F 10.24.01


Registered #______________

                             RATEXCHANGE CORPORATION
                        12% CONVERTIBLE SUBORDINATED NOTE
                              DUE DECEMBER 31, 2011

$XXX,000.00                                                    November 26, 2001

     THIS  NOTE  IS  ISSUED  PURSUANT  TO AN  EXEMPTION  FROM  THE  REGISTRATION
     PROVISIONS  OF THE  SECURITIES  ACT OF 1933 (THE  "ACT") AND  QUALIFICATION
     PROVISIONS OF APPLICABLE STATE  SECURITIES LAWS.  NEITHER IT NOR THE SHARES
     OF COMMON STOCK INTO WHICH IT CAN BE CONVERTED CAN BE SOLD, HYPOTHECATED OR
     OTHERWISE  TRANSFERRED UNLESS REGISTERED  PURSUANT TO THE ACT AND QUALIFIED
     UNDER  APPLICABLE  STATE LAW OR, IN THE  OPINION OF  COUNSEL  TO MAKER,  AN
     EXEMPTION THEREFROM IS AVAILABLE.

FOR  VALUE  RECEIVED,  the  undersigned,  RATEXCHANGE  CORPORATION,  a  Delaware
corporation  with  offices  at  100  Pine  Street,  Suite  500,  San  Francisco,
California  94111-5101  ("Maker"),  promises to pay  XXXXXXX  with an address at
XXXXXXXX,  except as  otherwise  provided  herein  (the  "Maturity  Date"),  the
principal amount of  ($XXX,000.00)  Dollars in lawful money of the United States
of America (the "Principal") together with all accrued interest.

This Note is one of a series of notes  (collectively the "Notes"),  all with the
same  terms and  conditions  as those set forth  herein,  which may be issued by
Maker up to the  aggregate  principal  amount of Three  Million  Two Hundred and
Fifty  Thousand  ($3,250,000)  Dollars.  Each Note is part of an  offering  (the
"Offering")  of up to sixty five (65) units (the  "Units")  being  conducted  by
Maker on a best efforts  basis.  Each Unit consists of one note in the principal
amount of Fifty  Thousand  ($50,000.00)  Dollars and 12,500  Class A  Redeemable
Warrants.  The Offering  will  terminate on the sooner of the sale of all of the
Notes or October 31, 2001 (unless  extended to November 30, 2001,  at the option
of Maker and the placement agent in the Offering).

The Note is (i) subordinated to certain of Maker's  indebtedness  defined herein
as "Senior Debt";  and (ii)  convertible  into Maker's  common stock,  par value
$0.0001 per share (the "Common Stock"),  all as set forth below. It bears simple
interest (the  "Interest") at the annual rate of twelve percent (12%),  payable,
in arrears, on the Interest Payment Dates (as defined in Section 1 below), until
the Principal and all accrued Interest thereon  (collectively the "Obligations")
shall be paid in full.


                                  Page 1 of 15
<PAGE>
RateXchange Corporation                                               F 10.24.01
12% Convertible
Subordinated Note


1. Interest.

Maker  will pay  Interest  on the first  day of each  January,  April,  July and
October, (the "Interest Payment Dates") commencing on April 1, 2002. Interest on
the Note will accrue from the most recent date to which  interest  has been paid
or, if no interest has been paid,  from the date of delivery of the Note.  If an
Interest  Payment Date falls on a date that is not a business  day, the Interest
shall be payable on the next succeeding  business day. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.

2. Method of Payment.

Maker will pay  Principal and Interest in money of the United States that at the
time of payment is legal  tender for the  payment of public and  private  debts.
Maker  may,  however,  pay  Principal  and  Interest  by its  check,  subject to
collection,  payable in such  money.  It may mail an  Interest  check to Payee's
address as it first  appears on this Note or such other  address as Payee  shall
give by notice to Maker.  Payee  must  surrender  this Note to Maker to  collect
Principal  payments.  If less than the then  outstanding  Principal is paid, the
Note shall be  surrendered  only for notation by Maker of the principal  payment
made and returned to Payee.

3. Conversion.

(a) Payee's right to Convert. Payee shall have the right, at any time commencing
on the date hereof  until the close of business on the day the  Obligations  are
paid in full, to cause the  conversion of all or any portion (if such portion is
Five Thousand  [$5,000]  Dollars or a whole  multiple of Five Thousand  [$5,000]
Dollars) of the Principal  outstanding  at the time such  conversion is effected
(the  "Convertible  Obligations")  into shares of Common Stock (the  "Underlying
Shares").  Payee shall forfeit all accrued but unpaid Interest upon  conversion.
The price for conversion,  subject to adjustment as provided in Section 4 below,
shall be $0.37 per  share.  Maker  will not issue a  fractional  share of Common
Stock upon  conversion.  Maker will round any  fractional  share to the  nearest
share so that if the  fraction  is less than 0.5 no share shall be issued and if
the fraction is 0.5 or higher Maker shall issue one full share

(b) Manner of  Conversion.  Payee may  exercise his  conversion  right by giving
notice thereof to Maker setting forth the amount of the Convertible  Obligations
to be converted. Within fifteen (15) days after the giving of such notice, Maker
shall  issue  the  number  of  Underlying  Shares  into  which  the  Convertible
Obligations  are to be converted in  accordance  with the  conversion  price and
deliver to Payee a certificate or certificates therefor, registered in his name,
representing  such Shares against  delivery to Maker of this Note marked paid in
full if all of the Convertible  Obligations are converted.  If only a portion of
the Convertible  Obligations then outstanding is converted,  Maker shall deliver
to Payee,  together with the aforesaid  certificate(s),  a new note, in form and
substance identical to this Note, except that the principal amount thereof shall
equal  that  portion  of the  Obligations  then  outstanding  which has not been
converted. Payee shall represent in writing to Maker prior to the receipt of the
Underlying Shares that such Shares will be


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<PAGE>
RateXchange Corporation                                               F 10.24.01
12% Convertible
Subordinated Note


acquired  by him for  investment  only and not for  resale or with a view to the
distribution  thereof,  and shall agree that any  certificates  representing the
Shares may bear a legend,  conspicuously noting such restriction, as Maker shall
deem  reasonably  necessary  or  desirable  to  enable  it to  comply  with  any
applicable federal or state laws or regulations.

(c) Taxes on Shares Issued.  The issue of stock  certificates  on conversions of
this Note shall be made  without  charge to Payee for any tax in respect of such
issue. Maker shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of Common Stock in
any name other than that of Payee,  and Maker  shall not be required to issue or
deliver any  certificates  representing  such Common  Stock unless and until the
person or  persons  requesting  the issue  thereof  shall have paid to Maker the
amount of such tax or shall have  established to the  satisfaction of Maker that
such tax has been paid.

(d) Covenants of Maker Relating to Conversion.  Maker  covenants and agrees that
from and after the date  hereof and until the date of  repayment  in full of the
Obligations, or full conversion of the Convertible Obligations:

     (i) It shall reserve,  free from preemptive  rights,  out of its authorized
     but  unissued  shares,  or out of shares held in its  treasury,  sufficient
     shares to provide for the  conversion of this Note from time to time as the
     Note is presented for conversion;

     (ii) All shares which may be issued upon  conversion of this Note will upon
     issue be  validly  issued,  fully  paid and  non-assessable,  free from all
     taxes, liens and charges with respect to the issue thereof, and will not be
     subject to the preemptive rights of any stockholder of Maker;

     (iii) If any  shares of Common  Stock to be  provided  for the  purpose  of
     conversion  of this  Note  require  registration  with or  approval  of any
     governmental  authority  under any  federal or state law before such shares
     may be  validly  issued  upon  conversion,  Maker will in good faith and as
     expeditiously as possible attempt to secure such  registration or approval,
     as the case may be, and Maker's  obligation to deliver shares of the Common
     Stock upon conversion of this Note shall be abated until such  registration
     or approval is obtained; and

     (iv) If, and thereafter so long as, the Common Stock shall be listed on any
     national securities exchange, Maker will, if permitted by the rules of such
     exchange,  list and keep  listed and for sale so long as the  Common  Stock
     shall be so listed on such exchange,  upon official notice of issuance, all
     Common Stock issued upon conversion of this Note.

4. Adjustment in Conversion Price.

(a) Adjustment  for Change in Capital  Stock.  Except as provided in Paragraph 4
(o) below, if Maker shall (i) declare a dividend on its outstanding Common Stock
in shares of its capital  stock,  (ii) subdivide its  outstanding  Common Stock,
(iii) combine its


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<PAGE>
RateXchange Corporation                                               F 10.24.01
12% Convertible
Subordinated Note


outstanding  Common  Stock into a smaller  number of  shares,  or (iv) issue any
shares of its capital stock by  reclassification  of its Common Stock (including
any such  reclassification in connection with a consolidation or merger in which
Maker is the  continuing  corporation),  then in each such  case the  conversion
privilege and the conversion  price in effect  immediately  prior to such action
shall be adjusted so that if the Note is thereafter converted, Payee may receive
the number and kind of shares  which he would have owned  immediately  following
such action if he had converted the Note immediately prior to such action.  Such
adjustment  shall be made  successively  whenever such an event shall occur. The
adjustment shall become effective  immediately after the record date in the case
of a dividend or distribution  and  immediately  after the effective date in the
case of a subdivision,  combination or reclassification.  If after an adjustment
Payee upon  conversion of this Note may receive shares of two or more classes of
capital  stock  of  Maker,  Maker's  Board  of  Directors  shall  determine  the
allocation  of the  adjusted  conversion  price  between  the classes of capital
stock. After such allocation,  the conversion  privilege and conversion price of
each class of capital  stock shall  thereafter be subject to adjustment on terms
comparable to those applicable to Common Stock in this Section 4.

(b) Adjustment for Certain Issuances of Common Stock. If Maker shall at any time
or from time to time issue any shares of Common Stock (other than shares  issued
as a dividend  or  distribution  as  provided  in  Paragraph  5 (a) above) for a
consideration  per share less than the conversion price in effect on the date of
such issue or less than the Current  Market Price (as defined in  Paragraph  (e)
below) per share of the Common  Stock,  then,  forthwith  upon such  issue,  the
conversion  price in effect  immediately  prior to such  action  (the  "Existing
Conversion  Price")  shall be reduced by: (x)  dividing  the number of shares so
issued  by the total  number of shares  outstanding  after  such  issuance,  (y)
multiplying the quotient by the difference between the Existing Conversion Price
and the price of the shares so issued, and (z) subtracting the result of (x) and
(y) from the Existing  Conversion  Price.  In the case of an issue of additional
shares of Common Stock for cash,  the  consideration  received by Maker therefor
shall be deemed to be the net cash  proceeds  received  for such  shares,  after
deducting  therefrom  any and all  commissions  and expenses paid or incurred by
Maker for any  underwriting  of, or otherwise in connection  with,  the issue of
such  shares.  The term  "issue"  shall be deemed to  include  the sale or other
disposition of shares held in Maker's treasury. The number of shares outstanding
at any given time shall not include shares in Maker's treasury.

(c)  Subscription  Offerings.  In case Maker shall issue to all of its  existing
stockholders  or otherwise  grant  rights,  options,  or warrants  entitling the
holders  thereof  to  subscribe  for or  purchase  Common  Stock (or  securities
convertible  into or  exchangeable  for  Common  Stock) at a price per share (or
having a conversion price per share, in the case of a security  convertible into
or  exchangeable  for Common Stock) less than the Current Market Price per share
on the record date for the  determination  of  stockholders  entitled to receive
such rights or the granting date, as the case may be, then in each such case the
Existing  Conversion  Price  shall  be  adjusted  by  multiplying  the  Existing
Conversion Price in effect  immediately prior to such record or granting date by
a fraction, of which the numerator shall be the number of shares of Common Stock
outstanding  on such record or granting date plus the number of shares of Common
Stock which the aggregate offering price of the total number of shares of Common
Stock so to be offered (or the aggregate initial


                                  Page 4 of 15
<PAGE>
RateXchange Corporation                                               F 10.24.01
12% Convertible
Subordinated Note


conversion price of the convertible  securities so to be offered) would purchase
at such Current Market Price and of which the denominator shall be the number of
shares of Common  Stock  outstanding  on such record or  granting  date plus the
number of additional  shares of Common Stock to be offered for  subscription  or
purchase (or into which the  convertible  or  exchangeable  securities  so to be
offered are initially convertible or exchangeable). Such adjustment shall become
effective at the close of business on such record date; provided, however, that,
to the extent  the shares of Common  Stock (or  securities  convertible  into or
exchangeable for shares of Common Stock) are not delivered, the conversion price
shall be readjusted  after the expiration of such rights,  options,  or warrants
(but only to the extent that this Note is not converted after such  expiration),
to the conversion  price which would then be in effect had the adjustments  made
upon the  issuance  of such  rights  or  warrants  been  made  upon the basis of
delivery of only the number of shares of Common Stock (or securities convertible
into or exchangeable  for shares of Common Stock) actually  issued.  In case any
subscription  price may be paid in a consideration part or all of which shall be
in a form  other  than  cash,  the  value  of  such  consideration  shall  be as
determined in good faith by Maker's  Board of Directors.  Shares of Common Stock
owned by or held for the account of Maker or any majority-owned subsidiary shall
not be deemed outstanding for the purpose of any such computation.

(d) Other Rights to Acquire Common Stock. In case Maker shall  distribute to all
holders of its Common Stock evidences of its  indebtedness or assets  (excluding
cash dividends or distributions  paid from retained earnings of Maker) or rights
or warrants to subscribe for or purchase Common Stock  (excluding those referred
to in Paragraph (c) above), then in each such case the conversion price shall be
adjusted so that the same shall equal the price  determined by  multiplying  the
conversion price in effect immediately prior to the date of such distribution by
a fraction of which the  numerator  shall be the Current  Market Price per share
(as  defined in  Paragraph  (d) below) of the  Common  Stock on the Record  Date
mentioned  below less the then fair market value (as determined in good faith by
the Board of  Directors  of Maker of the portion of the assets or  evidences  of
indebtedness  so  distributed  or of such rights or warrants  applicable  to one
share of Common Stock, and the denominator shall be the Current Market Price per
share of the Common Stock.  Such adjustment shall become  effective  immediately
after the Record Date for the determination of shareholders  entitled to receive
such distribution.

(e) Current Market Price. For the purpose of any computation  under Paragraphs 4
(b) through (d) above,  the "Current  Market Price" per share of Common Stock on
any date shall be deemed to be the average of the daily "Closing  Price" for the
thirty (30)  consecutive  trading days  commencing  forty five (45) trading days
before such date. The "Closing  Price" for each day shall mean the last reported
sales price  regular way or, in case no such  reported  sale takes place on such
day, the closing bid price regular way, in either case on the principal national
securities  exchange on which the Common  Stock is listed or admitted to trading
or, if the Common  Stock is not listed or  admitted  to trading on any  national
securities exchange, the highest reported bid price as furnished by the National
Association of Securities Dealers,  Inc. through NASDAQ or similar  organization
if NASDAQ is no longer  reporting  such  information,  or by the National  Daily
Quotation


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<PAGE>
RateXchange Corporation                                               F 10.24.01
12% Convertible
Subordinated Note


Bureau or  similar  organization  if the Common  Stock is not then  quoted on an
inter-dealer  quotation  system.  If on any such  date the  Common  Stock is not
quoted by any such  organization,  the fair  value of the  Common  Stock on such
date, as determined in good faith by Maker's Board of Directors, shall be used.

(f) Action to Permit Valid  Issuance of Common  Stock.  Before taking any action
which would cause an adjustment reducing the conversion price below the then par
value,  if any, of the shares of Common Stock  issuable  upon  conversion of the
Notes,  Maker will take all  corporate  action  which may, in the opinion of its
counsel,  be necessary in order that Maker may validly and legally  issue shares
of such Common Stock at such adjusted conversion price.

(g) Minimum Adjustment.  No adjustment in the conversion price shall be required
if such  adjustment  is less  than 1% of the  then  Existing  Conversion  Price;
provided,  however, that any adjustments which by reason of this Paragraph 4 (g)
are not  required to be made shall be carried  forward and taken into account in
any subsequent  adjustment.  All calculations under this Section 4 shall be made
to the nearest cent or to the nearest  one-hundredth of a share, as the case may
be.  Anything to the contrary  notwithstanding,  Maker shall be entitled to make
such  reductions in the conversion  price, in addition to those required by this
Paragraph 4 (g), as it in its  discretion  shall  determine  to be  advisable in
order that any stock dividends, subdivision of shares, distribution of rights to
purchase stock or securities,  or distribution of securities convertible into or
exchangeable for stock hereafter made by Maker to its stockholders  shall not be
taxable.

(h) Referral of  Adjustment.  In any case in which this Section 4 shall  require
that an adjustment in the conversion price be made effective as of a record date
for a  specified  event (the  "Conversion  Event"),  if the Note shall have been
converted after such record date,  Maker may elect to defer until the occurrence
of the Conversion Event issuing to Payee the shares,  if any,  issuable upon the
Conversion  Event  over  and  above  the  shares,  if any,  issuable  upon  such
Conversion  Event on the basis of the  conversion  price in effect prior to such
adjustment;  provided,  however, that Maker shall deliver to Payee a due bill or
other appropriate instrument evidencing Payee's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.

(i) Number of Shares.  Upon each adjustment of the conversion  price as a result
of the  calculations  made in Paragraphs 4 (a) through (d) above, the Note shall
thereafter  evidence the right to purchase,  at the adjusted  conversion  price,
that  number of shares  (calculated  to the nearest  one-hundredth)  obtained by
dividing (i) the product  obtained by multiplying  the number of shares issuable
upon  conversion  of the Note prior to adjustment of the number of shares by the
conversion  price in effect prior to adjustment of the conversion  price by (ii)
the conversion price in effect after such adjustment of the conversion price.

(j) When No Adjustment  Required.  No adjustment  need be made for a transaction
referred  to in  Paragraphs  4 (a) through  (d) above if Payee is  permitted  to
participate in the transaction on a basis no less favorable than any other party
and at a level which would


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RateXchange Corporation                                               F 10.24.01
12% Convertible
Subordinated Note


preserve  Payee's  percentage  equity  participation  in the  Common  Stock upon
conversion  of the Note.  No  adjustment  need be made for sales of Common Stock
pursuant to a Company  plan for  reinvestment  of  dividends  or  interest,  the
granting  of options  and/or the  exercise of options  outstanding  under any of
Maker's  currently  existing  stock option  plans,  the exercise of any other of
Maker's currently  outstanding  options, or any currently  authorized  warrants,
whether or not  outstanding.  No adjustment need be made for a change in the par
value of the  Common  Stock,  or from par  value  to no par  value.  If the Note
becomes  convertible  solely into cash, no adjustment  need be made  thereafter.
Interest will not accrue on the cash.

(k) Notice of Adjustment. Whenever the conversion price is adjusted, Maker shall
promptly  mail to Payee a notice of the  adjustment  together with a certificate
from Maker's Chief Financial Officer briefly stating (i) the facts requiring the
adjustment,  (ii) the adjusted  conversion price and the manner of computing it,
and the date on which such adjustment becomes  effective.  The certificate shall
be evidence that the adjustment is correct, absent manifest error.

(l) Voluntary Reduction. Maker from time to time may reduce the conversion price
by any amount for any period of time if the period is at least  twenty (20) days
and if the reduction is irrevocable  during the period.  Whenever the conversion
price is  reduced,  Maker shall mail to Payee a notice of the  reduction.  Maker
shall mail the notice at least  fifteen  (15) days  before the date the  reduced
conversion  price takes  effect.  The notice shall state the reduced  conversion
price and the period it will be in effect.  A reduction of the conversion  price
does not change or adjust the conversion  price otherwise in effect for purposes
of Paragraphs 4 (a) through (d) above.

(m) Prohibition  against Certain  Reductions of Exercise Price.  Anything to the
contrary  notwithstanding,  for the purpose of any computation  under Paragraphs
(b),  (c) or (l) of this  Section 5, in no event shall the  Conversion  Price be
reduced  below (x) the Closing  Price per Share of the Common  Stock on the date
Maker executes this Note or (y) the par value of the Common Stock.

(n) Notice of Certain  Transactions.  If (i) Maker  takes any action  that would
require an adjustment  in the  conversion  price  pursuant to this Section 4; or
(ii) there is a liquidation or dissolution of Maker, Maker shall mail to Payee a
notice stating the proposed  record date for a distribution or effective date of
a  reclassification,  consolidation,  merger,  transfer,  lease,  liquidation or
dissolution.  Maker shall mail the notice at least fifteen (15) days before such
date.  Failure  to mail the  notice or any  defect in it shall  not  affect  the
validity of the transaction.

(o)  Reorganization of Company.  If Maker and/or the holders of Common Stock are
parties to a merger, consolidation or a transaction in which (i) Maker transfers
or leases  substantially all of its assets;  (ii) Maker  reclassifies or changes
its  outstanding  Common  Stock;  or (iii) the  Common  Stock is  exchanged  for
securities,  cash or other assets; the person who is the transferee or lessee of
such assets or is  obligated to deliver  such  securities,  cash or other assets
shall assume the terms of this Note. If the issuer of


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<PAGE>
RateXchange Corporation                                               F 10.24.01
12% Convertible
Subordinated Note


securities  deliverable  upon  conversion  of the  Note is an  affiliate  of the
surviving,  transferee  or lessee  corporation,  that issuer  shall join in such
assumption.  The assumption  agreement  shall provide that the Payee may convert
the  Convertible  Obligations  into the kind and amount of  securities,  cash or
other  assets  which he would have owned  immediately  after the  consolidation,
merger,  transfer,  lease or exchange if he had converted  the Note  immediately
before the effective date of the  transaction.  The assumption  agreement  shall
provide for adjustments  that shall be as nearly  equivalent as may be practical
to the adjustments  provided for in this Section 4. The successor  company shall
mail to Payee a notice  briefly  describing the  assumption  agreement.  If this
Paragraph applies, Paragraph 4 (a) above does not apply.

5. Right to Registration.

(a)  Payee's  Demand  Right  to  Registration.   Upon  receipt  of  notice  (the
"Registration  Request  Notice")  requesting  registration  under the Act of the
Underlying  Shares  from the  holders  of more than fifty  percent  (50%) of the
aggregate  principal  amount of the  Notes,  on only one  occasion,  at any time
commencing on the date hereof and terminating two years  thereafter,  Maker will
offer  to Payee  the  opportunity  to  include  his  Underlying  Shares  in such
registration.  Maker  will use its  reasonable  best  efforts  to file  with the
Securities  and  Exchange   Commission   (the   "Commission")   as  promptly  as
practicable, a registration statement (the "Demand Registration Statement"), and
will use its reasonable best efforts to have the Demand  Registration  Statement
declared  effective  and  remain  effective  until  the  earliest  of two  years
thereafter,  the date all the  Underlying  Shares  registered  thereby have been
sold, or, in the reasonable  opinion of Maker's counsel,  the Underlying  Shares
may be sold publicly  without  registration.  Maker will also use its reasonable
best efforts to qualify the Underlying  Shares under the securities  laws of the
state where Payee  resides  provided  Maker is not required to execute a general
consent to service or to qualify to do  business  in such  state.  This offer to
Payee  shall  be  made  within  twenty  (20)  days  after  Maker   receives  the
Registration Request Notice. If Payee elects to include his Underlying Shares in
the Demand Registration Statement,  he will, in a timely fashion,  provide Maker
and its counsel  with such  information  and execute  such  documents as Maker's
counsel may  reasonably  require to prepare and process the Demand  Registration
Statement.  If Payee elects not to include his  Underlying  Shares in the Demand
Registration  Statement,  he shall have no further rights to the registration of
his  Underlying  Shares under this  Paragraph 5 (a). In the event that Maker has
filed a registration  statement  with the Commission  relating to its securities
within ninety (90) days prior to its receipt of the Registration Request Notice,
which registration  statement as not been declared effective,  Payee agrees that
Maker can thereafter delay the filing of the Demand Registration Statement for a
period not to exceed ninety (90) days. Anything to the contrary notwithstanding,
in no event shall Maker be required to file a Demand Registration Statement with
the Commission prior to one hundred and eighty (180) days after the date hereof.

(b) Payee's  "Piggy  Back"  Registration  Rights.  If at any time after the date
hereof,  Maker  proposes  to file a  Registration  Statement  under the Act with
respect  to any of its  securities  (except  one  relating  to stock  option  or
employee benefit plans or a merger or


                                  Page 8 of 15
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RateXchange Corporation                                               F 10.24.01
12% Convertible
Subordinated Note


similar transaction), Maker shall give written notice of its intention to effect
such filing to Payee at least thirty (30) days prior to filing such Registration
Statement (the "Piggy-Back Registration  Statement").  If the Payee's Underlying
Shares have not been  previously  registered as provided in Section 5 (a) above,
and  Payee  desires  to  include  his   Underlying   Shares  in  the  Piggy-Back
Registration  Statement,  he shall notify Maker in writing  within  fifteen (15)
days after receipt of such notice from Maker, in which event Maker shall include
Payee's  Underlying Shares in the Piggy-Back  Registration  Statement.  If Payee
elects to include his Underlying Shares in the Piggy-Back Registration Statement
as set forth herein, he shall, in a timely manner, provide Maker and its counsel
with such  information  and execute such documents as its counsel may reasonably
require to prepare and process the Piggy-Back Registration  Statement.  Anything
to the  contrary  notwithstanding,  in the event that the offering for which the
Piggy-Back  Registration  Statement has been filed is to be effected  through or
with the assistance of an  underwriter,  Payee will consent to restrict the sale
of his Underlying  Shares or reduce the number of his Underlying Shares that may
be included in such  registration  statement in accordance with the requirements
of such underwriter.

(c) Copies of Registration Statements and Prospectuses. Maker will provide Payee
with a copy of the Demand  Registration  Statement  or  Piggy-Back  Registration
Statement,  as the case may be, and any  amendments  thereto,  and copies of the
final  prospectus  included  therein in such  quantities  as may  reasonably  be
required  to  permit  Payee to sell  his  Underlying  Shares  after  the  Demand
Registration Statement or Piggy-Back Registration Statement, as the case may be,
is declared effective by the Commission (the "Effective Date").

(d) Maker's  Obligation  to Bear Expenses of  Registration.  Maker will bear all
expenses (except  underwriting  discounts and commission,  if any, and the legal
fees and expenses,  if any, of counsel to Payee) necessary and incidental to the
performance of its obligations under this Section 5.

(e) Indemnification.  Maker and Payee, if Payee's Underlying Shares are included
in  a  Registration   Statement  pursuant  to  this  Section  5,  shall  provide
appropriate cross indemnities to each other covering the information supplied by
the indemnifying party for inclusion in the Registration Statement.

(f)   Cancellation   of   Registration   Rights.   Anything   to  the   contrary
notwithstanding,  Maker shall not be required to register any Underlying  Shares
which, in the reasonable opinion of Maker's counsel, may be sold pursuant to the
exemption  from  registration  provided by Section  (k) of Rule 144  promulgated
under the Act.

6. Subordination; Pari Passu with other Notes.

The  Note is  subordinated  to  "Senior  Debt,"  which is the  principal  of and
premium, if any, and interest (including post-petition interest, if any) on, and
any  other  payment  due  pursuant  to the  terms  of  instruments  creating  or
evidencing  Indebtedness  of  Maker  outstanding  on the  date of  this  Note or
Indebtedness thereafter created, incurred, assumed


                                  Page 9 of 15
<PAGE>
RateXchange Corporation                                               F 10.24.01
12% Convertible
Subordinated Note


or guaranteed  by Maker and all renewals,  extensions  and  refundings  thereof,
which is payable to banks or other traditional  long-term  institutional lenders
such as insurance  companies and pension  funds and  including  debt incurred in
connection  with  equipment  leasing  transactions,  unless  in  the  instrument
creating  or  evidencing  such  Indebtedness,  it  is  not  provided  that  such
Indebtedness  is senior in right of  payment  to this  Note.  There  shall be no
limitation  on the amount of Senior  Debt that Maker may incur.  Notwithstanding
the foregoing, Senior Debt with respect to Maker or any subsidiary thereof shall
not  include  (i) any  Indebtedness  of Maker to any such  subsidiary  for money
borrowed or advanced from such subsidiary, or (ii) any Indebtedness representing
the redemption price of any preferred stock.  "Indebtedness,"  as applied to any
entity, means any indebtedness,  contingent or otherwise, in respect of borrowed
money  (whether or not the  recourse of the lender is to the whole of the assets
of such entity or only to a portion  thereof),  or  evidenced  by bonds,  notes,
debentures or similar  instruments  or letters of credit,  or  representing  the
balance  deferred and unpaid of the  purchase  price of any property or interest
therein, except any such balance that constitutes a trade payable, if and to the
extent that such  indebtedness  would appear as a liability upon a balance sheet
of such entity  prepared on a  consolidated  basis in accordance  with generally
accepted accounting principles in the United States. Senior Debt must be paid in
accordance  with the terms thereof before the Note may be paid.  This Note shall
be paid on a pari  passu  basis  with all other  Notes.  Upon  request of Maker,
Payee, shall execute such  subordination  agreements with holders of Senior Debt
as shall be reasonably requested.

7. Covenants.

Maker  covenants  and agrees  that from and after the date  hereof and until the
date of repayment in full of the  Obligations it shall comply with the following
conditions:

     (i)  Maintenance  of Existence  and Conduct of Business.  Maker shall,  and
     shall cause each of its subsidiaries, if any, to (A) do or cause to be done
     all  things  necessary  to  preserve  and keep in full force and effect its
     corporate existence and rights; and (B) continue to conduct its business so
     that the business  carried on in  connection  therewith may be properly and
     advantageously conducted at all times.

     (ii)  Books  and  Records.  Maker  shall,  and  shall  cause  each  of  its
     subsidiaries,  if any, to keep  adequate  books and records of account with
     respect to its business activities.

     (iii) Insurance. Maker shall, and shall cause each of its subsidiaries,  if
     any, to maintain  insurance policies insuring such risks as are customarily
     insured  against  by  companies  engaged  in  businesses  similar  to those
     operated  by Maker  or such  subsidiaries,  as the  case  may be.  All such
     policies are to be carried with reputable  insurance  carriers and shall be
     in such  amounts  as are  customarily  insured  against by  companies  with
     similar assets and properties engaged in a similar business.

     (iv)  Compliance  with  Law.  Maker  shall,  and  shall  cause  each of its
     subsidiaries,  if any, to comply in all material respects with all federal,
     state and local laws and regulations applicable to it or such subsidiaries,
     as the case may be,


                                 Page 10 of 15
<PAGE>
RateXchange Corporation                                               F 10.24.01
12% Convertible
Subordinated Note


     which if breached  would have a material  adverse effect on Maker's or such
     subsidiaries',  as  the  case  may  be,  business,  prospects,  operations,
     properties, assets or condition (financial or otherwise).

8. Representations and Warranties of Maker.

Maker  represents  and warrants  that it: (i) is a corporation  duly  organized,
validly  existing and in good  standing  under the laws of the State of Delaware
and has all requisite  corporate power to carry on its business as now conducted
and to own its  properties  and assets it now owns;  (ii) is duly  qualified  or
licensed  to do  business  as a  foreign  corporation  in good  standing  in the
jurisdictions  in which  ownership  of property  or the conduct of its  business
requires such qualification except jurisdictions in which the failure to qualify
to do business will have no material adverse effect on its business,  prospects,
operations,  properties, assets or condition (financial or otherwise); (iii) has
full  power and  authority  to  execute  and  deliver  this  Note,  and that the
execution  and delivery of this Note will not result in the breach of or default
under,  with or without  the giving of notice  and/or the  passage of time,  any
other agreement,  arrangement or indenture to which it is a party or by which it
may be bound, or the violation of any law, statute,  rule,  decree,  judgment or
regulation  binding upon it; and (iv) has taken and will take all acts required,
including but not limited to authorizing  the signatory  hereof on its behalf to
execute this Note,  so that upon the  execution  and  delivery of this Note,  it
shall constitute the valid and legally binding  obligation of Maker  enforceable
in accordance with the terms thereof. Maker further represents and warrants that
its subsidiaries,  if any, (x) are corporations duly organized, validly existing
and in good standing under the laws of their respective  states of incorporation
and have all  requisite  corporate  power  to  carry  on their  business  as now
conducted and to own their  properties  and assets;  (ii) are duly  qualified or
licensed  to do  business  as  foreign  corporations  in  good  standing  in the
jurisdictions  in which  ownership of property or the conduct of their  business
requires such qualification except jurisdictions in which the failure to qualify
to do  business  will  have  no  material  adverse  effect  on  their  business,
prospects, operations, properties, assets or condition (financial or otherwise).

9. Defaults and Remedies.

(a) Events of Default.  The  occurrence  or  existence of any one or more of the
following  events or  conditions  (regardless  of the  reasons  therefor)  shall
constitute an "Event of Default" hereunder:

     (i) Maker shall fail to make any payment of Principal or Interest  when due
     and payable or declared  due and payable  pursuant to the terms  hereof and
     such failure  shall remain  uncured for a period of fifteen (15) days after
     notice thereof has been given by Payee to Maker;

     (ii) Maker shall fail at any time to be in material  compliance with any of
     the  covenants  set forth in Paragraph 3 (d) or Section 7 of this Note,  or
     shall  fail at any time to be in  material  compliance  with or  neglect to
     perform,  keep or observe any of the provisions of this Note to be complied
     with,  performed,  kept or observed by Maker and such failure  shall remain
     uncured for a period of thirty (30)


                                 Page 11 of 15
<PAGE>
RateXchange Corporation                                               F 10.24.01
12% Convertible
Subordinated Note


     days after notice thereof has been given by Payee to Maker;

     (iii) Any  representation  or warranty  made in this Note by Maker shall be
     untrue or  incorrect  in any  material  respect as of the date when made or
     deemed made;

     (iv) A case or proceeding  shall have been commenced  against Maker, or any
     of  its  material  subsidiaries,  if  any,  in  a  court  having  competent
     jurisdiction  seeking a decree or order in respect of Maker,  or any of its
     subsidiaries,  (A)  under  Title  11 of  the  United  States  Code,  as now
     constituted or hereafter amended, or any other applicable federal, state or
     foreign  bankruptcy  or other  similar  law;  (B)  appointing  a custodian,
     receiver,  liquidator,   assignee,  trustee  or  sequestrator  (or  similar
     official) of Maker, or any of its subsidiaries,  or any of their respective
     properties; or (C) ordering the winding-up or liquidation of the affairs of
     Maker, or any of its subsidiaries, and such case or proceeding shall remain
     unstayed or  undismissed  for a period of ninety (90)  consecutive  days or
     such court shall enter a decree or order granting the relief sought in such
     case or proceeding; or

     (v) Maker,  or any of its material  subsidiaries,  if any, shall (A) file a
     petition  seeking  relief under Title 11 of the United  States Code, as now
     constituted or hereafter amended, or any other applicable federal, state or
     foreign  bankruptcy or other similar law; or (B) consent to the institution
     of  proceedings  thereunder or to the filing of any such petition or to the
     appointment  of or the  taking  of  possession  by a  custodian,  receiver,
     liquidator,  assignee,  trustee or  sequestrator  (or similar  official) of
     Maker, or any of its subsidiaries, or any of their respective properties.

(b) Remedies. Upon the occurrence of an Event of Default specified in Paragraphs
9 (iv) and (v) above,  all  Obligations  then remaining  unpaid  hereunder shall
immediately  become due and payable without  notice.  Upon the occurrence of any
other Event of Default,  the holders of no less than 51% in principal  amount of
the  Notes  may  thereafter,  at their  option  immediately  by notice to Maker,
declare all  Obligations  then remaining  unpaid  hereunder  immediately due and
payable,  whereupon the same shall forthwith  mature and become due and payable,
without any further notice to Maker and without presentment,  demand, protest or
notice of protest,  all of which are hereby waived by Maker.  Upon a declaration
of  acceleration,  the entire  Obligations then remaining unpaid hereunder shall
become  immediately  due and  payable  in full  plus all  reasonable  costs  and
expenses of the collection and  enforcement of this Note,  including  reasonable
attorney's  fees and  expenses,  all of which  shall be added to the  amount due
under this Note. The rights,  powers,  privileges and remedies of Payee pursuant
to the terms  hereof  are  cumulative  and not  exclusive  of any other  rights,
powers,  privileges  and  remedies  which  Payee may have under this Note or any
other instrument or agreement.

10. Maker's Right to Redeem.

On or  after  the  earlier  of the  Effective  Date  or the  date on  which  the
Underlying  Shares may otherwise be sold publicly,  Maker may redeem the Note or
any portion  thereof without any premium or penalty at any time on not less than
thirty (30) nor more than sixty (60) days' prior written  notice,  provided that
the reported closing price of the


                                 Page 12 of 15
<PAGE>
RateXchange Corporation                                               F 10.24.01
12% Convertible
Subordinated Note


Common Stock equals or exceeds 4.2857 times of the then conversion  price, for a
period of twenty (20)  consecutive  trading days ending one trading day prior to
the notice of redemption.

11. Acknowledgment of Payee's Investment Representations.

By accepting this Note, Payee  acknowledges that this Note has not been and will
not be registered under the Act or qualified under any state securities laws and
that the transferability thereof is restricted by the registration provisions of
the  Act as  well as  such  state  laws.  Based  upon  the  representations  and
agreements  being made by him herein,  this Note is being issued to him pursuant
to an exemption from such registration  provided by Section 4 (2) of the Act and
Rule  506  promulgated   thereunder,   and  applicable   state   securities  law
qualification exemptions. Payee represents that he is acquiring the Note for his
own account, for investment purposes only and not with a view to resale or other
distribution  thereof,  or  with  the  intention  of  selling,  transferring  or
otherwise  disposing  of all or any  part  of it for  any  particular  event  or
circumstance,  except  selling,  transferring  or disposing of it only upon full
compliance  with all applicable  provisions of the Act, the Securities  Exchange
Act of 1934, the Rules and Regulations promulgated by the Commission thereunder,
and any applicable state  securities laws. Payee further  understands and agrees
that no transfer of this Note shall be valid unless made in compliance  with the
restrictions  set forth on the front of this Note,  effected on Maker's books by
the  registered  holder hereof,  in person or by an attorney duly  authorized in
writing, and similarly noted hereon. Maker may charge Payee a reasonable fee for
any re registration, transfer or exchange of this Note.

12. Limitation of Liability.

A director,  officer, employee or stockholder,  as such, of Maker shall not have
any  liability  for any  obligations  of Maker  under this Note or for any claim
based on, in respect or by reason of such obligations or their creation.  Payee,
by accepting this Note,  waives and releases all such liability.  The waiver and
release are part of the consideration for the issuance of this Note.

13. Limitation of Interest Payments.

Nothing contained in this Note or in any other agreement between Maker and Payee
requires  Maker to pay or Payee to  accept  Interest  in an amount  which  would
subject Payee to any penalty or  forfeiture  under  applicable  law. In no event
shall the total of all charges payable hereunder, whether of Interest or of such
other  charges  which may or might be  characterized  as  interest,  exceed  the
maximum rate  permitted to be charged  under the laws of the State of California
and the state of Payee's residence.  Should Payee receive any payment,  which is
or would be in excess of that  permitted  to be charged  under  such laws,  such
payment shall have been and shall be deemed to have been made in error and shall
automatically be applied to reduce the Principal outstanding on this Note.

14. Miscellaneous.


                                 Page 13 of 15
<PAGE>
RateXchange Corporation                                               F 10.24.01
12% Convertible
Subordinated Note


(a)  Effect of  Forbearance.  No  forbearance,  indulgence,  delay or failure to
exercise any right or remedy by Payee with respect to this Note shall operate as
a waiver or as an acquiescence in any default.

(b) Effect of Single or Partial Exercise of Right. No single or partial exercise
of any right or remedy by Payee  shall  preclude  any other or further  exercise
thereof or any exercise of any other right or remedy by Payee.

(c) Governing Law. This Note shall be construed and enforced in accordance with,
and the rights of the parties  shall be governed  by, the  internal  laws of the
State of California  applicable to contracts  made and to be performed  entirely
within such State.  Any action,  suit or proceeding in connection with this Note
may be brought  against  Maker in a court of record of the State of  California,
the City and County of San Francisco, or in the United States District Court for
the Northern  District of California,  Maker hereby consenting and submitting to
the jurisdiction thereof.

(d) Maker  Determination  Final.  Any  determination  that Maker or its Board of
Directors  must  make as  provided  in this  Note  shall be  conclusive,  absent
manifest error.

(e) Headings. The headings and captions of the various paragraphs herein are for
convenience  of  reference  only and shall in no way  modify any of the terms or
provisions of this Note.

(f) Loss,  Theft,  Destruction or Mutilation.  Upon receipt by Maker of evidence
reasonably satisfactory to it of loss, theft,  destruction or mutilation of this
Note (and upon surrender of this Note if mutilated),  and upon  reimbursement of
Maker's  reasonable  incidental  expenses  and in the  case of  loss,  theft  or
destruction,  indemnity and/or security as Maker shall, at its option,  request,
Maker shall make and deliver or caused to be made and  delivered  to Payee a new
Note of like date and tenor in lieu of this Note.

(g)  Modification  of Note or  Waiver of Terms  Thereof  Relating  to Payee.  No
modification  or waiver of any of the provisions of this Note shall be effective
unless in  writing  and signed by Payee and then only to the extent set forth in
such writing,  or shall any such  modification or waiver be applicable except in
the  specific  instance for which it is given.  This Note may not be  discharged
orally but only in writing duly executed by Payee.

(h)  Notice.  All  offers,  acceptances,  notices,  requests,  demands and other
communications  under  this Note shall be in writing  and,  except as  otherwise
provided  herein,  shall be deemed to have been  given  only when  delivered  in
person,  via nationally  recognized  overnight  courier  service,  via facsimile
transmission  if receipt  thereof is confirmed by the recipient,  or, if mailed,
when mailed by certified or  registered  mail  prepaid,  to the parties at their
respective  addresses  first set forth above, or at such other address as may be
given in writing in future by either party to the other.

(i) Transfer.  This Note shall be  transferable  only on the books of Maker upon
delivery  thereof duly endorsed by Payee or by his duly  authorized  attorney or


                                 Page 14 of 15
<PAGE>
RateXchange Corporation                                               F 10.24.01
12% Convertible
Subordinated Note


representative, or accompanied by proper evidence of succession,  assignment, or
authority  to  transfer.  In all cases of  transfer  by an  attorney,  executor,
administrator,  guardian,  or other  legal  representative,  duly  authenticated
evidence of his or its authority  shall be produced.  Upon any  registration  of
transfer,  Maker  shall  deliver  a new  Note or Notes  to the  person  entitled
thereto.  Notwithstanding the foregoing, Maker shall have no obligation to cause
Notes to be transferred on its books to any person if, in the opinion of counsel
to Maker,  such transfer does not comply with the  provisions of the Act and the
rules and regulations thereunder.

(j)  Successors  and  Assigns.  This  Note  shall be  binding  upon  Maker,  its
successors,  assigns and  transferees,  and shall inure to the benefit of and be
enforceable by Payee and his successors and assigns.

(k)  Severability.  If one or more of the  provisions  or  portions of this Note
shall be deemed by any court or quasi-judicial  authority to be invalid, illegal
or unenforceable in any respect, the invalidity,  illegality or unenforceability
of the remaining  provisions,  or portions of provisions  contained herein shall
not in any way be affected or impaired thereby.

IN WITNESS  WHEREOF,  Maker has caused this Note to be executed on its behalf by
an officer thereunto duly authorized as of the date set forth above.

                                             RateXchange Corporation.
                                             a Delaware corporation

                  [SEAL]

                                             By: ______________________________
                                                 D. Jonathan Merriman,
                                                 Chief Executive Officer

ATTEST: _________________________________
        Christopher L. Aguilar, Secretary


                                 Page 15 of 15