EXHIBIT 4.1


                              SECURED FLOATING RATE
                          CONVERTIBLE SUBORDINATED NOTE

                                       OF

                         LORACA ACQUISITION CORPORATION

                                   PAYABLE TO

                            -------------------------






                               February ____, 2000






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                                TABLE OF CONTENTS

1.       DEFINITIONS.................................................2
2.       PREPAYMENT..................................................4
         2.1.     Optional and Mandatory Prepayment..................4
         2.2.     Notice of Prepayment...............................4
3.       SUBORDINATION...............................................5
         3.1.     Principal and Interest.............................5
         3.2.     Distributions of Assets............................5
         3.3.     Modification of Senior Indebtedness................6
         3.4.     No Other Indebtedness Senior to Notes..............6
         3.5.     Subrogation........................................6
         3.6.     Unconditional Obligations..........................7
         3.7.     Judicial Determination.............................7
4.       CONVERSION..................................................7
         4.1.     Conversion to Common Stock.........................7
         4.2.     Exercise of Conversion Right.......................7
         4.3.     Deemed Date of Conversion..........................7
         4.4.     No Fractional Shares...............................8
5.       MERGER, ETC. OF LORACA......................................8
6.       COVENANTS OF CORPORATION....................................9
         6.1.     Maintenance of Business............................9
         6.2.     Reporting to Holder of the Senior Indebtedness.....9
         6.3.     Notice of Defaults, Etc............................9
         6.4.     Other Notes; Payments..............................9
         6.5.     Additional Secured Indebtedness...................10
7.       DEFAULT....................................................10
         7.1.     Events of Default.................................10

         7.2.     Remedies..........................................11


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8.       CONSENT TO JURISDICTION; WAIVER OF IMMUNITIES
         AND RIGHT TO TRIAL BY JURY.................................12
         8.1.     Consent to Jurisdiction...........................12
         8.2.     Additional Service of Process.....................12
         8.3.     Waiver of Immunity................................12
9.       MISCELLANEOUS..............................................12
         9.1.     Interest Rate.....................................12
         9.2.     Notices...........................................13
         9.3.     Transfer..........................................14
         9.4.     Headings..........................................15
         9.5.     Security..........................................15
         9.6.     Governing Law.....................................15

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         THE SECURITIES  REPRESENTED  HEREBY HAVE NOT BEEN REGISTERED  UNDER THE
         SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW AND MAY
         NOT BE REOFFERED, RESOLD, CONVERTED, PLEDGED, HYPOTHECATED, CONVEYED OR
         OTHERWISE  TRANSFERRED  UNTIL (i) SUCH  SECURITIES HAVE BEEN REGISTERED
         UNDER SUCH SECURITIES ACT AND ANY APPLICABLE  STATE  SECURITIES LAW, OR
         (ii)  PERMITTED   PURSUANT  TO  THE  PROVISIONS  OF  A  CERTAIN  MERGER
         AGREEMENT,  COPIES  OF  WHICH  ARE  ON  FILE  AT  THE  OFFICES  OF  THE
         CORPORATION.


               SECURED FLOATING RATE CONVERTIBLE SUBORDINATED NOTE


No. C-1  $_________.00

     LORACA ACQUISITION CORPORATION, a corporation duly organized under the laws
of the State of Washington ("Corporation"),  for value received, hereby promises
to  pay to  ____________________.,  or  registered  assigns  (collectively,  the
"Holder"),  the  principal  sum of  ______________________  and  No/100  Dollars
($_________) in twelve (12) equal  consecutive  monthly  payments of $_________,
with the first  payment of principal  due on August 1, 2001 and each  succeeding
payment being due on the first day of each month thereafter, and to pay interest
on such outstanding principal balance from the date hereof quarterly on April 1,
July 1, October 1, and January 1 of each year,  commencing  April 1, 2000,  at a
rate equal to the prime rate as published  in The Wall Street  Journal from time
to time (or if such  rate is not so  published,  then the  rate  published  by a
comparable national financial  publication) ("Stated Rate"), until the principal
hereof is paid or made  available  for  payment,  all as  hereinafter  provided.
Interest  for each year shall be  computed  based  upon a year of three  hundred
sixty (360) days. In the event the  Corporation  does not pay any installment of
principal or interest when due, such installment shall bear interest at the rate
of five and  one-half  percentage  points per annum in excess of the Stated Rate
("Default Rate")  commencing on the 15th day after the date that notice is given
by Holder to the  Corporation  of such failure to pay when due. In the event the
Holder  accelerates  the maturity date of this Note as provided in Section , the
entire unpaid  principal  balance of this  Convertible  Note,  together with all
accrued and unpaid interest on this Convertible Note, shall bear interest at the
Default Rate from the date of  acceleration  until the entire  unpaid  principal
balance of, and all accrued and unpaid  interest  on, this  Convertible  Note is
paid in full. Payments of the principal of and interest on this Convertible Note
will be made  to the  Holder  at the  close  of  business  on the  Business  Day
immediately  preceding  the date such  payment  is due by wire  transfer  to the

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account  designated  by the  Holder,  or, in  default  of such  designation,  by
certified check mailed to the address of the Holder as such address shall appear
in the records of the Corporation.

     1. DEFINITIONS. The following words and terms when used in this Convertible
Note  shall  have the  meanings  set forth  below,  unless  the  context  or use
indicates another or different  meaning or intent,  and such definitions and the
other words and terms in this  Convertible  Note shall be equally  applicable to
the singular and plural as well as the masculine,  feminine,  and neuter, as the
context requires.  Capitalized terms used herein, but not defined herein,  shall
have the meanings ascribed to them in the Merger Agreement.

     "Business Day" means each Monday, Tuesday, Wednesday,  Thursday, and Friday
which  is not a day on which  banking  institutions  in the  city of  Lexington,
Kentucky are authorized or obligated by law or executive order to close.

     "Closing  Price" means with respect to the Common Stock on any day, (i) the
last  reported  sales price  regular way or, in case no such reported sale takes
place on such day,  the average of the  reported  closing  bid and asked  prices
regular way, in either case on the New York Stock Exchange or the American Stock
Exchange,  or (ii) if the Common  Stock is not listed or  admitted to trading on
such  exchanges,  the last reported  sales price regular way, or in case no such
reported  sale takes place on such day, the average of the reported  closing bid
and asked prices regular way, on the principal national  securities  exchange on
which the Common Stock is listed or admitted to trading,  or (iii) if the Common
Stock is not listed or admitted to trading on any national securities  exchange,
the last reported  sales price regular way in the National  Market System of the
National Association of Securities Dealers, Inc., or (iv) if the Common Stock is
not listed or admitted  to trading on any  national  securities  exchange or the
National Market System,  the average of the last reported sale price on such day
on the  over-the-counter  Bulletin  Board,  or  (v) if  none  of the  above  are
applicable, the average of the bid and asked prices for such day as furnished by
any New York Stock Exchange member firm regularly  making a market in the Common
Stock  selected  for such  purpose  by the  Board of  Directors  of  Loraca or a
committee thereof.

     "Common Stock" means Loraca's common stock, $.001 par value.

     "Conversion  Price"  means the average of the  Closing  Price of the Common
Stock for the 20 consecutive  trading days ending on the fifth day preceding the
date of the  Conversion  Notice (in the form  attached  hereto as Exhibit A), as
adjusted in the Guaranty Agreement.

     "Convertible   Note"  means  this   Secured   Floating   Rate   Convertible
Subordinated Note.

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     "Default" means any event or condition, the occurrence of which would, with
the  lapse of time or the  giving of  notice,  or both,  constitute  an Event of
Default under Section ___.

     "Encumbrance" shall mean any charge, claim, condition,  equitable interest,
lien, mortgage, option, pledge, security interest, or restriction of any kind.

     "Equity  Offering" means a private equity financing or a public offering of
equity by the Corporation.

     "Event of Default" has the meaning set forth in Section .

     "Guaranty Agreement" means the agreement attached hereto as Exhibit B.

     "Loraca" means Loraca  International,  Inc., a Nevada corporation,  and the
parent corporation of the Corporation.

     "Mandatory  Prepayment  Amount"  means  an  amount  equal  to  23%  of  the
cumulative  amount  in  excess  of  $5,000,000  which is  raised  in all  Equity
Offerings which may occur during the period there is any  outstanding  principal
payable under this Convertible Note.

     Merger Agreement" means the Agreement and Plan of Merger, dated January __,
2000, among the Corporation,  Loraca,  the Holder,  and the holders of the other
Notes, relating to, among other things, the issuance of the Notes.

     "Notes" means the Secured Floating Rate Convertible  Subordinated  Notes of
the Corporation in the aggregate principal amount of $2,300,000.

     "Person"  means,   whether  or  not   capitalized,   a  natural  person,  a
partnership,  a corporation,  an association,  a trust, a joint venture, a joint
stock company, an unincorporated organization,  or a governmental entity, or any
department, agency, or political subdivision thereof.

     "Public  Offering"  means a public  offering  of equity  securities  of the
Corporation pursuant to an effective registration statement under the Securities
Act.

     "Senior  Indebtedness"  means the  principal  of and  premium,  if any, and
unpaid  interest  on, and fees and other  amounts  payable  with respect to, the
Corporation's  $________  credit  facility  ("Line  of  Credit")  with Bank One,
Lexington,  N.A., as agent for the banks from time to time participating therein
(as the same may be amended, modified, increased, extended and/or replaced), and
any refundings,  renewals,  extensions, or deferrals of such credit facility and
for the payment of which the  Corporation  is liable  directly or  indirectly by
guarantee,  letter of credit,  obligation to purchase or acquire,  or otherwise,

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unless the terms of the instrument  evidencing such  indebtedness or pursuant to
which  such   indebtedness  is  outstanding   specifically   provide  that  such
indebtedness  is not superior in right of payment to the Notes.  Anything herein
to the contrary notwithstanding, Senior Indebtedness does not include (a) a note
or similar instrument given or any obligation  incurred or arising,  directly or
indirectly,  in  connection  with  the  acquisition  by the  Corporation  of any
business,  properties, or assets, including securities (provided,  however, that
Senior  Indebtedness  will always include any  acquisition  indebtedness  of the
Corporation  funded under the Line of Credit),  (b) any account payable or other
obligation  created or  assumed by the  Corporation  in the  ordinary  course of
business  in  connection  with the  obtaining  of  materials  or  services,  (c)
obligations under capital and other leases, and (d) the Notes.

     "Subsidiary"  means  (a) any  corporation  of  which  more  than 50% of the
outstanding  capital stock ordinarily  having voting power to elect the board of
directors of such corporation  (irrespective of whether at the time stock of any
other class or classes of such corporation shall have or might have voting power
by reason of the  happening  of any  contingency)  is at the time,  directly  or
indirectly,  owned by the  Corporation,  or (b) any  partnership  of  which  the
Corporation  owns or has the  right to  acquire  45% or more of the  outstanding
units of partnership interest or other interests of such partnership  ordinarily
having  voting  power  with  respect  to any  matter  concerning  the  business,
management, or operations of the partnership, including, without limitation, the
selection or removal of the general  partner of such  partnership or the sale or
other  disposition of all or any material part of the business or assets of such
partnership.

     "Technology  Security  Agreement" means the agreement of even date herewith
attached hereto as Exhibit D.

     2. PREPAYMENT.

     2.1. Optional and Mandatory Prepayment.  After giving notice as required in
Section __, the Corporation,  at its option, may prepay this Convertible Note at
any  time,  in whole or in part,  by  paying  the  Holder  the full  outstanding
principal  amount to be  prepaid,  together  with any  unpaid  interest  accrued
thereon to the date of such prepayment.  Subject to Sections 3, and after giving
notice as required in Section __, the Corporation  shall prepay this Convertible
Note,  at the  request  of the  Holder,  in an  amount  equal  to the  Mandatory
Prepayment Amount allocable to this Convertible Note.

     2.2. Notice of Prepayment.  Before the Corporation  shall authorize or take
steps to effect or make the prepayment,  in whole or in part, of any Convertible
Note the  Corporation  shall  cause to be mailed to the Holder at such  Holder's
last address as it shall appear in the records of the  Corporation,  at least 30
days prior to the  applicable  record or other  date  hereinafter  specified,  a
notice stating the date on which such prepayment is to be made, which date shall
be at least 30 days prior to the date such prepayment is to occur.

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     3. SUBORDINATION.

     3.1. Principal and Interest.  The Corporation covenants and agrees, and the
Holder  likewise  covenants  and  agrees,  that no payment  shall be made by the
Corporation on account of principal of or interest on this Convertible  Note, or
otherwise,  if (a) there shall have  occurred  and be  continuing a default with
respect to the Senior  Indebtedness that would or would with the passage of time
permit the acceleration  thereof, or if there would be a default with respect to
the  Senior  Indebtedness  caused  by any  payment  on or with  respect  to this
Convertible  Note,  or (b) in the event any such  default  is the  subject  of a
judicial  proceeding,  unless and until such  default or Event of Default  shall
have  been  cured or  waived or shall  have  ceased  to exist or such  notice is
withdrawn or found by a court of competent jurisdiction to be invalid.

     3.2.  Distributions  of Assets.  Upon any  acceleration of the principal of
this  Convertible  Note or any payment by the  Corporation  or  distribution  of
assets of the Corporation of any kind or character,  whether in cash,  property,
or securities,  to creditors of the Corporation  upon any dissolution or winding
up or liquidation or  reorganization  of the Corporation,  whether  voluntary or
involuntary,  or in  bankruptcy,  insolvency,  receivership,  or  other  similar
proceedings, all amounts due or to become due upon all Senior Indebtedness shall
first be paid in full in money or money's  worth,  or payment  thereof  provided
for,  before any payment is made on account of the  principal  of or interest on
this  Convertible Note and upon such dissolution or winding up or liquidation or
reorganization, any payment by the Corporation, or distribution of assets of the
Corporation of any kind or character,  whether in cash, property, or securities,
to which the Holder would be entitled except for the provisions hereof, shall be
paid by the Corporation or by any receiver,  trustee in bankruptcy,  liquidating
trustee,  agent, or other person making such payment or distribution directly to
the   holder   of  the   Senior   Indebtedness   or  their   representative   or
representatives,  or to the trustee or trustees under any indenture  pursuant to
which any instruments  evidencing any Senior  Indebtedness may have been issued,
as their  respective  interests may appear,  to the extent  necessary to pay the
Senior  Indebtedness  in full in money or money's worth,  after giving effect to
any  concurrent  payment  or  distribution  to or for the  holder of the  Senior
Indebtedness, before any payment or distribution is made to the Holder.

     Notwithstanding  the  foregoing,  in  the  event  that  any  payment  of or
distribution of assets of the  Corporation of any kind or character,  whether in
cash, property, or securities, prohibited by the foregoing, shall be received by
the Holder  before all Senior  Indebtedness  is paid in full in money or money's
worth,  or  provision  is made for such  payment,  then and in such  event  such
payment or  distribution  shall be paid over or  delivered  to the holder of the
Senior Indebtedness or their representative or representatives,  for application
to the  payment  of all  Senior  Indebtedness  remaining  unpaid  to the  extent
necessary  to pay all Senior  Indebtedness  in full in money or  money's  worth,
after giving  effect to any  concurrent  payment or  distribution  to or for the

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holder  of the  Senior  Indebtedness  (but  subject  to the  power of a court of
competent jurisdiction to make other equitable provision,  which shall have been
determined by such court to give effect to the rights  conferred herein upon the
Senior  Indebtedness  and the holders  thereof with respect to this  Convertible
Note or the Holder  hereof by a lawful plan or  reorganization  or  readjustment
under applicable bankruptcy law).

     3.3.  Modification  of  Senior  Indebtedness.  The  holder  of  the  Senior
Indebtedness  may, at any time and from time to time,  but only with the consent
of and notice to the Holder, without incurring  responsibility to the Holder and
without  impairing or releasing the  obligations  of the Holder to the holder of
the Senior  Indebtedness:  (a) change the manner,  place, or terms of payment or
change or extend the time of payment of, or renew or alter Senior  Indebtedness,
or  otherwise  amend  in  any  manner  Senior  Indebtedness  or  any  instrument
evidencing  the same or any agreement  under which such Senior  Indebtedness  is
outstanding;  (b) sell,  exchange,  release, or otherwise deal with any property
pledged,  mortgaged, or otherwise securing Senior Indebtedness;  (c) release any
person liable in any manner for the collection of Senior  Indebtedness;  and (d)
exercise or refrain from  exercising any rights against the  Corporation and any
other person; provided, the Corporation shall promptly give notice to the Holder
of each and every action of the holder of the Senior  Indebtedness  described in
this  Section , and,  further  provided,  the amount of the Senior  Indebtedness
outstanding  shall not at any time exceed the sum of $____________  [NOTE:  Same
amounts as listed on page 4].

     3.4.  No Other  Indebtedness  Senior to Notes.  The  Corporation  shall not
permit any of its  indebtedness  to be senior to the Notes other than the Senior
Indebtedness.

     3.5.  Subrogation.  Subject to the payment in full of all amounts  then due
(whether by acceleration of the maturity thereof or otherwise) on account of the
principal of,  premium,  if any, and interest on all Senior  Indebtedness at the
time outstanding,  the Holder shall be subrogated to the rights of the holder of
the Senior Indebtedness to receive payments or distributions of cash,  property,
or securities of the Corporation applicable to the Senior Indebtedness until the
principal of and interest on this  Convertible  Note shall be paid in full; and,
for the  purposes  of such  subrogation,  no payments  or  distributions  by the
Corporation to the holder of the Senior Indebtedness of any cash,  property,  or
securities  to which the Holder  would be  entitled  except  for the  provisions
hereof,  and no payments over pursuant to the provisions hereof to the holder of
the Senior  Indebtedness by the Holder,  shall, as between the Corporation,  its
creditors  other than  holder of the Senior  Indebtedness,  and the  Holder,  be
deemed  to be a  payment  by the  Corporation  to or on  account  of the  Senior
Indebtedness. It is understood that the foregoing provisions of this Convertible
Note are,  and are  intended  to be,  solely  for the  purpose of  defining  the
relative  rights  of the  Holder on the one hand and the  holder  of the  Senior
Indebtedness on the other hand.

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     3.6. Unconditional Obligations.  Nothing contained in this Convertible Note
is intended to or shall impair,  as among the  Corporation,  its creditors other
than the holder of the Senior  Indebtedness,  and the Holder,  the obligation of
the Corporation,  which is absolute and unconditional,  to pay to the Holder the
principal  of and interest on this  Convertible  Note as and when the same shall
become due and payable in accordance  with its terms, or is intended to or shall
affect the relative rights of the Holder and creditors of the Corporation  other
than the holder of the Senior  Indebtedness,  nor shall anything  herein prevent
the Holder from  exercising all remedies  otherwise  permitted by applicable law
upon Default under this Convertible Note.

     3.7. Judicial Determination.  Upon any payment or distribution of assets of
the  Corporation  referred to herein,  the Holder shall be entitled to rely upon
any order or decree made by any court of  competent  jurisdiction  in which such
dissolution, winding up, liquidation, or reorganization proceedings are pending,
or certificate  of the receiver,  trustee in  bankruptcy,  liquidating  trustee,
agent,  or other person  making such payment or  distribution,  delivered to the
Holder,  for the purpose of ascertaining  the persons entitled to participate in
such distribution,  the holder of the Senior Indebtedness and other indebtedness
of the Corporation, the amount thereof or payable thereon, the amount or amounts
paid or distributed thereon and all other facts pertinent thereto.

     4. CONVERSION.

     4.1.  Conversion to Common Stock.  Subject to and upon  compliance with the
provisions of this  Convertible  Note,  the Holder is entitled,  at the Holder's
option,  at any  time on or  before  the  payment  in  full  of all  outstanding
principal  payable under this Convertible Note, to convert this Convertible Note
into fully paid and nonassessable shares of Common Stock at the Conversion Price
and as  provided  herein and in the  Guaranty  Agreement  of even date  herewith
between the Holder and Loraca.

     4.2.  Exercise of Conversion  Right. To exercise the conversion  privilege,
the  Holder  must  surrender  this  Convertible  Note  at  the  offices  of  the
Corporation in Seattle, Washington,  accompanied by notice to the Corporation at
such office,  that the Holder elects to convert all or part of this  Convertible
Note. Such notice shall be in substantially  the form attached hereto as Exhibit
A. All  accrued  but  unpaid  interest  through  the  Business  Day  immediately
preceding the date of such  conversion  with respect to the principal  amount of
this  Convertible Note being converted shall be payable upon the next succeeding
interest  payment date,  unless the entire  principal amount of this Convertible
Note is converted,  in which case all accrued but unpaid interest  thereon shall
be payable upon conversion.

     4.3. Deemed Date of Conversion.  This  Convertible  Note shall be deemed to
have been  converted  immediately  prior to the close of  business on the day of
surrender  of this  Convertible  Note  for  conversion  in  accordance  with the

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foregoing provisions and at such time the rights of the Holder (as a noteholder)
shall  cease,  and the person or persons  entitled to receive  the Common  Stock
issuable  upon  conversion  shall be  treated  for all  purposes,  to the extent
permitted  by law, as the record  holder or holders of such  Common  Stock as of
such day. The  Convertible  Note delivered for conversion  shall be delivered to
the Corporation to be canceled.  In the event the entire  principal  balance due
hereunder  is  not  converted,  as  promptly  as  practicable  on or  after  the
conversion  date,  the  Corporation  shall issue a new  Convertible  Note to the
Holder for the then  outstanding  principal  balance due under this  Convertible
Note,  which new Convertible  Note shall be identical to this  Convertible  Note
except for the principal amount thereof.

     4.4. No Fractional  Shares.  No fractional  shares of Common Stock shall be
issued upon conversion of this Convertible Note. Any fractional shares of Common
Stock which would otherwise be issuable upon conversion of this Convertible Note
(or  specified  portions  thereof) will be paid in cash to the Holder or, in the
event less than the entire outstanding principal balance is converted,  added to
the principal balance of the new Convertible Note.

     5. MERGER, ETC. OF LORACA.

     In the event of any proposed (a) consolidation of Loraca with, or merger of
Loraca into, any other  corporation,  or (b) merger of another  corporation into
Loraca  (other  than a merger  which  does not  result in any  reclassification,
conversion, exchange, or cancellation of outstanding shares of Common Stock), or
(c) share exchange,  sale, or transfer of all or substantially all of the assets
of Loraca,  which would result in the shareholders of Loraca not controlling the
surviving entity  ("Merger")  Loraca shall give notice to Holder no less than 30
days prior to the closing of the proposed  Merger,  and shall  include with such
notice detailed information concerning the proposed Merger. Holder shall have 10
days to (a) give the Holder's consent to the Merger,  which consent shall not be
unreasonably  withheld, or (b) to declare the outstanding principal and interest
on this Convertible Note to be immediately due and payable.  Failure to give the
notice  shall be deemed a consent to the Merger.  If  Holder's  consent is given
Loraca shall require the  corporation  formed by or which  participates  in such
Merger,  to  execute  and  deliver  to  the  Holder  an  agreement   ("Successor
Agreement")  providing that the Holder shall have the right  thereafter,  during
the period there is any outstanding  principal due on this Convertible  Note, to
convert all or part of the outstanding  principal on this  Convertible Note into
the kind and amount of securities, cash, and other property receivable upon such
consolidation,  merger,  share  exchange,  sale,  or transfer by a holder of the
number of shares of Common  Stock into which  this  Convertible  Note might have
been converted  immediately prior to such Merger. Any Successor  Agreement shall
provide for adjustments to protect against dilution for events subsequent to the
effective date of such consolidation,  merger, share exchange, sale, or transfer
which shall be as nearly  equivalent as may be  practicable  to the  adjustments
provided  for  herein.  The above  provisions  of this  Convertible  Note  shall

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similarly  apply to  successive  Mergers.  However,  for the avoidance of doubt,
notwithstanding  anything contained herein to the contrary,  no adjustment shall
be made to the  Conversion  Price  in the  event  of a  merger,  stock  or asset
transaction  or share  exchange  with any third party which does not result in a
reclassification,  conversion,  or  cancellation  of the  outstanding  shares of
Common Stock.

     6. COVENANTS OF CORPORATION.

     6.1.  Maintenance  of Business.  Corporation  shall maintain its existence,
rights and privileges.  Corporation  shall maintain its rights to do business in
each state  where it is  presently  conducting  business  and where it  conducts
business  after  the  date  hereof,  to  the  extent  commercially   reasonable.
Corporation  shall  maintain  its right and  privilege  to do business  with the
Federal  National  Mortgage   Association,   the  Government  National  Mortgage
Association,  the Federal  Housing  Authority,  the Federal  Home Loan  Mortgage
Corporation,  the Housing and Urban Development Department,  the Federal Housing
Authority and the Veterans Administration.  The Corporation shall not materially
change the nature of the  business  in which it is  presently  engaged if such a
change  would  be  materially  adverse  to  the  business,  operations,  assets,
liabilities, financial condition or prospects of the Corporation.

     6.2. Reporting to Holder of the Senior Indebtedness.  The Corporation shall
promptly  send to the  holders  of all Notes a copy of the  quarterly  and other
reports it sends to the holder of the Senior Indebtedness.

     6.3. Notice of Defaults,  Etc. The  Corporation  will deliver to the Holder
promptly,  but in any event within 10 Business  Days of  discovery  thereof by a
responsible officer of the Corporation,  notice of, and the steps being taken by
the Corporation  with respect to, any Default or any of the events  specified in
Section , whether or not there has been satisfied any  requirement  specified in
connection with such event in Section for the giving of notice,  or the lapse of
time, or the happening of any further  condition,  event,  or act.  Further,  in
addition  to  the  requirements  set  forth  in  the  preceding  sentence,   the
Corporation  shall  give  prompt  notice to the  Holder of any fact known to the
Corporation  which would  prohibit  the making of any payment of moneys to or by
the Corporation in respect of this Convertible Note.

     6.4. Other Notes;  Payments.  The Notes were issued under and in accordance
with,  are  subject  to the terms and  conditions  of,  and are in all  respects
equally and ratably entitled to the benefits of the Merger Agreement.  Until the
Corporation has paid in full all obligations owed to the Holder, the Corporation
agrees that if it makes any payment of the interest owed or principal amount on,
or any  distribution  of assets  of the  Corporation  of any kind or  character,
whether in cash,  property,  or  securities,  with respect to, any of the Notes,
then the Corporation  shall make a proportionate  payment or distribution to the
Holder.

                                       9
<PAGE>

     6.5. Additional Secured Indebtedness.  The Corporation shall not permit any
of its assets,  properties  or  interests  in  properties  ("Properties")  to be
subject  to any  Encumbrance  except  (a) the  Properties  securing  the  Senior
Indebtedness  and (b)  Encumbrances  incurred in connection with the acquisition
of, and securing, Properties acquired by the Corporation after the date hereof.

     7. DEFAULT.

     7.1.  Events of Default.  Any of the following shall be an Event of Default
under this Convertible Note:

     (a) Failure by the Corporation to pay when due any principal or interest on
this  Convertible  Note or any of the other Notes and such  failure has not been
remedied  within 45 days after  notice is received by the  Corporation  from the
Holder or the other holder(s) of the Note (or Notes).

     (b) Any material  representation  or warranty  made by the  Corporation  in
connection with this  Convertible Note or any of the other Notes shall have been
untrue, misleading, or incomplete in any material respect when made.

     (c) The  Corporation  violates or fails to observe,  or is in default  with
respect to, any  material  covenant or agreement  contained in this  Convertible
Note or any of the other Notes and such  violation  shall not have been cured or
remedied,  if subject to cure or remedy within such period, within 30 days after
notice  thereof  is  received  by the  Corporation  from the Holder or the other
holder(s) of the Note(s).

     (d) There is an Event of Default  under any of the Guaranty  Agreements  or
the  Technology  Security  Agreement  between Loraca and the Holder or any other
holder of the Notes.

     (e) The  Corporation  makes an assignment for the benefit of its creditors,
or admits in writing its  inability  to pay its debts  generally  as they become
due, or  consents to the  appointment  of a  receiver,  conservator,  custodian,
liquidator,  or trustee of the Corporation or any  Subsidiary,  or of all or any
part of the property of any of them.

     (f) The  Corporation  files a petition in voluntary  bankruptcy  or seeking
relief  under any  provision  of any  bankruptcy,  reorganization,  arrangement,
insolvency,  readjustment  of  debt,  dissolution,  or  liquidation  law  of any
jurisdiction,  whether now or hereafter in effect,  or consents to the filing of
any petition against it under any such law.

     (g) A  receiver,  conservator,  custodian,  liquidator,  or  trustee of the
Corporation,  or of all or any of the property of the Corporation,  is appointed
by court  order and such order  remains  in effect for more than 90 days;  or an
order for relief is entered  under the federal  bankruptcy  laws with respect to

                                       10
<PAGE>

the  Corporation;  or  any of  the  material  property  of  the  Corporation  is
sequestered  by court  order and such  order  remains in effect for more than 90
days;  or a petition is filed  against  the  Corporation  under the  bankruptcy,
reorganization,  arrangement,  insolvency, readjustment of debt, dissolution, or
liquidation law of any jurisdiction,  whether now or hereafter in effect, and is
not dismissed within 90 days after such filing.

     (h)  Any  order  is  entered  in any  proceeding  against  the  Corporation
decreeing the dissolution or split-up of the Corporation, and such order remains
unstayed and in effect for 90 days.

     (i) There  shall  occur a default or the  happening  of any event under the
Senior Indebtedness, and the holder of the Senior Indebtedness shall as a result
thereof  have the right to  accelerate  the maturity of in excess of $400,000 of
such Senior Indebtedness.

     7.2. Remedies.

     (a) If any Event of Default  described in Sections , , , or shall occur and
be continuing,  this  Convertible  Note and interest  accrued  thereon,  and all
liabilities  of  the  Corporation  hereunder,  shall  thereupon  become  and  be
immediately  due and payable without  presentment,  demand,  protest,  notice of
intent to accelerate, notice of acceleration, or other notice of any kind to the
Corporation, all of which are hereby waived. If any other Event of Default shall
occur and be continuing,  the Holder may, by notice to the Corporation,  declare
this Convertible Note and interest accrued hereupon,  and all liabilities of the
Corporation  hereunder,  to be immediately  due and payable,  and the same shall
become and be immediately due and payable without presentment,  demand, protest,
notice of intent to accelerate,  or other notice of any kind to the Corporation,
all of which are hereby waived.

     (b) In the  event  this  Convertible  Note is  placed  in the  hands  of an
attorney  for  collection  or for  enforcement,  or in the event that the Holder
incurs  any costs  incident  to the  collection  of any  indebtedness  evidenced
hereby,  the  Corporation  shall pay all reasonable  attorneys'  fees, all court
costs and the reasonable costs of any other collection  efforts.  Forbearance to
exercise  the remedies set forth herein with respect to any failure or breach of
the  Corporation  shall not  constitute  a waiver  by the  Holder of any of such
remedies.

     (c) From time to time, without affecting the obligations of the Corporation
or its legal  representatives,  successors,  or assigns  to pay the  outstanding
principal  balance of this  Convertible  Note and observe the  covenants  of the
Corporation contained herein and in the documents and instrument related hereto,
without  giving  notice to or obtaining the consent of the  Corporation,  or its
legal representatives,  successors or assigns, and without liability on the part
of the Holder, the Holder may, at the option of the Holder,  extend the time for

                                       11

<PAGE>

payment of said outstanding  principal  balance or any part thereof,  reduce the
payments  thereon,  release anyone liable on any of said  outstanding  principal
balance, accept a renewal of this Convertible Note, modify the terms and time of
payment  of said  outstanding  principal  balance  or join in any  extension  or
subordination agreement, and agree in writing with the Corporation to modify the
rate of interest or period of  amortization of this  Convertible  Note or change
the  amount of the  payments  hereunder.  No one or more of such  actions  shall
constitute a novation or otherwise affect or impair the  indebtedness  evidenced
hereby.

     8.  CONSENT TO  JURISDICTION;  WAIVER OF  IMMUNITIES  AND RIGHT TO TRIAL BY
JURY.

     8.1. Consent to Jurisdiction.  Any suit,  action or proceeding  against the
Corporation with respect to this Convertible Note or any judgment entered by any
court in respect  thereof,  may be brought in the courts of the  Commonwealth of
Kentucky,  located in Fayette County or in the United States  District Court for
the Eastern District of Kentucky as the Holder, in the Holder's sole discretion,
may elect and the Corporation  hereby submits to the non-exclusive  jurisdiction
of such courts for the purpose of any such suit,  action or  proceeding  in said
court if  given in  writing  in  accordance  with  the  terms of  Section  . The
Corporation  hereby  irrevocably  waives  any  objections  which  it may  now or
hereafter have to the laying of venue of any suit, action or proceeding  arising
out of or relating to this Convertible Note brought in the courts located in the
Commonwealth of Kentucky,  Fayette County or in the United States District Court
for the Eastern District of Kentucky,  and hereby further irrevocably waives any
claim that any such  suit,  action or  proceeding  brought in any such court has
been brought in an inconvenient forum.

     8.2.  Additional  Service of Process.  Nothing in this Section shall affect
the right of the Holder to serve legal process in any other manner  permitted by
law or affect the right of the Holder to bring any action or proceeding  against
the Corporation or its property in the courts of any other jurisdictions.

     8.3.  Waiver  of  Immunity.  To the  extent  that  the  Corporation  has or
hereafter  may acquire any immunity from  jurisdiction  of any court or from any
legal process (whether through service or notice,  attachment prior to judgment,
attachment in aid of execution,  execution or otherwise)  with respect to itself
or its property,  the  Corporation  hereby  irrevocably  waives such immunity in
respect of its obligations under this Convertible Note.

     9. MISCELLANEOUS.

     9.1.  Interest Rate.  Regardless of any other provision of this Convertible
Note or in any documents  guaranteeing  or securing  payment hereof or otherwise
relating  hereto,  no Holder of this  Convertible Note shall ever be entitled to
receive,  collect,  reserve,  or  apply as  interest  on the  principal  of this

                                       12

<PAGE>

Convertible Note any amount in excess of the maximum rate of interest  allowable
under  applicable law or  regulations,  as amended or enacted from time to time,
and if any Holder of this Convertible Note ever receives,  collects,  or applies
as interest hereon any such excess, such amount that would be excessive interest
shall be deemed a partial  prepayment of principal and shall be treated as such,
and if the principal is paid in full,  any remaining  excess shall  forthwith be
paid to the Corporation.  In determining whether the interest paid or payable on
the principal  outstanding  under this Convertible Note exceeds the maximum rate
of interest  allowable  under  applicable  law, the  Corporation  and the Holder
shall, to the maximum extent  permitted under  applicable law, (a)  characterize
any  non-principal  payment  as an  expense,  fee,  or  premium  rather  than as
interest,  (b) exclude  voluntary  prepayments and the effects thereof,  and (c)
spread the total  amount of interest  throughout  the entire  contemplated  term
hereof; provided, however, that if the indebtedness evidenced hereby is paid and
performed  in full  prior  to the end of the full  actual  period  of  existence
thereof, and if the interest received for the actual period of existence thereof
exceeds the maximum rate of interest  allowable under applicable law, the Holder
shall  either  apply or refund to the  Corporation  the amount of such excess as
herein  provided,  and in such  event the  Holder  shall not be  subject  to any
penalties  provided  by any  laws  for  contracting  for,  charging,  reserving,
collecting,  or  receiving  interest in excess of the  maximum  rate of interest
allowable under applicable law.

     9.2. Notices. All notices,  requests,  consents,  claims, demands and other
communications  hereunder  shall be in writing  and shall be deemed to have been
duly given if (a) mailed (registered or certified mail, postage prepaid,  return
receipt requested) or (b) personally  delivered against a written receipt or (c)
delivered to a reputable  express  messenger  (such as Federal  Express,  United
Parcel Service or DHL Courier) as follows:


                  If to Holder:             ________________
                                            ________________
                                            ________________
                                            ________________

         With a copy (which shall not
         constitute notice) to:             ________________
                                            ________________
                                            ________________
                                            ________________

                  If to Corporation:        Loraca Acquisition Corporation.
                                            c/o Loraca International, Inc.
                                            6 CenterPointe Drive, Suite 360
                                            Lake Oswego, Oregon 97035
                                            Attn:  Bernard A. Guy

                                       13
<PAGE>

         With a copy (which shall not
         constitute notice) to:             Mark T. Lee
                                            Gray Cary Ware & Freidenrich
                                            4365 Executive Drive, Suite 1600
                                            San Diego, CA  92121

or to such  other  address  as any party  may have  furnished  to the  others in
writing in accordance  herewith,  except that notices of change of address shall
only be effective upon receipt.

     9.3. Transfer.

     (a) In the event of prepayment or  conversion of this  Convertible  Note in
part only, a new Convertible  Note for the unpaid or unconverted  portion hereof
will  be  issued  in the  name  or  names  requested  by  the  Holder  upon  the
cancellation hereof.

     (b) The transfer of this  Convertible  Note is  registrable on the books of
the  Corporation  upon surrender of this  Convertible  Note for  registration of
transfer at the offices of the Corporation in Seattle, Washington, duly endorsed
by, or accompanied by a written  instrument of transfer in form  satisfactory to
the Corporation  duly executed by, the Holder or its attorney duly authorized in
writing,  and  thereupon  one  or  more  new  Convertible  Notes  of  authorized
denominations,  and for the same aggregate  principal amount,  will be issued to
the designated transferee or transferees.

     (c) Prior to the due presentment of this  Convertible Note for registration
or transfer,  the  Corporation  and any agent of the  Corporation  may treat the
person in whose name this Convertible Note is registered as the owner hereof for
all purposes,  whether or not this Convertible Note be overdue,  and neither the
Corporation nor any such agent shall be affected by notice to the contrary.

     (d)  Notwithstanding  any provision  herein to the  contrary,  neither this
Convertible Note nor the shares of Common Stock into which it is convertible may
be transferred or otherwise  assigned unless the Corporation is provided with an
opinion of counsel  reasonably  acceptable to the Corporation  (the  Corporation
acknowledges that Greenebaum, Doll & McDonald PLLC is acceptable), or such other
assurances as it may reasonably  require,  that such transfer or assignment does
not violate the  registration  provisions  of the  Securities  Act or applicable
state securities laws. In addition,  the Holder  understand and agrees that none
of the shares of Common Stock into which this  Convertible  Note is  convertible
have been or will be registered  under the Securities Act or the securities laws
of any state and that they may be sold or  otherwise  disposed of only in one or
more  transactions  registered  under the Securities Act and, where  applicable,

                                       14
<PAGE>

such laws or as to which an exemption from the registration  requirements of the
Securities  Act and,  where  applicable,  such laws are  available.  The  Holder
understands and agrees that each certificate representing shares of Common Stock
shall bear the following legend:

         "THE SHARES  REPRESENTED BY THIS  CERTIFICATE  HAVE NOT BEEN REGISTERED
         UNDER THE SECURITIES  ACT OF 1933 OR THE  SECURITIES  LAWS OF ANY STATE
         AND MAY NOT BE SOLD OR  OTHERWISE  DISPOSED  OF EXCEPT  PURSUANT  TO AN
         EFFECTIVE  REGISTRATION  STATEMENT UNDER SUCH ACT AND APPLICABLE  STATE
         SECURITIES  LAWS  OR  AN  APPLICABLE   EXEMPTION  TO  THE  REGISTRATION
         REQUIREMENTS OF SUCH ACT OR SUCH LAWS."

     9.4. Headings.  The Section headings contained in this Convertible Note are
for  reference  purposes  only and shall not  affect in any way the  meaning  or
interpretations of this Convertible Note.

     9.5. Security.  Payments of principal and interest on this Convertible Note
are secured pursuant to the terms of the Technology Security Agreement.

     9.6.  Governing  Law.  This  Convertible  Note  shall  be  governed  by and
construed  and  enforced  in  accordance  with the laws of the  Commonwealth  of
Kentucky,  without  regard to its  conflict of law rules.  No party hereto shall
commence  any  litigation  against  another  party  hereto  arising  out of this
Convertible Note except in a court located in the Commonwealth of Kentucky.  All
parties hereby consent to jurisdiction over it by such a court.

     IN  WITNESS  WHEREOF,  this  Convertible  Note has been duly  executed  and
delivered by the duly  authorized  officer of the  Corporation on the date first
above written.


                                             LORACA ACQUISITION CORPORATION


                                             By:____________________________
                                             Title:_________________________

                                                       ("Corporation")

                                       15

<PAGE>

                                    EXHIBIT A

                            FORM OF CONVERSION NOTICE


TO LORACA ACQUISITION CORPORATION AND LORACA INTERNATIONAL, INC.:

     The undersigned Holder of the attached  Convertible Note hereby assigns the
Convertible Note to Loraca Acquisition Corporation and irrevocably exercises the
option to convert  such  Convertible  Note into shares of Common Stock of Loraca
International,  Inc. ("Loraca") in accordance with the terms of such Convertible
Note and the  Guaranty  Agreement  with  Loraca,  and directs that the shares of
Loraca's  Common Stock issuable and  deliverable  upon the  conversion,  and any
portion of the Convertible Note  representing  any unconverted  principal amount
thereof,  be issued and delivered to the  undersigned  Holder unless a different
name has been indicated  below.  The principal  amount of the  Convertible  Note
being converted is $____________ and the Conversion Rate is $_________.


                                             _________________________________

                                             Fill in for  registration of shares
                                             of  Common  Stock  and  Convertible
                                             Note if to be issued otherwise than
                                             to the registered Holder.


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 (including zip code number)

SOCIAL SECURITY OR OTHER
TAXPAYER IDENTIFYING NUMBER

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