Document:

Exhibit
      4.2

     

    [FORM
      OF 8% SECURED CONVERTIBLE NOTE]

     

    NEITHER
      THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
      THE
      SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
      LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
      (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL
      TO
      THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO
      THE
      COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
      OR
      ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
      NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
      WITH
      A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY
      THE
      SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF
      THIS NOTE, INCLUDING SECTIONS 3(c)(iii) AND 18(a) HEREOF. THE PRINCIPAL AMOUNT
      REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE UPON
      CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF
      PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.

    

      GENEREX
        BIOTECHNOLOGY CORPORATION

       

      SENIOR
        SECURED CONVERTIBLE NOTE

    

     

    
      	
              Issuance
                Date: March 31, 2008

            	
              Original
                Principal Amount: U.S. 

            

    

    

    FOR
      VALUE RECEIVED,
      Generex
      Biotechnology Corporation, a Delaware corporation (the “Company”),
      hereby promises to pay to the order of ____________________ or
      registered assigns (“Holder”)
      the
      amount set out above as the Original Principal Amount (as reduced pursuant
      to
      the terms hereof pursuant to redemption, conversion or otherwise, the
“Principal”)
      when
      due, whether upon the Maturity Date (as defined below), on any Installment
      Date
      with respect to the Installment Amount due on such Installment Date (each,
      as
      defined herein), acceleration, redemption or otherwise (in each case in
      accordance with the terms hereof) and to pay interest (“Interest”)
      on any
      outstanding Principal at the applicable Interest Rate from the date set out
      above as the Issuance Date (the “Issuance Date”)
      until
      the same becomes due and payable, whether upon an Interest Date (as defined
      below), any Installment Date or the Maturity Date or acceleration, conversion,
      redemption or otherwise (in each case in accordance with the terms hereof).
      This
      Senior Secured Convertible Note (including all Senior Secured Convertible Notes
      issued in exchange, transfer or replacement hereof, this “Note”)
      is one
      of an issue of Senior Secured Convertible Notes issued pursuant to the
      Securities Purchase Agreement on the Closing Date (collectively, the
“Notes”
and
      such other Senior Convertible Notes, the “Other Notes”).
      Certain capitalized terms used herein are defined in Section
      28.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    1. PAYMENTS
      OF PRINCIPAL.
      On each
      Installment Date (which includes the Maturity Date), the Company shall pay
      to
      the Holder an amount equal to the Installment Amount due on such Installment
      Date in accordance with Section 8. Other than as specifically permitted by
      this
      Note, the Company may not prepay any portion of the outstanding Principal,
      accrued and unpaid Interest or accrued and unpaid Late Charges on Principal
      and
      Interest, if any.

     

    2. INTEREST;
      INTEREST RATE.
      Interest on this Note shall commence accruing on the Issuance Date, shall accrue
      daily at the Interest Rate on the outstanding Principal amount from time to
      time, shall be computed on the basis of a 360-day year comprised of twelve
      (12)
      thirty (30) day months and shall be payable in arrears for each Quarter on
      the
      first Installment Date immediately following the end of such Quarter during
      the
      period beginning on the Issuance Date and ending on, and including, the Maturity
      Date (each, an “Interest Date”),
      with
      the first Interest Date being August 1, 2008. Interest shall be payable on
      each
      Interest Date in accordance with Section 8 as part of the Installment Amount,
      to
      the record holder of this Note on the applicable Interest Date, and
      to
      the extent that any Principal amount of this Note is converted prior to such
      Interest Date, accrued and unpaid Interest with respect to such converted
      Principal amount and accrued and unpaid Late Charges with respect to such
      Principal and Interest shall be paid on the applicable Conversion Date (as
      defined below) to the record holder of this Note, in
      cash.
      From and after the occurrence and during the continuance of any Event of
      Default, the Interest Rate shall be increased to sixteen percent (16%). In
      the
      event that such Event of Default is subsequently cured, the adjustment referred
      to in the preceding sentence shall cease to be effective as of the date of
      such
      cure; provided that the Interest as calculated and unpaid at such increased
      rate
      during the continuance of such Event of Default shall continue to apply to
      the
      extent relating to the days after the occurrence of such Event of Default
      through and including the date of such cure of such Event of
      Default.

     

    3. CONVERSION
      OF NOTES.
      This
      Note shall be convertible into shares of Common Stock (as defined below), on
      the
      terms and conditions set forth in this Section 3.

     

    (a) Conversion
      Right.
      Subject
      to the provisions of Section 3(d), at any time or times on or after the Issuance
      Date, the Holder shall be entitled to convert any portion of the outstanding
      and
      unpaid Conversion Amount (as defined below) into fully paid and nonassessable
      shares of Common Stock in accordance with Section 3(c), at the Conversion Rate
      (as defined below). The Company shall not issue any fraction of a share of
      Common Stock upon any conversion. If the issuance would result in the issuance
      of a fraction of a share of Common Stock, the Company shall round such fraction
      of a share of Common Stock up to the nearest whole share. The Company shall
      pay
      any and all transfer, stamp and similar taxes that may be payable with respect
      to the issuance and delivery of Common Stock upon conversion of any Conversion
      Amount.

     

    (b) Conversion
      Rate.
      The
      number of shares of Common Stock issuable upon conversion of any Conversion
      Amount pursuant to Section 3(a) shall be determined by dividing (x) such
      Conversion Amount by (y) the Conversion Price (the “Conversion
      Rate”).

    
      
        
        

      

      
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    (i) “Conversion
      Amount”
means
      the portion of the Principal to be converted, redeemed or otherwise with respect
      to which this determination is being made.

     

    (ii) “Conversion
      Price”
means,
      as of any Conversion Date or other date of determination, $1.21, subject to
      adjustment as provided herein.

     

    (c) Mechanics
      of Conversion.

     

    (i) Optional
      Conversion.
      To
      convert any Conversion Amount into shares of Common Stock on any date (a
“Conversion
      Date”),
      the
      Holder shall (A) transmit by facsimile (or otherwise deliver), for receipt
      on or
      prior to 11:59 p.m., New York time, on such date, a copy of an executed notice
      of conversion in the form attached hereto as Exhibit
      I
      (the
“Conversion
      Notice”)
      to the
      Company and (B) if required by Section 3(c)(iii), surrender this Note to a
      nationally recognized overnight delivery service for delivery to the Company
      (or
      an indemnification undertaking with respect to this Note in the case of its
      loss, theft or destruction). On or before the first (1st)
      Trading
      Day following the date of receipt of a Conversion Notice, the Company shall
      transmit by facsimile an acknowledgment of confirmation of receipt of such
      Conversion Notice to the Holder and the Company’s transfer agent (the
“Transfer
      Agent”).
      On or
      before the second (2nd)
      Trading
      Day following the date of receipt of a Conversion Notice (the “Share
      Delivery Date”),
      the
      Company shall (1) provided that the Transfer Agent is participating in The
      Depository Trust Company’s (“DTC”)
      Fast
      Automated Securities Transfer Program, credit such aggregate number of shares
      of
      Common Stock to which the Holder shall be entitled to the Holder’s or its
      designee’s balance account with DTC through its Deposit Withdrawal Agent
      Commission system or (Y) if the Transfer Agent is not participating in the
      DTC
      Fast Automated Securities Transfer Program, issue and deliver (via reputable
      overnight courier) to the address as specified in the Conversion Notice, a
      certificate, registered in the name of the Holder or its designee, for the
      number of shares of Common Stock to which the Holder shall be entitled; and
      (2)
      pay to the Holder in cash an amount equal to the accrued and unpaid Interest
      on
      the Conversion Amount up to and including the Conversion Date, including
accrued
      and unpaid Late Charges with respect to such Conversion Amount and
      Interest.
      If this
      Note is physically surrendered for conversion as required by Section 3(c)(iii)
      and the outstanding Principal of this Note is greater than the Principal portion
      of the Conversion Amount being converted, then the Company shall as soon as
      practicable and in no event later than three (3) Business Days after receipt
      of
      this Note and at its own expense, issue and deliver to the Holder (or its
      designee) a new Note (in accordance with Section 18(d)) representing the
      outstanding Principal not converted. The Person or Persons entitled to receive
      the shares of Common Stock issuable upon a conversion of this Note shall be
      treated for all purposes as the record holder or holders of such shares of
      Common Stock on the Conversion Date. In the event of a partial conversion of
      this Note pursuant hereto, the Principal amount converted shall be deducted
      from
      the Installment Amount(s) relating to the Installment Date(s) as set forth
      in
      the Conversion Notice.

    
      
        
        

      

      
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    (ii) Company’s
      Failure to Timely Convert.
      If the
      Company shall fail, for any reason or for no reason, to issue to the Holder
      within three (3) Trading Days after the Company’s receipt of a facsimile copy of
      a Conversion Notice, a certificate for the number of shares of Common Stock
      to
      which the Holder is entitled and register such shares of Common Stock on the
      Company’s share register or to credit the Holder’s or its designee’s balance
      account with DTC for such number of shares of Common Stock to which the Holder
      is entitled upon the Holder’s conversion of any Conversion Amount (as the case
      may be) (a “Conversion
      Failure”),
      then,
      in addition to all other remedies available to the Holder, (1) the Company
      shall
      pay in cash to the Holder on each day after such third (3rd)
      Trading
      Day that the issuance of such shares of Common Stock is not timely effected
      an
      amount equal to 2% of the product of (A) the sum of the number of shares of
      Common Stock not issued to the Holder on a timely basis and to which the Holder
      is entitled and (B) the Closing Sale Price of the Common Stock on the Trading
      Day immediately preceding the last possible date which the Company could have
      issued such shares of Common Stock to the Holder without violating Section
      3(c)(i) and (2) the Holder, upon written notice to the Company, may void its
      Conversion Notice with respect to, and retain or have returned (as the case
      may
      be) any portion of this Note that has not been converted pursuant to such
      Conversion Notice; provided
      that the
      voiding of a Conversion Notice shall not affect the Company’s obligations to
      make any payments which have accrued prior to the date of such notice pursuant
      to this Section 3(c)(ii) or otherwise. In addition to the foregoing, if within
      three (3) Trading Days after the Company’s receipt of the facsimile copy of a
      Conversion Notice, the Company shall fail to issue and deliver a certificate
      to
      the Holder and register such shares of Common Stock on the Company’s share
      register or credit the Holder’s or its designee’s balance account with DTC for
      the number of shares of Common Stock to which the Holder is entitled upon the
      Holder’s conversion hereunder (as the case may be), and if on or after such
      third (3rd)
      Trading
      Day the Holder purchases (in an open market transaction or otherwise) shares
      of
      Common Stock to deliver in satisfaction of a sale by the Holder of shares of
      Common Stock issuable upon such conversion that the Holder anticipated receiving
      from the Company (a “Buy-In”),
      then
      the Company shall, within three (3) Business Days after the Holder’s request and
      in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal
      to the Holder’s total purchase price (including brokerage commissions and other
      out-of-pocket expenses, if any) for the shares of Common Stock so purchased
      (the
“Buy-In
      Price”),
      at
      which point the Company’s obligation to deliver such certificate (and to issue
      such shares of Common Stock) shall terminate, or (ii) promptly honor its
      obligation to deliver to the Holder a certificate or certificates representing
      such shares of Common Stock or credit the Holder’s balance account with DTC for
      the number of shares of Common Stock to which the Holder is entitled upon the
      Holder’s conversion hereunder (as the case may be) and pay cash to the Holder in
      an amount equal to the excess (if any) of the Buy-In Price over the product
      of
      (A) such number of shares of Common Stock times (B) the Closing Sale Price
      of
      the Common Stock on the Trading Day immediately preceding the Conversion
      Date.

    
      
        
        

      

      
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    (iii) Book-Entry.
      Notwithstanding anything to the contrary set forth herein, upon conversion
      of
      any portion of this Note in accordance with the terms hereof, the Holder shall
      not be required to physically surrender this Note to the Company unless (A)
      the
      full Conversion Amount represented by this Note is being converted or (B) the
      Holder has provided the Company with prior written notice (which notice may
      be
      included in a Conversion Notice) requesting reissuance of this Note upon
      physical surrender of this Note. The Holder and the Company shall maintain
      records showing the Principal, Interest and Late Charges converted and/or paid
      (as the case may be) and the dates of such conversions and/or payments (as
      the
      case may be) or shall use such other method, reasonably satisfactory to the
      Holder and the Company, so as not to require physical surrender of this Note
      upon conversion.

     

    (iv) Pro
      Rata Conversion; Disputes.
      In the
      event that the Company receives a Conversion Notice from more than one holder
      of
      Notes for the same Conversion Date and the Company can convert some, but not
      all, of such portions of the Notes submitted for conversion, the Company,
      subject to Section 3(d), shall convert from each holder of Notes electing to
      have Notes converted on such date a pro rata amount of such holder’s portion of
      its Notes submitted for conversion based on the principal amount of Notes
      submitted for conversion on such date by such holder relative to the aggregate
      principal amount of all Notes submitted for conversion on such date. In the
      event of a dispute as to the number of shares of Common Stock issuable to the
      Holder in connection with a conversion of this Note, the Company shall issue
      to
      the Holder the number of shares of Common Stock not in dispute and resolve
      such
      dispute in accordance with Section 23.

     

    (d) Limitations
      on Conversions.

     

    (i) Beneficial
      Ownership.
      Notwithstanding
      anything to the contrary contained in this Note, this Note shall not be
      convertible by the Holder hereof, and the Company shall not effect any
      conversion of this Note or otherwise issue any shares of Common Stock pursuant
      to Section 8 hereof, to the extent (but only to the extent) that, if after
      giving effect to such conversion, the Holder or any of its affiliates would
      beneficially own in excess of [4.99%] [9.99%] (the “Maximum
      Percentage”)
      of the
      outstanding shares of Common Stock immediately after giving effect to
      such conversion. To the extent the above limitation applies, the determination
      of whether this Note shall be convertible (vis-à-vis other convertible,
      exercisable or exchangeable securities owned by the Holder) shall, subject
      to
      such Maximum Percentage limitation, be determined on the basis of the first
      submission to the Company for conversion, exercise or exchange (as the case
      may
      be). No prior inability to convert this Note, or to issue shares of Common
      Stock, pursuant to this paragraph shall have any effect on the applicability
      of
      the provisions of this paragraph with respect to any subsequent
      determination of convertibility. For purposes of this paragraph, beneficial
      ownership and all determinations and calculations (including, without
      limitation, with respect to calculations of percentage ownership) shall be
      determined by the Holder in accordance with Section 13(d) of the 1934 Act (as
      defined in the Securities Purchase Agreement) and the rules and regulations
      promulgated thereunder. The provisions of this paragraph shall be implemented
      in
      a manner otherwise than in strict conformity with the terms of this paragraph
      to
      correct this paragraph (or any portion hereof) which may be defective or
      inconsistent with the intended Maximum Percentage beneficial ownership
      limitation herein contained or to make changes or supplements necessary or
      desirable to properly give effect to such Maximum Percentage limitation. The
      limitations contained in this paragraph shall apply to a successor Holder of
      this Note. For any reason at any time, upon the written or oral request of
      the
      Holder, the Company shall within one (1) Business Day confirm orally and in
      writing to the Holder the number of shares of Common Stock then outstanding,
      including by virtue of any prior conversion or exercise of convertible or
      exercisable securities into Common Stock, including, without limitation,
      pursuant to this Note or securities issued pursuant to the Securities Purchase
      Agreement. Each delivery of a Conversion Notice by the Holder will constitute
      a
      representation by the Holder that it has evaluated the limitation set forth
      in
      this paragraph and determined that issuance of the full number of Conversion
      Shares requested by the Holder in such Conversion Notice is permitted under
      this
      paragraph. 

    
      
        
        

      

      
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    (ii) Principal
      Market Regulation.
      The
      Company shall not issue any shares of Common Stock upon conversion of this
      Note
      (including, without limitation, under Section 8 hereof), and the Holder of
      this
      Note shall not have the right to receive upon conversion of this Note any shares
      of Common Stock, if the issuance of such shares of Common Stock would exceed
      the
      aggregate number of shares of Common Stock which the Company may issue upon
      conversion or exercise (as the case may be) of the Notes and Warrants without
      breaching the Company’s obligations under the rules or regulations of the
      Principal Market (the number of shares which may be issued without violating
      such rules and regulations, the “Exchange
      Cap”),
      except that such limitation shall not apply in the event that the Company (A)
      obtains Shareholder Approval (as defined in the Securities Purchase Agreement)
      as required by the applicable rules of the Principal Market for issuances of
      shares of Common Stock in excess of such amount or (B) obtains a written opinion
      from outside counsel to the Company that such approval is not required, which
      opinion shall be reasonably satisfactory to the Holder. Until Shareholder
      Approval or such written opinion is obtained, no purchaser of the Notes pursuant
      to the Securities Purchase Agreement (the “Buyers”)
      shall
      be issued in the aggregate, upon conversion or exercise or otherwise (as the
      case may be) of Notes or Warrants, shares of Common Stock in an amount greater
      than the product of the Exchange Cap multiplied by a fraction, the numerator
      of
      which is the original principal amount of Notes issued to such Buyer pursuant
      to
      the Securities Purchase Agreement on the Closing Date and the denominator of
      which is the aggregate original principal amount of all Notes issued to the
      Buyers pursuant to the Securities Purchase Agreement on the Closing Date (with
      respect to each Buyer, the “Exchange
      Cap Allocation”).
      In
      the event that any Buyer shall sell or otherwise transfer any of such Buyer’s
      Notes, the transferee shall be allocated a pro rata portion of such Buyer’s
      Exchange Cap Allocation, and the restrictions of the prior sentence shall apply
      to such transferee with respect to the portion of the Exchange Cap Allocation
      allocated to such transferee. In the event that any holder of Notes shall
      convert all of such holder’s Notes into a number of shares of Common Stock
      which, in the aggregate, is less than such holder’s Exchange Cap Allocation,
      then the difference between such holder’s Exchange Cap Allocation and the number
      of shares of Common Stock actually issued to such holder shall be allocated
      to
      the respective Exchange Cap Allocations of the remaining holders of Notes on
      a
      pro rata basis in proportion to the aggregate principal amount of the Notes
      then
      held by each such holder. In the event that the Company is prohibited from
      issuing any shares of Common Stock upon conversion of this Note as a result
      of
      the operation of this Section 3(d)(ii), the Company shall pay cash in exchange
      for cancellation of such shares of Common Stock, at a price per share equal
      to
      the difference between the Closing Sale Price of the Common Stock for the
      Trading Day immediately preceding the date of the attempted conversion and
      the
      applicable Conversion Price as of such date of attempted conversion. 

    
      
        
        

      

      
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    4. RIGHTS
      UPON EVENT OF DEFAULT.

     

    (a) Event
      of Default.
      Each of
      the following events shall constitute an “Event
      of Default”:

     

    (i) the
      failure of the applicable Registration Statement (as defined in the Registration
      Rights Agreement) to be filed with the SEC on or prior to the date that is
      ten
      (10) days after the applicable Filing Deadline (as defined in the Registration
      Rights Agreement) or the failure of the applicable Registration Statement to
      be
      declared effective by the SEC on or prior to the date that is twenty (20) days
      after the applicable Effectiveness Deadline (as defined in the Registration
      Rights Agreement);

     

    (ii) while
      the
      applicable Registration Statement is required to be maintained effective
      pursuant to the terms of the Registration Rights Agreement, the effectiveness
      of
      the applicable Registration Statement lapses for any reason (including, without
      limitation, the issuance of a stop order) or is unavailable to any holder of
      Registrable Securities (as defined in the Registration Rights Agreement) for
      sale of all of such holder’s Registrable Securities (as defined in the
      Registration Rights Agreement) in accordance with the terms of the Registration
      Rights Agreement, and such lapse or unavailability remains uncured for a period
      of five (5) consecutive Trading Days or for more than an aggregate of seven
      (7)
      Trading Days in any 365-day period (excluding days during an Allowable Grace
      Period (as defined in the Registration Rights Agreement));

     

    (iii) the
      suspension from trading or failure of the Common Stock to be listed on an
      Eligible Market for a period of five (5) consecutive days or for more than
      an
      aggregate of ten (10) days in any 365-day period;

     

    (iv) the
      Company’s (A) failure to cure a Conversion Failure by delivery of the required
      number of shares of Common Stock within five (5) Trading Days after the
      applicable Conversion Date or (B) notice, written or oral, to any holder of
      the
      Notes, including, without limitation, by way of public announcement or through
      any of its agents, at any time, of its intention not to comply with a request
      for conversion of any Notes into shares of Common Stock that is requested in
      accordance with the provisions of the Notes, other than pursuant to Section
      3(d);

    
      
        
        

      

      
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    (v) at
      any
      time following the tenth (10th)
      consecutive day that the Holder’s Authorized Share Allocation is less than the
      number of shares of Common Stock that the Holder would be entitled to receive
      upon a conversion of the full Conversion Amount of this Note (without regard
      to
      any limitations on conversion set forth in Section 3(d) or
      otherwise);

     

    (vi) the
      Company’s or any Subsidiary’s failure to pay to the Holder any amount of
      Principal, Interest, Late Charges or other amounts when and as due under this
      Note (including, without limitation, the Company’s or any Subsidiary’s failure
      to pay any redemption payments or amounts hereunder) or any other Transaction
      Document (as defined in the Securities Purchase Agreement) or any other
      agreement, document, certificate or other instrument delivered in connection
      with the transactions contemplated hereby and thereby to which the Holder is
      a
      party, except, in the case of a failure to pay Interest and Late Charges when
      and as due, in which case only if such failure remains uncured for a period
      of
      at least five (5) days;

     

    (vii) the
      Company fails to remove any restrictive legend on any certificate or any shares
      of Common Stock issued to the Holder upon conversion or exercise (as the case
      may be) of any Securities acquired by the Holder under the Securities Purchase
      Agreement (including this Note) as and when required by such Securities or
      the
      Securities Purchase Agreement, unless otherwise then prohibited by applicable
      federal securities laws, and any such remains uncured for at least five (5)
      days;

     

    (viii) the
      occurrence of any default under, redemption of or acceleration prior to maturity
      of any Indebtedness (as defined in the Securities Purchase Agreement) of the
      Company or any of its Subsidiaries, other than with respect to (A) Permitted
      Senior Indebtedness and (B) any Other Notes;

     

    (ix) bankruptcy,
      insolvency, reorganization or liquidation proceedings or other proceedings
      for
      the relief of debtors shall be instituted by or against the Company or any
      Material Subsidiary and, if instituted against the Company or any Material
      Subsidiary by a third party, shall not be dismissed within thirty (30) days
      of
      their initiation;

     

    (x) the
      commencement by the Company or any Material Subsidiary of a voluntary case
      or
      proceeding under any applicable federal, state or foreign bankruptcy,
      insolvency, reorganization or other similar law or of any other case or
      proceeding to be adjudicated a bankrupt or insolvent, or the consent by it
      to
      the entry of a decree, order, judgment or other similar document in respect
      of
      the Company or any Material Subsidiary in an involuntary case or proceeding
      under any applicable federal, state or foreign bankruptcy, insolvency,
      reorganization or other similar law or to the commencement of any bankruptcy
      or
      insolvency case or proceeding against it, or the filing by it of a petition
      or
      answer or consent seeking reorganization or relief under any applicable federal,
      state or foreign law, or the consent by it to the filing of such petition or
      to
      the appointment of or taking possession by a custodian, receiver, liquidator,
      assignee, trustee, sequestrator or other similar official of the Company or
      any
      Material Subsidiary or of any substantial part of its property, or the making
      by
      it of an assignment for the benefit of creditors, or the execution of a
      composition of debts, or the occurrence of any other similar federal, state
      or
      foreign proceeding, or the admission by it in writing of its inability to pay
      its debts generally as they become due, the taking of corporate action by the
      Company or any Material Subsidiary in furtherance of any such action or the
      taking of any action by any Person to commence a UCC foreclosure sale or any
      other similar action under federal, state or foreign law;

    
      
        
        

      

      
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    (xi) the
      entry
      by a court of (i) a decree, order, judgment or other similar document in respect
      of the Company or any Material Subsidiary of a voluntary or involuntary case
      or
      proceeding under any applicable federal, state or foreign bankruptcy,
      insolvency, reorganization or other similar law or (ii) a decree, order,
      judgment or other similar document adjudging the Company or any Material
      Subsidiary as bankrupt or insolvent, or approving as properly filed a petition
      seeking liquidation, reorganization, arrangement, adjustment or composition
      of
      or in respect of the Company or any Material Subsidiary under any applicable
      federal, state or foreign law or (iii) a decree, order, judgment or other
      similar document appointing a custodian, receiver, liquidator, assignee,
      trustee, sequestrator or other similar official of the Company or any Material
      Subsidiary or of any substantial part of its property, or ordering the winding
      up or liquidation of its affairs, and the continuance of any such decree, order,
      judgment or other similar document or any such other decree, order, judgment
      or
      other similar document unstayed and in effect for a period of thirty (30)
      consecutive days;

     

    (xii) a
      final
      judgment or judgments for the payment of money aggregating in excess of $500,000
      are rendered against the Company and/or any of its Subsidiaries and which
      judgments are not, within thirty (30) days after the entry thereof, bonded,
      discharged or stayed pending appeal, or are not discharged within thirty (30)
      days after the expiration of such stay; provided, however, that any judgment
      which is covered by insurance or an indemnity from a credit worthy party shall
      not be included in calculating the $500,000 amount set forth above so long
      as
      the Company provides the Holder a written statement from such insurer or
      indemnity provider (which written statement shall be reasonably satisfactory
      to
      the Holder) to the effect that such judgment is covered by insurance or an
      indemnity and the Company or such Subsidiary (as the case may be) will receive
      the proceeds of such insurance or indemnity within thirty (30) days of the
      issuance of such judgment;

     

    (xiii) the
      Company and/or any Subsidiary, individually or in the aggregate, either (i)
      fails to pay, when due, or within any applicable grace period, any payment
      with
      respect to any Indebtedness in excess of $250,000 due to any third party, other
      than, with respect to unsecured Indebtedness only, payments contested by the
      Company and/or such Subsidiary (as the case may be) in good faith by proper
      proceedings and with respect to which adequate reserves have been set aside
      for
      the payment thereof in accordance with GAAP, or otherwise be in breach or
      violation of any agreement for monies owed or owing in an amount in excess
      of
      $250,000, which breach or violation permits the other party thereto to declare
      a
      default or otherwise accelerate amounts due thereunder, or (ii) suffer to exist
      any other circumstance or event that would, with or without the passage of
      time
      or the giving of notice, result in a default or event of default under any
      agreement binding the Company or any Subsidiary, which default or event of
      default would or is likely to have a material adverse effect on the business,
      assets, operations (including results thereof), liabilities, properties,
      condition (including financial condition) or prospects of the Company or any
      of
      its Subsidiaries, individually or in the aggregate;

    
      
        
        

      

      
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    (xiv) the
      Company or any Subsidiary materially breaches any representation, warranty,
      covenant or other term or condition of any Transaction Document, except, in
      the
      case of a breach of a covenant of any Transaction Document which is curable,
      only if such breach remains uncured for a period of at least five (5)
      days;

     

    (xv) any
      breach or failure in any respect by the Company or any Subsidiary to comply
      with
      any provision of either of Sections 8 or 13 of this Note; 

     

    (xvi) any
      Material Adverse Effect (as defined in the Securities Purchase Agreement)
      occurs;

     

    (xvii) any
      breach or failure in any respect by the Company or any Subsidiary to comply
      with
      any provision of Sections 6(c), 6(g)(i), 6(g)(ii) or 6(k) of the Security
      Agreement (as defined below); or

     

    (xviii) any
      Event
      of Default (as defined in the Other Notes) occurs with respect to any Other
      Notes.

     

    (b) Redemption
      Right.
      Upon
      the occurrence of an Event of Default with respect to this Note or any Other
      Note, the Company shall within one (1) Business Day deliver written notice
      thereof via facsimile and overnight courier (with next day delivery specified)
      (an “Event
      of Default Notice”)
      to the
      Holder. At any time after the earlier of the Holder’s receipt of an Event of
      Default Notice and the Holder becoming aware of an Event of Default, the Holder
      may require the Company to redeem all or any portion of this Note by delivering
      written notice thereof (the “Event
      of Default Redemption Notice”)
      to the
      Company, which Event of Default Redemption Notice shall indicate the portion
      of
      this Note the Holder is electing to redeem. Each portion of this Note subject
      to
      redemption by the Company pursuant to this Section 4(b) shall be redeemed by
      the
      Company at a price equal to the greater of (i) the product of (A) the sum of
      the
      Conversion Amount to be redeemed together with accrued and unpaid Interest
      with
      respect to such Conversion Amount and accrued and unpaid Late Charges with
      respect to such Conversion Amount and Interest and (B) the Redemption Premium
      and (ii) the product of (X) the Conversion Rate with respect to such sum of
      the
      Conversion Amount together with accrued and unpaid Interest with respect to
      such
      Conversion Amount and accrued and unpaid Late Charges with respect to such
      Conversion Amount and Interest in effect at such time as the Holder delivers
      an
      Event of Default Redemption Notice and (Y) the product of (1) the Equity Value
      Redemption Premium and (2) the greater of (I) the Closing Sale Price of the
      Common Stock on the date immediately preceding such Event of Default, (II)
      the
      Closing Sale Price of the Common Stock on the date immediately after such Event
      of Default and (III) the Closing Sale Price of the Common Stock on the date
      the
      Holder delivers the Event of Default Redemption Notice (the “Event
      of Default Redemption
      Price”).
      Redemptions required by this Section 4(b) shall be made in accordance with
      the
      provisions of Section 11. To the extent redemptions required by this Section
      4(b) are deemed or determined by a court of competent jurisdiction to be
      prepayments of the Note by the Company, such redemptions shall be deemed to
      be
      voluntary prepayments. Notwithstanding anything to the contrary in this Section
      4, but subject to Section 3(d), until the Event of Default Redemption Price
      (together with any interest thereon) is paid in full, the Conversion Amount
      submitted for redemption under this Section 4(b) (together with any interest
      thereon) may be converted, in whole or in part, by the Holder into Common Stock
      pursuant to Section 3. In the event of a partial redemption of this Note
      pursuant hereto, the Principal amount redeemed shall be deducted from the
      Installment Amount(s) relating to the applicable Installment Date(s) as set
      forth in the Event of Default Redemption Notice. The parties hereto agree that
      in the event of the Company’s redemption of any portion of the Note under this
      Section 4(b), the Holder’s damages would be uncertain and difficult to estimate
      because of the parties’ inability to predict future interest rates and the
      uncertainty of the availability of a suitable substitute investment opportunity
      for the Holder. Accordingly, any redemption premium due under this Section
      4(b)
      is intended by the parties to be, and shall be deemed, a reasonable estimate
      of
      the Holder’s actual loss of its investment opportunity and not as a
      penalty.

    
      
        
        

      

      
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    5. RIGHTS
      UPON FUNDAMENTAL TRANSACTION.

     

    (a) Assumption.
      The
      Company shall not enter into or be party to a Fundamental Transaction unless
      (i) the Successor Entity assumes in writing all of the obligations of the
      Company under this Note and the other Transaction Documents in accordance with
      the provisions of this Section 5(a) pursuant to written agreements in form
      and
      substance satisfactory to the Holder and approved by the Holder prior to such
      Fundamental Transaction, including agreements to deliver to each holder of
      Notes
      in exchange for such Notes a security of the Successor Entity evidenced by
      a
      written instrument substantially similar in form and substance to the Notes,
      including, without limitation, having a principal amount and interest rate
      equal
      to the principal amounts then outstanding and the interest rates of the Notes
      held by such holder, having similar conversion rights as the Notes and having
      similar ranking to the Notes, and satisfactory to the Holder and (ii) the
      Successor Entity (including its Parent Entity) is a publicly traded corporation
      whose common stock is quoted on or listed for trading on an Eligible Market.
      Upon the occurrence of any Fundamental Transaction, the Successor Entity shall
      succeed to, and be substituted for (so that from and after the date of such
      Fundamental Transaction, the provisions of this Note and the other Transaction
      Documents referring to the “Company” shall refer instead to the Successor
      Entity), and may exercise every right and power of the Company and shall assume
      all of the obligations of the Company under this Note and the other Transaction
      Documents with the same effect as if such Successor Entity had been named as
      the
      Company herein. Upon consummation of the Fundamental Transaction, the Successor
      Entity shall deliver to the Holder confirmation that there shall be issued
      upon
      conversion or redemption of this Note at
      any
      time after the consummation of the Fundamental Transaction, in lieu of the
      shares of the Company’s Common Stock (or
      other
      securities, cash, assets or other property (except such items still issuable
      under Section 6, which shall continue to be receivable thereafter) issuable
      upon the conversion or redemption of the Notes prior to such Fundamental
      Transaction,
      such
      shares of the publicly traded common stock (or their equivalent) of the
      Successor Entity (including its Parent Entity) which the Holder would have
      been
      entitled to receive upon the happening of such Fundamental Transaction had
      this
      Note been converted immediately prior to such Fundamental Transaction
(without
      regard to any limitations on the conversion of this Note),
      as
      adjusted in accordance with the provisions of this Note. The
      provisions of this Section shall apply similarly and equally to successive
      Fundamental Transactions and shall be applied without regard to any limitations
      on the conversion of this Note.

    
      
        
        

      

      
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    (b) Redemption
      Right.
      No
      sooner than twenty (20) Trading Days nor later than ten (10) Trading Days prior
      to the consummation of a Fundamental Transaction, but not prior to the public
      announcement of such Fundamental Transaction, the Company shall deliver written
      notice thereof via facsimile and overnight courier to the Holder (a
“Fundamental
      Transaction Notice”).
      At
      any time during the period beginning after the Holder’s receipt of a Fundamental
      Transaction Notice and ending on the later of twenty (20) Trading Days after
      (A)
      consummation of such Fundamental Transaction or (B) the date of receipt of
      such
      Fundamental Transaction Notice, the Holder may require the Company to redeem
      all
      or any portion of this Note by delivering written notice thereof (“Fundamental
      Transaction Redemption Notice”)
      to the
      Company, which Fundamental Transaction Redemption Notice shall indicate the
      Conversion Amount the Holder is electing to redeem. The portion of this Note
      subject to redemption pursuant to this Section 5 shall be redeemed by the
      Company in cash at a price equal to the greater of (i) the sum of (x) the
      product of the Fundamental Transaction Redemption Premium and the Conversion
      Amount being redeemed and (y) the amount of any accrued but unpaid Interest
      on
      such Conversion Amount being redeemed and accrued and unpaid Late Charges,
      if
      any, with respect to such Conversion Amount and Interest through the date of
      such redemption payment and (ii) the product of (x) the Equity Value Redemption
      Premium and (y) the sum of (1) the product of (A) the Conversion Amount being
      redeemed multiplied by (B) the quotient determined by dividing (I) the aggregate
      cash consideration and the aggregate cash value of any non-cash consideration
      per share of Common Stock to be paid to the holders of the shares of Common
      Stock upon consummation of the Fundamental Transaction (any such non-cash
      consideration to be valued at the higher of the Closing Sale Price of such
      securities as of the Trading Day immediately prior to the consummation of such
      Fundamental Transaction, the Closing Sale Price on the Trading Day immediately
      following the public announcement of such proposed Fundamental Transaction
      and
      the Closing Sale Price on the Trading Day immediately prior to the public
      announcement of such proposed Fundamental Transaction) by (II) the Conversion
      Price plus (2) the amount of any accrued but unpaid Interest on such Conversion
      Amount being redeemed and accrued and unpaid Late Charges, if any, with respect
      to such Conversion Amount and Interest through the date of such redemption
      payment, (the “Fundamental
      Transaction Redemption Price”).
      Redemptions required by this Section 5 shall be made in accordance with the
      provisions of Section 11 and shall have priority to payments to stockholders
      in
      connection with a Fundamental Transaction. To the extent redemptions required
      by
      this Section 5(b) are deemed or determined by a court of competent jurisdiction
      to be prepayments of the Note by the Company, such redemptions shall be deemed
      to be voluntary prepayments. Notwithstanding anything to the contrary in this
      Section 5, but subject to Section 3(d), until the Fundamental Transaction
      Redemption Price (together with any interest thereon) is paid in full, the
      Conversion Amount submitted for redemption under this Section 5(b) (together
      with any interest thereon) may be converted, in whole or in part, by the Holder
      into Common Stock pursuant to Section 3. In the event of a partial redemption
      of
      this Note pursuant hereto, the Principal amount redeemed shall be deducted
      from
      the Installment Amount(s) relating to the applicable Installment Date(s) as
      set
      forth in the Fundamental Transaction Redemption Notice. The parties hereto
      agree
      that in the event of the Company’s redemption of any portion of the Note under
      this Section 5(b), the Holder’s damages would be uncertain and difficult to
      estimate because of the parties’ inability to predict future interest rates and
      the uncertainty of the availability of a suitable substitute investment
      opportunity for the Holder. Accordingly, any redemption premium due under this
      Section 5(b) is intended by the parties to be, and shall be deemed, a reasonable
      estimate of the Holder’s actual loss of its investment opportunity and not as a
      penalty.

    
      
        
        

      

      
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    6. RIGHTS
      UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.

     

    (a) Purchase
      Rights.
      In
      addition to any adjustments pursuant to Section 7 below, if at any time the
      Company grants, issues or sells any Options, Convertible Securities or rights
      to
      purchase stock, warrants, securities or other property pro rata to the record
      holders of any class of Common Stock (the “Purchase
      Rights”),
      then
      the Holder will be entitled to acquire, upon the terms applicable to such
      Purchase Rights, the aggregate Purchase Rights which the Holder could have
      acquired if the Holder had held the number of shares of Common Stock acquirable
      upon complete conversion of this Note (without taking into account any
      limitations or restrictions on the convertibility of this Note) immediately
      before the date on which a record is taken for the grant, issuance or sale
      of
      such Purchase Rights, or, if no such record is taken, the date as of which
      the
      record holders of Common Stock are to be determined for the grant, issue or
      sale
      of such Purchase Rights (provided, however, that to the extent that the Holder’s
      right to participate in any such Purchase Right would result in the Holder
      exceeding the Maximum Percentage, then the Holder shall not be entitled to
      participate in such Purchase Right to such extent (or beneficial ownership
      of
      such shares of Common Stock as a result of such Purchase Right to such extent)
      and such Purchase Right to such extent shall be held in abeyance for the Holder
      until such time, if ever, as its right thereto would not result in the Holder
      exceeding the Maximum Percentage).

     

    (b) Other
      Corporate Events.
      In
      addition to and not in substitution for any other rights hereunder, prior to
      the
      consummation of any Fundamental Transaction pursuant to which holders of shares
      of Common Stock are entitled to receive securities or other assets with respect
      to or in exchange for shares of Common Stock (a “Corporate
      Event”),
      the
      Company shall make appropriate provision to insure that the Holder will
      thereafter have the right to receive upon a conversion of this Note (i) in
      addition to the shares of Common Stock receivable upon such conversion, such
      securities or other assets to which the Holder would have been entitled with
      respect to such shares of Common Stock had such shares of Common Stock been
      held
      by the Holder upon the consummation of such Corporate Event (without taking
      into
      account any limitations or restrictions on the convertibility of this Note)
      or
      (ii) in lieu of the shares of Common Stock otherwise receivable upon such
      conversion, such securities or other assets received by the holders of shares
      of
      Common Stock in connection with the consummation of such Corporate Event in
      such
      amounts as the Holder would have been entitled to receive had this Note
      initially been issued with conversion rights for the form of such consideration
      (as opposed to shares of Common Stock) at a conversion rate for such
      consideration commensurate with the Conversion Rate. The provisions of this
      Section shall apply similarly and equally to successive Corporate Events and
      shall be applied without regard to any limitations on the conversion or
      redemption of this Note.

    
      
        
        

      

      
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    7. RIGHTS
      UPON ISSUANCE OF OTHER SECURITIES.

     

    (a) Adjustment
      of Conversion Price upon Issuance of Common Stock.
      If and
      whenever on or after the Subscription Date, the Company issues or sells, or
      in
      accordance with this Section 7(a) is deemed to have issued or sold, any
shares
      of
Common
      Stock (including the issuance or sale of shares
      of
Common
      Stock owned or held by or for the account of the Company, but excluding any
      Excluded Securities (as defined in the Securities Purchase Agreement) issued
      or
      sold or deemed to have been issued or sold) for a consideration per share (the
      “New
      Issuance Price”)
      less
      than a price equal to the Conversion Price in effect immediately prior to such
      issue or sale or deemed issuance or sale (such lesser price being referred
      to as
      the “Applicable
      Price”)
      (the
      foregoing a “Dilutive
      Issuance”),
      then
      immediately after such Dilutive Issuance, the Conversion Price then in effect
      shall be reduced to an amount equal to the New Issuance Price. For purposes
      of
      determining the adjusted Conversion Price under this Section 7(a), the following
      shall be applicable:

     

    (i) Issuance
      of Options.
      If
      the
      Company in any manner grants or sells any Options and the lowest price per
      share
      for which one share of Common Stock is issuable upon the exercise of any such
      Option or upon conversion, exercise or exchange of any Convertible Securities
      issuable upon exercise of any such Option is less than the Applicable Price,
      then such share of Common Stock shall be deemed to be outstanding and to have
      been issued and sold by the Company at the time of the granting or sale of
      such
      Option for such price per share. For purposes of this Section 7(a)(i), the
      “lowest price per share for which one share of Common Stock is issuable upon
      the
      exercise of any such Options or upon conversion, exercise or exchange of any
      Convertible Securities issuable upon exercise of any such Option” shall be equal
      to the sum of the lowest amounts of consideration (if any) received or
      receivable by the Company with respect to any one share of Common Stock upon
      the
      granting or sale of the Option, upon exercise of the Option and upon conversion,
      exercise or exchange of any Convertible Security issuable upon exercise of
      such
      Option. Except as contemplated below, no further adjustment of the Conversion
      Price shall be made upon the actual issuance of such share of Common Stock
      or of
      such Convertible Securities upon the exercise of such Options or upon the actual
      issuance of such share of Common Stock upon conversion, exercise or exchange
      of
      such Convertible Securities.

    
      
        
        

      

      
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    (ii) Issuance
      of Convertible Securities.
      If the
      Company in any manner issues or sells any Convertible Securities and the lowest
      price per share for which one share of Common Stock is issuable upon the
      conversion, exercise or exchange thereof is less than the Applicable Price,
      then
      such share of Common Stock shall be deemed to be outstanding and to have been
      issued and sold by the Company at the time of the issuance or sale of such
      Convertible Securities for such price per share. For the purposes of this
      Section 7(a)(ii), the “lowest price per share for which one share of Common
      Stock is issuable upon the conversion, exercise or exchange thereof” shall be
      equal to the sum of the lowest amounts of consideration (if any) received or
      receivable by the Company with respect to one share of Common Stock upon the
      issuance or sale of the Convertible Security and upon conversion, exercise
      or
      exchange of such Convertible Security. Except as contemplated below, no further
      adjustment of the Conversion Price shall be made upon the actual issuance of
      such share of Common Stock upon conversion, exercise or exchange of such
      Convertible Securities, and if any such issue or sale of such Convertible
      Securities is made upon exercise of any Options for which adjustment of the
      Conversion Price has been or is to be made pursuant to other provisions of
      this
      Section 7(a), except as contemplated below, no further adjustment of the
      Conversion Price shall be made by
      reason
      of such issue or sale.

     

    (iii) Change
      in Option Price or Rate of Conversion.
      If the
      purchase or exercise price provided for in any Options, the additional
      consideration, if any, payable upon the issue, conversion, exercise or exchange
      of any Convertible Securities, or the rate at which any Convertible Securities
      are convertible into or exercisable or exchangeable for shares of Common Stock
      increases or decreases at any time, the Conversion Price in effect at the time
      of such increase or decrease shall be adjusted to the Conversion Price which
      would have been in effect at such time had such Options or Convertible
      Securities provided for such increased or decreased purchase price, additional
      consideration or increased or decreased conversion rate (as the case may be)
      at
      the time initially granted, issued or sold. For purposes of this Section
      7(a)(iii), if the terms of any Option or Convertible Security that was
      outstanding as of the Subscription Date are increased or decreased in the manner
      described in the immediately preceding sentence, then such Option or Convertible
      Security and the shares of Common Stock deemed issuable upon exercise,
      conversion or exchange thereof shall be deemed to have been issued as of the
      date of such increase or decrease. No adjustment pursuant to this Section 7(a)
      shall be made if such adjustment would result in an increase of the Conversion
      Price then in effect.

    
      
        
        

      

      
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    (iv) Calculation
      of Consideration Received.
      In case
      any Option is issued in connection with the issue or sale of other securities
      of
      the Company, together comprising one integrated transaction in which no specific
      consideration is allocated to such Options by the parties thereto, the Options
      will be deemed to have been issued for a consideration of $0.01. If any shares
      of Common Stock, Options or Convertible Securities are issued or sold or deemed
      to have been issued or sold for cash, the consideration received therefor will
      be deemed to be the net amount received by the Company therefor. If any shares
      of Common Stock, Options or Convertible Securities are issued or sold for a
      consideration other than cash, the amount of such consideration received by
      the
      Company will be the fair value of such consideration, except where such
      consideration consists of publicly traded securities, in which case the amount
      of consideration received by the Company for such securities will be the average
      VWAP of such security for the five (5) Trading Day period immediately preceding
      the date of receipt. If any shares of Common Stock, Options or Convertible
      Securities are issued to the owners of the non-surviving entity in connection
      with any merger in which the Company is the surviving entity, the amount of
      consideration therefor will be deemed to be the fair value of such portion
      of
      the net assets and business of the non-surviving entity as is attributable
      to
      such shares of Common Stock, Options or Convertible Securities (as the case
      may
      be). The fair value of any consideration other than cash or publicly traded
      securities will be determined jointly by the Company and the Holder. If such
      parties are unable to reach agreement within ten (10) days after the occurrence
      of an event requiring valuation (the “Valuation
      Event”),
      the
      fair value of such consideration will be determined within five (5) Trading
      Days
      after the tenth (10th)
      day
      following such Valuation Event by an independent, reputable appraiser jointly
      selected by the Company and the Holder. The determination of such appraiser
      shall be final and binding upon all parties absent manifest error and the fees
      and expenses of such appraiser shall be borne by the Company.

     

    (v) Record
      Date.
      If the
      Company takes a record of the holders of shares of Common Stock for the purpose
      of entitling them (A) to receive a dividend or other distribution payable in
      Common Stock, Options or in Convertible Securities or (B) to subscribe for
      or
      purchase shares of Common Stock, Options or Convertible Securities, then such
      record date will be deemed to be the date of the issue or sale of the shares
      of
      Common Stock deemed to have been issued or sold upon the declaration of such
      dividend or the making of such other distribution or the date of the granting
      of
      such right of subscription or purchase (as the case may be).

     

    (b) Adjustment
      of Conversion Price upon Subdivision or Combination of Common
      Stock.
      If the
      Company at any time on or after the Subscription Date subdivides (by any stock
      split, stock dividend, recapitalization or otherwise) one or more classes of
      its
      outstanding shares of Common Stock into a greater number of shares, the
      Conversion Price in effect immediately prior to such subdivision will be
      proportionately reduced. If the Company at any time on or after the Subscription
      Date combines (by combination, reverse stock split or otherwise) one or more
      classes of its outstanding shares of Common Stock into a smaller number of
      shares, the Conversion Price in effect immediately prior to such combination
      will be proportionately increased. Any adjustment pursuant to this Section
      7(b)
      shall become effective immediately after the effective date of such subdivision
      or combination. If any event requiring an adjustment under this Section 7(b)
      occurs during the period that a Conversion Price is calculated hereunder, then
      the calculation of such Conversion Price shall be adjusted appropriately to
      reflect such event.

    
      
        
        

      

      
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    (c) Other
      Events.
      In the
      event that the Company (or any direct or indirect subsidiary thereof) shall
      take any action to which the provisions hereof are not strictly applicable,
      or,
      if applicable, would not operate to protect the Holder from dilution or if
      any
      event occurs of the type contemplated by the provisions of this Section 7 but
      not expressly provided for by such provisions (including, without limitation,
      the granting of stock appreciation rights, phantom stock rights or other rights
      with equity features), then the Company’s Board of Directors shall in good faith
      determine and implement an appropriate adjustment in the Conversion Price so
      as
      to protect the rights of the Holder; provided that no such adjustment pursuant
      to this Section 7(c) will increase the Conversion Price as otherwise determined
      pursuant to this Section 7, provided further that if the Holder does not accept
      such adjustments as appropriately protecting its interests hereunder against
      such dilution, then the Company’s Board of Directors and the Holder shall agree,
      in good faith, upon an independent investment bank of nationally recognized
      standing to make such appropriate adjustments, whose determination shall be
      final and binding and whose fees and expenses shall be borne by the
      Company.

     

    8. COMPANY
      INSTALLMENT CONVERSION OR REDEMPTION. 

     

    (a) General.
      On each
      applicable Installment Date, the Company shall pay to the Holder of this Note
      the Installment Amount due on such date by converting such Installment Amount,
      provided that there is not then an Equity Conditions Failure, in accordance
      with
      this Section 8 (a “Company
      Conversion”);
      provided, however, that the Company may, at its option as described below,
      pay
      all or any part of the Installment Amount by redeeming such Installment Amount
      in cash (a “Company
      Redemption”)
      or by
      any combination of a Company Conversion and a Company Redemption so long as
      all
      of the outstanding applicable Installment Amount due shall be converted and/or
      redeemed by the Company on the applicable Installment Date, subject to the
      provisions of this Section 8; provided further, however, that the Company shall
      not be entitled to pay any portion of the Installment Amount in shares of Common
      Stock pursuant to a Company Conversion and shall be required to pay such
      Installment Amount in cash pursuant to a Company Redemption if the average
      daily
      volume of the Common Stock on the Principal Market (as reported on Bloomberg)
      during the Company Conversion Measuring Period is less than 200,000 shares.
      Notwithstanding
      the foregoing, (i) the Company may not effect a Company Conversion of any
      Installment Amount under this Section 8 in excess of the Holder Pro Rata Amount
      of the applicable Installment Volume Limitation and (ii) the Company may not
      effect a Company Conversion of any Installment Amount under this Section 8
      until
      Shareholder Approval is obtained.
      On or
      prior to the date which is the twenty first (21st)
      Trading
      Day prior to each Installment Date (each, an “Installment
      Notice Due Date”),
      the
      Company shall deliver written notice (each, a “Company
      Installment Notice”
and
      the
      date all of the holders receive such notice is referred to as to the
“Company
      Installment Notice Date”),
      to
      each holder of Notes which Company Installment Notice shall (i) either (A)
      confirm that the applicable Installment Amount of such holder’s Note shall be
      converted in whole pursuant to a Company Conversion or (B) (1) state that the
      Company elects to redeem, or is required to redeem in accordance with the
      provisions of the Notes, in whole or in part, the applicable Installment Amount
      pursuant to a Company Redemption and (2) specify the portion of the Installment
      Amount which the Company elects or is required to redeem pursuant to a Company
      Redemption (such amount to be redeemed, the “Company
      Redemption Amount”)
      and
      the portion of the Installment Amount, if any, that the Company elects to
      convert pursuant to a Company Conversion (such amount of the applicable
      Installment Amount so elected to be properly converted pursuant to this Section
      8 is referred to herein as the “Company
      Conversion Amount”)
      which
      amounts when added together, must equal the entire applicable Installment Amount
      and (ii) if the Installment Amount is to be paid, in whole or in part, pursuant
      to a Company Conversion, certify that there is not then an Equity Conditions
      Failure as of the date of the Company Installment Notice. Each Company
      Installment Notice shall be irrevocable. If the Company does not timely deliver
      a Company Installment Notice in accordance with this Section 8, then the Company
      shall be deemed to have delivered an irrevocable Company Installment Notice
      confirming a Company Conversion and shall be deemed to have certified that
      there
      is not then an Equity Conditions Failure in connection with any such conversion.
      No later than two (2) Trading Days after delivery of a Company Installment
      Notice setting forth a Company Conversion Amount, the Company shall deliver
      to
      the Holder’s account with DTC such number of shares of Common Stock (the
“Pre-Installment
      Conversion Shares”)
      equal
      to the quotient of (x) such Company Conversion Amount divided by (y) the
      Pre-Installment Conversion Price. Except as expressly provided in this Section
      8(a), the Company shall convert and/or redeem the applicable Installment Amount
      of this Note pursuant to this Section 8 and the corresponding Installment
      Amounts of the Other Notes pursuant to the corresponding provisions of the
      Other
      Notes in the same ratio of the Installment Amount being converted and/or
      redeemed hereunder. The Company Conversion Amount (whether set forth in the
      Company Installment Notice or by operation of this Section 8) shall be converted
      in accordance with Section 8(b) and the Company Redemption Amount shall be
      redeemed in accordance with Section 8(c).

    
      
        
        

      

      
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    (b) Mechanics
      of Company Conversion.
      Subject
      to Section 3(d), if the Company delivers a Company Installment Notice and
      elects, or is deemed to have delivered a Company Installment Notice and deemed
      to have elected, in whole or in part, a Company Conversion in accordance with
      Section 8(a), then the applicable Company Conversion Amount, if any, which
      remains outstanding as of the applicable Installment Date shall be converted
      as
      of the applicable Installment Date by converting on such Installment Date such
      Company Conversion Amount at the Company Conversion Price; provided that the
      Equity Conditions are then satisfied (or waived in writing by the Holder) on
      such Installment Date, that the Holder Pro Rata Amount of the Installment Volume
      Limitation is not exceeded, Shareholder Approval has been obtained and the
      Company is not otherwise prohibited under any other provision of this Note
      from
      electing a Company Conversion. The number of shares of Common Stock to be
      delivered upon such Company Conversion shall be reduced by the amount of any
      Pre-Installment Conversion Shares delivered in connection with such Installment
      Date. If an Event of Default occurs during any applicable Installment Period,
      then either (i) the Holder shall return any Pre-Installment Conversion Shares
      delivered in connection with the applicable Installment Date or (ii) the
      Conversion Amount used to calculate the Event of Default Redemption Price shall
      be reduced by the product of (x) the Company Conversion Amount applicable to
      such Installment Date multiplied by (y) the Conversion Share Ratio (as defined
      below). If the Equity Conditions are not satisfied (or waived in writing by
      the
      Holder) on such Installment Date, the Holder Pro Rata Amount of the Installment
      Volume Limitation is exceeded, Shareholder Approval has not been obtained,
      or
      the Company is not otherwise permitted under any other provision of this Note
      from electing a Company Conversion, then at the option of the Holder designated
      in writing to the Company, the Holder may require the Company to do any one
      or
      more of the following: (i) the Company shall redeem all or any part designated
      by the Holder of the unconverted Company Conversion Amount (such designated
      amount is referred to as the “First
      Redemption Amount”)
      and
      the Company shall pay to the Holder within three (3) days of such Installment
      Date, by wire transfer of immediately available funds, an amount in cash equal
      to 120% of such First Redemption Amount, and/or (ii) the Company Conversion
      shall be null and void with respect to all or any part designated by the Holder
      of the unconverted Company Conversion Amount and the Holder shall be entitled
      to
      all the rights of a holder of this Note with respect to such amount of the
      Company Conversion Amount; provided, however, that the Conversion Price for
      such
      unconverted Company Conversion Amount shall thereafter be adjusted to equal
      the
      lesser of (A) the Company Conversion Price as in effect on the date on which
      the
      Holder voided the Company Conversion and (B) the Company Conversion Price as
      in
      effect on the date on which the Holder delivers a Conversion Notice relating
      thereto. In the event of an Equity Conditions Failure, either (I) the Holder
      shall return any Pre-Installment Conversion Shares delivered in connection
      with
      the applicable Installment Date or (II) any related First Redemption Amount
      shall be reduced by the product of (X) the Company Conversion Amount applicable
      to such Installment Date multiplied by (Y) the Conversion Share Ratio. If the
      Company fails to redeem any First Redemption Amount by the third (3rd)
      day
      following the applicable Installment Date by payment of such amount on the
      applicable Installment Date, then the Holder shall have the rights set forth
      in
      Section 11(a) as if the Company failed to pay the applicable Company Installment
      Redemption Price (as defined below) and all other rights under this Note
      (including, without limitation, such failure constituting an Event of Default
      described in Section 4(a)(xv)). Notwithstanding anything to the contrary in
      this
      Section 8(b), but subject to 3(d), until the Company delivers Common Stock
      representing the Company Conversion Amount to the Holder, the Company Conversion
      Amount may be converted by the Holder into Common Stock pursuant to Section
      3.
      In the event that the Holder elects to convert the Company Conversion Amount
      prior to the applicable Installment Date as set forth in the immediately
      preceding sentence, the Company Conversion Amount so converted shall be deducted
      from the Installment Amount(s) relating to the applicable Installment Date(s)
      as
      set forth in the applicable Conversion Notice.

     

    (c) Mechanics
      of Company Redemption.
      If the
      Company elects, or is required to elect, a Company Redemption, in whole or
      in
      part, in accordance with Section 8(a), then the Company Redemption Amount,
      if
      any, which is to be paid to the Holder on the applicable Installment Date shall
      be redeemed by the Company on such Installment Date, and the Company shall
      pay
      to the Holder on such Installment Date, by wire transfer of immediately
      available funds, in an amount in cash (the “Company
      Installment Redemption Price”)
      equal
      to 100% of the Company Redemption Amount. If the Company fails to redeem the
      Company Redemption Amount on the applicable Installment Date by payment of
      the
      Company Installment Redemption Price on such date, then at the option of the
      Holder designated in writing to the Company (any such designation, “Conversion
      Notice”
for
      purposes of this Note), the Holder may require the Company to convert all or
      any
      part of the Company Redemption Amount at the Company Conversion Price.
      Conversions required by this Section 8(c) shall be made in accordance with
      the
      provisions of Section 3(c). Notwithstanding anything to the contrary in this
      Section 8(c), but subject to Section 3(d), until the Company Installment
      Redemption Price (together with any interest thereon) is paid in full, the
      Company Redemption Amount (together with any interest thereon) may be converted,
      in whole or in part, by the Holder into Common Stock pursuant to Section 3.
      In
      the event the Holder elects to convert all or any portion of the Company
      Redemption Amount prior to the applicable Installment Date as set forth in
      the
      immediately preceding sentence, the Company Redemption Amount so converted
      shall
      be deducted from the Installment Amounts relating to the applicable Installment
      Dates as set forth in the applicable Conversion Notice.

    
      
        
        

      

      
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    9. NONCIRCUMVENTION.
      The
      Company hereby covenants and agrees that the Company will not, by amendment
      of
      its Certificate of Incorporation, Bylaws or through any reorganization, transfer
      of assets, consolidation, merger, scheme of arrangement, dissolution, issue
      or
      sale of securities, or any other voluntary action, avoid or seek to avoid the
      observance or performance of any of the terms of this Note, and will at all
      times in good faith carry out all of the provisions of this Note and take all
      action as may be required to protect the rights of the Holder of this Note.
      Without limiting the generality of the foregoing, the Company (i) shall not
      increase the par value of any shares of Common Stock receivable upon conversion
      of this Note above the Conversion Price then in effect, (ii) shall take all
      such actions as may be necessary or appropriate in order that the Company may
      validly and legally issue fully paid and nonassessable shares of Common Stock
      upon the conversion of this Note, and (iii) shall, so long as any of the Notes
      are outstanding, take all action necessary to reserve and keep available out
      of
      its authorized and unissued shares of Common Stock, solely for the purpose
      of
      effecting the conversion of the Notes, the maximum number of shares of Common
      Stock as shall from time to time be necessary to effect the conversion of the
      Notes then outstanding (without regard to any limitations on
      conversion).

     

    10. RESERVATION
      OF AUTHORIZED SHARES.

     

    (a) Reservation.
      The
      Company shall initially reserve out of its authorized and unissued Common Stock
      a number of shares of Common Stock for each of the Notes equal to 120% of the
      entire Conversion Rate with respect to the entire Conversion Amount of each
      such
      Note as of the Issuance Date.
      So
      long as any of the Notes are outstanding, the Company shall take all action
      necessary to reserve and keep available out of its authorized and unissued
      Common Stock, solely for the purpose of effecting the conversion of the Notes,
      120% of the number of shares of Common Stock as shall from time to time be
      necessary to effect the conversion of all of the Notes then outstanding;
      provided that at no time shall the number of shares of Common Stock so reserved
      be less than the number of shares required to be reserved by the previous
      sentence (without regard to any limitations on conversions) (the “Required
      Reserve Amount”).
      The
      initial number of shares of Common Stock reserved for conversions of the Notes
      and each increase in the number of shares so reserved shall be allocated pro
      rata among the holders of the Notes based on the original principal amount
      of
      the Notes held by each holder at the Closing (as defined in the Securities
      Purchase Agreement) or increase in the number of reserved shares (as the case
      may be) (the “Authorized
      Share Allocation”).
      In
      the event that a holder shall sell or otherwise transfer any of such holder’s
      Notes, each transferee shall be allocated a pro rata portion of such holder’s
      Authorized Share Allocation. Any shares of Common Stock reserved and allocated
      to any Person which ceases to hold any Notes shall be allocated to the remaining
      holders of Notes, pro rata based on the principal amount of the Notes then
      held
      by such holders.

    
      
        
        

      

      
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    (b) Insufficient
      Authorized Shares.
      If,
      notwithstanding Section 10(a), and not in limitation thereof, at any time while
      any of the Notes remain outstanding the Company does not have a sufficient
      number of authorized and unreserved shares of Common Stock to satisfy its
      obligation to reserve for issuance upon conversion of the Notes at least a
      number of shares of Common Stock equal to the Required Reserve Amount (an
“Authorized
      Share Failure”),
      then
      the Company shall immediately take all action necessary to increase the
      Company’s authorized shares of Common Stock to an amount sufficient to allow the
      Company to reserve the Required Reserve Amount for the Notes then outstanding.
      Without limiting the generality of the foregoing sentence, as soon as
      practicable after the date of the occurrence of an Authorized Share Failure,
      but
      in no event later than sixty (60) days after the occurrence of such Authorized
      Share Failure, the Company shall hold a meeting of its stockholders for the
      approval of an increase in the number of authorized shares of Common Stock.
      In
      connection with such meeting, the Company shall provide each stockholder with
      a
      proxy statement and shall use its best efforts to solicit its stockholders’
approval of such increase in authorized shares of Common Stock and to cause
      its
      board of directors to recommend to the stockholders that they approve such
      proposal.

     

    11. HOLDER’S
      REDEMPTIONS.

     

    (a) Mechanics.
      The
      Company shall deliver the applicable Event of Default Redemption Price to the
      Holder within five (5) Business Days after the Company’s receipt of the Holder’s
      Event of Default Redemption Notice. If the Holder has submitted a Fundamental
      Transaction Redemption Notice in accordance with Section 5(b), the Company
      shall
      deliver the applicable Fundamental Transaction Redemption Price to the Holder
      concurrently with the consummation of such Fundamental Transaction if such
      notice is received prior to the consummation of such Fundamental Transaction
      and
      within five (5) Business Days after the Company’s receipt of such notice
      otherwise. The Company shall deliver the applicable Company Installment
      Redemption Price to the Holder on the applicable Installment Date. In the event
      of a redemption of less than all of the Conversion Amount of this Note, the
      Company shall promptly cause to be issued and delivered to the Holder a new
      Note
      (in accordance with Section 18(d)) representing the outstanding Principal which
      has not been redeemed. In the event that the Company does not pay the applicable
      Redemption Price to the Holder within the time period required, at any time
      thereafter and until the Company pays such unpaid Redemption Price in full,
      the
      Holder shall have the option, in lieu of redemption, to require the Company
      to
      promptly return to the Holder all or any portion of this Note representing
      the
      Conversion Amount that was submitted for redemption and for which the applicable
      Redemption Price (together with any Late Charges thereon) has not been paid.
      Upon the Company’s receipt of such notice, (x) the applicable Redemption Notice
      shall be null and void with respect to such Conversion Amount, (y) the Company
      shall immediately return this Note, or issue a new Note (in accordance with
      Section 18(d)) to the Holder representing the sum of such Conversion Amount
      to
      be redeemed together with accrued and unpaid Interest with respect to such
      Conversion Amount and accrued and unpaid Late Charges with respect to such
      Conversion Amount and Interest and (z) after Shareholder Approval is obtained,
      the Conversion Price of this Note or such new Notes shall be adjusted to the
      lesser of (A) the Conversion Price as in effect on the date on which the
      applicable Redemption Notice is voided and (B) the lowest Closing Bid Price
      of
      the Common Stock during the period beginning on and including the date on which
      the applicable Redemption Notice is delivered to the Company and ending on
      and
      including the date on which the applicable Redemption Notice is voided. The
      Holder’s delivery of a notice voiding a Redemption Notice and exercise of its
      rights following such notice shall not affect the Company’s obligations to make
      any payments of Late Charges which have accrued prior to the date of such notice
      with respect to the Conversion Amount subject to such notice.

    
      
        
        

      

      
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    (b) Redemption
      by Other Holders.
      Upon
      the Company’s receipt of notice from any of the holders of the Other Notes for
      redemption or repayment as a result of an event or occurrence substantially
      similar to the events or occurrences described in Section 4(b) or Section 5(b)
      (each, an “Other
      Redemption Notice”),
      the
      Company shall immediately, but no later than one (1) Business Day of its receipt
      thereof, forward to the Holder by facsimile a copy of such notice. If the
      Company receives a Redemption Notice and one or more Other Redemption Notices,
      during the seven (7) Business Day period beginning on and including the date
      which is three (3) Business Days prior to the Company’s receipt of the Holder’s
      applicable Redemption Notice and ending on and including the date which is
      three
      (3) Business Days after the Company’s receipt of the Holder’s applicable
      Redemption Notice and the Company is unable to redeem all principal, interest
      and other amounts designated in such Redemption Notice and such Other Redemption
      Notices received during such seven (7) Business Day period, then the Company
      shall redeem a pro rata amount from each holder of the Notes (including the
      Holder) based on the principal amount of the Notes submitted for redemption
      pursuant to such Redemption Notice and such Other Redemption Notices received
      by
      the Company during such seven (7) Business Day period.

     

    12. VOTING
      RIGHTS.
      The
      Holder shall have no voting rights as the holder of this Note, except as
      required by law, including, without limitation, the General Corporation Law
      of
      the State of Delaware, and as expressly provided in this Note.

     

    13. COVENANTS.

     

    (a) Rank. All
      payments due under this Note (a) shall rank pari
      passu
      with all
      Other Notes and (b) shall be senior to all other Indebtedness of the Company
      and
      its Subsidiaries other than the Permitted Senior Indebtedness.

     

    (b) Incurrence
      of Indebtedness.
      So long
      as this Note is outstanding, the Company shall not, and the Company shall not
      permit any of its Subsidiaries to, directly or indirectly, incur or guarantee,
      assume or suffer to exist any Indebtedness, other than (i) the Indebtedness
      evidenced by this Note and the Other Notes and (ii) Permitted
      Indebtedness.

    
      
        
        

      

      
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    (c) Existence
      of Liens.
      So long
      as this Note is outstanding, the Company shall not, and the Company shall not
      permit any of its Subsidiaries to, directly or indirectly, allow or suffer
      to
      exist any mortgage, lien, pledge, charge, security interest or other encumbrance
      upon or in any property or assets (including accounts and contract rights)
      owned
      by the Company or any of its Subsidiaries (collectively, “Liens”)
      other
      than Permitted Liens.

     

    (d) Restricted
      Payments.
      The
      Company shall not, and the Company shall not permit any of its Subsidiaries
      to,
      directly or indirectly, redeem, defease, repurchase, repay or make any payments
      in respect of, by the payment of cash or cash equivalents (in whole or in part,
      whether by way of open market purchases, tender offers, private transactions
      or
      otherwise), all or any portion of any Indebtedness (other than Permitted Senior
      Indebtedness), whether by way of payment in respect of principal of (or premium,
      if any) or interest on, such Indebtedness if at the time such payment is due
      or
      is otherwise made or, after giving effect to such payment, (i) an event
      constituting an Event of Default has occurred and is continuing or (ii) an
      event
      that with the passage of time and without being cured would constitute an Event
      of Default has occurred and is continuing.

     

    (e) Restriction
      on Redemption and Cash Dividends.
      Until
      all of the Notes have been converted, redeemed or otherwise satisfied in
      accordance with their terms, the Company shall not, directly or indirectly,
      redeem, repurchase or declare or pay any cash dividend or distribution on its
      capital stock without the prior express written consent of the
      Holder.

     

    (f) Net
      Cash Balance Test.
      The
      Company shall maintain a Net Cash Balance in excess of the applicable Reserved
      Amount (the “Net
      Cash Balance Test”).
      If
      the Company fails (a “Failure
      Date”)
      to
      satisfy the Net Cash Balance Test, the Company promptly shall provide to the
      Holder a certification, executed on behalf of the Company by the Chief Financial
      Officer of the Company, as to the amount of the Net Cash Balance as of the
      Failure Date, and immediately publicly disclose (on a Current Report on Form
      8-K
      or otherwise) such material non-public information (the date of such
      certification and public announcement, the “Disclosure
      Date”).

     

    (g) Restriction
      on Transfer of Assets.
      The
      Company shall not, and shall cause each Subsidiary to not, sell, lease, convey
      or otherwise dispose of any assets or rights of the Company or any Subsidiary
      owned or hereafter acquired whether in a single transaction or a series of
      related transactions, other than (i) sales, leases, conveyances and other
      dispositions of such assets or rights by the Company and its Subsidiaries that,
      in the aggregate, do not have a fair market value in excess of $250,000 in
      any
      twelve (12) month period and (ii) sales of inventory in the ordinary course
      of
      business.

     

    (h) Maturity
      of Indebtedness.
      The
      Company shall not permit any Indebtedness of the Company or any of the
      Subsidiaries to mature or accelerate prior to the Maturity Date, other than
      Permitted Senior Indebtedness.

     

    (i) New
      Subsidiaries.
      Simultaneously with the acquisition or formation of each New Subsidiary, the
      Company shall cause such New Subsidiary to execute, and deliver to each holder
      of Notes, all Security Documents (as defined in the Securities Purchase
      Agreement) required to be executed by each of the Current Subsidiaries on the
      Closing Date.

    
      
        
        

      

      
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    14. SECURITY.
      This
      Note and the Other Notes are secured to the extent and in the manner set forth
      in the Transaction Documents (including, without limitation, the Security
      Documents and the Guaranties (as defined in the Securities Purchase
      Agreement)).

     

    15. PARTICIPATION.
      The
      Holder, as the holder of this Note, shall be entitled to receive such dividends
      paid and distributions made to the holders of Common Stock to the same extent
      as
      if the Holder had converted this Note into Common Stock (without regard to
      any
      limitations on conversion herein or elsewhere) and had held such shares of
      Common Stock on the record date for such dividends and distributions. Payments
      under the preceding sentence shall be made concurrently with the dividend or
      distribution to the holders of Common Stock (provided, however, that to the
      extent that the Holder’s right to participate in any such dividend or
      distribution would result in the Holder exceeding the Maximum Percentage, then
      the Holder shall not be entitled to participate in such dividend or distribution
      to such extent (or the beneficial ownership of any such shares of Common Stock
      as a result of such dividend or distribution to such extent) and such dividend
      or distribution to such extent shall be held in abeyance for the benefit of
      the
      Holder until such time, if ever, as its right thereto would not result in the
      Holder exceeding the Maximum Percentage).

     

    16. AMENDING
      THE TERMS OF NOTES.
      The
      prior written consent of the Holder shall be required for any change or
      amendment to this Note. No
      consideration shall be offered or paid to the Holder to amend or consent to
      a
      waiver or modification of any provision of this Note unless the same
      consideration is also offered to all of the holders of the Other Notes.
The
      Holder shall be entitled, at its option, to the benefit of any amendment to
      any
      of the Other Notes.

     

    17. TRANSFER.
      This
      Note and any shares of Common Stock issued upon conversion of this Note may
      be
      offered, sold, assigned or transferred by the Holder without the consent of
      the
      Company, subject only to the provisions of Section 2(g) of the Securities
      Purchase Agreement.

     

    18. REISSUANCE
      OF THIS NOTE.

     

    (a) Transfer.
      If this
      Note is to be transferred, the Holder shall surrender this Note to the Company,
      whereupon the Company will forthwith issue and deliver upon the order of the
      Holder a new Note (in accordance with Section 18(d)), registered as the Holder
      may request, representing the outstanding Principal being transferred by the
      Holder and, if less than the entire outstanding Principal is being transferred,
      a new Note (in accordance with Section 18(d)) to the Holder representing the
      outstanding Principal not being transferred. The Holder and any assignee, by
      acceptance of this Note, acknowledge and agree that, by reason of the provisions
      of Section 3(c)(iii) following conversion or redemption of any portion of this
      Note, the outstanding Principal represented by this Note may be less than the
      Principal stated on the face of this Note.

    
      
        
        

      

      
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    (b) Lost,
      Stolen or Mutilated Note.
      Upon
      receipt by the Company of evidence reasonably satisfactory to the Company of
      the
      loss, theft, destruction or mutilation of this Note (as to which a written
      certification and the indemnification contemplated below shall suffice as such
      evidence), and, in the case of loss, theft or destruction, of any
      indemnification undertaking by the Holder to the Company in customary and
      reasonable form and, in the case of mutilation, upon surrender and cancellation
      of this Note, the Company shall execute and deliver to the Holder a new Note
      (in
      accordance with Section 18(d)) representing the outstanding
      Principal.

     

    (c) Note
      Exchangeable for Different Denominations.
      This
      Note is exchangeable, upon the surrender hereof by the Holder at the principal
      office of the Company, for a new Note or Notes (in accordance with Section
      18(d)
      and in principal amounts of at least $100,000) representing in the aggregate
      the
      outstanding Principal of this Note, and each such new Note will represent such
      portion of such outstanding Principal as is designated by the Holder at the
      time
      of such surrender.

     

    (d) Issuance
      of New Notes.
      Whenever the Company is required to issue a new Note pursuant to the terms
      of
      this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall
      represent, as indicated on the face of such new Note, the Principal remaining
      outstanding (or in the case of a new Note being issued pursuant to Section
      18(a)
      or Section 18(c), the Principal designated by the Holder which, when added
      to
      the principal represented by the other new Notes issued in connection with
      such
      issuance, does not exceed the Principal remaining outstanding under this Note
      immediately prior to such issuance of new Notes), (iii) shall have an issuance
      date, as indicated on the face of such new Note, which is the same as the
      Issuance Date of this Note, (iv) shall have the same rights and conditions
      as
      this Note, and (v) shall represent accrued and unpaid Interest and Late Charges
      on the Principal and Interest of this Note, from the Issuance Date.

     

    19. REMEDIES,
      CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
      RELIEF.
      The
      remedies provided in this Note shall be cumulative and in addition to all other
      remedies available under this Note and any of the other Transaction Documents
      at
      law or in equity (including a decree of specific performance and/or other
      injunctive relief), and nothing herein shall limit the Holder’s right to pursue
      actual and consequential damages for any failure by the Company to comply with
      the terms of this Note. The Company covenants to the Holder that there shall
      be
      no characterization concerning this instrument other than as expressly provided
      herein. Amounts set forth or provided for herein with respect to payments,
      conversion and the like (and the computation thereof) shall be the amounts
      to be
      received by the Holder and shall not, except as expressly provided herein,
      be
      subject to any other obligation of the Company (or the performance thereof).
      The
      Company acknowledges that a breach by it of its obligations hereunder will
      cause
      irreparable harm to the Holder and that the remedy at law for any such breach
      may be inadequate. The Company therefore agrees that, in the event of any such
      breach or threatened breach, the Holder shall be entitled, in addition to all
      other available remedies, to an injunction restraining any breach, without
      the
      necessity of showing economic loss and without any bond or other security being
      required.

    
      
        
        

      

      
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    20. PAYMENT
      OF COLLECTION, ENFORCEMENT AND OTHER COSTS.
      If (a)
      this Note is placed in the hands of an attorney for collection or enforcement
      or
      is collected or enforced through any legal proceeding or the Holder otherwise
      takes action to collect amounts due under this Note or to enforce the provisions
      of this Note or (b) there occurs any bankruptcy, reorganization, receivership
      of
      the Company or other proceedings affecting Company creditors’ rights and
      involving a claim under this Note, then the Company shall pay the costs incurred
      by the Holder for such collection, enforcement or action or in connection with
      such bankruptcy, reorganization, receivership or other proceeding, including,
      without limitation, attorneys’ fees and disbursements.

     

    21. CONSTRUCTION;
      HEADINGS.
      This
      Note shall be deemed to be jointly drafted by the Company and the Holder and
      shall not be construed against any Person as the drafter hereof. The headings
      of
      this Note are for convenience of reference and shall not form part of, or affect
      the interpretation of, this Note. Terms used in this Note but defined in the
      other Transaction Documents shall have the meanings ascribed to such terms
      on
      the Closing Date in such other Transaction Documents unless otherwise consented
      to in writing by the Holder.

     

    22. FAILURE
      OR INDULGENCE NOT WAIVER.
      No
      failure or delay on the part of the Holder 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. No waiver
      shall be effective unless it is in writing and signed by an authorized
      representative of the waiving party.

     

    23. DISPUTE
      RESOLUTION.
      In the
      case of a dispute as to the determination of the Closing Bid Price, the Closing
      Sale Price or the fair market value or the arithmetic calculation of the
      Conversion Rate or any Redemption Price, the Company or the Holder (as the
      case
      may be) shall submit the disputed determinations or arithmetic calculations
      (as
      the case may be) via facsimile within two (2) Business Days of receipt, or
      deemed receipt, of the applicable notice or other event giving rise to such
      dispute (as the case may be) to the Company or the Holder (as the case may
      be).
      If the Holder and the Company are unable to agree upon such determination or
      calculation within two (2) Business Days of such disputed determination or
      arithmetic calculation being submitted to the Company or the Holder (as the
      case
      may be), then the Company shall, within two (2) Business Days submit via
      facsimile (a) the disputed determination of the Closing Bid Price, the Closing
      Sale Price or fair market value (as the case may be) to an independent,
      reputable investment bank selected by the Company and approved by the Holder
      or
      (b) the disputed arithmetic calculation of the Conversion Rate or any Redemption
      Price (as the case may be) to the Company’s independent, outside accountant. The
      Company shall cause at its expense the investment bank or the accountant (as
      the
      case may be) to perform the determinations or calculations (as the case may
      be)
      and notify the Company and the Holder of the results no later than ten (10)
      Business Days from the time it receives such disputed determinations or
      calculations (as the case may be). Such investment bank’s or accountant’s
      determination or calculation (as the case may be) shall be binding upon all
      parties absent demonstrable error.

    
      
        
        

      

      
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    24. NOTICES;
      PAYMENTS.

     

    (a) Notices.
      Whenever notice is required to be given under this Note, unless otherwise
      provided herein, such notice shall be given in accordance with Section 9(f)
      of
      the Securities Purchase Agreement. The Company shall provide the Holder with
      prompt written notice of all actions taken pursuant to this Note, including
      in
      reasonable detail a description of such action and the reason therefore. Without
      limiting the generality of the foregoing, the Company will give written notice
      to the Holder (i) immediately upon any adjustment of the Conversion Price,
      setting forth in reasonable detail, and certifying, the calculation of such
      adjustment and (ii) at least fifteen (15) days prior to the date on which the
      Company closes its books or takes a record (A) with respect to any dividend
      or
      distribution upon the Common Stock, (B) with respect to any grant, issuances,
      or
      sales of any Options, Convertible Securities or rights to purchase stock,
      warrants, securities or other property to holders of shares of Common Stock
      or
      (C) for determining rights to vote with respect to any Fundamental Transaction,
      dissolution or liquidation, provided in each case that such information shall
      be
      made known to the public prior to or in conjunction with such notice being
      provided to the Holder.

     

    (b) Payments.
      Whenever any payment of cash is to be made by the Company to any Person pursuant
      to this Note, such payment shall be made in lawful money of the United States
      of
      America by a check drawn on the account of the Company and sent via overnight
      courier service to such Person at such address as previously provided to the
      Company in writing (which address, in the case of each of the Buyers, shall
      initially be as set forth on the Schedule of Buyers attached to the Securities
      Purchase Agreement); provided that the Holder may elect to receive a payment
      of
      cash via wire transfer of immediately available funds by providing the Company
      with prior written notice setting out such request and the Holder’s wire
      transfer instructions. Whenever any amount expressed to be due by the terms
      of
      this Note is due on any day which is not a Business Day, the same shall instead
      be due on the next succeeding day which is a Business Day and, in the case
      of
      any Interest Date which is not the date on which this Note is paid in full,
      the
      extension of the due date thereof shall not be taken into account for purposes
      of determining the amount of Interest due on such date. Any amount of Principal
      or other amounts due under the Transaction Documents which is not paid when
      due
      shall result in a late charge being incurred and payable by the Company in
      an
      amount equal to interest on such amount at the rate of eighteen percent (18%)
      per annum from the date such amount was due until the same is paid in full
      (“Late
      Charge”).

     

    25. CANCELLATION.
      After
      all Principal, accrued Interest and other amounts at any time owed on this
      Note
      have been paid in full, this Note shall automatically be deemed canceled, shall
      be surrendered to the Company for cancellation and shall not be
      reissued.

     

    26. WAIVER
      OF NOTICE.
      To the
      extent permitted by law, the Company hereby irrevocably waives demand, notice,
      presentment, protest and all other demands and notices in connection with the
      delivery, acceptance, performance, default or enforcement of this Note and
      the
      Securities Purchase Agreement.

    
      
        
        

      

      
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    27. GOVERNING
      LAW.
      This
      Note shall be construed and enforced in accordance with, and all questions
      concerning the construction, validity, interpretation and performance of this
      Note shall be governed by, the internal laws of the State of New York, without
      giving effect to any choice of law or conflict of law provision or rule (whether
      of the State of New York or any other jurisdictions) that would cause the
      application of the laws of any jurisdictions other than the State of New York.
      The Company hereby irrevocably submits to the exclusive jurisdiction of the
      state and federal courts sitting in The City of New York, Borough of Manhattan,
      for the adjudication of any dispute hereunder or in connection herewith or
      with
      any transaction contemplated hereby or discussed herein, and hereby irrevocably
      waives, and agrees not to assert in any suit, action or proceeding, any claim
      that it is not personally subject to the jurisdiction of any such court, that
      such suit, action or proceeding is brought in an inconvenient forum or that
      the
      venue of such suit, action or proceeding is improper. Nothing contained herein
      shall be deemed to limit in any way any right to serve process in any manner
      permitted by law. In the event that any provision of this Note is invalid or
      unenforceable under any applicable statute or rule of law, then such provision
      shall be deemed inoperative to the extent that it may conflict therewith and
      shall be deemed modified to conform with such statute or rule of law. Any such
      provision which may prove invalid or unenforceable under any law shall not
      affect the validity or enforceability of any other provision of this Note.
      Nothing contained herein shall be deemed or operate to preclude the Holder
      from
      bringing suit or taking other legal action against the Company in any other
      jurisdiction to collect on the Company’s obligations to the Holder, to realize
      on any collateral or any other security for such obligations, or to enforce
      a
      judgment or other court ruling in favor of the Holder. THE
      COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
      REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
      CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED
      HEREBY.

     

    28. CERTAIN
      DEFINITIONS.
      For
      purposes of this Note, the following terms shall have the following
      meanings:

     

    (a) “Bloomberg”
means
      Bloomberg Financial Markets.

     

    (b) “Business
      Day”
means
      any day other than Saturday, Sunday or other day on which commercial banks
      in
      The City of New York are authorized or required by law to remain
      closed.

     

    (c) “Closing
      Bid Price”
and
      “Closing
      Sale Price”
means,
      for any security as of any date, the last closing bid price and last closing
      trade price, respectively, for such security on the Principal Market, as
      reported by Bloomberg, or, if the Principal Market begins to operate on an
      extended hours basis and does not designate the closing bid price or the closing
      trade price (as the case may be) then the last bid price or last trade price,
      respectively, of such security prior to 4:00:00 p.m., New York time, as reported
      by Bloomberg, or, if the Principal Market is not the principal securities
      exchange or trading market for such security, the last closing bid price or
      last
      trade price, respectively, of such security on the principal securities exchange
      or trading market where such security is listed or traded as reported by
      Bloomberg, or if the foregoing do not apply, the last closing bid price or
      last
      trade price, respectively, of such security in the over-the-counter market
      on
      the electronic bulletin board for such security as reported by Bloomberg, or,
      if
      no closing bid price or last trade price, respectively, is reported for such
      security by Bloomberg, the average of the bid prices, or the ask prices,
      respectively, of any market makers for such security as reported in the “pink
      sheets” by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If
      the Closing Bid Price or the Closing Sale Price cannot be calculated for a
      security on a particular date on any of the foregoing bases, the Closing Bid
      Price or the Closing Sale Price (as the case may be) of such security on such
      date shall be the fair market value as mutually determined by the Company and
      the Holder. If the Company and the Holder are unable to agree upon the fair
      market value of such security, then such dispute shall be resolved in accordance
      with the procedures in Section 23. All such determinations shall be
      appropriately adjusted for any stock dividend, stock split, stock combination
      or
      other similar transaction during such period.

    
      
        
        

      

      
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    (d) “Closing
      Date”
shall
      have the meaning set forth in the Securities Purchase Agreement, which date
      is
      the date the Company initially issued Notes pursuant to the terms of the
      Securities Purchase Agreement.

     

    (e) “Common
      Stock”
means
      (i) the Company’s shares of common stock, $0.001 par value per share, and
      (ii) any capital stock into which such common stock shall have been changed
      or
      any share capital resulting from a reclassification of such common
      stock.

     

    (f) “Company
      Conversion Price”
means
      the lower of (i) the then applicable Conversion Price and (ii) the price which
      shall be computed as 90% of the arithmetic average of the VWAP of the Common
      Stock on each of the twenty (20) consecutive Trading Days immediately preceding
      the applicable Installment Date (each such period, a “Company
      Conversion Measuring Period”).
      All
      such determinations to be appropriately adjusted for any stock split, stock
      dividend, stock combination or other similar transaction during such Company
      Conversion Measuring Period.

     

    (g) “Conversion
      Share Ratio”
      means as
      to any applicable Installment Date, the quotient of (i) the number of
      Pre-Installment Conversion Shares delivered in connection with such Installment
      Date divided by (ii) the number of Post-Installment Conversion Shares applicable
      to such Installment Date.

     

    (h) “Convertible
      Securities”
means
      any stock or securities (other than Options) directly or indirectly convertible
      into or exercisable or exchangeable for shares of Common Stock.

     

    (i) “Current
      Subsidiaries”
means,
      collectively, Generex Pharmaceuticals Inc., an Ontario corporation, Generex
      (Bermuda), Inc., a corporation existing pursuant to the Bermuda Companies Act,
      Antigen Express, Inc., a Delaware corporation, Generex Pharmaceuticals (USA)
      LLC, a North Carolina limited liability company, Generex Marketing &
Distribution Inc., an Ontario corporation, and 1097346 Ontario Inc., an Ontario
      corporation, and each of the foregoing, individually, a “Current
      Subsidiary.”
      

    
      
        
        

      

      
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    (j) “Eligible
      Market”
means
      the Principal Market, The New York Stock Exchange, Inc., the Nasdaq Global
      Select Market or the Nasdaq Global Market.

     

    (k) “Equity
      Conditions”
means:
      (i) on each day during the period beginning one month prior to the applicable
      date of determination and ending on and including the applicable date of
      determination either
      (x) the applicable Registration Statement filed pursuant to the Registration
      Rights Agreement shall be effective and the prospectus contained therein shall
      be available for the resale of all of the Registrable Securities (which, solely
      for clarification purposes, includes all shares
      of
      Common Stock issuable upon conversion of this Note, including, without
      limitation, under Sections 3 and 8)
      in
      accordance with the terms of the Registration Rights Agreement and
      there
      shall not have been during such period any Grace Periods (as
      defined in the Registration Rights Agreement) or
      (y)
      all Registrable Securities shall be eligible for sale without restriction and
      without the need for registration under any applicable federal or state
      securities laws (in each case, disregarding any limitation on conversion or
      exercise);
      (ii) on
      each day during the period beginning three months prior to the applicable date
      of determination and ending on and including the applicable date of
      determination (the “Equity
      Conditions Measuring Period”),
      the
      shares of Common Stock (including all Registrable Securities)
      are
      listed or designated for quotation on an Eligible Market and shall not have
      been
      suspended from trading on an Eligible Market (other than suspensions of not
      more
      than two (2) days and occurring prior to the applicable date of determination
      due to business announcements by the Company) nor shall delisting or suspension
      by an Eligible Market have been threatened (with a reasonable prospect of
      delisting occurring) or pending either (A) in writing by such Eligible Market
      or
      (B) by falling below the minimum listing maintenance requirements of the
      Eligible Market on which the shares of Common Stock are then listed; (iii)
      on
      each day during the Equity Conditions Measuring Period, the Company shall have
      delivered all shares of Common Stock issuable upon conversion of this Note
      on a
      timely basis as set forth in Section 3 hereof and all other shares of capital
      stock required to be delivered by the Company on a timely basis as set forth
      in
      the other Transaction Documents; (iv) any shares of Common Stock to be issued
      in
      connection with the event requiring determination may be issued in full without
      violating Section 3(d) hereof or the rules or regulations of the Eligible Market
      on which the Common Stock is then listed; (v) on each day during the Equity
      Conditions Measuring Period, no public announcement of a pending, proposed
      or
      intended Fundamental Transaction shall have occurred which has not been
      abandoned, terminated or consummated; (vi)
      the
      Company shall have no knowledge of any fact that would reasonably be expected
      to
      cause (1) the applicable Registration Statement required to be filed pursuant
      to
      the Registration Rights Agreement not to be effective or the prospectus
      contained therein not to be available for the resale of at least all of the
      Registrable Securities in accordance with the terms of the Registration Rights
      Agreement or (2) any Registrable Securities not to be eligible for sale without
      restriction pursuant to Rule 144 under the 1933 Act and any applicable state
      securities laws (in each case, disregarding any limitation on conversion or
      exercise); (vii) the Holder shall not be in (and no other Buyer shall be in)
      possession of any material, non-public information provided to any of them
      by
      the Company or any of its affiliates, other than as expressly contemplated
      by
      Section 4(i) of the Securities Purchase Agreement; (viii) on
      each
      day during the Equity Conditions Measuring Period, the Company otherwise shall
      have been in compliance with and shall not have breached any provision,
      covenant, representation or warranty of any Transaction Document; and (ix)
      on
      each day during the Equity Conditions Measuring Period, there shall not have
      occurred an Event of Default or an event that with the passage of time or giving
      of notice would constitute an Event of Default.

    
      
        
        

      

      
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    (l) “Equity
      Conditions Failure”
means
      that on any day during the period commencing ten (10) Trading Days prior to
      the
      applicable Company Installment Notice Date through the later of the applicable
      Installment Date and the date on which the applicable shares of Common Stock
      are
      actually delivered to the Holder, the Equity Conditions have not been satisfied
      (or waived in writing by the Holder).

     

    (m) “Equity
      Value Redemption Premium”
means
      135%.

     

    (n) “Fundamental
      Transaction”
means
      that the Company shall, directly or indirectly, in one or more related
      transactions, (i) consolidate or merge with or into (whether or not the Company
      is the surviving corporation) another Person, or (ii) sell, assign, transfer,
      convey or otherwise dispose of all or substantially all of the properties or
      assets of the Company to another Person, or (iii) allow another Person to make
      a
      purchase, tender or exchange offer that is accepted by the holders of more
      than
      50% of the outstanding shares of Common Stock (not including any shares of
      Common Stock held by the Person or Persons making or party to, or associated
      or
      affiliated with the Persons making or party to, such purchase, tender or
      exchange offer), or (iv) consummate a stock purchase agreement or other business
      combination (including, without limitation, a reorganization, recapitalization,
      spin-off or scheme of arrangement) with another Person whereby such other Person
      acquires more than the 50% of the outstanding shares of Common Stock (not
      including any shares of Common Stock held by the other Person or other Persons
      making or party to, or associated or affiliated with the other Persons making
      or
      party to, such stock purchase agreement or other business combination), or
      (v)
      reorganize, recapitalize or reclassify its Common Stock, or (vi) any “person” or
“group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the
      Exchange Act) is or shall become the “beneficial owner” (as defined in Rule
      13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate
      ordinary voting power represented by issued and outstanding Common
      Stock.

     

    (o) “Fundamental
      Transaction Redemption Premium”
means
      150%.

     

    (p) “GAAP”
means
      United States generally accepted accounting principles, consistently
      applied.

     

    (q) “Holder
      Pro Rata Amount”
means
      a
      fraction (i) the numerator of which is the original Principal amount of this
      Note on the Closing Date and (ii) the denominator of which is the aggregate
      original principal amount of all Notes issued to the initial purchasers pursuant
      to the Securities Purchase Agreement on the Closing Date.

    
      
        
        

      

      
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    (r) “Installment
      Amount”
means,
      with respect to any Installment Date, the lesser of (A) the product of (i)
      $1,376,666.67, multiplied
      by (ii)
      Holder Pro Rata Amount and (B) the Principal amount under this Note as of such
      Installment Date, as any such Installment Amount may be reduced pursuant to
      the
      terms of this Note, whether upon conversion, redemption or otherwise, together
      with, in each case, the sum of any accrued and unpaid Interest as of such
      Installment Date under this Note (if such Installment Date is also an Interest
      Date) and accrued and unpaid Late Charges, if any, under this Note as of such
      Installment Date. In the event the Holder shall sell or otherwise transfer
      any
      portion of this Note, the transferee shall be allocated a pro rata portion
      of
      the each unpaid Installment Amount hereunder.

     

    (s) “Installment
      Date”
means
      each of the following dates: (i) August 1, 2008, (ii) September 1, 2008, (iii)
      October 1, 2008, (iv) November 1, 2008, (v) December 1, 2008, (vi) January
      1,
      2009, (vii) February 1, 2009, (viii) March 1, 2009, (ix) April 1, 2009, (x)
      May
      1, 2009, (xi) June 1, 2009, (xii) July 1, 2009, (xiii) August 1, 2009, (xv)
      September 1, 2009 and (xv) the Maturity Date.

     

    (t) “Installment
      Volume Limitation”
means
      25% of the aggregate dollar trading volume (as reported on Bloomberg) of the
      Common Stock on the Principal Market over the twenty (20) consecutive Trading
      Day period ending on the Trading Day immediately preceding the applicable
      Installment Notice Date.

     

    (u) “Interest Rate”
means
      eight percent (8%) per annum.

     

    (v) “Material
      Subsidiaries”
means,
      collectively, Generex Pharmaceuticals, Inc., Antigen Express, Inc. and any
      other
      Subsidiary which has, as of any date of determination, at least $250,000 in
      revenues, $250,000 in assets or owns, leases or licenses any assets or rights
      of
      any kind or nature, or provides any services of any kind or nature, that
      are material to the business, operations (including results thereof),
      properties, condition (including financial condition) or prospects of the
      Company or any of its Subsidiaries, either individually or in the aggregate,
      and
      each of the foregoing, individually, a “Material Subsidiary.”

     

    (w) “Maturity Date”
shall
      mean September 30, 2009; provided,
      however,
      that
      the Maturity Date may be extended at the option of the Holder (i) in the event
      that, and for so long as, an Event of Default shall have occurred and be
      continuing or any event shall have occurred and be continuing that with the
      passage of time and the failure to cure would result in an Event of Default
      or
      (ii) through the date that is twenty (20) Business Days after the consummation
      of a Fundamental Transaction in the event that a Fundamental Transaction is
      publicly announced or a Fundamental Transaction Notice is delivered prior to
      the
      Maturity Date; provided,
      further,
      that if
      a Holder elects to convert some or all of this Note pursuant to Section 3
      hereof, and the Conversion Amount would be limited pursuant to Section 3(d)
      hereunder, the Maturity Date shall automatically be extended until such time
      as
      such provision shall not limit the conversion of this Note.

     

    (x) “Net
      Cash Balance”
means,
      at any date, (i) an amount equal to the aggregate amount of cash, cash
      equivalents (but not including any restricted cash) and marketable securities,
      consisting of corporate bonds, commercial paper and medium-term notes, as shown
      or reflected in the notes to the Company’s consolidated balance sheet as at such
      date minus
      (ii) all
      Indebtedness of the Company and its Subsidiaries (including,
      for
      purposes of this clause (ii),
      trade
      payables but excluding,
      for purposes of this clause (ii),
      Indebtedness under the Notes).

    
      
        
        

      

      
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    (y) “New
      Subsidiaries”
means,
      as of any date of determination, any Person (i) in which the Company after
      the
      Subscription Date, directly or indirectly, owns or acquires any of the
      outstanding capital stock or holds any equity or similar interest of such Person
      or (ii) in which the Company after the Subscription Date, directly or
      indirectly, controls or operates all or any part of the business, operations
      or
      administration of such Person, and each of the foregoing, individually, a
“New
      Subsidiary.”

     

    (z) “Options”
means
      any rights, warrants or options to subscribe for or purchase shares of Common
      Stock or Convertible Securities.

     

    (aa) “Parent
      Entity”
of
      a
      Person means an entity that, directly or indirectly, controls the applicable
      Person and whose common stock or equivalent equity security is quoted or listed
      on an Eligible Market, or, if there is more than one such Person or Parent
      Entity, the Person or Parent Entity with the largest public market
      capitalization as of the date of consummation of the Fundamental
      Transaction.

     

    (bb) “Permitted
      Indebtedness”
      means
      (i) total Indebtedness of the Company and the Subsidiaries not to exceed $2
      million in the aggregate outstanding at any time; provided, however, that such
      Indebtedness shall be made expressly subordinate in right of payment to the
      Indebtedness evidenced by the Notes, as reflected in a written agreement
      acceptable to the Required Holders and approved by the Required Holders in
      writing, and which Indebtedness does not provide at any time for (A) the
      payment, prepayment, repayment, repurchase or defeasance, directly or
      indirectly, of any principal or premium, if any, thereon until ninety-one (91)
      days after the Maturity Date or later and (B) total interest and fees at a
      rate
      in excess of the Interest Rate; (ii) equipment leases and purchase money
      obligations of the Company and the Subsidiaries not to exceed $500,000 in the
      aggregate outstanding at any time, (iii) Indebtedness evidenced by this Note
      and
      the Other Notes and (iv) Indebtedness of 1097346 Ontario Inc. secured by
      mortgages outstanding on the date hereof in the principal amount of $3,292,969
      (in Canadian dollars), and any renewal or refinancing thereof (provided that
      such renewal or refinancing does not increase the outstanding principal amount
      or increase or decrease the length of the term thereof).

     

    (cc) “Permitted
      Liens”
means
      (i) any Lien for taxes not yet due or delinquent or being contested in good
      faith by appropriate proceedings for which adequate reserves have been
      established in accordance with GAAP, (ii) any statutory Lien arising in the
      ordinary course of business by operation of law with respect to a liability
      that
      is not yet due or delinquent, (iii) any Lien created by operation of law, such
      as materialmen’s liens, mechanics’ liens and other similar liens, arising in the
      ordinary course of business with respect to a liability that is not yet due
      or
      delinquent or that are being contested in good faith by appropriate proceedings,
      (iv) Liens securing the Company’s obligations under the Notes, and (v) any Lien
      securing Permitted Senior Indebtedness.

    
      
        
        

      

      
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    (dd) “Permitted
      Senior Indebtedness” means
      the
      Indebtedness described in clauses (ii) and (iv) of Permitted
      Indebtedness.

     

    (ee) “Person”
means
      an individual, a limited liability company, a partnership, a joint venture,
      a
      corporation, a trust, an unincorporated organization, any other entity and
      a
      government or any department or agency thereof.

     

    (ff) “Post-Installment
      Conversion Shares”
      means
      that number of shares of Common Stock that would be required to be delivered
      pursuant to Section 8 on an applicable Installment Date without taking into
      account the delivery of any Pre-Installment Conversion Shares.

     

    (gg) “Pre-Installment
      Conversion Price”
means
      the lower of (i) the then applicable Conversion Price and (ii) the price which
      shall be computed as 90% of the arithmetic average of the VWAP of the Common
      Stock on each of the twenty (20) consecutive Trading Days immediately preceding
      the delivery or deemed delivery of the applicable Company Installment Notice.
      All such determinations to be appropriately adjusted for any stock split, stock
      dividend, stock combination or other similar transaction during such Company
      Conversion Measuring Period.

     

    (hh) “Principal
      Market”
means
      the Nasdaq Capital Market.

     

    (ii) “Quarter”
means
      each of: the period beginning on and including April 1 and ending on and
      including June 30; the period beginning on and including July 1 and ending
      on
      and including September 30; the period beginning on and including October 1
      and
      ending on and including December 31; and the period beginning on and including
      January 1 and ending on and including March 31.

     

    (jj) “Redemption
      Notices”
means,
      collectively, the Event of Default Redemption Notice and the Fundamental
      Transaction Redemption Notice, and each of the foregoing, individually, a
“Redemption
      Notice.”

     

    (kk) “Redemption
      Premium”
means
      (i) in the case of the Events of Default described in Section 4(a)(i) (other
      than Sections 4(a)(ix) through 4(a)(xi)), 135% or (ii) in the case of the Events
      of Default described in Sections 4(a)(ix) through 4(a)(xi), 100%.

     

    (ll) “Redemption
      Prices”
means,
      collectively, the Event of Default Redemption Price, the Fundamental Transaction
      Redemption Price and the Company Installment Redemption Price, and each of
      the
      foregoing, individually, a “Redemption
      Price.”

     

    (mm) “Registration
      Rights Agreement”
means
      that certain registration rights agreement, dated as of the Closing Date, by
      and
      among the Company and the initial holders of the Notes relating to, among other
      things, the registration of the resale of the Common Stock issuable upon
      conversion of the Notes and exercise of the Warrants.

     

    (nn) “Required
      Holders”
means
      the holders of Notes representing at least eighty percent (80%) of the aggregate
      principal amount of the Notes then outstanding.

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

    (oo) “Reserved
      Amount”
means,
      as of any date of determination, an amount equal to 75% of the aggregate
      Principal amount outstanding under all of the Notes.

     

    (pp) “SEC”
means
      the United States Securities and Exchange Commission.

     

    (qq) “Securities
      Purchase Agreement”
means
      that certain securities purchase agreement, dated as of the Subscription Date,
      by and among the Company and the initial holders of the Notes pursuant to which
      the Company issued the Notes and Warrants.

     

    (rr) “Security
      Agreement”
means
      that certain security agreement, dated as of the Closing Date, by and among
      the
      Company, the Subsidiaries and the initial holders of the Notes.

     

    (ss) “Subscription
      Date”
means
      March 31, 2008.

     

    (tt) “Subsidiaries”
means,
      as of any date of determination, collectively, all Current Subsidiaries and
      all
      New Subsidiaries, and each of the foregoing, individually, a “Subsidiary.”

     

    (uu) “Successor
      Entity”
means
      the Person (or, if so elected by the Holder, the Parent Entity) formed by,
      resulting from or surviving any Fundamental Transaction or the Person (or,
      if so
      elected by the Holder, the Parent Entity) with which such Fundamental
      Transaction shall have been entered into.

     

    (vv) “Trading
      Day”
means
      any day on which the Common Stock is traded on the Principal Market, or, if
      the
      Principal Market is not the principal trading market for the Common Stock,
      then
      on the principal securities exchange or securities market on which the Common
      Stock is then traded; provided that “Trading Day” shall not include any day on
      which the Common Stock is scheduled to trade on such exchange or market for
      less
      than 4.5 hours or any day that the Common Stock is suspended from trading during
      the final hour of trading on such exchange or market (or if such exchange or
      market does not designate in advance the closing time of trading on such
      exchange or market, then during the hour ending at 4:00:00 p.m., New York
      time).

     

    (ww) “VWAP”
means,
      for any security as of any date, the dollar volume-weighted average price for
      such security on the Principal Market (or, if the Principal Market is not the
      principal trading market for such security, then on the principal securities
      exchange or securities market on which such security is then traded) during
      the
      period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m.,
      New
      York time, as reported by Bloomberg through its “Volume at Price” function or,
      if the foregoing does not apply, the dollar volume-weighted average price of
      such security in the over-the-counter market on the electronic bulletin board
      for such security during the period beginning at 9:30:01 a.m., New York time,
      and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if
      no
      dollar volume-weighted average price is reported for such security by Bloomberg
      for such hours, the average of the highest closing bid price and the lowest
      closing ask price of any of the market makers for such security as reported
      in
      the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau,
      Inc.). If the VWAP cannot be calculated for such security on such date on any
      of
      the foregoing bases, the VWAP of such security on such date shall be the fair
      market value as mutually determined by the Company and the Holder. If the
      Company and the Holder are unable to agree upon the fair market value of such
      security, then such dispute shall be resolved in accordance with the procedures
      in Section 23. All such determinations shall be appropriately adjusted for
      any
      share dividend, share split or other similar transaction during such
      period.

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

     

    (xx) “Warrants”
has
      the
      meaning ascribed to such term in the Securities Purchase Agreement, and shall
      include all warrants issued in exchange therefor or replacement
      thereof.

     

    29. DISCLOSURE.
      Upon
      receipt or delivery by the Company of any notice in accordance with the terms
      of
      this Note, unless the Company has in good faith determined that the matters
      relating to such notice do not constitute material, nonpublic information
      relating to the Company or any of its Subsidiaries, the Company shall within
      one
      (1) Business Day after any such receipt or delivery publicly disclose such
      material, nonpublic information on a Current Report on Form 8-K or otherwise.
      In
      the event that the Company believes that a notice contains material, nonpublic
      information relating to the Company or any of its Subsidiaries, the Company
      so
      shall indicate to such Holder contemporaneously with delivery of such notice,
      and in the absence of any such indication, the Holder shall be allowed to
      presume that all matters relating to such notice do not constitute material,
      nonpublic information relating to the Company or its Subsidiaries. Nothing
      contained in this Section
      29 shall
      limit any obligations of the Company, or any rights of the Holder, under Section
      4(i) of the Securities Purchase Agreement.

     

    [signature
      page follows]

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF, the Company has caused this Note to be duly executed as of
      the
      Issuance Date set out above.

    

    
      	
              
                GENEREX
                  BIOTECHNOLOGY CORPORATION

              

            
	 
	
              By:

            	  
              
	 	
              Name:

            
	 	
              Title:

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      I

     

    GENEREX
      BIOTECHNOLOGY CORPORATION

    CONVERSION
      NOTICE

     

    Reference
      is made to the Senior Secured Convertible Note (the “Note”)
      issued
      to the undersigned by Generex Biotechnology Corporation (the “Company”).
      In
      accordance with and pursuant to the Note, the undersigned hereby elects to
      convert the Conversion Amount (as defined in the Note) of the Note indicated
      below into shares of Common Stock, par value $0.001 per share (the “Common
      Stock”),
      of
      the Company, as of the date specified below.

     

    
      	
               

              Date
                of Conversion:

            	 
	
               

              Aggregate
                Conversion Amount to be converted:

            	 
	
               

              Please
                confirm the following information:

            
	
               

              Conversion
                Price:

            	 
	
               

              Number
                of shares of Common Stock to be issued:

            	 
	
               

              Please
                issue the Common Stock into which the Note is being converted in
                the
                following name and to the following address:

            
	
               

              Issue to:

            	 
	 	 
	 	 
	
               

              Facsimile
                Number:

            	 
	
               

              Authorization:

            	 
	
               

              By:

            	 
	
               

              Title:

            	 
	
               

              Dated:

            	 
	
               

              Account
                Number:

            	 
	
                (if
                electronic book entry transfer)

            	
               

            
	
               

              Transaction
                Code Number:

            	
               

            
	
                (if
                electronic book entry transfer)

            	 
	
              Installment
                Amounts to be reduced (and corresponding Installment Dates) and amount
                of
                reduction:

            	
              _____________________________________________________________________________

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ACKNOWLEDGMENT

     

    The
      Company hereby acknowledges this Conversion Notice and hereby directs
      _________________ to issue the above indicated number of shares of Common Stock
      in accordance with the Transfer Agent Instructions dated _____________, 2008
      from the Company and acknowledged and agreed to by
      ________________________.

    

    
      	
              
                GENEREX
                  BIOTECHNOLOGY CORPORATION

              

            
	 
	
              By:

            	  
              
	 	
              Name:

            
	 	
              Title:Exhibit
      4.3

     

    [FORM
      OF SERIES A WARRANT]

     

    NEITHER
      THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
      THE
      SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
      LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
      (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL
      TO
      THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO
      THE
      COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
      OR
      ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
      NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION
      WITH
      A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY
      THE
      SECURITIES.

     

    GENEREX
      BIOTECHNOLOGY CORPORATION

     

    
      WARRANT
        TO PURCHASE COMMON STOCK

       

    

    Warrant
      No.:    

    Number
      of
      Shares of Common Stock: ___________

    Date
      of
      Issuance: March 31, 2008 (“Issuance
      Date”)

     

    Generex
      Biotechnology Corporation, a Delaware corporation (the “Company”),
      hereby certifies that, for good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, ___________________, the
      registered holder hereof or its permitted assigns (the “Holder”),
      is
      entitled, subject to the terms set forth below, to purchase from the Company,
      at
      the Exercise Price (as defined below) then in effect, upon exercise of this
      Warrant to Purchase Common Stock (including any Warrants to Purchase Common
      Stock issued in exchange, transfer or replacement hereof, the “Warrant”),
      at
      any time or times on or after the Issuance Date, but not after 11:59 p.m.,
      New
      York time, on the Expiration Date (as defined below), ______________ fully
      paid
      and nonassessable shares of Common Stock (as defined below) (the
      “Warrant
      Shares”).
      Except as otherwise defined herein, capitalized terms in this Warrant shall
      have
      the meanings set forth in Section 16.
      This
      Warrant is one of the Warrants to purchase Common Stock (the “SPA
      Warrants”)
      issued
      pursuant to Section 1 of that certain Securities Purchase Agreement, dated
      as of
      March 31, 2008, by and among the Company and the investors (the “Buyers”)
      referred to therein (the “Securities
      Purchase Agreement”).

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              1.

            	
              EXERCISE
                OF WARRANT.

            

    

     

    (a) Mechanics
      of Exercise.
      Subject
      to the terms and conditions hereof (including, without limitation, the
      limitations set forth in Section 1(f),
      this
      Warrant may be exercised by the Holder on any day on or after the Issuance
      Date,
      in whole or in part, by (i) delivery of a written notice, in the form
      attached hereto as Exhibit
      A
      (the
“Exercise
      Notice”),
      of
      the Holder’s election to exercise this Warrant and (ii) (A) payment to the
      Company of an amount equal to the then-applicable Exercise Price multiplied
      by
      the number of Warrant Shares as to which this Warrant is being exercised (the
      “Aggregate
      Exercise Price”)
      in
      cash or wire transfer of immediately available funds or (B) by notifying the
      Company that this Warrant is being exercised pursuant to a Cashless Exercise
      (as
      defined in Section 1(d)).
      The
      Holder shall not be required to deliver the original of this Warrant in order
      to
      effect an exercise hereunder. Execution and delivery of the Exercise Notice
      with
      respect to less than all of the Warrant Shares shall have the same effect as
      cancellation of the original of this Warrant and issuance of a new Warrant
      evidencing the right to purchase the remaining number of Warrant Shares.
      Execution and delivery of the Exercise Notice for all of the Warrant Shares
      shall have the same effect as cancellation of the original of this Warrant
      after
      delivery of the Warrant Shares in accordance with the terms hereof. On or before
      the first (1st)
      Trading
      Day following the date on which the Company has received each of the Exercise
      Notice and the Aggregate Exercise Price (or notice of a Cashless Exercise)
      (the
“Exercise
      Delivery Documents”),
      the
      Company shall transmit by facsimile an acknowledgment of confirmation of receipt
      of the Exercise Delivery Documents to the Holder and the Company’s transfer
      agent (the “Transfer
      Agent”).
      On or
      before the third (3rd)
      Trading
      Day following the date on which the Company has received all of the Exercise
      Delivery Documents (the “Share
      Delivery Date”),
      the
      Company shall (X) provided that the Transfer Agent is participating in The
      Depository Trust Company (“DTC”)
      Fast
      Automated Securities Transfer Program, upon the request of the Holder, credit
      such aggregate number of shares of Common Stock to which the Holder is entitled
      pursuant to such exercise to the Holder’s or its designee’s balance account with
      DTC through its Deposit Withdrawal Agent Commission system, or (Y) if the
      Transfer Agent is not participating in the DTC Fast Automated Securities
      Transfer Program, issue and deliver to the Holder or, at Holder’s instruction
      pursuant to the Exercise Notice, Holder’s agent or designee, in each case, sent
      by reputable overnight courier to the address as specified in the Exercise
      Notice, a certificate, registered in the Company’s share register in the name of
      the Holder or its designee (as indicated in the Exercise Notice), for the number
      of shares of Common Stock to which the Holder is entitled pursuant to such
      exercise. Upon delivery of the Exercise Delivery Documents, the Holder shall
      be
      deemed for all corporate purposes to have become the holder of record of the
      Warrant Shares with respect to which this Warrant has been exercised,
      irrespective of the date such Warrant Shares are credited to the Holder’s DTC
      account or the date of delivery of the certificates evidencing such Warrant
      Shares (as the case may be). If this Warrant is submitted in connection with
      any
      exercise pursuant to this Section 1(a)
      and the
      number of Warrant Shares represented by this Warrant submitted for exercise
      is
      greater than the number of Warrant Shares being acquired upon an exercise,
      then
      the Company shall as soon as practicable and in no event later than three (3)
      Business Days after any exercise and at its own expense, issue and deliver
      to
      the Holder (or its designee) a new Warrant (in accordance with Section
      7(d))
      representing the right to purchase the number of Warrant Shares purchasable
      immediately prior to such exercise under this Warrant, less the number of
      Warrant Shares with respect to which this Warrant is exercised. No fractional
      shares of Common Stock are to be issued upon the exercise of this Warrant,
      but
      rather the number of shares of Common Stock to be issued shall be rounded up
      to
      the nearest whole number. The Company shall pay any and all taxes which may
      be
      payable with respect to the issuance and delivery of Warrant Shares upon
      exercise of this Warrant. 

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (b) Exercise
      Price.
      For
      purposes of this Warrant, “Exercise
      Price”
means
      $1.21, subject to adjustment as provided herein.

     

    (c) Company’s
      Failure to Timely Deliver Securities.
      If the
      Company shall fail, for any reason or for no reason, to issue to the Holder
      within three (3) Trading Days of receipt of the Exercise Delivery Documents,
      a
      certificate for the number of shares of Common Stock to which the Holder is
      entitled and register such shares of Common Stock on the Company’s share
      register or to credit the Holder’s balance account with DTC for such number of
      shares of Common Stock to which the Holder is entitled upon the Holder’s
      exercise of this Warrant (as the case may be), then, in addition to all other
      remedies available to the Holder, the Company shall pay in cash to the Holder
      on
      each day after such third (3rd)
      Trading
      Day that the issuance of such shares of Common Stock is not timely effected
      an
      amount equal to 2% of the product of (A) the sum of the number of shares of
      Common Stock not issued to the Holder on a timely basis and to which the Holder
      is entitled and (B) the Closing Sale Price of the Common Stock on the Trading
      Day immediately preceding the last possible date which the Company could have
      issued such shares of Common Stock to the Holder without violating Section
      1(a).
      In
      addition to the foregoing, if within three (3) Trading Days after the Company’s
      receipt of the facsimile copy of an Exercise Notice, the Company shall fail
      to
      issue and deliver a certificate to the Holder and register such shares of Common
      Stock on the Company’s share register or credit the Holder’s balance account
      with DTC for the number of shares of Common Stock to which the Holder is
      entitled upon such Holder’s exercise hereunder (as the case may be), and if on
      or after such third (3rd)
      Trading
      Day the Holder purchases (in an open market transaction or otherwise) shares
      of
      Common Stock to deliver in satisfaction of a sale by the Holder of shares of
      Common Stock issuable upon such exercise that the Holder anticipated receiving
      from the Company (a “Buy-In”),
      then
      the Company shall, within three (3) Business Days after the Holder’s request and
      in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal
      to the Holder’s total purchase price (including brokerage commissions, if any)
      for the shares of Common Stock so purchased (the “Buy-In
      Price”),
      at
      which point the Company’s obligation to deliver such certificate (and to issue
      such shares of Common Stock) shall terminate, or (ii) promptly honor its
      obligation to deliver to the Holder a certificate or certificates representing
      such shares of Common Stock or credit the Holder’s balance account with DTC for
      the number of shares of Common Stock to which the Holder is entitled upon such
      Holder’s exercise hereunder (as the case may be) and pay cash to the Holder in
      an amount equal to the excess (if any) of the Buy-In Price over the product
      of
      (A) such number of shares of Common Stock times (B) the Closing Sale Price
      of
      the Common Stock on the Trading Day immediately preceding the date of the
      Exercise Notice.

     

    (d) Cashless
      Exercise.
      Notwithstanding anything contained herein to the contrary (other than
      Section 1(f)
      below),
      the Holder may, in its sole discretion, exercise this Warrant in whole or in
      part and, in lieu of making the cash payment otherwise contemplated to be made
      to the Company upon such exercise in payment of the Aggregate Exercise Price,
      elect instead to receive upon such exercise the “Net Number” of shares of Common
      Stock determined according to the following formula (a “Cashless
      Exercise”):

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    Net
      Number = (A
      x
      B) - (A x C)

                                B

     

    For
      purposes of the foregoing formula:

     

    A=
      the
      total number of shares with respect to which this Warrant is then being
      exercised.

     

    B=
      the
      Closing Sale Price of the Common Stock on the Trading Day immediately preceding
      the date of the Exercise Notice.

     

    C=
      the
      Exercise Price then in effect for the applicable Warrant Shares at the time
      of
      such exercise.

     

    (e) Disputes.
      In the
      case of a dispute as to the determination of the Exercise Price or the
      arithmetic calculation of the number of Warrant Shares to be issued pursuant
      to
      the terms hereof, the Company shall promptly issue to the Holder the number
      of
      Warrant Shares that are not disputed and resolve such dispute in accordance
      with
      Section 13.

     

    (f) Limitations
      on Exercises. 

     

    (i) Beneficial
      Ownership.
      Notwithstanding anything to the contrary contained in this Warrant, this Warrant
      shall not be exercisable by the Holder hereof to the extent (but only to the
      extent) that, if exercisable by the Holder, the Holder or any of its affiliates
      would beneficially own in excess of [4.99%] [9.99%] (the “Maximum
      Percentage”)
      of the
      outstanding shares of Common Stock. To the extent the above limitation
      applies, the determination of whether this Warrant shall be exercisable
      (vis-à-vis other convertible, exercisable or exchangeable securities owned by
      the Holder) and of which warrants shall be exercisable (as among all warrants
      owned by the Holder) shall, subject to such Maximum Percentage limitation,
      be
      determined on the basis of the first submission to the Company for conversion,
      exercise or exchange (as the case may be). No prior inability to exercise this
      Warrant pursuant to this paragraph shall have any effect on the applicability
      of
      the provisions of this paragraph with respect to any subsequent
      determination of exercisability. For the purposes of this paragraph, beneficial
      ownership and all determinations and calculations (including, without
      limitation, with respect to calculations of percentage ownership) shall be
      determined by the Holder in accordance with Section 13(d) of the 1934 Act (as
      defined in the Securities Purchase Agreement) and the rules and regulations
      promulgated thereunder. The provisions of this paragraph shall be implemented
      in
      a manner otherwise than in strict conformity with the terms of this paragraph
      to
      correct this paragraph (or any portion hereof) which may be defective or
      inconsistent with the intended Maximum Percentage beneficial ownership
      limitation herein contained or to make changes or supplements necessary or
      desirable to properly give effect to such Maximum Percentage limitation. The
      limitations contained in this paragraph shall apply to a successor Holder of
      this Warrant. For any reason at any time, upon the written or oral request
      of
      the Holder, the Company shall within one (1) Business Day confirm orally and
      in
      writing to the Holder the number of shares of Common Stock then outstanding,
      including by virtue of any prior conversion or exercise of convertible or
      exercisable securities into Common Stock, including, without limitation,
      pursuant to this Warrant or securities issued pursuant to the Securities
      Purchase Agreement.
      Each
      delivery of an Exercise Notice by the Holder will constitute a representation
      by
      the Holder that it has evaluated the limitation set forth in this paragraph
      and
      determined that issuance of the full number of Warrant Shares requested by
      the
      Holder in such Exercise Notice is permitted under this
      paragraph.

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (ii) Principal
      Market Regulation.
      The
      Company shall not issue any shares of Common Stock upon exercise of this Warrant
      if the issuance of such shares of Common Stock would exceed the aggregate number
      of shares of Common Stock which the Company may issue upon conversion or
      exercise (as the case may be) of the Notes and SPA Warrants without breaching
      the Company’s obligations under the rules or regulations of the Principal Market
      (the number of shares which may be issued without violating such rules and
      regulations, the “Exchange
      Cap”),
      except that such limitation shall not apply in the event that the Company (A)
      obtains Shareholder Approval (as defined in the Securities Purchase Agreement)
      as required by the applicable rules of the Principal Market for issuances of
      shares of Common Stock in excess of such amount or (B) obtains a written opinion
      from outside counsel to the Company that such approval is not required, which
      opinion shall be reasonably satisfactory to the Holder. Until Shareholder
      Approval or such written opinion is obtained, no Buyer shall be issued in the
      aggregate, upon exercise or conversion of any SPA Warrants or any of the Notes
      or otherwise, shares of Common Stock in an amount greater than the product
      of
      the Exchange Cap multiplied by a fraction, the numerator of which is the
      original principal amount of Notes issued to such Buyer pursuant to the
      Securities Purchase Agreement on the Closing Date and the denominator of which
      is the aggregate original principal amount of all Notes issued to the Buyers
      pursuant to the Securities Purchase Agreement on the Closing Date (with respect
      to each Buyer, the “Exchange
      Cap Allocation”).
      In
      the event that any Buyer shall sell or otherwise transfer any of such Buyer’s
      SPA Warrants, the transferee shall be allocated a pro rata portion of such
      Buyer’s Exchange Cap Allocation, and the restrictions of the prior sentence
      shall apply to such transferee with respect to the portion of the Exchange
      Cap
      Allocation allocated to such transferee. In the event that any holder of SPA
      Warrants shall exercise all of such holder’s SPA Warrants into a number of
      shares of Common Stock which, in the aggregate, is less than such holder’s
      Exchange Cap Allocation, then the difference between such holder’s Exchange Cap
      Allocation and the number of shares of Common Stock actually issued to such
      holder shall be allocated to the respective Exchange Cap Allocations of the
      remaining holders of SPA Warrants on a pro rata basis in proportion to the
      shares of Common Stock underlying the SPA Warrants then held by each such
      holder. In the event that the Company is prohibited from issuing any Warrant
      Shares for which an Exercise Notice has been received as a result of the
      operation of this Section 1(f)(i),
      the
      Company shall pay cash in exchange for cancellation of such Warrant Shares,
      at a
      price per Warrant Share equal to the difference between the Closing Sale Price
      of the Common Stock for the Trading Day immediately preceding the date of the
      attempted exercise and the Exercise Price as of such date of attempted
      exercise.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    
      (g) Insufficient
        Authorized Shares.
        The
        Company shall at all times keep reserved for issuance under this Warrant
        a
        number of shares of Common Stock as shall be necessary to satisfy the Company’s
        obligation to issue shares of Common Stock hereunder (without regard to any
        limitation otherwise contained herein with respect to the number of shares
        of
        Common Stock that may be acquirable upon exercise of this Warrant). If,
        notwithstanding the foregoing, and not in limitation thereof, at any time
        while
        any of the SPA Warrants remain outstanding the Company does not have a
        sufficient number of authorized and unreserved shares of Common Stock to
        satisfy
        its obligation to reserve for issuance upon exercise of the SPA Warrants
        at
        least a number of shares of Common Stock equal to the number of shares of
        Common
        Stock as shall from time to time be necessary to effect the exercise of all
        of
        the SPA Warrants then outstanding (the “Required
        Reserve Amount”)
        (an
“Authorized
        Share Failure”),
        then
        the Company shall immediately take all action necessary to increase the
        Company’s authorized shares of Common Stock to an amount sufficient to allow the
        Company to reserve the Required Reserve Amount for all the SPA Warrants then
        outstanding. Without limiting the generality of the foregoing sentence, as
        soon
        as practicable after the date of the occurrence of an Authorized Share Failure,
        but in no event later than sixty (60) days after the occurrence of such
        Authorized Share Failure, the Company shall hold a meeting of its stockholders
        for the approval of an increase in the number of authorized shares of Common
        Stock. In connection with such meeting, the Company shall provide each
        stockholder with a proxy statement and shall use its best efforts to solicit
        its
        stockholders’ approval of such increase in authorized shares of Common Stock and
        to cause its board of directors to recommend to the stockholders that they
        approve such proposal.

    

     

    2. ADJUSTMENT
      OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
      The
      Exercise Price and number of Warrant Shares issuable upon exercise of this
      Warrant are subject to adjustment from time to time as set forth in this Section
      2.

     

    (a) Stock
      Dividends and Splits.
      If the
      Company, at any time on or after the date of the Securities Purchase Agreement,
      (i) pays a stock dividend on one or more classes of its then outstanding shares
      of Common Stock or otherwise makes a distribution on any class of capital stock
      that is payable in shares of Common Stock, (ii) subdivides (by any stock split,
      stock dividend, recapitalization or otherwise) one or more classes of its then
      outstanding shares of Common Stock into a larger number of shares or (iii)
      combines (by combination, reverse stock split or otherwise) one or more classes
      of its then outstanding shares of Common Stock into a smaller number of shares,
      then in each such case the Exercise Price shall be multiplied by a fraction
      of
      which the numerator shall be the number of shares of Common Stock outstanding
      immediately before such event and of which the denominator shall be the number
      of shares of Common Stock outstanding immediately after such event. Any
      adjustment made pursuant to clause (i) of this paragraph shall become effective
      immediately after the record date for the determination of stockholders entitled
      to receive such dividend or distribution, and any adjustment pursuant to clause
      (ii) or (iii) of this paragraph shall become effective immediately after the
      effective date of such subdivision or combination. If any event requiring an
      adjustment under this paragraph occurs during the period that an Exercise Price
      is calculated hereunder, then the calculation of such Exercise Price shall
      be
      adjusted appropriately to reflect such event.

     

    (b) Adjustment
      Upon Issuance of Shares of Common Stock.
      If and
      whenever on or after the date of the Securities Purchase Agreement, the Company
      issues or sells, or in accordance with this Section 2
      is
      deemed to have issued or sold, any shares of Common Stock (including the
      issuance or sale of shares of Common Stock owned or held by or for the account
      of the Company, but excluding any Excluded Securities (as defined in the
      Securities Purchase Agreement) issued or sold or deemed to have been issued
      or
      sold) for a consideration per share (the “New
      Issuance Price”)
      less
      than a price equal to the Exercise Price in effect immediately prior to such
      issue or sale or deemed issuance or sale (such lesser price being referred
      to as
      the “Applicable
      Price”)
      (the
      foregoing a “Dilutive
      Issuance”),
      then
      immediately after such Dilutive Issuance, the Exercise Price then in effect
      shall be reduced to an amount equal to the New Issuance Price. For purposes
      of
      determining the adjusted Exercise Price under this Section 2(b),
      the
      following shall be applicable:

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (i) Issuance
      of Options.
      If the
      Company in any manner grants or sells any Options and the lowest price per
      share
      for which one share of Common Stock is issuable upon the exercise of any such
      Option or upon conversion, exercise or exchange of any Convertible Securities
      issuable upon exercise of any such Option is less than the Applicable Price,
      then such share of Common Stock shall be deemed to be outstanding and to have
      been issued and sold by the Company at the time of the granting or sale of
      such
      Option for such price per share. For purposes of this Section
      2(b)(i),
      the
“lowest price per share for which one share of Common Stock is issuable upon
      the
      exercise of any such Options or upon conversion, exercise or exchange of any
      Convertible Securities issuable upon exercise of any such Option” shall be equal
      to the sum of the lowest amounts of consideration (if any) received or
      receivable by the Company with respect to any one share of Common Stock upon
      the
      granting or sale of the Option, upon exercise of the Option and upon conversion,
      exercise or exchange of any Convertible Security issuable upon exercise of
      such
      Option. Except as contemplated below, no further adjustment of the Exercise
      Price shall be made upon the actual issuance of such shares of Common Stock
      or
      of such Convertible Securities upon the exercise of such Options or upon the
      actual issuance of such shares of Common Stock upon conversion, exercise or
      exchange of such Convertible Securities.

     

    (ii) Issuance
      of Convertible Securities.
      If the
      Company in any manner issues or sells any Convertible Securities and the lowest
      price per share for which one share of Common Stock is issuable upon the
      conversion, exercise or exchange thereof is less than the Applicable Price,
      then
      such share of Common Stock shall be deemed to be outstanding and to have been
      issued and sold by the Company at the time of the issuance or sale of such
      Convertible Securities for such price per share. For the purposes of this
      Section 2(b)(ii),
      the
“lowest price per share for which one share of Common Stock is issuable upon
      the
      conversion, exercise or exchange thereof” shall be equal to the sum of the
      lowest amounts of consideration (if any) received or receivable by the Company
      with respect to one share of Common Stock upon the issuance or sale of the
      Convertible Security and upon conversion, exercise or exchange of such
      Convertible Security. Except as contemplated below, no further adjustment of
      the
      Exercise Price shall be made upon the actual issuance of such shares of Common
      Stock upon conversion, exercise or exchange of such Convertible Securities,
      and
      if any such issue or sale of such Convertible Securities is made upon exercise
      of any Options for which adjustment of this Warrant has been or is to be made
      pursuant to other provisions of this Section 2(b),
      except
      as contemplated below, no further adjustment of the Exercise Price shall be
      made
      by reason of such issue or sale. 

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    
      (iii) Change
        in Option Price or Rate of Conversion.
        If the
        purchase or exercise price provided for in any Options, the additional
        consideration, if any, payable upon the issue, conversion, exercise or exchange
        of any Convertible Securities, or the rate at which any Convertible Securities
        are convertible into or exercisable or exchangeable for shares of Common
        Stock
        increases or decreases at any time, the Exercise Price in effect at the time
        of
        such increase or decrease shall be adjusted to the Exercise Price which would
        have been in effect at such time had such Options or Convertible Securities
        provided for such increased or decreased purchase price, additional
        consideration or increased or decreased conversion rate, as the case may
        be, at
        the time initially granted, issued or sold. For purposes of this Section
        2(b)(iii),
        if the
        terms of any Option or Convertible Security that was outstanding as of the
        date
        of issuance of this Warrant are increased or decreased in the manner described
        in the immediately preceding sentence, then such Option or Convertible Security
        and the shares of Common Stock deemed issuable upon exercise, conversion
        or
        exchange thereof shall be deemed to have been issued as of the date of such
        increase or decrease. No adjustment pursuant to this
        Section 2(b)
        shall be
        made if such adjustment would result in an increase of the Exercise Price
        then
        in effect.

       

    

    (iv) Calculation
      of Consideration Received.
      In case
      any Option is issued in connection with the issue or sale of other securities
      of
      the Company, together comprising one integrated transaction in which no specific
      consideration is allocated to such Options by the parties thereto, the Options
      will be deemed to have been issued for a consideration of $0.01. If any shares
      of Common Stock, Options or Convertible Securities are issued or sold or deemed
      to have been issued or sold for cash, the consideration received therefor will
      be deemed to be the net amount received by the Company therefor. If any shares
      of Common Stock, Options or Convertible Securities are issued or sold for a
      consideration other than cash, the amount of such consideration received by
      the
      Company will be the fair value of such consideration, except where such
      consideration consists of publicly traded securities, in which case the amount
      of consideration received by the Company for such securities will be the average
      VWAP of such security for the five (5) Trading Day period immediately preceding
      the date of receipt. If any shares of Common Stock, Options or Convertible
      Securities are issued to the owners of the non-surviving entity in connection
      with any merger in which the Company is the surviving entity, the amount of
      consideration therefor will be deemed to be the fair value of such portion
      of
      the net assets and business of the non-surviving entity as is attributable
      to
      such shares of Common Stock, Options or Convertible Securities, as the case
      may
      be. The fair value of any consideration other than cash or publicly traded
      securities will be determined jointly by the Company and the Holder. If such
      parties are unable to reach agreement within ten (10) days after the occurrence
      of an event requiring valuation (the “Valuation
      Event”),
      the
      fair value of such consideration will be determined within five (5) Trading
      Days
      after the tenth (10th)
      day
      following such Valuation Event by an independent, reputable appraiser jointly
      selected by the Company and the Holder. The determination of such appraiser
      shall be final and binding upon all parties absent manifest error and the fees
      and expenses of such appraiser shall be borne by the Company.

     

    (v) Record
      Date.
      If the
      Company takes a record of the holders of shares of Common Stock for the purpose
      of entitling them (A) to receive a dividend or other distribution payable
      in shares of Common Stock, Options or in Convertible Securities or (B) to
      subscribe for or purchase shares of Common Stock, Options or Convertible
      Securities, then such record date will be deemed to be the date of the issue
      or
      sale of the shares of Common Stock deemed to have been issued or sold upon
      the
      declaration of such dividend or the making of such other distribution or the
      date of the granting of such right of subscription or purchase (as the case
      may
      be).

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (c) Number
      of Warrant Shares.
      Simultaneously with any adjustment to the Exercise Price pursuant to paragraphs
      (a) or (b) of this Section 2,
      the
      number of Warrant Shares that may be purchased upon exercise of this Warrant
      shall be increased or decreased proportionately, so that after such adjustment
      the aggregate Exercise Price payable hereunder for the adjusted number of
      Warrant Shares shall be the same as the aggregate Exercise Price in effect
      immediately prior to such adjustment (without regard to any limitations on
      exercise contained herein).

     

    (d) Other
      Events.
      In the
      event that the Company (or any direct or indirect subsidiary thereof) shall
      take any action to which the provisions hereof are not strictly applicable,
      or,
      if applicable, would not operate to protect the Holder from dilution or if
      any
      event occurs of the type contemplated by the provisions of this
      Section 2
      but not
      expressly provided for by such provisions (including, without limitation, the
      granting of stock appreciation rights, phantom stock rights or other rights
      with
      equity features), then the Company’s Board of Directors shall in good faith
      determine and implement an appropriate adjustment in the Exercise Price and
      the
      number of Warrant Shares (if applicable) so as to protect the rights of the
      Holder; provided that no such adjustment pursuant to this
      Section 2(d)
      will
      increase the Exercise Price or decrease the number of Warrant Shares as
      otherwise determined pursuant to this Section 2,
      provided further that if the Holder does not accept such adjustments as
      appropriately protecting its interests hereunder against such dilution, then
      the
      Company’s Board of Directors and the Holder shall agree, in good faith, upon an
      independent investment bank of nationally recognized standing to make such
      appropriate adjustments, whose determination shall be final and binding and
      whose fees and expenses shall be borne by the Company.

     

    (e) Calculations.
      All
      calculations under this Section 2
      shall be
      made to the nearest cent or the nearest 1/100th
      of a
      share, as applicable. The number of shares of Common Stock outstanding at any
      given time shall not include shares owned or held by or for the account of
      the
      Company, and the disposition of any such shares shall be considered an issue
      or
      sale of Common Stock.

     

    3. RIGHTS
      UPON DISTRIBUTION OF ASSETS.
      If the
      Company shall declare or make any dividend or other distribution of its assets
      (or rights to acquire its assets) to holders of shares of Common Stock, by
      way
      of return of capital or otherwise (including, without limitation, any
      distribution of cash, stock or other securities, property or options by way
      of a
      dividend, spin off, reclassification, corporate rearrangement, scheme of
      arrangement or other similar transaction) (a “Distribution”),
      at
      any time after the issuance of this Warrant, then, in each such case, the Holder
      shall be entitled to participate in such Distribution to the same extent that
      the Holder would have participated therein if the Holder had held the number
      of
      shares of Common Stock acquirable upon complete exercise of this Warrant
      (without regard to any limitations on exercise hereof, including without
      limitation, the Maximum Percentage) immediately before the date on which a
      record is taken for such Distribution, or, if no such record is taken, the
      date
      as of which the record holders of shares of Common Stock are to be determined
      for the participation in such Distribution (provided, however, that to the
      extent that the Holder’s right to participate in any such Distributions would
      result in the Holder exceeding the Maximum Percentage, then the Holder shall
      not
      be entitled to participate in such Distribution to such extent (or the
      beneficial ownership of any such shares of Common Stock as a result of such
      Distribution to such extent) and such Distribution to such extent shall be
      held
      in abeyance for the benefit of the Holder until such time, if ever, as its
      right
      thereto would not result in the Holder exceeding the Maximum
      Percentage).

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    
      	
              4.

            	
              PURCHASE
                RIGHTS; FUNDAMENTAL TRANSACTIONS.

            

    

     

    (a) Purchase
      Rights.
      In
      addition to any adjustments pursuant to Section 2
      above,
      if at any time the Company grants, issues or sells any Options, Convertible
      Securities or rights to purchase stock, warrants, securities or other property
      pro rata to the record holders of any class of shares of Common Stock (the
      “Purchase
      Rights”),
      then
      the Holder will be entitled to acquire, upon the terms applicable to such
      Purchase Rights, the aggregate Purchase Rights which the Holder could have
      acquired if the Holder had held the number of shares of Common Stock acquirable
      upon complete exercise of this Warrant (without regard to any limitations on
      exercise hereof, including without limitation, the Maximum Percentage)
      immediately before the date on which a record is taken for the grant, issuance
      or sale of such Purchase Rights, or, if no such record is taken, the date as
      of
      which the record holders of shares of Common Stock are to be determined for
      the
      grant, issue or sale of such Purchase Rights (provided, however, that to the
      extent that the Holder’s right to participate in any such Purchase Right would
      result in the Holder exceeding the Maximum Percentage, then the Holder shall
      not
      be entitled to participate in such Purchase Right to such extent (or beneficial
      ownership of such shares of Common Stock as a result of such Purchase Right
      to
      such extent) and such Purchase Right to such extent shall be held in abeyance
      for the Holder until such time, if ever, as its right thereto would not result
      in the Holder exceeding the Maximum Percentage).

     

    (b) Fundamental
      Transactions.
      The
      Company shall not enter into or be party to a Fundamental Transaction unless
      (i)  the Successor Entity assumes in writing all of the obligations of the
      Company under this Warrant and the other Transaction Documents (as defined
      in
      the Securities Purchase Agreement) in accordance with the provisions of this
      Section 4(b)
      pursuant
      to written agreements in form and substance satisfactory to the Holder and
      approved by the Holder prior to such Fundamental Transaction, including
      agreements to deliver to the Holder in exchange for this Warrant a security
      of
      the Successor Entity evidenced by a written instrument substantially similar
      in
      form and substance to this Warrant, including, without limitation, which is
      exercisable for a corresponding number of shares of capital stock equivalent
      to
      the shares of Common Stock acquirable and receivable upon exercise of this
      Warrant (without regard to any limitations on the exercise of this Warrant)
      prior to such Fundamental Transaction, and with an exercise price which applies
      the exercise price hereunder to such shares of capital stock (but taking into
      account the relative value of the shares of Common Stock pursuant to such
      Fundamental Transaction and the value of such shares of capital stock, such
      adjustments to the number of shares of capital stock and such exercise price
      being for the purpose of protecting the economic value of this Warrant
      immediately prior to the consummation of such Fundamental Transaction), and
      which is satisfactory in form and substance to the Holder and (ii) the
      Successor Entity (including its Parent Entity) is a publicly traded corporation
      whose common stock is quoted on or listed for trading on an Eligible Market.
      Upon the occurrence of any Fundamental Transaction, the Successor Entity shall
      succeed to, and be substituted for (so that from and after the date of such
      Fundamental Transaction, the provisions of this Warrant and the other
      Transaction Documents referring to the “Company” shall refer instead to the
      Successor Entity), and may exercise every right and power of the Company and
      shall assume all of the obligations of the Company under this Warrant and the
      other Transaction Documents with the same effect as if such Successor Entity
      had
      been named as the Company herein. Upon consummation of the Fundamental
      Transaction, the Successor Entity shall deliver to the Holder confirmation
      that
      there shall be issued upon exercise of this Warrant at
      any
      time after the consummation of the Fundamental Transaction, in lieu of the
      shares of the Common Stock (or
      other
      securities, cash, assets or other property (except such items still issuable
      under Sections 3
      and 4(a)
      above,
      which shall continue to be receivable thereafter)) issuable
      upon the exercise of this Warrant
      prior
      to
      such Fundamental Transaction,
      such
      shares of the publicly traded Common Stock (or its equivalent) of the Successor
      Entity (including its Parent Entity) which the Holder would have been entitled
      to receive upon the happening of such Fundamental Transaction had this
Warrant
      been
      exercised immediately prior to such Fundamental Transaction (without
      regard to any limitations on the exercise of this Warrant),
      as
      adjusted in accordance with the provisions of this Warrant.
      In
      addition to and not in substitution for any other rights hereunder, prior to
      the
      consummation of any Fundamental Transaction pursuant to which holders of shares
      of Common Stock are entitled to receive securities or other assets with respect
      to or in exchange for shares of Common Stock (a “Corporate
      Event”),
      the
      Company shall make appropriate provision to insure that the Holder will
      thereafter have the right to receive upon an exercise of this Warrant
at
      any
      time after the consummation of
      the
      Fundamental Transaction but
      prior
      to the Expiration Date,
      in lieu
      of the shares of the Common Stock (or
      other
      securities, cash, assets or other property (except such items still issuable
      under Sections 3
      and 4(a)
      above,
      which shall continue to be receivable thereafter)) issuable
      upon the exercise of the Warrant prior to such Fundamental
      Transaction,
      such
      shares of stock, securities, cash, assets or any other property whatsoever
      (including warrants or other purchase or subscription rights) which the Holder
      would have been entitled to receive upon the happening of such Fundamental
      Transaction had the Warrant been exercised immediately prior to such Fundamental
      Transaction (without
      regard to any limitations on the exercise of this Warrant).
      Provision
      made pursuant to the preceding sentence shall be in a form and substance
      reasonably satisfactory to the Holder. The provisions of this
      Section 4
      shall
      apply similarly and equally to successive Fundamental Transactions and Corporate
      Events and shall be applied as if this Warrant (and any such subsequent
      warrants) were fully exercisable and without regard to any limitations on the
      exercise of this Warrant (provided that the Holder shall continue to be entitled
      to the benefit of the Maximum Percentage, applied however with respect to shares
      of capital stock registered under the 1934 Act and thereafter receivable upon
      exercise of this Warrant (or any such other warrant)).

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (c) Black
      Scholes Value.
      Notwithstanding the foregoing and the provisions of
      Section 4(b)
      above,
      in the event of a Fundamental Transaction, if the Holder has not exercised
      this
      Warrant in full prior to the consummation of such Fundamental Transaction,
      at
      the request of the Holder delivered before the ninetieth (90th)
      day
      after the consummation of such Fundamental Transaction, the Company or the
      Successor Entity (as the case may be) shall purchase
      this Warrant from the Holder by paying to the Holder
      cash in
      an amount equal to the Black Scholes Value of the remaining unexercised portion
      of this Warrant on the date of the consummation of such Fundamental
      Transaction.

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    5. NONCIRCUMVENTION.
      The
      Company hereby covenants and agrees that the Company will not, by amendment
      of
      its Certificate of Incorporation, Bylaws or through any reorganization, transfer
      of assets, consolidation, merger, scheme of arrangement, dissolution, issue
      or
      sale of securities, or any other voluntary action, avoid or seek to avoid the
      observance or performance of any of the terms of this Warrant, and will at
      all
      times in good faith carry out all the provisions of this Warrant and take all
      action as may be required to protect the rights of the Holder. Without limiting
      the generality of the foregoing, the Company (i) shall not increase the par
      value of any shares of Common Stock receivable upon the exercise of this Warrant
      above the Exercise Price then in effect, (ii) shall take all such actions
      as may be necessary or appropriate in order that the Company may validly and
      legally issue fully paid and nonassessable shares of Common Stock upon the
      exercise of this Warrant, and (iii) shall, so long as any of the SPA Warrants
      are outstanding, take all action necessary to reserve and keep available out
      of
      its authorized and unissued shares of Common Stock, solely for the purpose
      of
      effecting the exercise of the SPA Warrants, the maximum number of shares of
      Common Stock as shall from time to time be necessary to effect the exercise
      of
      the SPA Warrants then outstanding (without regard to any limitations on
      exercise).

     

    6. WARRANT
      HOLDER NOT DEEMED A STOCKHOLDER.
      Except
      as otherwise specifically provided herein, the Holder, solely in such Person’s
      capacity as a holder of this Warrant, shall not be entitled to vote or receive
      dividends or be deemed the holder of share capital of the Company for any
      purpose, nor shall anything contained in this Warrant be construed to confer
      upon the Holder, solely in such Person’s capacity as the Holder of this Warrant,
      any of the rights of a stockholder of the Company or any right to vote, give
      or
      withhold consent to any corporate action (whether any reorganization, issue
      of
      stock, reclassification of stock, consolidation, merger, conveyance or
      otherwise), receive notice of meetings, receive dividends or subscription
      rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares
      which such Person is then entitled to receive upon the due exercise of this
      Warrant. In addition, nothing contained in this Warrant shall be construed
      as
      imposing any liabilities on the Holder to purchase any securities (upon exercise
      of this Warrant or otherwise) or as a stockholder of the Company, whether such
      liabilities are asserted by the Company or by creditors of the Company.
      Notwithstanding this Section 6,
      the
      Company shall provide the Holder with copies of the same notices and other
      information given to the stockholders of the Company generally,
      contemporaneously with the giving thereof to the stockholders.

     

    7. REISSUANCE
      OF WARRANTS.

     

    (a) Transfer
      of Warrant.
      If this
      Warrant is to be transferred, the Holder shall surrender this Warrant to the
      Company, whereupon the Company will forthwith issue and deliver upon the order
      of the Holder a new Warrant (in accordance with Section 7(d)),
      registered as the Holder may request, representing the right to purchase the
      number of Warrant Shares being transferred by the Holder and, if less than
      the
      total number of Warrant Shares then underlying this Warrant is being
      transferred, a new Warrant (in accordance with Section 7(d))
      to the
      Holder representing the right to purchase the number of Warrant Shares not
      being
      transferred.

     

    (b) Lost,
      Stolen or Mutilated Warrant.
      Upon
      receipt by the Company of evidence reasonably satisfactory to the Company of
      the
      loss, theft, destruction or mutilation of this Warrant (as to which a written
      certification and the indemnification contemplated below shall suffice as such
      evidence), and, in the case of loss, theft or destruction, of any
      indemnification undertaking by the Holder to the Company in customary and
      reasonable form and, in the case of mutilation, upon surrender and cancellation
      of this Warrant, the Company shall execute and deliver to the Holder a new
      Warrant (in accordance with Section 7(d))
      representing the right to purchase the Warrant Shares then underlying this
      Warrant.

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (c) Exchangeable
      for Multiple Warrants.
      This
      Warrant is exchangeable, upon the surrender hereof by the Holder at the
      principal office of the Company, for a new Warrant or Warrants (in accordance
      with Section 7(d))
      representing in the aggregate the right to purchase the number of Warrant Shares
      then underlying this Warrant, and each such new Warrant will represent the
      right
      to purchase such portion of such Warrant Shares as is designated by the Holder
      at the time of such surrender; provided, however, that no warrants for
      fractional shares of Common Stock shall be given.

     

    (d) Issuance
      of New Warrants.
      Whenever the Company is required to issue a new Warrant pursuant to the terms
      of
      this Warrant, such new Warrant (i) shall be of like tenor with this Warrant,
      (ii) shall represent, as indicated on the face of such new Warrant, the right
      to
      purchase the Warrant Shares then underlying this Warrant (or in the case of
      a
      new Warrant being issued pursuant to Section 7(a)
      or
      Section 7(c),
      the
      Warrant Shares designated by the Holder which, when added to the number of
      shares of Common Stock underlying the other new Warrants issued in connection
      with such issuance, does not exceed the number of Warrant Shares then underlying
      this Warrant), (iii) shall have an issuance date, as indicated on the face
      of
      such new Warrant which is the same as the Issuance Date, and (iv) shall have
      the
      same rights and conditions as this Warrant.

     

    8. NOTICES.
      Whenever notice is required to be given under this Warrant, unless otherwise
      provided herein, such notice shall be given in accordance with Section 9(f)
      of
      the Securities Purchase Agreement. The Company shall provide the Holder with
      prompt written notice of all actions taken pursuant to this Warrant, including
      in reasonable detail a description of such action and the reason therefore.
      Without limiting the generality of the foregoing, the Company will give written
      notice to the Holder (i) immediately upon each adjustment of the Exercise Price
      and the number of Warrant Shares, setting forth in reasonable detail, and
      certifying, the calculation of such adjustment(s) and (ii) at least fifteen
      (15)
      days prior to the date on which the Company closes its books or takes a record
      (A) with respect to any dividend or distribution upon the shares of Common
      Stock, (B) with respect to any grants, issuances or sales of any Options,
      Convertible Securities or rights to purchase stock, warrants, securities or
      other property to holders of shares of Common Stock or (C) for determining
      rights to vote with respect to any Fundamental Transaction, dissolution or
      liquidation, provided in each case that such information shall be made known
      to
      the public prior to or in conjunction with such notice being provided to the
      Holder and (iii) at least ten (10) Trading Days prior to the consummation of
      any
      Fundamental Transaction. To the extent that any notice provided hereunder
      constitutes, or contains, material, non-public information regarding the Company
      or any of its subsidiaries, the Company shall simultaneously file such notice
      with the SEC (as defined in the Securities Purchase Agreement) pursuant to
      a
      Current Report on Form 8-K.

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    
      9. AMENDMENT
        AND WAIVER.
        Except
        as otherwise provided herein, the provisions of this Warrant (other than
        Section
        1(f)(i))
        may be
        amended and the Company may take any action herein prohibited, or omit to
        perform any act herein required to be performed by it, only if the Company
        has
        obtained the written consent of the Holder. The Holder shall be entitled,
        at its
        option, to the benefit of any amendment of any other similar warrant issued
        either under the Securities Purchase Agreement or any other similar warrant.
        No
        waiver shall be effective unless it is in writing and signed by an authorized
        representative of the waiving party.

       

    

    10. SEVERABILITY.
      If any
      provision of this Warrant or the application thereof becomes or is declared
      by a
      court of competent jurisdiction to be illegal, void or unenforceable, the
      remainder of the terms of this Warrant will continue in full force and
      effect.

     

    11. GOVERNING
      LAW.
      This
      Warrant shall be governed by and construed and enforced in accordance with,
      and
      all questions concerning the construction, validity, interpretation and
      performance of this Warrant shall be governed by, the internal laws of the
      State
      of New York, without giving effect to any choice of law or conflict of law
      provision or rule (whether of the State of New York or any other jurisdictions)
      that would cause the application of the laws of any jurisdictions other than
      the
      State of New York.

     

    12. CONSTRUCTION;
      HEADINGS.
      This
      Warrant shall be deemed to be jointly drafted by the Company and the Holder
      and
      shall not be construed against any Person as the drafter hereof. The headings
      of
      this Warrant are for convenience of reference and shall not form part of, or
      affect the interpretation of, this Warrant. Terms used in this Warrant but
      defined in the other Transaction Documents shall have the meanings ascribed
      to
      such terms on the Closing Date in such other Transaction Documents unless
      otherwise consented to in writing by the Holder.

     

    13. DISPUTE
      RESOLUTION.
      In the
      case of a dispute as to the determination of the Exercise Price or fair market
      value or the arithmetic calculation of the Warrant Shares, the Company or the
      Holder (as the case may be) shall submit the disputed determinations or
      arithmetic calculations (as the case may be) via facsimile within two (2)
      Business Days of receipt of the applicable notice giving rise to such dispute
      to
      the Company or the Holder (as the case may be). If the Holder and the Company
      are unable to agree upon such determination or calculation of the Exercise
      Price
      or fair market value or the number of Warrant Shares (as the case may be) within
      three (3) Business Days of such disputed determination or arithmetic calculation
      being submitted to the Company or the Holder (as the case may be), then the
      Company shall, within two (2) Business Days submit via facsimile (a) the
      disputed determination of the Exercise Price or fair market value to an
      independent, reputable investment bank selected by the Company and approved
      by
      the Holder or (b) the disputed arithmetic calculation of the Warrant Shares
      to
      the Company’s independent, outside accountant. The Company shall cause at its
      expense the investment bank or the accountant (as the case may be) to perform
      the determinations or calculations (as the case may be) and notify the Company
      and the Holder of the results no later than ten (10) Business Days from the
      time
      it receives such disputed determinations or calculations (as the case may be).
      Such investment bank’s or accountant’s determination or calculation (as the case
      may be) shall be binding upon all parties absent demonstrable
      error.

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    14. REMEDIES,
      CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE
      RELIEF.
      The
      remedies provided in this Warrant shall be cumulative and in addition to all
      other remedies available under this Warrant and the other Transaction Documents,
      at law or in equity (including a decree of specific performance and/or other
      injunctive relief), and nothing herein shall limit the right of the Holder
      to
      pursue actual damages for any failure by the Company to comply with the terms
      of
      this Warrant. The Company acknowledges that a breach by it of its obligations
      hereunder will cause irreparable harm to the Holder and that the remedy at
      law
      for any such breach may be inadequate. The Company therefore agrees that, in
      the
      event of any such breach or threatened breach, the holder of this Warrant shall
      be entitled, in addition to all other available remedies, to an injunction
      restraining any breach, without the necessity of showing economic loss and
      without any bond or other security being required. The issuance of shares and
      certificates for shares as contemplated hereby upon the exercise of this Warrant
      shall be made without charge to the Holder or such shares for any issuance
      tax
      or other costs in respect thereof, provided that the Company shall not be
      required to pay any tax which may be payable in respect of any transfer involved
      in the issuance and delivery of any certificate in a name other than the Holder
      or its agent on its behalf. The Company covenants to the Holder that there
      shall
      be no characterization concerning this instrument other than as expressly
      provided herein.

     

    15. TRANSFER. This
      Warrant may be offered for sale, sold, transferred or assigned without the
      consent of the Company, except as may otherwise be required by Section 2(g)
      of
      the Securities Purchase Agreement.

     

    16. CERTAIN
      DEFINITIONS.
      For
      purposes of this Warrant, the following terms shall have the following
      meanings:

     

    (a) “Black
      Scholes Value”
means
      the value of this Warrant based on the Black and Scholes Option Pricing Model
      obtained from the “OV” function on Bloomberg determined as of the day of closing
      of the applicable Fundamental Transaction for pricing purposes and reflecting
      (i) a risk-free interest rate corresponding to the U.S. Treasury rate for a
      period equal to the remaining term of this Warrant as of such date of request,
      (ii) an expected volatility equal to the greater of 75% and the 100 day
      volatility obtained from the HVT function on Bloomberg as of the trading
      day immediately following the public announcement of the applicable Fundamental
      Transaction and (iii) the underlying price per share used in such calculation
      shall be the sum of the price per share being offered in cash, if any, plus
      the
      value of any non cash consideration, if any, being offered in such Fundamental
      Transaction.

     

    (b) “Bloomberg”
means
      Bloomberg Financial Markets.

     

    (c) “Business
      Day”
means
      any day other than Saturday, Sunday or other day on which commercial banks
      in
      The City of New York are authorized or required by law to remain
      closed.

     

    (d) “Closing
      Sale Price”
means,
      for any security as of any date, the last closing trade price for such security
      on the Principal Market, as reported by Bloomberg, or, if the Principal Market
      begins to operate on an extended hours basis and does not designate the closing
      trade price, then the last trade price of such security prior to 4:00:00 p.m.,
      New York time, as reported by Bloomberg, or, if the Principal Market is not
      the
      principal securities exchange or trading market for such security, the last
      trade price of such security on the principal securities exchange or trading
      market where such security is listed or traded as reported by Bloomberg, or
      if
      the foregoing does not apply, the last trade price of such security in the
      over-the-counter market on the electronic bulletin board for such security
      as
      reported by Bloomberg, or, if no last trade price is reported for such security
      by Bloomberg, the average of the ask prices of any market makers for such
      security as reported in the “pink sheets” by Pink Sheets LLC (formerly the
      National Quotation Bureau, Inc.). If the Closing Sale Price cannot be calculated
      for a security on a particular date on any of the foregoing bases, the Closing
      Sale Price of such security on such date shall be the fair market value as
      mutually determined by the Company and the Holder. If the Company and the Holder
      are unable to agree upon the fair market value of such security, then such
      dispute shall be resolved in accordance with the procedures in
      Section 13.
      All
      such determinations shall appropriately adjusted for any share dividend, share
      split, share combination or other similar transaction during such
      period.

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (e) “Common
      Stock”
means
      (i) the Company’s shares of common stock, $0.001 par value per share, and
      (ii) any capital stock into which such common stock shall have been changed
      or
      any share capital resulting from a reclassification of such common
      stock.

     

    (f) “Convertible
      Securities”
means
      any stock or securities (other than Options) directly or indirectly convertible
      into or exercisable or exchangeable for shares of Common Stock.

     

    (g) “Eligible
      Market”
means
      the The New York Stock Exchange, Inc., the Nasdaq Global Select Market, the
      Nasdaq Global Market or the Principal Market.

     

    (h) “Expiration
      Date”
means
      the date that is the seventh (7th)
      anniversary of the Issuance Date or, if such date falls on a day other than
      a
      Business Day or on which trading does not take place on the Principal Market
      (a
“Holiday”),
      the
      next date that is not a Holiday. 

     

    (i) “Fundamental
      Transaction”
means
      that the Company shall, directly or indirectly, in one or more related
      transactions, (i) consolidate or merge with or into (whether or not the Company
      is the surviving corporation) another Person, or (ii) sell, assign, transfer,
      convey or otherwise dispose of all or substantially all of the properties or
      assets of the Company to another Person, or (iii) allow another Person to make
      a
      purchase, tender or exchange offer that is accepted by the holders of more
      than
      the 50% of the outstanding shares of Common Stock (not including any shares
      of
      Common Stock held by the Person or Persons making or party to, or associated
      or
      affiliated with the Persons making or party to, such purchase, tender or
      exchange offer), or (iv) consummate a stock purchase agreement or other business
      combination (including, without limitation, a reorganization, recapitalization,
      spin-off or scheme of arrangement) with another Person whereby such other Person
      acquires more than the 50% of the outstanding shares of Common Stock (not
      including any shares of Common Stock held by the other Person or other Persons
      making or party to, or associated or affiliated with the other Persons making
      or
      party to, such stock purchase agreement or other business combination), or
      (v)
      reorganize, recapitalize or reclassify its Common Stock, or (vi) any “person” or
“group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the
      Exchange Act) is or shall become the “beneficial owner” (as defined in Rule
      13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate
      ordinary voting power represented by issued and outstanding Common
      Stock.

     

    (j) “Options”
means
      any rights, warrants or options to subscribe for or purchase shares of Common
      Stock or Convertible Securities.

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    (k) “Parent
      Entity”
of
      a
      Person means an entity that, directly or indirectly, controls the applicable
      Person and whose common stock or equivalent equity security is quoted or listed
      on an Eligible Market, or, if there is more than one such Person or Parent
      Entity, the Person or Parent Entity with the largest public market
      capitalization as of the date of consummation of the Fundamental
      Transaction.

     

    (l) “Person”
means
      an individual, a limited liability company, a partnership, a joint venture,
      a
      corporation, a trust, an unincorporated organization, any other entity and
      a
      government or any department or agency thereof.

     

    (m) “Principal
      Market”
means
      The Nasdaq Capital Market.

     

    (n) “Successor
      Entity”
means
      the Person (or, if so elected by the Holder, the Parent Entity) formed by,
      resulting from or surviving any Fundamental Transaction or the Person (or,
      if so
      elected by the Holder, the Parent Entity) with which such Fundamental
      Transaction shall have been entered into.

     

    (o) “Trading
      Day”
means
      any day on which the Common Stock is traded on the Principal Market, or, if
      the
      Principal Market is not the principal trading market for the Common Stock,
      then
      on the principal securities exchange or securities market on which the Common
      Stock is then traded; provided that “Trading Day” shall not include any day on
      which the Common Stock is scheduled to trade on such exchange or market for
      less
      than 4.5 hours or any day that the Common Stock is suspended from trading during
      the final hour of trading on such exchange or market (or if such exchange or
      market does not designate in advance the closing time of trading on such
      exchange or market, then during the hour ending at 4:00:00 p.m., New York
      time).

     

    (p) “VWAP”
means,
      for any security as of any date, the dollar volume-weighted average price for
      such security on the Principal Market (or, if the Principal Market is not the
      principal trading market for such security, then on the principal securities
      exchange or securities market on which such security is then traded) during
      the
      period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m.,
      New
      York time, as reported by Bloomberg through its “Volume at Price” function or,
      if the foregoing does not apply, the dollar volume-weighted average price of
      such security in the over-the-counter market on the electronic bulletin board
      for such security during the period beginning at 9:30:01 a.m., New York time,
      and ending at 4:00:00 p.m., New York time, as reported by Bloomberg, or, if
      no
      dollar volume-weighted average price is reported for such security by Bloomberg
      for such hours, the average of the highest closing bid price and the lowest
      closing ask price of any of the market makers for such security as reported
      in
      the “pink sheets” by Pink Sheets LLC (formerly the National Quotation Bureau,
      Inc.). If VWAP cannot be calculated for such security on such date on any of
      the
      foregoing bases, the VWAP of such security on such date shall be the fair market
      value as mutually determined by the Company and the Holder. If the Company
      and
      the Holder are unable to agree upon the fair market value of such security,
      then
      such dispute shall be resolved in accordance with the procedures in Section
      13.
      All
      such determinations shall be appropriately adjusted for any share dividend,
      share split or other similar transaction during such period.

     

    [signature
      page follows]

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      the
      Company has caused this Warrant to Purchase Common Stock to be duly executed
      as
      of the Issuance Date set out above.

     

    
      	
              GENEREX
                BIOTECHNOLOGY CORPORATION

            
	 
	
              By:____________________________________

            
	
              Name:

            
	
              Title:

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

     

    EXERCISE
      NOTICE

    TO
      BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

    WARRANT
      TO PURCHASE COMMON STOCK

     

    GENEREX
      BIOTECHNOLOGY CORPORATION

     

    The
      undersigned holder hereby exercises the right to purchase _________________
      of
      the shares of Common Stock (“Warrant
      Shares”)
      of
      Generex Biotechnology Corporation, a Delaware corporation (the “Company”),
      evidenced by Warrant to Purchase Common Stock No. _______ (the “Warrant”).
      Capitalized terms used herein and not otherwise defined shall have the
      respective meanings set forth in the Warrant.

     

    1. Form
      of Exercise Price.
      The
      Holder intends that payment of the Exercise Price shall be made as:

    

      
        	
                ____________

              	
                a
                  “Cash Exercise” with respect to _________________ Warrant Shares;
                  and/or

              
	 	 
	
                ____________

              	
                a
                  “Cashless Exercise” with respect to _______________ Warrant
                  Shares.

              

      

    

     

    2. Payment
      of Exercise Price.
      In the
      event that the Holder has elected a Cash Exercise with respect to some or all
      of
      the Warrant Shares to be issued pursuant hereto, the Holder shall pay the
      Aggregate Exercise Price in the sum of $___________________ to the Company
      in
      accordance with the terms of the Warrant.

     

    3. Delivery
      of Warrant Shares.
      The
      Company shall deliver to Holder, or its designee or agent as specified below,
      __________ Warrant Shares in accordance with the terms of the Warrant. Delivery
      shall be made to Holder, or for its benefit, to the following
      address:

     

    
      	
              _______________________

            
	
              _______________________

            
	
              _______________________

            
	
              _______________________

            

    

    

    
      	
              Date:
                _______________ __, ______

            
	 
	 
	 ____________________________________
	
              Name
                of Registered Holder

            

    

    

    
      	
              By:

            	 
	 	
              Name:

            
	 	
              Title:

            

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ACKNOWLEDGMENT

     

    The
      Company hereby acknowledges this Exercise Notice and hereby directs
      ______________ to issue the above indicated number of shares of Common Stock
      in
      accordance with the Transfer Agent Instructions dated _____________, 2008 from
      the Company and acknowledged and agreed to by _______________.

     

    
      	
              GENEREX
                BIOTECHNOLOGY CORPORATION

            
	 
	
              By:____________________________________

            
	
              Name:

            
	
              Title:

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