EXHIBIT 10.99

THIS NOTE HAS NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE  "ACT"),  OR  APPLICABLE  STATE  SECURITIES  LAWS,  AND  MAY  NOT BE  SOLD,
TRANSFERRED,  OR OTHERWISE  DISPOSED OF IN THE ABSENCE OF SUCH  REGISTRATION  OR
RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL IN THE FORM,  SUBSTANCE  AND SCOPE
REASONABLY SATISFACTORY TO THE MAKER THAT THIS NOTE MAY BE SOLD, TRANSFERRED, OR
OTHERWISE  DISPOSED OF, UNDER AN EXEMPTION FROM  REGISTRATION  UNDER THE ACT AND
SUCH STATE SECURITIES LAWS.


                                V-ONE CORPORATION

                    Subordinated Convertible Promissory Note
                              due February 27, 2009



No. CN-04-__                                                       $____________
Dated:  February 27, 2004


     For  value  received,  V-ONE  CORPORATION,   a  Delaware  corporation  (the
"MAKER"),  hereby  promises  to  pay  to the  order  of  _______________________
(together  with its  successors,  representatives,  and permitted  assigns,  the
"HOLDER"),  in accordance  with the terms  hereinafter  provided,  the principal
amount of  ________________________  ($______________),  together  with interest
thereon.  Concurrently  with the  issuance  of this  Note,  the Maker is issuing
separate notes (the "OTHER NOTES") to separate  purchasers (the "OTHER HOLDERS")
pursuant to the Purchase Agreement (as defined in Section 1.1 hereof).

     All payments  under or pursuant to this Note shall be made in United States
Dollars  in  immediately  available  funds to the  Holder at the  address of the
Holder as set forth  herein or at such other  place as the Holder may  designate
from time to time in  writing to the Maker or by wire  transfer  of funds to the
Holder's  account,  instructions for which are attached hereto as EXHIBIT A. The
outstanding  principal balance of this Note shall be due and payable on February
27, 2009 (the "MATURITY DATE") or at such earlier time as provided herein.

                                   ARTICLE I

          Section  1.1  PURCHASE  AGREEMENT.  This  Note has been  executed  and
delivered  pursuant  to the  Note and  Warrant  Purchase  Agreement  dated as of
February  27,  2004 (the  "PURCHASE  AGREEMENT")  by and among the Maker and the
purchasers  listed  therein.  Capitalized  terms used and not otherwise  defined
herein  shall  have  the  meanings  set  forth  for such  terms in the  Purchase
Agreement.

          Section 1.2 INTEREST.  Beginning on the issuance date for the purchase
of this Note (the "ISSUANCE  DATE"),  the outstanding  principal balance of this
Note shall bear interest, in arrears, at a rate per annum equal to seven percent

<PAGE>

(7%),  payable  semi-annually at the option of the Maker in cash or in shares of
the Maker's common stock,  par value $.001 per share (the "COMMON  STOCK").  The
number of shares of Common  Stock to be issued as payment of accrued  and unpaid
interest  shall be  determined  by dividing  (a) the total amount of accrued and
unpaid  interest to be converted into Common Stock by (b) the  Conversion  Price
(as defined in Section 3.2 hereof). Interest shall be computed on the basis of a
360-day  year of twelve (12) 30-day  months and shall accrue  commencing  on the
Issuance  Date.  Furthermore,  upon the  occurrence  of an Event of Default  (as
defined in Section 2.1 hereof),  then to the extent  permitted by law, the Maker
will pay interest to the Holder, payable on demand, on the outstanding principal
balance  of the Note from the date of the Event of  Default  until such Event of
Default  is cured at the rate of the  lesser  of  twelve  percent  (12%) and the
maximum applicable legal rate per annum.

          Section  1.3  SENIOR  SECURITIES.  So long  as at  least  $500,000  of
principal  amount of the  Notes is  outstanding,  the Maker  shall not issue any
securities  that rank pari passu or senior to this Note without the  affirmative
vote or consent of the  holders of at least  seventy-five  percent  (75%) of the
principal amount of the Notes outstanding at the time.

          Section 1.4  SUBORDINATION.  This Note shall be subordinated  and made
junior to the  outstanding  shares of the Maker's  Series C Preferred  Stock and
Series D Preferred Stock as to the payment of dividends or as to distribution of
assets upon liquidation, dissolution or winding up of the Maker.

          Section 1.5 PAYMENT ON NON-BUSINESS  DAYS.  Whenever any payment to be
made shall be due on a Saturday,  Sunday or a public  holiday  under the laws of
the State of New York, such payment may be due on the next  succeeding  business
day and such next  succeeding  day shall be included in the  calculation  of the
amount of accrued interest payable on such date.

          Section 1.6 TRANSFER. This Note may be transferred or sold, subject to
the  provisions  of  Section  4.8 of this  Note,  or  pledged,  hypothecated  or
otherwise granted as security by the Holder.

          Section 1.7  REPLACEMENT.  Upon receipt of a duly executed,  notarized
and unsecured  written statement from the Holder with respect to the loss, theft
or destruction of this Note (or any replacement  hereof),  and without requiring
an indemnity  bond or other  security,  or, in the case of a mutilation  of this
Note, upon surrender and  cancellation of such Note, the Maker shall issue a new
Note,  of like tenor and  amount,  in lieu of such lost,  stolen,  destroyed  or
mutilated Note.

                                   ARTICLE II

                           EVENTS OF DEFAULT; REMEDIES

          Section 2.1 EVENTS OF DEFAULT.  The occurrence of any of the following
     events shall be an "EVENT OF DEFAULT" under this Note:

     (a)  the Maker  shall fail to make the  payment of any amount of  principal
outstanding on the date such payment is due hereunder; or

                                      -2-
<PAGE>

     (b)  the Maker shall fail to make any payment of interest in cash or shares
of Common  Stock for a period of five (5) days after the date such  interest  is
due; or

     (c)  the failure of the Registration  Statement to be declared effective by
the Securities and Exchange  Commission ("SEC") on or prior to the date which is
one  hundred  eighty  (180)  days  after the  Closing  Date (as  defined  in the
Registration Rights Agreement); or

     (d)  the  suspension  from  trading  for a period  of five (5)  consecutive
Trading Days; or

     (e)  the  Maker's  notice  to  the  Holder,  including  by  way  of  public
announcement,  at any time, of its inability to comply (including for any of the
reasons  described in Section 3.8(a) hereof) or its intention not to comply with
proper requests for conversion of this Note into shares of Common Stock; or

     (f)  the Maker shall fail to (i) timely  deliver the shares of Common Stock
upon conversion of the Note or any interest accrued and unpaid, (ii) timely file
the Registration  Statement (as defined in the Registration Rights Agreement) or
(iii) make the payment of any fees and/or  liquidated  damages  under this Note,
the Purchase  Agreement or the Registration  Rights Agreement,  which failure in
the case of items (i) and (iii) of this Section  2.1(f) is not  remedied  within
five (5) business days after the incurrence thereof; or

     (g)  while  the  Registration   Statement  is  required  to  be  maintained
effective  pursuant  to the  terms of the  Registration  Rights  Agreement,  the
effectiveness  of the Registration  Statement lapses for any reason  (including,
without  limitation,  the  issuance  of a stop order) or is  unavailable  to the
Holder for sale of the  Registrable  Securities (as defined in the  Registration
Rights  Agreement)  in  accordance  with the  terms of the  Registration  Rights
Agreement,  and such lapse or  unavailability  continues  for a period of twenty
(20)  consecutive  Trading  Days,  provided  that  the  cause  of such  lapse or
unavailability is not due to factors primarily within the control of Holder; or

     (h)  default  shall be made in the  performance  or  observance  of (i) any
material covenant,  condition or agreement contained in this Note (other than as
set forth in clause (f) of this Section 2.1) and such default is not fully cured
within five (5) business days after the occurrence  thereof or (ii) any material
covenant,  condition or agreement contained in the Purchase Agreement, the Other
Notes or the  Registration  Rights  Agreement  which is not covered by any other
provisions  of this  Section 2.1 and such default is not fully cured within five
(5) business days after the occurrence thereof; or

     (i)  any material representation or warranty made by the Maker herein or in
the Purchase  Agreement,  the  Registration  Rights Agreement or the Other Notes
shall prove to have been false or incorrect or breached in a material respect on
the date as of which made; or

     (j)  Intentionally omitted.

     (k)  the Maker shall (i) default in any payment of any amount or amounts of
principal  of or  interest  on any  Indebtedness  (other  than the  Indebtedness
hereunder) the aggregate  principal amount of which Indebtedness is in excess of
$100,000 or (ii) default in the observance or performance of any other agreement
or condition  relating to any Indebtedness in excess of $100,000 or contained in


                                      -3-
<PAGE>

any instrument or agreement  evidencing,  securing or relating  thereto,  or any
other event shall occur or condition exist, the effect of which default or other
event  or  condition  is to  cause,  or to  permit  the  holder  or  holders  or
beneficiary or  beneficiaries  of such  Indebtedness to cause with the giving of
notice  if  required,  such  Indebtedness  to  become  due  prior to its  stated
maturity; or

     (l)  the Maker shall (i) apply for or consent to the appointment of, or the
taking of possession by, a receiver,  custodian, trustee or liquidator of itself
or of all or a substantial  part of its property or assets,  (ii) make a general
assignment  for the benefit of its  creditors,  (iii)  commence a voluntary case
under the United States Bankruptcy Code (as now or hereafter in effect) or under
the  comparable  laws of any  jurisdiction  (foreign or  domestic),  (iv) file a
petition  seeking to take advantage of any bankruptcy,  insolvency,  moratorium,
reorganization  or other  similar law affecting  the  enforcement  of creditors'
rights  generally,  (v) acquiesce in writing to any petition filed against it in
an involuntary case under United States  Bankruptcy Code (as now or hereafter in
effect) or under the comparable laws of any jurisdiction  (foreign or domestic),
(vi) issue a notice of bankruptcy  or winding down of its  operations or issue a
press  release  regarding  same,  or (vii) take any action under the laws of any
jurisdiction (foreign or domestic) analogous to any of the foregoing; or

     (m)  a  proceeding  or case  shall be  commenced  in  respect of the Maker,
without its  application  or consent,  in any court of  competent  jurisdiction,
seeking (i) the liquidation,  reorganization,  moratorium,  dissolution, winding
up, or  composition  or  readjustment  of its debts,  (ii) the  appointment of a
trustee,  receiver,  custodian,  liquidator  or the  like of it or of all or any
substantial part of its assets in connection with the liquidation or dissolution
of the Maker or (iii)  similar  relief in respect of it under any law  providing
for the relief of debtors,  and such proceeding or case described in clause (i),
(ii) or (iii)  shall  continue  undismissed,  or unstayed  and in effect,  for a
period  of sixty  (60)  days or any  order for  relief  shall be  entered  in an
involuntary  case under United  States  Bankruptcy  Code (as now or hereafter in
effect) or under the comparable laws of any  jurisdiction  (foreign or domestic)
against  the Maker or  action  under the laws of any  jurisdiction  (foreign  or
domestic)  analogous to any of the foregoing  shall be taken with respect to the
Maker and shall continue undismissed,  or unstayed and in effect for a period of
sixty (60) days; or

     (n)  the failure of the Maker to instruct its transfer  agent to remove any
legends  from shares of Common  Stock  eligible to be sold under Rule 144 of the
Securities Act and issue such unlegended  certificates to the Holder within five
(5) business days of the Holder's request so long as the Holder has provided the
standard representations regarding the Rule 144 sale; or

     (o)  the failure of the Maker to pay any  amounts due to the Holder  herein
or in the Purchase  Agreement or the Registration  Rights Agreement within three
(3) business days of receipt of notice to the Maker; or

     (p)  the occurrence of an Event of Default under the Other Notes.

     Section 2.2 REMEDIES UPON AN EVENT OF DEFAULT. If an Event of Default shall
have occurred and shall be  continuing,  the Holder of this Note may at any time
at its option,  (a) declare the entire  unpaid  principal  balance of this Note,
together with all interest accrued hereon, due and payable,  and thereupon,  the


                                      -4-
<PAGE>

same shall be accelerated and so due and payable,  without presentment,  demand,
protest,  or  notice,  all of which are  hereby  expressly  unconditionally  and
irrevocably waived by the Maker; provided,  however, that upon the occurrence of
an Event of Default  described in (i)  Sections 2.1 (l) or (m), the  outstanding
principal balance and accrued interest  hereunder shall be automatically due and
payable  and (ii)  Sections  2.1  (c)-(k),  demand the  prepayment  of this Note
pursuant  to Section 3.7 hereof,  (b) demand that the  principal  amount of this
Note then  outstanding  and all accrued  and unpaid  interest  thereon  shall be
converted into shares of Common Stock at a Conversion Price per share calculated
pursuant to Section 3.1 hereof  assuming that the date that the Event of Default
occurs is the  Conversion  Date (as defined in Section  3.2(a)  hereof),  or (c)
exercise or otherwise  enforce any one or more of the Holder's  rights,  powers,
privileges,  remedies and interests under this Note, the Purchase Agreement, the
Registration  Rights Agreement or applicable law. No course of delay on the part
of the Holder shall operate as a waiver thereof or otherwise prejudice the right
of the Holder. No remedy conferred hereby shall be exclusive of any other remedy
referred to herein or now or hereafter  available at law, in equity,  by statute
or otherwise.

                                  ARTICLE III

                      CONVERSION; ANTIDILUTION; PREPAYMENT

          Section 3.1 CONVERSION OPTION.

     (a)  At any  time on or  after  the  Issuance  Date,  this  Note  shall  be
convertible (in whole or in part), at the option of the Holder (the  "CONVERSION
OPTION"),  into such  number of fully paid and  non-assessable  shares of Common
Stock (the  "CONVERSION  RATE") as is determined by dividing (x) that portion of
the  outstanding  principal  balance  under  this  Note as of such date that the
Holder elects to convert by (y) the Conversion  Price (as  hereinafter  defined)
then in effect on the date on which the Holder faxes a notice of conversion (the
"CONVERSION  NOTICE"),  duly  executed,  to the Maker  (facsimile  number  (301)
___-____,  Attn.:  Chief Financial  Officer) (the "VOLUNTARY  CONVERSION DATE"),
PROVIDED,  HOWEVER,  that the Conversion Price shall be subject to adjustment as
described in Section 3.6 below.  The Holder shall deliver this Note to the Maker
at the address  designated in the Purchase Agreement at such time that this Note
is fully converted.  With respect to partial conversions of this Note, the Maker
shall  keep  written  records of the  amount of this Note  converted  as of each
Conversion Date.

     (b)  On the Mandatory  Conversion  Date (as defined  below),  the principal
amount of this Note plus all accrued and unpaid interest shall automatically and
without  any action on the part of the  Holder,  convert  into a number of fully
paid and  nonassessable  shares of Common Stock equal to the quotient of (i) the
principal  amount of this Note plus all accrued and unpaid interest  outstanding
on the Mandatory  Conversion Date divided by (ii) the Conversion Price in effect
on the Mandatory  Conversion  Date. As used herein,  the  "MANDATORY  CONVERSION
DATE"  shall be the  earlier  of (A) the date  that is five (5)  years  from the
Issuance Date and (B) the first date which is at least one hundred  eighty (180)
days following the effective date of the  registration  statement  providing for
the resale of the shares of Common Stock  issuable upon  conversion of this Note
and the Other  Notes,  that the Closing Bid Price (as defined in Section  3.2(d)
hereof)  of  the  Common  Stock  exceeds  $1.00  for a  period  of  twenty  (20)
consecutive  Trading Days (so long as the first  Trading Day of such twenty (20)


                                      -5-
<PAGE>

consecutive  Trading Day period  commences  following the one hundred  eightieth
(180th)  day  following  the  effective  date of such  registration  statement);
provided,  however,  that the  Registration  Statement is effective and has been
effective,  without lapse or suspension, for a period of 60 consecutive calendar
days prior to the Mandatory  Conversion Date, or the shares of Common Stock into
which this Note can be converted may be offered for sale to the public  pursuant
to Rule 144(k) under the Securities  Act.  Notwithstanding  the  foregoing,  the
Mandatory Conversion Date shall be extended for as long as (A) the conversion of
this Note would violate Section 3.4(c), or (B) a Triggering Event (as defined in
Section  3.7(f)  hereof)  shall have occurred and be  continuing.  The Mandatory
Conversion Date and the Voluntary  Conversion Date  collectively are referred to
in this Note as the "CONVERSION DATE."

          Section 3.2 CONVERSION PRICE.

     (a)  The term  "CONVERSION  PRICE"  shall mean $.20 per  share,  subject to
adjustment under Section 3.6 hereof.  Notwithstanding any adjustment  hereunder,
at no time shall the Fixed  Conversion  Price be greater  than $.20 per share or
less than $.15 per share;  provided,  however,  that the Conversion Price may be
greater than $.20 per share if it is adjusted pursuant to Section 3.6(a).

     (b)  Notwithstanding the foregoing to the contrary, if during any period (a
"BLACK-OUT  PERIOD"),  a Holder is unable to trade any  Common  Stock  issued or
issuable upon  conversion of the Notes  immediately  due to the  postponement of
filing or delay or suspension of  effectiveness  of a registration  statement or
because the Maker has otherwise informed such Holder that an existing prospectus
cannot  be used at that  time in the  sale  or  transfer  of such  Common  Stock
(provided that such postponement,  delay, suspension or fact that the prospectus
cannot be used is not due to factors  solely within the control of the Holder of
the Notes or due to the Maker  exercising  its rights under  Section 3(n) of the
Registration  Rights  Agreement),  such Holder shall have the option but not the
obligation  on any  Conversion  Date within ten (10) Trading Days  following the
expiration of the Black-out  Period of using the Conversion  Price applicable on
such Conversion Date or any Conversion  Price selected by such Holder that would
have been  applicable had such  Conversion  Date been at any earlier time during
the Black-out Period or within the ten (10) Trading Days thereafter. In no event
shall the Black-out Period have any effect on the Maturity Date of this Note.

     (c)  The term  "CLOSING BID PRICE"  shall mean,  for any security as of any
date,  the last closing bid price of such security on the OTC Bulletin Board for
such security as reported by Bloomberg,  or, if no closing bid price is reported
for such security by Bloomberg, the last closing trade price of such security as
reported by  Bloomberg,  or, if no last closing trade price is reported for such
security by  Bloomberg,  the bid price of any market makers for such security as
reported in the "pink  sheets" by the  National  Quotation  Bureau,  Inc. If the
Closing Bid Price cannot be calculated  for such security on such date on any of
the foregoing  bases,  the Closing Bid Price of such security on such date shall
be the fair market value as mutually  determined by the Maker and the holders of
a majority of the principal amount of the Notes outstanding.

                                      -6-
<PAGE>

          Section 3.3 MECHANICS OF CONVERSION.

     (a)  Not later than three (3) Trading Days after any  Conversion  Date, the
Maker or its designated  transfer agent, as applicable,  shall issue and deliver
to the Depository  Trust Company  ("DTC") account on the Holder's behalf via the
Deposit  Withdrawal  Agent  Commission  System  ("DWAC")  as  specified  in  the
Conversion Notice, registered in the name of the Holder or its designee, for the
number of shares of Common Stock to which the Holder  shall be entitled.  In the
alternative,  not later than three (3) Trading Days after any  Conversion  Date,
the  Maker  shall  deliver  to  the  applicable  Holder  by  express  courier  a
certificate  or  certificates  which  shall be free of  restrictive  legends and
trading  restrictions  (other than those required by Section 5.1 of the Purchase
Agreement) representing the number of shares of Common Stock being acquired upon
the  conversion  of this  Note.  If in the case of any  Conversion  Notice  such
certificate  or  certificates  are  not  delivered  to or  as  directed  by  the
applicable  Holder by the third  Trading  Day  after  the  Conversion  Date (the
"DELIVERY DATE"), the Holder shall be entitled by written notice to the Maker at
any  time  on  or  before  its  receipt  of  such  certificate  or  certificates
thereafter,  to  rescind  such  conversion,  in  which  event  the  Maker  shall
immediately  return this Note tendered for  conversion,  whereupon the Maker and
the Holder  shall each be restored  to their  respective  positions  immediately
prior to the  delivery  of such  notice of  revocation,  except that any amounts
described in Sections 3.3(b) and (c) shall be payable through the date notice of
rescission is given to the Maker.

     (b)  The Maker  understands  that a delay in the  delivery of the shares of
Common Stock upon  conversion of this Note beyond the Delivery Date could result
in economic loss to the Holder. If the Maker fails to deliver to the Holder such
certificate or certificates  pursuant to this Section  hereunder by the Delivery
Date, the Maker shall pay to such Holder, in cash, an amount per Trading Day for
each Trading Day until such  certificates are delivered,  together with interest
on such  amount at a rate of 10% per annum,  accruing  until such amount and any
accrued  interest thereon is paid in full, equal to the greater of (A) (i) 1% of
the aggregate  principal  amount of the Notes  requested to be converted for the
first five (5) Trading Days after the Delivery Date and (ii) 2% of the aggregate
principal  amount of the Notes  requested to be  converted  for each Trading Day
thereafter  and (B)  $2,000 per day (which  amount  shall be paid as  liquidated
damages and not as a penalty).  Nothing  herein shall limit a Holder's  right to
pursue  actual  damages  for  the  Maker's   failure  to  deliver   certificates
representing  shares of Common Stock upon conversion within the period specified
herein and such Holder shall have the right to pursue all remedies  available to
it at law or in equity  (including,  without  limitation,  a decree of  specific
performance and/or injunctive relief).  Notwithstanding anything to the contrary
contained herein,  the Holder shall be entitled to withdraw a Conversion Notice,
and upon such withdrawal the Maker shall only be obligated to pay the liquidated
damages  accrued in  accordance  with this Section  3.3(b)  through the date the
Conversion Notice is withdrawn.

     (c)  In addition to any other rights available to the Holder,  if the Maker
fails to deliver to the Holder  such  certificate  or  certificates  pursuant to
Section  3.3(a) by the Delivery  Date and if after the Delivery  Date the Holder
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by such Holder of the Conversion  Shares which
the Holder  anticipated  receiving upon such  conversion (A "BUY-IN"),  then the
Maker shall pay in cash to the Holder (in addition to any remedies  available to
or elected by the Holder) an amount  equal to (A) the  aggregate  amount paid by


                                      -7-
<PAGE>

such Holder for the shares of Common Stock so purchased  minus (B) the aggregate
amount of net  proceeds,  if any,  received  by such Holder from the sale of the
shares of Common Stock issued by the Maker pursuant to such conversion, together
with interest thereon at a rate of the lesser of 15% and the maximum  applicable
legal  rate per annum,  accruing  until such  amount  and any  accrued  interest
thereon is paid in full (which  amount shall be paid as  liquidated  damages and
not as a penalty).  For example,  if the Holder purchases shares of Common Stock
having a total  purchase  price of $11,000 to cover a Buy-In with  respect to an
attempted  conversion of $10,000  aggregate  principal  amount of this Note, the
Maker shall be  required to pay the Holder  $1,000,  plus  interest.  The Holder
shall provide the Maker written  notice  indicating  the amounts  payable to the
Holder in respect of the Buy-In.

          Section  3.4  OWNERSHIP  CAP  AND  CERTAIN  CONVERSION   RESTRICTIONS.

     (a)  Notwithstanding  anything  to the  contrary  set forth in Section 3 of
this Note,  at no time may the Holder  convert  all or a portion of this Note if
the number of shares of Common  Stock to be issued  pursuant to such  conversion
would exceed, when aggregated with all other shares of Common Stock owned by the
Holder at such time,  the number of shares of Common Stock which would result in
the Holder  owning more than 4.999% of all of the Common  Stock  outstanding  at
such time;  PROVIDED,  HOWEVER,  that upon the Holder  providing  the Maker with
sixty-one  (61) days  notice  (pursuant  to Section  4.1  hereof)  (the  "Waiver
Notice") that the Holder would like to waive this Section  3.4(a) with regard to
any or all shares of Common Stock  issuable upon  conversion of this Note,  this
Section  3.4(a) will be of no force or effect with regard to all or a portion of
the Note referenced in the Waiver Notice; provided, further, that this provision
shall  be of  no  further  force  or  effect  during  the  sixty-one  (61)  days
immediately  preceding the first to occur of the Mandatory  Conversion  Date and
the Maturity Date.

     (b)  Notwithstanding  anything  to the  contrary  set forth in Section 3 of
this Note,  at no time may the Holder  convert  all or a portion of this Note if
the number of shares of Common  Stock to be issued  pursuant to such  conversion
would exceed, when aggregated with all other shares of Common Stock owned by the
Holder  at such  time,  would  result  in the  Holder  beneficially  owning  (as
determined  in  accordance  with Section 13(d) of the Exchange Act and the rules
thereunder)  in excess of 9.999% of the then  issued and  outstanding  shares of
Common Stock outstanding at such time; PROVIDED,  HOWEVER,  that upon the Holder
providing  the Maker with a Waiver  Notice  that the Holder  would like to waive
Section  3.4(b) of this Note with  regard to any or all  shares of Common  Stock
issuable upon  conversion of this Note, this Section 3.4(b) shall be of no force
or effect with regard to all or a portion of the Note  referenced  in the Waiver
Notice;  PROVIDED,  FURTHER, that this provision shall be of no further force or
effect during the sixty-one (61) days  immediately  preceding the first to occur
of the Mandatory Conversion Date and the Maturity Date.

          Section 3.5 INTENTIONALLY OMITTED.

          Section 3.6 ADJUSTMENT OF CONVERSION PRICE.

     (a)  The Conversion  Price shall be subject to adjustment from time to time
as  follows,  PROVIDED,  HOWEVER,  in no event  shall  the  Conversion  Price be
adjusted to a price less than $.15 per share:

                                      -8-
<PAGE>

          (i)       ADJUSTMENTS FOR STOCK SPLITS AND COMBINATIONS.  If the Maker
shall at any time or from time to time after the Issuance  Date,  effect a stock
split of the outstanding Common Stock, the applicable Conversion Price in effect
immediately prior to the stock split shall be proportionately  decreased. If the
Maker shall at any time or from time to time after the  Issuance  Date,  combine
the  outstanding  shares of Common Stock,  the  applicable  Conversion  Price in
effect immediately prior to the combination shall be proportionately  increased.
Any adjustments  under this Section 3.6(a)(i) shall be effective at the close of
business on the date the stock split or combination occurs.

          (ii)      ADJUSTMENTS FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS.  If the
Maker shall at any time or from time to time after the  Issuance  Date,  make or
issue or set a record  date for the  determination  of holders  of Common  Stock
entitled to receive a dividend or other distribution payable in shares of Common
Stock,  then,  and in each  event,  the  applicable  Conversion  Price in effect
immediately  prior  to such  event  shall  be  decreased  as of the time of such
issuance  or, in the event such  record  date shall have been  fixed,  as of the
close of business on such record date, by multiplying, the applicable Conversion
Price then in effect by a fraction:

                    (1)    the  numerator  of which shall be the total number of
shares of Common Stock issued and outstanding  immediately  prior to the time of
such issuance or the close of business on such record date; and

                    (2)    the denominator of which shall be the total number of
shares of Common Stock issued and outstanding  immediately  prior to the time of
such  issuance  or the close of  business on such record date plus the number of
shares of Common Stock issuable in payment of such dividend or distribution.

          (iii)     ADJUSTMENT  FOR OTHER  DIVIDENDS AND  DISTRIBUTIONS.  If the
Maker shall at any time or from time to time after the  Issuance  Date,  make or
issue or set a record  date for the  determination  of holders  of Common  Stock
entitled  to  receive a  dividend  or other  distribution  payable in other than
shares of Common Stock, then, and in each event, an appropriate  revision to the
applicable  Conversion  Price  shall  be made  and  provision  shall be made (by
adjustments  of the  Conversion  Price or otherwise) so that the holders of this
Note shall receive upon conversions thereof, in addition to the number of shares
of Common Stock receivable thereon,  the number of securities of the Maker which
they would have received had this Note been  converted  into Common Stock on the
date of such event and had  thereafter,  during the period from the date of such
event to and including the Conversion Date,  retained such securities  (together
with any distributions  payable thereon during such period),  giving application
to all adjustments called for during such period under this Section  3.6(a)(iii)
with  respect  to the rights of the  holders  of this Note and the Other  Notes;
PROVIDED,  HOWEVER,  that if such  record  date  shall  have been fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed  therefor,  the  Conversion  Price  shall  be  adjusted  pursuant  to this
paragraph as of the time of actual payment of such dividends or distributions.

          (iv)      ADJUSTMENTS FOR RECLASSIFICATION,  EXCHANGE OR SUBSTITUTION.
If the Common Stock  issuable  upon  conversion of this Note at any time or from
time to time after the  Issuance  Date shall be changed to the same or different
number of shares of any class or classes of stock,  whether by reclassification,
exchange,  substitution  or  otherwise  (other  than by way of a stock  split or


                                      -9-
<PAGE>

combination  of shares or stock  dividends  provided for in Sections  3.6(a)(i),
(ii) and (iii), or a reorganization,  merger,  consolidation,  or sale of assets
provided for in Section  3.6(a)(v)),  then,  and in each event,  an  appropriate
revision to the Conversion  Price shall be made and provisions shall be made (by
adjustments of the Conversion  Price or otherwise) so that the Holder shall have
the right  thereafter to convert this Note into the kind and amount of shares of
stock  and  other  securities   receivable  upon   reclassification,   exchange,
substitution or other change, by holders of the number of shares of Common Stock
into  which  such Note  might  have  been  converted  immediately  prior to such
reclassification, exchange, substitution or other change, all subject to further
adjustment as provided herein.

          (v)       ADJUSTMENTS FOR  REORGANIZATION,  MERGER,  CONSOLIDATION  OR
SALES OF  ASSETS.  If at any time or from time to time after the  Issuance  Date
there  shall be a capital  reorganization  of the Maker  (other than by way of a
stock  split or  combination  of  shares  or stock  dividends  or  distributions
provided  for in  Section  3.6(a)(i),  (ii) and  (iii),  or a  reclassification,
exchange or  substitution of shares  provided for in Section  3.6(a)(iv)),  or a
merger or consolidation of the Maker with or into another  corporation where the
holders of outstanding  voting  securities prior to such merger or consolidation
do not own  over 50% of the  outstanding  voting  securities  of the  merged  or
consolidated entity, immediately after such merger or consolidation, or the sale
of all or  substantially  all of the Maker's  properties  or assets to any other
person  (an  "ORGANIC  CHANGE"),  then  as a part  of  such  Organic  Change  an
appropriate  revision to the Conversion  Price shall be made and provision shall
be made (by adjustments of the Conversion Price or otherwise) so that the Holder
shall have the right thereafter to convert such Note into the kind and amount of
shares of stock and other  securities  or property of the Maker or any successor
corporation  resulting  from  Organic  Change.  In any  such  case,  appropriate
adjustment  shall be made in the  application  of the provisions of this Section
3.6(a)(v)  with respect to the rights of the Holder after the Organic  Change to
the end that the provisions of this Section 3.6(a)(v)  (including any adjustment
in the  applicable  Conversion  Price then in effect and the number of shares of
stock or other securities deliverable upon conversion of this Note and the Other
Notes) shall be applied  after that event in as nearly an  equivalent  manner as
may be practicable.

          (vi)      ADJUSTMENTS  FOR  ISSUANCE  OF  ADDITIONAL  SHARES OF COMMON
STOCK.

                         (1)    In the event the Maker, shall, at any time, from
time to time,  issue or sell any  shares of  additional  shares of common  stock
(otherwise than as provided in the foregoing subsections (i) through (v) of this
Section  3.6(a) or  pursuant to Common  Stock  Equivalents  (hereafter  defined)
granted or issued  prior to the  Issuance  Date)  ("ADDITIONAL  SHARES OF COMMON
STOCK"),  at a price per share less than the Conversion  Price then in effect or
without  consideration,  then the Conversion Price upon each such issuance shall
be  adjusted  to  that  price  (rounded  to  the  nearest  cent)  determined  by
multiplying each of the Conversion Price then in effect by a fraction:

                                (A)    the  numerator of which shall be equal to
the sum of (x) the  number of shares of  Common  Stock  outstanding  immediately
prior to the  issuance of such  Additional  Shares of Common  Stock PLUS (y) the
number of shares of Common Stock  (rounded to the nearest whole share) which the
aggregate consideration for the total number of such Additional Shares of Common


                                      -10-
<PAGE>

Stock so issued  would  purchase  at a price per share  equal to the  Conversion
Price then in effect, and

                                (B)    the  denominator  of which shall be equal
to the  number  of  shares of Common  Stock  outstanding  immediately  after the
issuance of such Additional Shares of Common Stock.

                         (2)    The  provisions  of  paragraph  (1)  of  Section
3.6(a)(vi) shall not apply to any issuance of Additional  Shares of Common Stock
for which an adjustment is provided under Section 3.6(a)(vii).  No adjustment of
the number of shares of Common  Stock for which  this Note shall be  convertible
shall be made under paragraph (1) of Section 3.6(a)(vi) upon the issuance of any
Additional  Shares of Common Stock which are issued  pursuant to the exercise of
any Common Stock Equivalents,  if any such adjustment shall previously have been
made upon the  issuance of such  Common  Stock  Equivalents  pursuant to Section
3.6(a)(vii).

          (vii)     ISSUANCE OF COMMON STOCK  EQUIVALENTS.  If the Maker, at any
time after the Issuance  Date,  shall issue any securities  convertible  into or
exchangeable   for,   directly  or   indirectly,   Common  Stock   ("CONVERTIBLE
SECURITIES"),  other than the Notes,  or any  rights or  warrants  or options to
purchase any such Common  Stock or  Convertible  Securities,  shall be issued or
sold  (collectively,  the "COMMON STOCK  EQUIVALENTS")  and the aggregate of the
price  per share for which  Additional  Shares of Common  Stock may be  issuable
thereafter  pursuant to such Common  Stock  Equivalent,  plus the  consideration
received by the Maker for  issuance of such Common Stock  Equivalent  divided by
the number of shares of Common  Stock  issuable  pursuant to such  Common  Stock
Equivalent  (the  "AGGREGATE  PER COMMON  SHARE  PRICE")  shall be less than the
applicable  Conversion  Price then in effect,  or if, after any such issuance of
Common Stock  Equivalents,  the price per share for which  Additional  Shares of
Common Stock may be issuable  thereafter is amended or adjusted,  and such price
as so amended  shall make the  Aggregate Per Share Common Price be less than the
applicable  Conversion  Price  in  effect  at the  time  of  such  amendment  or
adjustment,  then the  applicable  Conversion  Price upon each such  issuance or
amendment shall be adjusted as provided in the first sentence of subsection (vi)
of this Section  3.6(a) on the basis that (1) the maximum  number of  Additional
Shares of Common Stock  issuable  pursuant to all such Common Stock  Equivalents
shall  be  deemed  to  have  been  issued  (whether  or not  such  Common  Stock
Equivalents are actually then exercisable,  convertible or exchangeable in whole
or in part) as of the  earlier  of (A) the date on which the Maker  shall  enter
into a firm  contract for the issuance of such Common Stock  Equivalent,  or (B)
the date of actual  issuance of such Common Stock  Equivalent.  No adjustment of
the applicable  Conversion  Price shall be made under this subsection (vii) upon
the  issuance  of any  Convertible  Security  which is  issued  pursuant  to the
exercise of any warrants or other  subscription or purchase rights therefor,  if
any  adjustment  shall  previously  have been made to the exercise price of such
warrants  then in effect  upon the  issuance of such  warrants  or other  rights
pursuant to this subsection (vii). No adjustment shall be made to the Conversion
Price upon the issuance of Common Stock pursuant to the exercise,  conversion or
exchange  of any  Convertible  Security  or  Common  Stock  Equivalent  where an
adjustment  to the  Conversion  Price  was made as a result of the  issuance  or
purchase of any Convertible Security or Common Stock Equivalent.

                                      -11-
<PAGE>

          (viii)    CONSIDERATION  FOR STOCK. In case any shares of Common Stock
or any Common Stock Equivalents shall be issued or sold:

                    (1)     in connection  with any merger or  consolidation  in
which the Maker is the surviving  corporation  (other than any  consolidation or
merger in which the previously  outstanding  shares of Common Stock of the Maker
shall be changed to or exchanged  for the stock or other  securities  of another
corporation),  the amount of consideration  therefore shall be, deemed to be the
fair value, as determined reasonably and in good faith by the Board of Directors
of the Maker,  of such  portion of the assets and  business of the  nonsurviving
corporation  as such Board may  determine to be  attributable  to such shares of
Common Stock, Convertible Securities, rights or warrants or options, as the case
may be; or

            (2)     in the event of any  consolidation or merger of the Maker in
which  the Maker is not the  surviving  corporation  or in which the  previously
outstanding  shares  of  Common  Stock of the  Maker  shall be  changed  into or
exchanged for the stock or other  securities of another  corporation,  or in the
event of any sale of all or  substantially  all of the  assets  of the Maker for
stock or other securities of any corporation,  the Maker shall be deemed to have
issued a number of shares of its Common Stock for stock or  securities  or other
property of the other  corporation  computed on the basis of the actual exchange
ratio on which the transaction was predicated,  and for a consideration equal to
the  fair  market  value on the date of such  transaction  of all such  stock or
securities or other property of the other  corporation.  If any such calculation
results in  adjustment  of the  applicable  Conversion  Price,  or the number of
shares of Common Stock issuable upon conversion of the Notes, the  determination
of the  applicable  Conversion  Price or the  number of  shares of Common  Stock
issuable  upon  conversion  of the  Notes  immediately  prior  to  such  merger,
consolidation  or sale,  shall be made after giving effect to such adjustment of
the number of shares of Common Stock issuable upon  conversion of the Notes.  In
the event Common Stock is issued with other shares or securities or other assets
of the Maker for consideration which covers both, the consideration  computed as
provided in this Section  3.6(viii) shall be allocated among such securities and
assets as determined in good faith by the Board of Directors of the Maker.

     (b)   RECORD  DATE.  In case the Maker  shall take record of the holders of
its Common Stock for the purpose of entitling  them to subscribe for or purchase
Common Stock or  Convertible  Securities,  then the date of the issue or sale of
the shares of Common Stock shall be deemed to be such record date.

     (c)   CERTAIN   ISSUES   EXCEPTED.   Anything   herein   to  the   contrary
notwithstanding,  the Maker shall not be required to make any  adjustment to the
Conversion  Price upon (i) the  Maker's  issuance  of any  Additional  Shares of
Common  Stock  and  warrants  therefore  in  connection  with  a  merger  and/or
acquisition,  consolidation,  sale or disposition of all or substantially all of
the Maker's  assets,  (ii) the Maker's  issuance of Additional  Shares of Common
Stock or warrants  therefore in connection with strategic license  agreements so
long as such  issuances  are not for the purpose of raising  capital,  (iii) the
Maker's  issuance  of Common  Stock or the  issuance  or grants  of  options  to
purchase  Common Stock  pursuant to the Maker's  stock option plans and employee
stock purchase plans as they now exist, (iv) any issuances of warrants issued to
a Purchaser pursuant to the Purchase  Agreement,  (v) any warrants issued to the
placement agent for the  transactions  contemplated  by the Purchase  Agreement,
(vi) the payment of any interest on the Notes,  and (vii) the issuance of common
stock upon the exercise or conversion of any securities  outstanding on the date
hereof.

                                      -12-
<PAGE>

          (d)  NO  IMPAIRMENT.   The  Maker  shall  not,  by  amendment  of  its
Certificate of Incorporation or through any reorganization,  transfer of assets,
consolidation,  merger,  dissolution,  issue or sale of  securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed  hereunder  by the Maker,  but will at all
times in good faith,  assist in the carrying out of all the  provisions  of this
Section  3.6  and in the  taking  of all  such  action  as may be  necessary  or
appropriate  in order to protect  the  Conversion  Rights of the Holder  against
impairment.  In the event a Holder  shall elect to convert any Notes as provided
herein,  the Maker cannot refuse  conversion based on any claim that such Holder
or any one  associated  or  affiliated  with such Holder has been engaged in any
violation  of law,  violation of an agreement to which such Holder is a party or
for any  reason  whatsoever,  unless,  an  injunction  from a court,  or notice,
restraining  and or  adjoining  conversion  of all or of said  Notes  shall have
issued and the Maker  posts a surety  bond for the  benefit of such Holder in an
amount  equal to 130% of the  amount of the  Notes the  Holder  has  elected  to
convert,   which  bond  shall   remain  in  effect  until  the   completion   of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Holder in the event it obtains judgment.

          (e)  CERTIFICATES   AS  TO   ADJUSTMENTS.   Upon  occurrence  of  each
adjustment or readjustment of the Conversion Price or number of shares of Common
Stock  issuable  upon  conversion of this Note pursuant to this Section 3.6, the
Maker at its expense shall promptly  compute such  adjustment or readjustment in
accordance with the terms hereof and furnish to the Holder a certificate setting
forth such adjustment and  readjustment,  showing in detail the facts upon which
such adjustment or readjustment is based. The Maker shall,  upon written request
of the Holder,  at any time,  furnish or cause to be  furnished  to the Holder a
like  certificate   setting  forth  such  adjustments  and  readjustments,   the
applicable  Conversion  Price in effect at the time, and the number of shares of
Common Stock and the amount,  if any, of other  securities or property  which at
the time would be received upon the conversion of this Note. Notwithstanding the
foregoing, the Maker shall not be obligated to deliver a certificate unless such
certificate  would  reflect an increase or decrease of at least one percent (1%)
of such adjusted amount.

          (f)  ISSUE  TAXES.  The  Maker  shall  pay any and all issue and other
taxes,  excluding  federal,  state or local income taxes, that may be payable in
respect of any issue or delivery of shares of Common Stock on conversion of this
Note pursuant thereto; PROVIDED,  HOWEVER, that the Maker shall not be obligated
to pay any transfer taxes resulting from any transfer requested by the Holder in
connection with any such conversion.

          (g)  FRACTIONAL  SHARES. No fractional shares of Common Stock shall be
issued upon  conversion of this Note. In lieu of any fractional  shares to which
the Holder would  otherwise  be entitled,  the Maker shall pay cash equal to the
product of such fraction  multiplied by the average of the Closing Bid Prices of
the Common Stock for the five (5) consecutive Trading Days immediately preceding
the Conversion Date.

          (h)  RESERVATION  OF COMMON  STOCK.  The Maker shall at all times when
this Note shall be outstanding, reserve and keep available out of its authorized
but unissued  Common Stock,  such number of shares of Common Stock as shall from
time to time be  sufficient  to  effect  the  conversion  of this  Note  and all
interest accrued thereon;  PROVIDED that the number of shares of Common Stock so
reserved  shall at no time be less than  120% of the  number of shares of Common
Stock  for which  this Note and all  interest  accrued  thereon  are at any time
convertible.  The Maker shall, from time to time in accordance with the Delaware


                                      -13-
<PAGE>

General  Corporation  Law,  increase the  authorized  number of shares of Common
Stock if at any time the  unissued  number  of  authorized  shares  shall not be
sufficient to satisfy the Maker's obligations under this Section 3.6(h).

            (i)   REGULATORY  COMPLIANCE.  If any  shares of Common  Stock to be
reserved  for the purpose of  conversion  of this Note or any  interest  accrued
thereon  require  registration  or listing with or approval of any  governmental
authority,  stock exchange or other  regulatory  body under any federal or state
law or  regulation  or  otherwise  before such  shares may be validly  issued or
delivered upon  conversion,  the Maker shall,  at its sole cost and expense,  in
good  faith  and  as  expeditiously   as  possible,   endeavor  to  secure  such
registration, listing or approval, as the case may be.

     Section 3.7  PREPAYMENT.

            (a)   PREPAYMENT UPON AN EVENT OF DEFAULT.  Notwithstanding anything
to the contrary  contained  herein,  upon the  occurrence of an Event of Default
described in Sections  2.1(c)-(m)  hereof,  the Holder shall have the right,  at
such Holder's option, to require the Maker to prepay in cash all or a portion of
this Note at a price equal to the Triggering  Event Prepayment Price (as defined
in Section  3.7(c) below)  applicable at the time of such request (the "EVENT OF
DEFAULT  PREPAYMENT  PRICE").  Nothing in this  Section  3.7(a)  shall limit the
Holder's rights under Section 2.2 hereof.

            (b)   PREPAYMENT OPTION UPON MAJOR  TRANSACTION.  In addition to all
other rights of the Holder contained herein, simultaneous with the occurrence of
a Major Transaction (as defined below),  the Holder shall have the right, at the
Holder's option,  to require the Maker to prepay in cash all or a portion of the
Holder's  Notes at a price equal to 100% of the  aggregate  principal  amount of
this  Note  plus  all  accrued  and  unpaid  interest  (the  "MAJOR  TRANSACTION
PREPAYMENT  PRICE");   provided,   however,  that  if  a  Major  Transaction  is
consummated  within six (6) months of the Issuance Date,  the Major  Transaction
Prepayment  Price shall be equal to 110% of the  aggregate  principal  amount of
this Note plus all accrued and unpaid interest.

            (c)   PREPAYMENT  OPTION UPON  TRIGGERING  EVENT. In addition to all
other  rights of the  Holder  contained  herein,  after a  Triggering  Event (as
defined  below),  the Holder shall have the right,  at the Holder's  option,  to
require the Maker to prepay all or a portion of the Holder's  Notes in cash at a
price  equal to 120% of the  aggregate  principal  amount  of this Note plus all
accrued and unpaid  interest  (the  "TRIGGERING  EVENT  PREPAYMENT  PRICE," and,
collectively  with the "MAJOR  TRANSACTION  PREPAYMENT  PRICE," the  "PREPAYMENT
PRICE").

            (d)   INTENTIONALLY OMITTED.

            (e)   "MAJOR  TRANSACTION." A "MAJOR  TRANSACTION" shall be deemed
to have occurred at such time as any of the following events:

                  (i)    the consolidation, merger or other business combination
of the Maker with or into  another  Person (as defined in Section  4.13  hereof)
(other than (A) pursuant to a migratory  merger  effected solely for the purpose
of  changing  the   jurisdiction  of   incorporation  of  the  Maker  or  (B)  a

                                      -14-
<PAGE>

consolidation,  merger or other  business  combination  in which  holders of the
Maker's voting power  immediately  prior to the  transaction  continue after the
transaction to hold,  directly or indirectly,  the voting power of the surviving
entity or entities  necessary to elect a majority of the members of the board of
directors (or their  equivalent if other than a  corporation)  of such entity or
entities).

                  (ii)   the sale or  transfer  of more than 50% of the  Maker's
assets  (based  on the fair  market  value as  determined  in good  faith by the
Maker's  Board of  Directors)  other than  inventory in the  ordinary  course of
business in one or a related series of transactions; or

                  (iii)  closing of a purchase, tender or exchange offer made to
the holders of more than 50% of the outstanding shares of Common Stock.

          (f)     "TRIGGERING  EVENT." A  "Triggering  Event" shall be deemed to
have occurred at such time as any of the following events:

                  (i)    so long as any Notes are outstanding, the effectiveness
of the Registration  Statement,  after it becomes effective,  (i) lapses for any
reason (including,  without limitation, the issuance of a stop order) or (ii) is
unavailable to the Holder for sale of the shares of Common Stock, and such lapse
or  unavailability  continues  for a period of twenty (20)  consecutive  Trading
Days,  and the  shares of Common  Stock  into  which the  Holder's  Notes can be
converted  cannot  be sold in the  public  securities  market  pursuant  to Rule
144(k),  provided that the cause of such lapse or  unavailability  is not due to
factors  solely  within the  control of the  Holder of the Notes;  and  provided
further that a Triggering Event shall not have occurred if and to the extent the
Maker exercised its rights set forth in Section 3(n) of the Registration  Rights
Agreement;

                  (ii)   the  suspension  from  trading for a period of five (5)
consecutive Trading Days;

                  (iii)  the  Maker's   notice  to  any  holder  of  the  Notes,
including by way of public announcement, at any time, of its inability to comply
(including for any of the reasons described in Section 3.8) or its intention not
to comply with proper requests for conversion of any Notes into shares of Common
Stock; or

                  (iv)   the Maker's failure to comply with a Conversion  Notice
tendered in accordance with the provisions of this Note within ten (10) business
days after the receipt by the Maker of the Conversion Notice.

          (g)     INTENTIONALLY OMITTED.

          (h)     MECHANICS  OF  PREPAYMENT  AT  OPTION  OF  HOLDER  UPON  MAJOR
TRANSACTION. No sooner than fifteen (15) days nor later than ten (10) days prior
to the  consummation  of a  Major  Transaction,  but  not  prior  to the  public
announcement of such Major  Transaction,  the Maker shall deliver written notice
thereof via facsimile and overnight  courier ("NOTICE OF MAJOR  TRANSACTION") to
the  Holder  of this  Note.  At any time  after  receipt  of a  Notice  of Major
Transaction (or, in the event a Notice of Major  Transaction is not delivered at
least ten (10) days prior to a Major  Transaction,  at any time  within ten (10)


                                      -15-
<PAGE>

days prior to a Major Transaction), any holder of the Notes then outstanding may
require the Maker to prepay,  effective immediately prior to the consummation of
such Major Transaction, all of the holder's Notes then outstanding by delivering
written  notice  thereof  via  facsimile  and  overnight   courier  ("NOTICE  OF
PREPAYMENT  AT OPTION OF HOLDER  UPON MAJOR  TRANSACTION")  to the Maker,  which
Notice of Prepayment at Option of Holder Upon Major  Transaction  shall indicate
(i) the  number of Notes  that such  holder is  electing  to prepay and (ii) the
applicable Major Transaction Prepayment Price, as calculated pursuant to Section
3.7(b) above.

          (i)     MECHANICS OF  PREPAYMENT  AT OPTION OF HOLDER UPON  TRIGGERING
EVENT.  Within one (1) day after the occurrence of a Triggering Event, the Maker
shall  deliver  written  notice  thereof via  facsimile  and  overnight  courier
("NOTICE OF  TRIGGERING  EVENT") to each holder of the Notes.  At any time after
the  earlier of a  holder's  receipt  of a Notice of  Triggering  Event and such
holder  becoming  aware of a Triggering  Event,  any holder of this Note and the
Other Notes then outstanding may require the Maker to prepay all of the Notes on
a pro rata  basis  by  delivering  written  notice  thereof  via  facsimile  and
overnight  courier  ("NOTICE OF PREPAYMENT  AT OPTION OF HOLDER UPON  TRIGGERING
EVENT")  to the  Maker,  which  Notice of  Prepayment  at Option of Holder  Upon
Triggering  Event shall  indicate (i) the amount of the Note that such holder is
electing to have prepaid and (ii) the  applicable  Triggering  Event  Prepayment
Price,  as calculated  pursuant to Section  3.7(c) above. A holder shall only be
permitted to require the Maker to prepay the Note pursuant to Section 3.7 hereof
for the  greater of a period of ten (10) days after  receipt by such holder of a
Notice  of  Triggering  Event  or  for so  long  as  such  Triggering  Event  is
continuing.

          (j)     INTENTIONALLY OMITTED.

          (k)     PAYMENT OF  PREPAYMENT  PRICE.  Upon the Maker's  receipt of a
Notice(s) of Prepayment at Option of Holder Upon Triggering Event or a Notice(s)
of Prepayment at Option of Holder Upon Major  Transaction from any holder of the
Notes, the Maker shall immediately  notify each holder of the Notes by facsimile
of the Maker's  receipt of such Notice(s) of Prepayment at Option of Holder Upon
Triggering  Event or  Notice(s)  of  Prepayment  at Option of Holder  Upon Major
Transaction  and each holder which has sent such a notice shall promptly  submit
to the Maker such holder's certificates representing the Notes which such holder
has elected to have prepaid.  The Maker shall deliver the applicable  Triggering
Event Prepayment Price, in the case of a prepayment  pursuant to Section 3.7(i),
to such holder  within  five (5)  business  days after the Maker's  receipt of a
Notice of Prepayment at Option of Holder Upon Triggering  Event and, in the case
of a  prepayment  pursuant  to  Section  3.7(k),  the Maker  shall  deliver  the
applicable  Major   Transaction   Prepayment  Price  immediately  prior  to  the
consummation of the Major  Transaction;  provided that a holder's  original Note
shall have been so delivered to the Maker; provided further that if the Maker is
unable  to prepay  all of the Notes to be  prepaid,  the Maker  shall  prepay an
amount  from each  holder  of the Notes  being  prepaid  equal to such  holder's
pro-rata  amount  (based on the number of Notes held by such holder  relative to
the number of Notes outstanding) of all Notes being prepaid.  If the Maker shall
fail to prepay all of the Notes submitted for prepayment (other than pursuant to
a dispute as to the arithmetic calculation of the Prepayment Price), in addition
to any remedy such holder of the Notes may have under this Note and the Purchase
Agreement,  the applicable Prepayment Price payable in respect of such Notes not
prepaid shall bear interest at the rate of 2.0% per month  (prorated for partial
months)  until  paid in full.  Until  the  Maker  pays  such  unpaid  applicable


                                      -16-
<PAGE>

Prepayment Price in full to a holder of the Notes submitted for prepayment, such
holder shall have the option (the "VOID OPTIONAL PREPAYMENT OPTION") to, in lieu
of prepayment, require the Maker to promptly return to such holder(s) all of the
Notes that were submitted for  prepayment by such  holder(s)  under this Section
3.7 and for which the applicable  Prepayment Price has not been paid, by sending
written notice thereof to the Maker via facsimile (the "VOID OPTIONAL PREPAYMENT
NOTICE").  Upon the Maker's receipt of such Void Optional  Prepayment  Notice(s)
and prior to payment of the full applicable Prepayment Price to such holder, (i)
the  Notice(s) of Prepayment  at Option of Holder Upon  Triggering  Event or the
Notice(s) of Prepayment at Option of Holder Upon Major Transaction,  as the case
may be,  shall be null and void  with  respect  to  those  Notes  submitted  for
prepayment and for which the applicable Prepayment Price has not been paid, (ii)
the Maker  shall  immediately  return any Notes  submitted  to the Maker by each
holder for  prepayment  under this Section  3.7(h) and for which the  applicable
Prepayment  Price  has not been  paid and  (iii)  the  Conversion  Price of such
returned Notes shall be adjusted to the lesser of (A) the Conversion Price as in
effect on the date on which the Void Optional Prepayment  Notice(s) is delivered
to the Maker and (B) the lowest Closing Bid Price during the period beginning on
the date on which the  Notice(s)  of  Prepayment  of Option of Holder Upon Major
Transaction  or the Notice(s) of Prepayment at Option of Holder Upon  Triggering
Event,  as the case may be, is  delivered to the Maker and ending on the date on
which the Void Optional Prepayment Notice(s) is delivered to the Maker; provided
that no adjustment  shall be made if such adjustment would result in an increase
of the Conversion Price then in effect.  A holder's  delivery of a Void Optional
Prepayment  Notice and  exercise of its rights  following  such notice shall not
effect the Maker's  obligations to make any payments which have accrued prior to
the date of such  notice.  Payments  provided for in this Section 3.7 shall have
priority  to  payments  to  other   stockholders  in  connection  with  a  Major
Transaction.

          (l)     MAKER  PREPAYMENT  OPTION.  Commencing  one year following the
Issuance  Date,  the Maker may  prepay  all or any  portion  of the  outstanding
principal  amount of this Note  together  with all accrued  and unpaid  interest
thereon  upon ten (10)  business  days prior  written  notice to the Holder (the
"MAKER'S PREPAYMENT NOTICE") at a price equal to 110% of the aggregate principal
amount  of this  Note  plus  any  accrued  but  unpaid  interest  (the  "MAKER'S
PREPAYMENT  PRICE");  provided,  however,  that  if a  holder  has  delivered  a
Conversion  Notice to the Maker or delivers a Conversion  Notice within ten (10)
business  days of  receipt  of the  Maker's  Prepayment  Notice,  the holder may
convert all of the principal  amount of the Notes  designated to be converted in
the  Conversion  Notice;  PROVIDED  FURTHER  that if during the  period  between
delivery of the Maker's  Prepayment  Notice and the Maker's  Prepayment Date (as
defined below), a holder shall become entitled to deliver a Notice of Prepayment
at Option of Holder Upon Major  Transaction or Notice of Prepayment at Option of
Holder upon  Triggering  Event,  then the such rights of the holders  shall take
precedence over the previously  delivered Maker Prepayment  Notice.  The Maker's
Prepayment  Notice  shall state the date of  prepayment  which date shall be the
twelfth (12th) business day after the Maker has delivered the Maker's Prepayment
Notice (the "MAKER'S  PREPAYMENT  DATE"),  the Maker's  Prepayment Price and the
amount of Notes to be prepaid by the Maker.  The Maker shall deliver the Maker's
Prepayment  Price to the Holder within twelve (12) business days after the Maker
has delivered the Maker's Prepayment Notice. On the Maker's Prepayment Date, the
Maker shall pay the Maker's Prepayment Price, subject to any adjustment pursuant
to the  immediately  preceding  sentence,  to the holder(s) on a pro rata basis,
PROVIDED,  HOWEVER,  that  upon  receipt  by  Maker of the  Notes to be  prepaid
pursuant to this  Section  3.7(l),  the Maker  shall,  on the next  business day


                                      -17-
<PAGE>

following the date of receipt by the Maker of the original Note, pay the Maker's
Prepayment Price to the holder(s) on a pro rata basis. If the Maker fails to pay
the Maker's  Prepayment Price by the twelfth (12th) business day after the Maker
has delivered the Maker's  Prepayment  Notice,  the prepayment  will be declared
null and void and the Maker shall lose its right to serve a Maker 's  Prepayment
Notice pursuant to this Section 3.7(l) in the future.

     Section 3.8  INABILITY TO FULLY CONVERT.

          (a)     HOLDER'S  OPTION IF MAKER CANNOT FULLY  CONVERT.  If, upon the
Maker's receipt of a Conversion  Notice, the Maker cannot issue shares of Common
Stock  registered  for resale under the  Registration  Statement for any reason,
including, without limitation,  because the Maker (w) does not have a sufficient
number of shares of Common Stock  authorized and  available,  (x) failed to call
the  Stockholder  Meeting  within the time  period  set forth in Section  3.4(c)
hereof,  (y) is  otherwise  prohibited  by  applicable  law or by the  rules  or
regulations  of any  stock  exchange,  interdealer  quotation  system  or  other
self-regulatory  organization  with  jurisdiction  over the  Maker or any of its
securities  from  issuing  all of the Common  Stock which is to be issued to the
Holder pursuant to a Conversion  Notice or (z) fails to have a sufficient number
of  shares  of  Common  Stock  registered  for  resale  under  the  Registration
Statement,  then the Maker shall  issue as many shares of Common  Stock as it is
able to issue in  accordance  with the  Holder's  Conversion  Notice  and,  with
respect to the unconverted portion of this Note, the Holder,  solely at Holder's
option, can elect to:

                  (i)    require the Maker to prepay  that  portion of this Note
for  which the Maker is unable  to issue  Common  Stock in  accordance  with the
Holder's  Conversion  Notice (the  "MANDATORY  PREPAYMENT") at a price per share
equal to the Triggering  Event  Prepayment Price as of such Conversion Date (the
"MANDATORY PREPAYMENT PRICE");

                  (ii)   if the Maker's  inability to fully  convert is pursuant
to Section  3.8(a)(y)  above,  require the Maker to issue  restricted  shares of
Common Stock in accordance with such holder's Conversion Notice;

                  (iii)  void its Conversion Notice and retain or have returned,
as the  case  may  be,  this  Note  that  was to be  converted  pursuant  to the
Conversion  Notice  (provided that the Holder's  voiding its  Conversion  Notice
shall not effect the Maker's obligations to make any payments which have accrued
prior to the date of such notice).

In the  event a Holder  shall  elect to  convert  any  portion  of its  Notes as
provided herein, the Maker cannot refuse conversion based on any claim that such
Holder or any one associated or affiliated  with such Holder has been engaged in
any violation of law,  violation of an agreement to which such Holder is a party
or for any reason  whatsoever,  unless,  an injunction  from a court, on notice,
restraining and or adjoining  conversion of all or of said Notes shall have been
issued and the Maker  posts a surety  bond for the  benefit of such Holder in an
amount equal to 130% of the principal amount of the Notes the Holder has elected
to  convert,  which  bond  shall  remain  in  effect  until  the  completion  of
arbitration/litigation of the dispute and the proceeds of which shall be payable
to such Holder in the event it obtains judgment.

                                      -18-
<PAGE>

          (b)     MECHANICS OF  FULFILLING  HOLDER'S  ELECTION.  The Maker shall
immediately  send via facsimile to the Holder,  upon receipt of a facsimile copy
of a  Conversion  Notice  from the Holder  which  cannot be fully  satisfied  as
described in Section  3.8(a) above,  a notice of the Maker's  inability to fully
satisfy the Conversion  Notice (the "INABILITY TO FULLY CONVERT  NOTICE").  Such
Inability to Fully Convert Notice shall indicate (i) the reason why the Maker is
unable to fully satisfy such holder's Conversion Notice, (ii) the amount of this
Note which cannot be converted  and (iii) the  applicable  Mandatory  Prepayment
Price.  The Holder shall  notify the Maker of its  election  pursuant to Section
3.8(a) above by delivering written notice via facsimile to the Maker ("NOTICE IN
RESPONSE TO INABILITY TO CONVERT").

          (c)     PAYMENT OF PREPAYMENT PRICE. If the Holder shall elect to have
its Notes prepaid  pursuant to Section  3.8(a)(i) above, the Maker shall pay the
Mandatory  Prepayment Price to the Holder within thirty (30) days of the Maker's
receipt of the Holder's  Notice in Response to  Inability  to Convert,  PROVIDED
that  prior to the  Maker's  receipt  of the  Holder's  Notice  in  Response  to
Inability to Convert the Maker has not delivered a notice to the Holder stating,
to the satisfaction of the Holder,  that the event or condition resulting in the
Mandatory  Prepayment has been cured and all Conversion  Shares  issuable to the
Holder can and will be delivered to the Holder in  accordance  with the terms of
this Note. If the Maker shall fail to pay the  applicable  Mandatory  Prepayment
Price to the Holder on a timely basis as described in this Section 3.8(c) (other
than pursuant to a dispute as to the determination of the arithmetic calculation
of the  Prepayment  Price),  in addition to any remedy the Holder may have under
this Note and the Purchase Agreement,  such unpaid amount shall bear interest at
the rate of 2.0% per month  (prorated  for partial  months)  until paid in full.
Until the full  Mandatory  Prepayment  Price is paid in full to the Holder,  the
Holder may (i) void the Mandatory Prepayment with respect to that portion of the
Note for which the full  Mandatory  Prepayment  Price  has not been  paid,  (ii)
receive  back such Note,  and (iii)  require that the  Conversion  Price of such
returned Note be adjusted to the lesser of (A) the Conversion Price as in effect
on the date on which the Holder  voided  the  Mandatory  Prepayment  and (B) the
lowest Closing Bid Price during the period  beginning on the Conversion Date and
ending on the date the Holder voided the Mandatory Prepayment.

          (d)     PRO-RATA  CONVERSION  AND  PREPAYMENT.  In the event the Maker
receives a Conversion  Notice from more than one holder of the Notes on the same
day and the  Maker  can  convert  and  prepay  some,  but not all,  of the Notes
pursuant  to this  Section  3.8,  the Maker  shall  convert and prepay from each
holder of the Notes  electing  to have its Notes  converted  and prepaid at such
time an amount equal to such  holder's  pro-rata  amount (based on the principal
amount of the Notes held by such holder relative to the principal  amount of the
Notes outstanding) of all the Notes being converted and prepaid at such time.

     Section 3.9  NO RIGHTS AS SHAREHOLDER. Nothing contained in this Note shall
be construed as  conferring  upon the Holder,  prior to the  conversion  of this
Note,  the right to vote or to  receive  dividends  or to  consent or to receive
notice as a  shareholder  in respect  of any  meeting  of  shareholders  for the
election of directors of the Maker or of any other  matter,  or any other rights
as a shareholder of the Maker.

                                      -19-
<PAGE>

                                   ARTICLE IV

                                  MISCELLANEOUS

          Section  4.1   NOTICES. Any notice, demand,  request,  waiver or other
     communication  required  or  permitted  to be given  hereunder  shall be in
     writing  and shall be  effective  (a) upon  hand  delivery  by telex  (with
     correct  answer back  received),  telecopy or  facsimile  at the address or
     number designated in the Purchase Agreement (if delivered on a business day
     during normal  business hours where such notice is to be received),  or the
     first  business day following  such delivery (if delivered  other than on a
     business  day during  normal  business  hours  where  such  notice is to be
     received) or (b) on the second  business day  following the date of mailing
     by express courier service,  fully prepaid,  addressed to such address,  or
     upon actual receipt of such mailing, whichever shall first occur. The Maker
     will give written  notice to the Holder at least ten (10) days prior to the
     date on which the Maker closes its books or takes a record (x) with respect
     to any dividend or distribution  upon the Common Stock, (y) with respect to
     any pro rata  subscription  offer to  holders  of  Common  Stock or (z) for
     determining rights to vote with respect to any Organic Change, dissolution,
     liquidation  or winding-up and in no event shall such notice be provided to
     such holder prior to such information  being made known to the public.  The
     Maker  will also give  written  notice to the Holder at least ten (10) days
     prior to the date on which any Organic Change, dissolution,  liquidation or
     winding-up will take place and in no event shall such notice be provided to
     the Holder prior to such  information  being made known to the public.  The
     Maker shall promptly  notify the Holder of this Note of any notices sent or
     received, or any actions taken with respect to the Other Notes.

          Section 4.2    GOVERNING  LAW.  This  Note  shall be  governed  by and
     construed in  accordance  with the internal  laws of the State of New York,
     without giving effect to the choice of law provisions.  This Note shall not
     be interpreted or construed with any presumption  against the party causing
     this Note to be drafted.

          Section 4.3    HEADINGS. Article and section headings in this Note are
     included herein for purposes of convenience of reference only and shall not
     constitute a part of this Note for any other purpose.

          Section 4.4    REMEDIES,    CHARACTERIZATIONS,    OTHER   OBLIGATIONS,
     BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Note shall be
     cumulative and in addition to all other remedies available under this Note,
     at law or in equity (including,  without  limitation,  a decree of specific
     performance  and/or other  injunctive  relief),  no remedy contained herein
     shall be deemed a waiver of compliance  with the provisions  giving rise to
     such  remedy and  nothing  herein  shall  limit a holder's  right to pursue
     actual  damages  for any  failure by the Maker to comply  with the terms of
     this  Note.  Amounts  set forth or  provided  for  herein  with  respect to
     payments,  conversion and the like (and the  computation  thereof) shall be
     the amounts to be received by the holder  thereof and shall not,  except as
     expressly  provided herein, be subject to any other obligation of the Maker
     (or the performance thereof). The Maker acknowledges that a breach by it of



                                      -20-
<PAGE>

     its obligations  hereunder will cause  irreparable and material harm to the
     Holder  and that the remedy at law for any such  breach may be  inadequate.
     Therefore  the  Maker  agrees  that,  in the  event of any such  breach  or
     threatened breach,  the Holder shall be entitled,  in addition to all other
     available rights and remedies, at law or in equity, to seek and obtain such
     equitable  relief,  including but not limited to an injunction  restraining
     any such breach or  threatened  breach,  without the  necessity  of showing
     economic loss and without any bond or other security being required.

          Section 4.5    ENFORCEMENT EXPENSES. The Maker agrees to pay all costs
     and expenses of enforcement of this Note,  including,  without  limitation,
     reasonable attorneys' fees and expenses.

          Section 4.6    BINDING  EFFECT.  The  obligations of the Maker and the
     Holder set forth herein shall be binding upon the successors and assigns of
     each such party, whether or not such successors or assigns are permitted by
     the terms hereof.

          Section 4.7    AMENDMENTS. This Note may not be modified or amended in
     any manner except in writing executed by the Maker and the Holder.

          Section 4.8    COMPLIANCE  WITH  SECURITIES  LAWS.  The Holder of this
     Note  acknowledges that this Note is being acquired solely for the Holder's
     own account and not as a nominee for any other party,  and for  investment,
     and that the Holder  shall not  offer,  sell or  otherwise  dispose of this
     Note.  This  Note  and any  Note  issued  in  substitution  or  replacement
     therefore shall be stamped or imprinted with a legend in substantially  the
     following form:

     " THIS NOTE HAS NOT BEEN  REGISTERED  UNDER THE  SECURITIES ACT OF 1933, AS
     AMENDED (THE "ACT"),  OR APPLICABLE  STATE  SECURITIES LAWS, AND MAY NOT BE
     SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH  REGISTRATION  OR RECEIPT BY THE
     MAKER OF AN OPINION OF COUNSEL IN THE FORM,  SUBSTANCE AND SCOPE REASONABLY
     SATISFACTORY  TO  THE  MAKER  THAT  THIS  NOTE  MAY BE  SOLD,  TRANSFERRED,
     HYPOTHECATED OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION
     UNDER THE ACT AND SUCH STATE SECURITIES LAWS."

          Section 4.9    CONSENT  TO  JURISDICTION.  Each of the  Maker  and the
     Holder (i) hereby irrevocably submits to the exclusive  jurisdiction of the
     United States  District Court sitting in the Southern  District of New York
     and the courts of the State of New York  located in New York county for the
     purposes of any suit,  action or  proceeding  arising out of or relating to
     this Note and (ii)  hereby  waives,  and  agrees  not to assert in any such
     suit, action or proceeding,  any claim that it is not personally subject to
     the  jurisdiction  of such court,  that the suit,  action or  proceeding is
     brought in an inconvenient  forum or that the venue of the suit,  action or
     proceeding  is  improper.  Each of the Maker  and the  Holder  consents  to
     process  being served in any such suit,  action or  proceeding by mailing a
     copy thereof to such party at the address in effect for notices to it under
     the Purchase  Agreement and agrees that such service shall  constitute good
     and  sufficient  service of process  and  notice  thereof.  Nothing in this
     Section 4.9 shall  affect or limit any right to serve  process in any other


                                      -21-
<PAGE>


     manner permitted by law. Each of the Maker and the Holder hereby agree that
     the prevailing  party in any suit,  action or proceeding  arising out of or
     relating  to this Note shall be entitled to  reimbursement  for  reasonable
     legal fees from the non-prevailing party.

          Section 4.10   PARTIES IN INTEREST.  This Note shall be binding  upon,
     inure to the  benefit of and be  enforceable  by the Maker,  the Holder and
     their respective successors and permitted assigns.

          Section 4.11   FAILURE OR INDULGENCE  NOT WAIVER.  No failure or delay
     on the part of the Holder in the exercise of any power,  right or privilege
     hereunder  shall  operate  as a waiver  thereof,  nor shall  any  single or
     partial  exercise of any such power,  right or privilege  preclude other or
     further exercise thereof or of any other right, power or privilege.

          Section 4.12   MAKER   WAIVERS.   Except  as  otherwise   specifically
     provided herein, the Maker and all others that may become liable for all or
     any  part  of  the  obligations   evidenced  by  this  Note,  hereby  waive
     presentment,  demand, notice of nonpayment,  protest and all other demands'
     and notices in connection  with the delivery,  acceptance,  performance and
     enforcement  of this Note,  and do hereby consent to any number of renewals
     of  extensions  of the  time or  payment  hereof  and  agree  that any such
     renewals or extensions  may be made without  notice to any such persons and
     without  affecting  their  liability  herein and do further  consent to the
     release of any person liable hereon, all without affecting the liability of
     the other persons,  firms or Maker liable for the payment of this Note, AND
     DO HEREBY WAIVE TRIAL BY JURY.

     (a)  No delay or  omission  on the part of the  Holder  in  exercising  its
rights under this Note, or course of conduct relating hereto, shall operate as a
waiver of such rights or any other right of the Holder,  nor shall any waiver by
the Holder of any such right or rights on any one occasion be deemed a waiver of
the same right or rights on any future occasion.

     (b)  THE MAKER  ACKNOWLEDGES  THAT THE  TRANSACTION OF WHICH THIS NOTE IS A
PART IS A COMMERCIAL  TRANSACTION,  AND TO THE EXTENT ALLOWED BY APPLICABLE LAW,
HEREBY  WAIVES ITS RIGHT TO NOTICE AND HEARING WITH  RESPECT TO ANY  PREJUDGMENT
REMEDY WHICH THE HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.

     Section 4.13   DEFINITIONS.  For the purposes  hereof,  the following terms
shall have the following meanings:

     "PERSON"  means  an  individual  or  a  corporation,   partnership,  trust,
incorporated or  unincorporated  association,  joint venture,  limited liability
company, joint stock company,  government (or an agency or political subdivision
thereof) or other entity of any kind.

     "TRADING  DAY" means (a) a day or which the  Common  Stock is traded in the
over-the-counter  market,  as reported by the OTC Bulletin  Board,  or (b if the
Common Stock is not quoted on the OTC Bulletin  Board, a day on which the Common
Stock is  quoted in the  over-the-counter  market as  reported  by the  National


                                      -22-
<PAGE>

Quotation Bureau Incorporated (or any similar  organization or agency succeeding
its functions of reporting prices);  provided,  however,  that in the event that
the  Common  Stock is not  listed or quoted as set forth in (a) and (b)  hereof,
then  Trading Day shall mean any day except  Saturday,  Sunday and any day which
shall be a legal holiday or a day on which banking  institutions in the State of
New York are authorized or required by law or other government action to close.


                                    V-ONE CORPORATION


                                    By:  ______________________________
                                         Name:
                                         Title:

                                      -23-
<PAGE>

EXHIBIT A

                               WIRE INSTRUCTIONS.



Payee: ________________________________________________________

Bank:  ________________________________________________________

Address: _____________________________________________________

         ______________________________________________________

Bank No.: _____________________________________________________

Account No.: __________________________________________________

Account Name: _________________________________________________


                                      -24-
<PAGE>

                                     FORM OF

                              NOTICE OF CONVERSION

     (To be Executed by the Registered Holder in order to Convert the Note)

The undersigned hereby  irrevocably elects to convert $ ________________  of the
principal  amount of the above Note No. ___ into shares of Common Stock of V-ONE
CORPORATION  (the "Maker")  according to the conditions  hereof,  as of the date
written below.

Date of Conversion _________________________________________________________

Applicable Conversion Price __________________________________________________

Number of shares of Common Stock beneficially owned or deemed beneficially owned
by the Holder on the Date of Conversion: _________________________

Signature___________________________________________________________________

      [Name]

Address:__________________________________________________________________

      ________________________________________________________________________

                                      -25-