Document:

Exhibit
      4.1

     

    AMENDMENT
      NO. 4 TO SECURITIES PURCHASE AGREEMENT
      AND
      REGISTRATION RIGHTS AGREEMENT

     

    

     

    This
      AMENDMENT NO. 4 TO SECURITIES PURCHASE AGREEMENT AND REGISTRATION RIGHTS
      AGREEMENT (this “Amendment”) is made and entered into as of January 19, 2006, by
      and among Generex Biotechnology Corporation, a Delaware corporation (“Generex”),
      and the stockholders identified on the signature pages hereto (each, a
“Purchaser” and, collectively, the “Purchasers”).

     

    RECITALS

     

    

     

    	1.  	
            Generex
              and the Purchasers are parties to a Securities Purchase Agreement,
              dated
              as of November 10, 2004 (as amended by Amendment No. 1 (as hereinafter
              defined) and Amendment No. 2 (as hereinafter defined), the “Purchase
              Agreement”), pursuant to which Generex issued and sold to the Purchasers
              an aggregate of $4,000,000 of Debentures and certain Warrants (each
              as
              defined in the Purchase Agreement). Capitalized terms used and not
              defined
              in this Amendment but defined in the Purchase Agreement shall have
              the
              respective meanings set forth in the Purchase Agreement.
              

          

     

    	2.  	
            In
              addition to the Debentures and Warrants, under the Purchase Agreement
              Generex issued and sold to the Purchasers Additional Investment Rights,
              pursuant to which the holders thereof had the right to purchase up
              to an
              additional aggregate principal amount of Debentures equal to the principal
              amount of $4,000,000 of Debentures (collectively, the “AIR Debentures”),
              together with additional Warrants to purchase up to a number of shares
              of
              Generex’s Common Stock equal to 100% of the shares issuable upon
              conversion of such AIR Debentures so purchased (collectively, the “AIR
              Warrants”).

          

     

    	3.  	
            In
              connection with the Purchase Agreement, Generex and the Purchasers
              entered
              into a Registration Rights Agreement, dated as of November 10, 2004
              (as
              amended by Amendment No. 1 (as hereinafter defined) and Amendment No.
              2
              (as hereinafter defined), the “Registration Rights Agreement”), pursuant
              to which Generex undertook certain registration obligations to the
              Purchasers.

          

     

    	4.  	
            In
              connection with that certain Amendment No. 1 to Securities Purchase
              Agreement and Registration Rights Agreement, dated as of June 15, 2005,
              by
              and among Generex and the Purchasers (“Amendment No. 1”), the Purchasers
              exercised an aggregate of $2,000,000 of Additional Investment Rights
              and
              Generex agreed to issue to the Purchasers further Additional Investment
              Rights (the “Amendment No. 1 AIR”) for an aggregate principal amount of
              $2,000,000 AIR Debentures, together with additional Warrants to purchase
              up to a number of shares of Generex’s Common Stock equal to 100% of the
              shares issuable upon conversion of such AIR Debentures so purchased.
              

          

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    	5.  	
            In
              connection with that certain Amendment No. 2 to Securities Purchase
              Agreement and Registration Rights Agreement, dated as of September
              8,
              2005, by and among Generex and the Purchasers (“Amendment No. 2”), the
              Purchasers exercised an aggregate of $2,000,000 of Additional Investment
              Rights and Generex agreed to issue to the Purchasers further Additional
              Investment Rights (the “Amendment No. 2 AIR”) for an aggregate principal
              amount of $2,000,000 AIR Debentures, together with additional Warrants
              to
              purchase up to a number of shares of Generex’s Common Stock equal to 100%
              of the shares issuable upon conversion of such AIR Debentures so
              purchased. 

          

     

    	6.  	
            In
              connection with that certain Amendment No. 3 to Securities Purchase
              Agreement and Registration Rights Agreement, dated as of December 4,
              2005,
              by and among Generex and the Purchasers (“Amendment No. 3”), the
              Purchasers exercised an aggregate of $4,000,000 of Additional Investment
              Rights and Generex agreed to issue to the Purchasers further Additional
              Investment Rights (the “Amendment No. 3 AIR” and together with the
              Amendment No. 1 AIR and the Amendment No. 2 AIR, the “Additional
              Investment Rights”) for an aggregate principal amount of $4,000,000 AIR
              Debentures, together with additional Warrants to purchase up to a number
              of shares of Generex’s Common Stock equal to 100% of the shares issuable
              upon conversion of such AIR Debentures so
              purchased.

          

     

    	7.  	
            Generex
              and the Purchasers now wish to further modify certain of the terms
              of the
              Purchase Agreement, Registration Rights Agreement, Additional Investment
              Rights and AIR Debentures.

          

     

    NOW,
      THEREFORE, in consideration of the foregoing Recitals and other good and
      valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged, Generex and each Purchaser, severally and not jointly, agree
      as
      follows:

     

    1. Additional
      Investment Rights.
      Subject
      to the terms hereof, each Purchaser agrees to exercise 100% of its Additional
      Investment Rights (pertaining to an aggregate of $4,000,000 of AIR Debentures
      and accompanying AIR Warrants) on the Business Day following the date of this
      Amendment. 

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    	1.1.  	
            In
              consideration for such exercise, Generex agrees that the “Initial Exercise
              Date” under each of the Additional Investment Rights shall be amended to
              be January 19, 2006.

          

     

    	1.2.  	
            In
              consideration for such exercise, Generex agrees that the “Conversion
              Price” under the AIR Debentures issuable upon such exercise (the
              “Amendment No. 4 AIR Debentures”) shall not equal $1.25, but shall equal
              $1.05 (subject to adjustment as set forth in the Amendment No. 4 AIR
              Debentures).

          

     

    	1.3.  	
            In
              consideration for such exercise, Generex agrees that the “Exercise Price”
              under the AIR Warrants issuable upon such exercise (the “Amendment No. 4
              AIR Warrants”) shall not equal $1.25, but shall equal $1.05 (subject to
              adjustment as set forth in the Amendment No. 4 AIR
              Warrants).

          

     

    	1.4.  	
            In
              further consideration for the exercise of the Additional Investment
              Right
              herein contemplated, Generex will issue and deliver to each Purchaser
              a
              further Additional Investment Right in the form of Exhibit A (which
              is
              substantially the same in form as the existing Additional Investment
              Rights) (each an “Amendment No. 4 Additional AIR” and collectively, the
              “Amendment No. 4 Additional AIRs”), pursuant to which each Purchaser will
              have the right to acquire detachable units consisting of (a) additional
              AIR Debentures in principal amount equal to the principal amount of
              AIR
              Debentures issuable upon the portion of the Additional Investment Right
              to
              be exercised by each such Purchaser under Section 1 (such additional
              AIR
              Debentures, the “Amendment No. 4 Additional AIR Debentures”) and (b)
              additional AIR Warrants entitling the holder thereof to purchase a
              number
              of shares of Common Stock equal to 100% of the shares of Common Stock
              issuable upon an assumed conversion in full (without regard to any
              restrictions on conversion therein contained) at a $1.25 Conversion
              Price
              (subject to adjustment as set forth therein) of the Amendment No. 4
              AIR
              Debentures contemplated in clause (a) above, at an exercise price equal
              to
              the “AIR Warrant Exercise Price” (as such term is defined in the
              Additional Investment Rights) (collectively, the “Amendment No. 4
              Additional AIR Warrants”). The “conversion price” of the Amendment No. 4
              Additional AIR Debentures will equal $1.25, subject to adjustment in
              accordance with the terms thereof.

          

     

     

    	2.  	
            Antidilution
              Provisions of Existing Securities.
              Except as specified in Sections 1.2 and 1.3, no adjustment will be
              made to
              the conversion or exercise price of the existing Warrants, Debentures
              and
              any other outstanding securities of Generex as a result of the issuance
              of
              the Amendment No. 4 AIR Debentures and Amendment No. 4 AIR Warrants
              with
              the modified conversion price as contemplated by Sections 1.2 and 1.3.
              Accordingly, each Purchaser severally agrees that the issuance of the
              Amendment No. 4 AIR Debentures and Amendment No. 4 AIR Warrants under
              Sections 1.2 and 1.3 will not be a “Dilutive Issuance” under section 3(b)
              of the Warrants or section 5(b) of the Debentures. Purchasers are not
              hereby waiving any other reductions to the exercise or conversion price
              of
              any of their respective Generex securities that may result from any
              other
              events or circumstances. 

          

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    	3.  	
            Registration
              Rights.
              To ensure that the registration rights of the Purchasers are not adversely
              affected as a result of the transactions contemplated by this Amendment
              and to provide registration rights consistent with the existing
              registration rights in respect of the securities issuable upon exercise
              of
              the Amendment No. 4 Additional AIR, Amendment No. 4 AIR Debentures
              and
              Amendment No. 4 AIR Warrants, the parties agree as follows with respect
              to
              registration rights:

          

     

    	3.1.  	
            The
              definition of “Additional Investment Right” under the Purchase Agreement
              is hereby amended to include the Amendment No. 4 Additional
              AIRs.

          

     

    	3.2.  	
            The
              definition of “Additional Investment Right Securities” under the Purchase
              Agreement is hereby amended to include the Amendment No. 4 Additional
              AIR
              Debentures and Amendment No. 4 Additional AIR Warrants and the Amendment
              No. 4 Underlying Shares (as hereinafter defined) issuable in connection
              therewith.

          

     

    	3.3.  	
            The
              parties hereby confirm that the definition of “Registrable Securities”
              under the Registration Rights Agreement includes (a) the additional
              shares
              of Common Stock as may be issuable upon a conversion of the Amendment
              No.
              4 AIR Debentures, (b) the additional shares of Common Stock as may
              be
              issuable upon an exercise of the Amendment No. 4 AIR Warrants, and
              (c) the
              Additional Investment Right Securities contemplated in Section
              3.2.

          

     

    	3.4.  	
            Generex
              will prepare and file a registration statement to cover all shares
              of
              Common Stock issuable under the Additional Investment Rights, including
              shares of Common Stock issuable upon conversion of the Amendment No.
              4
              Additional AIR Debentures and the Common Stock issuable upon the exercise
              of the Amendment No. 4 Additional AIR Warrants.

          

     

    	3.5.  	
            The
              registration statement contemplated in Section 3.4 will constitute
              a
              “Registration Statement” under the Registration Rights Agreement, afforded
              all of the rights and obligations of and upon each of Generex and the
              “Purchasers” thereunder, including Sections 2(b) and 3(c) thereof. With
              respect to the Registration Statement contemplated by Section 3.4,
              the
              Filing Date shall be January 26, 2006. The calculation of the
              Effectiveness Date with respect to the Registration Statement contemplated
              by Section 3.4 shall be the same as for the initial Registration Statement
              under the Registration Rights Agreement. In addition, such Registration
              Statement may include some or all of the shares set forth in Schedule
              3.5
              hereto, in addition to the shares referenced in Section 3.4 above.
              

          

     

     

    	4.  	
            Representation
              and Warranties of Generex.
              Generex hereby represents and warrants to each Purchaser as follows,
              except as may be set forth on the Additional Disclosure Schedules
              hereto:

          

     

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    (a)  Authorization;
      Enforcement.
      Generex
      has the requisite corporate power and authority to enter into and to consummate
      the transactions contemplated by this Amendment and each other Transaction
      Document (as hereinafter defined) and to carry out its obligations under each.
      The execution and delivery of each Transaction Document by Generex and the
      consummation by it of the transactions contemplated thereby have been duly
      authorized by all necessary action on the part of Generex and no further action
      is required by Generex in connection therewith other than the Required Approvals
      (as hereinafter defined). Each of this Amendment, the Amendment No. 4 Additional
      AIRs, the Amendment No. 4 AIR Debentures, the Amendment No. 4 AIR Warrants,
      the
      Amendment No. 4 Additional AIR Debentures and Amendment No. 4 Additional AIR
      Warrants (collectively, the “Transaction Documents”) has been (or upon delivery
      will have been) duly executed by Generex and, when delivered in accordance
      with
      the terms hereof, will constitute the valid and binding obligation of Generex,
      enforceable against Generex in accordance with their respective terms except
      (i)
      as limited by applicable bankruptcy, insolvency, reorganization, moratorium
      and
      other laws of general application affecting enforcement of creditors’ rights
      generally and (ii) as limited by laws relating to the availability of specific
      performance, injunctive relief or other equitable remedies.

     

    (b)  No
      Conflicts.
      The
      execution, delivery and performance of the Transaction Documents by Generex
      and
      the consummation by Generex of the other transactions contemplated thereby
      do
      not and will not: (i) conflict with or violate any provision of Generex’s or any
      Subsidiary’s certificate or articles of incorporation, bylaws or other
      organizational or charter documents, or (ii) conflict with, or constitute a
      default (or an event that with notice or lapse of time or both would become
      a
      default) under, result in the creation of any Lien upon any of the properties
      or
      assets of Generex or any Subsidiary, or give to others any rights of
      termination, amendment, acceleration or cancellation (with or without notice,
      lapse of time or both) of, any agreement, credit facility, debt or other
      instrument (evidencing a Company or Subsidiary debt or otherwise) or other
      understanding to which Generex or any Subsidiary is a party or by which any
      property or asset of Generex or any Subsidiary is bound or affected, or (iii)
      subject to the Required Approvals, conflict with or result in a violation of
      any
      law, rule, regulation, order, judgment, injunction, decree or other restriction
      of any court or governmental authority to which Generex or a Subsidiary is
      subject (including federal and state securities laws and regulations), or by
      which any property or asset of Generex or a Subsidiary is bound or affected,
      or
      (iv) conflict with or result in a violation of the rules or regulations of
      the
      Nasdaq Stock Market.

     

    (c)  Filings,
      Consents and Approvals.
      Generex
      is not required to obtain any consent, waiver, authorization or order of, give
      any notice to, or make any filing or registration with, any court or other
      federal, state, local or other governmental authority or other Person in
      connection with its execution, delivery and performance of the Transaction
      Documents, other than (i) filings required pursuant to Section 7.4, (ii) the
      filing with the Commission of the Registration Statement contemplated in Section
      3.4, (iii) the notice and/or application(s) to the Nasdaq Stock Market of the
      issuance and sale of the Amendment No. 4 Additional AIR and the listing of
      the
      shares of Common Stock ultimately issuable in respect thereof for trading
      thereon in the time and manner required thereby, and (iv) the filing of Form
      D
      with the Commission and such filings as are required to be made under applicable
      state securities laws (collectively, the “Required Approvals”). 

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    (d)  Stockholder
      Approval.
      No
      approval of the stockholders of Generex is required in order for Generex to
      enter into this Amendment and to issue and deliver to the Purchasers the
      Securities (as hereinafter defined).

     

    (e)  Issuance
      of the Securities.
      The
      Amendment No. 4 AIR Debentures, Amendment No. 4 AIR Warrants, Amendment No.
      4
      Additional AIRs, Amendment No. 4 Additional AIR Debentures, Amendment No. 4
      Additional AIR Warrants, and the shares of Common Stock issuable upon the
      exercise and conversion of each the foregoing (collectively, the “Securities”)
      are duly authorized and, when issued and paid for in accordance with their
      respective terms, will be duly and validly issued, fully paid and nonassessable,
      free and clear of all Liens other than restrictions on transfer under applicable
      securities laws. Generex has reserved from its duly authorized capital stock
      a
      number of shares of Common Stock for issuance upon exercise and conversion
      of
      the Amendment No. 4 AIR Debentures, Amendment No. 4 AIR Warrants, Amendment
      No.
      4 Additional AIR Debentures and Amendment No. 4 Additional AIR Warrants, and
      as
      payment of interest in shares of Common Stock under the Amendment No. 4 AIR
      Debentures and Amendment No. 4 Additional AIR Debentures (collectively, such
      shares of Common Stock are the “Amendment No. 4 Underlying Shares”) at least
      equal to the Required Minimum on the date hereof. “Required Minimum” means, as
      of any date, the maximum aggregate number of shares of Common Stock then issued
      or potentially issuable in the future pursuant to the Transaction Documents,
      including any Amendment No. 4 Underlying Shares issuable upon exercise or
      conversion in full of all Amendment No. 4 AIR Warrants, Amendment No. 4
      Additional AIR Warrants, Amendment No. 4 AIR Debentures and Amendment No. 4
      Additional AIR Debentures (including Amendment No. 4 Underlying Shares issuable
      as payment of interest), ignoring any conversion or exercise limits set forth
      therein, and assuming that the applicable conversion and exercise prices are
      at
      all times on and after the date of determination 75% of the then conversion
      or
      exercise price on the Trading Day immediately prior to the date of
      determination.

     

    (f)  Valid
      Private Placement.
      Assuming the accuracy of the Purchasers’ representations and warranties set
      forth in Section 4.2, no registration under the Securities Act is required
      for
      the offer and sale of the Securities by Generex to the Purchasers as
      contemplated by the Transaction Documents. 

     

    (g)  Acknowledgment
      Regarding Purchaser’ Purchase of Securities.
      Generex
      acknowledges and agrees that each Purchaser is acting solely in the capacity
      of
      an arm’s length purchaser with respect to the Transaction Documents. Generex
      further acknowledges that no Purchaser is acting as a financial advisor or
      fiduciary of Generex (or in any similar capacity) with respect to any
      Transaction Document or the transactions contemplated thereby, and any advice
      given by any Purchaser or any of their respective representatives or agents
      in
      connection with the Transaction Documents and the transactions contemplated
      thereby is merely incidental to the Purchasers’ respective purchase of the
      Securities. Generex further represents that Generex’s decision to enter into the
      Transaction Documents has been based solely on the independent evaluation of
      the
      transactions contemplated thereby by Generex and its
      representatives.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    (h)  Compliance
      with Existing Agreements.
      Generex
      is in compliance with the respective terms and conditions of the Purchase
      Agreement and “Transaction Documents” (as therein defined) entered into in
      connection therewith (including those pertaining to Amendment No. 1, Amendment
      No. 2, Amendment No. 3 and Amendment No. 4). No “Event of Default” (as defined
      under the Debentures and the AIR Debentures) has occurred, and no event has
      occurred that with notice or lapse of time or both would become an Event of
      Default under the Debentures or AIR Debentures.

     

    (i)  Certain
      Fees.
      Except
      for fees payable to the Shemano Group, described in the Disclosure Schedules
      to
      the Purchase Agreement, no brokerage or finder’s fees or commissions are or will
      be payable by Generex to any broker, financial advisor or consultant, finder,
      placement agent, investment banker, bank or other Person with respect to the
      transactions contemplated by this Amendment. The Purchasers shall have no
      obligation with respect to any fees or with respect to any claims made by or
      on
      behalf of other Persons for fees of a type contemplated in this Section that
      may
      be due in connection with the transactions contemplated by this
      Amendment.

     

    (j)  
      Listing and Maintenance Requirements.
      The
      Common Stock is registered pursuant to Section 12(g) of the Exchange Act, and
      Generex has taken no action designed to, or which to its knowledge is likely
      to
      have the effect of, terminating the registration of the Common Stock under
      the
      Exchange Act, nor has Generex received any notification that the Commission
      is
      contemplating terminating such registration. Except as disclosed in Generex’s
      publicly available periodic reports and Form 8-K’s under the Exchange Act,
      Generex has not, in the 12 months preceding the date hereof, received notice
      from any Trading Market on which the Common Stock is or has been listed or
      quoted to the effect that Generex is not in compliance with the listing or
      maintenance requirements of such Trading Market. Other than as to minimum stock
      price requirements, Generex is, and has no reason to believe that it will not
      in
      the foreseeable future continue to be, in compliance with all such listing
      and
      maintenance requirements.

     

    (k)  Bring
      Down of Certain Representations and Warranties.
      Generex
      hereby restates, as if first made as of and on the date of this Amendment,
      the
      representations and warranties set forth in the Purchase Agreement (as modified
      by the Disclosure Schedules to the extent they apply thereto) in Sections
      3.1(a), (b), (g), (h), (i), (j), (k), (l), (m), (n), (o), (p), (q), (r), (u),
      (v), (x), (aa), (cc), (ee), and (hh); provided that (1) the term “Transaction
      Documents” therein shall refer not only to such term as defined in the Purchase
      Agreement but also to the Transaction Documents defined in this Amendment,
      and
      (2) the term the “Company” defined in such Purchase Agreement shall also refer
      to “Generex” as used herein.

     

    (l)  Disclosure.
      Generex
      confirms that neither it nor any other Person acting on its behalf has provided
      any of the Purchasers or their agents or counsel with any information that
      constitutes or might constitute material, nonpublic information (except to
      the
      extent that the existence of this Amendment may be material). Generex
      understands and confirms that the Purchasers will rely on the foregoing
      representations in effecting transactions in securities of Generex. All
      disclosure provided to the Purchasers regarding Generex, its business and the
      transactions contemplated hereby, including any disclosure schedules to this
      Amendment, furnished by or on behalf of Generex with respect to the
      representations and warranties made herein are true and correct in all material
      respects with respect to such representations and warranties and do not contain
      any untrue statement of a material fact or omit to state any material fact
      necessary in order to make the statements made therein, in light of the
      circumstances under which they were made, not misleading. Generex acknowledges
      and agrees that each Purchaser does not make or has not made any representations
      or warranties with respect to the transactions contemplated hereby other than
      those specifically set forth in this Section 4.2. 

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    4.2.  Representations
      and Warranties of the Purchasers.
      Each
      Purchaser hereby, for itself and for no other Purchaser, represents and warrants
      as of the date hereof to Generex as follows:

     

    (a)  Organization;
      Authority.
      Such
      Purchaser is an entity duly organized, validly existing and in good standing
      under the laws of the jurisdiction of its organization with the requisite right,
      corporate or partnership power and authority to enter into and to consummate
      the
      transactions contemplated by this Amendment and to carry out its obligations
      hereunder. The execution, delivery and performance by such Purchaser of the
      transactions contemplated by this Amendment have been duly authorized by all
      necessary corporate or similar action on the part of such Purchaser. This
      Amendment has been duly executed by such Purchaser, and when delivered by such
      Purchaser in accordance with the terms hereof, will constitute the valid and
      legally binding obligation of such Purchaser, enforceable against it in
      accordance with its terms, except (i) as limited by general equitable principles
      and applicable bankruptcy, insolvency, reorganization, moratorium and other
      laws
      of general application affecting enforcement of creditors’ rights generally,
      (ii) as limited by laws relating to the availability of specific performance,
      injunctive relief or other equitable remedies and (iii) insofar as
      indemnification and contribution provisions may be limited by applicable
      law.

     

    (b)  Investment
      Intent.
      Such
      Purchaser understands that the Securities are “restricted securities” and have
      not been registered under the Securities Act or any applicable state securities
      law and is acquiring the Securities as principal for its own account and not
      with a view to or for distributing or reselling such Securities or any part
      thereof (this representation and warranty not limiting such Purchaser’s right to
      sell the Securities pursuant to the Registration Statement or otherwise in
      compliance with applicable federal and state securities laws). Nothing contained
      herein shall be deemed a representation or warranty by such Purchaser to hold
      Securities for any period of time. Such Purchaser is acquiring the Securities
      hereunder in the ordinary course of its business. Such Purchaser does not have
      any agreement or understanding, directly or indirectly, with any Person to
      distribute any of the Securities.

     

    (c)  Purchaser
      Status.
      Such
      Purchaser is either (i) an “accredited investor” as defined in Rule 501(a) under
      the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule
      144A(a) under the Securities Act. Such Purchaser is not registered as a
      broker-dealer under Section 15 of the Exchange Act.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    (d)  Experience
      of Such Purchaser.
      Such
      Purchaser, either alone or together with its representatives, has such
      knowledge, sophistication and experience in business and financial matters
      so as
      to be capable of evaluating the merits and risks of the prospective investment
      in the Securities, and has so evaluated the merits and risks of such investment.
      Such Purchaser is able to bear the economic risk of an investment in the
      Securities and, at the present time, is able to afford a complete loss of such
      investment.

     

    (e)  General
      Solicitation.
      Such
      Purchaser is not purchasing the Securities as a result of any advertisement,
      article, notice or other communication regarding the Securities published in
      any
      newspaper, magazine or similar media or broadcast over television or radio
      or
      presented at any seminar or any other general solicitation or general
      advertisement.

     

    (f)  Access
      to Information.
      Such
      Purchaser acknowledges that it has reviewed such materials it deems necessary
      to
      make an informed investment decision and has been afforded (i) the opportunity
      to ask such questions as it has deemed necessary of, and to receive answers
      from, representatives of Generex concerning the terms and conditions of the
      offering of the Securities and the merits and risks of investing therein; (ii)
      access to information about Generex and the Subsidiaries and their respective
      financial condition, results of operations, business, properties, management
      and
      prospects sufficient to enable it to evaluate its investment; and (iii) the
      opportunity to obtain such additional information that Generex possesses or
      can
      acquire without unreasonable effort or expense that is necessary to make an
      informed investment decision with respect to the investment. Neither such
      inquiries nor any other investigation conducted by or on behalf of such
      Purchaser or its representatives or counsel shall modify, amend or affect such
      Purchaser’s right to rely on the truth, accuracy and completeness of such
      materials it has reviewed and Generex’s representations and warranties contained
      in this Amendment.

     

    (g)  Limited
      Ownership.
      The
      purchase by such Purchaser of the Securities issuable to it upon the closing
      under this Amendment (including the Amendment No. 4 Underlying Shares then
      immediately issuable in respect of such Securities) will not result in such
      Purchaser (individually or together with any other Person with whom such
      Purchaser has identified, or will have identified, itself as part of a “group”
in a public filing made with the Commission involving Generex’s securities)
      acquiring, or obtaining the right to acquire, in excess of 19.999% of the Common
      Stock or the voting power of Generex on a post transaction basis that assumes
      that the closing shall have occurred. Such Purchaser does not presently intend
      to, alone or together with others, make a public filing with the Commission
      to
      disclose that it has (or that it together with such other Persons have)
      acquired, or obtained the right to acquire, as a result of the closing (when
      added to any other securities of Generex that it or they then own or have the
      right to acquire), in excess of 19.999% of the Common Stock or the voting power
      of Generex on a post transaction basis that assumes that the closing shall
      have
      occurred.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    (h)  Principal
      Amount of AIR Debentures.
      The
      principal amount of AIR Debentures which such Purchaser’s Additional Investment
      Right permits it to acquire immediately prior to its execution of this Amendment
      is set forth on such Purchaser’s signature page to this Amendment.

     

    (i)  Independent
      Investment Decision.
      Such
      Purchaser has independently evaluated the merits of its decision to purchase
      Securities pursuant to this Agreement, such decision has been independently
      made
      by such Purchaser and such Purchaser confirms that it has only relied on the
      advice of its own business and/or legal counsel and not on the advice of any
      other Purchaser’s business and/or legal counsel in making such decision. Such
      Purchaser understands that its investment in the Securities involves a high
      degree of risk. Such Purchaser has sought such accounting, legal and tax advice
      as it has considered necessary to make an informed investment decision with
      respect to its acquisition of the securities.

     

    (j)  Reliance
      on Exemptions.
      Such
      Purchaser understands that the Securities are being offered and sold to it
      in
      reliance on Regulation D and that Generex is relying upon the truth and accuracy
      of, and such Purchaser’s compliance with, the representations, warranties,
      agreements, acknowledgments and understandings of such Purchaser set forth
      herein in order to determine the availability of Regulation D and the
      eligibility of such Purchaser to acquire such Securities.

     

    (k)  No
      Governmental Review.
      Such
      Purchaser understands that no United States federal or state agency or any
      other
      government or governmental agency has passed on or made any recommendation
      or
      endorsement of the Securities or the fairness or suitability of the investment
      in the Securities nor have such authorities passed upon or endorsed the merits
      of the offering of the Securities. 

     

    (l)  Residency.
      Such
      Purchaser certifies that it resides or has a bona fide place of business at
      the
      address set forth below such Purchaser’s name on its signature page to this
      Amendment. 

     

     

    	5.  	
            Continued
              Validity of Transaction Documents under Purchase Agreement.
              The parties hereto agree that the Purchase Agreement and the Transaction
              Documents entered into in connection therewith (as amended by Amendment
              No. 1), remain in full force and effect, modified to the extent and
              only
              to the extent necessary to give effect to this Amendment and the
              transactions herein contemplated. Article IV of the Purchase Agreement
              is
              hereby incorporated by reference in its entirety, except for Sections
              4.6
              and 4.15 therein, into this Amendment with the understanding that if
              any
              term is identified in each of Article IV of the Purchase Agreement
              and in
              this Amendment, the term shall have the meaning set forth in this
              Amendment and references in such Article IV to “the Company” shall mean
              Generex.

          

     

     

    	6.  	
            Closing.

          

     

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    	6.1.  	
            Closing.
              On the Trading Day following the date on which the conditions set forth
              in
              Section 6.3 are satisfied, or on such other date as the parties may
              agree
              (the “Closing Date”), the closing of the transactions contemplated by this
              Amendment shall occur (the “Closing”).

          

     

    	6.2.  	
            Deliveries

          

     

    .

     

    	a)  	
            On
              the Closing Date, Generex shall deliver or cause to be delivered to
              each
              Purchaser the following:

          

     

    	(1)  	
            this
              Amendment, duly executed by Generex;

          

     

    	(2)  	
            an
              Amendment No. 4 AIR Debenture, registered in the name of such Purchaser
              in
              the correct principal amount;

          

     

    	(3)  	
            an
              Amendment No. 4 AIR Warrant, registered in the name of such
              Purchaser;

          

     

    	(4)  	
            an
              Amendment No. 4 Additional AIR, registered in the name of such Purchaser;
              and

          

     

    (5) a
      legal
      opinion issued by Company counsel.

     

    	b)  	
            On
              the Closing Date, each Purchaser shall deliver or cause to be delivered
              to
              Generex the following: 

          

     

    	(1)  	
            this
              Amendment, duly executed by such Purchaser;
              and

          

     

    	(2)  	
            100%
              of the principal amount of AIR Debentures issuable upon exercise in
              full
              of such Purchaser’s Additional Investment Right by wire transfer to the
              account as specified in writing by the Company.

          

     

    	6.3.  	
            Closing
              Conditions. 

          

     

    	a)  	
            The
              obligations of Generex hereunder in connection with the Closing are
              subject to the following conditions being
              met:

          

     

    	(1)  	
            the
              accuracy in all material respects when made and on the Closing Date
              of the
              representations and warranties of the Purchasers contained
              herein;

          

     

    	(2)  	
            all
              obligations, covenants and agreements of the Purchasers required to
              be
              performed at or prior to the Closing Date shall have been performed;
              and

          

     

    	(3)  	
            the
              delivery by the Purchasers of the items set forth in Section 6.2(b)
              of
              this Amendment.

          

     

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    	b)  	
            The
              respective obligations of the Purchasers hereunder in connection with
              the
              Closing are subject to the following conditions being
              met:

          

     

    	(4)  	
            the
              accuracy in all material respects on the Closing Date of the
              representations and warranties of Generex
              contained herein;

          

     

    	(5)  	
            all
              obligations, covenants and agreements of Generex required to be performed
              at or prior to the Closing Date shall have been performed;
              

          

     

    	(6)  	
            the
              delivery by Generex
              of
              the items set forth in Section 6.2(a) of this Amendment;
              

          

     

    	(7)  	
            there
              shall have been no Material Adverse Effect with respect to Generex
              since the date hereof; and

          

     

    	(8)  	
            From
              the date hereof to the Closing Date, trading in the Common Stock shall
              not
              have been suspended by the Commission (except for any suspension of
              trading of limited duration agreed to by Generex, which suspension
              shall
              be terminated prior to the Closing), and, at any time prior to the
              Closing
              Date, trading in securities generally as reported by Bloomberg Financial
              Markets shall not have been suspended or limited, or minimum prices
              shall
              not have been established on securities whose trades are reported by
              such
              service, or on any Trading Market, nor shall a banking moratorium have
              been declared either by the United States or New York State authorities
              nor shall there have occurred any material outbreak or escalation of
              hostilities or other national or international calamity of such magnitude
              in its effect on, or any material adverse change in, any financial
              market
              which, in each case, in the reasonable judgment of each Purchaser,
              makes
              it impracticable or inadvisable to exercise its Additional Investment
              Right at the Closing.

          

     

     

    	7.  	
            Miscellaneous.

          

     

    	7.1.  	
            Fees
              and Expenses.
              Generex has agreed to reimburse Cranshire Capital, L.P. (“Cranshire”)
              $15,000 for its legal fees and expenses in connection with this Amendment.
              Accordingly, the amount Cranshire must pay to Generex to exercise its
              Additional Investment Right under Section 1 shall be reduced by $15,000.
              Except for the foregoing, each party hereto will bear the fees and
              expenses of its own counsel and advisors in connection with the
              negotiation and entering into of this Amendment. Generex shall pay
              all
              transfer agent fees, stamp taxes and other taxes and duties levied
              in
              connection with the issuance of any
              Securities.

          

     

    	7.2.  	
            Entire
              Agreement.
              This Amendment and the Transaction Documents, together with the exhibits
              and schedules thereto, contain the entire understanding of the parties
              with respect to the subject matter hereof and supersede all prior
              agreements and understandings, oral or written, with respect to such
              matters, which the parties acknowledge have been merged into such
              documents, exhibits and schedules.

          

     

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    	7.3.  	
            Equal
              Treatment of Purchasers.
              No consideration shall be offered or paid to any person to amend or
              consent to a waiver or modification of any provision of any of the
              Transaction Documents unless the same consideration is also offered
              to all
              of the parties to the Transaction Documents. Further, Generex shall
              not
              make any payment of principal or interest on the Debentures, AIR
              Debentures or Amendment
              No. 4 AIR Debentures
              in
              amounts which are disproportionate to the respective principal amounts
              outstanding on the Debentures, AIR Debentures or Amendment No. 4 AIR
              Debentures at any applicable time. For clarification purposes, this
              provision constitutes a separate right granted to each Purchaser by
              Generex and negotiated separately by each Purchaser, and is intended
              to
              treat for Generex the Debenture, AIR Debenture and Amendment No. 4
              AIR
              Debenture holders as a class and shall not in any way be construed
              as the
              Purchasers acting in concert or as a group with respect to the purchase,
              disposition or voting of Securities or
              otherwise.

          

     

    	7.4.  	
            Public
              Announcement.
              Generex shall, by 4:30 p.m. Eastern time on the Trading Day following
              the
              date hereof, file a Current Report on Form 8-K, attaching the Transaction
              Documents thereto, each reasonably acceptable to each Purchaser. Generex
              and each Purchaser shall consult with each other in issuing any other
              press releases with respect to the transactions contemplated hereby,
              and
              neither Generex nor any Purchaser shall issue any such press release
              or
              otherwise make any such public statement without the prior consent
              of
              Generex, with respect to any press release of any Purchaser, or without
              the prior consent of each Purchaser, with respect to any press release
              of
              Generex, which consent shall not unreasonably be withheld, except if
              such
              disclosure is required by law, in which case the disclosing party shall
              promptly provide the other party with prior notice of such public
              statement or communication. Notwithstanding the foregoing, Generex
              shall
              not publicly disclose the name of any Purchaser, or include the name
              of
              any Purchaser in any filing with the Commission or any regulatory agency
              or Trading Market, without the prior written consent of such Purchaser,
              except (i) as required by federal securities law in connection with
              the
              registration statement contemplated by the Registration Rights Agreement
              and (ii) to the extent such disclosure is required by law or Trading
              Market regulations, in which case Generex shall provide the Purchasers
              with prior notice of such disclosure permitted under subclause (i)
              or
              (ii).

          

     

    	7.5.  	
            Notices.
              Any and all notices or other communications or deliveries required
              or
              permitted to be provided hereunder shall be in writing and shall be
              deemed
              given and effective as specified in the Purchase Agreement. The address
              for such notices and communications shall be as set forth on the signature
              pages attached to the Purchase Agreement.

          

     

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    	7.6.  	
            Amendments;
              Waivers.
              No provision of this Amendment may be waived or amended except in a
              written instrument signed, in the case of an amendment, by Generex
              and
              each Purchaser or, in the case of a waiver, by the party against whom
              enforcement of any such waiver is sought. No waiver of any default
              with
              respect to any provision, condition or requirement of this Amendment
              shall
              be deemed to be a continuing waiver in the future or a waiver of any
              subsequent default or a waiver of any other provision, condition or
              requirement hereof, nor shall any delay or omission of either party
              to
              exercise any right hereunder in any manner impair the exercise of any
              such
              right.

          

     

    	7.7.  	
            Amendment
              Controls.
              If any topic is addressed both in the Purchase Agreement (or any document
              related thereto) and in this Amendment, this Amendment shall
              control.

          

     

    	7.8.  	
            Construction.
              The headings herein are for convenience only, do not constitute a part
              of
              this Amendment and shall not be deemed to limit or affect any of the
              provisions hereof. The language used in this Amendment will be deemed
              to
              be the language chosen by the parties to express their mutual intent,
              and
              no rules of strict construction will be applied against any
              party.

          

     

    	7.9.  	
            Governing
              Law.
              All questions concerning the construction, validity, enforcement and
              interpretation of this Amendment shall be governed by and construed
              and
              enforced in accordance with the internal laws of the State of New York,
              without regard to the principles of conflicts of law thereof. The parties
              agree that Section 5.9 of the Purchase Agreement shall apply to this
              Amendment as if set forth in its entirety
              herein.

          

     

    	7.10.  	
            Survival.
              The representations and warranties contained herein shall survive the
              delivery, exercise and/or conversion of the Securities, as applicable
              for
              the applicable statue of limitations.

          

     

    	7.11.  	
            Execution.
              This Amendment may be executed in two or more counterparts, all of
              which
              when taken together shall be considered one and the same document and
              shall become effective when counterparts have been signed by each party
              and delivered to the other party, it being understood that both parties
              need not sign the same counterpart. 

          

     

    	7.12.  	
            Severability.
              If any provision of this Amendment is held to be invalid or unenforceable
              in any respect, the validity and enforceability of the remaining terms
              and
              provisions of this Amendment shall not in any way be affected or impaired
              thereby and the parties will attempt to agree upon a valid and enforceable
              provision that is a reasonable substitute therefor, and upon so agreeing,
              shall incorporate such substitute provision in this
              Amendment.

          

     

    	7.13.  	
            Independent
              Nature of Purchasers’ Obligations and Rights.
              The obligations of each Purchaser hereunder are several and not joint
              with
              the obligations of any other Purchaser, and no Purchaser shall be
              responsible in any way for the performance of the obligations of any
              other
              Purchaser. Nothing contained herein, and no action taken by any Purchaser
              pursuant hereto, shall be deemed to constitute the Purchasers as a
              partnership, an association, a joint venture or any other kind of entity,
              or create a presumption that the Purchasers are in any way acting in
              concert or as a group with respect to such obligations or the transactions
              contemplated hereby. Each Purchaser shall be entitled to independently
              protect and enforce its rights, including, without limitation, the
              rights
              arising out of this Amendment and it shall not be necessary for any
              other
              Purchaser to be joined as an additional party in any proceeding for
              such
              purpose. The Purchasers have not relied upon the same legal counsel
              in
              their review and negotiation of this Amendment. Generex has elected
              to
              provide all Purchasers with the same terms and form of Amendment for
              the
              convenience of Generex and not because it was required or requested
              to do
              so by the Purchasers. Each Purchaser represents that it has been
              represented by its own separate legal counsel in its review and
              negotiations of this Amendment and each party represents and confirms
              that
              Proskauer Rose LLP represents only Cranshire Capital, L.P. in connection
              with this Amendment.

          

     

    	7.14.  	
            Exempt
              Issuances.
              The term “Exempt Issuance” as defined in the Purchase Agreement is hereby
              amended to include Common Stock and Common Stock Equivalents to employees,
              officers, directors and consultants, if issued pursuant to a resolution
              adopted by the majority of the non-employee members of the Board of
              Directors.

          

     

    (Signature
      Pages Follow)

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
      executed by their respective authorized signatories as of the date first
      indicated above.

     

    
      	
              GENEREX
                BIOTECHNOLOGY CORPORATION

               

            
	
              By:/s/
                Mark A. Fletche 

              Name:
                Mark A. Fletcher

              Title:
                Executive Vice-President, General
                Counsel

            

    

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGE FOR PURCHASERS FOLLOWS]

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    

    IN
      WITNESS WHEREOF, the undersigned have caused this Amendment to be duly executed
      by their respective authorized signatories as of the date first indicated
      above.

     

    Name
      of
      Investing Entity: __________Smithfield
      Fiduciary LLC____________________________

    Signature
      of Authorized Signatory of Investing Entity:
      __/s/
      Scott M. Wallace_______________

    Name
      of
      Authorized Signatory: _______Scott
      M. Wallace________________________________

    Title
      of
      Authorized Signatory: ________Authorized
      Signatory______________________________

    Email
      Address of Authorized Entity:__________________________________________________

    

    

    The
      principal amount of AIR Debentures which such 

    Purchaser’s
      Additional Investment Right permits it to acquire: $___1,000,000___________

    

    

    Residency
      of Investing Entity: ______Cayman
      Islands________________________

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    

     

    IN
      WITNESS WHEREOF, the undersigned have caused this Amendment to be duly executed
      by their respective authorized signatories as of the date first indicated
      above.

     

    Name
      of
      Investing Entity: _____Cranshire
      Capital LP_________________________________

    Signature
      of Authorized Signatory of Investing Entity:
      __/s/
      Lawrence A. Prosser_________

    Name
      of
      Authorized Signatory: __Lawrence
      A. Prosser_______________________________

    Title
      of
      Authorized Signatory: ____CFO
      -
      Downsview Capital Inc. - The General Partner_____

    Email
      Address of Authorized Entity:______________________________________________

    

    

    The
      principal amount of AIR Debentures which such 

    Purchaser’s
      Additional Investment Right permits it to acquire: $_____1,000,000_______

    

    

    Residency
      of Investing Entity: _____Illinois_________________________

    

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    

    IN
      WITNESS WHEREOF, the undersigned have caused this Amendment to be duly executed
      by their respective authorized signatories as of the date first indicated
      above.

     

    Name
      of
      Investing Entity: ______Omicron
      Master Trust___________________________________

    Signature
      of Authorized Signatory of Investing Entity:
      ___/s/
      Bruce Bernstein________________

    Name
      of
      Authorized Signatory: _______Bruce
      Bernstein__________________________________

    Title
      of
      Authorized Signatory: ________Managing
      Partner_________________________________

    Email
      Address of Authorized
      Entity:__________________________________________________

    

    

    The
      principal amount of AIR Debentures which such 

    Purchaser’s
      Additional Investment Right permits it to acquire: $_____1,000,000__________

    

    

    Residency
      of Investing Entity: ______________________________

    

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    

    IN
      WITNESS WHEREOF, the undersigned have caused this Amendment to be duly executed
      by their respective authorized signatories as of the date first indicated
      above.

     

    Name
      of
      Investing Entity: ___________Iroquois
      Capital, L.P._______________________________

    Signature
      of Authorized Signatory of Investing Entity:
      __/s/
      Joshua Silverman_________________

    Name
      of
      Authorized Signatory: _______Joshua
      Silverman__________________________________

    Title
      of
      Authorized Signatory: ________Partner__________________________________________

    Email
      Address of Authorized
      Entity:___________________________________________________

    

    

    The
      principal amount of AIR Debentures which such 

    Purchaser’s
      Additional Investment Right permits it to acquire: $______1,000,000____________

    

    

    Residency
      of Investing Entity: ______________________________

    

     

    

    
      
         

      

      
        19Exhibit
      4.2

    

    NEITHER
      THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE
      BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
      COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
      THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
      MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
      STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
      OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
      SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
      EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
      SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY
      AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED
      IN
      CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
      SECURITIES.

    

    Original
      Issue Date: January 20, 2006

    Original
      Conversion Price (subject to adjustment herein): $1.05

    

    $1,000,000

    

    

    6%
      SECURED CONVERTIBLE DEBENTURE

    DUE
      MAY 20, 2007

    

    THIS
      DEBENTURE of Generex Biotechnology Company, a Delaware corporation, having
      a
      principal place of business at 33 Harbour Square, Suite 202, Toronto, Ontario
      Canada M5J2G2 (the “Company”),
      is
      designated as its 6% Convertible Debenture, due May 20, 2007 (the “Debenture”).

    

    FOR
      VALUE
      RECEIVED, the Company promises to pay to =
      or its
      registered assigns (the “Holder”),
      the
      principal sum of $1,000,000 on May 20, 2007 or such earlier date as the
      Debentures are required or permitted to be repaid as provided hereunder (the
      “Maturity
      Date”),
      and
      to pay interest to the Holder on the aggregate unconverted and then outstanding
      principal amount of this Debenture in accordance with the provisions hereof.
      This Debenture is subject to the following additional provisions:

    

    Section
      1. Definitions.
      For the
      purposes hereof, in addition to the terms defined elsewhere in this Debenture:
      (a) capitalized terms not otherwise defined herein have the meanings given
      to
      such terms in the Purchase Agreement Amendments, or if not found therein, the
      Purchase Agreement and (b) the following terms shall have the following
      meanings:

    

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

    

    “Base
      Conversion Price”
shall
      have the meaning set forth in Section 5(b).

     

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    

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

    

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

    

    “Change
      of Control Transaction”
means
      the occurrence after the date hereof of any of (i) an acquisition after the
      date
      hereof by an individual or legal entity or “group” (as described in Rule
      13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether
      through legal or beneficial ownership of capital stock of the Company, by
      contract or otherwise) of in excess of 33% of the voting securities of the
      Company, or (ii) a replacement at one time or within a three year period of
      more
      than one-half of the members of the Company’s board of directors which is not
      approved by a majority of those individuals who are members of the board of
      directors on the date hereof (or by those individuals who are serving as members
      of the board of directors on any date whose nomination to the board of directors
      was approved by a majority of the members of the board of directors who are
      members on the date hereof), or (iii) the execution by the Company of an
      agreement to which the Company is a party or by which it is bound, providing
      for
      any of the events set forth above in (i) or (ii).

    

    “Common
      Stock”
means
      the common stock, par value $0.001 per share, of the Company and stock of any
      other class into which such shares may hereafter have been reclassified or
      changed.

    

    “Conversion
      Date”
shall
      have the meaning set forth in Section 4(a).

    

    “Conversion
      Price”
shall
      have the meaning set forth in Section 4(b).

    

    “Conversion
      Shares”
means
      the shares of Common Stock issuable upon conversion of Debentures or as payment
      of interest in accordance with the terms.

    

    “Debenture
      Register”
shall
      have the meaning set forth in Section 2(c).

    

    “Dilutive
      Issuance”
shall
      have the meaning set forth in Section 5(b).

    

    “Dilutive
      Issuance Notice”
shall
      have the meaning set forth in Section 5(b).

    

    “Effectiveness
      Period”
shall
      have the meaning given to such term in the Registration Rights Agreement and
      the
      Purchase Agreement Amendments. 

    

    “Equity
      Conditions”
shall
      mean, during the period in question, (i)
      the
      Company shall have duly honored all conversions and redemptions scheduled to
      occur or occurring by virtue of one or more Notice of Conversions, if any,
      (ii)
      all liquidated damages and other amounts owing in respect of the Debentures
      shall have been paid; (iii)
      there is an effective Registration Statement pursuant to which the Holder is
      permitted to utilize the prospectus thereunder to resell all of the shares
      issuable pursuant to the Transaction Documents (and the Company believes, in
      good faith, that such effectiveness will continue uninterrupted for the
      foreseeable future), (iv) the Common Stock is trading on the Trading Market
      and
      all of the shares issuable pursuant to the Transaction Documents are listed
      for
      trading on a Trading Market (and the Company believes, in good faith, that
      trading of the Common Stock on a Trading Market will continue uninterrupted
      for
      the foreseeable future), (v) there is a sufficient number of authorized but
      unissued and otherwise unreserved shares of Common Stock for the issuance of
      all
      of the shares issuable pursuant to the Transaction Documents, (vi) there is
      then
      existing no Event of Default or event which, with the passage of time or the
      giving of notice, would constitute an Event of Default, (vii) all of the shares
      issued or issuable pursuant to the transaction proposed would not violate the
      limitations set forth in Section 4(c), (viii)
      no
      public announcement of a pending or proposed Fundamental Transaction, Change
      of
      Control Transaction or acquisition transaction has occurred that has not been
      consummated, and (ix) the Holder is not then in possession of what could be
      deemed material, non-public information, in the reasonable determination of
      the
      Holder.

    

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

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

    

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended.

    

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

    

    “Interest
      Conversion Rate”
means
      the
      lesser of (a) the Conversion Price and (b) 90%
      of
      the average of the 20 VWAPs immediately prior to the applicable Interest Payment
      Date.

    

    “Interest
      Payment Date”
shall
      have the meaning set forth in Section 2(a).

    

    “Late
      Fees”
shall
      have the meaning set forth in Section 2(d).

    

    “Mandatory
      Prepayment Amount”
for
      any
      Debentures shall equal the sum of (i) the greater of: (A) 130% of the principal
      amount of Debentures to be prepaid, plus all accrued and unpaid interest
      thereon, or (B) the principal amount of Debentures to be prepaid, plus all
      other
      accrued and unpaid interest hereon, divided by the Conversion Price on (x)
      the
      date the Mandatory Prepayment Amount is demanded or otherwise due or (y) the
      date the Mandatory Prepayment Amount is paid in full, whichever is less,
      multiplied by the VWAP on (x) the date the Mandatory Prepayment Amount is
      demanded or otherwise due or (y) the date the Mandatory Prepayment Amount is
      paid in full, whichever is greater, and (ii) all other amounts, costs, expenses
      and liquidated damages due in respect of such Debentures.

    

    “Monthly
      Redemption”
shall
      mean the redemption of this Debenture pursuant to Section 6(a)
      hereof.

    

    “Monthly
      Redemption Amount”
shall
      mean, as to a Monthly Redemption, $76,923.081   the
      original principal amount of this Debenture divided by 13.,
      or such
      lesser principal amount of this Debenture then outstanding.

    

    “Monthly
      Redemption Date”
means
      the first Trading Day of every month, commencing on April 1, 2006 and ending
      on
      the date when there is no principal amount of this Debenture
      outstanding.

     

     

    
      
        

      
1the
      original principal amount of this Debenture divided by 13.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    “New
      York Courts”
shall
      have the meaning set forth in Section 9(d).

    

    “Notice
      of Conversion”
shall
      have the meaning set forth in Section 4(a).

    

    “Original
      Issue Date”
shall
      mean January 20, 2006 regardless of the number of transfers of the Debenture
      and
      regardless of the number of instruments which may be issued to evidence the
      Debenture.

    

    “Person”
means
      a
      corporation, an association, a partnership, organization, a business, an
      individual, a government or political subdivision thereof or a governmental
      agency.

    “Purchase
      Agreement”
means
      the Securities Purchase Agreement, dated as of November 10, 2004, to which
      the
      Company and the original Holder are parties, as amended, modified or
      supplemented from time to time in accordance with its terms.

    

    “Purchase
      Agreement Amendments”
means,
      collectively, Amendment No. 1 to the Securities Purchase Agreement and
      Registration Rights Agreement dated June 17, 2005, Amendment No. 2 to the
      Securities Purchase Agreement and Registration Rights Agreement dated September
      8, 2005, Amendment No. 3 to the Securities Purchase Agreement and Registration
      Rights Agreement dated December 4, 2005, and Amendment No. 4 to the Securities
      Purchase Agreement and Registration Rights Agreement dated January 19, 2006.
      to
      which, in each case, the Company and the original Holder are parties, as
      amended, modified or supplemented from time to time in accordance with their
      terms.

    

    “Registration
      Rights Agreement”
means
      the Registration Rights Agreement, dated as of the date of the Purchase
      Agreement, to which the Company and the original Holder are parties, as amended,
      modified or supplemented from time to time in accordance with its
      terms.

    

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

    

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

    

    “Subsidiary”
shall
      have the meaning given to such term in the Purchase Agreement.

    

    “Trading
      Day”
means
      a
      day on which the Common Stock is traded on a Trading Market.

    

    “Trading
      Market”
means
      the following markets or exchanges on which the Common Stock is listed or quoted
      for trading on the date in question: the Nasdaq Capital Market, the American
      Stock Exchange, the New York Stock Exchange or the Nasdaq National
      Market.

    

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

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

    

    “VWAP”
means,
      for any date, the price determined by the first of the following clauses that
      applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
      the daily volume weighted average price of the Common Stock for such date (or
      the nearest preceding date) on the Trading Market on which the Common Stock
      is
      then listed or quoted as reported by Bloomberg Financial L.P. (based on a
      Trading Day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern Time); (b)  if
      the Common Stock is not then listed or quoted on a Trading Market and if prices
      for the Common Stock are then quoted on the OTC Bulletin Board, the volume
      weighted average price of the Common Stock for such date (or the nearest
      preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then
      listed or quoted on the OTC Bulletin Board and if prices for the Common Stock
      are then reported in the “Pink Sheets” published by the National Quotation
      Bureau Incorporated (or a similar organization or agency succeeding to its
      functions of reporting prices), the most recent bid price per share of the
      Common Stock so reported; or (d) in all other cases, the fair market value
      of a share of Common Stock as determined by an independent appraiser selected
      in
      good faith by the Holders and reasonably acceptable to the Company.

    

    Section
      2. Interest.

     

    a)  Payment
      of Interest in Cash or Kind.
      The
      Company shall pay interest to the Holder on the aggregate unconverted and then
      outstanding principal amount of this Debenture at the rate of 6% per annum,
      payable quarterly on March 31, June 30, September 30 and December 31, beginning
      on the first such date after the Original Issue Date and on each Conversion
      Date
      (as to that principal amount then being converted) and on the Maturity Date
      (except that, if any such date is not a Business Day, then such payment shall
      be
      due on the next succeeding Business Day) (each such date, an “Interest
      Payment Date”),
      in
      cash or shares of Common Stock in an amount equal to the amount of interest
      then
      due and owing divided by the Interest Conversion Rate, or a combination thereof;
      provided,
      however,
      payment
      in shares of Common Stock may only occur if during the 20 Trading Days
      immediately prior to the applicable Interest Payment Date all of the Equity
      Conditions have been met and the Company shall have given the Holder notice
      in
      accordance with the notice requirements set forth below. 

     

    b)  Company’s
      Election to Pay Interest in Kind.
      Subject
      to the terms and conditions herein, the decision whether to pay interest
      hereunder in shares of Common Stock or cash shall be at the discretion of the
      Company. Not less than 20 Trading Days prior to each Interest Payment Date,
      the
      Company shall provide the Holder with written notice of its election to pay
      interest hereunder either in cash or shares of Common Stock (the Company may
      indicate in such notice that the election contained in such notice shall
      continue for later periods until revised). Within 20 Trading Days prior to
      an
      Interest Payment Date, the Company’s election (whether specific to an Interest
      Payment Date or continuous) shall be irrevocable as to such Interest Payment
      Date. Subject to the aforementioned conditions, failure to timely provide such
      written notice shall be deemed an election by the Company to pay the interest
      on
      such Interest Payment Date in cash. 

    

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    c)  Interest
      Calculations.
      Interest shall be calculated on the basis of a 360-day year and shall accrue
      daily commencing on the Original Issue Date until payment in full of the
      principal sum, together with all accrued and unpaid interest and other amounts
      which may become due hereunder, has been made. Payment of interest in shares
      of
      Common Stock shall otherwise occur pursuant to Section 4(d)(ii) and only for
      purposes of the payment of interest in shares, the Interest Payment Date shall
      be deemed the Conversion Date. Interest shall cease to accrue with respect
      to
      any principal amount converted, provided that the Company in fact delivers
      the
      Conversion Shares within the time period required by Section 4(d)(ii). Interest
      hereunder will be paid to the Person in whose name this Debenture is registered
      on the records of the Company regarding registration and transfers of Debentures
      (the “Debenture
      Register”).
      Except as otherwise provided herein, if at any time the Company pays interest
      partially in cash and partially in shares of Common Stock, then such payment
      shall be distributed ratably among the Holders based upon the principal amount
      of Debentures held by each Holder. 

     

    d)  Late
      Fee.
      All
      overdue accrued and unpaid interest to be paid hereunder shall entail a late
      fee
      at the rate of 18% per annum (or such lower maximum amount of interest permitted
      to be charged under applicable law) (“Late
      Fees”)
      which
      will accrue daily, from the date such interest is due hereunder through and
      including the date of payment. Notwithstanding anything to the contrary
      contained herein, if on any Interest Payment Date the Company has elected to
      pay
      interest in Common Stock and is not able to pay accrued interest in the form
      of
      Common Stock because it does not then satisfy the conditions for payment in
      the
      form of Common Stock set forth above, then, at
      the
      option of the Holder, the
      Company, in lieu of delivering either
      shares
      of
      Common Stock pursuant to this Section 2 or
      paying
      the regularly scheduled cash interest payment, shall deliver, within three
      Trading Days of each applicable Interest Payment Date, an amount in cash equal
      to the product of the number of shares of Common Stock otherwise deliverable
      to
      the Holder in connection with the payment of interest due on such Interest
      Payment Date and the highest VWAP during the period commencing on the Interest
      Payment Date and ending on the Trading Day prior to the date such payment is
      made.

     

    e)  Prepayment.
      Except
      as otherwise set forth in this Debenture, the Company may not prepay any portion
      of the principal amount of this Debenture without the prior written consent
      of
      the Holder. 

    

    Section
      3.  Registration
      of Transfers and Exchanges.
      

     

    a)  Different
      Denominations.
      This
      Debenture is exchangeable for an equal aggregate principal amount of Debentures
      of different authorized denominations, as requested by the Holder surrendering
      the same. No service charge will be made for such registration of transfer
      or
      exchange.

     

    b)  Investment
      Representations.
      This
      Debenture has been issued subject to certain investment representations of
      the
      original Holder set forth in the Purchase Agreement and may be transferred
      or
      exchanged only in compliance with the Purchase Agreement and applicable federal
      and state securities laws and regulations. 

    

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    c)  Reliance
      on Debenture Register.
      Prior
      to due presentment to the Company for transfer of this Debenture, the Company
      and any agent of the Company may treat the Person in whose name this Debenture
      is duly registered on the Debenture Register as the owner hereof for the purpose
      of receiving payment as herein provided and for all other purposes, whether
      or
      not this Debenture is overdue, and neither the Company nor any such agent shall
      be affected by notice to the contrary.

    

    Section
      4.  Conversion.

     

    a)  Voluntary
      Conversion.
      At any
      time after the Original Issue Date until this Debenture is no longer
      outstanding, this Debenture shall be convertible into shares of Common Stock
      at
      the option of the Holder, in whole or in part at any time and from time to
      time
      (subject to the limitations on conversion set forth in Section 4(c)
      hereof). The Holder shall effect conversions by delivering to the Company the
      form of Notice of Conversion attached hereto as Annex
      A
      (a
“Notice
      of Conversion”),
      specifying therein the principal amount of Debentures to be converted and the
      date on which such conversion is to be effected (a “Conversion
      Date”).
      If no
      Conversion Date is specified in a Notice of Conversion, the Conversion Date
      shall be the date that such Notice of Conversion is provided hereunder. To
      effect conversions hereunder, the Holder shall not be required to physically
      surrender Debentures to the Company unless the entire principal amount of this
      Debenture plus all accrued and unpaid interest thereon has been so converted.
      Conversions hereunder shall have the effect of lowering the outstanding
      principal amount of this Debenture in an amount equal to the applicable
      conversion. The Holder and the Company shall maintain records showing the
      principal amount converted and the date of such conversions. The Company shall
      deliver any objection to any Notice of Conversion within 2 Business Days of
      receipt of such notice. In the event of any dispute or discrepancy, the records
      of the Holder shall be controlling and determinative in the absence of manifest
      error. The Holder and any assignee, by acceptance of this Debenture, acknowledge
      and agree that, by reason of the provisions of this paragraph, following
      conversion of a portion of this Debenture, the unpaid and unconverted principal
      amount of this Debenture may be less than the amount stated on the face
      hereof.

     

    b)  Conversion
      Price.
      The
      conversion price in effect on any Conversion Date shall be equal to $1.05
      (subject
      to adjustment herein) (the “Conversion
      Price”).

    

    c)  Holder’s
      Restriction on Conversion.
      The
      Company shall not effect any conversion of this Debenture, and the Holder shall
      not have the right to convert any portion of this Debenture, pursuant to Section
      4(a) or otherwise, to the extent that after giving effect to such conversion,
      the Holder (together with the Holder’s affiliates), as set forth on the
      applicable Notice of Conversion, would beneficially own in excess of 4.99%
      of
      the number of shares of the Common Stock outstanding immediately after giving
      effect to such conversion.  For purposes of the foregoing sentence, the
      number of shares of Common Stock beneficially owned by the Holder and its
      affiliates shall include the number of shares of Common Stock issuable upon
      conversion of this Debenture with respect to which the determination of such
      sentence is being made, but shall exclude the number of shares of Common Stock
      which would be issuable upon (A) conversion of the remaining, nonconverted
      portion of this Debenture beneficially owned by the Holder or any of its
      affiliates and (B) exercise or conversion of the unexercised or nonconverted
      portion of any other securities of the Company (including, without limitation,
      any other Debentures or the Warrants) subject to a limitation on conversion
      or
      exercise analogous to the limitation contained herein beneficially owned by
      the
      Holder or any of its affiliates.  Except as set forth in the preceding
      sentence, for purposes of this Section 4(c), beneficial ownership shall be
      calculated in accordance with Section 13(d) of the Exchange Act. To the extent
      that the limitation contained in this section applies, the determination of
      whether this Debenture is convertible (in relation to other securities owned
      by
      the Holder) and of which a portion of this Debenture is convertible shall be
      in
      the sole discretion of such Holder. To ensure compliance with this restriction,
      the Holder will be deemed to represent to the Company each time it delivers
      a
      Notice of Conversion that such Notice of Conversion has not violated the
      restrictions set forth in this paragraph and the Company shall have no
      obligation to verify or confirm the accuracy of such determination. For purposes
      of this Section 4(c), in determining the number of outstanding shares of Common
      Stock, the Holder may rely on the number of outstanding shares of Common Stock
      as reflected in (x) the Company’s most recent Form 10-Q or Form 10-K, as the
      case may be, (y) a more recent public announcement by the Company or (z) any
      other notice by the Company or the Company’s Transfer Agent setting forth the
      number of shares of Common Stock outstanding.  Upon the written or oral
      request of the Holder, the Company shall within two Trading Days confirm orally
      and in writing to the Holder the number of shares of Common Stock then
      outstanding.  In any case, the number of outstanding shares of Common Stock
      shall be determined after giving effect to the conversion or exercise of
      securities of the Company, including this Debenture, by the Holder or its
      affiliates since the date as of which such number of outstanding shares of
      Common Stock was reported.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    	d)  	
            Mechanics
              of Conversion

          

     

    i.  Conversion
      Shares Issuable Upon Conversion of Principal Amount.
      The
      number of shares of Common Stock issuable upon a conversion hereunder shall
      be
      determined by the quotient obtained by dividing (x) the outstanding principal
      amount of this Debenture to be converted by (y) the Conversion
      Price.

    

    ii.  Delivery
      of Certificate Upon Conversion.
      Not
      later than three Trading Days after any Conversion Date, the Company will
      deliver to the Holder (A) a certificate or certificates representing the
      Conversion Shares which shall be free of restrictive legends and trading
      restrictions (other than those required by the Purchase Agreement) representing
      the number of shares of Common Stock being acquired upon the conversion of
      Debentures (including, if so timely elected by the Company, shares of Common
      Stock representing the payment of accrued interest) and (B) a bank check in
      the
      amount of accrued and unpaid interest (if the Company is required to pay accrued
      interest in cash). The Company shall, if available and if allowed under
      applicable securities laws, use its commercially reasonable efforts to deliver
      any certificate or certificates required to be delivered by the Company under
      this Section electronically through the Depository Trust Corporation or another
      established clearing corporation performing similar functions. 

     

    iii.  Failure
      to Deliver Certificates.
      If in
      the case of any Notice of Conversion such certificate or certificates are not
      delivered to or as directed by the applicable Holder by the third Trading Day
      after a Conversion Date, the Holder shall be entitled by written notice to
      the
      Company at any time on or before its receipt of such certificate or certificates
      thereafter, to rescind such conversion, in which event the Company shall
      immediately return the certificates representing the principal amount of
      Debentures tendered for conversion; provided that if as a result of the
      limitations set forth in Section 4(c) hereof, such failure by the Company is
      for
      a portion of the Securities for which a Notice of Conversion has been delivered,
      the Holder shall be permitted to rescind solely that portion not so converted.
      

     

    iv.  Obligation
      Absolute; Partial Liquidated Damages.
      Subject
      to the limitations set forth in Section 4(c) hereof, if the Company fails for
      any reason to deliver to the Holder such certificate or certificates pursuant
      to
      Section 4(d)(ii) by the third Trading Day after the Conversion Date, the Company
      shall pay to such Holder, in cash, as liquidated damages and not as a penalty,
      for each $1000 of principal amount being converted, $10 per Trading Day
      (increasing to $20 per Trading Day after 5 Trading Days after such damages
      begin
      to accrue) for each Trading Day after such third Trading Day until such
      certificates are delivered. The Company’s obligations to issue and deliver the
      Conversion Shares upon conversion of this Debenture in accordance with the
      terms
      hereof are absolute and unconditional, irrespective of any action or inaction
      by
      the Holder to enforce the same, any waiver or consent with respect to any
      provision hereof, the recovery of any judgment against any Person or any action
      to enforce the same, or any setoff, counterclaim, recoupment, limitation or
      termination, or any breach or alleged breach by the Holder or any other Person
      of any obligation to the Company or any violation or alleged violation of law
      by
      the Holder or any other person, and irrespective of any other circumstance
      which
      might otherwise limit such obligation of the Company to the Holder in connection
      with the issuance of such Conversion Shares; provided,
      however,
      such
      delivery shall not operate as a waiver by the Company of any such action the
      Company may have against the Holder. In the event a Holder of this Debenture
      shall elect to convert any or all of the outstanding principal amount hereof,
      the Company may not refuse conversion based on any claim that the Holder or
      any
      one associated or affiliated with the Holder of has been engaged in any
      violation of law, agreement or for any other reason, unless, an injunction
      from
      a court, on notice, restraining and or enjoining conversion of all or part
      of
      this Debenture shall have been sought and obtained and the Company posts a
      surety bond for the benefit of the Holder in the amount of 150% of the principal
      amount of this Debenture outstanding, which is subject to the injunction, which
      bond shall remain in effect until the completion of arbitration/litigation
      of
      the dispute and the proceeds of which shall be payable to such Holder to the
      extent it obtains judgment. In the absence of an injunction precluding the
      same,
      the Company shall issue Conversion Shares or, if applicable, cash, upon a
      properly noticed conversion. Nothing herein shall limit a Holder’s right to
      pursue actual damages or declare an Event of Default pursuant to Section 8
      herein for the Company’s failure to deliver Conversion Shares within the period
      specified herein and such Holder shall have the right to pursue all remedies
      available to it at law or in equity including, without limitation, a decree
      of
      specific performance and/or injunctive relief. The exercise of any such rights
      shall not prohibit the Holders from seeking to enforce damages pursuant to
      any
      other Section hereof or under applicable law.

     

    v.  Compensation
      for Buy-In on Failure to Timely Deliver Certificates Upon
      Conversion.
      In
      addition to any other rights available to the Holder, if the Company fails
      for
      any reason, other than as a result of the limitations set forth in Section
      4(c)
      hereof, to deliver to the Holder such certificate or certificates pursuant
      to
      Section 4(d)(ii) by the third Trading Day after the Conversion Date, and if
      after such third Trading Day the Holder is required by its brokerage firm to
      purchase (in an open market transaction or otherwise) Common Stock to deliver
      in
      satisfaction of a sale by such Holder of the Conversion Shares which the Holder
      anticipated receiving upon such conversion (a “Buy-In”),
      then
      the Company shall (A) pay in cash to the Holder (in addition to any remedies
      available to or elected by the Holder) the amount by which (x) the Holder’s
      total purchase price (including brokerage commissions, if any) for the Common
      Stock so purchased exceeds (y) the product of (1) the aggregate number of shares
      of Common Stock that such Holder anticipated receiving from the conversion
      at
      issue multiplied by (2) the actual sale price of the Common Stock at the time
      of
      the sale (including brokerage commissions, if any) giving rise to such purchase
      obligation and (B) at the option of the Holder, either reissue Debentures in
      principal amount equal to the principal amount of the attempted conversion
      or
      deliver to the Holder the number of shares of Common Stock that would have
      been
      issued had the Company timely complied with its delivery requirements under
      Section 4(d)(ii). For example, if the Holder purchases Common Stock having
      a
      total purchase price of $11,000 to cover a Buy-In with respect to an attempted
      conversion of Debentures with respect to which the actual sale price of the
      Conversion Shares at the time of the sale (including brokerage commissions,
      if
      any) giving rise to such purchase obligation was a total of $10,000 under clause
      (A) of the immediately preceding sentence, the Company shall be required to
      pay
      the Holder $1,000. The Holder shall provide the Company written notice
      indicating the amounts payable to the Holder in respect of the Buy-In.
      Notwithstanding anything contained herein to the contrary, if a Holder requires
      the Company to make payment in respect of a Buy-In for the failure to timely
      deliver certificates hereunder and the Company timely pays in full such payment,
      the Company shall not be required to pay such Holder liquidated damages under
      Section 4(d)(iv) in respect of the certificates resulting in such
      Buy-In.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    vi.  Reservation
      of Shares Issuable Upon Conversion.
      The
      Company covenants that it will at all times reserve and keep available out
      of
      its authorized and unissued shares of Common Stock solely for the purpose of
      issuance upon conversion of the Debentures and payment of interest on the
      Debenture, each as herein provided, free from preemptive rights or any other
      actual contingent purchase rights of persons other than the Holders, not less
      than such number of shares of the Common Stock as shall (subject to any
      additional requirements of the Company as to reservation of such shares set
      forth in the Purchase Agreement) be issuable (taking into account the
      adjustments and restrictions of Section 5) upon the conversion of the
      outstanding principal amount of the Debentures and payment of interest
      hereunder. The Company covenants that all shares of Common Stock that shall
      be
      so issuable shall, upon issue, be duly and validly authorized, issued and fully
      paid, nonassessable and, if the Registration Statement is then effective under
      the Securities Act, registered for public sale in accordance with such
      Registration Statement.

    

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

    

    viii.  Transfer
      Taxes.
      The
      issuance of certificates for shares of the Common Stock on conversion of the
      Debentures shall be made without charge to the Holders thereof for any
      documentary stamp or similar taxes that may be payable in respect of the issue
      or delivery of such certificate, provided that the Company shall not be required
      to pay any tax that may be payable in respect of any transfer involved in the
      issuance and delivery of any such certificate upon conversion in a name other
      than that of the Holder of such Debentures so converted and the Company shall
      not be required to issue or deliver such certificates unless or until the person
      or persons requesting the issuance thereof shall have paid to the Company the
      amount of such tax or shall have established to the satisfaction of the Company
      that such tax has been paid.

    

    Section
      5. Certain
      Adjustments.

     

    a)  Stock
      Dividends and Stock Splits.
      If the
      Company, at any time while the Debentures are outstanding: (A) shall pay a
      stock
      dividend or otherwise make a distribution or distributions on shares of its
      Common Stock or any other equity or equity equivalent securities payable in
      shares of Common Stock (which, for avoidance of doubt, shall not include any
      shares of Common Stock issued by the Company pursuant to this Debenture,
      including as interest thereon), (B) subdivide outstanding shares of Common
      Stock
      into a larger number of shares, (C) combine (including by way of reverse stock
      split) outstanding shares of Common Stock into a smaller number of shares,
      or
      (D) issue by reclassification of shares of the Common Stock any shares of
      capital stock of the Company, then the Conversion Price shall be multiplied
      by a
      fraction of which the numerator shall be the number of shares of Common Stock
      (excluding treasury shares, if any) outstanding before such event and of which
      the denominator shall be the number of shares of Common Stock outstanding after
      such event. Any adjustment made pursuant to this Section shall become effective
      immediately after the record date for the determination of stockholders entitled
      to receive such dividend or distribution and shall become effective immediately
      after the effective date in the case of a subdivision, combination or
      re-classification.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    b)  Subsequent
      Equity Sales.
      If the
      Company or any Subsidiary thereof, as applicable, at any time while Debentures
      are outstanding, shall offer, sell, grant any option to purchase or offer,
      sell
      or grant any right to reprice its securities, or otherwise dispose of or issue
      (or announce any offer, sale, grant or any option to purchase or other
      disposition) any Common Stock or Common Stock Equivalents entitling any Person
      to acquire shares of Common Stock, at an effective price per share less than
      the
      then Conversion Price (such lower price, the “Base
      Conversion Price”
and
      such issuances collectively, a “Dilutive
      Issuance”),
      as
      adjusted hereunder (if the holder of the Common Stock or Common Stock
      Equivalents so issued shall at any time, whether by operation of purchase price
      adjustments, reset provisions, floating conversion, exercise or exchange prices
      or otherwise, or due to warrants, options or rights per share which is issued
      in
      connection with such issuance, be entitled to receive shares of Common Stock
      at
      an effective price per share which is less than the Conversion Price, such
      issuance shall be deemed to have occurred for less than the Conversion Price),
      then the Conversion Price shall be reduced to equal the Base Conversion Price.
      Such adjustment shall be made whenever such Common Stock or Common Stock
      Equivalents are issued. The Company shall notify the Holder in writing, no
      later
      than the Business Day following the issuance of any Common Stock or Common
      Stock
      Equivalents subject to this section, indicating therein the applicable issuance
      price, or of applicable reset price, exchange price, conversion price and other
      pricing terms (such notice the “Dilutive
      Issuance Notice”).
      For
      purposes of clarification, whether or not the Company provides a Dilutive
      Issuance Notice pursuant to this Section 5(b), upon the occurrence of any
      Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
      entitled to receive a number of Conversion Shares based upon the Base Conversion
      Price regardless of whether the Holder accurately refers to the Base Conversion
      Price in the Notice of Conversion. Notwithstanding
      the foregoing, no adjustment will be made hereunder in respect of (i) an Exempt
      Issuance other
      than an Exempt Issuance that involves an MFN Transaction or a Variable Rate
      Transaction for which the adjustment provisions of Section 5 shall be
      applicable, or (ii) issuances of up to, in the aggregate, the first 1,500,000
      shares of Common Stock or Common Stock Equivalents (subject to adjustment for
      reverse and forward stock splits, stock dividends, stock combinations and other
      similar transactions of the Common Stock that occur after the date of this
      Agreement) to consultants of the Company in any 12 month period pursuant to
      any
      resolution duly adopted by a majority of the non-employee members of the Board
      of Directors of the Company or a majority of the members of a committee of
      non-employee directors established for such purpose.

     

    c)  Pro
      Rata Distributions.
      If the
      Company, at any time while Debentures are outstanding, shall distribute to
      all
      holders of Common Stock (and not to Holders) evidences of its indebtedness
      or
      assets or rights or warrants to subscribe for or purchase any security, then
      in
      each such case the Conversion Price shall be determined by multiplying such
      Conversion Price in effect immediately prior to the record date fixed for
      determination of stockholders entitled to receive such distribution by a
      fraction of which the denominator shall be the VWAP determined as of the record
      date mentioned above, and of which the numerator shall be such VWAP on such
      record date less the then fair market value at such record date of the portion
      of such assets or evidence of indebtedness so distributed applicable to one
      outstanding share of the Common Stock as determined by the Board of Directors
      in
      good faith. In either case the adjustments shall be described in a statement
      provided to the Holders of the portion of assets or evidences of indebtedness
      so
      distributed or such subscription rights applicable to one share of Common Stock.
      Such adjustment shall be made whenever any such distribution is made and shall
      become effective immediately after the record date mentioned above.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    d)  Fundamental
      Transaction.
      If, at
      any time while this Debenture is outstanding, (A) the Company effects any merger
      or consolidation of the Company with or into another Person, (B) the Company
      effects any sale of its assets in one or a series of related transactions,
      (C)
      any tender offer or exchange offer (whether by the Company or another Person)
      is
      completed pursuant to which holders of Common Stock are permitted to tender
      or
      exchange their shares for other securities, cash or property, or (D) the Company
      effects any reclassification of the Common Stock or any compulsory share
      exchange pursuant to which the Common Stock is effectively converted into or
      exchanged for other securities, cash or property (in any such case, a
“Fundamental
      Transaction”),
      then
      upon any subsequent conversion of this Debenture, the Holder shall have the
      right to receive, for each Conversion Share that would have been issuable upon
      such conversion absent such Fundamental Transaction, the same kind and amount
      of
      securities, cash or property as it would have been entitled to receive upon
      the
      occurrence of such Fundamental Transaction if it had been, immediately prior
      to
      such Fundamental Transaction, the holder of one share of Common Stock (the
      “Alternate
      Consideration”).
      For
      purposes of any such conversion, the determination of the Conversion Price
      shall
      be appropriately adjusted to apply to such Alternate Consideration based on
      the
      amount of Alternate Consideration issuable in respect of one share of Common
      Stock in such Fundamental Transaction, and the Company shall apportion the
      Conversion Price among the Alternate Consideration in a reasonable manner
      reflecting the relative value of any different components of the Alternate
      Consideration. If holders of Common Stock are given any choice as to the
      securities, cash or property to be received in a Fundamental Transaction, then
      the Holder shall be given the same choice as to the Alternate Consideration
      it
      receives upon any conversion of this Debenture following such Fundamental
      Transaction. To the extent necessary to effectuate the foregoing provisions,
      any
      successor to the Company or surviving entity in such Fundamental Transaction
      shall issue to the Holder a new debenture consistent with the foregoing
      provisions and evidencing the Holder’s right to convert such debenture into
      Alternate Consideration. The terms of any agreement pursuant to which a
      Fundamental Transaction is effected shall include terms requiring any such
      successor or surviving entity to comply with the provisions of this paragraph
      (c) and insuring that this Debenture (or any such replacement security) will
      be
      similarly adjusted upon any subsequent transaction analogous to a Fundamental
      Transaction.

     

    e)  Calculations.
      All
      calculations under this Section 5 shall be made to the nearest cent or the
      nearest 1/100th of a share, as the case may be. The number of shares of Common
      Stock outstanding at any given time shall not include shares of Common Stock
      owned or held by or for the account of the Company, and the description of
      any
      such shares of Common Stock shall be considered on issue or sale of Common
      Stock. For purposes of this Section 5, the number of shares of Common Stock
      deemed to be issued and outstanding as of a given date shall be the sum of
      the
      number of shares of Common Stock (excluding treasury shares, if any) issued
      and
      outstanding.

    

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    f)  Notice
      to Holders.

    

    i.  Adjustment
      to Conversion Price.
      Whenever the Conversion Price is adjusted pursuant to any of this Section 5,
      the
      Company shall promptly mail to each Holder a notice setting forth the Conversion
      Price after such adjustment and setting forth a brief statement of the facts
      requiring such adjustment. If the Company issues a variable rate security,
      despite the prohibition thereon in the Purchase Agreement, the Company shall
      be
      deemed to have issued Common Stock or Common Stock Equivalents at the lowest
      possible conversion or exercise price at which such securities may be converted
      or exercised in the case of a Variable Rate Transaction (as defined in the
      Purchase Agreement), or the lowest possible adjustment price in the case of
      an
      MFN Transaction (as defined in the Purchase Agreement).

     

    ii.  Notice
      to Allow Conversion by Holder.
      If (A)
      the Company shall declare a dividend (or any other distribution) on the Common
      Stock; (B) the Company shall declare a special nonrecurring cash dividend on
      or
      a redemption of the Common Stock; (C) the Company shall authorize the granting
      to all holders of the Common Stock rights or warrants to subscribe for or
      purchase any shares of capital stock of any class or of any rights; (D) the
      approval of any stockholders of the Company shall be required in connection
      with
      any reclassification of the Common Stock, any consolidation or merger to which
      the Company is a party, any sale or transfer of all or substantially all of
      the
      assets of the Company, of any compulsory share exchange whereby the Common
      Stock
      is converted into other securities, cash or property; (E) the
      Company shall authorize the voluntary or involuntary dissolution, liquidation
      or
      winding up of the affairs of the Company; then, in each case, the Company shall
      cause to be filed at each office or agency maintained for the purpose of
      conversion of the Debentures, and shall cause to be mailed
      to
      the Holders at their last addresses as they shall appear upon the stock
      books of
      the
      Company, at least 20 calendar days prior to the applicable record or effective
      date hereinafter specified, a notice stating (x)
      the
      date on which a record is to be taken for the purpose of such dividend,
      distribution, redemption, rights or warrants, or if a record is not to be taken,
      the date as of which the holders of the Common Stock of record to be entitled
      to
      such dividend, distributions, redemption, rights or warrants are to be
      determined or (y) the date on which such reclassification, consolidation,
      merger, sale, transfer or share exchange is expected to become effective or
      close, and the date as of which it is expected that holders of the Common Stock
      of record shall be entitled to exchange their shares of the Common Stock for
      securities, cash or other property deliverable upon such reclassification,
      consolidation, merger, sale, transfer or share exchange; provided,
      that
      the failure to mail such notice or any defect therein or in the mailing thereof
      shall not affect the validity of the corporate action required to be specified
      in such notice. Holders are entitled to convert Debentures during the 20-day
      period commencing the date of such notice to the effective date of the event
      triggering such notice. 

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    Section
      6.
       Monthly
      Redemptions.

    

    a)  Monthly
      Redemption.
      On each
      Monthly Redemption Date, the Company shall redeem the Monthly Redemption Amount
      plus accrued but unpaid interest, the sum of all liquidated damages and any
      other amounts then owing to the Holder in respect of this Debenture. The Monthly
      Redemption Amount due on each Monthly Redemption Date shall, except as provided
      in this Section, be paid in cash. As to any Monthly Redemption and upon 20
      Trading Days’ prior written irrevocable notice, in lieu of a cash redemption
      payment the Company may elect to pay 100% of a Monthly Redemption in Conversion
      Shares based on a conversion price equal to the lesser of (i) 90% of the average
      of the 20 VWAPs immediately prior to the applicable Monthly Redemption Date
      (subject to adjustment for any stock dividend, stock split, stock combination
      or
      other similar event affecting the Common Stock during such 20 Trading Day
      period), and (ii) the Conversion Price. The Holders may convert, pursuant to
      Section 4(a), any principal amount of this Debenture subject to a Monthly
      Redemption at any time prior to the date that the Monthly Redemption Amount
      and
      all amounts owing thereon are due and paid in full. Unless otherwise directed
      by
      the Holder in the applicable Notice of Conversion, any portion of this Debenture
      converted during any 20 day period until the date the Monthly Redemption Amount
      is paid shall be first applied to the principal amount of Debenture subject
      to
      the Monthly Redemption and such Holder’s cash payment of the Monthly Redemption
      Amount on such Monthly Redemption Date shall be reduced accordingly. The Company
      covenants and agrees that it will honor all Notice of Conversions tendered
      up
      until such amounts are paid in full.

    

    b)  Redemption
      Procedure.
      The
      payment of cash and/or issuance of Common Stock, as the case may be, pursuant
      to
      a Monthly Redemption shall be made on the Monthly Redemption Date. If any
      portion of the cash payment for a Monthly Redemption shall not be paid by the
      Company by the respective due date, interest shall accrue thereon at the rate
      of
      18% per annum (or the maximum rate permitted by applicable law, whichever is
      less) until the payment of the Monthly Redemption Amount plus all amounts owing
      thereon is paid in full. Alternatively, if any portion of the Monthly Redemption
      Amount remains unpaid after such date, the Holders subject to such redemption
      may elect, by written notice to the Company given at any time thereafter,
      to invalidate ab initio such redemption, notwithstanding anything herein
      contained to the contrary. Notwithstanding anything to the contrary in this
      Section 6, the Company’s determination to redeem in cash or shares of Common
      Stock shall be applied ratably among the Holders of Debentures based upon the
      principal amount of Debentures initially purchased by each Holder, adjusted
      upward ratably in the event all of the principal amount of any Holder are no
      longer outstanding.
      The
      Holder may elect to convert the outstanding principal amount of this Debenture
      pursuant to Section 4 prior to actual payment in cash for any redemption under
      this Section 6 by fax delivery of a Notice of Conversion to the
      Company.

    

    Section
      7. Negative
      Covenants.
      So long
      as any portion of this Debenture is outstanding, the Company will not and will
      not permit any of its Subsidiaries to directly or indirectly:

     

    a)  enter
      into, create, incur, assume or suffer to exist any indebtedness or liens of
      any
      kind, on or with respect to any of its property or assets (including, without
      limitation, in respect to any of the Secured Proceeds as that terms is defined
      in the Custodial Agreement) now owned or hereafter acquired or any interest
      therein or any income or profits therefrom that is
      senior
      to, or pari passu
      with, in
      any respect, the Company’s obligations under the Debentures;

    

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    b)  amend
      its
      certificate of incorporation, bylaws or to the charter documents so as to
      adversely affect any rights of the Holder;

    

    c)  other
      than redemption payments with respect to the Company's Special Voting Rights
      Preferred Stock not to exceed $5,000 in the aggregate and repurchases of the
      Company's Series A Convertible Preferred Stock to the extent that the cash
      payments in respect of any such repurchases does not exceed, in the aggregate,
      $50,000, repay,
      repurchase or offer to repay, repurchase or otherwise acquire more than a
de
      minimis
      number
      of shares of its Common Stock or other equity or debt securities other than
      as
      to the Conversion Shares to the extent permitted or required under the
      Transaction Documents or as otherwise permitted by the Transaction Documents;
      or

    

    d)  enter
      into any agreement with respect to any of the foregoing.

     

    Section
      8. Events
      of Default.
      

    

    a)  “Event
      of Default”,
      wherever used herein, means any one of the following events (whatever the reason
      and whether it shall be voluntary or involuntary or effected by operation of
      law
      or pursuant to any judgment, decree or order of any court, or any order, rule
      or
      regulation of any administrative or governmental body):

    

    i.  any
      default in the payment of (A) the principal amount of any Debenture, or (B)
      interest (including Late Fees) on, or liquidated damages in respect of, any
      Debenture, in each case free of any claim of subordination, as and when the
      same
      shall become due and payable (whether on a Conversion Date or the Maturity
      Date
      or by acceleration or otherwise) which default, solely in the case of an
      interest payment or other default under clause (B) above, is not cured, within
      3
      Trading Days;

     

    ii.  the
      Company shall fail to observe or perform any other covenant or agreement
      contained in this Debenture or any of the other Transaction Documents (other
      than a breach by the Company of its obligations to deliver shares of Common
      Stock to the Holder upon conversion which breach is addressed in clause (xii)
      below) which failure is not cured, if possible to cure, within the earlier
      to
occur
      of
(A)
      5
Trading
      Days after notice of such default sent by the Holder or by any other
      Holder
      and
      (B)10 Trading Days after the Company shall become or should have become aware
      of
      such failure;

    

    iii.  a
      default
      or event of default (subject to any grace or cure period provided for in the
      applicable agreement, document or instrument) shall occur under (A) any of
      the
      Transaction Documents other than the Debentures, or (B) any other material
      agreement, lease, document or instrument to which the Company or any Subsidiary
      is bound;

    

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    iv.  any
      representation or warranty made herein,
      in any
      other Transaction Documents, in any written statement pursuant hereto or
      thereto, or in any other report, financial statement or certificate made or
      delivered to the Holder or any other holder of Debentures shall
      be
      untrue or incorrect in any material respect as of the date when made or deemed
      made;

    

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

     

    vi.  the
      Company or any Subsidiary shall default in any of its obligations under any
      mortgage, credit agreement or other facility, indenture agreement, factoring
      agreement or other instrument under which there may be issued, or by which
      there
      may be secured or evidenced any indebtedness for borrowed money or money due
      under any long term leasing or factoring arrangement of the Company in an amount
      exceeding $150,000, whether such indebtedness now exists or shall hereafter
      be
      created and such default shall result in such indebtedness becoming or being
      declared due and payable prior to the date on which it would otherwise become
      due and payable; 

    

    vii.  the
      Common Stock shall not be eligible for quotation on or quoted for trading on
      a
      Trading Market and shall not again be eligible for and quoted or listed for
      trading thereon within five Trading Days;

    

    viii.  the
      Company shall be a party to any Change of Control Transaction or Fundamental
      Transaction, shall agree to sell or dispose of all or in excess of 33% of its
      assets in one or more transactions (whether or not such sale would constitute
      a
      Change of Control Transaction) or shall redeem or repurchase more than a de
      minimis number of its outstanding shares of Common Stock or other equity
      securities of the Company (other than redemption
      payments with respect to the Company's Special Voting Rights Preferred Stock
      not
      to exceed $5,000 in the aggregate during
      the term of this Debenture);

    

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    ix.  a
      Registration Statement shall not have been declared effective by the Commission
      on or prior to the 180th calendar
      day after the Closing Date;

    

    x.  if,
      during the Effectiveness Period (as defined in the Registration Rights
      Agreement), the effectiveness of the Registration Statement lapses for any
      reason or the Holder shall not be permitted to resell Registrable Securities
      (as
      defined in the Registration Rights Agreement) under the Registration Statement,
      in either case, for more than 30 consecutive Trading Days or 60 non-consecutive
      Trading Days during any 12 month period; provided,
      however,
      that in
      the event that the Company
      is negotiating a merger, consolidation, acquisition or sale of all or
      substantially all of its assets or a similar transaction and in the written
      opinion of counsel to the Company, the Registration Statement, would be required
      to be amended to include information concerning such transactions or the parties
      thereto that is not available or may not be publicly disclosed at the time,
      the
      Company shall be permitted an additional 10 consecutive Trading during any
      12
      month period relating to such an event;

    

    xi.  an
      Event
      (as defined in the Registration Rights Agreement) shall not have been cured
      to
      the satisfaction of the Holder prior to the expiration of thirty days from
      the
      Event Date (as defined in the Registration Rights Agreement) relating thereto
      (other than an Event resulting from a failure of an Registration Statement
      to be
      declared effective by the Commission on or prior to the Effectiveness Date
      (as
      defined in the Registration Rights Agreement), which shall be covered by Section
      8(a)(ix); 

    

    xii.  the
      Company shall fail for any reason, other than as a result of the limitations
      set
      forth in Section 4(c) hereof, to deliver certificates to a Holder prior to
      the
      fifth Trading Day after a Conversion Date pursuant to and in accordance with
      Section 4(d) or the Company shall provide notice to the Holder, including by
      way
      of public announcement, at any time, of its intention not to comply with
      requests for conversions of any Debentures in accordance with the terms
      hereof;

    

    xiii.  the
      Company shall fail for any reason to pay in full the amount of cash due pursuant
      to a Buy-In within 5 Trading Days after notice therefor is delivered hereunder
      or shall fail to pay all amounts owed on account of an Event of Default within
      five days of the date due;

    

    xiv.  any
      Person shall breach the agreements delivered to the initial Holders pursuant
      to
      Section 2.2(a)(iv) of the Purchase Agreement.

    

    b)  Remedies
      Upon Event of Default.
      If any
      Event of Default occurs, the full principal amount of this Debenture, together
      with interest and other amounts owing in respect thereof, to the date of
      acceleration shall become, at the Holder’s election, immediately due and payable
      in cash. The aggregate amount payable upon an Event of Default shall be equal
      to
      the Mandatory Prepayment Amount. Commencing 5 days after the occurrence of
      any
      Event of Default that results in the eventual acceleration of this Debenture,
      the interest rate on this Debenture shall accrue at the rate of 18% per annum,
      or such lower maximum amount of interest permitted to be charged under
      applicable law. All Debentures for which the full Mandatory Prepayment Amount
      hereunder shall have been paid in accordance herewith shall promptly be
      surrendered to or as directed by the Company. The Holder need not provide and
      the Company hereby waives any presentment, demand, protest or other notice
      of
      any kind, and the Holder may immediately and without expiration of any grace
      period enforce any and all of its rights and remedies hereunder and all other
      remedies available to it under applicable law. Such declaration may be rescinded
      and annulled by Holder at any time prior to payment hereunder and the Holder
      shall have all rights as a Debenture holder until such time, if any, as the
      full
      payment under this Section shall have been received by it. No such rescission
      or
      annulment shall affect any subsequent Event of Default or impair any right
      consequent thereon.

    

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    Section
      9. Miscellaneous.
      

     

    a)  Notices.
      Any and
      all notices or other communications or deliveries to be provided by the Holders
      hereunder, including, without limitation, any Notice of Conversion, shall be
      in
      writing and delivered personally, by facsimile, sent by a nationally recognized
      overnight courier service, addressed to the Company, at the address set forth
      above, facsimile number 416-364-9363,
      Attn: Anna E. Gluskin, President, or
      such
      other address or facsimile number as the Company may specify for such purposes
      by notice to the Holders delivered in accordance with this Section. Any and
      all
      notices or other communications or deliveries to be provided by the Company
      hereunder shall be in writing and delivered personally, by facsimile, sent
      by a
      nationally recognized overnight courier service addressed to each Holder at
      the
      facsimile telephone number or address of such Holder appearing on the books
      of
      the Company, or if no such facsimile telephone number or address appears, at
      the
      principal place of business of the Holder. Any notice or other communication
      or
      deliveries hereunder shall be deemed given and effective on the earliest of
      (i)
      the date of transmission, if such notice or communication is delivered via
      facsimile at the facsimile telephone number specified in this Section prior
      to
      5:00 p.m. (New York City time), (ii) the date after the date of transmission,
      if
      such notice or communication is delivered via facsimile at the facsimile
      telephone number specified in this Section later than 5:00 p.m. (New York City
      time) on any date and earlier than 11:59 p.m. (New York City time) on such
      date,
      (iii) the second Business Day following the date of mailing, if sent by
      nationally recognized overnight courier service, or (iv) upon actual receipt
      by
      the party to whom such notice is required to be given.

     

    b)  Absolute
      Obligation.
      Except
      as expressly provided herein, no provision of this Debenture shall alter or
      impair the obligation of the Company, which is absolute and unconditional,
      to
      pay the principal of, interest and liquidated damages (if any) on, this
      Debenture at the time, place, and rate, and in the coin or currency, herein
      prescribed. This Debenture is a direct debt obligation of the Company and,
      pursuant to the Cusotdial Agreement dated the date hereof by and between the
      Company and the Purchasers (as defined therein), is secured by a first priority
      security interest in certain Secured Proceeds (as defined in the Custodial
      Agreement) for the benefit of the Holder. This Debenture ranks pari passu
      with all
      other Debentures now or hereafter issued under the terms set forth
      herein. 

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

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

    

    d)  Governing
      Law.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Debenture shall be governed by and construed and enforced in accordance
      with the internal laws of the State of New York, without regard to the
      principles of conflicts of law thereof. Each party agrees that all legal
      proceedings concerning the interpretations, enforcement and defense of the
      transactions contemplated by any of the Transaction Documents (whether brought
      against a party hereto or its respective affiliates, directors, officers,
      shareholders, employees or agents) shall be commenced in the state and federal
      courts sitting in the City of New York, Borough of Manhattan (the “New
      York Courts”).
      Each
      party hereto hereby irrevocably submits to the exclusive jurisdiction of the
      New
      York Courts for the adjudication of any dispute hereunder or in connection
      herewith or with any transaction contemplated hereby or discussed herein
      (including with respect to the enforcement of any of the Transaction Documents),
      and hereby irrevocably waives, and agrees not to assert in any suit, action
      or
      proceeding, any claim that it is not personally subject to the jurisdiction
      of
      any such court, or such New York Courts are improper or inconvenient venue
      for
      such proceeding. Each party hereby irrevocably waives personal service of
      process and consents to process being served in any such suit, action or
      proceeding by mailing a copy thereof via registered or certified mail or
      overnight delivery (with evidence of delivery) to such party at the address
      in
      effect for notices to it under this Debenture and agrees that such service
      shall
      constitute good and sufficient service of process and notice thereof. Nothing
      contained herein shall be deemed to limit in any way any right to serve process
      in any manner permitted by law. Each party hereto hereby irrevocably waives,
      to
      the fullest extent permitted by applicable law, any and all right to trial
      by
      jury in any legal proceeding arising out of or relating to this Debenture or
      the
      transactions contemplated hereby. If either party shall commence an action
      or
      proceeding to enforce any provisions of this Debenture, then the prevailing
      party in such action or proceeding shall be reimbursed by the other party for
      its attorneys’ fees and other costs and expenses incurred with the
      investigation, preparation and prosecution of such action or
      proceeding.

     

    e)  Waiver.
      Any
      waiver by the Company or the Holder of a breach of any provision of this
      Debenture shall not operate as or be construed to be a waiver of any other
      breach of such provision or of any breach of any other provision of this
      Debenture. The failure of the Company or the Holder to insist upon strict
      adherence to any term of this Debenture on one or more occasions shall not
      be
      considered a waiver or deprive that party of the right thereafter to insist
      upon
      strict adherence to that term or any other term of this Debenture. Any waiver
      must be in writing.

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    f)  Severability.
      If any
      provision of this Debenture is invalid, illegal or unenforceable, the balance
      of
      this Debenture shall remain in effect, and if any provision is inapplicable
      to
      any person or circumstance, it shall nevertheless remain applicable to all
      other
      persons and circumstances. If it shall be found that any interest or other
      amount deemed interest due hereunder violates applicable laws governing usury,
      the applicable rate of interest due hereunder shall automatically be lowered
      to
      equal the maximum permitted rate of interest. The Company covenants (to the
      extent that it may lawfully do so) that it shall not at any time insist upon,
      plead, or in any manner whatsoever claim or take the benefit or advantage of,
      any stay, extension or usury law or other law which would prohibit or forgive
      the Company from paying all or any portion of the principal of or interest
      on
      this Debenture as contemplated herein, wherever enacted, now or at any time
      hereafter in force, or which may affect the covenants or the performance of
      this
      Debenture, and the Company (to the extent it may lawfully do so) hereby
      expressly waives all benefits or advantage of any such law, and covenants that
      it will not, by resort to any such law, hinder, delay or impeded the execution
      of any power herein granted to the Holder, but will suffer and permit the
      execution of every such as though no such law has been enacted.

     

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

    

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

    

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

    

    

    
      	
              GENEREX
                BIOTECHNOLOGY CORPORTION

               

            
	
              By:__________________________________________

              Name:
                Mark A. Fletcher

              Title:
                Executive Vice-President, General
                Counsel

            

    

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    ANNEX
      A

    

    NOTICE
      OF CONVERSION

     

    

    The
      undersigned hereby elects to convert principal under the 6% Convertible
      Debenture of Generex Biotechnology Company, a Delaware corporation (the
“Company”),
      due
      on May 20, 2007, into shares of common stock, par value $0.001 per share (the
      “Common
      Stock”),
      of
      the Company according to the conditions hereof, as of the date written below.
      If
      shares are to be issued in the name of a person other than the undersigned,
      the
      undersigned will pay all transfer taxes payable with respect thereto and is
      delivering herewith such certificates and opinions as reasonably requested
      by
      the Company in accordance therewith. No fee will be charged to the holder for
      any conversion, except for such transfer taxes, if any.

    

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

    

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

    

    Conversion
      calculations:   

    Date
      to
      Effect Conversion:

    

    Principal
      Amount of Debentures to be Converted:

    

    Payment
      of Interest in Common Stock __ yes __ no

    If
      yes,
      $_____ of Interest Accrued on Account of Conversion at Issue.

    

    Is
      conversion to be applied against next Monthly Redemption Payment and if so,
      what
      portion? (note failure to answer deemed entire portion to be applied)
      $_________

    Number
      of
      shares of Common Stock to be issued:

     

    Signature:

     

    Name:

     

    Address:

    

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    

    Schedule
      1

    

    CONVERSION
      SCHEDULE

    

    The
      6%
      Convertible Debentures due on May 20, 2007, in the aggregate principal amount
      of
      $____________ issued by Generex Biotechnology Company. This Conversion Schedule
      reflects conversions made under Section 4 of the above referenced
      Debenture.

    

    Dated:
      

    

    

    
      	
               

              Date
                of Conversion

              (or
                for first entry, Original Issue Date)

            	
               

              Amount
                of Conversion

            	
               

              Aggregate
                Principal Amount Remaining Subsequent to Conversion

              (or
                original Principal Amount)

            	
               

              Company
                Attest

            
	 	 	 	 
	 	 	 	 
	
               

            	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 

    

    

    

     

    
      
         

      

      
        21

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00096-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00096-of-00352.parquet"}]]