Date and shall,where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof. 

“Threshold Period” shall have the meaning set forth in Section 6(c). 

“Trading Day” means a day on which a Trading Market is open for trading; provided that, if the Common Stock is not on a Trading Market, then as reported on any

 
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day in the “Pink Sheets” published by Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices). 

“Trading Market” means any of the following markets or exchanges on which the CommonStock is listed or quoted for trading on the date in question: the New York Stock Exchange, the NYSE AMEX, the NASDAQ Capital Market, the NASDAQ Global Market, the NASDAQ Global Select Market, the OTCQB Marketplace, or the OTC Bulletin Board (or anysuccessors to any of the foregoing). 

“Variable Rate Transaction” means atransaction in which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for, or include the right to receive, additional shares of Common Stock either (A) at a conversionprice, exercise price or exchange rate or other price that is based upon, and/or varies with, the trading prices of or quotations for the shares of Common Stock at any time after the initial issuance of such debt or equity securities or(B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence of specified or contingent events directly or indirectlyrelated to the business of the Company or the market for the Common Stock, or (ii) enters into any agreement, including, but not limited to, an equity line of credit, whereby the Company may sell securities at a future determined price.

“VWAP” means, for any date, the price of the Common Stock determined by thefirst of the following clauses that applies: (a) if the Common Stock is then listed or quoted for trading on a Trading Market, the volume weighted average price per share of the Common Stock for such date (or the nearest preceding date) on theTrading Market on which the Common Stock is then listed or quoted for trading as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)); (b) if the Common Stock is not thenlisted or quoted for trading on a Trading Market and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices),the most recent bid price per share of the Common Stock so reported for such date; 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 Holder andreasonably acceptable to the Company. 

Section 2. Interest, Payment in Kind and Prepayment. 

a) Payment of Interest. No regularly scheduled interest payments shall be made on this Debenture.

b) Company’s Election to Pay Principal in Cash or Kind at the Maturity Date.Subject to the terms and conditions herein, the decision whether to pay any principal amount outstanding at the Maturity Date in cash, shares of Common Stock at a conversion price per share equal to the average of the VWAPs for the ten(10) consecutive Trading Days ending on the Trading Day that is immediately prior to the 

 
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Maturity Date, or a combination thereof shall be at the sole discretion of the Company; provided, however, that payment in shares of Common Stock may only occur if (i) the VWAPon each Trading Day during such 10 consecutive Trading Day period is at least $.50 per share (subject to adjustment for forward and reverse stock splits, recapitalizations, stock dividends and the like after the Original Issue Date) and(ii) all of the Equity Conditions have been met (unless waived by the Holder in writing) during such period of ten (10) Trading Days and through and including the date such shares of Common Stock are actually issued to the Holder.

c) Prepayment. Except as otherwise set forth in this Debenture, the Company may notprepay 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 amountof Debentures of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange. 

b) Reliance on Debenture Register. Prior to due presentment for transfer to the Company of thisDebenture, 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 otherpurposes, 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, if the VWAP equals or exceeds $1.50 (subject to adjustment for reverse and forward stock splits, stock dividends, stockcombinations and other similar transactions of the Common Stock after the Original Issue Date) on each Trading Day in any ten (10) Consecutive Trading Days, this Debenture shall be convertible, in whole or in part, into shares of Common Stockat the option of the Holder, at any time and from time to time (subject to the conversion limitations set forth in Section 4(c) hereof). The Holder shall effect a conversion by delivering to the Company a Notice of Conversion, the form of whichis attached hereto as Annex A (a “Notice of Conversion”), specifying therein the principal amount of this Debenture to be converted and the date on which such conversion shall be effected (such date, the “ConversionDate”). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is deemed delivered hereunder. To effect a conversion hereunder, the Holder shall not be required tophysically surrender this Debenture 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 in an amountequal to the applicable 

 
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amount converted. The Holder and the Company shall maintain records showing the principal amount(s) converted and the date(s) of such conversion(s). The Company may deliver an objection to anyNotice of Conversion within one (1) Business Day of delivery of such Notice of Conversion. In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error. **TheHolder, 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 Debenturemay be less than the amount stated on the face hereof**. 

b) Conversion Price. Theconversion price in effect on any Conversion Date shall be equal to the average of the VWAPs for the ten (10) consecutive Trading Days ending on the Trading Day that is immediately preceding the Original Issue Date but not to exceed $1.25 pershare, subject to adjustment herein (the “Conversion Price”). 

c)Conversion Limitations. The Company shall not effect a conversion of this Debenture, and the Holder shall not have the right to convert this Debenture, to the extent that after giving effect to the conversion as set forth on the Notice ofConversion, the Holder (together with the Holder’s Affiliates and any other Person acting as a group together with the Holder or any of the Holder’s Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation (asdefined below). 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 withrespect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) conversion of the remaining, unconverted principal amount of this Debenture beneficially owned by theHolder or any of its Affiliates and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents), subject to a limitation onconversion 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 becalculated in accordance with Section 13(d) of the Exchange Act. To the extent that the limitation contained in this Section 4(c) applies, the determination of whether this Debenture is convertible (in relation to other securities owned bythe Holder together with any Affiliates) and of which principal amount of this Debenture is convertible shall be in the sole discretion of the Holder, and the submission of a Notice of Conversion shall be deemed to be the Holder’s determinationof whether this Debenture may be converted (in relation to other securities owned by the Holder together with any Affiliates) and which principal amount of this Debenture is convertible, in each case subject to the Beneficial Ownership Limitation.To ensure compliance with this restriction, the Holder will be deemed to represent to the Company when it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this Section 4(c), and theCompany shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the

 
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Exchange Act. 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 asreflected in (x) the Company’s most recent Form 10-Q Quarterly Report or Form 10-K Annual Report, as the case may be, (y) a more recent public announcement by the Company, or (z) any other notice by the Company or theCompany’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two (2) Trading Days confirm orally and in writing to the Holder the number ofshares 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 Holderor its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediatelyafter giving effect to the issuance of shares of Common Stock issuable upon conversion of this Debenture held by the Holder. The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial OwnershipLimitation provisions of this Section 4(c), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of CommonStock upon conversion of this Debenture held by the Holder and the provisions of this Section 4(c) shall continue to apply. Any such increase or decrease will not be effective until the61st day after such notice is delivered to the Company.The provisions of this Section 4(c) shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 4(c) to correct this paragraph (or any portion hereof) which may be defective orinconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this Section 4(c) shall apply to asuccessor holder of this Debenture. 

d) Mechanics of Conversion. 

i. Conversion Shares Issuable Upon Conversion of Principal Amount. The number of shares of CommonStock 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 or Quarterly Redemption Price, asapplicable. 

ii. Delivery of Certificate(s) Upon Conversion. Not later than three(3) Trading Days after each Conversion Date, Quarterly Redemption Date, Forced Conversion Date or Maturity Date, as applicable (the “Share Delivery Date”), the Company shall deliver, or cause to be delivered, to the Holder acertificate or certificates representing the Conversion Shares which shall be free of restrictive legends and trading restrictions representing the number of shares of Common Stock being acquired upon the conversion of this Debenture. The Companyshall use its best efforts to deliver any certificate or certificates required to be delivered 

 
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by the Company under this Section 4(d)(ii) electronically through the Depository Trust Company or another established clearing corporation performing similar functions. 

iii. Failure to Deliver Certificates. If, in the case of any Notice of Conversion, the certificateor certificates representing the Conversion Shares are not delivered to, or as directed by, the Holder by the Share Delivery Date, the Holder shall be entitled to elect, by written notice to the Company at any time on or before its receipt of suchcertificate or certificates, to rescind the Notice of Conversion, in which event the Company shall promptly return to the Holder any original Debenture delivered to the Company and the Holder shall promptly return to the Company the certificatesrepresenting such Conversion Shares. 

iv. Obligations Absolute; Partial LiquidatedDamages. 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 toenforce 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 oralleged 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 obligationof the Company to the Holder in connection with the issuance and delivery of such Conversion Shares; provided, however, that such delivery shall not operate as a waiver by the Company of any such action the Company may have against theHolder. In the event the Holder of this Debenture shall elect to convert any or all of the outstanding principal amount hereof, the Company may not refuse conversion based on any claim that the Holder or anyone associated or affiliated with theHolder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and or enjoining conversion of all or part of this Debenture shall have been sought and obtained,and the Company posts a surety bond for the benefit of the Holder in the amount of 150% of the outstanding principal amount of this Debenture, which is subject to the injunction, which bond shall remain in effect until the completion ofarbitration/litigation of the underlying dispute and the proceeds of which shall be payable to the Holder to the extent it obtains judgment. In the absence of such injunction, the Company shall issue Conversion Shares or, if applicable underSection 2(b), cash, upon a properly noticed conversion. If the Company fails for any reason to deliver to the Holder a certificate or certificates representing the Conversion Shares pursuant to Section 4(d)(ii) by the second Trading Dayfollowing the Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of principal amount being converted, $10 per Trading Day (increasing to $20 per Trading Day on the fifthTrading Day after such liquidated damages begin to 

 
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accrue) for each Trading Day after the second Trading Day following the Share Delivery Date until such certificates are delivered. Nothing herein shall limit a Holder’s right to pursueactual damages or declare an Event of Default pursuant to Section 8 hereof for the Company’s failure to deliver Conversion Shares within the period specified herein and the Holder shall have the right to pursue all remedies available to ithereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Sectionhereof or under applicable law. 

v. Compensation for Buy-In on Failure to Timely DeliverCertificates Upon Conversion. In addition to any other rights available to the Holder, if the Company fails for any reason to deliver to the Holder a certificate or certificates representing the Conversion Shares on or before the Share DeliveryDate pursuant to Section 4(d)(ii), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares ofCommon Stock to deliver in satisfaction of a sale by the Holder of the Conversion Shares which the Holder was entitled to receive upon the conversion relating to such Share Delivery Date (a “Buy-In”), then the Company shall(A) pay in cash to the Holder the amount by which (x) the Holder’s total purchase price (including any brokerage commissions) for the shares of Common Stock so purchased exceeds (y) the product of (1) the aggregate number ofshares of Common Stock that the Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the sell order giving rise to such purchase obligation was executed (including any brokeragecommissions) and (B) at the option of the Holder, either reissue (if surrendered) this Debenture in a principal amount equal to the principal amount of the attempted conversion or deliver to the Holder the number of shares of Common Stock thatwould have been issued if the Company had timely complied with its delivery requirements under Section 4(d)(ii). For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to anattempted conversion of this Debenture with respect to which the actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediatelypreceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of theamount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respectto the Company’s failure to timely deliver certificates representing shares of Common Stock upon conversion of this Debenture as required pursuant to the terms hereof. 

 
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vi. Reservation of Shares Issuable Upon Conversion.The Company covenants that, during the period this Debenture is outstanding, it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of thisDebenture, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the other holders of the Debentures), not less than such aggregate number of shares of the CommonStock as shall be issuable (taking into account the adjustments and restrictions of Section 5) upon the conversion of the outstanding principal amount of this Debenture. The Company covenants that all shares of Common Stock that shall be soissuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable. 

vii. Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shallbe issued upon the conversion of this Debenture. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Company shall, at its election, either pay a cash adjustment in respect of such finalfraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole share. 

viii. Transfer Taxes. The issuance of certificates for Conversion Shares shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respectof the issue or delivery of such certificates; provided that, the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a nameother than that of the Holder of this Debenture so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amountof 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 anytime while this Debenture is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents (which, for avoidance of doubt,shall not include any shares of Common Stock issued by the Company upon conversion of this Debenture), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of a reverse stocksplit) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then in each case the Conversion Priceshall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding any treasury shares of the 

 
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Company) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment madepursuant to this Section 5(a) 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 inthe case of a subdivision, combination or re-classification. 

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

c) Pro Rata Distributions. If the Company, at any time while thisDebenture is outstanding, shall distribute to all holders of Common Stock (and not to Holders of the Debentures) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase anysecurity, then in each such case the Conversion Price shall be adjusted by multiplying the Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction ofwhich 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 per share fair market value at such record date of the portion of such assetsor evidence of indebtedness so distributed applicable to one (1) outstanding share of the Common Stock as determined by the Board of Directors of the Company in good faith. In either case the adjustments shall be described in a statementdelivered to the Holder describing the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one (1) share of Common Stock. Such adjustment shall be made whenever any such distribution is madeand shall become effective immediately after the record date mentioned above. 

d)Fundamental Transaction. If, at any time while this Debenture is outstanding, (i) the Company effects any merger or consolidation of the Company with or into another Person, (ii) the Company effects any sale of all or substantiallyall of its assets in one transaction or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to 

 
13 

which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock orany compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (each, a “Fundamental Transaction”), then, upon any subsequent conversion of thisDebenture, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the same kind and amount of securities, cash orproperty 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 (1) share of Common Stock (the “AlternateConsideration”). 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 ofone (1) share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of theAlternate 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 receivesupon 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 Holdera 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 includeterms requiring any such successor or surviving entity to comply with the provisions of this Section 5(d) and insuring that this Debenture (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogousto a Fundamental Transaction. 

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

f) Notice to the Holder. 

i. Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to anyprovision of this Section 5, the Company shall promptly mail to the 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 enters intoa Variable Rate Transaction, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion price at which such securities may be converted or exercised. 

 
14 

ii. Notice to Allow Conversion by Holder. If(A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Companyshall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be requiredin 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, or any compulsory share exchange whereby theCommon Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall causeto be filed at each office or agency maintained for the purpose of conversion of this Debenture, and shall cause to be delivered to the Holder at its last address as it shall appear upon the Debenture Register, at least twenty (20) calendardays 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 tobe 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 orother property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of thecorporate action required to be specified in such notice. The Holder is entitled to convert this Debenture during the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice. 

Section 6. Quarterly Redemption; Forced Conversion. 

a) Quarterly Redemption. On each Quarterly Redemption Date, the Company shall redeem the QuarterlyRedemption Amount subject to the terms and conditions set forth herein (the “Quarterly Redemption”). The Quarterly Redemption Amount payable on each Quarterly Redemption Date shall be paid in shares of Common Stock based on aconversion price per share equal to the lesser of (i) $1.25 (subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock after the Original Issue Date) or(ii) the average of the VWAPs for the ten (10) consecutive Trading Days ending on the Trading Day that is immediately prior to the applicable Quarterly Redemption Date (such conversion price, the “Quarterly RedemptionPrice” and such 10 Trading Day period, the 

 
15 

“Quarterly Redemption Period”); provided, however, that the Company shall not redeem the Quarterly Redemption Amount unless (x) the Quarterly Redemption Priceequals or exceeds $1.00 (subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock after the Original Issue Date), (y) on each Trading Day in the QuarterlyRedemption Period, the Equity Conditions have been satisfied, unless waived in writing by the Holder, and (z) as to such Quarterly Redemption, prior to such Quarterly Redemption Period (but not more than five (5) Trading Days prior to thecommencement of the Quarterly Redemption Period), the Company shall have delivered to the Holder’s account with The Depository Trust Company a number of shares of Common Stock to be applied against such Quarterly Redemption Amount equal to thequotient of (x) the applicable Quarterly Redemption Amount divided by (y) the average of the VWAPs for the ten (10) consecutive Trading Days ending on the third Trading Day immediately prior to the date on which commences theQuarterly Redemption Period (the “Pre-Redemption Conversion Shares”), provided that, if the number of Conversion Shares to be delivered on the Quarterly Redemption Date is less than the number of Pre-Redemption Conversion Sharesdelivered pursuant to this Section 6(a), the Holder shall promptly return the surplus Pre-Redemption Conversion Shares to the Company. If the Quarterly Redemption Price for a Quarterly Redemption Date is less than $1.00, the QuarterlyRedemption Amount for such Quarterly Redemption Date shall become payable at the Maturity Date pursuant to the terms of Section 2(b) herein; provided, however, that the Holder, upon written notice to the Company, may elect toconvert such Quarterly Redemption Amount for such Quarterly Redemption Date at a Quarterly Redemption Price that is deemed to be equal to $1.00 (subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations andother similar transactions of the Common Stock after the Original Issue Date). The Holder may convert, pursuant to Section 4(a), any principal amount of this Debenture subject to a Quarterly Redemption at any time prior to the date that theQuarterly Redemption Amount, plus accrued but unpaid liquidated damages and any other amounts then owing to the Holder are due and paid in full. The Company covenants and agrees that it will honor all Notices of Conversion tendered up until suchamounts are paid in full. The Holder, and any assignee by acceptance of this Debenture, acknowledge and agree that, by reason of the provisions of this paragraph, following a Quarterly Redemption, the unpaid and unconverted principal amount of thisDebenture (i) will be reduced by the Quarterly Redemption Amount and (ii) may be less than the amount stated on the face hereof. 

b) Redemption Procedure. The issuance of Common Stock pursuant to a Quarterly Redemption shall be payable on the Quarterly Redemption Date. If any portion of the payment pursuant to a QuarterlyRedemption shall not be paid by the Company by the applicable due date, interest shall accrue thereon at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law until such amount is paid in full.Notwithstanding anything herein contained to the contrary, if any portion of the Quarterly Redemption Amount remains unpaid after such date, the Holder may elect, by written notice to the Company given at any time thereafter, to invalidate suchQuarterly Redemption, abinitio. Notwithstanding anything to the contrary in this Section 

 
16 

6, the Company’s determination to issue Common Stock shall be applied ratably among the Holders of Debentures. The Holder may elect to convert the outstanding principal amount of theDebenture pursuant to Section 4 prior to any redemption under this Section 6 by the delivery of a Notice of Conversion to the Company. 

c) Forced Conversion. Notwithstanding anything herein to the contrary, if at any time after the Original Issue Date until this Debenture is no longer outstanding, the VWAP for each of any thirty(30) consecutive Trading Days (such period, the “Threshold Period”) equals or exceeds $1.88 (subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of theCommon Stock after the Original Issue Date), then the Company may, within three (3) Trading Days after the end of any such Threshold Period, deliver a written notice to the Holder (a “Forced Conversion Notice” and the date suchnotice is delivered to the Holder, the “Forced Conversion Notice Date” and such conversion, the “Forced Conversion”) to cause the Holder to convert, at the Conversion Price, all or part of the then outstandingprincipal amount of this Debenture plus, if so specified in the Forced Conversion Notice, accrued but unpaid liquidated damages and other amounts owing to the Holder under this Debenture, up to an aggregate amount equal to $5,000,000 in principalamount of the Debentures, it being agreed that the “Conversion Date” for purposes of Section 4 shall be deemed to occur on the third Trading Day following the Forced Conversion Notice Date (such third Trading Day, the “ForcedConversion Date”). The Company may not deliver a Forced Conversion Notice, and any Forced Conversion Notice delivered by the Company shall not be effective, unless all of the Equity Conditions are met (unless waived in writing by theHolder) on each Trading Day occurring during the applicable Threshold Period through and including the later of the Forced Conversion Date and the Trading Day after the date such Conversion Shares pursuant to such conversion are delivered to theHolder. Any Forced Conversion shall be applied ratably to all Holders of Debentures based on their percentage interest of the then outstanding principal balance of the Debentures, provided that any voluntary conversions by a Holder shall be appliedagainst the Holder’s pro rata allocation, thereby decreasing the aggregate amount forcibly converted hereunder if only a portion of this Debenture is forcibly converted. For purposes of clarification, a Forced Conversion shall be subject to allof the provisions of Section 4, including, without limitation, the provision requiring payment of liquidated damages and limitations on conversions. The Company may exercise this Forced Conversion right more than once under this Debenture.

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

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

 
17 

b) repay, repurchase or offer to repay, repurchase orotherwise acquire more than a deminimis number of shares of its Common Stock or Common Stock Equivalents other than repurchases of Common Stock or Common Stock Equivalents of departing officers and directors of the Company, providedthat such repurchases shall not exceed an aggregate of $100,000 for all officers and directors during the term of this Debenture; 

c) repay, repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness, other than the Debentures if on a pro-rata basis, other than regularly scheduled principal and interest paymentsas such terms are in effect as of the Original Issue Date or any payments to its creditors or the creditors of its Subsidiaries as required under the Plan, provided that such payments shall not be permitted if, at such time, or after giving effectto such payment, any Event of Default exists or occurs; 

d) pay cash dividends or distributionson any equity securities of the Company; 

e) enter into any transaction with any Affiliate ofthe Company which would be required to be disclosed in any public filing with the Commission, unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the disinterested directors of the Company (even ifless than a quorum otherwise required for board approval); or 

f) enter into any agreement withrespect to any of the foregoing. 

Section 8. Events of Default. 

a) “Event of Default” means, wherever used herein, any of the following events (whateverthe reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmentalbody): 

i. any default in the payment of (A) the principal amount of any Debenture or(B) liquidated damages and other amounts owing to a Holder on any Debenture, as and when the same shall become due and payable (whether on a Conversion Date, a Quarterly Redemption Date, a Forced Conversion Date or the Maturity Date or byacceleration or otherwise), which default, solely in the case of a payment default under clause (B) above, is not cured within three (3) Trading Days; 

ii. the Company shall fail to observe or perform any other covenant or agreement contained in theDebentures (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 (ix) below) which failure is not cured, if possible to cure, within theearlier to occur of (A) ten (10) Trading Days after 

 
18 

notice of such failure sent by the Holder or by any other Holder to the Company and (B) fifteen (15) Trading Days after the Company has become or should have become aware of suchfailure; 

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

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

v. the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X)shall be subject to a Bankruptcy Event; 

vi. the Company or any Subsidiary shall default on anyof 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 borrowedmoney or money due under any long term leasing or factoring arrangement that (a) involves an obligation greater than $150,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtednessbecoming or being declared due and payable prior to the date on which it would otherwise become due and payable; 

vii. the Common Stock shall not be eligible for listing or quotation for trading on a Trading Market and shall not be eligible to resume listing or quotation for trading thereon within five(5) Trading Days; 

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

ix. the Company shall fail for any reason to deliver certificates to a Holder prior to the fifth TradingDay after a Conversion Date, a Quarterly Redemption Date or any Forced Conversion Date pursuant to Section 4(d) or the Company shall provide at any time notice to the Holder, including by way of public announcement, of the Company’sintention to not honor requests for conversions of any Debentures in accordance with the terms hereof; or 

 
19 

x. any monetary judgment, writ or similar final processshall be entered or filed against the Company, any Subsidiary or any of their respective property or other assets for more than $100,000, and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed for a period of45 calendar days. 

b) Remedies Upon Event of Default. If any Event of Default occurs,the outstanding principal amount of this Debenture, plus accrued but unpaid liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due and payable incash at the Mandatory Default Amount. Commencing five (5) days after the occurrence of any Event of Default that results in the eventual acceleration of this Debenture, interest shall accrue on this Debenture at an interest rate equal to thelesser of 18% per annum or the maximum rate permitted under applicable law. Upon the payment in full of the Mandatory Default Amount, the Holder shall promptly surrender this Debenture to or as directed by the Company. In connection with suchacceleration described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all ofits rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by the Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder ofthe Debenture until such time, if any, as the Holder receives full payment pursuant to this Section 8(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. 

Section 9. Miscellaneous. 

a) Notices. Any and all notices or other communications or deliveries to be provided by the Holderhereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above,or such other facsimile number or address as the Company may specify for such purpose by notice to the Holder delivered in accordance with this Section 9(a). Any and all notices or other communications or deliveries to be provided by theCompany hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to the Holder at the facsimile number or address of the Holder appearing on the books of theCompany, or if no such facsimile number or address appears, at the principal place of business of the Holder. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date oftransmission, if such notice or communication is delivered via facsimile (if to the Company, at the facsimile number specified on the signature page) prior to 5:30 p.m. (New York City time), (ii) the date immediately following the date oftransmission, if such notice or communication is delivered via facsimile (if to the Company, at the facsimile number specified on the signature page) 

 
20 

between 5:30 p.m. (New York City time) and 11:59 p.m. (New York City time) on any date, (iii) the second Business Day following the date of mailing, if sent by nationally recognizedovernight 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 theprincipal and liquidated damages on this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct debt obligation of the Company. This Debenture ranks paripassu with all otherDebentures now or hereafter issued under the terms set forth herein. 

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

d) Governing Law. All questions concerning theconstruction, 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 conflict of laws thereof.Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Debenture (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 exclusivejurisdiction 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 this Debenture), and herebyirrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such New York Courts, or such New York Courts are an improper or inconvenient venue for suchproceeding. 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 evidenceof 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 inany way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arisingout 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 

 
21 

Debenture, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other costs and expenses incurred in the investigation,preparation and prosecution of such action or proceeding. 

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

f) Severability.If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all otherPersons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal themaximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, anystay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of this Debenture as contemplated herein, wherever enacted, now or at any time hereafter in force, or which mayaffect 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 impede 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 dayother than a Business Day, such payment shall be made on the next succeeding Business Day. 

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

i) Assumption. Any successor to the Company or any surviving entity in a Fundamental Transactionshall (i) assume, prior to such Fundamental Transaction, all of the obligations of the Company under this Debenture pursuant to written agreements in form and substance satisfactory to the Holder (such approval not to be unreasonably withheldor delayed) and (ii) issue to the Holder a new debenture of such successor entity evidenced by a written instrument substantially similar in form and substance to this Debenture, including, without limitation, having a principal amount equal tothe principal 

 
22 

amount of this Debenture and having similar ranking to this Debenture, which shall be satisfactory to the Holder (any such approval not to be unreasonably withheld or delayed). The provisions ofthis Section 9(i) shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations of this Debenture. 

j) Waivers and Amendments. This Debenture may be modified or amended or the provisions hereofwaived with the prior written consent of the Company and the holders of 67% or more of the aggregate principal amount of all Debentures then outstanding. 

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

*(Signature Page Follows)*

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

 
**ACCENTIA BIOPHARMACEUTICALS, INC.**By: 
 
 
Name: Samuel S. Duffey

Title: President

 
Facsimile No. for delivery of notices:                        
 
24 

**ANNEX A**

**NOTICE OF CONVERSION**

The undersigned hereby elects to convert principal under the Convertible Debenture due November 17, 2012 of Accentia Biopharmaceuticals, Inc., a Florida corporation (the “Company”),into shares of common stock, par value $.001 per share (the “Common Stock”), of the Company according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a person otherthan 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 theholder for any conversion, except for such transfer taxes, if any. 

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

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

Conversion calculations: 

 
   Date to Effect Conversion:   Principal Amount of Debenture to be Converted:   Number of shares of Common Stock to be issued:   Signature:   Name:   Address for Delivery of Common Stock Certificates:   Or   DWAC Instructions:   Broker No:                           Account No:                     
 
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**Schedule 1**

**CONVERSION SCHEDULE**

The Convertible Debenture due November 17, 2012 in the original principal amount of $             is issued by AccentiaBiopharmaceuticals, Inc., a Florida corporation. This Conversion Schedule reflects conversions made under Section 4 of the above referenced Debenture. 

Date: 

 

Date of Conversion

(or for first entry,

Original Issue Date)
  
Amount of

Conversion
  
Aggregate

Principal

Amount

Remaining

Subsequent to

Conversion

(ororiginal

Principal

Amount)
  
Company Attest
                        
 
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