**Exhibit
      4.12**







THIS
      DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
      OR ANY STATE SECURITIES LAWS. THIS DEBENTURE MAY NOT BE SOLD, OFFERED FOR SALE,
      PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
      AS
      TO THIS DEBENTURE UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
      AN
      OPINION OF COUNSEL REASONABLY SATISFACTORY TO TM BIOSCIENCE CORPORATION THAT
      SUCH REGISTRATION IS NOT REQUIRED.




UNLESS
      PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE HOLDER OF THIS DEBENTURE
      SHALL NOT TRADE THE DEBENTURE BEFORE DECEMBER 16 ,
      2006.




**UNSECURED
      SUBORDINATED DEBENTURE**




**FOR
      VALUE RECEIVED** ,
      Tm
      Bioscience Corporation (the “ **Borrower** ”),
      hereby promises to pay to Gundy
      Co., ITF A/C 515-0001427, 161 Bay Street, BCE Place, Toronto, Ontario, M5J
      2S8 (the
“ **Holder** ”)
      or its
      permitted assigns or successors in interest, on order, on presentation and
      surrender of this Unsecured Subordinated Debenture, the aggregate principal
      amount of three
      million and fifty thousand in
      lawful money of the Canada ($3,050,000), together with any accrued and unpaid
      interest thereon, on the
      date
      which is the first anniversary of the date hereof (the “ **Maturity
      Date** ”)
      or at
      such other times as set out herein or as otherwise directed by the
      Holder .




This
      Unsecured Subordinated Debenture is one of the Unsecured Subordinated Debentures
      issued by the Borrower on the date hereof. Each such Unsecured Subordinated
      Debenture shall rank *pari
      passu* to one
      another. No amendments shall be made to any one of the Unsecured Subordinated
      Debentures or to any provision common to all the Unsecured Subordinated
      Debentures without the same amendments being made to the other Unsecured
      Subordinated Debentures. All payments of principal, interest and other amounts
      due and made to or on behalf of the holders of Unsecured Subordinated Debentures
      shall be made rateably to or for the benefit of each Holder thereof.






**ARTICLE I**


**DEFINITIONS**


1.1  Defined
      Terms .
      As used
      in this Unsecured Subordinated Debenture, the following expressions shall have
      the following meanings:




“ **Borrower** ”
means
      Tm Bioscience Corporation, a corporation incorporated under the laws of the
      Province of Ontario.




“ **Cash
      Infusion** ”
has
      the
      meaning ascribed thereto in Section 2.3 hereof.




“ **Event
      of Default** ”
has
      the
      meaning ascribed thereto in Article V hereof.




“ **Holder** ”
means Gundy
      Co., ITF A/C 515-0001427, 161 Bay Street, BCE Place, Toronto, Ontario, M5J
      2S8 .




“ **Maturity
      Date** ”
means
      the first anniversary of the date hereof.







“ **Obligations** ”
means
      all monies and all obligations now or at any time and from time to time
      hereafter owing or payable by the Borrower to the Holder under this Unsecured
      Subordinated Debenture (whether now existing, presently arising or created
      in
      the future), and whether direct or indirect, absolute or contingent, matured
      or
      not.




“ **Person** ”
means
      an individual, partnership, corporation, trust, unincorporated association,
      joint venture, governmental agency or other entity.




“ **Permitted
      Encumbrances** ”
has
      the
      meaning ascribed thereto in Schedule “A” hereof.




“ **Proceeding** ”
has
      the
      meaning ascribed thereto in Section 3.2 hereof.




“ **Subscription
      Agreement** ”
means
      the subscription agreement dated as of the date hereof between the Borrower
      and
      the Holder relating to the issuance of this Unsecured Subordinated Debenture
      by
      the Borrower to the Holder.




“ **Senior
      Debt** ”
has
      the
      meaning ascribed thereto in Section 3.1 hereof.






**ARTICLE II**


**INTEREST
      & REPAYMENT**




2.1  Interest .
      The
      interest payable on this Unsecured Subordinated Debenture shall accrue at eleven
      percent (11%) per annum, **** payable
      monthly in arrears.




2.2  Optional
      Prepayment .
      The
      Borrower may prepay to the Holder, at any time prior to the Maturity Date,
      the
      then remaining principal amount, in whole or in part, together with accrued
      but
      unpaid interest thereon, if any, then due, accrued, payable or owing to the
      Holder under this Unsecured Subordinated Debenture.




2.3  Mandatory
      Prepayment .
      The
      Borrower shall prepay this Unsecured Subordinated Debenture by paying to the
      Holder the then remaining principal amount of the Unsecured Subordinated
      Debenture together with accrued but unpaid interest thereon, if any, then due,
      accrued, payable or owing to the Holder under this Unsecured Subordinated
      Debenture, within 30 days of any investment, offering (of debt or equity),
      receipt of capital contributions, investment income or partnership proceeds,
      sale of assets or shares, or any similar transaction (collectively, a
“ **Cash
      Infusion** ”)
      that
      results in net proceeds to the Borrower of fifteen million dollars ($15,000,000)
      or more. In the event the Cash Infusion results in net proceeds to the Company
      of less than fifteen million dollars ($15,000,000), the Company shall prepay
      this Unsecured Subordinated Debenture by paying to the Holder a *pro
      rata* portion
      of the then remaining principal amount of the Unsecured Subordinated Debenture,
      being the proportion of the actual amount of the net proceeds to the Company
      of
      the Cash Infusion relative to fifteen million dollars ($15,000,000) together
      with accrued but unpaid interest, if any, then due, accrued, payable or owing
      to
      the Holder under this Unsecured Subordinated Debenture, within 30 days of the
      Cash Infusion.




2.4  No
      Gross-Up Payments
      of principal and interest on this Unsecured Subordinated Debenture shall not
      be
      increased to take into account any taxes, levies, imposts, deductions, charges
      or withholdings, including any Canadian withholding taxes payable in respect
      of
      interest or amounts deemed to be interest on this Unsecured Subordinated
      Debenture. For greater certainty, the Borrower shall not be responsible for
      any
      present or future stamp or documentary taxes or any other excise or property
      taxes, charges or similar levies that arise from any payment hereunder or from
      the execution, delivery or registration of, or otherwise with respect to, this
      Unsecured Subordinated Debenture.




2




**ARTICLE III**


**SUBORDINATION**




3.1  The
      Obligations are expressly subordinated and postponed, to the extent and in
      the
      manner provided in this Article III without any further action or documentation
      whatsoever being necessary to give effect to such subordination, in right of
      payment to the prior payment in full of the secured convertible note dated November
      22, 2005 held by
      Laurus Master Fund, Ltd. and any refinancings and renewals thereof (the
“ **Senior
      Debt** ”).




3.2  In
      the
      event of any insolvency or bankruptcy proceedings, or any receivership,
      liquidation, reorganization or other similar proceedings relating to the
      Borrower, or to its property or assets, or in the event of any proceedings
      for
      voluntary liquidation, dissolution or other winding-up of the Borrower, whether
      or not involving insolvency or bankruptcy, or any marshalling of the assets
      and
      liabilities of the Borrower (collectively referred to as a “ **Proceeding** ”),
      the
      holders of Senior Debt shall be entitled to receive payment in full of all
      the
      Senior Debt before the Holder shall be entitled to receive any payment or
      distribution of any kind or character, whether in cash, property or securities
      which may be payable or deliverable in any such event in respect of this
      Unsecured Subordinated Debenture.




3.3  Upon
      any
      payment or distribution of assets of the Borrower referred to in this Article
      III, the Holder shall be entitled to call for and rely upon a certificate,
      addressed to the Holder, of the Person making the payment or distribution for
      the purpose of ascertaining (i) the Persons entitled to participate in the
      distribution, (ii) the holder of Senior Debt and other indebtedness of the
      Borrower, (iii) the amount of the indebtedness, (iv) the amount or amounts
      paid
      or distributed, and (v) all other pertinent facts.




3.4  Subject
      to the payment in full of all Senior Debt, the Holder shall be subrogated to
      the
      rights of the holder of Senior Debt to receive payments and distributions of
      property and assets of the Borrower in respect of and on account of Senior
      Debt,
      to the extent of the application thereto of moneys or other assets which would
      have been received by the Holder but for the provisions of this Article III,
      until the principal of and interest on this Unsecured Subordinated Debenture
      shall be paid in full. No payment or distribution of assets of the Borrower
      to
      the Holder which would be payable or distributable to the holder of Senior
      Debt
      pursuant to this Article III shall, as between the Borrower, its creditors
      (other than the holder of Senior Debt) and the Holder, be deemed to be a payment
      by the Borrower to or on account of the Holder, it being understood that the
      provisions of this Article III are, and are intended, solely for the purpose
      of
      defining the relative rights of the Holder on the one hand, and the holder
      of
      the Senior Debt on the other hand. Nothing contained in this Article III or
      elsewhere in this Unsecured Subordinated Debenture is intended to or shall
      impair, as between the Borrower and its creditors (other than the holders of
      Senior Debt), the obligation of the Borrower, which is unconditional and
      absolute, to pay to the Holder the principal of and interest on this Unsecured
      Subordinated Debenture and any other amounts payable under this Unsecured
      Subordinated Debenture as and when the same shall become due and payable in
      accordance with its terms, or to affect the relative rights of the Holder and
      creditors of the Borrower other than the holder of the Senior Debt, nor shall
      anything herein or therein prevent the Holder from exercising all remedies
      otherwise permitted by applicable law upon default under this Unsecured
      Subordinated Debenture, subject to the rights, if any, under this Article III,
      of the holder of Senior Debt upon the exercise of any such remedy.




3


3.5  In
      the
      event that, notwithstanding the foregoing provisions of this Article III, the
      Holder shall have received any payment after a Proceeding has commenced and
      before all Senior Debt has been paid in full, the Holder shall hold such payment
      in trust for the benefit of the holders of Senior Debt and shall immediately,
      upon the completion of the Proceeding, pay the payment over to the holders
      of
      Senior Debt for application against unpaid Senior Debt.




3.6  For
      greater certainty, this Article III shall not be construed so as to prevent
      the
      Holder from receiving and retaining any payments on account of this Unsecured
      Subordinated Debenture which are made (i) in a manner that is consistent with
      the terms of this Unsecured Subordinated Debenture or the Subscription
      Agreement, and (ii) at any time when no event of default, as defined in the
      instruments creating any Senior Debt, has occurred and is continuing and in
      respect of which notice has been given by or on behalf of the holder of Senior
      Debt to the Borrower and the Holder. Until written notice has been given to
      the
      Holder by or on behalf of any holder of any Senior Debt of the occurrence of
      any
      default with respect to the Senior Debt or the existence of any other facts
      which would have the result that any payment in respect of this Unsecured
      Subordinated Debenture would be in contravention of the provisions of this
      Article III, the Holder shall be entitled to assume that no such default has
      occurred, or that no such facts exist.




3.7  The
      holder of Senior Debt shall be entitled to rely and shall be third party
      beneficiaries of the provisions of this Article III.






**ARTICLE IV**


**COVENANTS
      OF THE BORROWER**




The
      Borrower
      hereby covenants and agrees for the benefit of the Holder, that so long as
      this
      Unsecured Subordinated Debenture remains outstanding:




4.1  To
      Pay
      Principal Amount and Interest. The
      Borrower will duly and punctually pay or cause to be duly and punctually paid
      to
      the Holder, all amounts payable by the Borrower under this Unsecured
      Subordinated Debenture at the times and places and in the currency and manner
      mentioned therein.




4.2  Proper
      Records. The
      Borrower will maintain proper books of account and other records in accordance
      with applicable generally accepted accounting principles, consistent with past
      practice.




4.3  Insurance. The
      Borrower will maintain insurance at all times with financially sound and
      reputable insurers and in such amounts and covering such risks as the Borrower
      reasonably believes is customary for companies engaged in similar businesses
      and
      owning similar properties in the same general areas and to the extent available
      on commercially reasonable terms.




4.4  Compliance
      with Laws. The
      Borrower will comply in all material respects with all applicable laws, rules,
      regulations, permits, authorizations, consents and orders, the non-compliance
      with which would materially adversely affect the ability of the Borrower to
      perform its obligations under this Unsecured Subordinated
      Debenture.




4


4.5  Notice
      of Default. The
      Borrower will give the Holder notice of the occurrence of any Event of Default
      pursuant to this Unsecured Subordinated Debenture or any event which, with
      the
      lapse of time or the giving of notice or both, would constitute an Event of
      Default;




4.6  Notice
      of Litigation. The
      Borrower shall give the Holder, as soon as practicable after it shall become
      aware of the commencement or threat in writing of any material action,
      proceeding, arbitration or investigation against the Borrower or any material
      part of its properties, assets or business.




4.7  Existence. The
      Borrower shall preserve and maintain its legal existence in good standing and
      shall qualify and remain duly qualified to carry on business and own property
      in
      each jurisdiction in which failure to maintain such qualification would have
      a
      material adverse effect on the business or existence of the
      Borrower.




4.8  Use
      of
      Proceeds. The
      Borrower shall use the proceeds of this Unsecured Subordinated Debenture for
      the
      Borrower’s pipeline of genetic tests and for general corporate purposes.




4.9  Reporting
      Issuer Status. The
      Borrower will maintain reporting issuer status in at least the provinces of
      British Columbia, Alberta, Manitoba, Ontario and Quebec.




4.10  Inspection. At all
      reasonable times the Borrower will, upon prior written notice, furnish or cause
      to be furnished to the Holder or its duly authorized agent or attorney such
      information relating to its business as the Holder may reasonably require and
      such books of account shall at all reasonable times be open for inspection
      by
      the Holder or such agent or attorney of the Holder.




4.11  Financial
      Statements. Upon the
      reasonable request of the holder, the Borrower will furnish to the Holder a
      copy
      of all financial statements, whether annual or interim, of the Borrower and
      the
      report, if any, of the Borrower’s auditors thereon and of all annual and other
      periodic reports of the Borrower, if any, furnished to its shareholders at
      the
      same time as they are furnished to the shareholders.




4.12  Negative
      Covenants. The
      Borrower will not, without the consent of the Holder:




(a)
            make
                any amendment to the articles of the Borrower in a manner which may
                prejudice the Holder or could reasonably be expected to result in
                a
                material adverse change to the
                Borrower;




(b)
            make
                any payment of any dividend to any shareholder of the
                Borrower;




(c)****
            create,
                incur, grant, assume or suffer to exist any mortgages, charges or
                security
                interest over the property and assets of the Borrower other than
                the
                Permitted Encumbrances;




(d)
            prepay
                any debt obligations which are subordinate in right of payment to
                the
                prior payment in full of the Obligations, in advance of the maturity
                date
                or such other date as may be otherwise prescribed by the instrument
                creating such debt obligation;






5




(e)
            guarantee
                the obligations of any Person, other than obligations secured by
                a
                Permitted Encumbrance or obligations incurred in the ordinary course
                of
                business; and




(f)
            enter
                into a transaction with any Person not dealing at arm’s length (as defined
                in the*Income
                Tax Act*(Canada))
                with the Borrower outside the ordinary course of
                business.






**ARTICLE
      V**


**EVENTS
      OF DEFAULT AND DEFAULT RELATED PROVISIONS**




Upon
      the
      occurrence and continuance of an Event of Default (as defined below), the Holder
      may by notice in writing to the Borrower declare the principal amount and all
      accrued interest thereon, and all other amounts, if any, accruing, payable
      or
      owing under this Unsecured Subordinated Debenture to be immediately due and
      payable.




The
      occurrence of any of the following events set forth in Sections 5.1 through
      5.7, inclusive, constitutes an “ **Event
      of Default** ”:




5.1  Failure
      to Pay Principal, Interest or other Amounts .
      The
      Borrower fails to pay when due any instalment of principal, interest or other
      amounts in accordance herewith, or the Borrower fails to pay when due any amount
      due under any other Unsecured Subordinated Debenture issued by Borrower, and
      in
      any such case, such failure shall continue for a period of five (5) business
      days following the date upon which any such payment was due.




5.2  Breach
      of Covenant .
      The
      Borrower breaches any covenant or any other term or condition of this Unsecured
      Subordinated Debenture in any material respect, and such breach, if subject
      to
      cure, continues for a period of twenty (20) business days after the occurrence
      thereof.




5.3  Receiver
      or Trustee .
      The
      Borrower or any of its subsidiaries shall make an assignment for the benefit
      of
      creditors, or apply for or consent to the appointment of a receiver or trustee
      for it or for a substantial part of its property or business; or such a receiver
      or trustee shall otherwise be appointed, and such appointment is not contested
      by the Borrower in good faith within five (5) business days of such
      appointment.




5.4  Bankruptcy .
      Bankruptcy, insolvency, reorganization or liquidation proceedings or other
      proceedings or relief under any bankruptcy law or any law for the relief of
      debtors shall be instituted by or against the Borrower or any of its
      subsidiaries, unless in any case such proceeding or process is stayed,
      withdrawn, dismissed or vacated, as the case may be, within ninety (90)
      days.




5.5  Default
      Under Other Agreements .
      The
      occurrence and continuance of any event of default (or similar term) by the
      Borrower under any other indebtedness (including
      without limitation any claim under a guarantee, acceleration of or demand under
      existing credit agreements or action taken concerning the enforcement of
      security) which
      is
      not incurred in the ordinary course of business  and
      which
      is for an amount in excess of $ 100,000 .




5.6  Default
      Interest Rate .
      Following the occurrence and during the continuance of an Event of
      Default, **** all
      outstanding obligations under this Unsecured Subordinated Debenture, including
      unpaid interest, shall continue to accrue such interest at eleven percent (11%)
      per annum from the date of such Event of Default until the date such Event
      of
      Default is cured or waived.




6


5.7  Cumulative
      Remedies .
      The
      remedies under this Unsecured Subordinated Debenture shall be
      cumulative.






**ARTICLE VI**


**MISCELLANEOUS**




6.1  Currency .
      All
      principal, interest and other amounts owing under this Unsecured Subordinated
      Debenture, that in accordance with their terms, are paid in cash shall be paid
      in Canadian dollars.




6.2  Failure
      or Indulgence Not Waiver .
      No
      failure or delay on the part of the Holder hereof in the exercise of any power,
      right or privilege hereunder shall operate as a waiver thereof, nor shall any
      single or partial exercise of any such power, right or privilege preclude other
      or further exercise thereof or of any other right, power or privilege. All
      rights and remedies existing hereunder are cumulative to, and not exclusive
      of,
      any rights or remedies otherwise available.




6.3  Notices .
      Any
      notice herein required or permitted to be given shall be in writing and shall
      be
      deemed effectively received: (a) upon personal delivery to the party notified,
      (b) when sent by confirmed telex or facsimile on the business day of the sending
      (provided it was sent before 4:30 p.m. Toronto time), if not, then on the next
      business day, and the applicable printed facsimile record shall be definitive
      evidence of the time and date of such telex or facsimile transmission, or (c)
      one day after deposit with a nationally recognized overnight courier, specifying
      next day delivery, with written verification of receipt. All communications
      shall be sent to the Borrower at 439 University Avenue, Toronto, Ontario, M5G
      158, attention: James Pelot, Chief Operating Officer and Chief Financial
      Officer, and to the Holder at the address provided in the Subscription Agreement
      for such Holder, or at such other address as the Borrower or the Holder may
      designate by ten (10) days advance written notice to the other parties hereto.




6.4  Amendment
      Provision .
      The
      term “Unsecured Subordinated Debenture” and all reference thereto, as used
      throughout this instrument, shall mean this instrument as originally executed,
      or if later amended or supplemented, then as so amended or
      supplemented.




6.5  Assignability .
      This
      Unsecured Subordinated Debenture shall be binding upon the Borrower and its
      successors and assigns, and shall inure to the benefit of the Holder and its
      successors and assigns, and may be assigned by the Holder with the consent
      of
      the Borrower, such consent not to be unreasonably withheld. Notwithstanding
      the
      foregoing, the Holder shall have the right to assign this Unsecured Subordinated
      Debenture to an affiliate (as such term is defined in the *Business
      Corporations Act* (Ontario)) without the consent of the Borrower. This Unsecured Subordinated
      Debenture shall not be assigned by the Borrower without the consent of the
      Holder, such consent not to be unreasonably withheld. All assignments and
      transfers of this Unsecured Subordinated Debenture shall be in accordance with
      applicable securities laws.




6.6  Governing
      Law .
      This
      Unsecured Subordinated Debenture will be governed by, interpreted and enforced
      in accordance with the laws of the Province of Ontario and the federal laws
      of
      Canada applicable therein.




6.7  Maximum
      Payments .
      Nothing
      contained herein shall be deemed to establish or require the payment of a rate
      of interest or other charges in excess of the maximum permitted by applicable
      law. In the event that the rate of interest required to be paid or other charges
      hereunder exceed the maximum permitted by such law, any payments in excess
      of
      such maximum shall be credited against amounts owed by the Borrower to the
      Holder and thus refunded to the Borrower.




7


6.8  Construction .
      Each
      party acknowledges that its legal counsel participated in the preparation of
      this Unsecured Subordinated Debenture and, therefore, stipulates that the rule
      of construction that ambiguities are to be resolved against the drafting party
      shall not be applied in the interpretation of this Unsecured Subordinated
      Debenture to favor any party against the other.




6.9  Counterparts. This
      Unsecured Subordinated Debenture may be executed in any number of counterparts
      and all such counterparts taken together shall be deemed to constitute one
      and
      the same instrument.




6.10  Cost
      of Collection .
      If
      default is made in the payment of this Unsecured Subordinated Debenture, the
      Borrower shall pay to Holder reasonable costs of collection, including
      reasonable legal fees.




6.11  Third
      Party Beneficiary Clause .
      There
      are no third party beneficiaries under this Unsecured Subordinated Debenture
      other than the holders of Senior Debt.




**IN
      WITNESS
      WHEREOF** ,
      the
      parties have executed this Unsecured Subordinated Debenture as of this _____
      day
      of August, 2006.




**TM
              BIOSCIENCE CORPORATION**By:
            /s/ James
              PelotName:James
              PelotTitle






**GUNDY
                CO.**By:
            /s/Name:Title












8




**SCHEDULE** **“****A****”**




**PERMITTED
      ENCUMBRANCES**




“ **Permitted
      Encumbrances** ”
means
      any of the following:





(i)
            liens
                for taxes, assessments, governmental charges or levies not at the
                time due
                unless contested in good faith by all necessary proceedings;




(ii)
            defects
                or irregularities in title to land, easements, rights of way or other
                similar rights in land existing at the date hereof which individually
                or
                in the aggregate do not materially impair the usefulness in the business
                of the Borrower, its subsidiaries or the property subject
                thereto;




(iii)
            rights
                reserved to or vested in any municipality or governmental or other
                public
                authority by the terms of any lease, licence, franchise, grant or
                permit,
                or by any statutory provision, to terminate the same or to require
                annual
                or other periodic payments as a condition to the continuance
                thereof;




(iv)
            any
                lien or encumbrance the validity of which is being contested by the
                Borrower in good faith and in respect of which either there shall
                have
                been deposited with the Holder cash in an amount sufficient to satisfy
                the
                same or the Holder shall be otherwise satisfied that its interests
                are not
                prejudiced thereby;




(v)
            any
                reservations, limitations, provisos and conditions expressed in any
                original grant from the Crown;




(vi)
            title
                defects or irregularities which, in the opinion of counsel to the
                Holder,
                are of a minor nature and in the aggregate shall not materially impair
                the
                usefulness in the business of the Company or its
                Subsidiaries;




(vii)
            a
                security interest in cash or governmental obligations deposited in
                the
                ordinary course of business in connection with contracts, bids, tenders
                or
                to secure worker’s compensation, unemployment insurance, surety or appeal
                bonds, costs of litigation when required by law, public and statutory
                obligations, liens or claims incidental to current construction,
                mechanics’, warehousemen’s, carriers’ and other similar
                liens;




(viii)
            security
                given in the ordinary course of business to a public utility or any
                municipality or governmental or other public authority when required
                by
                such utility or municipality or governmental or other authority in
                connection with the operations of the Borrower or any of its subsidiaries;




(ix)
            a
                security interest arising under a lease (other than a lease for real
                property) entered into in the ordinary course of business over the
                goods
                that are the subject matter of such lease, to an aggregate amount
                of
                $500,000;




(x)
            a
                security interest in or title retention relating to equipment (not
                constituting, for greater certainty, inventory) which is created
                to secure
                the unpaid purchase price thereof or retain title thereto until so
                paid,
                provided that each such security interest is limited to the asset
                so
                acquired (and any insurance or other proceeds thereof) and does not
                secure
                an amount in excess of the purchase price thereof or any re-advance
                on the
                security of the equipment;











(xi)
            security
                interests or any security granted by the Company in connection with
                the
                letter of credit issued by the Royal Bank of Canada in favour of
                Luminex
                Corporation and in connection with the secured convertible note issued
                by
                the Borrower to Laurus Master Fund, Ltd., and any refinancings and
                renewals thereof;




(xii)
            other
                encumbrances arising by operation of law or which are not material
                in
                character, amount, and extent and do not materially detract from
                the value
                of the property subject thereto, the use of the Borrower’s or any of its
                subsidiaries’ assets or materially impair the operations of the Borrower
                or any of its subsidiaries; and




(xiii)
            liens
                held by customers or suppliers of the Borrower or any of its subsidiaries
                in respect of the work-in-progress relating to: (i) goods under production
                for customers and any assignment of such liens to third parties as
                approved by the Holder; (ii) all equipment drop shipped to the Borrower
                or
                any of its subsidiaries by its customers (or suppliers) for integration
                to
                machinery which is owned by such customers (or suppliers); and (iii)
                in
                leasehold improvements.









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