EXHIBIT A



NEITHER THESE  SECURITIES NOR THE SECURITIES  ISSUABLE UPON  CONVERSION OF THESE
SECURITIES HAVE BEEN  REGISTERED WITH THE SECURITIES AND EXCHANGE  COMMISSION OR
THE  SECURITIES  COMMISSION  OF ANY STATE IN  RELIANCE  UPON AN  EXEMPTION  FROM
REGISTRATION  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED  (THE  "SECURITIES
ACT"),  AND,  ACCORDINGLY,  MAY NOT BE OFFERED  OR SOLD  EXCEPT  PURSUANT  TO AN
EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR PURSUANT TO AN
AVAILABLE  EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE  REGISTRATION
REQUIREMENTS  OF THE  SECURITIES  ACT AND IN ACCORDANCE  WITH  APPLICABLE  STATE
SECURITIES  LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH  EFFECT,  THE  SUBSTANCE  OF WHICH SHALL BE  REASONABLY  ACCEPTABLE  TO THE
COMPANY.  THESE SECURITIES AND THE SECURITIES  ISSUABLE UPON CONVERSION OF THESE
SECURITIES  MAY BE PLEDGED IN A MANNER  CONSISTENT  WITH THE  SECURITIES  ACT IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.

No. [  ]                                                                 $[    ]
                                              Original Issue Date: April 4, 2005



                         CALYPTE BIOMEDICAL CORPORATION

            SECURED 8% CONVERTIBLE PROMISSORY NOTE DUE APRIL 3, 2007

      THIS  NOTE is one of a  series  of duly  authorized  and  issued  notes of
Calypte  Biomedical   Corporation,   a  Delaware  corporation  (the  "COMPANY"),
designated as its Secured 8% Convertible  Promissory Notes due April 3, 2007, in
the original  aggregate  principal  amount eight  million  dollars  ($8,000,000)
(collectively, the "NOTES" and each Note comprising the Notes, a "NOTE").

      FOR VALUE RECEIVED, the Company promises to pay to the order of [ ] or its
registered  assigns (the "INVESTOR"),  the principal sum of [ ] ($), on April 3,
2007 or such  earlier  date as this Note is  required  to be repaid as  provided
hereunder  (the  "MATURITY  DATE"),  and to pay  interest to the Investor on the
principal  amount of this Note  outstanding from time to time in accordance with
the provisions  hereof. All holders of Notes are referred to collectively as the
"INVESTORS." This Note is subject to the following additional provisions:


<PAGE>

            1.  Definitions.  In addition to the terms defined elsewhere in this
Note: (a) capitalized  terms that are used but not otherwise defined herein have
the meanings given to such terms in the Purchase Agreement, dated as of April 4,
2005,  among the  Company and the  Investors  identified  therein (the "PURCHASE
AGREEMENT"), and (b) the following terms have the meanings indicated below:

      "BANKRUPTCY  EVENT" means any of the following events:  (a) the Company or
any  Subsidiary  commences  a case or other  proceeding  under  any  bankruptcy,
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or  liquidation  or similar law of any  jurisdiction  relating to the
Company or any Subsidiary thereof; (b) there is commenced against the Company or
any Subsidiary any such case or proceeding that is not dismissed  within 60 days
after commencement;  (c) the Company or any subsidiary is adjudicated by a court
of competent  jurisdiction insolvent or bankrupt or any order of relief or other
order  approving any such case or proceeding is entered;  (d) the Company or any
Subsidiary  suffers any  appointment  of any custodian or the like for it or any
substantial  part of its property  that is not  discharged  or stayed  within 60
days; (e) under  applicable  law the Company or any  Subsidiary  makes a general
assignment for the benefit of creditors; (f) the Company or any Subsidiary fails
to pay,  or states  that it is  unable  to pay or is  unable  to pay,  its debts
generally as they become due; (g) the Company or any Subsidiary  calls a meeting
of  its  creditors  with  a view  to  arranging  a  composition,  adjustment  or
restructuring of its debts; or (h) the Company or any Subsidiary,  by any act or
failure to act, expressly  indicates its consent to, approval of or acquiescence
in any of the  foregoing or takes any  corporate or other action for the purpose
of effecting any of the foregoing.

      "CHANGE OF CONTROL" means the occurrence of any of the following in one or
a series of related transactions: (i) an acquisition after the date hereof by an
individual  or legal entity or "group" (as described in Rule  13d-5(b)(1)  under
the  Exchange  Act) of more  than  one-third  of the  voting  rights  or  equity
interests  in the  Company;  (ii) a  replacement  of more than  one-half  of the
members of the  Company's  board of directors in a single  election of directors
that is not  approved  by those  individuals  who are  members  of the  board of
directors  on the date hereof (or other  directors  previously  approved by such
individuals);  (iii) a Fundamental  Transaction (as defined in Section 11(c)), a
merger or  consolidation of the Company or any Subsidiary or a sale of more than
one-half  of  the  assets  of  the  Company  in  one  or  a  series  of  related
transactions,  unless following such transaction or series of transactions,  the
holders of the Company's securities prior to the first such transaction continue
to hold at least a majority  of the voting  rights and equity  interests  in the
surviving  entity  or  acquirer  of  such  assets;   (iv)  a   recapitalization,
reorganization or other transaction involving the Company or any Subsidiary that
constitutes  or results in a transfer  of more than fifty  percent of the voting
rights or equity interests in the Company,  unless following such transaction or
series of  transactions,  the holders of the Company's  securities  prior to the
first such  transaction  continue to hold at least  fifty  percent of the voting
rights and equity  interests in the surviving entity or acquirer of such assets;
(v)  consummation  of a "Rule 13e-3  transaction" as defined in Rule 13e-3 under
the  Exchange  Act with  respect to the  Company,  or (vi) the  execution by the
Company  or  its  controlling  stockholders  of an  agreement  providing  for or
reasonably likely to result in any of the foregoing events.

                                       2
<PAGE>

      "CLOSING PRICE" means,  for any date, the price determined by the first of
the following  clauses that  applies:  (a) if the Common Stock is then listed or
quoted on an Eligible Market, the last trade price per share of the Common Stock
for such date (or the nearest  preceding date) on the primary Eligible Market on
which the Common  Stock is then  listed or quoted;  (b) if prices for the Common
Stock are then quoted on the OTC Bulletin Board, the closing bid price per share
of the Common Stock for such date (or the nearest preceding date) so quoted; (c)
if prices for the Common Stock are then reported in the "Pink Sheets"  published
by the National  Quotation  Bureau  Incorporated  (or a similar  organization or
agency  succeeding  to its functions of reporting  prices),  the most recent bid
price per share of the Common Stock so reported;  or (d) in all other cases, the
fair market value of a share of Common  Stock as  determined  by an  independent
qualified  appraiser  selected  in good  faith  and  paid for by a  majority  in
interest of the Investors.

      "COMMON STOCK" means the common stock of the Company,  $0.03 par value per
share,  and any  securities  into  which  such  common  stock may  hereafter  be
reclassified.

      "COMMON  STOCK  EQUIVALENTS"  means any  securities  of the  Company  or a
Subsidiary  thereof which entitle the holder  thereof to acquire Common Stock at
any time,  including  without  limitation,  any debt,  preferred stock,  rights,
options,  warrants or other  instrument that is at any time  convertible into or
exchangeable  for, or otherwise  entitles the holder thereof to receive,  Common
Stock or other  securities  that  entitle  the holder to  receive,  directly  or
indirectly, Common Stock.

      "CONVERSION  DATE" means the date a Conversion  Notice  together  with the
Conversion Schedule is delivered to the Company in accordance with Section 5(a).

      "CONVERSION  NOTICE" means a written notice in the form attached hereto as
Exhibit A.

      "CONVERSION  PRICE" means $0.30  subject to  adjustment  from time to time
pursuant to Section 11.

      "DEFAULT"  means  any event or  condition  which  constitutes  an Event of
Default  or that  upon  notice,  lapse of time or both  would,  unless  cured or
waived, become an Event of Default.

      "ELIGIBLE  MARKET" means any of the New York Stock Exchange,  the American
Stock Exchange, the Nasdaq National Market or the Nasdaq SmallCap Market.

      "EQUITY  CONDITIONS ARE SATISFIED" means, as of any date of determination,
that each of the  following  conditions is (or would be) satisfied on such date,
if the  Company  were to issue on such date all of the  Underlying  Shares  then
issuable upon (1) conversion in full of the outstanding  principal amount of all
Notes,  and (2) the payment on such date of accrued  and unpaid  interest on all
Notes: (i) the number of authorized but unissued and otherwise unreserved shares
of Common Stock is sufficient for such issuance, (ii) the Common Stock is listed
or quoted (and is not  suspended  from  trading) on an Eligible  Market and such
shares of Common  Stock are approved  for listing on such  Eligible  Market upon
issuance,   (iii)  such  Common  Stock  is  registered   for  resale  under  the
Registration  Statement and the prospectus under such Registration  Statement is


                                       3
<PAGE>

available for the sale of all Registrable Securities held by the Investor,  (iv)
such issuance would be permitted in full without  violating  Section 5(b) hereof
or the rules or  regulations  of the  Eligible  Market on which such  shares are
listed or quoted,  (v) both immediately  before and after giving effect thereto,
no Default shall or would exist, and (vi) no public announcement of a pending or
proposed  Change  of  Control   transaction  has  occurred  that  has  not  been
consummated.

      "EVENT EQUITY VALUE" means the average of the Closing  Prices for the five
consecutive  Trading Days preceding  either:  (a) the date of an Event Notice or
the date the Company  becomes  obligated  to pay the Event  Price under  Section
7(b),  as  applicable,  or (b) the date on which the Event  Price  with  respect
thereto (together with any other payments,  expenses and liquidated damages then
due and payable under the Transaction  Documents) is paid in full,  whichever is
greater.

      "EVENT OF DEFAULT"  means any one of the  following  events  (whatever the
reason and whether it shall be voluntary or involuntary or effected by operation
of law or pursuant to any judgment,  decree or order of any court, or any order,
rule or regulation of any administrative or governmental body):

                  (i)  any  default  in  the  payment  (free  of  any  claim  of
subordination),  when the same becomes due and payable  (whether on a Prepayment
Date, the Maturity Date or by acceleration  or prepayment or otherwise),  of (a)
liquidated  damages in respect of this Note which default  continues  unremedied
for a period of three  Trading  Days after the date on which  written  notice of
such  default is first given to the Company by the  Investor,  or (b)  principal
under or interest in respect of this Note.

                  (ii) the Company or any  Subsidiary  (1) fails to pay when due
or there is an  acceleration of any monetary  obligation  (regardless of amount)
under any currently  existing or hereafter arising debenture (other than a Note)
or any  mortgage,  credit  agreement  or other  facility,  indenture  agreement,
factoring  agreement or other instrument under which there may be issued,  or by
which there may be secured or evidenced, any Indebtedness or under any long term
leasing or factoring arrangement, if the aggregate amount of the obligations and
liabilities of the Company and the subsidiaries thereunder exceeds $50,000 (each
of the  foregoing  a  "MATERIAL  DEBT  AGREEMENT"),  or (2) fails to  observe or
perform any other obligation under any Material Debt Agreement, and such failure
results in the obligations thereunder becoming or being declared due and payable
prior to the date on which they would otherwise become due and payable.

                  (iii) the  occurrence  of a Change in  Control or the entry by
the Company or any subsidiary into any transaction that would result in a Change
of Control of the Company.

                  (iv)  the  Company  shall  fail  to  observe  or  perform  any
covenant,  condition or agreement  contained in any Transaction  Document (other
than  those  specified  in clause (i) above and clause  (xvi)  below),  and such
failure shall  continue  unremedied  for a period of five Trading Days after the
date on which  written  notice of such  default is first given to the Company by
the Investor (it being understood that no prior notice need be given in the case
of a default that cannot reasonably be cured within five Trading Days).

                                       4
<PAGE>

                  (v) the  occurrence  and  continuance  of an Event of  Default
under any other Note.

                  (vi) any  prepayment  by the  Company of any other Note or any
other  Indebtedness  issued by it or any issuance of  securities in exchange for
any Notes issued by it (other than  Underlying  Shares upon  conversion  of such
Notes in  accordance  with their terms as in effect on the  Original  Issue Date
thereof),  except in each case (i) if the  Company  offers  to the  Investor  in
writing the same  prepayment  of this Note and all other Notes then held by such
Investor on the same  economic  terms on which the Company  prepays or offers to
prepay  (whichever is more favorable to the holder of such Note) such Notes, and
(ii) the Investor  consents to such  prepayment of this Note in accordance  with
the prepayment provisions of Section 13 of this Note.

                  (vii) any of the Company's  representations and warranties set
forth in any Transaction  Document shall be incorrect in any material respect as
of the date made or as of the Original Issue Date.

                  (viii) the occurrence of a Bankruptcy Event.

                  (ix)  one or more  judgments  for the  payment  of money in an
aggregate  amount in excess of $50,000 shall be rendered  against the Company or
any subsidiary or any  combination  thereof (which shall not be fully covered by
insurance  without  taking into account any  applicable  deductibles)  and which
shall remain undischarged or unbonded for a period of 30 consecutive days during
which execution shall not be effectively  stayed, or any action shall be legally
taken by a judgment creditor to attach or levy upon any assets of the Company or
any subsidiary to enforce any such judgment.

                  (x) any Transaction  Document shall cease, for any reason,  to
be in full force and effect,  or the Company shall so assert in writing or shall
disavow any of its obligations thereunder.

                  (xi) the Common  Stock  shall not be listed or  quoted,  or is
suspended from trading,  on an Eligible Market for a period of five Trading Days
(which need not be consecutive Trading Days).

                  (xii)  the  Company  fails  to  deliver  a  stock  certificate
evidencing  Underlying  Shares to an Investor  within five  Trading Days after a
Conversion Date or in the case of exercises under a Warrant, within five Trading
days  after a Date of  Exercise  under,  and as such term is  defined  in,  such
Warrant,  or the conversion or exercise rights of the Investors  pursuant to the
terms hereof or the terms of the Warrants are otherwise suspended for any reason
(other than as a result of the limitations set forth in Section 5(b)(i)).

                  (xiii) the Company fails to have available a sufficient number
of  authorized  but unissued  and  otherwise  unreserved  shares of Common Stock
available to issue  Underlying  Shares upon any  conversion of Notes or upon any
exercise of Warrants.

                  (xiv) the Company effects or publicly  announces its intention
to effect any exchange,  recapitalization  or other transaction that effectively
requires or rewards  physical  delivery of  certificates  evidencing  the Common
Stock, unless

                                       5
<PAGE>

following such transaction, the holders of the Company's securities prior to the
first  such  transaction  continue  to  beneficially  own at  least  a  majority
(one-third  in the case of a Change in Control) of the voting  rights and equity
interests in the surviving entity or acquirer of such assets.

                  (xv)  a  Registration  Statement  under  Section  2(a)  of the
Registration Rights Agreement is not declared effective by the Commission by the
120th day following  the Closing Date, or is not effective as to all  Underlying
Shares  issuable  upon  the  conversion  of the  Notes  (other  than  any  which
constitutes  interest accreted to principal of the Notes), and available for use
by the holders of such  Underlying  Shares,  for in excess of an aggregate of 20
Trading Days (which need not be  consecutive  Trading  Days) in any twelve month
period during the  Effectiveness  Period (as defined in the Registration  Rights
Agreement).

                  (xvi)  the  Company  fails to make any cash  payment  required
under the Transaction Documents (other than as set forth in paragraph (i) above)
and such  failure is not cured  within five  Trading  Days after  notice of such
default is first given to the Company by an Investor.

                  (xvii) any  violation  of the Prior  Placements  or  Amendment
thereto.

      "INDEBTEDNESS"  has the meaning  given to the term "Debt" in the  Purchase
Agreement.

      "ORIGINAL ISSUE DATE" has the meaning set forth on the face of this Note.

      "PROCEEDING"  means an action,  claim,  suit,  investigation or proceeding
(including,  without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.

      "STOCKHOLDER  APPROVAL"  shall  have the  meaning  set  forth  in  Section
5(b)(ii).

      "STRATEGIC  TRANSACTION"  shall have the meaning set forth in the Purchase
Agreement.

      "TRADING  DAY" means (i) a day on which the  Common  Stock is traded on an
Eligible  Market,  or (ii) if the  Common  Stock is not  listed  on an  Eligible
Market,  a day on which  the  Common  Stock is  traded  in the  over-the-counter
market,  as reported by the OTC Bulletin Board or the National  Quotation Bureau
Incorporated,  or (iii) 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  to its  functions  of  reporting  prices);
provided, that in the event that the Common Stock is not listed or quoted as set
forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.

      "UNDERLYING  SHARES"  means  the  shares  of Common  Stock  issuable  upon
conversion of the Notes and payment of interest thereunder.

      "VWAP" means, with respect to any date of determination,  the daily volume
weighted  average price (as reported by Bloomberg using the VAP function) of the
Common Stock on such date of determination, or if there is no such price on such
date of determination,  then the daily volume weighted average price on the date
nearest preceding such date.

                                       6
<PAGE>

      2.  Interest.  (a) The Company  shall pay  interest to the Investor on the
aggregate  unconverted and then outstanding principal amount of this Note at the
rate of 8% per annum, payable quarterly in cash or, subject to the conditions of
Section  2(b),  by adding the amount of such  interest  to the then  outstanding
principal amount under this Note, in arrears on each three month  anniversary of
the Original Issue Date (each, an "INTEREST PAYMENT DATE"),  except if such date
is not a Trading Day, in which case such  interest  shall be payable on the next
succeeding  Trading Day.  Interest shall be calculated on the basis of a 360-day
year for the actual number of days elapsed and shall accrue daily  commencing on
the Original Issue Date.

            (b) Subject to the conditions and limitations set forth below,  from
and after such time as the Company has obtained  Stockholder Approval and if the
Equity Conditions Are Satisfied,  in lieu of paying interest in cash the Company
may, at its option,  on each Interest  Payment Date,  add the amount of interest
due on an Interest  Payment Date to the  principal  amount under this Note.  The
Company must deliver  written  notice to the Investor  indicating  the manner in
which it  intends  to pay  interest  at least  ten  Trading  Days  prior to each
Interest  Payment Date, but the Company may indicate in any such notice that the
election contained therein shall continue for subsequent  Interest Payment Dates
until  rescinded.  Failure to timely provide such written notice shall be deemed
an  irrevocable  election  by the  Company  to pay such  interest  in cash.  All
interest  payable in respect of the Notes on any  Interest  Payment Date must be
paid in the same manner.  Investor shall have the right, but not the obligation,
to add to the principal  amount of the Notes any interest not fully paid,  which
may be converted at the Conversion Price.

      3.  Registration  of Notes.  The  Company  shall  register  the Notes upon
records  maintained by the Company for that purpose (the "NOTE REGISTER") in the
name of each record Investor thereof from time to time. The Company may deem and
treat the registered  Investor of this Note as the absolute owner hereof for the
purpose of any conversion hereof or any payment of interest hereon,  and for all
other purposes, absent actual notice to the contrary from such record Investor.

      4. Registration of Transfers and Exchanges. The Company shall register the
transfer of any portion of this Note in the Note Register upon surrender of this
Note to the Company at its address  for notice set forth  herein.  Upon any such
registration  or transfer,  a new Note, in  substantially  the form of this Note
(any such new debenture,  a "NEW NOTE"),  evidencing the portion of this Note so
transferred  shall be issued to the  transferee  and a New Note  evidencing  the
remaining  portion of this Note not so  transferred,  if any, shall be issued to
the  transferring  Investor.  The  acceptance of the New Note by the  transferee
thereof shall be deemed the  acceptance by such  transferee of all of the rights
and obligations of a holder of a Note. The Company agrees that its prior consent
is not required for the transfer of any portion of this Note; provided, however,
that the Company shall be entitled to reasonable assurance, including an opinion
of counsel  reasonably  acceptable to Company,  that such transfer complies with
applicable  federal and state  securities laws. This Note is exchangeable for an
equal aggregate principal amount of Notes of different authorized denominations,
as requested by the Investor  surrendering  the same. No service charge or other
fee will be imposed in  connection  with any such  registration  of  transfer or
exchange.

                                       7
<PAGE>

      5. Conversion.

            (a) (i) At the  Option of the  Investor.  All or any  portion of the
principal  amount of this Note then  outstanding  together  with any accrued and
unpaid interest  hereunder  shall be convertible  into shares of Common Stock at
the Conversion  Price (subject to limitations set forth in Section 5(b)), at the
option  of the  Investor,  at any time and from  time to time from and after the
Original  Issue Date.  The  Investor may effect  conversions  under this Section
5(a), by delivering to the Company a Conversion  Notice together with a schedule
in the form of Schedule 1 attached hereto (the  "CONVERSION  SCHEDULE").  If the
Investor is converting less than all of the principal amount represented by this
Note,  or if a  conversion  hereunder  may not be  effected  in full  due to the
application  of Section  5(b),  the Company  shall honor such  conversion to the
extent  permissible  hereunder  and shall  promptly  deliver  to the  Investor a
Conversion   Schedule  indicating  the  principal  amount  which  has  not  been
converted.

                  (ii) At the Option of the Company.  Subject to the  provisions
of this Section 5(a)(ii),  at any time after the eighteenth month anniversary of
the Closing Date, the Company may deliver (via certified United States mail with
a return receipt requested) a written notice (such notice, a "COMPANY CONVERSION
NOTICE") to the  Investor  within  five days after any day (such day,  the "TEST
DATE") on which the  conditions  in (i),  (ii),  (iii) and (iv)  below  shall be
satisfied,  stating its irrevocable  election to convert at the Conversion Price
of all (but not less than all) of the outstanding principal amount of this Note,
provided that: (i) the VWAP for each of the 20 consecutive Trading Days prior to
the Test Date is greater  than the price per share  derived by  multiplying  the
Conversion  Price by the number two (2)  (subject to equitable  adjustment  as a
result of the events set forth in Sections 11(a),  (b) and (c)), (ii) the Equity
Conditions Are  Satisfied,  (iii) the average daily trading volume of the Common
Stock during the entire  period  referred to in clause (i) of this  subparagraph
(ii) shall be at least  450,000  shares  (subject to equitable  adjustment  as a
result  of  intervening  stock  splits  and  reverse  stock  splits),  and  (iv)
immediately  before or after  giving  effect to such  issuance on such date,  no
Event of  Default  or  Default  shall or would  exist.  Subject to the terms and
conditions of this Section 5(a)(ii),  the Company shall effect the conversion of
this Note  pursuant  to a Company  Conversion  Notice  on the 10th  Trading  Day
immediately  succeeding the date of the Company  Conversion Notice (the "COMPANY
CONVERSION  DATE").  Notwithstanding  anything to the contrary set forth in this
Note,  the  Investor  shall have the right to nullify  such  Company  Conversion
Notice if any of the  conditions  set forth in this Section  5(a)(ii)  shall not
have been met on each date  during the entire  period  referred to in clause (i)
above.  The  Company  covenants  and agrees  that it will  honor all  Conversion
Notices  tendered  from the time of delivery of the  Company  Conversion  Notice
through  6:30 p.m.  (California  time) on the  Trading  Day prior to the Company
Conversion  Date.  Notwithstanding  the foregoing,  the Company and the Investor
agree that,  if and to the extent  Section 5(b) of this Note would  restrict the
right of the Company to issue or the right of the Investor to receive any of the
Underlying Shares otherwise issuable upon the conversion in respect of a Company
Conversion Notice,  then  notwithstanding  anything to the contrary set forth in
the Company  Conversion  Notice,  the Company  Conversion Notice shall be deemed
automatically amended to apply only to such portion of this Note as would permit
conversion in full in compliance  with Section 5(b).  The Investor will promptly
(and, in any event,  prior to the Company Conversion Date) notify the Company in
writing  following  receipt of a Company  Conversion  Notice if Section  5(b)(i)
would  restrict  its right to  receive  the full  number of  otherwise  issuable
Underlying Shares following such Company Conversion Notice.

                                       8
<PAGE>

            (b) Certain Conversion Restrictions.

                  (i) Notwithstanding anything to the contrary contained herein,
the number of shares of Common  Stock that may be acquired  by an Investor  upon
each  conversion of Notes (or  otherwise in respect  hereof) shall be limited to
the  extent  necessary  to insure  that,  following  such  conversion  (or other
issuance), the total number of shares of Common Stock then beneficially owned by
such  Investor  and  its  Affiliates  and any  other  Persons  whose  beneficial
ownership of Common Stock would be aggregated  with such Investor's for purposes
of Section  13(d) of the  Exchange  Act,  does not  exceed  9.999%  of the total
number of issued and  outstanding  shares of Common  Stock  (including  for such
purpose the shares of Common  Stock  issuable  upon such  conversion).  For such
purposes,  beneficial  ownership  shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations  promulgated thereunder.
This provision  shall not restrict the number of shares of Common Stock which an
Investor may receive or  beneficially  own in order to  determine  the amount of
securities or other consideration that such Investor may receive in the event of
a Fundamental  Transaction (defined below) involving the Company as contemplated
herein. This restriction may not be waived.(1)

                  (ii) Notwithstanding anything to the contrary in this Note, if
the Company has not previously obtained Stockholder  Approval,  then the Company
may not issue  shares of Common  Stock in excess of the  Issuable  Maximum  upon
conversions of this Note. The "Issuable Maximum" means, as of any date, a number
of shares of Common Stock equal to  34,224,397.  Each Investor shall be entitled
to a portion of the Issuable Maximum equal to the quotient obtained by dividing:
(x) the  principal  amount  of Notes  issued  and sold to such  Investor  on the
Original  Issue Date by (y) the aggregate  principal  amount of all Notes issued
and sold by the Company on the Original  Issue Date.  If any  Investor  shall no
longer  hold  Notes,  then such  Investor's  remaining  portion of the  Issuable
Maximum shall be allocated pro-rata among the remaining Investors, giving effect
to the  Company's  desire  to  allocate  this  limitation  among  the  class  of
securities  known as the Notes. If on any Conversion Date or Company  Conversion
Date, or at such time as an Investor shall notify the Company that the condition
in (A) following  this clause shall be in effect:  (A) the  aggregate  number of
shares of Common Stock that would then be issuable  upon  conversion  in full of
all then outstanding principal amount of Notes would exceed the Issuable Maximum
on such date, and (B) the Company shall not have previously obtained the vote of
shareholders,  as may be required by the applicable rules and regulations of the
American Stock Exchange (or any successor  entity or any other Trading Market on
which the Company's  securities then trade),  applicable to approve the issuance
of shares of Common  Stock in excess of the  Issuable  Maximum  pursuant  to the
terms hereof (the "STOCKHOLDER APPROVAL"),  then, the Company shall issue to the
Investor a number of shares of Common Stock such that the total number of shares
issued pursuant to the Purchase  Agreement is equal to the Issuable Maximum and,
with respect to the remainder of the principal  amount of Notes then held by the
Investors for which a conversion would result in an issuance of shares of Common
Stock in excess of the Issuable  Maximum,  the Company must use its best efforts
to seek and obtain  Stockholder  Approval as soon as possible,  but in any event
not later than the 90th day following such Conversion Date,  Company  Conversion
Date or the date of such request.  The Company and the Investor  understand  and
agree that Underlying Shares issued to and then held by the Investor as a result
of conversions of Notes shall not be entitled to cast votes on any resolution to
obtain Stockholder Approval pursuant hereto.


---------------------------
(1) This provision will not appear in the Marr note.


                                       9
<PAGE>

      6. Mechanics of Conversion.

            (a) The number of Underlying  Shares  issuable  upon any  conversion
hereunder  shall  equal  the  outstanding  principal  amount  of this Note to be
converted,  divided  by the  Conversion  Price  on the  Conversion  Date (or the
Company Conversion Date), plus (if indicated in the applicable Conversion Notice
or the Company  Conversion Notice) the amount of any accrued but unpaid interest
on this Note  through  the  Conversion  Date (or the Company  Conversion  Date),
divided  by the  Conversion  Price  on  the  Conversion  Date  (or  the  Company
Conversion Date).

            (b) The  Company  shall,  by the third  Trading Day  following  each
Conversion  Date  (and on the  Company  Conversion  Date),  issue or cause to be
issued and cause to be  delivered  to or upon the written  order of the Investor
and in such name or names as the Investor may  designate a  certificate  for the
Underlying Shares issuable upon such conversion,  free of restrictive legends if
at such time a Registration Statement is then effective and available for use by
the  Investor.  The  Investor,  or any Person so  designated  by the Investor to
receive  Underlying  Shares,  shall be deemed to have become holder of record of
such Underlying  Shares as of such  Conversion  Date (or the Company  Conversion
Date).  The  Company  shall use its best  efforts to deliver  Underlying  Shares
hereunder  electronically  (via a DWAC) through the Depository Trust Corporation
or another established clearing corporation performing similar functions.

            (c) The Investor  shall not be required to deliver the original Note
in order  to  effect a  conversion  hereunder.  Execution  and  delivery  of the
Conversion  Notice  shall have the same effect as  cancellation  of the Note and
issuance of a New Note representing the remaining outstanding principal amount.

            (d) The Company's obligations to issue and deliver Underlying Shares
upon  conversion of this Note in  accordance  with the terms hereof are absolute
and  unconditional,  irrespective  of any action or inaction by the  Investor to
enforce the same,  any waiver or consent with respect to any  provision  hereof,
the  recovery  of any  judgment  against any Person or any action to enforce the
same, or any setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged  breach by the Investor or any other Person of any  obligation
to the Company or any  violation or alleged  violation of law by the Investor or
any other  Person,  and  irrespective  of any  other  circumstance  which  might
otherwise  limit such  obligation  of the Company to the Investor in  connection
with the issuance of such Underlying Shares.

            (e) If by the  third  Trading  Day  after a  Conversion  Date or the
Company  Conversion  Date the  Company  fails to  deliver to the  Investor  such
Underlying Shares in such amounts and in the manner required pursuant to Section
5, then the Investor will have the right to rescind the Conversion Notice or the
Company  Conversion  Notice  pertaining  thereto by giving written notice to the
Company prior to such Investor's receipt of such Underlying Shares.

                                       10
<PAGE>

            (f) If by the  third  Trading  Day  after a  Conversion  Date or the
Company  Conversion  Date the  Company  fails to  deliver  to the  Investor  the
required number of Underlying  Shares in the manner required pursuant to Section
5, and if  after  such  third  Trading  Day and  prior  to the  receipt  of such
Underlying  Shares,  the Investor  purchases (in an open market  transaction  or
otherwise)  shares of Common Stock to deliver in  satisfaction  of a sale by the
Investor of the Underlying Shares which the Investor anticipated  receiving upon
such  conversion (a "BUY-IN"),  then the Company  shall:  (1) pay in cash to the
Investor  (in  addition  to any other  remedies  available  to or elected by the
Investor) the amount by which (x) the Investor's total purchase price (including
brokerage  commissions,  if any) for the  shares  of Common  Stock so  purchased
exceeds (y) the amount  obtained  by  multiplying  (A) the number of  Underlying
Shares that the Company was  required to deliver to the  Investor in  connection
with the exercise at issue by (B) the Closing  Price on the  Conversion  Date or
the Company  Conversion Date and (2) at the option of the Investor,  either void
the  conversion  at issue and  reinstate  the  principal  amount of Notes  (plus
accrued  interest  therein) for which such  conversion was not timely honored or
deliver to the  Investor  the  number of shares of Common  Stock that would have
been issued had the Company  timely  complied  with its  exercise  and  delivery
obligations  hereunder.  The  Investor  shall  provide  the  Company  reasonably
detailed  evidence  or written  notice  indicating  the  amounts  payable to the
Investor in respect of the Buy-In.

      7. Events of Default.

            (a) At any time or times  following  the  occurrence  and during the
continuance  of an Event of  Default  (other  than under  clause  (viii) of such
defined term with respect to the Company),  the Investor may elect, by notice to
the Company (an "EVENT  NOTICE"),  to require the Company to purchase all or any
portion of the outstanding  principal  amount of this Note, as indicated in such
Event  Notice,  at a purchase  price in Dollars in cash equal to the greater of:
(A) 100% of such  outstanding  principal  amount  (except that such amount shall
equal  115% of such  outstanding  principal  amount  in the  case of an Event of
Default under clause (iii) of the  definition  of "Event of Default"),  plus all
accrued but unpaid interest thereon and any unpaid liquidated  damages and other
amounts then owing to the Investor under the Transaction Documents,  through the
date of purchase,  or (B) the Event Equity Value of the  Underlying  Shares that
would be issuable upon conversion of such principal amount and payment in Common
Stock of all such accrued but unpaid  interest  thereon  (without  regard to any
condition precedent or conversion  limitation  contained herein).  The aggregate
amount payable  pursuant to the preceding  sentence is referred to as the "EVENT
PRICE." The Company shall pay the aggregate Event Price to the Investor (free of
any claim of  subordination)  no later than the third  Trading Day following the
date of delivery of the Event  Notice,  and upon  receipt  thereof the  Investor
shall deliver the original Note so repurchased to the Company.

            (b) Upon the occurrence of any Bankruptcy  Event with respect to the
Company, all outstanding  principal and accrued but unpaid interest on this Note
and any  unpaid  liquidated  damages  and other  amounts  then  owing  under the
Transaction  Documents  shall  immediately  become  due and  payable  in full in
Dollars in cash (free of any claim of subordination),  without any action by the
Investor, and the Company shall immediately be obligated to repurchase this Note
held by such Investor at the Event Price pursuant to the preceding  paragraph as
if  the  Investor  had  delivered  an  Event  Notice  immediately  prior  to the
occurrence of such Bankruptcy Event.

                                       11
<PAGE>

            (c) In connection  with any Event of Default,  the Investor need not
provide and the Company hereby waives any presentment,  demand, protest or other
notice  of any  kind  (other  than  the  Event  Notice),  and the  Investor  may
immediately  enforce any and all of its rights and  remedies  hereunder  and all
other remedies available to it under applicable law. Any such declaration may be
rescinded  and annulled by the Investor at any time prior to payment  hereunder.
No such rescission or annulment shall affect any subsequent  Event of Default or
impair any right consequent thereto.

      8.  Ranking.  This Note  ranks  pari  passu  with all  other  Notes now or
hereafter  issued pursuant to the Transaction  Documents.  The Company will not,
directly or indirectly, enter into, create, incur, assume or suffer to exist any
Indebtedness  of any  kind  that  is  senior  in any  respect  to the  Company's
obligations under the Notes.

      9. Charges,  Taxes and Expenses.  Issuance of certificates  for Underlying
Shares upon  conversion  of (or otherwise in respect of) this Note shall be made
without charge to the Investor for any issue or transfer tax,  withholding  tax,
transfer agent fee or other incidental tax or expense in respect of the issuance
of such  certificate,  all of  which  taxes  and  expenses  shall be paid by the
Company;  provided,  however,  that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Underlying  Shares or Notes in a name other than that of
the Investor. The Investor shall be responsible for all other tax liability that
may  arise as a  result  of  holding  or  transferring  this  Note or  receiving
Underlying Shares in respect hereof.

      10.  Reservation of Underlying  Shares. The Company covenants that it will
at all times reserve and keep  available out of the aggregate of its  authorized
but unissued and otherwise  unreserved  Common Stock,  solely for the purpose of
enabling  it to issue  Underlying  Shares as required  hereunder,  the number of
Underlying Shares which are then issuable and deliverable upon the conversion of
(and  otherwise  in respect  of) this  entire  Note  (taking  into  account  the
adjustments of Section 11), free from preemptive  rights or any other contingent
purchase rights of persons other than the Investor.  The Company  covenants that
all  Underlying  Shares so issuable  and  deliverable  shall,  upon  issuance in
accordance  with the terms hereof,  be duly and validly  authorized,  issued and
fully paid and nonassessable.

      11. Certain  Adjustments.  The  Conversion  Price is subject to adjustment
from time to time as set forth in this Section 11.

            (a) Stock  Dividends and Splits.  If the Company,  at any time while
this Note is  outstanding:  (i) pays a stock  dividend  on its  Common  Stock or
otherwise  makes a distribution on any class of capital stock that is payable in
shares of Common Stock, (ii) subdivides  outstanding shares of Common Stock into
a larger number of shares, or (iii) combines  outstanding shares of Common Stock
into a smaller  number of shares,  then in each such case the  Conversion  Price
shall be multiplied by a fraction of which the numerator  shall be the number of
shares of Common Stock  outstanding  immediately  before such event and of which
the  denominator  shall be the  number of shares  of  Common  Stock  outstanding
immediately after such event. Any adjustment made pursuant to clause (i) of this
paragraph  shall  become  effective  immediately  after the record  date for the
determination of stockholders entitled to receive such dividend or distribution,
and any  adjustment  pursuant  to clause (ii) or (iii) of this  paragraph  shall
become  effective  immediately  after the effective date of such  subdivision or
combination.

                                       12
<PAGE>

            (b) Pro Rata  Distributions.  If the Company, at any time while this
Note is outstanding, distributes to all holders of Common Stock (i) evidences of
its  indebtedness,  (ii) any security (other than a distribution of Common Stock
covered by the preceding  paragraph),  (iii) rights or warrants to subscribe for
or purchase any  security,  or (iv) any other asset (in each case,  "DISTRIBUTED
PROPERTY"),  then, at the request of the Investor  delivered before the 90th day
after the record  date  fixed for  determination  of  stockholders  entitled  to
receive such distribution, the Company will deliver to the Investor, within five
Trading  Days after such request (or, if later,  on the  effective  date of such
distribution),  the  Distributed  Property  that the  Investor  would  have been
entitled  to receive in  respect  of the  Underlying  Shares for which this Note
could  have  been  converted  immediately  prior to such  record  date.  If such
Distributed  Property is not delivered to the Investor pursuant to the preceding
sentence,  then upon any  conversion  of this Note that occurs after such record
date, the Investor  shall be entitled to receive,  in addition to the Underlying
Shares otherwise  issuable upon such conversion,  the Distributed  Property that
the  Investor  would have been  entitled to receive in respect of such number of
Underlying  Shares had the Investor  been the record  holder of such  Underlying
Shares  immediately  prior to such record date.  Notwithstanding  the foregoing,
this Section 11(b) shall not apply to any  distribution  of rights or securities
in respect of adoption by the Company of a stockholder rights plan, which events
shall be covered by Section 11(a).

            (c)  Fundamental  Transactions.  If, at any time  while this Note is
outstanding,  (i) the Company effects any merger or consolidation of the Company
with or into  another  Person,  (ii)  the  Company  effects  any  sale of all or
substantially  all of its  assets  in one or a series of  related  transactions,
(iii) any tender  offer or  exchange  offer  (whether  by the Company or another
Person)  is  completed  pursuant  to which  holders  of Common  Stock  tender or
exchange  their  shares  for other  securities,  cash or  property,  or (iv) the
Company effects any reclassification of the Common Stock or any compulsory share
exchange  pursuant to which the Common Stock is  effectively  converted  into or
exchanged for other  securities,  cash or property  (other than as a result of a
subdivision  or  combination  of shares of Common Stock covered by Section 11(a)
above) (in any such case, a "FUNDAMENTAL TRANSACTION"), then upon any subsequent
conversion  of this Note,  the Investor  shall have the right to: (x) declare an
Event of Default  pursuant to clause (iii)  thereunder,  (y)  receive,  for each
Underlying Share that would have been issuable upon such conversion  absent such
Fundamental  Transaction,  the  same  kind and  amount  of  securities,  cash or
property as it would have been  entitled to receive upon the  occurrence of such
Fundamental  Transaction if it had been,  immediately  prior to such Fundamental
Transaction,   the  holder  of  one  share  of  Common  Stock  (the   "ALTERNATE
CONSIDERATION")  or (z) require the surviving entity to issue to the Investor an
instrument  identical  to this  Note  (with  an  appropriate  adjustment  to the
Conversion  Price).  For  purposes of any such  conversion,  the  Company  shall
apportion the Conversion Price among the Alternate Consideration in a reasonable
manner  reflecting  the  relative  value  of  any  different  components  of the
Alternate  Consideration.  If holders of Common Stock are given any choice as to
the  securities,  cash or property to be received in a Fundamental  Transaction,
then  the  Investor  shall  be  given  the  same  choice  as  to  the  Alternate
Consideration  it  receives  upon any  conversion  of this Note  following  such
Fundamental  Transaction.  To the extent  necessary to effectuate  the foregoing
provisions, any successor to the Company or surviving entity in such Fundamental
Transaction  (or, if different,  the ultimate parent of such successor or entity


                                       13
<PAGE>

or the entity issuing the Alternate Consideration) shall issue to the Investor a
new  debenture  consistent  with the foregoing  provisions  and  evidencing  the
Investor's  right to convert such debenture into  Alternate  Consideration.  The
terms of any agreement  pursuant to which a Fundamental  Transaction is effected
shall include terms  requiring any such successor or surviving  entity to comply
with the  provisions  of this  paragraph (c) and insuring that this Note (or any
such  replacement  security)  will be  similarly  adjusted  upon any  subsequent
transaction analogous to a Fundamental Transaction.

            (d) Subsequent Equity Sales.

                  (i) If the Company or any subsidiary  thereof,  as applicable,
at any time prior to the one year  anniversary of the Original Issue Date, shall
issue or enter into any  agreement  or  understanding  to issue shares of Common
Stock or Common  Stock  Equivalents  entitling  any Person to acquire  shares of
Common Stock, at a price per share less than the Conversion Price (if the holder
of the Common  Stock or Common  Stock  Equivalent  so issued  shall at any time,
whether by operation of purchase price adjustments,  reset provisions,  floating
conversion,  exercise  or  exchange  prices or  otherwise,  or due to  warrants,
options or rights  issued in  connection  with such  issuance,  be  entitled  to
receive shares of Common Stock at a price less than the Conversion  Price,  such
issuance shall be deemed to have occurred for less than the  Conversion  Price),
then,  the  Conversion  Price shall be reduced to equal such lower  price.  Such
adjustment shall be made whenever such Common Stock or Common Stock  Equivalents
are issued. The Company shall notify the Investor in writing,  no later than the
Trading  Day  following  the  issuance  of any  Common  Stock  or  Common  Stock
Equivalent subject to this section,  indicating therein the applicable  issuance
price, or of applicable reset price, exchange price,  conversion price and other
pricing terms.

                  (ii) For  purposes of this  subsection  11(d),  the  following
subsections (d)(ii)(l) to (d)(ii)(6) shall also be applicable:

                         (1) Issuance of Rights or Options.  In case at any time
the Company  shall in any manner  grant  (directly  and not by  assumption  in a
merger  or  otherwise)  any  warrants  or other  rights to  subscribe  for or to
purchase,  or any  options for the  purchase  of,  Common  Stock or any stock or
security  convertible  into or  exchangeable  for Common  Stock (such  warrants,
rights or options being called  "OPTIONS" and such  convertible or  exchangeable
stock or securities being called "CONVERTIBLE  SECURITIES")  whether or not such
Options or the right to convert or exchange any such Convertible  Securities are
immediately  exercisable,  and the price per  share  for which  Common  Stock is
issuable upon the exercise of such Options or upon the conversion or exchange of
such Convertible Securities (determined by dividing (i) the sum (which sum shall
constitute  the  applicable  consideration)  of (x) the  total  amount,  if any,
received or receivable by the Company as consideration  for the granting of such
Options,  plus (y) the aggregate amount of additional  consideration  payable to
the Company upon the exercise of all such Options, plus (z), in the case of such
Options  which  relate  to  Convertible  Securities,  the  aggregate  amount  of
additional  consideration,  if  any,  payable  upon  the  issue  or sale of such
Convertible  Securities and upon the conversion or exchange thereof, by (ii) the
total  maximum  number of shares of Common Stock  issuable  upon the exercise of
such  Options  or upon  the  conversion  or  exchange  of all  such  Convertible
Securities  issuable upon the exercise of such  Options)  shall be less than the
Conversion Price in effect immediately prior to the time of the granting of such

                                       14
<PAGE>

Options,  then the total  number of shares  of Common  Stock  issuable  upon the
exercise of such Options or upon  conversion  or exchange of the total amount of
such Convertible  Securities issuable upon the exercise of such Options shall be
deemed to have been  issued for such price per share as of the date of  granting
of such Options or the issuance of such  Convertible  Securities  and thereafter
shall be deemed to be  outstanding  for  purposes of  adjusting  the  Conversion
Price. Except as otherwise provided in subsection 11(d)(ii)(3), no adjustment of
the Conversion Price shall be made upon the actual issue of such Common Stock or
of such Convertible  Securities upon exercise of such Options or upon the actual
issue of such Common  Stock upon  conversion  or  exchange  of such  Convertible
Securities.

                         (2) Issuance  of Convertible  Securities.   In case the
Company shall in any manner issue (directly and not by assumption in a merger or
otherwise)  or sell any  Convertible  Securities,  whether  or not the rights to
exchange or convert any such Convertible Securities are immediately exercisable,
and the price per share for which Common Stock is issuable upon such  conversion
or exchange  (determined by dividing (i) the sum (which sum shall constitute the
applicable  consideration) of (x) the total amount received or receivable by the
Company as consideration  for the issue or sale of such Convertible  Securities,
plus (y) the aggregate  amount of additional  consideration,  if any, payable to
the Company upon the conversion or exchange thereof, by (ii) the total number of
shares of Common  Stock  issuable  upon the  conversion  or exchange of all such
Convertible  Securities)  shall be less  than  the  Conversion  Price in  effect
immediately  prior to the time of such  issue or sale,  then the  total  maximum
number of shares of Common Stock  issuable  upon  conversion  or exchange of all
such  Convertible  Securities shall be deemed to have been issued for such price
per share as of the date of the issue or sale of such Convertible Securities and
thereafter  shall be deemed to be  outstanding  for  purposes of  adjusting  the
Conversion Price,  provided that (a) except as otherwise  provided in subsection
11(d)(ii)(3),  no  adjustment  of the  Conversion  Price  shall be made upon the
actual  issuance  of such  Common  Stock upon  conversion  or  exchange  of such
Convertible  Securities and (b) no further  adjustment of the  Conversion  Price
shall be made by  reason  of the issue or sale of  Convertible  Securities  upon
exercise of any Options to purchase any such  Convertible  Securities  for which
adjustments  of the  Conversion  Price  have  been  made  pursuant  to the other
provisions of this subsection 11(d).

                         (3) Change in Option Price or Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase price provided
for in any Option referred to in subsection  11(d)(ii)(l) hereof, the additional
consideration,   if  any,  payable  upon  the  conversion  or  exchange  of  any
Convertible Securities referred to in subsections  11(d)(ii)(l) or 11(d)(ii)(2),
or  the  rate  at  which  Convertible  Securities  referred  to  in  subsections
11(d)(ii)(l) or 11(d)(ii)(2)  are  convertible  into or exchangeable  for Common
Stock shall change at any time (including,  but not limited to, changes under or
by reason of provisions  designed to protect against  dilution),  the Conversion
Price in effect at the time of such event shall  forthwith be  readjusted to the
Conversion  Price which would have been in effect at such time had such  Options
or Convertible  Securities still outstanding  provided for such changed purchase
price,  additional  consideration or conversion rate, as the case may be, at the
time  initially  granted,  issued or sold. On the  termination of any Option for
which any adjustment was made pursuant to this subsection  11(d) or any right to
convert or exchange  Convertible  Securities  for which any  adjustment was made
pursuant  to this  subsection  11(d)  (including  without  limitation  upon  the
redemption or purchase for  consideration of such Convertible  Securities by the
Company),  the  Conversion  Price then in effect  hereunder  shall  forthwith be
changed to the  Conversion  Price which would have been in effect at the time of
such  termination  had such  Option or  Convertible  Securities,  to the  extent
outstanding immediately prior to such termination, never been issued.

                                       15
<PAGE>

                         (4) Stock  Dividends. Subject to the provisions of this
Section  11(d),  in case the Company  shall declare a dividend or make any other
distribution upon any stock of the Company (other than the Common Stock) payable
in Common  Stock,  Options or  Convertible  Securities,  then any Common  Stock,
Options or Convertible  Securities,  as the case may be,  issuable in payment of
such  dividend  or  distribution  shall be deemed  to have  been  issued or sold
without consideration.

                         (5)  Consideration  for Stock.  In case  any  shares of
Common  Stock,  Options or  Convertible  Securities  shall be issued or sold for
cash, the  consideration  received therefor shall be deemed to be the net amount
received by the Company  therefor,  after  deduction  therefrom  of any expenses
incurred or any  underwriting  commissions or concessions paid or allowed by the
Company in connection therewith.  In case any shares of Common Stock, Options or
Convertible  Securities  shall be issued or sold for a consideration  other than
cash,  the amount of the  consideration  other than cash received by the Company
shall be deemed to be the fair value of such consideration as determined in good
faith by the Board of Directors of the Company,  after deduction of any expenses
incurred or any  underwriting  commissions or concessions paid or allowed by the
Company  in  connection  therewith.  In case  any  Options  shall be  issued  in
connection with the issue and sale of other securities of the Company,  together
comprising  one  integral  transaction  in which no  specific  consideration  is
allocated to such Options by the parties  thereto,  such Options shall be deemed
to have been issued for such  consideration  as  determined in good faith by the
Board of Directors  of the  Company.  If Common  Stock,  Options or  Convertible
Securities shall be issued or sold by the Company and, in connection  therewith,
other Options or Convertible  Securities (the  "ADDITIONAL  RIGHTS") are issued,
then the consideration received or deemed to be received by the Company shall be
reduced by the fair market value of the Additional  Rights (as determined  using
the  Black-Scholes  option pricing model or another method mutually agreed to by
the Company  and the  Investor).  The Board of  Directors  of the Company  shall
respond  promptly,  in writing,  to an inquiry by the  Investors  as to the fair
market value of the Additional  Rights. In the event that the Board of Directors
of the Company and the  Investors are unable to agree upon the fair market value
of the Additional  Rights, the Company and the Investors shall jointly select an
appraiser,  who is experienced  in such matters.  The decision of such appraiser
shall be final and conclusive,  and the cost of such appraiser shall be borne by
the Company provided that in the event that the valuation determined by Board of
Directors  is  within  ten  percent  (10%) of the  valuation  determined  by the
appraiser, such costs shall be borne evenly by the Company and the Investor.

                         (6) Record Date.  In  case  the  Company  shall  take a
record of the holders of its Common Stock for the purpose of entitling  them (i)
to receive a dividend or other distribution  payable in Common Stock, Options or
Convertible  Securities  or (ii) to  subscribe  for or  purchase  Common  Stock,
Options or Convertible  Securities,  then such record date shall be deemed to be
the date of the issue or sale of the shares of Common  Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such other
distribution  or the  date of the  granting  of such  right of  subscription  or
purchase, as the case may be.

                                       16
<PAGE>

                  (iii)  Notwithstanding  the foregoing,  no adjustment  will be
made under this paragraph (d) in respect of: (1) the issuance of securities upon
the exercise or conversion of any Common Stock Equivalents issued by the Company
prior to the  Original  Issue  Date of this Note (but this  subsection  (d) will
apply to any amendments,  modifications, and reissuances thereof and as a result
of any  changes,  resets  or  adjustments  to a  Conversion  or  Exchange  Price
thereunder  whether  or  not  as a  result  of any  amendment,  modification  or
reissuance), (2) the grant of options or warrants, or the issuance of additional
securities,  under any duly  authorized  Company stock option,  stock  incentive
plan,  restricted  stock plan or stock purchase plan in existence on the Closing
Date or thereafter  approved by the  stockholders of the Company,  (3) shares of
Common  Stock or Common  Stock  Equivalents  issued to  consultants,  employees,
officers or directors of the Company,  as compensation for their services to the
Company or any of its direct or indirect  Subsidiaries  pursuant to arrangements
approved  by the Board of  Directors  of the Company  and  consistent  with past
practice,  or (4) the  issuance of the  Securities  pursuant to the  Transaction
Documents,  or  (5) up to  250,000  shares  of  Common  Stock  or  Common  Stock
Equivalents  issuable  in  connection  with an  equipment  financing  by Vencore
Solutions,  LLC, or (6) the issuance of Common Stock to  Logisticorp,  Inc., and
Southwest Resource  Preservation,  Inc., or their successors and assigns,  based
upon the issuance and conversion of outstanding convertible debentures, with the
issuance of said Common  Stock not to exceed  700,000  shares,  or (7) shares of
Common Stock issued as  consideration  for the acquisition of another company or
business  in which the  shareholders  of the  Company  do not have an  ownership
interest,  which  acquisition has been approved by the Board of Directors of the
Company, or (8) pursuant to the Anti-Dilution  Entitlements and New Entitlements
(each as defined  in the  Amendment),  or (9)  shares of Common  Stock or Common
Stock Equivalents issued in connection with Strategic Transactions.

                  (iv) The adjustments that would arise under this paragraph (d)
shall only take effect from such time as the  Company has  obtained  Stockholder
Approval;  and if such  Stockholder  Approval is obtained,  then the adjustments
that would have  occurred  under  this  paragraph  (d) prior to the date of such
Stockholder  Approval  shall  take  effect  as of the  date of such  Stockholder
Approval.  The  Company  will use best  efforts  to  include  on the  ballot for
Stockholder Approval a proposal for the stockholders to approve the transactions
contemplated by the Transaction Documents.

            (e)   Reclassifications;   Share   Exchanges.   In   case   of   any
reclassification  of the Common Stock, or any compulsory share exchange pursuant
to which the Common Stock is converted into other  securities,  cash or property
(other  than  compulsory  share  exchanges  which  constitute  Change of Control
transactions), the Investor shall have the right thereafter to convert this Note
only 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
reclassification or share exchange, and the Investor shall be entitled upon such
event to receive such amount of securities,  cash or property as a holder of the
number of shares of Common Stock of the Company into which the principal  amount
of this Note then  outstanding  together  with any accrued  and unpaid  interest
hereunder could have been converted  immediately prior to such  reclassification
or share exchange would have been entitled. This provision shall similarly apply
to successive reclassifications or share exchanges.

                                       17
<PAGE>

            (f)  Calculations.  All calculations  under this Section 11 shall be
made to the nearest cent or the nearest 1/100th of a share,  as applicable.  The
number of shares of Common Stock outstanding at any given time shall not include
shares owned or held by or for the account of the Company,  and the  disposition
of any such shares shall be considered an issue or sale of Common Stock.

            (g) Notice of  Adjustments.  Upon the occurrence of each  adjustment
pursuant to this  Section 11, the Company at its expense will  promptly  compute
such  adjustment in  accordance  with the terms hereof and prepare a certificate
describing in reasonable detail such adjustment and the transactions giving rise
thereto,  including all facts upon which such adjustment is based.  Upon written
request,  the Company will promptly  deliver a copy of each such  certificate to
the Investor.

            (h)  Notice of  Corporate  Events.  If the  Company  (i)  declares a
dividend or any other  distribution  of cash,  securities  or other  property in
respect of its Common Stock, including without limitation any granting of rights
or warrants to subscribe for or purchase any capital stock of the Company or any
subsidiary,  (ii) authorizes and publicly approves, or enters into any agreement
contemplating or solicits stockholder  approval for any Fundamental  Transaction
or (iii) publicly authorizes the voluntary  dissolution,  liquidation or winding
up of the affairs of the Company, then the Company shall deliver to the Investor
a notice  describing the material terms and conditions of such  transaction,  at
least 20 calendar days prior to the applicable record or effective date on which
a Person would need to hold Common Stock in order to participate in or vote with
respect to such  transaction,  and the  Company  will take all steps  reasonably
necessary  in  order  to  insure  that  the  Investor  is  given  the  practical
opportunity  to convert this Note prior to such time so as to  participate in or
vote with respect to such transaction;  provided,  however,  that the failure to
deliver such notice or any defect  therein  shall not affect the validity of the
corporate action required to be described in such notice.

      12. Fractional Shares. The Company shall not be required to issue or cause
to be issued  fractional  Underlying  Shares on  conversion of this Note. If any
fraction  of an  Underlying  Share  would,  except  for the  provisions  of this
Section, be issuable upon conversion of this Note or payment of interest hereon,
the number of  Underlying  Shares to be issued will be rounded up to the nearest
whole share.

      13. Prepayment at Option of Company.  This Note may not be prepaid without
the consent of the Investor.

      14.  Notices.  Any and all notices or other  communications  or deliveries
hereunder  (including  without  limitation any Conversion  Notice or the Company
Conversion  Notice)  shall be in writing and shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication
is delivered  via facsimile at the  facsimile  number  specified in this Section
prior to 6:30 p.m.  (New York City time) on a Trading Day, (ii) the next Trading
Day after the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number specified in this Section on a day that is
not a Trading  Day or later than 6:30 p.m.  (New York City time) on any  Trading
Day, (iii) the Trading Day following the date of sending,  if sent by nationally
recognized  overnight courier service,  or (iv) upon actual receipt by the party
to  whom  such  notice  is  required  to  be  given.   The  addresses  for  such


                                       18
<PAGE>

communications shall be: (i) if to the Company, to 5000 Hopyard Road, Suite 480,
Pleasanton,  CA 94588,  facsimile:  (925) 730-0146,  attention:  Chief Financial
Officer,  (ii) if to the Investor,  to the address or facsimile number appearing
on the Company's  stockholder  records or such other address or facsimile number
as the Investor may provide to the Company in accordance with this Section.

      15. Miscellaneous.

            (a) This Note shall be  binding  on and inure to the  benefit of the
parties hereto and their respective successors and assigns.

            (b) Subject to Section 15(a),  above,  nothing in this Note shall be
construed  to give to any person or  corporation  other than the Company and the
Investor any legal or  equitable  right,  remedy or cause under this Note.  This
Note  shall  inure to the sole and  exclusive  benefit  of the  Company  and the
Investor.

            (c) All questions concerning the construction, validity, enforcement
and  interpretation of this Note shall be governed by and construed and enforced
in accordance with the internal laws of the State of New York, without regard to
the  principles  of  conflicts  of law  thereof.  Each  party  agrees  that  all
Proceedings  shall be  commenced  exclusively  in the state and  federal  courts
sitting in the City of New York,  Borough of Manhattan  (the "NEW YORK COURTS").
Each party hereto hereby  irrevocably  submits to the exclusive  jurisdiction of
the New York  Courts for any  Proceeding,  and hereby  irrevocably  waives,  and
agrees  not to assert in any  Proceeding,  any claim  that it is not  personally
subject to the jurisdiction of any New York Court or that a New York Court is an
inconvenient  forum for such  Proceeding.  Each party hereto hereby  irrevocably
waives  personal  service of process and consents to process being served in any
such  Proceeding by mailing a copy thereof via  registered or certified  mail or
overnight  delivery  (with evidence of delivery) to such party at the address in
effect for  notices to it under this Note and  agrees  that such  service  shall
constitute good and sufficient  service of process and notice  thereof.  Nothing
contained  herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto hereby irrevocably  waives, to
the fullest  extent  permitted by applicable  law, any and all right to trial by
jury in any legal  Proceeding.  The  prevailing  party in a Proceeding  shall be
reimbursed by the other party for its reasonable attorneys' fees and other costs
and expenses  incurred with the  investigation,  preparation  and prosecution of
such Proceeding.

            (d) The headings herein are for convenience  only, do not constitute
a part of this  Note and  shall  not be  deemed  to limit or  affect  any of the
provisions hereof.

            (e) In case any one or more of the  provisions of this Note shall be
invalid or unenforceable in any respect,  the validity and enforceability of the
remaining  terms and provisions of this Note shall not in any way be affected or
impaired  thereby  and the  parties  will  attempt in good faith to agree upon a
valid  and  enforceable  provision  which  shall  be a  commercially  reasonable
substitute  therefor,  and upon so agreeing,  shall  incorporate such substitute
provision in this Note.

                                       19
<PAGE>

            (f) No provision of this Note may be waived or amended except (i) in
accordance with the requirements set forth in the Purchase  Agreement,  and (ii)
in a written instrument signed, in the case of an amendment,  by the Company and
the Investor or, in the case of a waiver,  by the party against whom enforcement
of any such  waiver is  sought.  No waiver of any  default  with  respect to any
provision,  condition  or  requirement  of this  Note  shall be  deemed  to be a
continuing  waiver  in the  future or a waiver of any  subsequent  default  or a
waiver of any other provision,  condition or requirement  hereof,  nor shall any
delay or omission of either party to exercise any right  hereunder in any manner
impair the exercise of any such right.

            (g) To the extent it may lawfully do so, the Company  hereby  agrees
not to insist upon or plead or in any manner  whatsoever  claim, and will resist
any and all efforts to be compelled  to take the benefit or advantage  of, usury
laws wherever enacted, now or at any time hereafter in force, in connection with
any claim,  action or Proceeding that may be brought by any Investor in order to
enforce any right or remedy under the Notes.  Notwithstanding  any  provision to
the contrary  contained in the Notes,  it is expressly  agreed and provided that
the total liability of the Company under the Notes for payments in the nature of
interest shall not exceed the maximum lawful rate  authorized  under  applicable
law (the "MAXIMUM RATE"), and, without limiting the foregoing, in no event shall
any rate of interest or default interest,  or both of them, when aggregated with
any other sums in the nature of interest  that the Company may be  obligated  to
pay under the Notes exceed such Maximum  Rate.  It is agreed that if the maximum
contract  rate  of  interest  allowed  by law and  applicable  to the  Notes  is
increased or decreased by statute or any official governmental action subsequent
to the date hereof,  the new maximum  contract  rate of interest  allowed by law
will be the Maximum Rate of interest  applicable to the Notes from the effective
date forward,  unless such  application is precluded by applicable law. If under
any circumstances whatsoever,  interest in excess of the Maximum Rate is paid by
the Company to any Investor with respect to indebtedness evidenced by the Notes,
such excess shall be applied by such Investor to the unpaid principal balance of
any such indebtedness or be refunded to the Company, the manner of handling such
excess to be at such Investor's election.

            (h) The  obligations  under this Note are  secured  pursuant  to the
Security Agreement.

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

                                                CALYPTE BIOMEDICAL CORPORATION

                                                By:
                                                   -----------------------------
                                                   Name:  Richard D. Brounstein
                                                   Title: EVP and CFO


                                       20
<PAGE>

                                    EXHIBIT A

                                CONVERSION NOTICE

 (To be Executed by the Registered Investor
in order to convert Notes)

      The  undersigned  hereby  elects to convert the  principal  amount of Note
indicated below, into shares of Common Stock of Calypte Biomedical  Corporation,
as of the date written below. If shares are to be issued in the name of a Person
other than undersigned, the undersigned will pay all transfer taxes payable with
respect  thereto and is delivering  herewith such  certificates  and opinions as
reasonably  requested  by the Company in  accordance  therewith.  No fee will be
charged to the Investor for any  conversion,  except for such transfer taxes, if
any.  All terms used in this  notice  shall have the  meanings  set forth in the
Note.

Conversion calculations:
                        --------------------------------------------------------
                        Date to Effect Conversion


                        --------------------------------------------------------
                        Principal amount of Note owned prior to conversion


                        --------------------------------------------------------
                        Principal amount of Note to be Converted


                        --------------------------------------------------------
                        Principal amount of Note remaining after Conversion


                        --------------------------------------------------------
                        DTC Account


                        --------------------------------------------------------
                        Number of shares of Common Stock to be Issued


                        --------------------------------------------------------
                        Applicable Conversion Price


                        --------------------------------------------------------
                        Name of Investor

                        By:
                           -----------------------------------------------------
                           Name:
                           Title:


                                       21
<PAGE>

      By the  delivery of this  Conversion  Notice the Investor  represents  and
warrants to the Company  that its  ownership of the Common Stock does not exceed
the restrictions set forth in Section 5(b) of the Note.










                                       22
<PAGE>

                                   SCHEDULE 1

                         Calypte Biomedical Corporation
                 Secured 8% Convertible Notes due April 3, 2007

                              CONVERSION SCHEDULE

      This  Conversion  Schedule  reflects  conversions  made  under  the  above
referenced Notes.

                                     Dated:
<TABLE>
<CAPTION>

------------------------------ -------------------------- --------------------- ---------------------------------
<S>                             <C>                          <C>                     <C>
Date of Conversion               Amount of Conversion           Aggregate             Applicable Conversion
                                                                Principal                     Price
                                                                 Amount
                                                                Remaining
                                                              Subsequent to
                                                               Conversion
------------------------------ -------------------------- --------------------- ---------------------------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

</TABLE>




                                       23