Document:

AMENDMENT
      NO. 2 TO SECURITIES PURCHASE AGREEMENT
      AND

    REGISTRATION
      RIGHTS AGREEMENT

     

    

    This
      AMENDMENT NO. 2 TO SECURITIES PURCHASE AGREEMENT AND REGISTRATION RIGHTS
      AGREEMENT (this “Amendment”) is made and entered into as of September 8, 2005,
      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), 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), 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 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.  	
              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 50%
                of its
                Additional Investment Right (pertaining to an aggregate of $2,000,000
                of
                AIR Debentures and accompanying AIR Warrants) on the Business Day
                following the date of this Amendment.

            

    

     

    
      	1.1.  	
              In
                consideration for such exercise, Generex agrees that the “Conversion
                Price” under the AIR Debentures issuable upon such exercise (the
                “Amendment No. 2 AIR Debentures”) shall not equal $0.82, but shall equal
                $0.60 (subject to adjustment as set forth in the Amendment No. 2
                AIR
                Debentures). However, neither the “Conversion Price” under the Debentures
                issued to the Purchasers at the closing pursuant to the Purchase
                Agreement
                nor the “Conversion Price” of the AIR Debentures issuable upon exercise of
                the balance of the Additional Investment Rights not exercised under
                this
                Section shall be modified as a result of this
                Amendment.

            

    

     

    
      	1.2.  	
              The
                AIR Warrants issuable upon the Additional Investment Right exercise
                contemplated in this Section 1 (the “Amendment No. 2 AIR Warrants”) shall
                entitle the holder thereof to purchase a number of shares of Common
                Stock
                equal to 100% of the shares of Common Stock issuable upon the conversion
                in full (without regard to any restrictions on conversion therein
                contained) of the Amendment No. 2 AIR Debentures issuable upon the
                exercise contemplated by this Section 1 at a $0.82 Conversion Price
                (subject to adjustment as set forth therein) notwithstanding that
                the
                Conversion Price for such Amendment No. 2 AIR Debentures will equal
                $0.60
                as set forth in Section 1.1 (an aggregate of 2,439,024 shares). The
                exercise price of the AIR Warrants shall not be modified as a result
                of
                this Amendment. 

            

    

     

    
      	1.3.  	
              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. 2 Additional AIR” and collectively, the
                “Amendment No. 2 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. 2 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 $0.82 Conversion
                Price
                (subject to adjustment as set forth therein) of the Amendment No.
                2 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. 2
                Additional AIR Warrants”). The “conversion price” of the Amendment No. 2
                Additional AIR Debentures will equal $0.82, subject to adjustment
                in
                accordance with the terms thereof.

            

    

     

    
      
        
        

      

      
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      	2.  	
              Antidilution
                Provisions of Existing Securities.
                Except as specified in Section 1.1, no adjustment will be made to
                the
                conversion or exercise price of the existing Warrants and Debentures
                as a
                result of the issuance of the Amendment No. 2 AIR Debentures with
                the
                modified conversion price as contemplated by Section 1.1. Accordingly,
                each Purchaser severally agrees that the issuance of the Amendment
                No. 2
                AIR Debentures under Section 1.1 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.  	
              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. 2 Additional AIR, Amendment No. 2 AIR Debentures
                and
                Amendment No. 2 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. 2 Additional
                AIRs.

            

    

     

    
      	3.2.  	
              The
                definition of “Additional Investment Right Securities” under the Purchase
                Agreement is hereby amended to include the Amendment No. 2 Additional
                AIR
                Debentures and Amendment No. 2 Additional AIR Warrants and the Amendment
                No. 2 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.
                2 AIR Debentures, including as a result of the conversion price
                modification contemplated in Section 1.1, (b) the additional shares
                of
                Common Stock as may be issuable upon an exercise of the Amendment
                No. 2
                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 not less
                than a
                number of Registrable Securities as equals the sum of (a) in respect
                of
                the Amendment No. 2 AIR Debentures and Amendment No. 2 AIR Warrants
                issuable upon the exercise of the Additional Investment Right as
                contemplated by Section 1.1, 110% of the difference between 3,333,334
                shares and such number of shares covered by Generex’s Registration
                Statement on Form S-3, (Registration No. 333-121309) with regard
                to the
                AIR Debentures, which difference is 313,009 shares, (b) in respect
                of the
                Amendment No. 2 Additional AIR, 4,878,049 Additional Investment Right
                Shares, and (c) in respect of the present shortfall of Registrable
                Securities to those shares covered by the Registration Statement
                referenced in clause (a). 

            

    

     

    
      
        
        

      

      
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      	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 the 45th
                calendar day following the date hereof. 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:

            

    

     

    (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. 2 Additional
      AIRs, the Amendment No. 2 AIR Debentures, the Amendment No. 2 AIR Warrants,
      the
      Amendment No. 2 Additional AIR Debentures and Amendment No. 2 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.

     

     

     

    
      
        
        

      

      
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    (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. 2 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”). 

     

    (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). At a meeting of the stockholders of Generex
      duly convened and held April 5, 2005, the stockholders of Generex approved
      the
      Purchase Agreement and the transactions entered into in connection therewith,
      and approved the issuance and potential issuance by Generex of 20% or more
      of
      its then outstanding Common Stock in connection therewith at a price lower
      than
      the market price of the Common Stock at such time (the “Stockholder Approval”).
      The Stockholder Approval satisfied the requirements of Nasdaq Rule
      4350(i)(1)(D)(ii). The Stockholder Approval extends to this Amendment and the
      transactions contemplated by the Transaction Documents so that additional
      stockholder approval is not required in order for Generex to enter into and
      consummate the transactions contemplated by the Transaction Documents, including
      without limitation, modifying the conversion price of the AIR Debentures,
      issuing the additional Amendment No. 2 Underlying Shares as a result thereof
      and
      granting and issuing the Amendment No. 2 Additional AIRs and the other
      Securities (as hereinafter defined) thereunder.

     

    
      
        
        

      

      
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    (e)  Issuance
      of the Securities.
      The
      Amendment No. 2 AIR Debentures, Amendment No. 2 AIR Warrants, Amendment No.
      2
      Additional AIRs, Amendment No. 2 Additional AIR Debentures, Amendment No. 2
      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. 2 AIR Debentures, Amendment No. 2 AIR Warrants, Amendment
      No.
      2 Additional AIR Debentures and Amendment No. 2 Additional AIR Warrants, and
      as
      payment of interest in shares of Common Stock under the Amendment No. 2 AIR
      Debentures and Amendment No. 2 Additional AIR Debentures (collectively, such
      shares of Common Stock are the “Amendment No. 2 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. 2 Underlying Shares issuable upon exercise or
      conversion in full of all Amendment No. 2 AIR Warrants, Amendment No. 2
      Additional AIR Warrants, Amendment No. 2 AIR Debentures and Amendment No. 2
      Additional AIR Debentures (including Amendment No. 2 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.

     

    (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). 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.

     

     

    
      
        
        

      

      
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    (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. 

    
 

    
      
        
        

      

      
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    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, has no present intention of distributing any of such Securities and
      has
      no arrangement or understanding with any other persons regarding the
      distribution of such Securities (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). 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.

     

    (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.

     

    
      
        
        

      

      
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    (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. 2 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.

     

    (h)  Principal
      Amount of AIR Debentures.
      50% of
      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.

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (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.

            

    

     

    
      	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:

            

    

     

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    
      	(1)  	
              this
                Amendment, duly executed by
                Generex;

            

    

     

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

            

    

     

    
      	(3)  	
              an
                Amendment No. 2 AIR Warrant, registered in the name of such
                Purchaser;

            

    

     

    
      	(4)  	
              an
                Amendment No. 2 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)  	
              50%
                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.

            

    

     

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

            

    

     

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    
      	(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. 2 AIR Debentures
                in
                amounts which are disproportionate to the respective principal amounts
                outstanding on the Debentures, AIR Debentures or Amendment No. 2
                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.
                2 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 9:30 a.m. Eastern time on the Trading Day following
                the
                date hereof, issue a press release disclosing the material terms
                of the
                transactions contemplated hereby and the Closing, and file a Current
                Report on Form 8-K, attaching such press release and 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.

            

    

     

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    
      	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.

            

    

     

    
      	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)

     

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

     

    

    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:__________________________________________

              Name:

              Title:

            

    

    

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK

    SIGNATURE
      PAGE FOR PURCHASERS FOLLOWS]

     

    
      
        
        

      

      
        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:
      ________________________________________________________

    Signature
      of Authorized Signatory of Investing Entity:
      __________________________________

    Name
      of
      Authorized Signatory:
      ____________________________________________________

    Title
      of
      Authorized Signatory:
      _____________________________________________________

    Email
      Address of Authorized
      Entity:________________________________________________

    

    

    50%
      of
      the principal amount of AIR Debentures which such 

    Purchaser’s
      Additional Investment Right permits it to acquire: $______________________

    

    

    Residency
      of Investing Entity: ______________________________

    

     

    

    
      
        
        

      

      
        17NEITHER
        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: September 8, 2005

      Original
        Conversion Price (subject to adjustment herein): $0.60

      

      $500,000

      

      

      6%
        SECURED CONVERTIBLE DEBENTURE

      DUE
        DECEMBER 8 2006

      

      THIS
        DEBENTURE is one of a series of duly authorized and issued 6% Secured
        Convertible Debentures 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”),
        designated as its 6% Convertible Debenture, due December 8, 2006 (the
“Debenture(s)”).

      

      FOR
        VALUE
        RECEIVED, the Company promises to pay to ·
        or its
        registered assigns (the “Holder”),
        the
        principal sum of $500,000 on December 8, 2006 or such earlier date as the
        Debentures are required or permitted to be repaid as provided hereunder (the
        “Maturity
        Date”),
        and
        to pay interest to the Holder on the aggregate unconverted and then outstanding
        principal amount of this Debenture in accordance with the provisions hereof.
        This Debenture is subject to the following additional provisions:

      

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

      

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

      

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

      

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

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

      

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

      

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

      

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

      

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

      

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

      

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

      

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

      

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

      

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

      

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

      

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

      

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

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

      

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

      

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

      

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

      

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

      

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

      

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

      

      “Monthly
        Conversion Price”
        shall
        have the meaning set forth in Section 6(a) hereof.

      

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

      

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      “Monthly
        Redemption Amount”
        shall
        mean, as to a Monthly Redemption, $38,461.541   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 December 1, 2005 and
        ending
        on the date when there is no principal amount of this Debenture
        outstanding.

      

      “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 the date of the first issuance of the Debentures regardless of the number
        of transfers of any Debenture and regardless of the number of instruments
        which
        may be issued to evidence such 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 9, 2004, to which
        the
        Company and the original Holder are parties, as amended, modified or
        supplemented from time to time in accordance with its terms.

      

      “Purchase
        Agreement Amendment”
        means
        Amendment No. 2 to Securities Purchase Agreement and Registration Rights
        Agreement dated September 8, 2005, to which the Company and the original
        Holder
        are parties, as amended, modified or supplemented from time to time in
        accordance with its terms.

      

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

      

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

      

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

      

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

      

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

      

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

       

      

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

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

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

      

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

      

      Section
        2. Interest.

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

       

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

      

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

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

       

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

       

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

      

      Section
        3.  Registration
        of Transfers and Exchanges.
        

       

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

       

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      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. 

      

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

      

      Section
        4.  Conversion.

       

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

       

      b)  Conversion
        Price.
        The
        conversion price in effect on any Conversion Date shall be equal to $0.60
        (subject
        to adjustment herein)(the “Conversion
        Price”).

      

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      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.

       

      	d)  	
              Mechanics
                of Conversion

            

       

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

      

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

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

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

       

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

       

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

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

       

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

      

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

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

      

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

      

      Section
        5. Certain
        Adjustments.

       

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

       

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

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

       

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

       

      
        
           

        

        
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      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.

      

      
        
           

        

        
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      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. 

       

      
        
           

        

        
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      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 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).
        The
        Holders may convert, pursuant to Section 4(a), any principal amount of this
        Debenture subject to a Monthly Redemption at any time prior to the date that
        the
        Monthly Redemption Amount and all amounts owing thereon are due and paid
        in
        full. Unless otherwise directed by the Holder in the applicable Notice of
        Conversion, any portion of this Debenture converted during any 20 day period
        until the date the Monthly Redemption Amount is paid shall be first applied
        to
        the principal amount of Debenture subject to the Monthly Redemption and such
        Holder’s cash payment of the Monthly Redemption Amount on such Monthly
        Redemption Date shall be reduced accordingly. The Company covenants and agrees
        that it will honor all Notice of Conversions tendered up until such amounts
        are
        paid in full.

      

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

      

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

       

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

      

      
        
           

        

        
          15

          
            

          

        

        
           

        

      

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

      

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

      

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

       

      Section
        8. Events
        of Default.
        

      

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

      

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

       

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

      

      
        
           

        

        
          16

          
            

          

        

        
           

        

      

      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);

      

      
        
           

        

        
          17

          
            

          

        

        
           

        

      

      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.

      

      
        
           

        

        
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      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.

      

      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. 

       

      
        
           

        

        
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      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.

       

      
        
           

        

        
          20

          
            

          

        

        
           

        

      

      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

              

      

      
        
          
            18

            

          

           

        

        
          21

          
            

          

        

        
           

        

      

      ANNEX
        A

      

      NOTICE
        OF CONVERSION

      

      The
        undersigned hereby elects to convert principal under the 6% Convertible
        Debenture of Generex Biotechnology Company, a Delaware corporation (the
“Company”),
        due
        on December 8, 2006 , into shares of common stock, par value $0.001 per share
        (the “Common
        Stock”),
        of
        the Company according to the conditions hereof, as of the date written below.
        If
        shares are to be issued in the name of a person other than the undersigned,
        the
        undersigned will pay all transfer taxes payable with respect thereto and
        is
        delivering herewith such certificates and opinions as reasonably requested
        by
        the Company in accordance therewith. No fee will be charged to the holder
        for
        any conversion, except for such transfer taxes, if any.

      

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

      

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

      

      Conversion
        calculations:   

      Date
        to
        Effect Conversion:

      

      Principal
        Amount of Debentures to be Converted:

      

      Payment
        of Interest in Common Stock __ yes __ no

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

      

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

       

      Number
        of
        shares of Common Stock to be issued:

       

      Signature:

       

      Name:

       

      Address:

      

      
        
           

        

        
          22

          
            

          

        

        
           

        

      

      

      Schedule
        1

      

      CONVERSION
        SCHEDULE

      

      The
        6%
        Convertible Debentures due on December 8, 2006, in the aggregate principal
        amount of $____________ issued by Generex Biotechnology Company. This Conversion
        Schedule reflects conversions made under Section 4 of the above referenced
        Debenture.

      

      Dated:
        

      

      

      
        	
                 

                Date
                  of Conversion

                (or
                  for first entry, Original Issue Date)

              	
                 

                Amount
                  of Conversion

              	
                 

                Aggregate
                  Principal Amount Remaining Subsequent to Conversion

                (or
                  original Principal Amount)

              	
                 

                Company
                  Attest

              
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 

      

      

      

       

      
        
           

        

        
          23

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