<PAGE>
EXHIBIT 10.4


THIS NOTE AND THE SECURITIES  INTO WHICH THIS NOTE IS CONVERTIBLE  HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,  OR THE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR IN ANY OTHER  JURISDICTION.  THE SECURITIES
REPRESENTED HEREBY MAY NOT BE OFFERED,  SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE  REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES
LAWS UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THOSE LAWS.


                       CONVERTIBLE SECURED PROMISSORY NOTE
                       -----------------------------------

Date: March __, 2003                                                  $_________


         FOR VALUE RECEIVED, P-COM, INC., a corporation organized under the laws
of  the  State  of  Delaware   (hereinafter   called  the   "Borrower"   or  the
"Corporation"),  hereby promises to pay to the order of ____________________,  a
____________________, or its registered assigns (individually, the "Holder", and
collectively  with the  holders of all other  notes of same like and tenor,  the
"Holders"),  the sum of  _______________________($_________)  on March __,  2004
[First  Anniversary of Issue Date] (the "Scheduled  Maturity Date"),  and to pay
interest on the unpaid principal balance hereof at a rate determined as follows:
(a) during the period from the date hereof (the "Issue  Date")  until  September
__, 2003,  interest shall accrue at the rate of ten percent (10%) per annum, and
(b) thereafter,  interest shall accrue at the rate of thirteen percent (13%) per
annum (in each case, except as otherwise provided herein). Interest shall accrue
on the unpaid  principal  balance  hereof  from the Issue Date until the same is
paid, whether at maturity, or upon prepayment, repayment, or otherwise. Interest
shall  be  calculated  based on a 365 day year  and  shall  be  payable  in cash
quarterly in arrears on June __, 2003, September __, 2003, December __, 2003 and
the Scheduled  Maturity  Date. The principal  amount  hereof,  together with all
accrued and unpaid interest  thereon,  shall be due and payable on the Scheduled
Maturity  Date.  All  payments  of  principal  and  interest  (to the extent not
converted  in  accordance  with the  terms  hereof)  shall  be made in,  and all
references herein to monetary  denominations shall refer to, lawful money of the
United  States of America.  All  payments  shall be made at such  address as the
Holder  shall  have given or shall  hereafter  give to the  Borrower  by written
notice made in accordance with the provisions of this Note.

         The term "Note" and all references  thereto,  as used  throughout  this
instrument,  shall mean this  instrument  as  originally  executed,  or if later
amended or supplemented,  then as so amended or supplemented. This Note is being
issued by the  Borrower  along with  similar  convertible  notes  designated  as
Convertible  Secured Promissory Notes (the "Other Notes" and, together with this
Note, the "Notes") pursuant to that certain Securities Purchase Agreement, dated
as of the date hereof,  between the Borrower  and the  signatories  thereto (the
"Securities Purchase Agreement"). The obligations under the Notes are secured as
provided in a Security  Agreement,  dated as of the date hereof, by the Borrower

<PAGE>

in favor of the Holders of the Notes (the "Security Agreement").  The Notes, the
Securities  Purchase  Agreement,  the Security  Agreement,  the Warrants  issued
pursuant  to  the  Securities   Purchase  Agreement  (the  "Warrants")  and  the
Registration Rights Agreement, dated as of the date hereof, between the Borrower
and the parties thereto (the  "Registration  Rights Agreement") are collectively
referred to herein as the "Transaction Documents."


                                   ARTICLE I

                                   PREPAYMENT

         A. Mandatory Prepayment. Upon the occurrence of an Event of Default (as
defined  below),  this Note shall be prepaid by the Borrower in accordance  with
the provisions of Article V hereof.

         B. No Prepayment  Without Consent.  This Note may not be prepaid at the
option of Borrower without the prior written consent of the Holder.


                                   ARTICLE II

                               CERTAIN DEFINITIONS

         The following terms shall have the following meanings:

         A. "Authorized  Stock Approval" means the approval of the Corporation's
stockholders  of  the  increase  in  the  number  of  authorized  shares  of the
Corporation's  Common Stock to a number sufficient to provide for the conversion
of all of the Notes.

         B.  "Closing Bid Price"  means,  for any  security as of any date,  the
closing bid price of such  security on the principal  United  States  securities
exchange or trading  market where such  security is listed or traded as reported
by Bloomberg  Financial  Markets (or a comparable  reporting service of national
reputation selected by the Corporation and reasonably acceptable to holders of a
majority of the aggregate  principal amount and accrued interest  represented by
the then outstanding Notes ("Majority  Holders") if Bloomberg  Financial Markets
is not then  reporting  closing  bid  prices  of such  security)  (in any  case,
"Bloomberg"), or if the foregoing does not apply, the last reported bid price of
such security in the OTC Bulletin Board (the "Bulletin Board") for such security
as reported by  Bloomberg,  or, if no bid price is reported for such security by
Bloomberg,  the average of the bid prices of any market makers for such security
as reported  in the "pink  sheets" by the Pink Sheets LLC, in each case for such
date or,  if such  date was not a trading  date for such  security,  on the next
preceding  date which was a trading  date.  If the Closing  Bid Price  cannot be
calculated  for such security as of either of such dates on any of the foregoing
bases,  the  Closing  Bid Price of such  security on such date shall be the fair
market value as reasonably  determined by an investment banking firm selected by
the  Corporation  and reasonably  acceptable to the Majority  Holders,  with the
costs of such appraisal to be borne by the Corporation.

                                      -2-
<PAGE>

         C. "Common Stock" means the common stock of the Corporation,  par value
$0.0001 per share.

         D. "Common Stock Equivalent" means (A) any security  convertible,  with
or without  consideration,  into any Common Stock (including any option, warrant
or other right to subscribe for or purchase  such a security),  (B) any security
carrying  any option,  warrant or other right to  subscribe  for or purchase any
Common Stock, or (C) any such option, warrant or other right.

         E. "Conversion  Amount" means the portion of the outstanding  principal
amount of this Note,  together with all accrued and unpaid interest thereon,  on
the Conversion Date, multiplied by:

                  (i)  in  the  event  that,  as  of  the  Conversion  Date  the
         Corporation has not entered into definitive documentation relating to a
         Qualified Transaction, 1.2; or

                  (ii)  in  the  event  that,  as of  the  Conversion  Date  the
         Corporation  has entered into  definitive  documentation  relating to a
         Qualified Transaction, 1.1.

         F. "Conversion  Date" means (i) in the case of an automatic  conversion
pursuant  to  Section  III.A,  the  date on which  the  Qualified  Financing  is
consummated,  and (ii) in the case of an optional conversion pursuant to Section
III.B, the date specified in the Notice of Conversion so long as the copy of the
Notice of Conversion is faxed (or delivered by other means  resulting in notice)
to the  Corporation  at or  before  11:59  p.m.,  New  York  City  time,  on the
Conversion Date indicated in the Notice of Conversion;  provided,  however, that
if the Notice of Conversion is not so faxed or otherwise  delivered  before such
time,  then the Conversion  Date shall be the date the Holder faxes or otherwise
delivers the Notice of Conversion to the Corporation.

         G.  "Conversion  Securities"  means  (i) in the  case  of an  automatic
conversion  pursuant to Section III.A, shares of Common Stock and/or the type of
Common  Stock  Equivalents  that are sold and issued by the  Corporation  in the
Qualified Financing,  and (ii) in the case of an optional conversion pursuant to
Section III.B, shares of Common Stock.

         H.  "Conversion  Price"  means the  lesser  of (i)  $0.10,  subject  to
adjustment as set forth herein, or (ii) subject to the Corporation obtaining the
Price Adjustment  Approval,  the  consideration per share of Common Stock or Net
Consideration  Per Share of the Common  Stock  Equivalents  sold and issued in a
Qualified Financing.

         I. "Daily  Market Price" means,  as of any date of  determination,  the
volume  weighted  average  price  for the  Common  Stock,  for the  trading  day
immediately   preceding  such  date  of  determination   (subject  to  equitable
adjustment for any stock splits,  stock dividends,  reclassifications or similar
events  during such trading day and further  shall be subject to  adjustment  as
provided herein) on the principal United States  securities  exchange or trading
market where the Common Stock is listed or traded as reported by  Bloomberg,  or
if the  foregoing  does not apply,  the volume  weighted  average  price for the
Common Stock in the Bulletin  Board for such  security as reported by Bloomberg,
or, if no sale price is  reported  for such  security by  Bloomberg,  the volume
weighted  average of the bid prices of any market  makers for such  security  as
reported in the "pink sheets" by the Pink Sheets LLC, in each case for such date
or, if such date was not a trading date for such security, on the next preceding
date which was a trading  date.  For the  avoidance  of doubt,  the  trading day
immediately  preceding  any  Conversion  Date is the last calendar day that is a
                                      -3-
<PAGE>

trading day and which is immediately preceding the Conversion Date. If the Daily
Market Price cannot be  calculated  for such security as of either of such dates
on any of the foregoing  bases,  the Daily Market Price of such security on such
date shall be the fair market value as  reasonably  determined  by an investment
banking  firm  selected by the  Corporation  and  reasonably  acceptable  to the
Majority  Holders,  with  the  costs  of  such  appraisal  to be  borne  by  the
Corporation.

         J.   "Measurement   Date"  means  for  purposes  of  any  issuances  of
securities, the date of such issuance.

         K. "Net  Consideration Per Share" shall mean with respect to any Common
Stock Equivalents issued in a Qualified  Financing,  the amount equal to (i) the
total  amount of  consideration,  if any,  received by the  Corporation  for the
issuance  of such  Common  Stock  Equivalents  plus (ii) the  minimum  amount of
consideration,  if any, payable to the Corporation upon conversion,  exercise or
exchange thereof, divided by the aggregate number of shares of Common Stock that
would be issued if all such Common Stock  Equivalents were converted,  exercised
or exchanged.  The Net  Consideration  Per Share  receivable by the  Corporation
shall be  determined in each instance as of the date of issuance of Common Stock
Equivalents   without  giving  effect  to  any  possible   future  upward  price
adjustments  or rate  adjustments  that may be  applicable  with respect to such
Common Stock Equivalents.

         L. "Notice of  Conversion"  shall mean a notice of  conversion,  in the
form attached hereto as Exhibit A, delivered by the Holder to the Corporation.

         M. "Price Adjustment  Approval" means the approval of the Corporation's
stockholders  of  the   anti-dilution   and  other   conversion/exercise   price
adjustments contained in the Notes and the Warrants, as required by Article VII,
Section 8 of the Corporation's Bylaws.

         N. "Qualified Financing" means the sale and issuance by the Corporation
of any  Common  Stock  and/or  Common  Stock  Equivalents,  on terms  reasonably
acceptable to the Majority Holders, resulting in aggregate gross proceeds to the
Corporation  (without  giving  effect to the  conversion  of the Notes  pursuant
hereto) of at least Three Million Dollars ($3,000,000).

         O. "Qualified  Transaction"  means the acquisition by the  Corporation,
either by merger,  consolidation or asset acquisitions of a third party mutually
agreed  upon by the  Corporation  and the  Majority  Holders  to be a  desirable
strategic acquisition target for the Corporation.


                                  ARTICLE III

                                   CONVERSION
                                      -4-
<PAGE>

         A. Automatic Conversion.  If, prior to the Scheduled Maturity Date, the
Corporation consummates a Qualified Financing,  then the unpaid principal amount
hereof and any accrued  interest thereon shall  automatically  convert into such
number of fully paid and non-assessable  Conversion  Securities as determined in
accordance with Section III.C below.

         B. Optional Conversion. At any time from and after the later of (i) the
date on which the Corporation obtains the Authorized Stock Approval and (ii) the
90th day  following  the  Closing  Date,  and  prior to the  earlier  of (x) the
Scheduled  Maturity  Date  and  (y) the  consummation  by the  Corporation  of a
Qualified  Financing,  the Holder  shall  have the right to  convert  all or any
portion of the unpaid  principal  amount hereof and any accrued interest thereon
into such  number of fully  paid and  non-assessable  shares of Common  Stock as
determined in accordance with Section III.C below.

         C. Conversion Formula.

                  (i) In the case of (A) an automatic  conversion as a result of
         a  Qualified   Financing   involving  the  sale  and  issuance  by  the
         Corporation of Common Stock or (B) an optional  conversion,  the number
         of Conversion Securities issuable upon conversion of this Note shall be
         that  number  of shares  of  Common  Stock as is equal to the  quotient
         obtained by dividing (x) the  Conversion  Amount by (y) the  Conversion
         Price then in effect.

                  (ii) In the case of an automatic  conversion  as a result of a
         Qualified  Financing involving the sale and issuance by the Corporation
         of  Common  Stock  Equivalents,  the  number of  Conversion  Securities
         issuable  upon  conversion  of this Note shall be that number of Common
         Stock   Equivalents  as  is  convertible  or   exchangeable   into,  or
         exercisable  for,  that number of shares of Common Stock as is equal to
         the quotient  obtained by dividing (x) the Conversion Amount by (y) the
         greater  of the  Conversion  Price  then in effect  less the  amount of
         consideration  per  share  of  Common  Stock,  if any,  payable  to the
         Corporation upon conversion,  exercise or exchange of such Common Stock
         Equivalents into Common Stock, and $0.0001 .

                  (iii) In the case of an automatic  conversion as a result of a
         Qualified  Financing involving the sale and issuance by the Corporation
         of a combination of Common Stock,  Common Stock Equivalents  and/or any
         other  debt or  equity  security  of the  Corporation,  the  number  of
         Conversion  Securities  issuable upon  conversion of this Note shall be
         determined as set forth above (in subsection III.C.(i) for Common Stock
         and in subsection  III.C.(ii)  for Common Stock  Equivalents)  and such
         additional number of shares of equity or value of debt such that, taken
         as a whole,  the Holder  receives the  Conversion  Amount of securities
         offered in the Qualified Financing.

                  (iv) In the case of an automatic  conversion  as a result of a
         Qualified  Financing involving the sale and issuance by the Corporation
         of Common  Stock  Equivalents  that  require a payment of cash or other
         consideration to the Corporation upon conversion,  exercise or exchange
         thereof, such securities,  when issued to the Holder upon conversion of
         this Note, shall contain a "cashless exercise" provision.

         D. Mechanics of Conversion.

                                      -5-
<PAGE>

                  (i) In the event that the Corporation proposes to consummate a
         Qualified  Financing,  the Corporation  shall provide written notice to
         each Holder of such  Qualified  Financing at least 15 days prior to its
         consummation  thereof,  which notice should set forth the date on which
         such  Qualified  Financing  will be  consummated  (which  shall  be the
         Conversion Date). On the Conversion Date, the Holder shall surrender or
         cause to be surrendered  this Note, duly endorsed to the Corporation or
         the transfer agent.

                  (ii) In the event that the  Holder  desires  to  exercise  its
         right to effect an optional  conversion,  the Holder shall: (a) fax (or
         otherwise deliver) a copy of the fully executed Notice of Conversion to
         the  Corporation  or the  transfer  agent for the Common  Stock and (b)
         surrender or cause to be surrendered  this Note,  duly endorsed,  along
         with  a copy  of the  Notice  of  Conversion  as  soon  as  practicable
         thereafter to the Corporation or the transfer agent.

                  (iii) Upon receipt by the Corporation of a facsimile copy of a
         Notice of Conversion from a Holder,  the Corporation  shall immediately
         send,  via facsimile,  a  confirmation  to such Holder stating that the
         Notice  of  Conversion  has been  received,  the date  upon  which  the
         Corporation  expects to deliver  the Common  Stock  issuable  upon such
         conversion and the name and telephone number of a contact person at the
         Corporation  regarding the  conversion.  The  Corporation  shall not be
         obligated  to issue  shares of Common  Stock upon a  conversion  unless
         either this Note is delivered to the  Corporation or the transfer agent
         as  provided  above,  or the Holder  notifies  the  Corporation  or the
         transfer  agent  that  such  certificates  have  been  lost,  stolen or
         destroyed and delivers the documentation to the Corporation required by
         Section X.H hereof.

                  (iv) Upon the  surrender of this Note pursuant to clause (iii)
         above, the Corporation shall, no later than the later of (a) the second
         business day  following  the  Conversion  Date and (b) the business day
         following the date of such surrender  (or, in the case of lost,  stolen
         or destroyed  certificates,  after  provision of indemnity  pursuant to
         Section X.H), issue and deliver to the Holder or its nominee the number
         of Conversion  Securities  issuable upon  conversion of this Note.  The
         Corporation   shall  deliver  to  the  Holder   physical   certificates
         representing the Conversion Securities issuable upon conversion.

                  (v) The  Corporation  shall pay any and all taxes which may be
         imposed  upon it with  respect  to the  issuance  and  delivery  of the
         Conversion Securities upon the conversion of this Note.

                  (vi) No  fractional  shares of  Common  Stock are to be issued
         upon the conversion of this Note, but the Corporation  shall pay a cash
         adjustment in respect of any fractional  share which would otherwise be
         issuable in an amount  equal to the same  fraction of the Daily  Market
         Price of a share of Common Stock on the date of such conversion.

         E. No Five Percent Holders.  In no event shall a Holder of the Notes be
entitled to receive Conversion Securities upon conversion to the extent that the
sum of (a) the number of shares of capital stock of the Corporation beneficially
owned by the Holder and its  affiliates  (exclusive  of shares of capital  stock
issuable  upon  conversion  of  the  unconverted  portion  of the  Notes  or the
unexercised or unconverted  portion of any other  securities of the  Corporation
(including,  without  limitation,  the  Warrants)  subject  to a  limitation  on
conversion or exercise  analogous to the limitations  contained  herein) and (b)
the number of Conversion  Securities  issuable upon the  conversion of the Notes
                                      -6-
<PAGE>

with  respect to which the  determination  of this  subparagraph  is being made,
would result in  beneficial  ownership by the Holder and its  affiliates of more
than 4.99% of the outstanding  shares of capital stock of the  Corporation.  For
purposes of this  subparagraph,  beneficial  ownership  shall be  determined  in
accordance  with  Section  13(d) of the  Securities  Exchange  Act of  1934,  as
amended,  and  Regulation  13 D-G  thereunder,  except as otherwise  provided in
clause (a) above. Except as provided in the immediately succeeding sentence, the
restriction  contained  in this  Section  III.E shall not be  altered,  amended,
deleted or changed in any manner  whatsoever unless the holders of a majority of
the  outstanding  shares of capital  stock of the  Corporation  and the Majority
Holders  shall  approve  such  alteration,  amendment,  deletion  or change.  In
applying the foregoing,  such limitation  should be applied in conjunction  with
the  application  of  limitations  on  conversion  or exercise  analogous to the
foregoing limitation.

                                   ARTICLE IV

                              RESERVATION OF SHARES

         A. Reserved Amount.  Immediately upon the receipt by the Corporation of
the Authorized Stock Approval,  the Corporation shall reserve  18,600,000 shares
of the  authorized  but  unissued  shares of  Common  Stock  for  issuance  upon
conversion of each of the Notes  pursuant to Section III.B hereof and thereafter
the number of authorized  but unissued  shares of Common Stock so reserved shall
not be  decreased  and  shall at all  times be  sufficient  to  provide  for the
conversion  of each of the Notes  pursuant to Section  III.B  hereof at the then
current  Conversion  Price  thereof  (the  number of  shares of Common  Stock so
reserved pursuant to this Section IV.A being referred to herein as the "Reserved
Amount").

         B. Increases to Reserved  Amount.  If the Reserved Amount for any three
consecutive  trading  days  (the  last of such  three  trading  days  being  the
"Authorization  Trigger Date") shall be less than the number of shares of Common
Stock issuable upon conversion of the Notes, the Corporation  shall  immediately
notify the  Holders  of the Notes of such  occurrence  and shall take  immediate
action (including,  if necessary,  seeking shareholder approval to authorize the
issuance of additional  shares of Common Stock) to increase the Reserved  Amount
to 135% of the number of shares of Common Stock then issuable upon conversion of
the Notes. In the event the Corporation fails to so increase the Reserved Amount
within, in the event shareholder approval is required,  ninety (90) days, or, in
the event only approval of the Corporation's Board of Directors is required, ten
(10) days after an  Authorization  Trigger Date,  each Holder of the Notes shall
thereafter have the option, exercisable in whole or in part at any time and from
time to time by delivery of a Default  Notice (as defined in Section V.C) to the
Corporation,  to require  the  Corporation  to prepay for cash,  at the  Default
Amount (as defined in Section V.B), a portion of the Holder's  principal  amount
outstanding of the Notes (plus accrued interest thereon) such that, after giving
effect to such prepayment, the Holder's allocated portion of the Reserved Amount
equals the total number of shares of Common  Stock  issuable to such Holder upon
conversion  of its Note.  If the  Corporation  fails to pay the  Default  Amount
within five (5)  business  days after its receipt of such Default  Notice,  then
such  Holder  shall  be  entitled  to the  remedies  provided  in  Section  V.C.
Notwithstanding  anything  else  contained  herein,  if  the  Corporation  has a
                                      -7-
<PAGE>

sufficient  number of authorized  shares of Common Stock, the Corporation  shall
immediately  issue  additional  shares of  Common  Stock to any  Holder  who has
exceeded its allocated  portion of the Reserved Amount upon  conversions by such
Holder of its Notes.

         C. Adjustment to Conversion Price. If the Corporation is prohibited, at
any time,  from issuing  shares of Common Stock upon  conversion of the Notes to
any Holder  because the  Corporation  does not then have  available a sufficient
number of authorized  and reserved  shares of Common Stock,  then the Conversion
Price in respect of any Notes held by any Holder  (including  Notes submitted to
the Corporation  for  conversion,  but for which shares of Common Stock have not
been issued to any such Holder) shall be adjusted as provided in Section VI.A.


                                   ARTICLE V

                                EVENTS OF DEFAULT

         A. Events of Default.  In the event  (each of the events  described  in
clauses (i)-(viii) below after expiration of the applicable cure period (if any)
being an "Event of Default"):

                  (i) the Corporation  fails to pay in full an interest  payment
         on a  scheduled  payment  date,  or fails to pay in full the  principal
         hereof,  and/or the  accrued  and unpaid  interest  thereon,  when due,
         whether at maturity, upon acceleration or otherwise;

                  (ii) the Common Stock  (including  any of the shares of Common
         Stock  issuable  upon  conversion  of the  Notes) is not  eligible  for
         trading on the OTC  Bulletin  Board for an aggregate of 10 trading days
         in any nine month period;

                  (iii) the  Corporation  provides  notice to any  Holder of the
         Notes,  including by way of public  announcement,  at any time,  of its
         intention not to issue, or otherwise refuses to issue, shares of Common
         Stock to any Holder of the Notes upon conversion in accordance with the
         terms of the Notes (other than due to the circumstances contemplated by
         Articles IV or VI for which the  Holders  shall have the  remedies  set
         forth in such Articles);

                  (iv) except with  respect to matters  covered by  subparagraph
         (i) above, as to which such  subparagraph  shall apply, the Corporation
         otherwise  shall breach any material term  hereunder or under the other
         Transaction    Documents,    including,    without   limitation,    the
         representations and warranties contained therein (i.e., in the event of
         a material breach as of the date such  representation  and warranty was
         made) and if such  breach is  curable,  shall fail to cure such  breach
         within 10 business days after the Corporation has been notified thereof
         in writing by the Holder;

                  (v) the Corporation shall:

                           (a) sell,  convey or dispose of all or  substantially
                  all of its assets (the  presentation  of any such  transaction
                  for stockholder  approval being conclusive  evidence that such
                  transaction  involves the sale of all or substantially  all of
                  the assets of the Corporation);

                           (b)  merge,   consolidate  or  engage  in  any  other
                  business   combination  with  any  other  entity  (other  than
                  pursuant to a migratory merger effected solely for the purpose
                                      -8-
<PAGE>

                  of  changing  the   jurisdiction  of   incorporation   of  the
                  Corporation), other than (i) a Qualified Transaction, (ii) any
                  strategic merger,  consolidation or business combination being
                  pursued by the Corporation as of the Issue Date which has been
                  publicly disclosed prior to the Issue Date, or (iii) any other
                  strategic merger,  consolidation or business combination which
                  the  Majority  Holders  approve,   such  approval  not  to  be
                  unreasonably withheld;

                           (c) except for non-exclusive licenses of intellectual
                  property on arms' length bases, sell or otherwise transfer any
                  independently-significant  asset or  intellectual  property to
                  any  other  person(s)  or  entity(ies)   (including,   without
                  limitation, to any subsidiary(ies) of the Corporation);

                           (d) either (i) fail to pay,  when due,  or within any
                  applicable  grace  period,  any  payment  with  respect to any
                  indebtedness  of the  Corporation  in excess of $50,000 due to
                  any  third  party,   other  than  payments  contested  by  the
                  Corporation in good faith, or otherwise  breach or violate any
                  agreement  for monies  owed or owing in an amount in excess of
                  $50,000  which  breach or  violation  permits  the other party
                  thereto to declare a default or otherwise  accelerate  amounts
                  due  thereunder,  or (ii) suffer to exist any other default or
                  event of default under any agreement  binding the  Corporation
                  which default or event of default would or is likely to have a
                  material   adverse   effect  on  the   business,   operations,
                  properties,   prospects   or   financial   condition   of  the
                  Corporation; or

                           (e) sell or otherwise issue any securities other than
                  (i) in a Qualified Financing, (ii) in an issuance for which no
                  adjustment to the  Conversion  Price shall be made pursuant to
                  Section  VII.G.(vii),  or  (iii)  commencing  on the  30th day
                  following  the Issue  Date,  in an  issuance  of an  aggregate
                  amount  of  securities  not  exceeding   $500,000  in  any  30
                  consecutive  day period  provided  that (A) such issuance does
                  not constitute a Dilutive Issuance (as such term is defined in
                  Section  VII.E(i)  below)  and (B) the  Corporation  gives the
                  Holder the right,  exercisable within 15 days after the Holder
                  receives  written notice of the proposed  issuance  (including
                  all  material   terms  and   conditions   thereof)   from  the
                  Corporation, to participate in such issuance on the same terms
                  and conditions as all other participants  therein in an amount
                  up to such  Holder's Pro Rata Amount,  where the Holder's "Pro
                  Rata  Amount"  shall  equal  that  portion  of the  securities
                  proposed to be so issued which equals the proportion  that the
                  outstanding  principal  amount  of  this  Note  bears  to  the
                  aggregate outstanding principal amount of all Notes;

                  (vi) the  Corporation  or any  subsidiary  of the  Corporation
         shall make an assignment for the benefit of creditors,  or apply for or
         consent to the  appointment  of a receiver  or trustee  for it or for a
         substantial  part of its  property or  business;  or such a receiver or
         trustee shall otherwise be appointed;

                  (vii)  bankruptcy,  insolvency,  reorganization or liquidation
         proceedings or other proceedings for relief under any bankruptcy law or
         any law for the relief of debtors shall be instituted by or against the
         Corporation  or any  subsidiary of the  Corporation,  and if instituted
         against the Corporation or any subsidiary of the Corporation by a third
         party, shall not be dismissed within 60 days of their initiation; or
                                      -9-
<PAGE>


                  (viii) the  Corporation  shall  fail to obtain the  Authorized
         Stock  Approval  and the  Price  Adjustment  Approval  within  120 days
         following the Issue Date;

                  then, upon the occurrence of any such Event of Default, at the
         option of each Holder,  exercisable in whole or in part at any time and
         from  time to time by  delivery  of a Default  Notice  (as  defined  in
         Paragraph  C below) to the  Corporation  while  such  Event of  Default
         continues,  the  Corporation  shall  pay  the  Holders  (and  upon  the
         occurrence of an Event of Default  specified in subparagraphs  (vi) and
         (vii) of this Section V.A, the Corporation shall be required to pay the
         Holders),  in  satisfaction  of its  obligation to pay the  outstanding
         principal amount of the Notes and accrued and unpaid interest  thereon,
         an amount equal to the Default Amount (as defined in Section V.B below)
         and such Default  Amount,  together  with all other  ancillary  amounts
         payable  hereunder,  shall  immediately  become  due and  payable,  all
         without  demand,  presentment  or  notice,  all  of  which  are  hereby
         expressly  waived,   together  with  all  costs,   including,   without
         limitation, legal fees and expenses of collection, and the Holder shall
         be entitled to exercise all other rights and remedies  available at law
         or in equity.  For the avoidance of doubt,  the occurrence of any event
         described in clauses (i), (ii), (iii), (v), (vi) and (viii) above shall
         immediately  constitute  an Event of Default and there shall be no cure
         period. Upon the Corporation's receipt of any Default Notice hereunder,
         the Corporation shall immediately (and in any event within one business
         day  following  such  receipt)  deliver  a written  notice (a  "Default
         Announcement")  to all Holders of the Notes stating the date upon which
         the  Corporation  received  such  Default  Notice and the amount of the
         Notes covered thereby. Following the delivery of a Default Announcement
         hereunder,  at any time and from time to time, each Holder of the Notes
         may  request  (either  orally  or  in  writing)  information  from  the
         Corporation  with respect to the instant  default  (including,  but not
         limited to, the aggregate principal amount outstanding of Notes covered
         by Default  Notices  received by the  Corporation)  and the Corporation
         shall furnish (either orally or in writing) as soon as practicable such
         requested information to such requesting Holder.

         B. Definition of Default Amount. The "Default Amount" with respect to a
Note means an amount equal to the greater of:

                  (i)               V                x        M
                                   ----
                                   C P

         and      (ii)     V   x   115%
where:

         "V" means the aggregate principal amount outstanding of the Notes being
paid plus all accrued and unpaid interest thereon through the payment date;

         "CP"  means  the  Conversion  Price in  effect on the date on which the
Corporation receives the Default Notice; and

         "M" means  the  greater  of (i) the  highest  Closing  Bid Price of the
Corporation's  Common Stock during the period beginning on the date on which the
Corporation  receives  the  Default  Notice and  ending on the date  immediately
preceding  the date of payment  of the  Default  Amount or (ii) the fair  market
value, as of the date on which the Corporation  receives the Default Notice,  of
the  consideration  payable to the holder of a share of Common Stock pursuant to
the transaction  which triggers the repayment  obligation.  For purposes of this
definition,  "fair market value" shall be determined by the mutual  agreement of
the Corporation and the Majority Holders, or if such agreement cannot be reached
within  five  business  days prior to the date of  repayment,  by an  investment
banking  firm  selected by the  Corporation  and  reasonably  acceptable  to the
Majority  Holders,  with  the  costs  of  such  appraisal  to be  borne  by  the
Corporation.

                                      -10-
<PAGE>


         C. Failure to Pay Default Amounts.  If the Corporation fails to pay any
Holder the Default  Amount with  respect to any Note within five  business  days
after its receipt of a notice  requiring  such  repayment (a "Default  Notice"),
then the Holder of any Note  delivering such Default Notice shall be entitled to
interest  on the  Default  Amount  at a per  annum  rate  equal to the  lower of
twenty-four  percent (24%) and the highest interest rate permitted by applicable
law from the date on which the Corporation receives the Default Notice until the
date of payment of the Default Amount hereunder. In the event the Corporation is
not able to repay  all of the  outstanding  Notes  subject  to  Default  Notices
delivered  prior to the date upon which such  repayment is to be  effected,  the
Corporation  shall repay the outstanding  Notes from each Holder pro rata, based
on the total amounts due on the Notes at the time of repayment  included by such
Holder  in all  Default  Notices  delivered  prior to the date upon  which  such
repayment is to be effected relative to the total amounts due under the Notes at
the time of repayment  included in all of the Default Notices delivered prior to
the date upon which such repayment is to be effected.


                                   ARTICLE VI

                         FAILURE TO SATISFY CONVERSIONS

         A. Conversion Defaults;  Adjustments to Conversion Price. The following
shall  constitute a "Conversion  Default":  (i)  following  the  submission by a
Holder of a Notice of Conversion,  the  Corporation  fails for any reason (other
than because of an event  described  in clause  (iii)  below) to deliver,  on or
prior to the fourth business day following the expiration of the Delivery Period
for such conversion,  such number of Conversion  Securities to which such Holder
is entitled upon such  conversion,  (ii) the Corporation  provides notice to any
Holder at any time of its  intention  not to issue  Conversion  Securities  upon
exercise by any Holder of its conversion  rights in accordance with the terms of
the Notes (other than because of an event  described in clause (iii) below),  or
(iii) the  Corporation  is  prohibited,  at any time,  from  issuing  Conversion
Securities  upon  conversion of the Notes to any Holder because the  Corporation
does not have available a sufficient number of authorized and reserved shares of
Common  Stock.  In the case of a Conversion  Default,  the  Conversion  Price in
respect of any Notes  held by such  Holder  (including  Notes  submitted  to the
Corporation for conversion,  but for which  Conversion  Securities have not been
issued to such Holder)  shall  thereafter  be the lesser of (x) the Daily Market
Price on the date of the  Conversion  Default  and (y) the lowest  Daily  Market
Price in effect during the period beginning on, and including, such date through
and including (A) in the case of a Conversion  Default referred to in clause (i)
above, the day such Conversion  Securities are delivered to the Holder,  and (B)
in the case of a Conversion  Default referred to in clause (iii) above, the date
on which the prohibition on issuances of Conversion  Securities  terminates.  In
the case of a Conversion  Default described in clause (ii) above, the Conversion
Price with respect to any conversion thereafter shall be the lowest Daily Market
                                      -11-
<PAGE>

Price in effect at any time during the period  beginning on, and including,  the
date of the  occurrence  of such  Conversion  Default  through and including the
Default Cure Date (as hereinafter defined). Upon the occurrence of each reset of
the  Conversion  Price  pursuant to this  Paragraph A, the  Corporation,  at its
expense, shall promptly compute the new Conversion Price and prepare and furnish
to each  Holder of the Notes a  certificate  setting  forth such new  Conversion
Price  showing  in detail  each  Conversion  Price in effect  during  such reset
period.

         "Default  Cure Date"  means (A) with  respect to a  Conversion  Default
described in clause (i) of its definition,  the date the Corporation effects the
conversion of all of the outstanding Notes, and (B) with respect to a Conversion
Default  described  in  clause  (ii) or  (iii) of its  definition,  the date the
Corporation  issues Conversion  Securities in satisfaction of all conversions of
the Notes.

         B. Buy-In Cure.  Unless the  Corporation  has  notified the  applicable
Holder in writing prior to the delivery by such Holder of a Notice of Conversion
that the  Corporation  is unable to honor  conversions,  if (i) the  Corporation
fails for any reason to deliver during the Delivery Period Conversion Securities
to a Holder upon a conversion  of the Notes,  and (ii)  thereafter,  such Holder
purchases (in an open market transaction or otherwise)  Conversion Securities to
make  delivery  in  satisfaction  of a sale by  such  Holder  of the  Conversion
Securities (the "Sold Shares") which such Holder anticipated receiving upon such
conversion (a "Buy-In"),  the Corporation  shall pay such Holder (in addition to
any  other  remedies  available  to the  Holder)  the  amount  by which (x) such
Holder's total purchase price (including brokerage commissions,  if any) for the
Conversion Securities so purchased exceeds (y) the net proceeds received by such
Holder from the sale of the Sold  Shares.  For  example,  if a Holder  purchases
Conversion Securities having a total purchase price of $11,000 to cover a Buy-In
with respect to Conversion  Securities it sold for $10,000, the Corporation will
be required to pay the Holder  $1,000.  A Holder shall  provide the  Corporation
written notification and supporting documentation indicating any amounts payable
to such Holder  pursuant to this  Paragraph  B. The  Corporation  shall make any
payments required pursuant to this Paragraph B in accordance with and subject to
the provisions of Section X.I.

         C. Right to Require  Prepayment.  If the  Corporation  fails,  and such
failure  continues  uncured for five (5) business days after the Corporation has
been  notified  thereof  in  writing  by the  Holder,  for any  reason  to issue
Conversion  Securities  within 10  business  days  after the  expiration  of the
Delivery Period with respect to any conversion of the Notes, then the Holder may
elect at any time and from time to time prior to the Default  Cure Date for such
Conversion Default, by delivery of a Default Notice to the Corporation,  to have
all or any portion of such Holder's outstanding Notes prepaid by the Corporation
for cash, at the Default Amount.  If the  Corporation  fails to pay such Default
Amount  within five business  days after its receipt of a Default  Notice,  then
such Holder shall be entitled to the remedies provided for herein.


                                  ARTICLE VII

                       ADJUSTMENTS TO THE CONVERSION PRICE

                                      -12-
<PAGE>


         The Conversion  Price shall be subject to adjustment  from time to time
as follows:

         A. Stock Splits, Stock Dividends,  Etc. If, at any time on or after the
Issue Date, the number of outstanding shares of the Corporation's  capital stock
is increased by a stock split, stock dividend, combination,  reclassification or
other similar event, the Conversion Price shall be proportionately  reduced,  or
if the  number of  outstanding  shares  of the  Corporation's  capital  stock is
decreased by a reverse stock split,  combination or  reclassification of shares,
or other similar event, the Conversion Price shall be proportionately increased.
In such event, the Corporation shall notify the Corporation's  transfer agent of
such change on or before the effective date thereof.

         B. Adjustment Due to Merger, Consolidation,  Etc. If, at any time after
the  Issue  Date,  there  shall be (i) any  reclassification  or  change  of the
outstanding  shares of the  Corporation's  capital stock (other than a change in
par value, or from par value to no par value, or from no par value to par value,
or as a result of a  subdivision  or  combination),  (ii) any  consolidation  or
merger of the  Corporation  with any other entity  (other than a merger in which
the  Corporation is the surviving or continuing  entity and its capital stock is
unchanged), (iii) any sale or transfer of all or substantially all of the assets
of the  Corporation  or (iv) any  share  exchange  pursuant  to which all of the
outstanding shares of any class or series of the Corporation's capital stock are
converted  into other  securities or property  (each of (i) - (iv) above being a
"Corporate  Change"),   then  appropriate  provisions  (in  form  and  substance
reasonably  satisfactory to the Holders of a majority of the principal amount of
the  Notes  then  outstanding)  shall be made with  respect  to the  rights  and
interests of the Holders of the Notes to the end that the economic  value of the
Notes are in no way diminished by such Corporate  Change and that the provisions
hereof (including,  without  limitation,  in the case of any such consolidation,
merger or sale in which the  successor  entity or  purchasing  entity is not the
Corporation,  an  immediate  adjustment  of the  Conversion  Price  so that  the
Conversion  Price  immediately  after the  Corporate  Change  reflects  the same
relative value as compared to the value of the surviving  entity's  common stock
that existed  between the  Conversion  Price and the value of the  Corporation's
common stock  immediately  prior to such Corporate  Change) shall  thereafter be
applicable,  as nearly as may be  practicable in relation to any shares of stock
or  securities   thereafter   deliverable  upon  the  conversion  thereof.   The
Corporation  shall not effect any Corporate Change unless (i) each Holder of the
Notes has received  written  notice of such  transaction  at least 45 days prior
thereto,  but in no event  later than 15 days  prior to the record  date for the
determination of shareholders  entitled to vote with respect  thereto,  (ii) the
resulting  successor or  acquiring  entity (if not the  Corporation)  assumes by
written instrument (in form and substance reasonably satisfactory to the Holders
of a  majority  of the  principal  amount of the  Notes  then  outstanding)  the
obligations of the Notes and (iii) the Corporation shall have received the prior
written  consent of the  Majority  Holders.  The above  provisions  shall  apply
regardless of whether or not there would have been a sufficient number of shares
of capital stock  authorized  and available for issuance upon  conversion of the
Notes outstanding as of the date of such transaction,  and shall similarly apply
to successive  reclassifications,  consolidations,  mergers, sales, transfers or
share exchanges.

         C.  Adjustment  Due to  Distribution.  If, at any time  after the Issue
Date, the Corporation  shall declare or make any  distribution of its assets (or
rights to acquire its assets) to holders of the Corporation's capital stock as a
partial  liquidating  dividend,  by  way  of  return  of  capital  or  otherwise
                                      -13-
<PAGE>

(including any dividend or  distribution  to the  Corporation's  shareholders in
cash or shares (or rights to acquire  shares) of capital  stock of a  subsidiary
(i.e. a spin-off))  (a  "Distribution"),  then the Holders of the Notes shall be
entitled,  upon  any  conversion  of the  Notes  after  the date of  record  for
determining shareholders entitled to such Distribution, to receive the amount of
such  assets  which would have been  payable to the Holder  with  respect to the
shares of the Corporation's capital stock issuable upon such conversion had such
Holder  been the holder of such  shares of such stock on the record date for the
determination of shareholders entitled to such Distribution.

         D.  Purchase  Rights.  If,  at any  time  after  the  Issue  Date,  the
Corporation issues any warrants,  rights or options,  whether or not immediately
exercisable,  to subscribe for or to purchase the Corporation's capital stock or
securities  exercisable,  convertible into or exchangeable for the Corporation's
capital  stock or  rights  to  purchase  stock,  warrants,  securities  or other
property (the "Purchase  Rights") pro rata to the record holders of any class or
series of the Corporation's capital stock, then the Holders of the Notes will be
entitled to acquire,  upon the terms  applicable  to such Purchase  Rights,  the
aggregate  Purchase  Rights which such Holder could have acquired if such Holder
had held the number of shares of the Corporation's capital stock acquirable upon
complete  conversion of the Notes immediately  before the date on which a record
is taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken,  the date as of which the record  holders of the  Corporation's
capital stock are to be determined for the grant, issue or sale of such Purchase
Rights.

         E. Adjustment of Conversion Price.

                  (i) Except as otherwise  provided in  Paragraphs A, B, C and D
         of this  Article  VII, if during any period  after the later of (A) the
         date  that  is six  (6)  months  after  the  Issue  Date,  and  (B) the
         Corporation  obtaining the Price Adjustment  Approval,  the Corporation
         issues or sells,  or in  accordance  with Section  VII.E(ii)  hereof is
         deemed to have  issued  or sold,  any  shares  of  Common  Stock for no
         consideration or for a consideration per share less than the Conversion
         Price in effect at the time of such  issuance (a "Dilutive  Issuance"),
         then effective  immediately upon the Dilutive Issuance,  the Conversion
         Price  will be  adjusted  to equal  the per share  price at which  such
         shares were issued,  sold or deemed to have been issued or sold in such
         Dilutive Issuance.  Notwithstanding the foregoing,  no adjustment shall
         be made pursuant to this Paragraph E if such adjustment would result in
         an increase in the Conversion Price.

                  (ii)  Effect  on  Conversion  Price  of  Certain  Events.  For
         purposes of determining the adjusted  Conversion Price under Subsection
         (i), the following will be applicable:

                           (a) Issuance of Rights or Options. If the Corporation
                  in any  manner  issues  or  grants  any  warrants,  rights  or
                  options, whether or not immediately exercisable,  to subscribe
                  for  or  to  purchase   Common   Stock  or  other   securities
                  exercisable, convertible into or exchangeable for Common Stock
                  ("Convertible  Securities") (such warrants, rights and options
                  to  purchase  Common  Stock  or  Convertible   Securities  are
                  hereinafter  referred to as "Options") and the price per share
                  for which Common  Stock is issuable  upon the exercise of such
                  Options  (and  the  price  of any  conversion  of  Convertible
                  Securities,  if applicable) is less than the Conversion  Price
                  in effect on the Measurement  Date of such securities  ("Below
                  Conversion Price  Options"),  then the maximum total number of
                  shares of Common Stock  issuable upon the exercise of all such
                  Below  Conversion  Price  Options   (assuming  full  exercise,

                                      -14-
<PAGE>

                  conversion   or  exchange  of   Convertible   Securities,   if
                  applicable)  will,  as of the date of the issuance or grant of
                  such  Below  Conversion   Price  Options,   be  deemed  to  be
                  outstanding   and  to  have  been   issued  and  sold  by  the
                  Corporation  for such price per  share.  For  purposes  of the
                  preceding  sentence,  the  "price  per share for which  Common
                  Stock is issuable  upon the exercise of such Below  Conversion
                  Price Options" is determined by dividing (i) the total amount,
                  if  any,   received  or  receivable  by  the   Corporation  as
                  consideration  for the  issuance or granting of all such Below
                  Conversion Price Options, plus the minimum aggregate amount of
                  additional  consideration,  if any, payable to the Corporation
                  upon the exercise of all such Below  Conversion Price Options,
                  plus, in the case of Convertible  Securities issuable upon the
                  exercise of such Below Conversion  Price Options,  the minimum
                  aggregate amount of additional  consideration payable upon the
                  exercise,   conversion  or  exchange  thereof  (determined  in
                  accordance  with the  calculation  method set forth in Section
                  VII.E(ii)(b)(2) below) at the time such Convertible Securities
                  first become exercisable, convertible or exchangeable, by (ii)
                  the maximum  total number of shares of Common  Stock  issuable
                  upon the exercise of all such Below  Conversion  Price Options
                  (assuming  full  conversion  of  Convertible  Securities,   if
                  applicable).  No further  adjustment to the  Conversion  Price
                  will be made upon the actual  issuance  of such  Common  Stock
                  upon the exercise of such Below  Conversion  Price  Options or
                  upon the  exercise,  conversion  or  exchange  of  Convertible
                  Securities  issuable  upon  exercise of such Below  Conversion
                  Price Options.

                           (b) Issuance of Convertible Securities.

                  (1) If the  Corporation  in any  manner  issues  or sells  any
         Convertible  Securities,  which  Convertible  Securities  do not have a
         fluctuating  conversion or exercise price or exchange ratio, whether or
         not  immediately  convertible  (other than where the same are  issuable
         upon the  exercise of Options) and the price per share for which Common
         Stock is  issuable  upon such  exercise,  conversion  or  exchange  (as
         determined  pursuant to Section  VII.E(ii)(b)(2) if applicable) is less
         than the Conversion  Price in effect on the Measurement  Date, then the
         maximum  total  number  of shares of  Common  Stock  issuable  upon the
         exercise,  conversion  or exchange of all such  Convertible  Securities
         will, as of the date of the issuance of such Convertible Securities, be
         deemed  to be  outstanding  and to have  been  issued  and  sold by the
         Corporation for such price per share. For the purposes of the preceding
         sentence,  the "price per share for which Common Stock is issuable upon
         such  exercise,  conversion  or exchange" is determined by dividing (i)
         the total amount,  if any, received or receivable by the Corporation as
         consideration  for  the  issuance  or  sale  of  all  such  Convertible
         Securities,   plus  the   minimum   aggregate   amount  of   additional
         consideration,  if any,  payable to the Corporation  upon the exercise,
         conversion or exchange thereof at the time such Convertible  Securities
         first become  exercisable,  convertible  or  exchangeable,  by (ii) the
         maximum  total  number  of shares of  Common  Stock  issuable  upon the
         exercise, conversion or exchange of all such Convertible Securities. No
         further adjustment to the Conversion Price will be made upon the actual
         issuance of such Common Stock upon exercise,  conversion or exchange of
         such Convertible Securities.

                  (2) If the  Corporation  in any  manner  issues  or sells  any
         Convertible  Securities with a fluctuating conversion or exercise price
         or exchange ratio (a "Variable Rate  Convertible  Security"),  then the
         "price per share for which Common Stock is issuable upon such exercise,
         conversion or exchange" for purposes of the calculation contemplated by
         Section  VII.E(ii)(b)(1)  shall be  deemed to be the  lowest  price per
                                      -15-
<PAGE>

         share which would be applicable  (assuming all holding period and other
         conditions to any discounts contained in such Variable Rate Convertible
         Security  have  been   satisfied)  if  the  Conversion   Price  on  the
         Measurement Date of such Variable Rate Convertible  Security was 75% of
         the  Conversion  Price  on such  date  (the  "Assumed  Variable  Market
         Price").  Further,  if the  Conversion  Price  at  any  time  or  times
         thereafter is less than or equal to the Assumed  Variable  Market Price
         last used for  making any  adjustment  under  this  Section  VII.F with
         respect to any Variable Rate Convertible Security, the Conversion Price
         in effect  at such time  shall be  readjusted  to equal the  Conversion
         Price which would have resulted if the Assumed Variable Market Price at
         the time of issuance of the Variable Rate Convertible Security had been
         75% of the Daily  Market Price  existing at the time of the  adjustment
         required by this sentence.

                  (3) Change in Option Price or  Conversion  Rate. If there is a
         change  at any  time  in (a) the  amount  of  additional  consideration
         payable to the  Corporation  upon the exercise of any Options;  (b) the
         amount of additional consideration,  if any, payable to the Corporation
         upon  the  exercise,   conversion   or  exchange  of  any   Convertible
         Securities;  or (c) the rate at which any  Convertible  Securities  are
         convertible  into or exchangeable  for Common Stock (in each such case,
         other than under or by reason of provisions designed to protect against
         dilution  and except  when an  adjustment  is made  pursuant to Section
         VII.F(ii)(b)(2)  above),  the Conversion Price in effect at the time of
         such change will be readjusted to the Conversion Price which would have
         been in effect at such time had such Options or Convertible  Securities
         still outstanding provided for such changed additional consideration or
         changed  conversion  rate,  as the case may be,  at the time  initially
         granted, issued or sold.

         F. Calculation of Consideration  Received. If any Common Stock, Options
or  Convertible   Securities   are  issued,   granted  or  sold  for  cash,  the
consideration  received  therefor will be the amount received by the Corporation
therefor,  after  deduction  of all  underwriting  discounts  or  allowances  in
connection with such issuance,  grant or sale. In case any Common Stock, Options
or Convertible  Securities are issued or sold for a consideration part or all of
which shall be other than cash,  including in the case of a strategic or similar
arrangement in which the other entity will provide  services to the Corporation,
purchase  services  from  the  Corporation  or  otherwise   provide   intangible
consideration to the  Corporation,  the amount of the  consideration  other than
cash  received  by the  Corporation  (including  the net  present  value  of the
consideration  expected  by  the  Corporation  for  the  provided  or  purchased
services) will be the fair market value of such consideration, except where such
consideration consists of securities,  in which case the amount of consideration
received by the Corporation  will be the Daily Market Price with respect to such
securities thereof as of the date of receipt. In case any Common Stock,  Options
or  Convertible   Securities  are  issued  in  connection  with  any  merger  or
consolidation in which the Corporation is the surviving corporation,  the amount
of  consideration  therefor  will be deemed to be the fair market  value of such
portion of the net assets and business of the  non-surviving  corporation  as is
attributable  to such Common Stock,  Options or Convertible  Securities,  as the
case may be.  Notwithstanding  anything else herein to the  contrary,  if Common
Stock,  Options  or  Convertible  Securities  are  issued,  granted  or  sold in
conjunction  with each other as part of a single  transaction  or in a series of
related transactions,  any Holder of the Notes may elect to determine the amount
of consideration  deemed to be received by the Corporation therefor by deducting
the fair value of any type of securities (the "Disregarded  Securities") issued,
granted or sold in such  transaction  or series of  transactions.  If the Holder
makes an election pursuant to the immediately  preceding sentence, no adjustment
                                      -16-
<PAGE>

to the  Conversion  Price shall be made  pursuant to this Section  VII.F for the
issuance  of the  Disregarded  Securities  or upon any  conversion  or  exercise
thereof.  For example, if the Corporation were to issue convertible notes having
a face value of $1,000,000 and warrants to purchase shares of Common Stock at an
exercise  price  equal to the market  price of the  Common  Stock on the date of
issuance of such warrants in exchange for $1,000,000 of consideration,  the fair
value of the warrants would be subtracted  from the $1,000,000 of  consideration
received by the Corporation  for the purposes of determining  whether the shares
of Common Stock  issuable  upon  conversion  of the  convertible  notes shall be
deemed to be issued at a price per share  below  market  price  and,  if so, for
purposes of determining  any adjustment to the Conversion  Price  hereunder as a
result of the issuance of the  Convertible  Securities.  The  Corporation  shall
calculate,  using standard commercial  valuation methods appropriate for valuing
such  assets,  the fair  market  value of any  consideration  other than cash or
securities;  provided, however, that if the Holder hereof does not agree to such
fair market value  calculation  within three business days after receipt thereof
from the  Corporation,  then such fair market value will be  determined  in good
faith by an investment banker or other appropriate expert of national reputation
selected by the Corporation and reasonably  acceptable to the Majority  Holders,
with the costs of such appraisal to be borne by the Corporation.

         G. Additional Adjustment Provisions.  The following provisions shall be
applicable to the making of adjustments in the Conversion Price pursuant to this
Article VII:

                  (i) Any  obligation,  agreement or undertaking to issue shares
         of Common Stock or Common Stock  Equivalents  at any time in the future
         shall  be  deemed  to be an  issuance  at  the  time  such  obligation,
         agreement or undertaking is made or arises.

                  (ii) No  adjustment  of the  Conversion  Price  shall  be made
         pursuant to this  Article VII upon the issuance of any shares of Common
         Stock that are issued upon the exercise,  conversion or exchange of any
         Common Stock  Equivalents for which an adjustment has already been made
         pursuant to this Article VII. Should the Net Consideration Per Share of
         any Common  Stock  Equivalents  for which an  adjustment  has been made
         pursuant to this Article VII (or would have been made  pursuant to this
         Article VII had the Net  Consideration  Per Share of such Common  Stock
         Equivalents been less than the Conversion  Price in effect  immediately
         prior to the issuance or sale  thereof) be decreased  from time to time
         other than as a result of the application of  anti-dilution  provisions
         substantially similar to the provisions of this Article VII, then, upon
         the  effectiveness  of each such change,  the Conversion Price shall be
         readjusted  to  that  which  would  have  been  obtained  (A)  had  the
         adjustments made pursuant to this Article VII upon the issuance of such
         Common  Stock  Equivalents  been  made  upon  the  basis of the new Net
         Consideration Per Share of such Common Stock  Equivalents,  and (B) had
         the adjustments made to the Conversion Price since the date of issuance
         of such Common Stock  Equivalents been made to such Conversion Price as
         adjusted pursuant to clause (A) above.

                  (iii) In the event any shares of Common  Stock or Common Stock
         Equivalents  are issued or sold without  consideration,  such shares of
         Common Stock or Common Stock  Equivalents  shall be deemed to have been
         issued or sold for a consideration of $0.0001 per share.

                  (iv) In the  event  that all or any part of the  consideration
         received  or paid by the  Corporation  in  connection  with  any of the
                                      -17-
<PAGE>

         transactions  described in this Article VII consists of property  other
         than cash,  such  consideration  shall be deemed to have a fair  market
         value  as is  reasonably  determined  in good  faith  by the  Board  of
         Directors of the Corporation in a manner  reasonably  acceptable to the
         Holder of this Note.

                  (v) All  calculations  under this Article VII shall be made to
         the nearest 1/100th of a cent or 1/10,000th of a share of Common Stock,
         as the case may be. No  adjustment  to the  Conversion  Price  shall be
         required  unless such  adjustment  (plus any adjustments not previously
         made by reason of this Section  VII.G(v)  would  require an increase or
         decrease of at least 1% in such Conversion  Price;  provided,  however,
         that any adjustment(s)  that by reason of this Section VII.G(v) are not
         required  to be made shall be carried  forward  and taken into  account
         upon the earlier of (A) any subsequent adjustment or (B) any conversion
         of this Note.

                  (vi)  Notwithstanding  any other  provision  of this Note,  no
         adjustment  to the  Conversion  Price  shall be made to the extent such
         adjustment would reduce the Conversion Price below the par value of the
         Common Stock.

                  (vii) No adjustment to the Conversion  Price shall be made (A)
         upon the exercise of any warrants,  options or  convertible  securities
         issued and  outstanding on the Issue Date that are set forth in Section
         3(c) of the Disclosure Schedule to the Securities Purchase Agreement in
         accordance  with the terms of such securities as of the Issue Date; (B)
         upon the grant or exercise of any stock or options  which may hereafter
         be granted to or  exercised  by any  employee,  director or  consultant
         under any employee  benefit plan of the  Corporation now existing or to
         be implemented in the future,  so long as the issuance of such stock or
         options is  approved  by a majority  of the Board of  Directors  of the
         Corporation or a majority of the members of a committee of non-employee
         directors  established  for such purpose;  (C) upon conversion of these
         Notes or exercise of the Warrants; or (D) the issuance of securities in
         connection with a Qualified Transaction.

         H.  Notice  of  Adjustments.  Upon the  occurrence  of any  event  that
requires any  adjustment of the Conversion  Price,  then, and in each such case,
the  Corporation,  at its expense,  shall promptly  compute such  adjustment and
prepare and furnish to each Holder a certificate  setting forth such  adjustment
and  showing  in detail  the facts upon  which  such  adjustment  is based.  The
Corporation  shall,  upon the  written  request at any time of any Holder of the
Notes,  furnish  to such  Holder  a like  certificate  setting  forth  (i)  such
adjustment and (ii) the Conversion Price at the time in effect.

         I. Other Action Affecting  Conversion  Price. If the Corporation  takes
any action  affecting the  Conversion  Stock after the date hereof that would be
covered by Section  VII.A  through F, but for the manner in which such action is
taken or  structured,  which would in any way  diminish  the value of the Notes,
then the  Conversion  Price  shall be  adjusted  in such  manner as the Board of
Directors of the Corporation shall in good faith determine to be equitable under
the circumstances.
                                      -18-
<PAGE>


                                  ARTICLE VIII

                                      RANK

         The Notes  shall  rank  senior  to any  indebtedness  (including  those
certain 7% Convertible  Subordinated Notes due 2005 issued by the Corporation on
November 1, 2002) outstanding as of the Issue Date as to repayment,  except that
the Notes shall rank junior to any secured  indebtedness  of the Corporation for
which a security interest has been perfected as of the Issue Date.

                                   ARTICLE IX

                                 CONSENT RIGHTS

         A. So long as any Notes are outstanding,  except as otherwise expressly
provided in the Securities  Purchase  Agreement,  the Corporation  shall not, in
each case without first obtaining the written  consent of the Majority  Holders:
(i)(a) redeem,  or declare or pay any dividends  (whether in cash or stock),  or
otherwise make any distributions  with respect to any class or series of capital
stock of the Corporation,  except for dividends and distributions payable solely
in  the  capital  stock  of  the  Corporation,  or (b)  prepay  any  outstanding
indebtedness of the Corporation, or (ii) create or sell any securities that rank
senior to or pari passu with the Notes.


                                   ARTICLE X

                                  MISCELLANEOUS

         A. Failure or Indulgency Not Waiver. No failure or delay on the part of
any Holder in the  exercise of any power,  right or  privilege  hereunder  shall
operate as a waiver  thereof,  nor shall any single or partial  exercise  of any
such power,  right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.

         B.  Notices.  Any notices  required or  permitted to be given under the
terms of this Note shall be sent by certified or registered mail (return receipt
requested) or delivered  personally or by courier or by confirmed telecopy,  and
shall be effective five days after being placed in the mail, if mailed,  or upon
receipt  or  refusal  of  receipt,  if  delivered  personally  or by  courier or
confirmed  telecopy,  in each case addressed to a party.  The addresses for such
communications shall be:

                           If to the Corporation:

                           P-Com, Inc.
                           3175 South Winchester Blvd.
                           Campbell, CA 95008
                           Telephone: (408) 866-3666
                           Facsimile:  (408) 874-4461
                           Attention:  Chief Executive Officer

                                      -19-
<PAGE>

         If to the Holder,  to the address set forth under such Holder's name on
the signature page to the Securities Purchase Agreement executed by such Holder.
Each party shall provide notice to the other parties of any change in address or
the address of any transferee of the Note.

         C.  Amendment  Provision.  This Note and any  provision  hereof  may be
amended  only by an  instrument  in writing  signed by the  Corporation  and the
Majority Holders.

         D.  Assignability.  This Note shall be binding upon the Corporation and
its  successors and assigns and shall inure to the benefit of the Holder and its
successors and assigns.  Notwithstanding  anything to the contrary  contained in
this Note or the Transaction Documents,  this Note may be pledged and all rights
of the Holder  under this Note may be assigned to any  affiliate or to any other
person or entity without the consent of the Corporation.

         E. Cost of  Collection.  If an Event of Default occurs  hereunder,  the
Corporation  shall  pay  the  Holder  hereof  costs  of  collection,   including
reasonable attorneys' fees.

         F.  Governing  Law;  Jurisdiction.  This Note shall be  governed by and
construed in  accordance  with the laws of the State of Delaware  applicable  to
contracts  made and to be performed in the State of  Delaware.  The  Corporation
irrevocably consents to the jurisdiction of the United States federal courts and
the state  courts  located in the State of  Delaware  in any suit or  proceeding
based on or arising  under this Note and  irrevocably  agrees that all claims in
respect  of such  suit or  proceeding  may be  determined  in such  courts.  The
Corporation  irrevocably  waives  the  defense of an  inconvenient  forum to the
maintenance  of such suit or  proceeding.  The  Corporation  further agrees that
service  of process  upon the  Corporation  mailed by first  class mail shall be
deemed in every respect effective service of process upon the Corporation in any
such suit or proceeding.  Nothing herein shall affect the right of any Holder to
serve process in any other manner permitted by law. The Corporation  agrees that
a final  non-appealable  judgment  in any  such  suit  or  proceeding  shall  be
conclusive and may be enforced in other  jurisdictions  by suit on such judgment
or in any other lawful manner.

         G. Denominations.  At the request of the Holder, upon surrender of this
Note,  the  Corporation   shall  promptly  issue  new  Notes  in  the  aggregate
outstanding  principal amount hereof, in the form hereof, in such  denominations
of at least $25,000 as the Holder shall request.

         H.  Lost or  Stolen  Notes.  Upon  receipt  by the  Corporation  of (i)
evidence of the loss, theft,  destruction or mutilation of any Note and (ii) (y)
in the case of loss,  theft or  destruction,  of indemnity  (without any bond or
other security) reasonably  satisfactory to the Corporation,  or (z) in the case
of mutilation,  upon  surrender and  cancellation  of any Note, the  Corporation
shall execute and deliver a new Note of like tenor and date.

         I. Payment of Cash;  Defaults.  Whenever the Corporation is required to
make any cash payment to a Holder under the Notes  (whether a Default  Amount or
upon  prepayment,  repayment or  otherwise),  such cash payment shall be made in
U.S.  dollars to the Holder  within five  business  days after  delivery by such
Holder of a notice  specifying that the Holder elects to receive such payment in
cash and the method (e.g., by check, wire transfer) in which such payment should
be made. If such payment is not delivered  within such five business day period,
                                      -20-
<PAGE>

such Holder shall  thereafter  be entitled to interest on the unpaid amount at a
per annum rate equal to the lower of  twenty-four  percent (24%) and the highest
interest rate  permitted by applicable  law until such amount is paid in full to
the Holder.

         J. Status as Note  Holder.  Upon an  automatic  conversion  or optional
conversion pursuant to Article III hereof, (i) the principal amount of the Notes
(but none of the accrued and unpaid interest  thereon) shall be deemed converted
into  Conversion  Securities  as of the  Conversion  Date and (ii) the  Holder's
rights as a Holder of such Notes shall cease and  terminate,  excepting only the
right (A) to receive  certificates  for such  Conversion  Securities  and (B) to
exercise any remedies provided herein or otherwise available at law or in equity
to such Holder because of a failure by the  Corporation to comply with the terms
of the Notes.

         K.  Remedies  Cumulative.  The remedies  provided in this Note shall be
cumulative and in addition to all other remedies  available  under this Note, at
law or in  equity  (including  a decree of  specific  performance  and/or  other
injunctive  relief),  and nothing  herein shall limit a Holder's right to pursue
actual  damages for any failure by the  Corporation  to comply with the terms of
this Note. The Corporation  acknowledges  that a breach by it of its obligations
hereunder will cause  irreparable  harm to the Holders of the Notes and that the
remedy at law for any such breach may be inadequate.  The Corporation  therefore
agrees, in the event of any such breach or threatened  breach,  that the Holders
of the Notes shall be entitled,  in addition to all other available remedies, to
an injunction  restraining any breach, without the necessity of showing economic
loss and without any bond or other security being required.

         L. Business  Day. For purposes of this Note,  the term  "business  day"
means  any day,  other  than a  Saturday  or  Sunday  or a day on which  banking
institutions  in the  State of New  York are  authorized  or  obligated  by law,
regulation  or  executive  order to close.  If any payment to be made  hereunder
shall be stated to be or become due on a day which is not a business  day,  such
payment shall be made on the next  following  business day and such extension of
time shall be included in computing interest in connection with such payment.

         M.  Certain   Waivers.   Borrower  and  each   endorser   hereby  waive
presentment,  notice of nonpayment or dishonor,  protest,  notice of protest and
all other notices in  connection  with the  delivery,  acceptance,  performance,
default or  enforcement  of payment of this Note, and hereby waive all notice or
right of approval of any  extensions,  renewals,  modifications  or forbearances
which may be allowed.

         N.  JURY  TRIAL  WAIVER.  BORROWER  HEREBY  WAIVES,  AND  HOLDER BY ITS
ACCEPTANCE  HEREOF  THEREBY  WAIVES,  TRIAL  BY  JURY  IN ANY  LEGAL  PROCEEDING
INVOLVING,  DIRECTLY  OR  INDIRECTLY,  ANY  MATTER  (WHETHER  SOUNDING  IN TORT,
CONTRACT OR  OTHERWISE) IN ANY WAY ARISING OUT OF OR RELATED TO THIS NOTE OR THE
RELATIONSHIP  EVIDENCED  HEREBY.  THIS  PROVISION IS A MATERIAL  INDUCEMENT  FOR
HOLDER TO ACCEPT AND RELY UPON THIS NOTE.

         O.  Severability.  If any provision of this Note shall be prohibited or
invalid,  under  applicable  law, it shall be  ineffective  only to such extent,
without invalidating the remainder of this Note.
                                      -21-
<PAGE>


         P. Maximum  Interest Rate. If the effective  interest rate on this Note
would otherwise  violate any applicable  usury law, then the interest rate shall
be reduced to the  maximum  permissible  rate and any  payment  received  by the
Holder  in  excess  of the  maximum  permissible  rate  shall  be  treated  as a
prepayment of the principal of this Note.

               [Remainder of this page intentionally left blank.]


                                      -22-
<PAGE>

         IN WITNESS WHEREOF, Borrower has caused this Note to be executed by its
duly authorized officer as of the date first written above.


                                  P-COM, INC.



                                  By: __________________________
                                      Name:
                                      Title:




            [Signature page to Convertible Secured Promissory Note.]

<PAGE>
                                                             Exhibit A
                                                             ----------

                          NOTICE OF OPTIONAL CONVERSION

To:      P-COM, INC.
         3175 South Winchester Blvd.
         Campbell, CA 95008
         Facsimile:  (408) 874-4461
         Attention:  Chief Executive Officer

The undersigned  hereby irrevocably  elects to convert  $____________  principal
amount of the Note (the  "Conversion"),  into  shares of common  stock  ("Common
Stock") of P-COM,  INC. (the  "Corporation")  according to the conditions of the
Convertible  Secured Promissory Note dated March ____, 2003 (the "Note"),  as of
the date written  below.  If securities 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.  No fee will be charged to the holder for any conversion,
except for  transfer  taxes,  if any. A copy of the Note is attached  hereto (or
evidence of loss, theft or destruction thereof).

The Corporation shall electronically transmit the Common Stock issuable pursuant
to this Notice of  Conversion to the account of the  undersigned  or its nominee
(which is  ________________)  with DTC  through  its  Deposit  Withdrawal  Agent
Commission System ("DTC Transfer").

In the event of partial exercise,  please reissue an appropriate Note(s) for the
principal balance which shall not have been converted.

Check Box if Applicable:

|_|      In lieu of receiving  the shares of Common Stock  issuable  pursuant to
         this  Notice of  Conversion  by way of DTC  Transfer,  the  undersigned
         hereby  requests  that  the  Corporation   issue  and  deliver  to  the
         undersigned  or  its  nominee  (if  applicable)  physical  certificates
         representing such shares of Common Stock.


                                    Date of Conversion: _______________________

                                    Applicable Conversion Price: ______________

                                    Amount of Accrued and Unpaid Interest
                                    on the Principal Amount to be converted,
                                    if any: ___________________________________

                                    Default Amount to be converted, if any: ___

                                    Number of Shares of
                                    Common Stock to be Issued: ________________

                                    Signature: ________________________________

                                    Name: _____________________________________

                                    Address: __________________________________



<PAGE>