Exhibit 4.2


THIS NOTE HAS NOT BEEN  REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT").  PURSUANT TO THE SECURITIES PURCHASE AGREEMENT,  THIS NOTE HAS
BEEN ACQUIRED FOR INVESTMENT  ONLY AND MAY NOT BE SOLD,  TRANSFERRED OR ASSIGNED
IN THE ABSENCE OF  REGISTRATION  OF THE RESALE  THEREOF UNDER THE 1933 ACT OR AN
OPINION OF COUNSEL  REASONABLY  SATISFACTORY IN FORM, SCOPE AND SUBSTANCE TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.


                              DIRECT INSITE CORP.

                        SENIOR SUBORDINATED SECURED NOTE

No. ___                                                         $__________

Bohemia, New York
March 29, 2005

     FOR  VALUE   RECEIVED,   DIRECT  INSITE  CORP.,   a  Delaware   corporation
(hereinafter    called   the    "Company"),    hereby   promises   to   pay   to
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or  registered  assigns  (the  "Holder"),   or  order,  the  sum  of  __________
($__________), on the Maturity Date, and to pay interest on the unpaid principal
balance hereof at the Applicable Rate  commencing June 28, 2005,  until the same
becomes  due  and  payable,  whether  at  maturity  or upon  acceleration  or by
repurchase  in  accordance  with the terms  hereof  or  otherwise.  Any  amount,
including,  without  limitation,  principal  of or  interest on this Note or the
Optional  Redemption Price or the Repurchase  Price,  that is payable under this
Note and that is not paid when due shall bear  interest at the Default Rate from
the due date thereof  until the same is paid  ("Default  Interest").  No regular
interest shall be due with respect to the period from March 29, 2005 to June 28,
2005.  Regular  interest  shall be payable in arrears on each  Interest  Payment
Date, commencing on October 1, 2005, on the principal amount outstanding on such
date.  Regular interest on this Note shall be computed on the basis of a 360-day
year of twelve 30-day months and actual days elapsed.  No regular interest shall
be payable on an Interest Payment Date on any portion of the principal amount of
this Note which shall have been redeemed prior to such Interest  Payment Date so
long as the  Company  shall  have  complied  in full with its  obligations  with
respect to such redemption.

     All  payments of  principal of and  premium,  if any,  interest,  and other
amounts  on this Note  shall be made in  lawful  money of the  United  States of
America,  or, at the option of the Holder and subject to the  provisions of this
Note,  interest  payable on any Interest Payment Date may be paid in whole or in
part in fully paid and  nonassessable  shares of Common Stock. All cash payments
shall be made by wire transfer of immediately available funds to such account as
the Holder may from time to time designate by written notice in accordance  with
the  provisions  of this Note.  Whenever  any amount  expressed to be due by the
terms of this Note is due on any day which is not a Business Day, the same shall
instead be due on the next  succeeding  day which is a Business  Day and, in the
case of any  Interest  Payment  Date which is not the date on which this Note is
paid in full,  the  extension  of the due date  thereof  shall not be taken into
account for  purposes of  determining  the amount of interest  due on such date.
Certain capitalized terms used in this Note are defined in Article VI.

<PAGE>

     The  obligations  of the  Company  under  this Note  shall rank in right of
payment  junior to the existing  bank lines with JP Morgan Chase Bank,  Sterling
National  Bank,  Silicon  Valley  Bank,  and DIRI Rec Fund LLC and senior to all
other  obligations  of the Company for  indebtedness  for borrowed  money or the
purchase  price of  property.  This Note is issued  pursuant  to the  Securities
Purchase  Agreement and the Holder of this Note and this Note are subject to the
terms and entitled to the benefits of the Securities Purchase Agreement.

     The following terms shall apply to this Note:


                                   ARTICLE I

                     PAYMENT OF CERTAIN INTEREST IN COMMON
                           STOCK; OPTIONAL REDEMPTION

     1.1 Issuance of Common Stock in Lieu of Cash Interest.

     (a) (1) The Holder may  exercise  its right to elect to receive  payment of
interest on this Note wholly or partly in Common Stock (herein  sometimes called
the "Share Interest  Payment  Option") with respect to any Interest Payment Date
only by giving  notice of such  election  to the Company not less than 5 or more
than 10 Trading Days prior to such  Interest  Payment  Date,  which notice shall
state the percentage of the interest payable on such Interest Payment Date which
is to be paid in  Interest  Payment  Shares,  and which  payment of  interest in
Common  Stock shall be subject to the  approval of the  Company.  If the Company
does not  approve the  issuance of share of Common  Stock in payment of interest
with respect to any Interest  Payment Date,  the Company shall pay such interest
in cash;  provided,  however,  if the  Company  does  not pay  such  cash by the
Interest Payment Date, such interest shall be paid in shares of Common Stock. If
the Holder elects the Share Interest Payment Option with respect to a particular
Interest  Payment Date and the Company  approves such issuance or is required to
issue shares of Common  Stock,  the Company shall issue to the Holder in respect
of such  Interest  Payment Date the  aggregate  number of whole shares of Common
Stock  determined by dividing the per share  Interest  Share Price of the Common
Stock on the applicable  Interest Payment Date into an amount equal to the total
amount of lawful  money of the United  States of America  which the Holder would
receive if the aggregate  amount of interest on this Note which is being paid in
Common Stock were being paid in such lawful money.  Notwithstanding  anything to
the  contrary  herein,  if the  Interest  Share Price on a  particular  Interest
Payment Date is greater than 120% of the Market Price of the Common Stock on the
date the Holder  gives the Company  notice  that it has elected to exercise  the
Share Interest  Payment  Option with respect to such Interest  Payment Date (the
"Share  Interest  Notice  Date"),  the Holder may,  at its  option,  require the
Company to make such payment of interest on such Interest Payment Date in cash.

     (2) If the Holder elects the Share Interest  Payment Option with respect to
an Interest  Payment Date and the Company  approves such issuance or is required
to issue shares of Common Stock,  the Interest  Payment Shares for such Interest

                                       2
<PAGE>


Payment Date shall become issuable on such Interest Payment Date and the Company
shall deliver,  or cause to be delivered,  the  appropriate  number of shares of
Common  Stock to the  Holder  within  five  Trading  Days  after the  applicable
Interest Payment Date. If in any case the Company shall fail to deliver or cause
to be delivered  such number of shares of Common Stock to the Holder within such
period of five  Trading  Days,  then in  addition to any other  liabilities  the
Company may have hereunder and under applicable law (1) the Company shall pay or
reimburse  the  Holder on demand  for all out-  of-pocket  expenses,  including,
without limitation,  reasonable fees and expenses of legal counsel,  incurred by
the Holder as a result of such failure, and (2) the Holder may by written notice
(which  may be  given by mail,  courier,  personal  service  or  telephone  line
facsimile transmission) or oral notice (promptly confirmed in writing), given at
any time prior to delivery to the Holder of the shares of Common Stock  issuable
in connection with such exercise of the Share Interest  Payment Option,  require
payment in cash of the  interest  in respect of which the Holder  exercised  the
Share Interest  Payment Option,  in which case the amount of such interest shall
be  immediately  due  and  payable,  with  Default  Interest  thereon  from  the
applicable Interest Payment Date until paid in full and the Company shall not be
obligated or entitled to issue such Interest  Payment  Shares in respect of such
Interest  Payment  Date.  The Holder  shall notify the Company in writing (or by
telephone  conversation,  confirmed  in  writing)  as  promptly  as  practicable
following the third  Trading Day after such Interest  Payment Date if the Holder
becomes  aware that shares of Common Stock so issuable have not been received as
provided  herein  but any  failure  to give such  notice  shall not  affect  the
Holder's  rights under this Note or otherwise.  No  fractional  shares of Common
Stock shall be issued in payment of interest on this Note. In lieu thereof,  the
Company  may,  at its  option,  issue a number of shares of Common  Stock  which
reflects a rounding up to the next whole  number or may pay lawful  money of the
United States of America in lieu of issuance of such fractional share.

     (b) If the Holder elects the Share Interest  Payment Option with respect to
a payment of interest on this Note with respect to a particular Interest Payment
Date and the Company  approves  such  issuance or is required to issue shares of
Common Stock,  the Company shall deliver to the Holder,  on or prior to the date
on which  Interest  Payment Shares for such payment of interest on this Note are
to be received by the Holder, a Company  Certificate setting forth (i) the total
amount of the cash  interest  payment to which the Holder is entitled,  (ii) the
portion of such interest  payment being made in Interest  Payment Shares and the
amount  which is 100%  thereof,  (iii) the  number of  Interest  Payment  Shares
allocable to such payment,  as calculated pursuant to this Section 1.1, (iv) any
rounding  adjustment to such number or any payment necessary to be made pursuant
to Section 1.1(a), (v) a brief statement of the facts requiring such adjustment,
and (vi) a brief statement that all of the requirements of this Section 1.1 have
been met.  The Interest  Payment  Shares shall be duly issued in the name of the
Holder or its nominee.  Such Company Certificate shall be conclusive evidence of
the  correctness  of the  calculation  of the number of Interest  Payment Shares
allocable to the payments to which such Company  Certificate  relates and of any
adjustments  to such number made  pursuant to this Section 1.1 in the absence of
manifest  error.  On or before the  pertinent  payment  date,  the Company shall
issue,  or cause the  transfer  agent for the Common Stock to prepare and issue,
the  Interest  Payment  Shares in the name of the Holder or its  nominee  before
being so delivered by the Company on the payment date.

                                       3
<PAGE>


     (c) The Interest Payment Shares,  when issued pursuant to and in compliance
with this  Section 1.1,  shall be, and for all  purposes  shall be deemed to be,
validly  issued,  fully  paid and  nonassessable  shares  of Common  Stock;  the
issuance and  delivery  thereof is in all respects  hereby  authorized;  and the
issuance thereof, together with lawful money of the United States of America, if
any,  paid in lieu of fractional  shares of Common  Stock,  will be, and for all
purposes  shall be deemed  to be,  in full  discharge  and  satisfaction  of the
Company's  obligation  to pay the  interest on this Note to which such  Interest
Payment Shares relate.

     1.2  Optional  Redemption.  The  following  right  of  redemption  must  be
exercised on a proportionate  basis, in accordance with outstanding  amount due,
among  this  Note and the  Other  Notes.  (a) At any time  during  the  Optional
Redemption  Period,  the Company  shall have the right to redeem at any one time
all or from time to time any part of the  outstanding  principal  amount of this
Note at the  Optional  Redemption  Price  pursuant  to this  Section  1.2 on any
Optional  Redemption  Date. In order to exercise its right of  redemption  under
this Section 1.2, the Company  shall give an Optional  Redemption  Notice to the
Holder  not  less  than 5 days  or  more  than 10  days  prior  to the  Optional
Redemption  Date stating that: (1) the Company is exercising its right to redeem
a specified  portion  (which may be all, if so specified by the Company) of this
Note in accordance with this Section 1.2, (2) the principal  amount of this Note
to be  redeemed,  (3) the  Optional  Redemption  Price,  and  (4)  the  Optional
Redemption Date. On the applicable  Optional Redemption Date (or such later date
as the Holder  surrenders  this Note to the Company) the Company shall pay to or
upon the order of the Holder, by wire transfer of immediately available funds to
such account as shall be  specified  for such purpose by the Holder at least one
Business  Day prior to the  Optional  Redemption  Date,  an amount  equal to the
Optional  Redemption  Price of the portion (which may be all) of this Note to be
redeemed.  In each such case the aggregate principal amount of this Note and the
Other  Notes  to be so  redeemed  shall be at least  $50,000.00  or such  lesser
aggregate  principal  amount of this Note and the  Other  Notes as shall  remain
outstanding at the time an Optional Redemption Notice is given.

     1.3 No  Prepayment.  Except as  specifically  provided in Section 1.2, this
Note may not be prepaid,  redeemed or  repurchased  at the option of the Company
prior to the Maturity Date.


                                   ARTICLE II

                               CERTAIN COVENANTS

     So long as the Company shall have any obligation under this Note:

     2.1 Limitations on Certain  Indebtedness.  The Company will not itself, and
will not permit any Subsidiary to, create,  assume, incur, suffer to exist or in
any manner become liable in respect of, including, without limitation, by reason
of any business combination  transaction (all of which are referred to herein as
"incurring"), any Indebtedness other than Permitted Indebtedness.

                                       4
<PAGE>


     2.2 Payment of  Obligations.  The Company will pay and discharge,  and will
cause each Significant Subsidiary to pay and discharge, subject to the terms and
conditions of the Securities Purchase  Agreement,  all their respective material
obligations  and  liabilities,  except  where the same may be  contested in good
faith by appropriate proceedings and the Company shall have established adequate
reserves therefor on its books.

     2.3 Maintenance of Property; Insurance. (a) The Company will keep, and will
cause each Significant Subsidiary to keep, all property which, in the reasonable
business  judgment of the  Company,  is useful and  necessary in its business in
good working order and condition, ordinary wear and tear excepted.

     (b) The Company will maintain,  and will cause each Significant  Subsidiary
to  maintain,  with  financially  sound  and  responsible  insurance  companies,
insurance,  in at least such  amounts  and against  such risks as is  reasonably
adequate for the conduct of their  respective  businesses and the value of their
respective properties.

     2.4 Conduct of Business  and  Maintenance  of  Existence.  The Company will
continue,  and will cause each Significant  Subsidiary to continue, to engage in
business of the same  general type as now  conducted  by the  Company,  and will
preserve,  renew  and  keep in full  force  and  effect,  and  will  cause  each
Significant  Subsidiary  to  preserve,  renew and keep in full  force and effect
their respective corporate existence and their respective rights, privileges and
franchises  necessary or  desirable  in the normal  conduct of business and such
matter other than maintenance of the Company's corporate existence, except where
the  failure  to do so  would  not have a  material  adverse  effect  on (i) the
business,  properties,  operations,  condition (financial or other),  results of
operation or prospects of the Company and the Subsidiaries, taken as a whole or,
(ii) the ability of the Company to pay and  perform  its  obligations  under the
Transaction Documents.

     2.5  Compliance  with Laws.  The Company will  comply,  and will cause each
Significant  Subsidiary to comply,  in all material respects with all applicable
laws,  ordinances,  rules,  regulations,  decisions,  orders and requirements of
governmental   authorities   and   courts   (including,    without   limitation,
environmental  laws) except (i) where compliance  therewith is contested in good
faith by appropriate  proceedings or (ii) where  non-compliance  therewith could
not  reasonably be expected to have a material  adverse  effect on the business,
condition  (financial  or  otherwise),  operations,  performance,  properties or
prospects of the Company and the Subsidiaries, taken as a whole.

     2.6  Investment  Company Act. The Company will not be or become an open-end
investment trust, unit investment trust or face-amount  certificate company that
is or is required to be registered under Section 8 of the Investment Company Act
of 1940, as amended.

     2.7 Limitations on Asset Sales,  Liquidations,  Etc.; Certain Matters.  The
Company shall not

                                       5
<PAGE>


     (a) sell,  convey or otherwise  dispose of all or substantially  all of the
assets of the Company as an entirety or substantially as an entirety in a single
transaction or in a series of related transactions; or

     (b) liquidate, dissolve or otherwise wind up the affairs of the Company.

     2.8 Limitation on Certain Issuances.  The Company shall not (A) offer, sell
or issue, or enter into any agreement,  arrangement or  understanding  to offer,
sell or issue,  any  Common  Stock  Equivalent  for which the price at which the
holder of such Common Stock  Equivalent is entitled to acquire  shares of Common
Stock varies based on the market or trading  price of the Common  Stock,  or (B)
offer, sell or issue, or enter into any agreement,  arrangement or understanding
to offer,  sell or issue,  any Common Stock or Common Stock  Equivalent on terms
which  provide for  adjustment  or repricing of the purchase  price or number of
shares or other units of such Common  Stock or Common  Stock  Equivalents  other
than pursuant to customary  anti-dilution  provisions;  provided,  however, that
nothing in this Section 2.8 shall  prohibit  the Company from issuing  shares of
Common Stock for cash for the account of the Company (x) in an offering  that is
underwritten  on a firm  commitment  basis and registered with the SEC under the
1933 Act,  or (y) an offering of Common  Stock that is a private  investment  in
publicly-traded equity (commonly known as a PIPE).

     2.9 Limitations on Liens. The Company will not itself,  and will not permit
any Subsidiary to, create, assume or suffer to exist any mortgage, lien, pledge,
security interest or other charge or encumbrance (including, without limitation,
the lien or retained security title of a conditional  vendor),  all of which are
referred  to below as  "liens",  upon  all or any  part of its  property  of any
character, whether owned at the date hereof or thereafter acquired, except:

     (a) liens upon any property of any Subsidiary or  Subsidiaries  as security
for indebtedness owing by such Subsidiary to the Company;

     (b) liens securing this Note and the Other Notes ratably;

     (c) liens for taxes or assessments or governmental charges or levies on its
property if such taxes or assessments or charges or levies shall not at the time
be due and payable or if the amount, applicability, or validity of any such tax,
assessment,  charge  or levy  shall  currently  be  contested  in good  faith by
appropriate  proceedings  or  necessary  preliminary  steps are  being  taken to
contest,   compromise  or  settle  the  amount   thereof  or  to  determine  the
applicability or validity thereof and if the Company or such Subsidiary,  as the
case may be,  shall  have set aside on its  books  reserves  (segregated  to the
extent required by sound accounting practice) deemed by it adequate with respect
thereto;  deposits  or  pledges  to secure  payment  of  worker's  compensation,
unemployment insurance,  old age pensions or other social security;  deposits or
pledges to secure performance of bids, tenders,  contracts (other than contracts
for the  payment  of money  borrowed  or  credit  extended),  leases,  public or
statutory obligations,  surety or appeal bonds, or other deposits or pledges for
purposes of like general nature in the ordinary course of business;  mechanics',
carriers',  workers',  repairmen's  or other like liens  arising in the ordinary

                                       6
<PAGE>


course of business securing obligations which are not overdue for a period of 60
days, or which are in good faith being  contested or  litigated,  or deposits to
obtain the  release  of such  liens;  liens  created  by or  resulting  from any
litigation or legal  proceedings or proceedings being contested in good faith by
appropriate proceedings,  provided any execution levied thereon shall be stayed;
leases  made,  or existing  on  property  acquired,  in the  ordinary  course of
business;  landlords'  liens under leases to which the Company or any Subsidiary
is a party; and zoning restrictions,  easements, licenses or restrictions on the
use of real property or minor irregularities in title thereto; provided that all
such liens described in this subsection (d) do not, in the aggregate, materially
impair the use of such property in the operations of the business of the Company
or any  Subsidiary  or the  value  of  such  property  for the  purpose  of such
business;

     (d) liens  existing on the Issuance Date and listed in Schedule 4(r) to the
Securities Purchase Agreement; and

     (e)  liens  upon  raw  materials,  works in  progress  and  finished  goods
inventory and accounts  receivable  granted to a bank,  finance company or other
institutional lender providing receivables and inventory financings.

     2.10 Transactions  with Affiliates.  The Company will not pay, and will not
permit any Subsidiary,  directly or indirectly,  to pay, any funds to or for the
account  of,  make  any   investment   (whether  by   acquisition  of  stock  or
Indebtedness,  by  loan,  advance,  transfer  of  property,  guarantee  or other
agreement to pay, purchase or service, directly or indirectly, any Indebtedness,
or otherwise)  in,  lease,  sell,  transfer or otherwise  dispose of any assets,
tangible or  intangible,  to, or  participate  in, or effect any  transaction in
connection  with,  any joint  enterprise or other joint  arrangement  with,  any
Affiliate of the Company,  except, on terms to the Company or such Subsidiary no
less  favorable  than  terms  that  could be  obtained  by the  Company  or such
Subsidiary from a Person that is not an Affiliate of the Company,  as determined
in good faith by the Board of Directors.

     2.11 Rule 144A  Information  Requirement.  Within the  period  prior to the
expiration  of the holding  period  applicable to sales hereof under Rule 144(k)
under the 1933 Act (or any successor  provision),  the Company shall, during any
period in which it is not  subject to  Section  13 or 15(d)  under the 1934 Act,
make available to the Holder and any prospective purchaser of this Note from the
Holder, the information  required pursuant to Rule 144A(d)(4) under the 1933 Act
upon the  request  of the  Holder  and it will take such  further  action as the
Holder may reasonably  request,  all to the extent required from time to time to
enable  the  Holder to sell this Note  without  registration  under the 1933 Act
within the limitations of the exemption  provided by Rule 144A, as Rule 144A may
be amended from time to time.  Upon the request of the Holder,  the Company will
deliver to the Holder a written  statement  as to whether it has  complied  with
such requirements.

     2.12 Notice of Defaults.  The Company shall notify the Holder promptly, but
in any event not later than five days  after the  Company  becomes  aware of the
fact, of any failure by the Company to comply with this Article II.

     2.13 Security  Agreement.  No later than 30 days after the date hereof, the
Company  shall  execute  and  deliver to the Holder and the holders of the Other
Notes a Security Agreement, in form, scope and substance reasonably satisfactory
to a majority in interest of the Holder and such other holders,  taken together,

                                       7
<PAGE>


based  upon the  aggregate  principal  amount of Notes  outstanding,  granting a
security interest in all of the assets of the Company excluding only Receivables
as such term is defined in the Silicon Valley Bank Accounts  Receivable Purchase
Agreement dated October 10, 2001 (the "Collateral") to secure the obligations of
the Company under this Note. Such security  interest shall be junior only to the
existing bank lines with JP Morgan Chase Bank,  Sterling National Bank,  Silicon
Valley  Bank and DIRI Rec Fund  LLC.  The  Company  shall  use its  commercially
reasonable  efforts to obtain any  necessary  consents  to the  granting of such
security interest to the Holder and the holders of the Other Notes.


                                  ARTICLE III

                               EVENTS OF DEFAULT

     3.1 If any of the following events of default (each, an "Event of Default")
shall occur:

     (a) Failure to Pay Principal,  Interest,  Etc. The Company fails (1) to pay
the principal, the Optional Redemption Price or the Repurchase Price hereof when
due, whether at maturity, upon acceleration or otherwise, as applicable,  or (2)
to pay any  installment  of  interest  hereon  when due and, in the case of this
clause (2) of this Section 3.1(a) only,  such failure  continues for a period of
ten Business Days after notice from the Holder to the Company thereof; or

     (b) Breach of Certain  Covenants.  The Company fails to comply with Section
2.1, 2.7 or 2.8; or

     (c) Breach of Other Covenants.  The Company fails to comply in any material
respect with any other  provision of Article II of this Note (other than Section
2.1, 2.7 or 2.8) or breaches any other material  covenant or other material term
or condition of this Note or any of the other Transaction  Documents (other than
as  specifically  provided in clauses (a) and (b) of this Section 3.1), and such
breach  continues  for a period of 15 days after written  notice  thereof to the
Company from the Holder; or

     (d)  Breach  of  Representations  and  Warranties.  Any  representation  or
warranty  of  the  Company  made  herein  or  in  any  agreement,  statement  or
certificate  given in writing  pursuant  hereto (or pursuant to any  Transaction
Documents) shall be false or misleading in any material respect when made; or

     (e) Certain  Voluntary  Proceedings.  The Company or any  Subsidiary  shall
commence   a   voluntary   case  or  other   proceeding   seeking   liquidation,
reorganization  or other  relief  with  respect to itself or its debts under any
bankruptcy,  insolvency  or other  similar  law now or  hereafter  in  effect or
seeking the appointment of a trustee, receiver,  liquidator,  custodian or other
similar official of it or any substantial part of its property, or shall consent
to any such relief or to the  appointment  of or taking  possession  by any such
official in an involuntary  case or other  proceeding  commenced  against it, or

                                       8
<PAGE>


shall make a general  assignment  for the  benefit of  creditors,  or shall fail
generally  to pay its debts as they  become due or shall  admit in  writing  its
inability generally to pay its debts as they become due; or

     (f)  Certain  Involuntary   Proceedings.   An  involuntary  case  or  other
proceeding  shall be  commenced  against the Company or any  Subsidiary  seeking
liquidation,  reorganization  or other  relief  with  respect to it or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the  appointment  of a trustee,  receiver,  liquidator,  custodian or
other similar official of it or any substantial  part of its property,  and such
involuntary case or other proceeding shall remain undismissed and unstayed for a
period of 60 consecutive days; or

     (g) Judgments and Governmental Actions. Any court of competent jurisdiction
or any  governmental  authority  shall enter one or more  judgments  against the
Company or any Subsidiary or any of their respective properties or other assets,
or find the Company or any Subsidiary  liable for any damages or past due unpaid
liabilities,  including  in respect of any unpaid  taxes,  including  federal or
state income,  sales,  use or other taxes,  in an aggregate  amount in excess of
$50,000; or

     (h) Default Under Other Agreements. (a) The Company or any Subsidiary shall
(i) default in any payment with respect to any  Indebtedness  for borrowed money
(other than this Note) which Indebtedness has an outstanding principal amount in
excess of $75,000  individually  or in the aggregate for all such  Indebtedness,
beyond the period of grace,  if any,  provided in the  instrument  or  agreement
under  which  such  Indebtedness  was  created or (ii)  default in any  material
respect in the observance or performance of any agreement, covenant or condition
relating to any such  Indebtedness  or contained in any  instrument or agreement
evidencing,  securing  or  relating  thereto,  or any other event shall occur or
condition  exist,  the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such  Indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause,  any such  Indebtedness  to
become due prior to its stated maturity and such default or event shall continue
beyond the period of grace,  if any,  provided in the  instrument  or  agreement
under which such Indebtedness was created (after giving effect to any consent or
waiver  obtained and then in effect  thereunder) and such default shall continue
for five days (or to such earlier  date as the holder of any other  Indebtedness
shall  declare  the same due and payable by reason of such  default;  or (b) any
Indebtedness of the Company or any Subsidiary which has an outstanding principal
amount in excess of the $75,000  individually  or in the  aggregate for all such
Indebtedness  shall,  in  accordance  with its terms,  be declared to be due and
payable,  or  required  to be prepaid  other than by a  regularly  scheduled  or
required payment prior to the stated maturity thereof; or

     (i) Failure to Provide Security Interest.  The Company does not provide the
Holder and the holders of Other Notes with a perfected  security interest in the
Collateral to secure the  obligations  of the Company under the Notes by May 13,
2005, junior only to the existing bank lines with JP Morgan Chase Bank, Sterling
National Bank, Silicon Valley Bank and DIRI Rec Fund LLC; then,



                                       9
<PAGE>

     (1) upon the occurrence and during the continuation of any Event of Default
specified  in clause (a),  (b), or (d) of this Section 3.1, at the option of the
Holder, and upon the occurrence of any Event of Default specified in clause (e),
(f) or (i) of this  Section  3.1:  (X) the  Company  shall pay to the  Holder an
amount equal to the outstanding  principal  amount of this Note plus accrued and
unpaid interest on such principal amount to the date of payment plus accrued and
unpaid Default  Interest,  if any,  thereon at the rate provided in this Note to
the date of payment, (Y) all other amounts payable hereunder or under any of the
other  Transaction  Documents  shall  immediately  become due and  payable,  all
without demand, presentment or notice, all of which hereby are expressly waived,
together with all costs,  including,  without limitation,  reasonable legal fees
and expenses of collection, and (Z) the Holder shall be entitled to exercise all
other rights and remedies available at law or in equity; and

     (2) upon the occurrence and during the continuation of any Event of Default
specified  in clause (c),  (g) or (h) of this  Section  3.1: (A) if any Event of
Default  continues  during  the  period of 30  consecutive  days  following  the
occurrence  of such Event of Default,  then  thereafter  so long as any Event of
Default is continuing,  at the option of the Holder (i) the Company shall pay to
the Holder an amount equal to the outstanding principal amount of this Note plus
accrued and unpaid interest on such principal amount to the date of payment plus
accrued and unpaid  Default  Interest,  if any,  thereon at the rate provided in
this Note to the date of payment,  and (ii) all other amounts payable  hereunder
shall  immediately  become due and payable,  all without demand,  presentment or
notice,  all of which  hereby are  expressly  waived,  together  with all costs,
including,   without  limitation,   reasonable  legal  fees  and  expenses,   of
collection,  and (B) the Holder  shall be entitled  to  exercise  all rights and
remedies  available  at law or in  equity  other  than  those  set  forth in the
immediately preceding clause (A).


                                   ARTICLE IV

                       REPURCHASE UPON A REPURCHASE EVENT

     4.1 Repurchase  Right Upon Repurchase  Event. If a Repurchase Event occurs,
in addition to any other right of the Holder,  the Holder  shall have the right,
at the Holder's  option,  to require the Company to repurchase all of this Note,
or any portion  hereof on the  repurchase  date that is five Business Days after
the date of the Holder Notice  delivered with respect to such Repurchase  Event;
provided that any such repurchase shall be made proportionally  among the Holder
and the holders of Other Notes who have elected to have their Notes  repurchased
due to such  Repurchase  Event.  The Holder  shall have the right to require the
Company to repurchase all or any such portion of this Note if a Repurchase Event
occurs at any time  while any  portion of the  principal  amount of this Note is
outstanding at a price equal to the Repurchase Price.

                                       10
<PAGE>


     4.2 Notices;  Method of Exercising Repurchase Rights, Etc. (a) On or before
the fifth Business Day after the occurrence of a Repurchase  Event,  the Company
shall give to the Holder a Company  Notice of the  occurrence of the  Repurchase
Event and of the repurchase  right set forth herein arising as a result thereof.
Such Company Notice shall set forth:

     (i) the date by which the repurchase right must be exercised, and

     (ii) a description  of the procedure  (set forth in this Section 4.2) which
the Holder must follow to exercise the repurchase right.

No failure of the Company to give a Company Notice or defect therein shall limit
the Holder's  right to exercise the  repurchase  right or affect the validity of
the proceedings for the repurchase of this Note or portion hereof.

     (b) To exercise  the  repurchase  right,  the Holder  shall  deliver to the
Company on or before the 30th day after a Company  Notice (or if no such Company
Notice  has been  given,  within 40 days after the  Holder  first  learns of the
Repurchase  Event) (i) a Holder Notice  setting forth the name of the Holder and
the principal  amount of this Note to be  repurchased,  and (ii) this Note, duly
endorsed for transfer to the Company of the portion of the outstanding principal
amount of this Note to be  repurchased.  A Holder  Notice  may be revoked by the
Holder at any time prior to the time the Company pays the applicable  Repurchase
Price to the Holder.

     (c) If the Holder shall have given a Holder Notice,  then on the date which
is five  Business Days after the date such Holder Notice is given (or such later
date as the Holder  surrenders  this  Note) the  Company  shall make  payment in
immediately  available funds of the applicable  Repurchase Price to such account
as  specified  by the Holder in writing to the Company at least one Business Day
prior to the applicable repurchase date.

     4.3 Other.  A Holder  Notice  given by the  Holder  shall be deemed for all
purposes  to be in proper form unless the  Company  notifies  the Holder  within
three  Business Days after such Holder Notice has been given (which notice shall
specify all defects in such Holder Notice), and any Holder Notice containing any
such  defect  shall  nonetheless  be  effective  on the date given if the Holder
promptly  undertakes to correct all such defects.  No such claim of defect shall
limit or delay performance of the Company's obligation to repurchase any portion
of this Note, the repurchase of which is not in dispute.


                                   ARTICLE V

                                   CONVERSION

     5.1 Conversion Into Next  Financing.  (a) The Holder may convert all or any
part of the  principal  and accrued  interest  on this Note into the  securities
issued in a Future Financing;  provided that any partial  conversion shall be in
an amount at least equal to the minimum  subscription  allowable pursuant to the
terms of the Future  Financing.  This Note may be converted  into the number and
type of securities as could be purchased in the Future  Financing for a purchase
price equal to the  principal  amount and accrued  interest,  including  Default
Interest, if any, on this Note being converted.

                                       11
<PAGE>


     (b) In the event the Company  contemplates a Future Financing,  the Company
shall provide written notice thereof to the Holder, which notice shall set forth
in  reasonable  detail the terms of the Future  Financing and include the final,
definitive  purchase  agreement  and  related  documentation.  To  exercise  its
conversion  right, the Holder shall provide written notice to the Company within
five  Business  Days  after  receipt  of such  notice  from the  Company  of the
principal  and  accrued  interest  it wishes to  convert.  In the event that the
Company fails to deliver notice of the consummation of the Future Financing, the
Holder shall have the right to convert this Note into the same securities on the
same terms as those  issued in the Future  Financing by notice to the Company no
later  than  thirty  days  after it learns  of the  consummation  of the  Future
Financing.


                                   ARTICLE VI

                                  DEFINITIONS

     6.1 Certain  Defined Terms.  (a) All the  agreements or instruments  herein
defined shall mean such  agreements or  instruments as the same may from time to
time be  supplemented  or amended or the terms thereof waived or modified to the
extent permitted by, and in accordance with, the terms thereof and of this Note.

     (b) The following terms shall have the following meanings (such meanings to
be  equally  applicable  to both the  singular  and  plural  forms of the  terms
defined):

     "Affiliate"  means,  with  respect to any  Person,  any other  Person  that
directly,  or  indirectly  through  one or  more  intermediaries,  controls,  is
controlled by or is under common control with the subject  Person.  For purposes
of this definition,  "control"  (including,  with correlative meaning, the terms
"controlled  by" and "under common control  with"),  as used with respect to any
Person,  shall mean the  possession,  directly  or  indirectly,  of the power to
direct or cause the  direction  of the  management  and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.

     "AMEX" means the American Stock Exchange, Inc.

     "Applicable  Rate"  means 5 percent  per  annum or, if an Event of  Default
shall occur, then so long as any Event of Default shall continue, 12 percent per
annum (or in either case such lesser rate as shall be the highest rate permitted
by applicable law).

     "Board of Directors" means the Board of Directors of the Company.

     "Board Resolution" means a copy of a resolution  certified by the Secretary
or an Assistant  Secretary of the Company to have been duly adopted by the Board

                                       12
<PAGE>


of Directors,  or duly authorized  committee thereof (to the extent permitted by
applicable  law),  and to be in  full  force  and  effect  on the  date  of such
certification, and delivered to the Holder.

     "Business  Day"  means any day other  than a  Saturday,  Sunday or a day on
which commercial banks in The City of New York are authorized or required by law
or executive order to remain closed.

     "Common Stock" means the Common Stock,  par value $.0001 per share,  or any
shares of capital  stock of the Company  into which such shares shall be changed
or reclassified after the Issuance Date.

     "Common  Stock  Equivalent"  means any  warrant,  option,  subscription  or
purchase right with respect to shares of Common Stock, any security  convertible
into,  exchangeable  for, or otherwise  entitling the holder thereof to acquire,
shares of Common Stock or any warrant,  option,  subscription  or purchase right
with respect to any such convertible, exchangeable or other security.

     "Company"  shall have the meaning  provided in the first  paragraph of this
Note.

     "Company  Certificate"  means a  certificate  of the  Company  signed by an
Officer.

     "Company  Notice"  means a Company  Notice in the form  attached  hereto as
Exhibit B.

     "Default  Interest" shall have the meaning  provided in the first paragraph
of this Note.

     "Default Rate" means 12 percent per annum.

     "Eligible Bank" means a corporation organized or existing under the laws of
the United States or any other state,  having combined capital and surplus of at
least $100 million and subject to supervision by federal or state  authority and
which has a branch located in New York, New York.

     "Event of Default" shall have the meaning provided in Section 3.1.

     "Fundamental Change" means

     (a) Any  consolidation  or merger of the Company or any Subsidiary  with or
into another entity (other than a merger or  consolidation  of a Subsidiary into
the Company or a wholly-owned  Subsidiary) where the stockholders of the Company
immediately  prior to such  transaction do not  collectively own at least 51% of
the  outstanding  voting  securities  of  the  surviving   corporation  of  such
consolidation or merger immediately  following such transaction;  or the sale of
all or substantially  all of the assets of the Company and the Subsidiaries in a
single transaction or a series of related transactions; or

                                       13
<PAGE>


     (b) The occurrence of any transaction or event in connection with which all
or  substantially  all the Common Stock shall be exchanged for,  converted into,
acquired for or constitute the right to receive consideration  (whether by means
of  an  exchange  offer,  liquidation,  tender  offer,  consolidation,   merger,
combination,  reclassification,  recapitalization or otherwise) which is not all
or  substantially  all common stock which is (or will,  upon  consummation of or
immediately  following such transaction or event,  will be) listed on a national
securities  exchange or approved for  quotation on Nasdaq or any similar  United
States system of automated  dissemination of transaction reporting of securities
prices; or

     (c) The  acquisition  by a Person or entity or group of Persons or entities
acting in concert as a partnership, limited partnership,  syndicate or group, as
a result  of a tender  or  exchange  offer,  open  market  purchases,  privately
negotiated purchases or otherwise,  of beneficial ownership of securities of the
Company  representing  25% or  more  of  the(i)  combined  voting  power  of the
outstanding  voting securities of the Company  ordinarily (and apart from rights
accruing in special  circumstances)  having the right to vote in the election of
directors or (ii) fully diluted shares of Common Stock.

     "Future  Financing"  means a  private  placement  financing,  or  series of
related  private  placement  financings,  by the Company  after the Closing Date
pursuant to which gross proceeds of at least $1,500,000 are raised

     "Generally  Accepted  Accounting  Principles"  for  any  Person  means  the
generally  accepted  accounting  principles and practices applied by such Person
from time to time in the preparation of its audited financial statements.

     "Holder"  shall have the meaning  provided in the first  paragraph  of this
Note.

     "Holder  Notice"  means a Holder  Notice  in the form  attached  hereto  as
Exhibit C.

     "Indebtedness" as used in reference to any Person means all indebtedness of
such Person for borrowed money, the deferred  purchase price of property,  goods
and services and  obligations  under leases which are required to be capitalized
in accordance with Generally  Accepted  Accounting  Principles and shall include
all such  indebtedness  guaranteed  in any  manner  by such  Person or in effect
guaranteed  by such Person  through a  contingent  agreement to purchase and all
indebtedness  for the payment or purchase of which such Person has  contingently
agreed to advance or supply  funds and all  indebtedness  secured by mortgage or
other lien upon  property  owned by such  Person,  although  such Person has not
assumed or become  liable for the  payment of such  indebtedness,  and,  for all
purposes  hereof,  such  indebtedness  shall be  treated  as  though it has been
assumed by such Person.

     "Interest Payment Date" means each July 1, October 1, January 1 and April 1
and the Maturity Date.

                                       14
<PAGE>


     "Interest  Payment  Shares"  means the shares of Common  Stock  issuable in
payment of interest on this Note in accordance with Section 1.1.

     "Interest  Share Price" for any Interest  Payment Date means the average of
the Market  Price of the Common  Stock for all of the  Trading  Days  during the
period of 10  consecutive  Trading Days ending on and  including the Trading Day
immediately preceding such Interest Payment Date.

     "Issuance Date" means March 29, 2005.

     "Market  Price"  with  respect  to any  security  on any day shall mean the
closing price of such security on such day on the Nasdaq,  the NYSE or the AMEX,
as applicable,  or, if such security is not listed or admitted to trading on the
Nasdaq, the NYSE or the AMEX, on the principal national  securities  exchange or
quotation  system on which  such  security  is quoted or listed or  admitted  to
trading,  in any such case as reported  by  Bloomberg,  L.P.  (or if such source
ceases to be available,  comparable source selected by the Holder and acceptable
to the  Company  in its  reasonable  judgment)  or,  if not  quoted or listed or
admitted to trading on any national securities exchange or quotation system, the
closing  price of such security on the  over-the-  counter  market on the day in
question,  as reported  by the  National  Quotation  Bureau  Incorporated,  or a
similar generally accepted reporting  service,  or if not so available,  in such
manner as  furnished by any NYSE member firm  selected  from time to time by the
Board of Directors for that purpose,  or a price determined in good faith by the
Board of Directors,  whose  determination shall be conclusive and described in a
Board Resolution.

     "Maturity  Date" means the earlier to occur of (i) September 29, 2006, (ii)
the date on which demand for payment of the loan payable to JPMorgan  Chase Bank
is made, and (iii)  commencing May 13, 2005, the due date of the loan payable to
JPMorgan  Chase Bank pursuant to the Grid Demand  Promissory  Note,  dated as of
June 27, 2003,  including if due on demand and whether or not demand for payment
is actually made, as such due date may be extended.

     "Nasdaq" means the Nasdaq National Market.

     "Nasdaq SmallCap" means the Nasdaq SmallCap Market.

     "Next Financing" means the next private placement  financing,  or series of
related  private  placement  financings,  by the Company  after the Closing Date
pursuant to which gross proceeds of at least $1,500,000 are raised.

     "1934 Act" means the Securities Exchange Act of 1934, as amended.

     "1933 Act" means the Securities Act of 1933, as amended.

     "Note" means this instrument as originally executed, or if later amended or
supplemented in accordance with its terms, then as so amended or supplemented.

     "NYSE" means the New York Stock Exchange, Inc.

                                       15
<PAGE>


     "Officer" means the Chairman of the Board, the Chief Executive Officer, the
President or the Chief Financial Officer of the Company.

     "Optional Redemption Date" means each Business Day on which this Note is to
be redeemed in whole or in part pursuant to Section 1.2.

     "Optional  Redemption  Notice" means an Optional  Redemption  Notice in the
form attached hereto as Exhibit A.

     "Optional  Redemption  Period" means the period which commences on the date
that is thirty days after closing of the Next Financing and ends on the Maturity
Date.

     "Optional Redemption Price" means an amount in cash equal to the sum of (1)
100% of the outstanding  principal  amount of this Note specified in an Optional
Redemption  Notice as being  redeemed by the Company plus (2) accrued and unpaid
interest on such principal  amount to the applicable  Optional  Redemption  Date
plus (3) accrued and unpaid Default Interest,  if any, on the amount referred to
in the immediately preceding clause (2) at the rate provided in this Note to the
Optional Redemption Date.

     "Other  Notes" means the Senior  Subordinated  Secured  Notes issued by the
Company pursuant to the Securities Purchase Agreement other than this Note.

     "Permitted Indebtedness" means

     (1) Indebtedness outstanding on the Issuance Date prior to issuance of this
Note and listed on Schedule 4(l) to the Securities Purchase Agreement; and

     (2) Indebtedness evidenced by the Note and the Other Notes;

     (3)  Indebtedness  incurred  after the  Issuance  Date which is  unsecured,
subordinated  to the Notes as to  payment on terms  approved  in advance of such
incurrence by a majority in interest of the Holders of the Notes, based upon the
outstanding  principal amounts thereof,  as evidenced by the written approval of
such Holders given prior to the incurrence of such  Indebtedness,  and for which
no payment of principal of such Indebtedness is scheduled to be due prior to the
date that is six months after the latest scheduled Maturity Date;

     (4)  endorsements  for  collection  or  deposit in the  ordinary  course of
business;

     (5) in the case of any Subsidiary,  Indebtedness owed by such Subsidiary to
the Company;

     (6) Accrued expenses and trade payables  incurred in the ordinary course of
business of the Company;

                                       16
<PAGE>


     (7)  Indebtedness  incurred after the Issuance Date in an aggregate  amount
not to  exceed  $250,000  at any  one  time  outstanding  so  long  as (x)  such
Indebtedness is incurred for the purpose of acquiring equipment owned or used or
to be owned or used by the  Company or any  Subsidiaries  (or for the purpose of
acquiring the capital stock or similar equity  interests of a Subsidiary that is
formed for the limited purpose of owning same and does not own or hold any other
material  assets)  and does not  exceed  the  purchase  price of the  equipment,
capital stock or other equity interest so acquired plus  reasonable  transaction
expenses  and (y) such  Indebtedness,  if  secured,  is  secured  solely  by the
interest of the Company or one of its  Subsidiaries in the equipment so acquired
and rights related thereto; and

     (8)  Indebtedness  incurred after the Issuance Date not to exceed  $250,000
that is unsecured or subordinate to the Holder;

so long as at the time of  incurrence of such  Indebtedness  no Event of Default
has occurred and is continuing or would result from such incurrence and no event
which, with notice or passage of time, or both, would become an Event of Default
has occurred and is continuing or would result from such  incurrence and so long
as in the case of such  Indebtedness  referred to in the preceding  clauses (2),
(3), (7) and (8),  such  Indebtedness  shall have been  approved by the Board of
Directors prior to the incurrence thereof.

     "Person"  means  any  natural  person,  corporation,  partnership,  limited
liability company, trust, incorporated organization,  unincorporated association
or  similar  entity  or  any  government,   governmental   agency  or  political
subdivision.

     "QIB" means a "qualified institutional buyer" as defined in Rule 144A.

     "Registration  Statement" means the Registration  Statement  required to be
filed by the Company with the SEC pursuant to Section  8(a)(1) of the Securities
Purchase Agreement.

     "Repurchase Event" means the occurrence of any one or more of the following
events:

     (a) Any Fundamental Change;

     (b) The consummation of the Next Financing;

     (c) The occurrence of any Event of Default specified in Article III of this
Note; or

     (d) The  failure of the  Company to deliver to the Holder  copies of fully-
executed contracts with the customers listed on Exhibit D,  substantially  final
drafts of which have been previously delivered to Holder or, with respect to GSX
and Lenovo,  contracts  or proof of ongoing  payments  substantially  equivalent
thereto.

     "Repurchase  Price"  means  with  respect  to any  repurchase  pursuant  to
Sections  4.1 and 4.2 an  amount  in cash  equal  to the sum of (1)  100% of the

                                       17
<PAGE>


outstanding  principal  amount of this Note plus (2) accrued and unpaid interest
on such  principal  amount to the date of such  repurchase  plus (3) accrued and
unpaid Default  Interest,  if any,  thereon at the rate provided in this Note to
the date of such repurchase.

     "Rule  144A"  means  Rule  144A as  promulgated  under  the 1933 Act or any
successor rule thereto.

     "SEC" means the Securities and Exchange Commission.

     "SEC  Effective  Date" means the date the  Registration  Statement is first
declared effective by the SEC.

     "Securities  Purchase  Agreement" means the Securities  Purchase Agreement,
dated as of March 29,  2005,  by and between the Company,  Metropolitan  Venture
Partners II, L.P. and Sigma Opportunity Fund, LLC.

     "Share  Interest  Notice  Date" shall have the meaning  provided in Section
1.1(a).

     "Share Interest  Payment Option" shall have the meaning provided in Section
1.1(a).

     "Significant  Subsidiary" shall have the meaning provided in Regulation S-X
of the SEC, except that a Subsidiary shall not be a Significant  Subsidiary only
if such Subsidiary,  when consolidated for financial reporting purposes with all
other Subsidiaries which are not Significant Subsidiaries,  would not constitute
a Significant Subsidiary.

     "Subsidiary"  means any  corporation or other entity of which a majority of
the capital stock or other ownership  interests  having ordinary voting power to
elect a majority of the board of directors or other Persons  performing  similar
functions are at the time directly or indirectly owned by the Company.

     "Trading Day" means at any time a day on which any of a national securities
exchange,  Nasdaq,  the OTC Bulletin Board or such other securities market as at
such time  constitutes the principal  securities  market for the Common Stock is
open for general trading of securities.

     "Transaction Documents" means this Note, the Securities Purchase Agreement,
and  the  Warrants  and  the  other   agreements,   instruments   and  documents
contemplated hereby and thereby.

     "Transfer  Agent"  means  Manhattan  Transfer & Registrar  Company,  or its
successor as transfer agent and registrar for the Common Stock.

     "Warrants"  means Common Stock  Purchase  Warrants of the Company issued to
the original Holder of this Note pursuant to the Securities Purchase Agreement.

                                       18
<PAGE>

                                   ARTICLE VII

                                 MISCELLANEOUS

     7.1 Failure or  Indulgency  Not Waiver.  No failure or delay on the part of
the Holder in the  exercise of any power,  right or  privilege  hereunder  shall
operate as a waiver  thereof,  nor shall any single or partial  exercise  of any
such power,  right or privilege preclude other or further exercise thereof or of
any other right, power or privileges. All rights and remedies existing hereunder
are  cumulative  to, and not  exclusive  of, any  rights or  remedies  otherwise
available.

     7.2 Notices.  Except as otherwise  specifically provided herein, any notice
herein  required  or  permitted  to be  given  shall  be in  writing  and may be
personally served, sent by telephone line facsimile transmission, the receipt of
which is  electronically  confirmed,  or  delivered by courier or sent by United
States  mail and shall be deemed to have been given upon  receipt if  personally
served,  sent by telephone  line  facsimile  transmission  or sent by courier or
three days after being  deposited in the  facilities of the United States Postal
Service,  certified,  with postage pre-paid and properly  addressed,  if sent by
mail.  For the purposes  hereof,  the address and  facsimile  line  transmission
number of the Holder  shall be as  furnished  by the Holder for such purpose and
shown on the records of the Company;  and the address of the Company shall be 80
Orville Drive,  Bohemia,  New York 11716,  Attention:  Chief  Financial  Officer
(telephone line facsimile transmission number (631) 563-8085). The Holder or the
Company may change its  address  for notice by service of written  notice to the
other as herein provided.

     7.3 Amendment,  Waiver,  Etc. Neither this Note nor any terms hereof may be
changed, waived,  discharged or terminated unless such change, waiver, discharge
or termination is in writing signed by the Company and a majority in interest of
the Holders of Notes and Other Notes  (which must include  Metropolitan  Venture
Partners II, L.P.,  except in the case where the rights of Metropolitan  Venture
Partners II, L.P.  would not be materially  adversely  affected by a waiver,  in
which case their prior written  consent shall not be required),  taken together,
based  upon the  aggregate  principal  amount of the Notes and Other  Notes then
outstanding Any such amendment,  modification,  waiver, discharge or termination
shall affect all Holders proportionally.

     7.4  Assignability.  This Note shall be binding  upon the  Company  and its
successors, and shall inure to the benefit of and be binding upon the Holder and
its successors and permitted  assigns.  The Company may not assign its rights or
obligations under this Note.

     7.5 Certain Expenses. The Company shall pay on demand all expenses incurred
by  the  Holder,  including  reasonable  attorneys'  fees  and  expenses,  as  a
consequence  of, or in connection  with (x) any amendment or waiver of this Note
or any  other  Transaction  Document,  (y) any  default  or breach of any of the
Company's  obligations  set  forth  in the  Transaction  Documents  and  (z) the
enforcement or  restructuring  of any right of,  including the collection of any

                                       19
<PAGE>


payments due, the Holder under the Transaction  Documents,  including any action
or proceeding  relating to such  enforcement  or any order,  injunction or other
process seeking to restrain the Company from paying any amount due the Holder.

     7.6 Governing  Law. This Note shall be governed by the internal laws of the
State of New York, without regard to the principles of conflict of laws.

     7.7 Transfer of Note and Noteholder Payment Amount.  This Note has not been
and is not being  registered  under the  provisions of the 1933 Act or any state
securities  laws and this Note may not be  transferred  unless the Holder  shall
have delivered to the Company an opinion of counsel,  reasonably satisfactory in
form,  scope and  substance to the Company,  to the effect that this Note may be
sold or transferred  without  registration under the 1933 Act. Prior to any such
transfer,  such transferee shall have represented in writing to the Company that
such  transferee  has requested  and received  from the Company all  information
relating  to the  business,  properties,  operations,  condition  (financial  or
other),  results of operations or prospects of the Company and the  Subsidiaries
deemed relevant by such  transferee;  that such transferee has been afforded the
opportunity to ask questions of the Company concerning the foregoing and has had
the  opportunity  to  obtain  and  review  the  reports  and  other  information
concerning the Company which at the time of such transfer have been filed by the
Company with the SEC  pursuant to the 1934 Act. If such  transfer is intended to
assign  the  rights  and  obligations  under  5(a),  5(b),  8,  9 and  10 of the
Securities  Purchase  Agreement,  such  transfer  shall  otherwise  be  made  in
compliance with Article V of the Securities Purchase  Agreement.  The Holder may
not transfer a portion of this Note to any Person if such transfer  would result
in an increase in the  aggregate  number of  registered  holders of this Note of
more than four such holders  without the prior  written  consent of the Company,
which consent will not be unreasonably  withheld. Any instrument issued upon any
such  transfer of a portion of this Note which  results in such  increase of one
holder  shall bear a legend  that the holder  thereof  shall not be  entitled to
transfer such instrument in a manner which would further  increase the aggregate
number of registered  holders of this Note without the prior written  consent of
the  Company,  which  consent  shall  not be  unreasonably  withheld;  provided,
however,  that any remaining right of the Holder to transfer all or a portion of
this Note may be transferred  to the transferee by agreement  between the Holder
and the  transferee.  The Company  shall  provide such  assistance as reasonably
necessary to allow a transfer of this Note.

     7.8 Enforceable Obligation. The Company represents and warrants that at the
time of the original  issuance of this Note it received the full purchase  price
payable  pursuant to the  Securities  Purchase  Agreement  in an amount at least
equal to the original  principal  amount of this Note,  and that this Note is an
enforceable  obligation  of the  Company  which is not  subject  to any  offset,
reduction, counterclaim or disallowance of any sort.

     7.9 Note  Register;  Replacement  of Notes.  The Company  shall  maintain a
register  showing the names,  addresses and telephone line facsimile  numbers of
the Holder and the registered holders of the Other Notes. The Company shall also
maintain a facility for the registration of transfers of this Note and the Other
Notes and at which this Note and the Other Notes may be surrendered for split up
into instruments of smaller denominations or for combination into instruments of
larger  denominations.  Upon  receipt  by the  Company  of  evidence  reasonably

                                       20
<PAGE>


satisfactory  to it of the  ownership  of and the loss,  theft,  destruction  or
mutilation of this Note and (a) in the case of loss,  theft or  destruction,  of
indemnity from the Holder  reasonably  satisfactory  in form to the Company (and
without the  requirement to post any bond or other  security) or (b) in the case
of mutilation,  upon surrender and  cancellation  of this Note, the Company will
execute and deliver to the Holder a new Note of like tenor without charge to the
Holder.

     7.10 Payment of Note on  Redemption  or  Repurchase;  Deposit of Redemption
Price or Repurchase  Price, Etc. (a) If this Note or any portion of this Note is
to be redeemed as provided in Section 1.2 or repurchased as provided in Sections
4.1 and 4.2 and any notice  required  in  connection  therewith  shall have been
given as provided therein and the Company shall have otherwise complied with the
requirements of this Note with respect thereto, then this Note or the portion of
this Note to be so redeemed or  repurchased  and with  respect to which any such
notice has been given  shall  become due and  payable on the date stated in such
notice at the applicable  Optional  Redemption Price or Repurchase Price. On and
after the Optional  Redemption Date or repurchase date so stated in such notice,
provided that the Company shall have deposited with an Eligible Bank on or prior
to such Optional Redemption Date or repurchase date, an amount sufficient to pay
the applicable Optional  Redemption Price or Repurchase Price,  interest on this
Note or the portion of this Note to be so redeemed or repurchased shall cease to
accrue,  and  this  Note  or such  portion  hereof  shall  be  deemed  not to be
outstanding  and shall not be entitled to any benefit  with respect to principal
of or interest on the portion to be so redeemed or repurchased except to receive
payment of the applicable  Optional  Redemption  Price or Repurchase  Price.  On
presentation and surrender of this Note or such portion hereof, this Note or the
specified  portion  hereof  shall be paid and  redeemed  or  repurchased  at the
applicable  Optional  Redemption Price or Repurchase Price. If a portion of this
Note is to be  redeemed  or  repurchased,  upon  surrender  of this  Note to the
Company in  accordance  with the terms  hereof,  the Company  shall  execute and
deliver to the Holder without  service charge,  a new Note or Notes,  having the
same  date  hereof  and  containing  identical  terms  and  conditions,  in such
denomination or denominations as requested by the Holder in aggregate  principal
amount equal to, and in exchange for, the unredeemed or unrepurchased portion of
the principal amount of this Note so surrendered.

     (b) Upon the  payment in full of all amounts  payable by the Company  under
this Note or the deposit thereof as provided in Section 7.10(a),  thereafter the
obligations of the Company under this Note shall be as set forth in this Article
VII, and, in the case of such deposit,  to pay the Optional  Redemption Price or
Repurchase  Price,  as the case may be, from the funds so  deposited.  Upon such
payment or deposit, any Event of Default which occurred prior to such payment or
deposit by reason of one or more  provisions of this Note with which the Company
thereafter is no longer obligated to comply, then shall no longer exist.


                  [Remainder of Page Intentionally Left Blank]

                                       21
<PAGE>


     IN WITNESS  WHEREOF,  the  Company has caused this Note to be signed in its
name by its duly  authorized  officer as of the day and in the year first  above
written.

                                                DIRECT INSITE CORP.


                                                By:
                                                Name:
                                                Title:
<PAGE>


                                   ASSIGNMENT

     For value received  _________________________ hereby sell(s), assign(s) and
transfer(s)  unto  _________________________  (Please insert social  security or
other       Taxpayer        Identification       Number       of       assignee:
______________________________)   the  within  Note,   and  hereby   irrevocably
constitutes and appoints _________________________ attorney to transfer the said
Note  on  the  books  of  Direct  Insite  Corp.,  a  Delaware  corporation  (the
"Company"), with full power of substitution in the premises.

     In connection  with any transfer of the Note within the period prior to the
expiration of the holding  period  applicable to sales thereof under Rule 144(k)
under  the 1933  Act (or any  successor  provision)  (other  than  any  transfer
pursuant to a registration  statement that has been declared effective under the
1933 Act), the undersigned confirms that such Note is being transferred:

[  ]  To the Company or a subsidiary thereof; or

[  ]  To a QIB pursuant to and in compliance with Rule 144A; or

[  ]  To an "accredited investor" pursuant to and in compliance with
the 1933 Act; or

[  ]  Pursuant to and in compliance with Rule 144 under the 1933
Act;

and unless the box below is  checked,  the  undersigned  confirms  that,  to the
knowledge  of  the  undersigned,  such  Note  is  not  being  transferred  to an
"affiliate"  of the  Company  as  defined  in Rule  144  under  the 1933 Act (an
"Affiliate").

[  ]  The transferee is an Affiliate of the Company.

     Capitalized  terms  used  in  this  Assignment  and  not  defined  in  this
Assignment shall have the respective meanings provided in the Note.

Dated:                                  NAME:

                                        Signature(s)

<PAGE>


                                                                Exhibit A

                              DIRECT INSITE CORP.

                           OPTIONAL REDEMPTION NOTICE
               (Section 1.2 of Senior Subordinated Secured Note)

TO:
        (Name of Holder)

     (1)  Pursuant  to the terms of the Senior  Subordinated  Secured  Note (the
"Note"),  Direct Insite Corp., a Delaware  corporation (the  "Company"),  hereby
notifies  the  above-named  Holder that the Company is  exercising  its right to
redeem the Note in accordance with Section 1.2 of the Note as set forth below:

     (i) The principal amount of the Note to be redeemed is $ .

     (ii) The Optional Redemption Price is $ .

     (iii) The Optional Redemption Date is .

     (2) Capitalized terms used herein and not otherwise defined herein have the
respective meanings provided in the Note.


Date _________________________                  DIRECT INSITE CORP.


                                                By:
                                                Title:

                                      A-1

<PAGE>


                                                                Exhibit B

                              DIRECT INSITE CORP.

                                 COMPANY NOTICE
              (Section 4.2(a) of Senior Subordinated Secured Note)

TO:
        (Name of Holder)


     (1) A Repurchase  Event described in the Senior  Subordinated  Secured Note
(the "Note") of Direct Insite Corp.,  a Delaware  corporation  (the  "Company"),
occurred on , 200 . As a result of such Repurchase Event, the Holder is entitled
to exercise its repurchase rights pursuant to Section 4.2 of the Note.

     (2) The Holder's repurchase right must be exercised on or before , 200 .

     (3) At or before the date set forth in the  preceding  paragraph  (2),  the
Holder must deliver to the Company:

     (a) a Holder Notice, in the form attached as Exhibit C to the Note; and

     (b) the Note,  duly  endorsed for transfer to the Company of the portion of
the principal amount to be repurchased.

     (4) Capitalized terms used herein and not otherwise defined herein have the
respective meanings provided in the Note.


Date _________________________          DIRECT INSITE CORP.


                                        By:
                                        Title:

                                      B-1


<PAGE>


                                                                Exhibit C

                              DIRECT INSITE CORP.

                                 HOLDER NOTICE
              (Section 4.2(b) of Senior Subordinated Secured Note)

TO:     DIRECT INSITE CORP.

     (1)  Pursuant  to the terms of the Senior  Subordinated  Secured  Note (the
"Note"),  the undersigned  Holder hereby elects to exercise its right to require
repurchase  by the Company  pursuant  to Sections  4.2(a) and 4.2(b) of $ of the
Note,  equal to the sum of $  principal  amount of the Note,  $ of  accrued  and
unpaid  interest  on such  principal  amount and $ of Default  Interest  on such
interest at the Repurchase Price provided in the Note.

     (2) Capitalized terms used herein and not otherwise defined herein have the
respective meanings provided in the Note.


Date:                                   NAME OF HOLDER:


                                        By:______________________________
                                        Signature of Registered Holder
                                        (Must be signed exactly as name
                                        appears in the Note.)


                                      C-1

<PAGE>


                                                                Exhibit D

GXS
Lenovo
IBM
EDS




                                       D-1