EXHIBIT 10.11


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,  PLEDGED OR  HYPOTHECATED  IN THE ABSENCE OF SUCH  REGISTRATION  OR
RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE REASONABLY
ACCEPTABLE  TO  THE  MAKER)  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.


                                        A
                       Secured Convertible Promissory Note
                               due April 23, 2004


No. CN-1                                                             $350,000.00
Dated:  April 23, 2002


     For value  received,  ARMITEC INC., a Delaware  corporation  (the "Maker"),
hereby promises to pay to the order of STONESTREET LIMITED PARTNERSHIP (together
with its successors,  representatives,  and permitted assigns, the "Holder"), in
accordance with the terms  hereinafter  provided,  the principal amount of three
hundred fifty Thousand Dollars ($350,000.00), together with interest thereon.

     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 first set forth above 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 April 23,
2004(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 Convertible Note Purchase Agreement,  dated as of April 23, 2002
(the "Purchase Agreement"),  by and among the Maker and the Holder.  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  date  hereof,  the  outstanding
principal  balance of this Note shall bear interest,  in arrears,  at a rate per
annum  equal to seven  percent  (7%),  payable  October  1, 2002 and  thereafter
semi-annually  and upon  earlier  conversion  or  prepaid  as  provided  herein.


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<PAGE>


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 of this Note (the
"Issuance Date"). The interest shall be payable, at the option of the Holder, in
cash or shares of the Maker's  common  stock,  par value  $.00167 per share (the
"Common Stock");  provided, that if the Holder elects to receive any interest in
Common Stock, the Maker shall issue to the Holder registered and freely tradable
shares of 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
the lesser of (i) $.07 and (ii) an amount  equal to 70% of the average Per Share
Market  Value (as  defined in Section  3.2(b)  hereof) for the three (3) Trading
Days (as  defined in Section  4.13  hereof)  having the lowest Per Share  Market
Value during the thirty (30) Trading Days prior to the date the interest payment
is due.  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  payment in full at the
rate of fifteen percent (15%) per annum.

     Section 1.3 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 1.4 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 1.5  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

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


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<PAGE>

     (c) the failure of the Company in having the following:

          (i) the Form 8 K/A (Form 8-K shall be used for current  reports  under
Section 13 or 15(d) of the  Securities  Exchange Act of 1934,  filed pursuant to
Rule 13a-11 or Rule 15d-11 and for reports of nonpublic  information required to
be disclosed by Regulation  FD) with audited  financials  filed by June 20, 2002
and  all SEC  comments  cleared  by  June  30,  2002,  and  (ii)  the  Form  14C
informational  Proxy  (Information to holders of record prior to annual or other
meeting) filed no later than June 20, 2002, and

          (iii) the  Registration  Statement  ("as  defined in the  Registration
rights Agreement") filed no later than July 1, 2002, and

          (iv) the Registration  Statement, as amended to include all the shares
required  to be reserved  declared  effective  by the  Securities  and  Exchange
Commission ("SEC") on or prior to September 30, 2002; and

          (v) failure to reserve  8,611,371  shares for the holder upon closing;
and

          (vi) failure to reserve the shares  required to be reserved in Section
1.2 of the Convertible Note Purchase Agreement on or before July 1, 2002.

     (d) the Common Stock shall not be eligible for  quotation on and quoted for
trading on the OTC  Bulletin  Board  ("OTC') or listed for trading on the Nasdaq
SmallCap Market, New York Stock Exchange,  American Stock Exchange or the Nasdaq
National  Market (each,  a "Subsequent  Market") and shall not again be eligible
for and quoted or listed for trading thereon within five 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  delivery the shares of Common Stock
within five trading days after  delivery of notice of conversion of the Note and
any interest accrued and unpaid, (ii) timely file the Registration  Statement as
of the filing date (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 seven
(7) 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 ten (10) consecutive  Trading Days,


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<PAGE>

provided  that the cause of such lapse or  unavailability  is not due to factors
solely within the control of Holder; or

     (h)  default  shall be made in the  performance  or  observance  of (i) any
covenant, condition or agreement contained in this Note (other than as set forth
in clause (f) of this  Section  2.1) and such  default  upon notice is not fully
cured within seven (7) business  days after the  occurrence  thereof or (ii) any
material covenant, condition or agreement contained in the Purchase Agreement or
the  Registration  Rights Agreement which is not covered by any other provisions
of this Section 2.1 and such default upon notice is not fully cured within seven
(7) business days after the occurrence thereof; or

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

     (j) the Maker shall issue any debt securities  which are not subordinate to
this Note on such terms as are  acceptable  to the  Holder of a majority  of the
outstanding principal amount of this holder

     (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
$75,000 or (ii) a material default in the observance or performance of any other
agreement  or  condition  relating  to  any  indebtedness  or  contained  in any
instrument or agreement  evidencing,  securing or relating thereto, or any other
material  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 holder 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.  The  Maker  shall  have  seven  days to  cure  the  defaults  in this
subsection 2.1(l); 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),
or (vi) take any action under the laws of any jurisdiction (foreign or domestic)
analogous to any of the foregoing; or

     (m) the Maker's failure to comply with a Conversion  Notice tendered within
five (5) business days after the receipt by the Maker of the  Conversion  Notice
and the certificates representing the Notes. The Note itself does not have to be
delivered  until  fully  paid.  In  the  event  the  shares  are  electronically
transferable,  then delivery of the Shares must be made by  electronic  transfer


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<PAGE>

provided,  request for such electronic  transfer has been made by the Holder.  A
note  representing  the balance of the Note not so converted will be provided to
the Holder, if requested by Holder provided an original Note is delivered to the
Company.  To the event that the  Holder  elects  not to  surrender  the Note for
reissuance  upon  partial  payment or  conversion,  the Holder  indemnifies  the
Company against ant and all loss or damange  attributable to a third-party claim
in an amount in excess of the actual amount then due under the Note.

     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
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),  (m) or (n),  the
outstanding   principal   balance  and  accrued  interest   hereunder  shall  be
automatically  due and  payable  and  (ii)  Sections  2.1  (a)-(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
3.1  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.  Upon the earlier of the effectiveness date
of the definitive 14c to be filed that increases the authorized, 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 plus accrued and unpaid interest
under the 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 (404) 842-9418,  Attn.: Chief Executive
Officer) (the "Conversion Date"),  provided,  however, that the Conversion Price
shall be subject to adjustment as described in Section 3.6 below.

     Section 3.2 Conversion Price.

     (a) The term  "Conversion  Price"  shall  mean the  lesser of (A) $.07 (the
"Fixed  Conversion  Price") and (B) an amount equal to seventy  percent (70%) of
the average  Per Share  Market  Value for the three (3) Trading  Days having the


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<PAGE>

lowest Per Share  Market  Value during the thirty (30) Trading Days prior to the
Conversion  Date,  except that 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, 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.

     (b) The term "Per Share Market Value" means on any particular  date (a) the
closing bid price of the Common  Stock on such date on the OTC  Bulletin  Board,
The Nasdaq  Small-Cap  Market,  the Nasdaq National  Market or other  registered
national  stock exchange on which the Common Stock is then listed or if there is
no such price on such  date,  then the  closing  bid price on such  exchange  or
quotation  system on the date nearest  preceding such date, or (b) if the Common
Stock is not listed then on The Nasdaq  Small-Cap  Market,  the Nasdaq  National
Market or any registered  national stock  exchange,  the closing bid price for a
share of Common Stock in the  over-the-counter  market, as reported by NASDAQ or
in the National Quotation Bureau Incorporated or similar  organization or agency
succeeding  to its  functions of  reporting  prices) at the close of business on
such  date,  then the  average of the three (3)  lowest  closing  bid or closing
prices,  if applicable,  of the "Pink Sheet" quotes for the relevant thirty (30)
day trading conversion period, as determined in good faith by the Holder, or (d)
if the Common Stock is not then publicly traded the fair market value of a share
of Common Stock as determined by an Independent Appraiser (as defined in Section
4.13  hereof)  selected in good faith by the Holder of a majority in interest of
the Notes; provided, however, that the Maker, after receipt of the determination
by such  Independent  Appraiser,  shall  have the right to select an  additional
Independent  Appraiser,  in which case,  the fair market value shall be equal to
the  average  of the  determinations  by each such  Independent  Appraiser;  and
provided, further that all determinations of the Per Share Market Value shall be
appropriately  adjusted for any stock  dividends,  stock splits or other similar
transactions  during such period.  The  determination of fair market value by an
Independent  Appraiser  shall be based upon the fair market  value of the Issuer
determined  on a going  concern  basis as between a willing  buyer and a willing
seller and taking into account all relevant factors  determinative of value, and
shall be final and binding on all parties.  In determining the fair market value
of  any  shares  of  Common  Stock,  no  consideration  shall  be  given  to any
restrictions  on transfer of the Common Stock imposed by agreement or by federal
or state  securities laws, or to the existence or absence of, or any limitations
on, voting rights

     Section 3.3 Mechanics of Conversion.


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<PAGE>

     (a) Not later than five (5) Trading  Days after any  Conversion  Date,  the
Maker will 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  the  Notes.  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 Fifth  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  the  certificates   representing  the  Notes  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 the Notes and failure to deliver  certificates
representing the unconverted  shares of the Notes 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 (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  (which  amounts  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  (including,  without
limitation,  damages  relating to any purchase of shares of Common Stock by such
Holder  to  make  delivery  on a sale  effected  in  anticipation  of  receiving
certificates  representing shares of Common Stock upon conversion,  such damages
to be in an amount equal to (A) the aggregate amount paid by such Holder for the
shares of Common Stock so purchased  minus (B) the aggregate value of the shares
on the date the shares were delivered),  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 that the liquidated damages are paid.

     (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) the amount by which (A) the  Holder's  total  purchase
price (including brokerage  commissions,  if any) for the shares of Common Stock


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<PAGE>

so purchased  exceeds (B) the aggregate  principal amount of the Notes for which
such conversion was not timely honored, together with interest thereon at a rate
of 15% 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 the Notes, 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.  Notwithstanding  anything to the contrary set
forth in  Section 3 of this Note,  at no time may a holder of this Note  convert
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 such  holder at such time,  the number of shares of Common  Stock which
would  result in such holder  owning more than 9.99% of all of the Common  Stock
outstanding  at such time;  provided,  however,  that upon a holder of this Note
providing the Company with 75 days notice  (pursuant to Section 4.1 hereof) (the
"Waiver  Notice")  that such  holder  would like to waive this  Section 3.4 with
regard to any or all shares of Common Stock  issuable  upon  conversion  of this
Note,  this  Section  3.4 will be of no force or effect  with regard to all or a
portion of the Note referenced in the Waiver Notice.

     Section 3.5 Intentionally Omitted.

     Section 3.6 Adjustment of Conversion Price.

     (a) The Fixed  Conversion Price shall be subject to adjustment from time to
time as follows:

          (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 Fixed 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 Fixed 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 holder of Common Stock  entitled to
receive a dividend  or other  distribution  payable  in shares of Common  Stock,
then,  and in each  event,  the  applicable  Fixed  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,  as  applicable,  the
applicable Fixed Conversion Price then in effect by a fraction:


                                       8
<PAGE>

                    (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 holder 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 Fixed
Conversion  Price shall be made and provision  shall be made (by  adjustments of
the Conversion Price or otherwise) so that the holder of the Notes 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 their Notes 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 holder of the Notes.

          (iv) Adjustments for  Reclassification,  Exchange or Substitution.  If
the Common Stock issuable upon  conversion of the Notes 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
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 Fixed  Conversion  Price shall be made and  provisions  shall be
made (by adjustments of the Conversion Price or otherwise) so that the holder of
each of the Notes shall have the right  thereafter to convert such Note into the
kind and  amount  of  shares  of stock  and  other  securities  receivable  upon
reclassification,  exchange,  substitution  or other  change,  by  holder 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,  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 of each


                                       9
<PAGE>

Note 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 of the Notes
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 the  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. If
the Maker,  at any time after the  Issuance  Date,  shall  issue any  additional
shares of Common Stock (otherwise than as provided in the foregoing  subsections
(i) through (v) of this Section 3.6) (the "Additional  Shares of Common Stock"),
at a price per share less than the  applicable  Fixed  Conversion  Price then in
effect or without consideration, then the applicable Fixed Conversion Price upon
each such issuance shall be adjusted to that price (rounded to the nearest cent)
determined by multiplying the applicable  Fixed  Conversion Price then in effect
by a fraction:

                    (1) the  numerator of which shall be equal to the sum of (A)
the  number  of  shares of Common  Stock  outstanding  immediately  prior to the
issuance of such Additional Shares of Common Stock plus (B) 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 Stock so
issued  would  purchase  at a price  per  share  equal to the  applicable  Fixed
Conversion Price then in effect, and

                    (2) 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.

The  provisions  of this  subsection  (vi)  shall  not  apply  under  any of the
circumstances  for which an adjustment  is provided in  subsections  (i),  (ii),
(iii), (iv) or (v) of this Section 3.6(a). No adjustment of the applicable Fixed
Conversion  Price shall be made under this subsection  (a)(iv) upon the issuance
of any Additional Shares of Common Stock which are issued pursuant to any Common
Stock  Equivalent  (as defined  below) if upon the issuance of such Common Stock
Equivalent (x) any adjustment  shall have been made pursuant to subsection (vii)
of this Section 3.6(a) or (y) no adjustment was required  pursuant to subsection
(vii) of this Section 3.6(a).  No adjustment of the applicable  Fixed Conversion
Price shall be made under this  subsection (vi) in an amount less than $.005 per
share, but any such lesser adjustment shall be carried forward and shall be made
at the time and together  with the next  subsequent  adjustment,  if any,  which
together with any adjustments so carried forward shall amount to $.005 per share
or more;  provided that upon any adjustment of the applicable  Fixed  Conversion
Price as a result of any  dividend or  distribution  payable in Common  Stock or
Convertible  Securities (as defined below) or the reclassification,  subdivision
or combination  of Common Stock into a greater or smaller number of shares,  the
foregoing  figure of $.005 per share (or such figure as last adjusted)  shall be
adjusted (to the nearest  one-half  cent) in proportion to the adjustment in the
applicable Fixed Conversion Price.


                                       10
<PAGE>

          (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 this Note,  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 price per share for
which Additional Shares of Common Stock may be issuable  thereafter  pursuant to
such Common Stock  Equivalent shall be less than the applicable Fixed 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 be less than the applicable  Fixed  Conversion Price in effect at the time
of such amendment,  then the applicable  Fixed  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,  and (2) the
aggregate  consideration  for such maximum number of Additional Shares of Common
Stock shall be deemed to be the minimum consideration  received or receivable by
the Maker for the issuance of such Additional Shares of Common Stock pursuant to
such Common Stock  Equivalent.  No adjustment of the applicable Fixed 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). If no adjustment is required under this subsection (vii) upon issuance of
any Common Stock  Equivalent or once an adjustment is made under this subsection
(vii)  based  upon the Per  Share  Market  Value in  effect  on the date of such
adjustment,  no further  adjustment  shall be made under this  subsection  (vii)
based solely upon a change in the Per Share Market Value after such date.

          (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


                                       11
<PAGE>

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 Fixed Conversion Price, or the number of
shares of Common Stock issuable upon conversion of the Notes, the  determination
of the applicable Fixed 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.

     (b) Record  Date.  In case the Maker shall take record of the holder 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 of the
number of shares of Common Stock issuable upon  conversion of the Notes upon the
grant after the Issuance  Date of, or the exercise  after the Issuance  Date of,
options or warrants or rights to purchase stock under the Maker's existing or to
be adopted  (issued)  stock  option  plan or options  or  warrants  or rights to
purchase stock issued to officers and/or directors of the Company.

     (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, 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  amount of the Notes the Holder  has  elected  to  convert  plus the
amount of the Notes  outstanding,  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 Fixed  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


                                       12
<PAGE>

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 such holder a like
certificate  setting forth such  adjustments and  readjustments,  the applicable
Fixed 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 any 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 Per Share  Market
Values of the Common Stock for the five (5) consecutive Trading Days immediately
preceding the Conversion Date.

     (h) Reservation of Common Stock.  The Maker shall reserve  8,611,371 shares
of common  stock for the holder  until the 14C proxy is deemed  effective by the
Securities  and Exchange  commission.  Subsequently  at all times when this Note
shall be  outstanding,  the Company shall reserve and keep  available out of its
authorized  but unissued  Common Stock,  such number of share 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 200% 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
General Corporation Law, as amended, 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.


                                       13
<PAGE>

     (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(a)-(k) hereof, the Holder shall have the right, at such Holder's
option,  to require the Maker to prepay all or a portion of this Note at a price
equal to Prepayment Price (as defined in Section 3.7(c) below) applicable at the
time of such  request.  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  of the  Notes  contained  herein,  simultaneous  with the
occurrence of a Major  Transaction (as defined below),  each holder of the Notes
shall have the right,  at such holder's  option,  to require the Maker to prepay
all or a portion of such  holder's  Notes at a price equal to the greater of (i)
115% of the aggregate  principal amount of the Notes and (ii) the product of (A)
the  Conversion  Rate and (B) the Per Share  Market Value of the Common Stock on
the Trading Day immediately preceding such Major Transaction ("Major Transaction
Prepayment Price").

     (c)  Prepayment  Option  Upon  Triggering  Event.  In addition to all other
rights of the holder of the Notes contained herein, after a Triggering Event (as
defined below),  each holder of the Notes shall have the right, at such holder's
option,  to require the Maker to prepay all or a portion of such holder's  Notes
at a price equal to the greater of (i) 130% of the aggregate principal amount of
the Notes and (ii) the product of (A) the  Conversion  Rate at such time and (B)
the Per  Share  Market  Value  of the  Common  Stock  calculated  as of the date
immediately  preceding such Triggering  Event on which the exchange or market on
which the Common Stock is traded is open  ("Triggering  Event Prepayment  Price"
and,  collectively with "Major  Transaction  Prepayment  Price," the "Prepayment
Price").

     (d)  "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  consolidation,  merger  or other  business
combination in which holder 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 all or  substantially  all of the Maker's
assets; or

          (iii) consummation of a purchase, tender or exchange offer made to the
holder of more than 30% of the outstanding shares of Common Stock.

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

          (i) the failure of the Registration Statement to be declared effective
by the SEC on or prior to September 30, 2002, provided that the Maker has failed


                                       14
<PAGE>

to file the  Registration  Statement on or before the Filing Date (as defined in
the  Registration  Rights  Agreement)  or  respond  to any and each of the SEC's
comments  within  fifteen (15) days of the Maker's  receipt of each of the SEC's
comments;

          (ii) 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 of the Notes 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 ten
(10) consecutive  Trading Days, provided that the cause of such lapse is not due
to factors  within the control of the Maker and not due to factors solely within
the control of such holder of the Notes;

          (iii) the  suspension  from trading or the failure of the Common Stock
to be traded  on the OTC  Bulletin  Board  for a period of five (5)  consecutive
days.

          (iv) the Maker's  notice to any holder of the Notes,  including by way
of public  announcement,  and SEC filing 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 of the Notes into shares of
Common Stock;

          (v) the Maker breaches any representation, warranty, covenant or other
term or condition of the Purchase  Agreement,  the Registration Rights Agreement
or any other agreement,  document,  certificate or other instrument delivered in
connection with the transactions contemplated thereby or hereby.

     (f) Mechanics of Prepayment at Option of Buyer 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 each holder
of the Notes. 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) 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  Buyer  Upon  Major  Transaction")  to the  Maker,  which  Notice  of
Prepayment  at Option of Buyer 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.

     (g)  Mechanics  of  Prepayment  at Option of Buyer 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


                                       15
<PAGE>

aware of a  Triggering  Event,  any  holder of the Notes  then  outstanding  may
require  the  Maker to  prepay  all of the Notes by  delivering  written  notice
thereof via facsimile and overnight  courier ("Notice of Prepayment at Option of
Buyer Upon Triggering Event") to the Maker, which Notice of Prepayment at Option
of Buyer Upon Triggering  Event shall indicate (i) the number of Notes that such
holder is electing to prepay and (ii) the applicable Triggering Event Prepayment
Price, as calculated pursuant to Section 3.7(c) above.

     (h) Payment of Prepayment Price. Upon the Maker's receipt of a Notice(s) of
Prepayment at Option of Buyer Upon Triggering Event or a Notice(s) of Prepayment
at Option of Buyer 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 Buyer  Upon
Triggering  Event or  Notice(s)  of  Prepayment  at Option of Buyer  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(g),
to such holder  within  five (5)  business  days after the Maker's  receipt of a
Notice of Prepayment at Option of Buyer Upon  Triggering  Event and, in the case
of a  prepayment  pursuant  to  Section  3.7(f),  the Maker  shall  deliver  the
applicable  Major   Transaction   Prepayment  Price  immediately  prior  to  the
consummation  of the Major  Transaction;  provided that a holder's  certificates
representing  the Notes  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  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 Buyer Upon  Triggering  Event or the Notice(s) of Prepayment at Option
of Buyer 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 Per Share
Market Value during the period  beginning on the date on which the  Notice(s) of
Prepayment  of  Option of Buyer  Upon  Major  Transaction  or the  Notice(s)  of
Prepayment  at Option of Buyer  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


                                       16
<PAGE>

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 stockholder in connection with a Major Transaction.

     Section 3.8 Optional Prepayment.

     (a) Subject to Section  3.8(b)  below,  the  Company  shall have the right,
exercisable  at any time and from time to time after the Original Issue Date, in
accordance with the terms hereof and upon ten Trading Days' prior written notice
to the Holder to be prepaid (an "Optional Prepayment Notice"),  to prepay all or
any portion of the outstanding  principal amount of the Debentures which has not
previously been repaid or for which Conversion  Notices have not previously been
delivered.  The prepayment  price  applicable to prepayments  under this Section
5(a) shall  equal 130% of the unpaid  principal  and shall be paid in cash.  Any
such prepayment  shall be free of any claim of  subordination.  The Holder shall
have the right to  tender,  and the  Company  shall  honor,  Conversion  Notices
delivered  prior to the expiration of the tenth Trading Day after receipt by the
Holder of an Optional  Prepayment  Notice for such Debentures (the tenth Trading
Day after receipt by the Holder of an Optional  Prepayment Notice is referred to
herein as the "Optional Prepayment Date")

     (b) The Company  shall not be  entitled  to deliver an Optional  Prepayment
Notice to the Holder (and, if after  delivery  thereof and prior to the Optional
Prepayment  Date,  any of the following  conditions  shall cease to be met, such
notice,  at the option of the Holder,  shall be deemed no longer  effective) if:
(i) the number of shares of Common  Stock at the time  authorized,  unissued and
unreserved for all purposes is insufficient to satisfy the Company's  conversion
obligations of the aggregate principal amount of Debentures then outstanding, or
(ii) there is neither an  effective  Underlying  Shares  Registration  Statement
under which the Holder can resell all of the issued Underlying Shares and all of
the Underlying  Shares as are issuable upon  conversion in full of the principal
amount of  Debentures  subject to an Optional  Prepayment  Notice nor may all of
such issued and issuable Underlying Shares be sold by the Holder subject to such
prepayment  without volume  restrictions  pursuant to Rule 144 promulgated under
the  Securities  Act,  as  determined  by counsel to the  Company  pursuant to a
written  opinion letter,  addressed to the Company's  transfer agent in the form
and substance  acceptable to the Holder and such  transfer  agent,  or (iii) the
Common  Stock  is not then  listed  or  quoted  for  trading  on the OTC or on a
Subsequent Market.

     (c) If any portion of the Prepayment Price shall not be paid by the Company
by the second (2nd)  Trading Day  following the Optional  Prepayment  Date,  the
Prepayment  Price shall be  increased  by 15% per annum (or such lesser  maximum
amount that is permitted to be paid by applicable  law) to accrue daily from the
date such  interest is due  hereunder  through and including the date of payment
(which  amount  shall be paid as  liquidated  damages and not as a penalty).  In
addition,  if any portion of the  Prepayment  Price remains  unpaid  through the
expiration  of  the  Optional  Prepayment  Date,  the  Holder  subject  to  such


                                       17
<PAGE>

prepayment  may elect by  written  notice to the  Company  to either  (x) demand
conversion in accordance with the formula and the time period therefor set forth
in Section 4 of any portion of the principal  amount of Debentures for which the
Prepayment Price, plus accrued  liquidated damages and accrued interest thereon,
has not been paid in full (the "Unpaid Prepayment  Principal Amount"),  in which
event the  applicable Per Share Market Value shall be the lower of the Per Share
Market Value calculated on the Optional Prepayment Date and the Per Share Market
Value as of the Holder's  written  demand for  conversion,  or (y) invalidate ab
initio such optional  prepayment,  notwithstanding  anything herein contained to
the contrary.  If the Holder elects option (x) above, the Company shall,  within
five Trading Days after such election is deemed delivered hereunder,  deliver to
the Holder the shares of Common Stock  issuable  upon  conversion  of the Unpaid
Prepayment  Principal  Amount  subject to such  conversion  demand and otherwise
perform its  obligations  hereunder with respect  thereto.  If the Holder elects
option (y) above,  the Company shall  promptly,  and in any event not later than
five Trading Days from receipt of notice of such election,  return to the Holder
new  Debentures  for the full Unpaid  Prepayment  Principal  Amount and shall no
longer have any  prepayment  rights under this  Debenture.  If, upon an election
under option (x) above, the Company fails to deliver  certificates  representing
the shares of Common Stock  issuable upon  conversion  of the Unpaid  Prepayment
Principal  Amount within the time period set forth in this Section,  the Company
shall pay to the Holder in cash,  as  liquidated  damages  and not as a penalty,
$2,500 per day until the Company delivers such certificates to the Holder.

     Section 3.9 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) 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 (y)  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
the Note, the Holder, solely at Holder's option, can elect to:

          (i) require the Maker to prepay that portion of the 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 Prepayment
Price as of such Conversion Date (the "Mandatory Prepayment Price");

          (ii) if the Maker's  inability to fully  convert  require the Maker to
issue  restricted  shares of Common  Stock equal to one hundred  twenty  percent
(120%) of the number of shares of Common Stock the Maker is unable to deliver in
accordance with such holder's Conversion Notice;


                                       18
<PAGE>

          (iii) void its Conversion  Notice and retain or have returned,  as the
case may be, the 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).

     (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 3.9(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 the 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
shares  prepaid  pursuant to Section  3.9(a)(i)  above,  the Maker shall pay the
Mandatory  Prepayment  Price in cash to the Holder within five (5) business 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 Per Share Market Value during the period beginning
on the  Conversion  Date and ending on the date the Holder  voided the Mandatory
Prepayment.

     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  shareholder  for the
election of directors of the Maker or of any other  matter,  or any other rights
as a shareholder  of the Maker.  Upon the issuance of a Conversion  Notice,  the
Holder shall have all 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 twenty (20) 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  holder  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  twenty (20) 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.

     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 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.


                                       20
<PAGE>

     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,  TRANSFERRED,  PLEDGED OR HYPOTHECATED
        IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF AN
        OPINION OF COUNSEL (WHICH COUNSEL SHALL BE REASONABLY  ACCEPTABLE
        TO THE  MAKER)  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 manner
permitted by law.


                                       21
<PAGE>

     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:

     "Independent  Appraiser"  means a nationally  recognized or major  regional
investment  banking firm or firm of independent  certified public accountants of
recognized standing (which may be the firm that regularly examines the financial
statements  of  the  Issuer)  that  is  regularly  engaged  in the  business  of
appraising  the Capital  Stock or assets of  corporations  or other  entities as
going concerns, and which is not affiliated with either the Issuer or the Holder
of any Warrant.

     "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 on which the  Common  Stock is traded on The
Nasdaq Small-Cap Market, the Nasdaq National Market or other registered national
stock  exchange on which the Common Stock has been listed,  or (b) if the Common
Stock is not listed on The Nasdaq Small-Cap  Market,  the Nasdaq National Market


                                       22
<PAGE>

or any registered  national stock  exchange,  a day or which the Common Stock is
traded in the over-the-counter market, as reported by the OTC Bulletin Board, or
(c) 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  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), (b) and
(c) 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.

     IN WITNESS  WHEREOF,  the  Company  has  caused  this  secured  Convertible
Debenture to be duly executed by a duly authorized  officer as of the date first
above indicated.



                                            ARMITEC, INC,



                                            By:  /s/ Bruce R. Davis
                                               ---------------------------------
                                                Name: Bruce R. Davis
                                                Title:   Chief Executive Officer







                                       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
ARMITEC,  INC. (the "Maker")  according to the conditions hereof, as of the date
written below.

Date of Conversion  ____________________________________________________________

Applicable Conversion Price * __________________________________________________

* Lesser of (A) $.07 (the "Fixed  Conversion  Price") and (B) an amount equal to
seventy  percent  (70%) of the average Per Share  Market Value for the three (3)
Trading  Days having the lowest Per Share  Market  Value  during the thirty (30)
Trading Days prior to the Conversion Date.

(Please  attach  printout  of stock  prices and a worksheet  showing  conversion
calculation)





Signature_______________________________________________________________________

         [Name]

Address:________________________________________________________________________

        ________________________________________________________________________









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