<PAGE>

                                                                   Exhibit 10.16

                                                                       EXHIBIT A


                            6% CONVERTIBLE DEBENTURE

     NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF
     HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE
     COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER THE
     SECURITIES ACT OF 1933, AS AMENDED (THE "ACT").  THE SECURITIES ARE
     RESTRICTED AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS
     PERMITTED UNDER THE ACT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR
     AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.


No. __                                                               US $250,000

                                Data Race, Inc.

                  6% CONVERTIBLE DEBENTURE DUE JUNE __, 2004


          THIS DEBENTURE is issued by Data Race, Inc., a corporation organized
and existing under the laws of the State of Texas (the "Company") and is
designated as its 6% Convertible Debenture due June __, 2004.

          FOR VALUE RECEIVED, the Company promises to pay to ______________ or
permitted assigns (the "Holder"), the principal sum of Two Hundred Fifty
Thousand and 00/100 (US $250,000) Dollars on June __, 2004 (the "Maturity Date")
and to pay interest on the principal sum outstanding from time to time quarterly
in arrears at the rate of 6% per annum (based upon a 360 calendar day year)
accruing from the date of initial issuance. Accrual of interest shall commence
on the first business day to occur after the date of initial issuance and
continue until payment in full of the principal sum has been made or duly
provided for.  Quarterly interest payments shall be due and payable on December
1, April 1, June 1 and October 1 of each year, commencing with October 1, 2001.
If any interest payment date or the Maturity Date is not a business day in the
State of New York, then such payment shall be made on the next succeeding
business day. The Company will pay the principal of, and any accrued but unpaid
interest due upon this Debenture on the Maturity Date, by check or wire transfer
to the person who is the registered Holder of this Debenture as of the tenth day
prior to the Maturity Date and addressed to such Holder at the last address
appearing on the Debenture Register. The Company shall not pay the principal due
upon this Debenture prior to the Maturity Date without the express written
consent of the Holder or as set forth in Section 3 herein. The forwarding of
such check or money order on the Maturity Date shall constitute a payment of
principal and interest hereunder and shall satisfy and discharge the liability
for principal and interest on this Debenture to the extent of the sum
represented by such check or wire transfer plus any amounts so deducted.

          This Debenture is subject to the following additional provisions:

          1.  Withholdings.  The Company shall be entitled to withhold from all
              ------------
     payments of interest on this Debenture any amounts required to be withheld
     under the applicable provisions of the United States income tax laws or
     other applicable laws at the time of such payments, and Holder shall
     execute and deliver all required documentation in connection therewith.

          2.  Transfers.  This Debenture has been issued subject to investment
              ---------
     representations of the original purchaser hereof and may be transferred or
     exchanged only in compliance with the Securities Act of 1933, as amended
     (the "Act"), and other applicable state and foreign securities laws.  The
     Holder shall

                                       1
<PAGE>

     deliver written notice to the Company of any proposed transfer of this
     Debenture. In the event of any proposed transfer of this Debenture, the
     Company may require, prior to issuance of a new Debenture in the name of
     such other person, that it receive reasonable transfer documentation
     including legal opinions that the issuance of the Debenture in such other
     name does not and will not cause a violation of the Act or any applicable
     state or foreign securities laws. Prior to due presentment for transfer of
     this Debenture, the Company and any agent of the Company may treat the
     person in whose name this Debenture is duly registered on the Company's
     Debenture Register as the owner hereof for the purpose of receiving payment
     as herein provided and for all other purposes, whether or not this
     Debenture be overdue, and neither the Company nor any such agent shall be
     affected by notice to the contrary. This Debenture has been executed and
     delivered pursuant to the Convertible Debentures and Warrants Purchase
     Agreement dated as of June 12, 2001 between the Company and the original
     Holder (the "Purchase Agreement"), and is subject to the terms and
     conditions of the Purchase Agreement, which are, by this reference,
     incorporated herein and made a part hereof. Capitalized terms used and not
     otherwise defined herein shall have the meanings set forth for such terms
     in the Purchase Agreement.

          3.  Optional Conversion.  The Holder of this Debenture is entitled, at
              -------------------
     its option, to convert at any time commencing on the date hereof until this
     Debenture is paid in full, the principal amount of this Debenture or any
     portion thereof, plus any accrued and unpaid interest, into shares of
     Common Stock of the Company ("Conversion Shares") at a conversion price for
     each share of Common Stock ("Conversion Price") equal to the lesser of (i)
     $_____ (110% of the Bid Price on the Trading Day immediately prior to the
     applicable Closing Date (and, at the Holder's option, if not listed on the
     Principal Market, the closing bid price of the Common Stock on the pink
     sheets or any other trading market) (the "Set Price")(subject to adjustment
     for stock splits and the like)), and (ii) 50% of the average of the five
     (5) lowest Bid Prices during the 25 Trading Days immediately preceding the
     applicable Conversion Date (and, at the Holder's option, if not listed on
     the Principal Market, the closing bid price of the Common Stock on the pink
     sheets or any other trading market).  If, upon any conversion of this
     Debenture, the Company's issuance of Conversion Shares would cause it to
     violate any listing requirement of the Principal Market, then, at the
     election of the Holder, (i) the Holder may convert this Debenture at a
     Conversion Price equal to 100% of the Bid Price on the first Closing Date,
     or (ii) in lieu of such stock issuance, the Company shall pay the Holder
     cash in an amount equal to the highest Bid Price during the period
     commencing on the Conversion Date and ending on the Trading Day payment is
     actually delivered to the Holder multiplied by the number of Conversion
     Shares which would otherwise have been issuable upon such conversion, but
     which were not delivered because of said listing requirement.  The Company
     shall be liable to the Holder for liquidated damages as set forth in
     Section 7(b) herein for failure to make such payments to Holder within
     three (3) Trading Days after the Conversion Date.  Additionally, except for
     sales of its securities (i) pursuant to the exercise of options granted or
     to be granted under an employee benefit plan which plan has been approved
     by the Company's stockholders, (ii) pursuant to any compensatory plan for a
     full-time employee or key consultant, or (iii) in connection with a
     strategic partnership or other business transaction, the principal purpose
     of which is not simply to raise money, or (iv) pursuant to the Equity Line,
     if during the period beginning on the date hereof and ending when the
     Holder no longer holds any of the principal amount of this Debenture or any
     accrued but unpaid interest of this Debenture (the "MFN Period"), the
     Company sells any shares of its Common Stock at a per share selling price
     ("Per Share Selling Price") lower than the Set Price per share, then the
     Set Price shall be adjusted downward to equal such lower Per Share Selling
     Price.  The Company shall give to each Holder written notice of any such
     sale within 24 hours of the closing of any such sale.


                    (a) For the purpose of this Section 3, the term "Per Share
          Selling Price" shall mean the amount actually paid by third parties
          for a share of Common Stock.  A sale of shares of Common Stock shall
          include the sale or issuance of rights, options, warrants or
          convertible securities ("derivative securities") under which the
          Company is or may become obligated to issue shares of Common Stock,
          and in such circumstances the sale of Common Stock shall be deemed to
          have occurred at the time of the issuance of the derivative securities
          and the Per Share Selling Price of the Common Stock covered thereby
          shall also include the exercise or conversion price thereof (in
          addition to the consideration per underlying Conversion Share received
          by the Company upon such sale or issuance of the derivative security).
          In case of any such security

                                       2
<PAGE>

          issued within the MFN Period in a "Variable Rate Transaction" or an
          "MFN Transaction" (each as defined below), the Per Share Selling Price
          shall be deemed to be the lowest conversion or exercise price at which
          such securities are converted or exercised in the case of a Variable
          Rate Transaction, or the lowest adjustment price in the case of an MFN
          Transaction. If shares are issued for a consideration other than cash,
          the per share selling price shall be the fair value of such
          consideration as determined in good faith by the Board of Directors of
          the Company.

               (b)  For the purpose of Section 3(a), the term "Variable Rate
          Transaction" shall mean a transaction in which the Company issues or
          sells (i) any debt or equity securities that are convertible into,
          exchangeable or exercisable for, or include the right to receive
          additional shares of Common Stock either (A) at a conversion, exercise
          or exchange rate or other price that is based upon and/or varies with
          the trading prices of or quotations for the Common Stock at any time
          after the initial issuance of such debt or equity securities, or (B)
          with a conversion, exercise or exchange price that is subject to being
          reset at some future date after the initial issuance of such debt or
          equity security or upon the occurrence of specified or contingent
          events directly or indirectly related to the business of the Company
          or the market for the Common Stock (but excluding standard stock split
          anti-dilution provisions), or (ii) any securities of the Company
          pursuant to an "equity line" structure which provides for the sale,
          from time to time, of securities of the Company which are registered
          for resale pursuant to the Securities  Act.

               (c) For the purposes of Section 3(a), the term "MFN Transaction"
          shall mean a transaction in which the Company issues or sells any
          securities in a capital raising transaction or series of related
          transactions (the "New Offering") which grants to an investor (the
          "New Investor") the right to receive additional shares based upon
          future transactions of the Company on terms more favorable than those
          granted to the New Investor in the New Offering.

               (d) In case of any stock split or reverse stock split, stock
          dividend, reclassification of the common stock, recapitalization,
          merger or consolidation, or like capital adjustment affecting the
          Common Stock of the Company, the provisions of this Section 3 shall be
          applied in a fair, equitable and reasonable manner so as to give
          effect, as nearly as may be, to the purposes hereof.

          4.  Interest.  The rate of interest on this Debenture shall be six
              --------
percent (6%), per annum (based upon a 360 calendar day year), on the outstanding
principal until paid, redeemed or converted. The Company shall have the right to
issue registered Common Stock in exchange for interest otherwise payable in cash
pursuant to this Debenture. The exact number of shares of Common Stock into
which such interest payment is convertible shall be determined as set forth in
Section 3.

          5.  Redemption.  The Company shall have the right to deliver to the
              ----------
Holder a written notice ("Redemption Notice") of the Company's intent to redeem
all or any part of the outstanding principal amount of this Debenture provided
that it also pays at such time all accrued but unpaid interest on the entire
outstanding principal amount plus the applicable Payment Premium. The Payment
Premium shall be (i) if the redemption payment is made prior to the 75th Trading
Day after the first Closing Date, 20% of the outstanding principal amount being
redeemed, and (ii) if the redemption payment is made on or after the 75th
Trading Day after the first Closing Date, 30% of the outstanding principal
amount being redeemed. The Company shall give the Holder at least five (5)
Trading Days' notice prior to the date a redemption payment is made ("Redemption
Date"). The Redemption Date and the outstanding principal amount being redeemed
shall be set forth in the Redemption Notice. The Holder shall have the right to
convert this Debenture as set forth in Section 3 until the Trading Day
immediately prior to the Trading Day set for payment of the redemption price. If
the Company fails to make the redemption payment to the Holder on the Redemption
Date, the Company shall thereafter not have any further right to redeem this
Debenture. Additionally, at the election of each Investor, the Company shall use
at least 50% of the net proceeds from any other sale for cash of its securities
(including the Equity Line) (each a "Subsequent Sale"), to redeem this
Debenture, plus all accrued but unpaid interest and the applicable Payment
Premium (as set forth above). The Company shall give the Holder at least five
(5) Trading Days' notice prior to the closing date

                                       3
<PAGE>

of a Subsequent Sale (each a "Subsequent Sale Closing Date"). The Company shall
make redemption payments to the Holder on such Subsequent Sale Closing Date
directly out of the proceeds of any such Subsequent Sale. The Holder shall have
the right to convert this Debenture as set forth in Section 3 until the Trading
Day i mmediately prior to the Trading Day set for payment of the redemption
price.

          6.  Maturity.  On the Maturity Date, the Company shall pay the
              --------
principal of and any accrued but unpaid interest due upon this Debenture, less
any amounts required by law to be deducted, to the registered Holder of this
Debenture and addressed to such Holder at the last address appearing on the
Debenture Register. The Company shall not have the right to pre-pay this
Debenture, except pursuant to Section 5 herein, without the prior written
consent of the Holder.

          7.  Conversion Procedure.

              (a) Conversion shall be effectuated by surrendering this
Debenture to the Company (if such Conversion will convert all outstanding
principal) together with the form of conversion notice attached hereto as
Exhibit A (the "Notice of Conversion"), executed by the Holder of this Debenture
---------
evidencing such Holder's intention to convert this Debenture or a specified
portion of this Debenture and if, and only if, the Holder intends to convert the
entire outstanding principal amount of this Debenture, the surrender of this
Debenture. Interest accrued or accruing from the Conversion Date shall be paid
as set forth above. No fraction of a share or scrip representing a fraction of a
share will be issued on conversion, but the number of shares issuable shall be
rounded to the nearest whole share. The Conversion Date shall be deemed to be
the date on which the Holder faxes the Notice of Conversion duly executed to the
Company. Facsimile delivery of the Notice of Conversion shall be accepted by the
Company at facsimile number (210) 558-0356 Attn: James G. Scogin. Certificates
representing Common Stock upon conversion will be delivered to the Holder within
three (3) Trading Days from the Conversion Date. Delivery of shares upon
conversion shall be made to the address specified by the Holder in the Notice of
Conversion.

              (b) The Company understands that a delay in the issuance of the
Conversion Shares (without legends, if issued during any periods that the
Registration Statement is effective or sales may be made pursuant to Rule 144
under the Securities Act and hereinafter referred to as "Rule 144") beyond the
three (3) Trading Day period described in Section 7(a) could result in economic
loss to the Holder. As compensation to the Holder for such loss, the Company
agrees to pay late payments to the Holder for late issuance of Conversion Shares
(without legends, if issued during any periods that the Registration Statement
is effective or sales may be made pursuant to Rule 144 under the Securities Act
and hereinafter referred to as "Rule 144") in accordance with the following
schedule (where "No. Trading Days Late" is defined as the number of Trading Days
beyond three (3) Trading Days from the Conversion Date).


-----------------------------------------------------------------------
No. Trading Days Late                Late Payment for Each

                                     $5,000 of Principal Amount

                                     Being Converted
-----------------------------------------------------------------------
          1                           $100
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          2                           $200
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                                       4
<PAGE>

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No. Trading Days Late                Late Payment for Each

                                     $5,000 of Principal Amount

                                     Being Converted
-----------------------------------------------------------------------

          3                           $300
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          4                           $400
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          5                           $500
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          6                           $600
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          7                           $700
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          8                           $800
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          9                           $900
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          10                        $1,000
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          More than 10              $1,000 +$200 for each Trading Day
                                    Late beyond 10 Trading Days
-----------------------------------------------------------------------

          The Company shall pay any payments incurred under this Section 7(b) in
     immediately available funds upon demand.  Nothing herein shall limit
     Holder's right to pursue injunctive relief and/or actual damages for the
     Company's failure to issue and deliver Conversion Shares (without legends,
     if issued during any periods that the Registration Statement is effective
     or sales may be made pursuant to Rule 144 under the Securities Act and
     hereinafter referred to as "Rule 144") or a new Debenture to the Holder,
     including, without limitation, the Holder's actual losses occasioned by any
     "buy-in" of Common Stock necessitated by such late delivery.  Furthermore,
     in addition to any other remedies which may be available to the Holder, in
     the event that the Company fails for any reason to effect delivery of such
     Conversion Shares (without legends, if issued during any periods that the
     Registration Statement is effective or sales may be made pursuant to Rule
     144 under the Securities Act and hereinafter referred to as "Rule 144")
     within three (3) Trading Days from the Conversion Date, the Holder will be
     entitled to revoke the relevant Notice of Conversion by delivering a notice
     to such effect to the Company, whereupon the Company and the Holder shall
     each be restored to their respective positions immediately prior to
     delivery of such Notice of Conversion except that the Holder shall retain
     the right to receive both any late payment liquidated damages as set forth
     above, accrued as of the revocation date, plus the actual net costs of any
     "buy-in".

          (c) If at any time (i) the Company challenges, disputes or denies the
     right of the Holder to effect the conversion of this Debenture into
     Conversion Shares or, if applicable, cash, or otherwise dishonors or
     rejects any Notice of Conversion properly delivered in accordance with this
     Section 7, or (ii) any Company stockholder who is not and has never been an
     Affiliate (as defined in Rule 405 under the

                                       5
<PAGE>

     Securities Act of 1933, as amended) of the Holder obtains a judgment or any
     injunctive relief from any court or public or governmental authority which
     denies, enjoins, limits, modifies, delays or disputes the right of the
     Holder hereof to effect the conversion of this Debenture into Conversion
     Shares, then the Holder shall have the right, by written notice, to require
     the Company to promptly redeem this Debenture for cash at a redemption
     price equal to one hundred fifty percent (150%) of the outstanding
     principal amount hereof and all accrued and unpaid interest hereon. Under
     any of the circumstances set forth above, the Company shall indemnify and
     hold harmless the Holder and be responsible for the payment of all costs
     and expenses of the Holder, including its reasonable legal fees and
     expenses, as and when incurred in disputing any such action or pursuing its
     rights hereunder (in addition to any other rights of the Holder). In the
     event a Holder of this Debenture shall elect to convert any or all of the
     outstanding principal amount hereof, the Company may not refuse conversion
     based on any claim that the Holder or any one associated or affiliated with
     the Holder of has been engaged in any violation of law, agreement or for
     any other reason, unless, an injunction from a court, on notice,
     restraining and or enjoining conversion of all or part of this Debenture
     shall have been sought and obtained and the Company posts a surety bond for
     the benefit of the Holder in the amount of 150% of the principal amount of
     this Debenture outstanding, which is subject to the injunction, 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 to
     the extent it obtains judgment. In the absence of an injunction precluding
     the same, the Company shall issue Conversion Shares or, if applicable,
     cash, upon a properly noticed conversion.

          8.  Company's Obligation.  No provision of this Debenture shall alter
              --------------------
or impair the obligation of the Company, which is absolute and unconditional, to
pay the principal of, and interest on, this Debenture at the time, place, and
rate, and in the coin or currency or Conversion Shares herein prescribed. This
Debenture is a direct obligation of the Company.

          9.  Recourse.  No recourse shall be had for the payment of the
              --------
principal of, or the interest on, this Debenture, or for any claim based hereon,
or otherwise in respect hereof, against any incorporator, shareholder, employee,
officer or director, as such, past, present or future, of the Company or any
successor corporation, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration for
the issue hereof, expressly waived and released.

          10.  Merger, Consolidation or Sale of Assets.  In case of any (a)
               ---------------------------------------
merger or consolidation of the Company with or into another Person, or (b) sale
by the Company of more than one-half of the assets of the Company (on an as
valued basis) in one or a series of related transactions, the Holder shall have
the right to (i) deem such an occurrence an Event of Default and exercise its
rights of prepayment pursuant to Section 14 herein, (ii) convert its aggregate
principal amount of this Debenture then outstanding into the shares of stock and
other securities, cash and property receivable upon or deemed to be held by
holders of Common Stock following such merger, consolidation or sale, and the
Holder shall be entitled upon such event or series of related events to receive
such amount of securities, cash and property as the Conversion Shares into which
such aggregate principal amount of this Debenture could have been converted
immediately prior to such merger, consolidation or sales would have been
entitled, or (iii) in the case of a merger or consolidation, (A) require the
surviving entity to issue securities with such aggregate stated value or in such
face amount, as the case may be, equal to the aggregate principal amount of this
Debenture then held by the Holder, plus all accrued and unpaid interest and
other amounts owing thereon, which newly issued securities shall have terms
identical (including with respect to conversion) to the terms of this Debenture
and shall be entitled to all of the rights and privileges of the Holder of this
Debenture set forth herein and the agreements pursuant to which this Debenture
was issued (including, without limitation, as such rights relate to the
acquisition, transferability, registration and listing of such shares of stock
other securities issuable upon conversion thereof), and (B) simultaneously with
the issuance of such securities, shall have the right to convert such instrument
only into shares of stock and other securities, cash and property receivable
upon or deemed to be held by holders of Common Stock following such merger or
consolidation. The terms of any such merger, sale or consolidation shall include
such terms so as to continue to give the Holder the right to receive the
securities, cash and property set forth in this Section

                                       6
<PAGE>

upon any conversion or redemption following such event. This Section shall
similarly apply to successive such events.

          11.  Obligations of Holder.  The Holder, by acceptance hereof, agrees
               ---------------------
that this Debenture is being acquired for investment and that such Holder will
not offer, sell or otherwise dispose of this Debenture or the Conversion Shares
thereof except under circumstances which will not result in a violation of the
Act or any applicable state Blue Sky or foreign laws or similar laws relating to
the sale of securities.

          12.  Governing Law.  This Debenture shall be governed by and construed
               -------------
in accordance with the laws of the State of New York. Each of the parties
consents to the jurisdiction of the federal courts whose districts encompass any
part of the City of New York or the state courts of the State of New York
sitting in the City of New York in connection with any dispute arising under
this Agreement and hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions.

          13.  Event of Default.  The following shall constitute an "Event of
               ----------------
Default":

          The Company shall default in the payment of principal or interest on
this Debenture and same shall continue for a period of three (3) Trading
Days; or

               a.  Any of the material representations or warranties made by the
          Company herein, in the Purchase Agreement, the Registration Rights
          Agreement, or in any agreement, certificate or financial statements
          heretofore or hereafter furnished by the Company in connection with
          the execution and delivery of this Debenture or the Purchase Agreement
          shall be false or misleading in any material respect at the time made;
          or

               b.  The Company fails to issue Conversion Shares to the Holder or
          to cause its Transfer Agent to issue Conversion Shares, or, if
          applicable, cash, upon proper exercise by the Holder of the conversion
          rights of the Holder in accordance with the terms of this Debenture,
          fails to transfer or to cause its Transfer Agent to transfer any
          certificate for Conversion Shares issued to the as and when required
          by this Debenture or the Registration Rights Agreement, and such
          transfer is otherwise lawful, or fails to remove any restrictive
          legend or to cause its Transfer Agent to transfer any certificate or
          any Conversion Shares issued to the Holder as and when required by
          this Debenture, the Purchase Agreement or the Registration Rights
          Agreement and such legend removal is otherwise lawful, and any such
          failure shall continue uncured for five (5) business days; or

               c.  The Company shall fail to perform or observe, in any material
          respect, any other covenant, term, provision, condition, agreement or
          obligation of the Company under the Purchase Agreement, the
          Registration Rights Agreement or this Debenture; or

               d.  The Company shall (i) admit in writing its inability to pay
          its debts generally as they mature; (ii) make an assignment for the
          benefit of creditors or commence proceedings for its dissolution; or
          (iii) apply for or consent to the appointment of a trustee, liquidator
          or receiver for its or for a substantial part of its property or
          business; or

               e.  A trustee, liquidator or receiver shall be appointed for the
          Company or for a substantial part of its property or business without
          its consent and shall not be discharged within sixty (60) days after
          such appointment; or

               f.  Any governmental agency or any court of competent
          jurisdiction at the instance of any governmental agency shall assume
          custody or control of the whole or any substantial

                                       7
<PAGE>

          portion of the properties or assets of the Company and shall not be
          dismissed wi thin sixty (60) days thereafter; or

               g.  Any money judgment, writ or warrant of attachment, or similar
          process in excess of One Hundred Thousand ($100,000) Dollars in the
          aggregate shall be entered or filed against the Company or any of its
          properties or other assets and shall remain unpaid, unvacated,
          unbonded or unstayed for a period of sixty (60) days or in any event
          later than five (5) days prior to the date of any proposed sale
          thereunder; or

               h.  Bankruptcy, reorganization, insolvency or liquidation
          proceedings or other proceedings for relief under any bankruptcy law
          or any law for the relief of debtors shall be instituted by or against
          the Company and, if instituted against the Company, shall not be
          dismissed within sixty (60) days after such institution or the Company
          shall by any action or answer approve of, consent to, or acquiesce in
          any such proceedings or admit the material allegations of, or default
          in answering a petition filed in any such proceeding;

               i.  The Registration Statement is not declared effective by the
          Commission within one hundred twenty (120) days from the first
          Closing; and

               j.  The Company shall have its Common Stock suspended or delisted
          from trading on a Principal Market for in excess of five (5) Trading
          Days.


          Then, or at any time thereafter, and in each and every such case,
unless such Event of Default shall have been waived in writing by the Holder
(which waiver shall not be deemed to be a waiver of any subsequent default) at
the option of the Holder and in the Holder's sole discretion, the Holder may
consider this Debenture immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary
notwithstanding, and the Holder may immediately enforce any and all of the
Holder's rights and remedies provided herein or any other rights or remedies
afforded by law.

          14.  Rights as Shareholder.  Nothing contained in this Debenture shall
               ---------------------
be construed as conferring upon the Holder the right to vote or to receive
dividends or to consent or receive notice as a shareholder in respect of any
meeting of shareholders or any rights whatsoever as a shareholder of the
Company, unless and to the extent converted in accordance with the terms hereof.
Upon delivery to the Company of a Notice of Conversion by a Holder, such Holder
shall immediately be deemed a shareholder of the Company with respect to the
Conversion Shares to be issued pursuant to such Notice of Conversion.

          15.  Limitation on Conversion.  In no event shall the Holder be
               ------------------------
permitted to convert this Debenture for Conversion Shares to the extent that (a)
the number of shares of Common Stock beneficially owned by such Holder (other
than Conversion Shares) plus (b) the number of Conversion Shares, would be equal
to or exceed 9.9% of the number of shares of Common Stock then issued and
outstanding, including shares issuable upon conversion of this Debenture held by
such Holder after application of this Section 16. As used herein, beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder. To
the extent that the limitation contained in this Section 15 applies, the
determination of whether this Debenture is convertible (in relation to other
securities owned by the Holder) and of which a portion of this Debenture is
convertible shall be in the sole discretion of such Holder, and the submission
of a Notice of Conversion shall be deemed to be such Holder's determination of
whether this Debenture is convertible (in relation to other securities owned by
such Holder) and of which portion of this Debenture is convertible, in each case
subject to such aggregate percentage limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination. Nothing
contained herein shall be deemed to restrict the right of a Holder to convert
this Debenture at such time as such conversion will not violate the provisions
of this Section 15. The provisions of this Section 15 may be waived by the
Holder of this Debenture upon, at the election of the Holder, not less than 61
calendar days' prior notice to the Company, and the provisions of this Section
15 shall continue to apply until such 61st day (or, at the election of the
Holder, such later date as may be specified in such notice of waiver). No
conversion of this Debenture in violation of this Section

                                       8
<PAGE>

15 but otherwise in accordance with this Debenture shall affect the status of
the Common Stock issued upon such conversion as validly issued, fully-paid and
nonassessable. If instead of receiving cash on the Maturity Date the Holder
instead exercises its right to convert this Debenture into Common Stock pursuant
to Section 3 by delivery of a Notice of Conversion prior to receipt of payment,
and such conversion would cause the limit contained in the first sentence of
this Section 15 to be exceeded, such conversion of this Debenture shall occur up
to such limit and the remaining unconverted portion of this Debenture shall be
converted into Common Stock in accordance with one or more Notices of Conversion
delivered by the Holder 61 days after the Maturity Date.

          16.  Section Headings.  The headings used in this Debenture are used
               ----------------
for convenience only and are not to be considered in construing or
interpreting this Debenture.

                                       9
<PAGE>

          IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized.

Dated: June __, 2001

                              DATA RACE, INC.

                              By:
                                  ---------------------------------------
                                  Michael McDonnell, President & CEO


Attest:


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

                                       10
<PAGE>

                                   EXHIBIT A

                             NOTICE OF CONVERSION

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

          The undersigned hereby irrevocably elects to convert $ ___________
of the principal amount of the above Debenture No. ___ into Shares of Common
Stock of Data Race, Inc. (the "Company") according to the conditions hereof, as
of the date written below.

Date of Conversion*
                   -----------------------------------------------------------

Conversion Price *
                   -----------------------------------------------------------

Accrued Interest
                 -------------------------------------------------------------

Signature
          --------------------------------------------------------------------
                           [Name]

Address:
         ---------------------------------------------------------------------

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


*If such conversion represents the remaining principal balance of the Debenture,
the original Debenture must accompany this notice within three Trading Days.

                                       11