Document:

Exhibit A
                                                                              to
                                                                      Securities
                                                                        Purchase
                                                                       Agreement

THIS  CONVERTIBLE NOTE AND THE SECURITIES  ISSUABLE UPON CONVERSION  HEREOF HAVE
NOT  BEEN  REGISTERED  UNDER  THE  SECURITIES  ACT  OF  1933,  AS  AMENDED  (THE
"SECURITIES  ACT"),  OR  THE  SECURITIES  LAWS  OF  ANY  STATE.  THE  SECURITIES
REPRESENTED HEREBY MAY NOT BE OFFERED,  SOLD OR OTHERWISE TRANSFERRED UNLESS THE
SECURITIES  ARE  REGISTERED  UNDER  THE  SECURITIES  ACT  AND  APPLICABLE  STATE
SECURITIES LAWS, OR ANY SUCH OFFER,  SALE OR TRANSFER IS MADE UNDER AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.

                                CONVERTIBLE NOTE

Date: July 25, 2000                                                 $___________

            FOR VALUE RECEIVED, LUMENON INNOVATIVE LIGHTWAVE TECHNOLOGY, INC., a
corporation   organized   under  the  laws  of  the  State  of   Delaware   (the
"Corporation"), hereby promises to pay to the order of ______________________ or
any assign registered on the books and records of the Corporation (individually,
the "Holder," and collectively  with the holders of all other notes of same like
and tenor, the "Holders") the sum of __________________  Dollars ($_____) on the
five-year anniversary of the date hereof (the "Scheduled Maturity Date"), and to
pay interest on the unpaid  principal  balance  hereof for each year (or portion
thereof) that this Note is  outstanding in an amount equal to seven and one-half
percent  (7.5%) per annum,  compounded  annually.  Interest  shall accrue on the
unpaid  principal  balance  hereof from the date hereof (the "Issue Date") until
the same  becomes  due and  payable,  whether at  maturity  or upon  prepayment,
repayment  or  otherwise.  Any  amounts on this Note which are not paid when due
shall bear interest at the rate equal to the lower of fifteen  percent (15%) per
annum and the highest rate  permitted by law from the due date thereof until the
same is paid.  Interest  shall be  calculated  based on a 360-day year and shall
commence  accruing  on the Issue  Date  and,  to the  extent  not  converted  in
accordance with the provisions hereof,  shall be payable in arrears at such time
as the outstanding  principal balance hereof with respect to which such interest
has accrued  becomes due and payable  hereunder.  All payments of principal  and
interest (to the extent not converted in accordance with the terms hereof) shall
be made in, and all references herein to monetary  denominations shall refer to,
lawful money of the United States of America. All payments shall be made at such
address as the Holder shall have given or shall  hereafter  give to the Borrower
by written notice in accordance with the provisions of this Note.

            This  Note is  being  issued  by the  Borrower  along  with  similar
convertible  term notes (the "Other  Notes" and,  together  with this Note,  the
"Notes") pursuant to that certain Securities Purchase

<PAGE>

Agreement,  dated as of the date hereof, by and among the Borrower and the other
signatories thereto (the "Securities Purchase Agreement").

                                    ARTICLE I
                                   PREPAYMENT

            Upon the  occurrence  of an Event of Default (as defined  below) and
the election by the Holder to require prepayment,  this Note shall be prepaid by
the  Corporation in accordance  with the provisions of Article VII hereof.  This
Note may not be prepaid  at the option of  Borrower  without  the prior  written
consent of the Holder.

                                   ARTICLE II
                               CERTAIN DEFINITIONS

            The following terms shall have the following meanings:

            A. "Closing Bid Price" means,  for any security as of any date,  the
closing bid price of such  security on the principal  United  States  securities
exchange or trading  market where such  security is listed or traded as reported
by Bloomberg  Financial  Markets (or a comparable  reporting service of national
reputation selected by the Corporation and reasonably acceptable to Holders of a
majority of the aggregate  principal amount  represented by the then outstanding
Notes ("Majority  Holders") if Bloomberg Financial Markets is not then reporting
closing  bid prices of such  security)  (collectively,  "Bloomberg"),  or if the
foregoing  does not apply,  the last reported sale price of such security in the
over-the-counter  market on the  electronic  bulletin board for such security as
reported by  Bloomberg,  or, if no sale price is reported  for such  security by
Bloomberg,  the average of the bid prices of all market makers for such security
as reported in the "pink sheets" by the National Quotation Bureau, Inc., in each
case for such date or, if such date was not a trading date for such security, on
the next  preceding  date which was a trading  date.  If the  Closing  Bid Price
cannot be calculated  for such security as of either of such dates on any of the
foregoing  bases,  the Closing Bid Price of such  security on such date shall be
the fair market value as reasonably  determined  by an  investment  banking firm
selected by the Corporation and reasonably  acceptable to the Majority  Holders,
with the costs of such appraisal to be borne by the Corporation.

            B. "Conversion  Amount" means the portion of the principal amount of
this Note being converted plus any accrued and unpaid  interest  thereon through
the Conversion  Date,  each as specified in the notice of conversion in the form
attached hereto (the "Notice of Conversion").

            C. "Conversion Date" means, for any Optional  Conversion (as defined
below),  the date  specified in the Notice of  Conversion so long as the copy of
the Notice of  Conversion  is faxed (or  delivered  by other means  resulting in
notice) to the  Corporation  at or before 11:59 p.m., New York City time, on the
Conversion Date indicated in the Notice of Conversion;  provided,  however, that
if the Notice of Conversion is not so faxed or otherwise  delivered  before such
time,  then the Conversion  Date shall be the date the Holder faxes or otherwise
delivers the Notice of  Conversion to the  Corporation.

                                      -2-
<PAGE>

            D.  "Conversion  Price" means, for any Conversion Date, the lower of
the Fixed  Conversion Price and the Variable  Conversion  Price, but in no event
less  than the Floor  Price,  each in  effect  as of such  date and  subject  to
adjustment as provided herein.

            E. "Fixed  Conversion  Price" means $25.00,  and shall be subject to
adjustment as provided herein.

            F. "Floor  Price" means  $7.00,  subject to  adjustment  as provided
herein.

            G.   "Variable   Conversion   Price"  means,   as  of  any  date  of
determination,  the  average of the  Closing  Bid  Prices for the  Corporation's
common  stock,  par  value  $.001  per  share  ("Common  Stock"),  for the  five
consecutive  trading days ending on the trading day  immediately  preceding such
date of  determination  (subject to equitable  adjustment  for any stock splits,
stock  dividends,  reclassifications  or similar events during such five trading
day period),  and shall be subject to  adjustment  as provided  herein.  For the
avoidance of doubt, the trading day immediately preceding any Conversion Date is
the last  calendar day that is a trading day and that is  immediately  preceding
the Conversion Date.

            H.  "Warrant"  shall mean the warrants  issued by the Company to the
initial Holder pursuant to the Securities Purchase Agreement.

            I. "Fixed Amounts" means,  collectively,  the Fixed Conversion Price
and the Floor Price.

            J. "Volume Weighted Average Price" means, for any security as of any
date, the Volume Weighted Average Price of such security on the principal United
States  securities  exchange or trading  market where such security is listed or
traded as reported by Bloomberg,  or if the foregoing  does not apply,  the last
reported  sale  price of such  security  in the  over-the-counter  market on the
electronic bulletin board for such security as reported by Bloomberg,  or, if no
sale price is reported for such  security by  Bloomberg,  the average of the bid
prices of all market  makers for such  security as reported in the "pink sheets"
by the National  Quotation Bureau,  Inc., in each case for such date or, if such
date was not a trading date for such security,  on the next preceding date which
was a trading  date. If the Volume  Weighted  Average Price cannot be calculated
for such security as of either of such dates on any of the foregoing  bases, the
Volume  Weighted  Average  Price of such security on such date shall be the fair
market value as reasonably  determined by an investment banking firm selected by
the  Corporation  and reasonably  acceptable to the Majority  Holders,  with the
costs of such appraisal to be borne by the Corporation.

                                      -3-
<PAGE>

                                   ARTICLE III
                                   CONVERSION

            A.  Conversion  at  the  Option  of  the  Holder.   Subject  to  the
limitations  on  conversions  contained  in Paragraph D of this Article III, the
Holder  may,  at any time and from  time to time on or  after  the  Issue  Date,
convert (an "Optional  Conversion") all or any part of the outstanding principal
amount of this Note,  plus all accrued  interest  thereon through the Conversion
Date,  into a number of fully  paid and  nonassessable  shares  of Common  Stock
determined in accordance with the following formula:

                                Conversion Amount
                                -----------------
                                Conversion Price

            B.  Mechanics  of  Conversion.   In  order  to  effect  an  Optional
Conversion,  a Holder shall: (x) fax (or otherwise  deliver) a copy of the fully
executed  Notice of Conversion to the  Corporation and (y) surrender or cause to
be  surrendered  this Note,  duly  endorsed,  along with a copy of the Notice of
Conversion as soon as practicable thereafter to the Corporation. Upon receipt by
the Corporation of a facsimile copy of a Notice of Conversion from a Holder, the
Corporation shall immediately send, via facsimile, a confirmation to such Holder
stating that the Notice of Conversion has been received, the date upon which the
Corporation  expects to deliver the Common Stock  issuable upon such  conversion
and the name  and  telephone  number  of a  contact  person  at the  Corporation
regarding the conversion. The Corporation shall not be obligated to issue shares
of Common  Stock upon a conversion  unless  either this Note is delivered to the
Corporation as provided  above,  or the Holder  notifies the  Corporation or the
transfer  agent that this Note has been lost,  stolen or destroyed  and delivers
the documentation to the Corporation required by Article IX.H hereof.

                  (i)  Delivery  of  Common  Stock  Upon  Conversion.  Upon  the
surrender of this Note  accompanied by a Notice of Conversion,  the  Corporation
shall,  no later than the later of (a) the second  business  day  following  the
Conversion  Date and (b) the business day following  the date of such  surrender
(or, in the case of lost,  stolen or destroyed  certificates,  after delivery of
the documentation  required by Article IX.H) (the "Delivery Period"),  issue and
deliver to the Holder or its nominee  (x) that number of shares of Common  Stock
issuable upon  conversion of the portion of this Note being  converted and (y) a
new Note in the form hereof  representing  the balance of the  principal  amount
hereof not being  converted,  if any.  If the  Corporation's  transfer  agent is
participating in the Depository Trust Company ("DTC") Fast Automated  Securities
Transfer program, and so long as the certificates  therefor do not bear a legend
and the Holder thereof is not then required to return such  certificate  for the
placement of a legend thereon, the Corporation shall cause its transfer agent to
electronically  transmit the Common Stock issuable upon conversion to the Holder
by  crediting  the  account of the Holder or its  nominee  with DTC  through its
Deposit   Withdrawal  Agent   Commission   system  ("DTC   Transfer").   If  the
aforementioned  conditions to a DTC Transfer are not satisfied,  the Corporation
shall deliver to the Holder physical certificates  representing the Common Stock
issuable upon  conversion.  Further,  a Holder may instruct the  Corporation  to
deliver to the  Holder  physical  certificates  representing  the  Common  Stock
issuable  upon  conversion  in  lieu of  delivering  such  shares  by way of DTC
Transfer.

                                      -4-
<PAGE>

                  (ii) Taxes. The Corporation  shall pay any and all taxes which
may be imposed  upon it with  respect to the issuance and delivery of the shares
of Common Stock upon the conversion of this Note.

                  (iii) No  Fractional  Shares.  If any  conversion of this Note
would  result  in the  issuance  of a  fractional  share of Common  Stock,  such
fractional  share shall be disregarded  and the number of shares of Common Stock
issuable  upon  conversion of the Notes shall be the next higher whole number of
shares.

                  (iv)  Conversion  Disputes.  In the case of any  dispute  with
respect to a conversion,  the  Corporation  shall  promptly issue such number of
shares of Common Stock as are not disputed in accordance with  subparagraph  (i)
above. If such dispute  involves the calculation of the Conversion  Price or the
Conversion Amount, the Corporation shall submit the disputed  calculations to an
independent outside accountant via facsimile within two business days of receipt
of the Notice of Conversion.  The accountant, at the Corporation's sole expense,
shall review the  calculations  and notify the Corporation and the Holder of the
results no later than two  business  days from the date it receives the disputed
calculations.  If after such independent accountant's review the Corporation and
the Holder cannot resolve such dispute, the Corporation and the Holder shall use
their best efforts to resolve such dispute through mediation prior to commencing
litigation.  Upon resolution of such dispute  (through  mediation or otherwise),
the  Corporation  shall  then issue the  appropriate  number of shares of Common
Stock in accordance with subparagraph (i) above.

            C. Mandatory Conversion

                  (i) If at any time all of the Required  Conditions (as defined
in  subparagraph  (iii) below) are  satisfied,  the  Corporation  shall have the
right,  subject to the  limitations  set forth in Article III.D,  to require the
conversion (a "Mandatory  Conversion")  of the outstanding  principal  amount of
this Note, plus all accrued  interest  thereon,  into a number of fully paid and
nonassessable  shares of Common Stock at the  Conversion  Price in effect on the
Effective  Date of Mandatory  Conversion  (as defined  below).  If the Mandatory
Conversion  occurs,  the Corporation and the Holders shall follow the applicable
conversion procedures set forth in Article III.B (including the requirement that
the Holder deliver this Note to the Corporation);  provided,  however,  that the
Holder  shall  not  be  required  to  deliver  a  Notice  of  Conversion  to the
Corporation.  The  Holder may  convert  all or any  portion  of the  outstanding
principal amount of this Note, plus all accrued interest thereon,  into a number
of fully paid and nonassessable shares of Common Stock by delivering a Notice of
Conversion  to the  Corporation  at any  time  prior  to the  Effective  Date of
Mandatory Conversion.

                  (ii) The  Corporation  shall effect a Mandatory  Conversion by
giving at least 30 trading days but not more than 40 trading days prior  written
notice (the "Mandatory  Conversion  Notice") to the Holder, of the date on which
such  Mandatory  Conversion  is to  become  effective  (the  "Effective  Date of
Mandatory  Conversion"),  which Mandatory  Conversion  Notice shall be deemed to
have been delivered to the Holder on the trading day after the Corporation's fax
(with a copy  sent by  overnight  courier)  of such  notice  to the  Holder.  No
Mandatory  Conversion Notice shall be effective hereunder unless it is delivered
to all Holders of Notes within ten trading days of any

                                      -5-
<PAGE>

satisfaction of all of the Required  Conditions set forth in subparagraph  (iii)
below;  provided,  however,  the  Corporation  shall be entitled to deliver such
notice after such ten day period if all of the Required  Conditions  continue to
be  satisfied.  The  failure of the  Company to deliver a  Mandatory  Conversion
Notice upon  satisfaction  of the  Required  Conditions  shall not  preclude the
Company from subsequently  delivering such notice if the Required Conditions are
again  satisfied.  Upon the surrender of this Note, the Corporation  shall issue
and  deliver to the  Holder  the  shares of Common  Stock to which the Holder is
entitled upon the Mandatory Conversion.

                  (iii)  The   "Required   Conditions"   shall  consist  of  the
following:

                        (1) at least 30  months  shall  have  elapsed  since the
Issue Date;

                        (2) the  Volume  Weighted  Average  Price for the Common
Stock  for any 40  consecutive  trading  day  period  equals or  exceeds  $50.00
(subject  to  equitable   adjustment   for  stock   splits,   stock   dividends,
recapitalizations and similar events ("Equitable  Adjustments")),  provided that
such  period  commences  after or during  the final two  months of the  30-month
period referred to in subparagraph (1) above;

                        (3) the average trading volume  (excluding block trades)
of the Common Stock on the NASDAQ National  Market  ("NASDAQ") or, if the Common
Stock is not then  traded on NASDAQ,  the  principal  United  States  securities
exchange  where the Common  Stock is then  traded,  during  such 40  consecutive
trading period equals or exceeds 120,000 shares per day;

                        (4) all shares of Common Stock issuable upon  conversion
of this Note are then (a) authorized  and reserved for issuance,  (b) registered
under  the  Securities  Act for  resale  by the  Holders  (and,  in the  case of
subparagraphs  (2) and (3) above,  have been so  registered  throughout  such 40
consecutive  trading  day  period) or may be  immediately  resold by the Holders
pursuant to Rule 144 under the  Securities  Act without  any  limitation  on the
number of such  shares  that can be  immediately  resold and (c)  eligible to be
listed or traded on any of the New York Stock  Exchange  ("NYSE"),  the American
Stock Exchange ("AMEX") or the NASDAQ (or the successor to any of them); and

                        (5) no Event of  Default  (as  defined  in  Article  VII
below) shall have occurred without having been cured.

For purposes of this Note, a "block  trade" is a trade of either  25,000 or more
shares or a quantity of shares having a market value of $200,000 or more.

                  (iv) In  addition,  the  Corporation  shall  have  the  right,
subject  to the  limitations  set  forth  in  Article  III.D.,  to  require  the
conversion of the  outstanding  principal  amount of this Note, plus all accrued
interest thereon, into a number of fully paid and nonassessable shares of Common
Stock at the  Conversion  Price in effect on the  closing of a  transaction  not
approved  by the  Board  of  Directors  of the  Corporation  (as  such  Board is
constituted  immediately  prior to the first  announcement  or  disclosure of an
intention to acquire control of the Corporation by a prospective

                                       -6-
<PAGE>

purchaser) as a result of which a majority of the assets or outstanding  capital
stock of the  Corporation  is  beneficially  owned by persons or  entities  that
beneficially  own less than 5% of the  outstanding  Common Stock  (determined in
accordance  with  Section  13(d) of the  Securities  Exchange  Act of  1934,  as
amended,  and  Regulation  13D-G  thereunder)  prior  to  the  closing  of  such
transaction,  and in which the  purchase  price per share is equal to or greater
than $50.00 (subject to Equitable Adjustments);  provided, however, in the event
of such a change of control, the Holder shall receive  consideration  consisting
entirely  of  cash  or  securities  that  are  registered   under  an  effective
registration statement filed under the Securities Act, or a combination thereof.
If any such conversion occurs, the Holder shall be required to deliver this Note
to the Corporation,  but shall not be required to deliver a Notice of Conversion
to the Corporation.

            D. Limitations on Conversions.  The conversion of this Note shall be
subject to the following limitations (each of which limitations shall be applied
independently):

                  (i) Cap Amount. If, prior to the Shareholder Approval Date (as
hereinafter  defined),  the  Corporation  is  prohibited  by Rule 4460(i) of the
National Association of Securities Dealers,  Inc. ("NASD"),  or any successor or
similar rule, or the rules or  regulations of any other  securities  exchange on
which the Common Stock is then listed or traded, from issuing a number of shares
of Common Stock in excess of a prescribed  amount (the "Cap  Amount"),  then the
Corporation  shall not be required to issue shares upon  conversion of this Note
or exercise of the Warrants in excess of the Cap Amount; provided, however, that
this  limitation  in this  Article  III.D (i) shall not apply and shall be of no
further force and effect after the date of the  effectiveness of the shareholder
approval (the  "Shareholder  Approval  Date") referred to in Section 4(m) of the
Securities Purchase Agreement. On the date hereof, the portion of the Cap Amount
attributable to the Notes and the Warrants is 6,855,978  shares.  The Cap Amount
shall be  allocated  pro rata to the Holders of the Notes as provided in Article
X.D. In the event the  Corporation  is prohibited  from issuing shares of Common
Stock as a result of the  operation of this  subparagraph  (i), the  Corporation
shall comply with Article V.

                  (ii) No Five  Percent  Holders.  In no event shall a Holder of
the Notes have the right to  convert  any  portion  of this Note into  shares of
Common  Stock or to dispose of any  portion of this Note to the extent that such
right to effect such conversion or disposition would result in the Holder or any
of its affiliates  beneficially owning more than 4.99% of the outstanding shares
of Common  Stock.  To the extent  the Holder of this Note owns other  securities
with a  limitation  on  conversion,  exercise or  disposition  analogous  to the
limitation  set forth in this Article  III.D,  the  limitations  on  conversion,
exercise  and  disposition  of this Note and such  securities  shall be  applied
collectively  to all such  securities so that the Holder may select the order in
which it wishes to  convert,  exercise  or  dispose of such  securities  and the
Holder of this Note  will only have the right to effect  conversions,  exercises
and  dispositions  of all such  securities to the extent that such  conversions,
exercises and  dispositions do not result in the Holder or any of its affiliates
beneficially  owning more than 4.99% of the outstanding  shares of Common Stock.
For purposes of this subparagraph,  beneficial  ownership shall be determined in
accordance  with  Section  13(d) of the  Securities  Exchange  Act of  1934,  as
amended,  and Regulation 13 D-G thereunder.  The  restriction  contained in this
subparagraph D shall not be altered,  amended,  deleted or changed in any manner

                                       -7-
<PAGE>

whatsoever unless the holders of a majority of the outstanding  shares of Common
Stock,  the Holder and the  Holders of a majority of the  outstanding  principal
amount of the Notes shall  approve,  in  writing,  such  alteration,  amendment,
deletion or change.

                                   ARTICLE IV
                      RESERVATION OF SHARES OF COMMON STOCK

            A. Reserved Amount. On the Issue Date, the Corporation shall reserve
10,800,000  shares of the  authorized  but  unissued  shares of Common Stock for
issuance  upon  conversion  of the Notes,  and upon exercise of the Warrants and
thereafter  the number of  authorized  but  unissued  shares of Common  Stock so
reserved (the  "Reserved  Amount") shall not be decreased and shall at all times
be  sufficient to provide for the  conversion of the Notes  (including an amount
equal to the interest  that would accrue over a two-year  period on the original
principal  balance  of this  Note) at a price  equal to the  lower of (i)  $7.00
(subject to Equitable  Adjustments) and (ii) the Conversion  Price, in each case
then in effect,  taking into  account any  adjustments  pursuant to Article VIII
hereof, and to provide for any shares of Common Stock issued or then issuable as
a result  of a  Conversion  Default  hereunder,  the  occurrence  of an Event of
Default hereunder, the exercise of the Warrants or any other payment convertible
into  shares of  Common  Stock  pursuant  to the  terms  hereof or that  certain
Registration  Rights  Agreement  by and  among  the  Corporation  and the  other
signatories thereto entered in connection with the Securities Purchase Agreement
(the "Registration Rights Agreement"). The Reserved Amount shall be allocated to
the Holders of the Notes as provided in Article X.D.

            B. Adjustment to Conversion Price. If the Corporation is prohibited,
at any time, from issuing shares of Common Stock upon conversion of the Notes to
any Holder  because the  Corporation  does not then have  available a sufficient
number  of  authorized  and  unissued  shares of  Common  Stock,  then the Fixed
Conversion  Price in respect of any Notes  held by any Holder  (including  Notes
submitted  to the  Corporation  for  conversion,  but for which shares of Common
Stock have not been issued to any such Holder)  shall be adjusted as provided in
Article V.A and the Holder  shall be entitled to exercise the remedies set forth
in Article VII.

                                    ARTICLE V
                         FAILURE TO SATISFY CONVERSIONS

            A.  Conversion  Defaults;   Adjustments  to  Conversion  Price.  The
following shall constitute a "Conversion Default":  (i) following the submission
by a Holder of a Notice of Conversion,  the Corporation  fails for any reason to
deliver, in accordance with the delivery instructions contained in the Notice of
Conversion, on or prior to the fifth trading day following the expiration of the
Delivery Period for such  conversion,  such number of freely tradeable shares of
Common Stock to which such Holder is entitled  upon such  conversion or (ii) the
Corporation  provides notice (or otherwise  indicates) to any Holder at any time
of its  intention  not to issue  freely  tradeable  shares of Common  Stock upon
exercise by any Holder of its conversion  rights in accordance with the terms of
the Notes,  or (iii) the  Corporation is prohibited,  at any time,  from issuing
shares of Common Stock upon  conversion  of the Notes to any Holder  because the
                                       -8-
<PAGE>

Corporation  (a) does not have  available a sufficient  number of authorized and
unissued shares of Common Stock or (b) if after November 30, 2000, such issuance
would exceed the then unissued portion of such Holder's Cap Amount.  In the case
of a  Conversion  Default  described in clause (i) above,  the Fixed  Conversion
Price in respect of any Notes held by such Holder  (including Notes submitted to
the Corporation  for  conversion,  but for which shares of Common Stock have not
been  issued to such  Holder)  shall  thereafter  be the lesser of (x) the Fixed
Conversion  Price  on the  date of the  Conversion  Default  and (y) the  lowest
Variable  Conversion  Price in  effect  during  the  period  beginning  on,  and
including,  such date  through  and  including  the  earlier of (1) the day such
shares of Common Stock are  delivered to the Holder and (2) the day on which the
Holder  regains  its  rights  as a Holder  of the  Notes  with  respect  to such
unconverted  Notes  pursuant to the  provisions of Article X.L hereof (in either
case without reference to or limitation by any Floor Price). In addition, in the
case of a  Conversion  Default  described in clause (i) above,  the  Corporation
shall pay to such Holder an amount equal to (A) the outstanding principal amount
of the Notes to be converted by such Holder  multiplied by (B) .24 multiplied by
(C) a  fraction,  the  numerator  of  which is the  number  of days  after  such
Conversion  Default until the  Corporation  issues the number of freely tradable
shares of Common Stock to which such Holder is entitled upon such conversion and
the denominator of which is 365. In the case of a Conversion  Default  described
in clause (ii) or clause (iii) above, the Fixed Conversion Price with respect to
any  conversion  thereafter  shall  be  the  lowest  Conversion  Price  (without
reference to or  limitation by any Floor Price) in effect at any time during the
period  beginning  on,  and  including,  the  date  of the  occurrence  of  such
Conversion  Default  through and  including  the  Default  Cure Date (as defined
below).  Following any adjustment to the Fixed Conversion Price pursuant to this
Article V.A, the Fixed  Conversion  Price shall thereafter be subject to further
adjustment for any events described in Article VIII. Upon the occurrence of each
reset  of  the  Fixed  Conversion  Price  pursuant  to  this  Paragraph  A,  the
Corporation,  at its expense,  shall promptly  compute the new Fixed  Conversion
Price and prepare and furnish to each Holder of the Notes a certificate  setting
forth such new Fixed  Conversion  Price and  showing in detail  each  Conversion
Price in effect during such reset period. In addition,  upon the occurrence of a
Conversion Default and until the Default Cure Date, the Holder shall be entitled
to the  remedies set forth in Article VII;  provided,  however,  that the Holder
shall not be entitled to exercise  the  remedies set forth in Article VII hereof
for a Conversion  Default of the type enumerated in Article V(A)(i) hereof until
the tenth  trading  day after the date  that  such  Conversion  Default  remains
uncured.

            "Default  Cure Date" means (i) with respect to a Conversion  Default
described in clause (i) of its definition,  the date the Corporation effects the
conversion of all of the outstanding Notes,  subject to the applicable Notice of
Conversion,  and (ii) with respect to a Conversion  Default  described in clause
(ii) of its definition,  the date the Corporation issues freely tradeable shares
of Common Stock in  satisfaction  of all  conversions of the Notes in accordance
with  Article  III.A,  and (iii)  with  respect to either  type of a  Conversion
Default, the date on which the Corporation prepays the Notes held by such Holder
pursuant to paragraph B of this Article V.

                                   ARTICLE VI
                              INTENTIONALLY OMITTED

                                       -9-
<PAGE>

                                   ARTICLE VII
                                EVENTS OF DEFAULT

            A. Events of Default.  In the event (each of the events described in
clauses  (i)-(xi) below after  expiration of the applicable cure period (if any)
being an "Event of Default"):

                  (i) the Corporation  fails to pay the principal  hereof or any
accrued  and  unpaid  interest  hereon  when  due,  whether  at  maturity,  upon
acceleration  or  otherwise  and such  failure  continues  for a period  of five
trading days after the due date thereof;

                  (ii) the  Corporation  either (a) fails to pay,  when due,  or
within any applicable grace period, any payment with respect to any indebtedness
of the  Corporation  in excess of $100,000  due to any third  party  (including,
without  limitation,  any of the Other Notes),  other than payments contested by
the  Corporation  in good faith,  or  otherwise is in breach or violation of any
agreement  for  monies  owed or owing in an amount in excess of  $100,000  which
breach or  violation  permits  the other  party  thereto to declare a default or
otherwise  accelerate amounts due thereunder,  or (b) suffers to exist any other
default or event of default under any agreement  binding the  Corporation  which
default or event of default would or is likely to have a material adverse effect
on the business, operations, properties, prospects or financial condition of the
Corporation, other than as set forth in Article VII.A(viii);

                  (iii) the Common Stock  (including any of the shares of Common
Stock  issuable upon  conversion of the Notes) is suspended  from trading on any
of, or is not listed (and  authorized) for trading on at least one of, the NYSE,
the AMEX or  NASDAQ  for an  aggregate  of ten  trading  days in any nine  month
period;

                  (iv) the Registration Statement referred to in Section 2(a) of
the Registration  Rights Agreement has not been declared  effective by the 270th
day  following the Issue Date or such  Registration  Statement (or any successor
registration  statement on Form S-3), after being declared effective,  cannot be
utilized by the Holders of the Notes for the resale of all of their  Registrable
Securities (as defined in the Registration Rights Agreement) for an aggregate of
more than 30 days;

                  (v) the Corporation fails to remove any restrictive  legend on
any certificate or any shares of Common Stock issued to the Holders of the Notes
upon  conversion  of any of the Notes as and when  required  by this  Note,  the
Securities  Purchase  Agreement or the Registration  Rights Agreement (a "Legend
Removal  Failure"),  and any such failure continues uncured for ten trading days
after the Corporation has been notified thereof in writing by the Holder;

                  (vi) the Corporation  provides notice (or otherwise indicates)
to any  Holder of the Notes,  including  by way of public  announcement,  at any
time, of its intention not to issue,  or otherwise  refuses to issue,  shares of
Common Stock to any Holder of the Notes upon  conversion in accordance  with the
terms of the Notes;

                  (vii) [intentionally omitted]

                                      -10-
<PAGE>

                  (viii) the  Corporation  otherwise  shall  breach any material
term  hereunder  (other  than as set forth in Article  VII.A(i)  and  including,
without  limitation,  Article  IV  hereof)  or  under  the  Securities  Purchase
Agreement,  the Registration Rights Agreement or the Warrants (as defined in the
Securities   Purchase   Agreement),    including,    without   limitation,   the
representations and warranties  contained therein and if such breach if curable,
remains  uncured for more than 60 days after the  Corporation  has been notified
thereof in writing by the Holder or the Corporation  fails to diligently  pursue
the cure of such breach during such 60-day period;

                  (ix) the  Corporation  or any  subsidiary  of the  Corporation
shall make an assignment  for the benefit of creditors,  or apply for or consent
to the appointment of a receiver or trustee for it or for a substantial  part of
its  property or  business,  or such a receiver or trustee  shall  otherwise  be
appointed;

                  (x)  bankruptcy,  insolvency,  reorganization  or  liquidation
proceedings or other  proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the  Corporation  or
any subsidiary of the Corporation and if instituted against the Corporation by a
third party, shall not be dismissed within 60 days of their initiation; or

                  (xi) the minimum  vote  specified  in Rule 4460(i) of the NASD
with  respect to the approval and  ratification  of the terms of the  Securities
Purchase Agreement and the consummation of the transactions contemplated thereby
by the Corporation shall not have been obtained on or before December 31, 2000;

then,  upon the  occurrence of any such Event of Default,  at the option of each
Holder,  exercisable  in whole  or in part at any time and from  time to time by
delivery of a Default  Notice (as defined below) to the  Corporation  while such
Event of Default continues,  the Corporation shall pay such Holder (and upon the
occurrence  of an Event of Default  specified in  subparagraphs  (ix) and (x) of
this  Paragraph A, the  Corporation  shall be required to pay the  Holders),  in
satisfaction  of its obligation to pay the outstanding  principal  amount of the
Notes and accrued and unpaid  interest  thereon,  an amount equal to the Default
Amount and such Default  Amount shall  immediately  become due and payable,  all
without demand, presentment or notice, all of which are hereby expressly waived,
together with all costs, including,  without limitation, legal fees and expenses
of collection, and the Holder shall be entitled to exercise all other rights and
remedies  available  at law or in  equity.  For  the  avoidance  of  doubt,  the
occurrence  of any event  described  in clauses  (vi),  (ix) or (x) above  shall
immediately constitute an Event of Default and there shall be no cure period. In
addition,  upon  the  occurrence  of an  Event of  Default,  if the  Corporation
receives from any Holder a Default Notice (as  hereinafter  defined) and demands
all  amounts  immediately  due and  payable  hereunder,  the Floor  Price  shall
permanently  be reset to $.001  and not be  subject  to any  further  adjustment
pursuant to Article VIII hereof or  otherwise,  and the Vesting Date (as defined
in the  Warrants)  shall be  deemed  to have  occurred,  thereby  rendering  the
Warrants immediately exercisable in accordance with their terms.

                                      -11-
<PAGE>

                        Following the submission of a Default Notice, the Holder
of this Note shall have the right to  continue to submit  Notices of  Conversion
and to convert this Note until such time (if any) as the Corporation pays to the
Holder the Default Amount.

                        Upon the  Corporation's  receipt of any  Default  Notice
hereunder  (other  than  during  the three  trading  day  period  following  the
Corporation's  delivery of a Default  Announcement  (as defined below) to all of
the Holders in response to the Corporation's initial receipt of a Default Notice
from a Holder of the Notes), the Corporation shall immediately (and in any event
within one trading  day  following  such  receipt)  deliver a written  notice (a
"Default  Announcement") to all Holders of the Notes stating the date upon which
the Corporation received such Default Notice and the amount of the Notes covered
thereby. The Corporation shall not redeem any Notes during the three trading day
period following the delivery of a required Default Announcement  hereunder.  At
any time and from time to time during such three trading day period, each Holder
of the Notes may  request  (either  orally or in writing)  information  from the
Corporation with respect to the instant default (including,  but not limited to,
the aggregate  principal amount  outstanding of Notes covered by Default Notices
received by the Corporation) and the Corporation shall furnish (either orally or
in writing) as soon as practicable such requested information to such requesting
Holder. In the event the Corporation is not able to repay all of the outstanding
Notes  within five  trading  days after its receipt of a notice  requiring  such
payment (a "Default  Notice") the Corporation  shall repay the outstanding Notes
to each Holder pro rata,  based on the total  amounts due under the Notes at the
time of repayment included by such Holder in all Default Notices delivered prior
to the date upon which such  repayment  is to be effected  relative to the total
amounts  due  under all Notes at the time of  repayment  included  in all of the
Default  Notices  delivered prior to the date upon which such repayment is to be
effected;  provided, however, the foregoing shall not constitute a waiver by any
Holder of its rights to payment  in full of the total  Default  Amount due under
each such Holder's Notes.

            B. Definition of Default Amount.  The "Default  Amount" with respect
to a Note means an amount equal to the greater of:

                   (i)        V           x      M
                         -------------
                            C P

            and    (ii)  V   x   115%

where:

            "V" means the  aggregate  principal  amount of the Notes  being paid
plus all accrued and unpaid interest thereon through the payment date;

            "CP" means the  Conversion  Price in effect on the date on which the
Corporation receives the Default Notice; and

                                      -12-
<PAGE>

            "M" means with respect to all repayments other than repayments,  the
highest  Closing Bid Price of the  Corporation's  Common Stock during the period
beginning on the date on which the  Corporation  receives the Default Notice and
ending on the date  immediately  preceding  the date of payment  of the  Default
Amount.

                                  ARTICLE VIII
              ADJUSTMENTS TO THE CONVERSION PRICE AND FIXED AMOUNTS

            The  Conversion   Price  and  Fixed  Amounts  shall  be  subject  to
adjustment from time to time as follows:

            A. Stock Splits,  Stock Dividends,  Etc. If, at any time on or after
the Issue Date, the number of outstanding shares of Common Stock is increased by
a stock split, stock dividend,  combination,  or other similar event, each Fixed
Amount shall be proportionately  reduced, or if the number of outstanding shares
of  Common  Stock  is  decreased  by  a  reverse  stock  split,  combination  or
reclassification  of shares,  or other similar event, each Fixed Amount shall be
proportionately  increased.  In such event,  the  Corporation  shall  notify the
Corporation's  transfer  agent of such  change on or before the  effective  date
thereof.

            B.  Adjustment  Due to Merger,  Consolidation,  Etc. If, at any time
after the Issue Date, there shall be (i) any  reclassification  or change of the
outstanding  shares of Common Stock  (other than a change in par value,  or from
par value to no par value,  or from no par value to par value, or as a result of
a  subdivision  or  combination),  (ii)  any  consolidation  or  merger  of  the
Corporation  with any other entity (other than a merger in which the Corporation
is the surviving or continuing entity and its capital stock is unchanged), (iii)
any  sale  or  transfer  of  all or  substantially  all  of  the  assets  of the
Corporation or (iv) any share exchange  pursuant to which all of the outstanding
shares of Common Stock are converted into other  securities or property (each of
(i) - (iv) above  being a  "Corporate  Change"),  then the  Holders of the Notes
shall  thereafter  have the right to  receive  upon  conversion,  in lieu of the
shares of Common  Stock  otherwise  issuable,  such shares of stock,  securities
and/or  other  property as would have been  issued or payable in such  Corporate
Change with  respect to or in exchange  for the number of shares of Common Stock
which would have been issuable  upon  conversion  (without  giving effect to the
limitations  contained  in Article  III.D) had such  Corporate  Change not taken
place,  and in any such  case,  appropriate  provisions  (in form and  substance
reasonably  satisfactory to the Holders of a majority of the principal amount of
the  Notes  then  outstanding)  shall be made with  respect  to the  rights  and
interests of the Holders of the Notes to the end that the economic  value of the
Notes are in no way diminished by such Corporate  Change and that the provisions
hereof (including,  without  limitation,  in the case of any such consolidation,
merger or sale in which the  successor  entity or  purchasing  entity is not the
Corporation,  an  immediate  adjustment  of each Fixed Amount so that each Fixed
Amount  immediately  after the Corporate Change reflects the same relative value
as compared to the value of the  surviving  entity's  common  stock that existed
between  such  Fixed  Amount  and the value of the  Corporation's  Common  Stock
immediately  prior to such  Corporate  Change and an  immediate  revision to the
Variable  Conversion  Price so that it is determined as provided in Article II.H
but based on the  price of the  common  stock of the  surviving  entity  and the
market in which such common stock is traded) shall

                                      -13-
<PAGE>

thereafter be  applicable,  as nearly as may be  practicable  in
relation to any shares of stock or securities  thereafter  deliverable  upon the
conversion thereof. The Corporation shall not effect any Corporate Change unless
(i) each Holder of the Notes has received  written notice of such transaction at
least 30 days  prior  thereto,  but in no event  later than 20 days prior to the
record date for the determination of stockholders  entitled to vote with respect
thereto,  (ii) if required by Section 4(h) of the Securities Purchase Agreement,
the consent of  Purchasers  (as defined in the  Securities  Purchase  Agreement)
shall have been  obtained in accordance  with such Section  4(h),  and (iii) the
resulting  successor or  acquiring  entity (if not the  Corporation)  assumes by
written instrument (in form and substance reasonably satisfactory to the Holders
of a  majority  of the  principal  amount of the  Notes  then  outstanding)  the
obligations of the Notes. The above provisions shall apply regardless of whether
or not there  would  have  been a  sufficient  number of shares of Common  Stock
authorized and available for issuance upon  conversion of the Notes  outstanding
as of the date of such  transaction,  and shall  similarly  apply to  successive
reclassifications, consolidations, mergers, sales, transfers or share exchanges.

            C. Adjustment Due to  Distribution.  If, at any time after the Issue
Date, the Corporation  shall declare or make any  distribution of its assets (or
rights  to  acquire  its  assets)  to  holders  of  Common  Stock  as a  partial
liquidating  dividend,  by way of return of capital or otherwise  (including any
dividend or distribution to the Corporation's shareholders in cash or shares (or
rights to acquire shares) of capital stock of a subsidiary (i.e. a spin-off)) (a
"Distribution"),  then the  Holders  of the Notes  shall be  entitled,  upon any
conversion  of the Notes after the date of record for  determining  stockholders
entitled to such Distribution,  to receive the amount of such assets which would
have been  payable to the  Holder  with  respect  to the shares of Common  Stock
issuable  upon  such  conversion  (without  giving  effect  to  the  limitations
contained  in Article  III.C) had such  Holder been the holder of such shares of
Common Stock on the record date for the  determination of stockholders  entitled
to such Distribution.  If the Distribution involves rights, warrants, options or
any other form of  convertible  securities  and the right to exercise or convert
such  securities  would  expire  in  accordance  with  its  terms  prior  to the
conversion of this Note,  then the terms of such  securities  shall provide that
such exercise or convertibility right shall remain in effect until 30 days after
the date the  Holder  of the  Notes  receive  such  securities  pursuant  to the
conversion hereof.

            D.  Issuance  of Other  Securities.  If, at any time after the Issue
Date, the Corporation  shall issue any securities  which are convertible into or
exchangeable for Common Stock  ("Convertible  Securities") at a conversion price
or exchange  rate which is more  favorable  to the  holders of such  Convertible
Securities than the Conversion Price mechanism provided for herein, then, at the
option of the Holder, such conversion price or exchange rate shall be applicable
hereto.

            E.  Purchase  Rights.  If, at any time  after the  Issue  Date,  the
Corporation  issues any  Convertible  Securities  or rights to  purchase  stock,
warrants,  securities or other property (the "Purchase  Rights") pro rata to the
record holders of any class of Common Stock,  then the Holders of the Notes will
be entitled to acquire,  upon the terms applicable to such Purchase Rights,  the
aggregate  Purchase  Rights which such Holder could have acquired if such Holder
had held  the  number  of  shares  of  Common  Stock  acquirable  upon  complete
conversion of the Notes (without giving effect to the  limitations  contained in
Article  III.D)  immediately  before the date on which a

                                      -14-
<PAGE>

record is taken for the grant,  issuance or sale of such Purchase Rights, or, if
no such record is taken, the date as of which the record holders of Common Stock
are to be determined for the grant, issue or sale of such Purchase Rights.

            F.  Adjustment  of Floor  Price.  Except as  otherwise  provided  in
Paragraphs A and B of this Article VIII,  if, at any time prior to the Scheduled
Maturity Date, the Corporation issues or sells any shares of Common Stock for no
consideration  or for a  consideration  per share less than the Market Price (as
defined in the Warrant) on the date of issuance (a "Dilutive  Issuance"),  then,
if the Floor  Price  then in effect is more than such  consideration  per share,
effective  immediately  upon the  Dilutive  Issuance,  the Floor  Price  will be
automatically reset to an amount equal to such consideration per share (or $.001
in the case of any issuance for no consideration) and the Vesting Date under the
Warrants  shall be  deemed  to have  occurred,  thereby  rendering  the  Warrant
immediately  exercisable in accordance  with its terms;  provided,  however,  no
adjustment  to the Floor  Price  will be made and the  Vesting  Date will not be
deemed to have  occurred  (i) upon the  exercise  of any  warrants,  options  or
convertible securities issued and outstanding on the Issue Date and set forth on
Schedule 3(d) of the Securities  Purchase Agreement in accordance with the terms
of such securities as of such date; (ii) upon the grant or exercise of any stock
or  options  which may  hereafter  be granted or  exercised  under any  employee
benefit plan of the Corporation now existing or to be implemented in the future,
so long as the  issuance  of such stock or options is  approved by a majority of
the  non-employee  members of the Board of  Directors  of the  Corporation  or a
majority of the members of a committee of non-employee directors established for
such purpose; or (iii) upon conversion of the Notes or exercise of the Warrants.
The  consideration  per share paid to the  Corporation  in  connection  with any
Dilutive  Issuance  shall be determined  in accordance  with Section 4(b) of the
Warrants.

            G. Notice of Adjustments.  Upon the occurrence of each adjustment or
readjustment of the Conversion  Price or Fixed Amounts  pursuant to this Article
VIII, the Corporation, at its expense, shall promptly compute such adjustment or
readjustment  and prepare and furnish to each Holder of the Notes a  certificate
setting forth such  adjustment or  readjustment  and showing in detail the facts
upon which such adjustment or readjustment is based. The Corporation shall, upon
the  written  request at any time of any  Holder of the  Notes,  furnish to such
Holder a like  certificate  setting forth (i) such  adjustment or  readjustment,
(ii) the  Conversion  Price or Fixed Amounts at the time in effect and (iii) the
number of shares of Common Stock and the amount,  if any, of other securities or
property which at the time would be received upon conversion of any Note.

            H. Other Action Affecting Conversion Price. If the Corporation takes
any  action  affecting  the Common  Stock  after the date  hereof  that would be
covered by Article  VIII.A through G, but for the manner in which such action is
taken or  structured,  which would in any way  diminish  the value of this Note,
then the  Conversion  Price  shall be  adjusted  in such  manner as the Board of
Directors of the Company shall in good faith determine to be equitable under the
circumstances.

                                      -15-
<PAGE>

                                   ARTICLE IX
                               OPTIONAL REDEMPTION

            A. Redemption  Events. In the event (each of the events described in
clauses (i) - (iii) below being a "Redemption Event"), the Corporation shall:

                  (i) sell, convey or dispose of all or substantially all of its
assets (the presentation of any such transaction for stockholder  approval being
conclusive  evidence  that  such  transaction   involves  the  sale  of  all  or
substantially all of the assets of the Corporation);

                  (ii) unless the  Corporation  may  exercise  its rights  under
Article  III.C(iv),   merge,   consolidate  or  engage  in  any  other  business
combination  with any other entity  (other than  pursuant to a migratory  merger
effected solely for the purpose of changing the jurisdiction of incorporation of
the  Corporation and other than pursuant to a merger in which the Corporation is
the surviving or continuing entity and its capital stock is unchanged; or

                  (iii) have fifty  percent (50%) or more of the voting power of
its capital stock owned  beneficially by one person,  entity or "group" (as such
term is used under  Section  13(d) of the  Securities  Exchange Act of 1934,  as
amended),  other  than Dr.  S.  Iraj  Najafi,  Dr.  Mark P.  Andrews  and  Molex
Incorporated, acting together, or Molex Incorporated acting individually;

then,  upon the occurrence of any such  Redemption  Event, at the option of each
Holder,  exercisable  in whole  or in part at any time and from  time to time by
delivery of a  Redemption  Notice (as  defined  below) to the  Corporation,  the
Corporation shall redeem the Notes for a redemption  price,  payable in cash, in
an amount  equal to the  Redemption  Amount (as defined  below),  plus all other
ancillary amounts payable hereunder, together with all costs, including, without
limitation,  legal  fees  and  expenses.  In  addition,  automatically  upon the
occurrence of a Redemption  Event (without the need to file a Redemption  Notice
hereunder),  the Vesting  Date (as defined in the  Warrants)  shall be deemed to
have  occurred,  thereby  rendering  the  Warrants  immediately  exercisable  in
accordance with their terms.

                  Upon  the  Corporation's  receipt  of  any  Redemption  Notice
hereunder  (other  than  during  the three  trading  day  period  following  the
Corporation's delivery of a Redemption Announcement (as defined below) to all of
the Holders in response to the  Corporation's  initial  receipt of a  Redemption
Notice from a Holder of the Notes),  the Corporation  shall  immediately (and in
any event  within one  trading day  following  such  receipt)  deliver a written
notice (a  "Redemption  Announcement")  to all Holders of the Notes  stating the
date upon which the Corporation  received such Redemption  Notice and the amount
of the Notes  covered  thereby.  At any time and from time to time  during  such
three trading day period, each Holder of the Notes may request (either orally or
in writing)  information  from the  Corporation  with respect to the  applicable
Redemption Event (including,  but not limited to, the aggregate principal amount
outstanding of Notes covered by Redemption  Notices received by the Corporation)
and the  Corporation  shall  furnish  (either  orally or in  writing) as soon as
practicable such requested  information to such requesting  Holder. In the event
the Corporation is not able to redeem all of the  outstanding  Notes within five
trading days after

                                      -16-
<PAGE>

its receipt of a notice of redemption (a  "Redemption  Notice") the  Corporation
shall repay the  outstanding  Notes to each Holder pro rata,  based on the total
amounts due under the Notes at the time of redemption included by such Holder in
all Redemption Notices delivered prior to the date upon which such redemption is
to be effected  relative to the total amounts due under all Notes at the time of
redemption included in all of the Redemption Notices delivered prior to the date
upon which such redemption is to be effected;  provided,  however, the foregoing
shall not  constitute a waiver by any Holder of its rights to payment in full of
the total Redemption  Amount due under each such Holder's Notes pursuant to this
Article VIII.

            B. Definition of Redemption  Amount.  The  "Redemption  Amount" with
respect to a Note means an amount equal to the greater of:

                   (i)          V              x   M
                           ------------
                              C P

            and    (ii)     V   x   115%

where:

            "V" means the aggregate principal amount of the Notes being redeemed
plus all accrued and unpaid interest thereon through the redemption date;

            "CP" means the  Conversion  Price in effect on the date on which the
Corporation receives the Redemption Notice; and

            "M" means the  greater of (i) the  highest  Closing Bid Price of the
Corporation's  Common Stock during the period beginning on the date on which the
Corporation  receives the Redemption  Notice and ending on the date  immediately
preceding the date of payment of the Redemption  Amount and (ii) the fair market
value, as of the date on which the Corporation  receives the Redemption  Notice,
of the  consideration  payable to the holder of a share of Common Stock pursuant
to the  transaction  which triggers the redemption  obligation.  For purposes of
this definition, "fair market value" shall be determined by the mutual agreement
of the Corporation and Holders of a majority-in-interest of the then outstanding
principal  amount of the Notes to be redeemed,  or if such  agreement  cannot be
reached  within  five  trading  days  prior  to the  date of  redemption,  by an
investment banking firm selected by the Corporation and reasonably acceptable to
Holders of a  majority-in-interest  of the then outstanding  principal amount of
the Notes to be  redeemed,  with the costs of such  appraisal to be borne by the
Corporation.

                                   ARTICLE IX
                                  MISCELLANEOUS

            A. Failure or Indulgency Not Waiver. No failure or delay on the part
of any Holder in the exercise of any power,  right or privilege  hereunder shall
operate as a waiver  thereof,  nor shall

                                      -17-
<PAGE>
any single or partial  exercise of any such power,  right or privilege  preclude
other or further exercise thereof or of any other right, power or privilege.

            B. Notices.  Any notices required or permitted to be given under the
terms of this Note shall be sent by certified or registered mail (return receipt
requested) or delivered  personally or by courier or by confirmed telecopy,  and
shall be effective five days after being placed in the mail, if mailed,  or upon
receipt  or  refusal  of  receipt,  if  delivered  personally  or by  courier or
confirmed  telecopy,  in each case addressed to a party.  The addresses for such
communications shall be:

                      If to the Corporation:

                      Lumenon Innovative Lightwave Technology, Inc.
                      8851 Trans-Canada Highway
                      St. Laurent Quebec H45 1Z6
                      Canada
                      Attention:  Vincent Belanger
                      Telecopy:   (514) 331-3738

                      with copies to:

                      De Grandpre Chaurette Levesque
                      2000 McGill College
                      Montreal, Quebec
                      Canada
                      Attention:  Pierre Barnard
                      Telecopy:   (514) 499-0469

                      and:

                      Olshan Grundman Frome Rosenzweig & Wolosky, LLP
                      505 Park Avenue
                      New York, NY  10022
                      Attention:  David Adler
                      Telecopy:   (212) 935-1787

            If to the Holder,  to the address set forth under such Holder's name
on the signature  page to the  Securities  Purchase  Agreement  executed by such
Holder.  Each party shall  provide  notice to the other parties of any change in
address.

            C. Amendment  Provision.  Except as set forth in Article III.D, this
Note and any  provision  hereof may only be amended by an  instrument in writing
signed  by the  Corporation  and all of the  Holders.  The term  "Note"  and all
references  thereto,  as  used  throughout  this  instrument,  shall  mean  this
instrument as originally executed, or if later amended or supplemented,  then as
so amended or supplemented.

                                      -18-

<PAGE>

            D. Assignability;  Allocation of Cap Amount Reserved Amount; Selling
Restrictions. This Note shall be binding upon the Corporation and its successors
and assigns and shall inure to the benefit of the Holder and its  successors and
assigns.  The initial Cap Amount and Reserved Amount shall be allocated pro rata
among the Holders of the Notes based on the aggregate  principal amount of Notes
issued to each Holder.  In the event a Holder  shall sell or otherwise  transfer
any of such  Holder's  Notes,  each  transferee  shall be  allocated  a pro rata
portion of such  transferor's Cap Amount and Reserved  Amount.  Each increase to
the Reserved Amount shall be allocated pro rata among the Holders of Notes based
on the outstanding  principal amount of Notes held by each Holder at the time of
the increase in the Reserved  Amount.  Any portion of the Reserved Amount or Cap
Amount which  remains  allocated to any person or entity which does not hold any
Notes shall be allocated to the  remaining  Holders of Notes,  pro rata based on
the  outstanding  principal  amount  of Notes  then held by such  Holders.  Each
transferee  of this Note or any  portion  hereof  shall be bound by the  selling
restrictions  set forth in Section 4(k) of the  Securities  Purchase  Agreement,
which Section is incorporated herein by reference.

            E. Cost of  Collection.  If default  is made in the  payment of this
Note, the Corporation shall pay the Holder hereof costs of collection, including
reasonable attorneys' fees.

            F. Governing Law;  Jurisdiction.  This Note shall be governed by and
construed in accordance with the laws of the State of Delaware.  The Corporation
irrevocably consents to the jurisdiction of the United States federal courts and
the state  courts  located in the State of  Delaware  in any suit or  proceeding
based on or arising  under this Note and  irrevocably  agrees that all claims in
respect  of such  suit or  proceeding  may be  determined  in such  courts.  The
Corporation  irrevocably  waives  the  defense of an  inconvenient  forum to the
maintenance  of such suit or  proceeding.  The  Corporation  further agrees that
service  of process  upon the  Corporation  mailed by first  class mail shall be
deemed in every respect effective service of process upon the Corporation in any
such suit or proceeding.  Nothing herein shall affect the right of any Holder to
serve process in any other manner permitted by law. The Corporation  agrees that
a final  non-appealable  judgment  in any  such  suit  or  proceeding  shall  be
conclusive and may be enforced in other  jurisdictions  by suit on such judgment
or in any other lawful manner.

            G.  Denominations.  At the request of Holder, upon surrender of this
Note,  the  Corporation   shall  promptly  issue  new  Notes  in  the  aggregate
outstanding  principal amount hereof, in the form hereof, in such  denominations
of at least $25,000 as Holder shall request.

            H. Lost or Stolen  Notes.  Upon  receipt by the  Corporation  from a
Holder of (i) evidence of the loss, theft, destruction or mutilation of any Note
and (ii) (y) in the case of loss,  theft or destruction,  of indemnity  (without
any bond or other security) reasonably  satisfactory to the Corporation,  or (z)
in the case of  mutilation,  upon  surrender and  cancellation  of any Note, the
Corporation  shall  execute  and  deliver  a new Note of like  tenor  and  date.
However,  the Corporation  shall not be obligated to reissue such lost or stolen
Note if the Holder  contemporaneously  requests the  Corporation to convert such
Note.

                                      -19-
<PAGE>

            I.  Quarterly  Statements  of Available  Shares.  For each  calendar
quarter  beginning  in the quarter in which the initial  registration  statement
required  to be  filed  pursuant  to  Section  2(a) of the  Registration  Rights
Agreement  is  declared  effective  and  thereafter  so  long as any  Notes  are
outstanding,  the  Corporation  shall  deliver (or cause its  transfer  agent to
deliver) to each Holder a written report notifying the Holders of any occurrence
which  prohibits  the  Corporation  from  issuing  Common  Stock  upon  any such
conversion.  The report shall also specify (i) the total  outstanding  principal
amounts of Notes as of the end of such quarter,  (ii) the total number of shares
of Common  Stock issued upon all  conversions  of Notes prior to the end of such
quarter, (iii) the total number of shares of Common Stock which are reserved for
issuance upon conversion of the Notes as of the end of such quarter and (iv) the
total  number of shares of Common  Stock which may  thereafter  be issued by the
Corporation upon conversion of the Notes before the Corporation would exceed the
Cap Amount and the Reserved  Amount.  The  Corporation  (or its transfer  agent)
shall  deliver the report for each quarter to each Holder prior to the tenth day
of the calendar  month  following the quarter to which such report  relates.  In
addition, the Corporation (or its transfer agent) shall provide,  within 15 days
after delivery to the Corporation of a written request by any Holder, any of the
information  enumerated in clauses (i) - (iv) of this Paragraph I as of the date
of such request.

            J. [Intentionally Omitted.]

            K. Restrictions on Shares.  The shares of Common Stock issuable upon
conversion  of this Note may not be sold or  transferred  unless  (i) they first
shall  have  been  registered  under the  Securities  Act and  applicable  state
securities laws, (ii) the Corporation  shall have been furnished with an opinion
of legal counsel (in form,  substance  and scope  customary for opinions in such
circumstances)  to the  effect  that such sale or  transfer  is exempt  from the
registration  requirements  of the  Securities  Act or (iii) they are sold under
Rule 144 under the Act. Except as otherwise provided in the Securities  Purchase
Agreement,  each certificate for shares of Common Stock issuable upon conversion
of this Note that have not been so registered  and that have not been sold under
an  exemption  that  permits  removal  of  the  legend,   shall  bear  a  legend
substantially in the following form, as appropriate:

                        THE SECURITIES  REPRESENTED BY THIS CERTIFICATE HAVE NOT
                        BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933, AS
                        AMENDED,  OR THE  SECURITIES  LAWS OF ANY  STATE  OF THE
                        UNITED STATES. THE SECURITIES REPRESENTED HEREBY MAY NOT
                        BE  OFFERED  OR  SOLD  IN THE  ABSENCE  OF AN  EFFECTIVE
                        REGISTRATION   STATEMENT   FOR  THE   SECURITIES   UNDER
                        APPLICABLE  SECURITIES  LAWS  UNLESS  OFFERED,  SOLD  OR
                        TRANSFERRED  UNDER  AN  AVAILABLE   EXEMPTION  FROM  THE
                        REGISTRATION REQUIREMENTS OF THOSE LAWS.

Upon the request of a holder of a certificate  representing any shares of Common
Stock issuable upon  conversion of this Note, the  Corporation  shall remove the
foregoing legend from the certificate and issue to such holder a new certificate
therefor free of any transfer legend, if (i) with such request,

                                      -20-
<PAGE>

the Corporation  shall have received either (A) an opinion of counsel,  in form,
substance and scope customary for opinions in such circumstances,  to the effect
that any such legend may be removed from such  certificate,  or (B) satisfactory
representations  from the  Holder  that the  Holder  is  eligible  to sell  such
security  under Rule 144 or (ii) a registration  statement  under the Securities
Act covering the resale of such  securities  is in effect.  Nothing in this Note
shall (i) limit  the  Corporation's  obligation  under the  Registration  Rights
Agreement,  or (ii) affect in any way the  Holder's  obligations  to comply with
applicable securities laws upon the resale of the securities referred to herein.

            L. Status as Note Holder.  Upon submission of a Notice of Conversion
by a Holder of the Notes, (i) the principal amount of the Notes and the interest
thereon  covered  thereby  (other than any portion of the Notes,  if any,  which
cannot  be  converted  because  their  conversion  could  exceed  such  Holder's
allocated  portion  of the  Reserved  Amount  or Cap  Amount)  shall  be  deemed
converted  into shares of Common  Stock as of the  Conversion  Date and (ii) the
Holder's  rights as a holder of such Notes shall cease and  terminate  (but only
with respect to that portion of the Notes covered by such Notice of Conversion),
excepting only the right to receive certificates for such shares of Common Stock
and to any remedies  provided herein or otherwise  available at law or in equity
to such Holder because of a failure by the  Corporation to comply with the terms
of the  Notes.  Notwithstanding  the  foregoing,  if a Holder  has not  received
certificates for all shares of Common Stock prior to the tenth trading day after
the expiration of the Delivery  Period with respect to a conversion of Notes for
any reason,  then (unless the Holder  otherwise elects to retain its status as a
holder of Common Stock by so notifying the Corporation  within five trading days
after  the  expiration  of such ten  trading  day  period)  the  portion  of the
principal amount and interest thereon subject to such conversion shall be deemed
outstanding  under the Notes and the Corporation  shall, as soon as practicable,
return the Notes to the Holder. In all cases, the Holder shall retain all of its
rights and remedies  (including,  without  limitation,  (i) the right to receive
payments  pursuant  to  Article  V.C to the  extent  required  thereby  for such
Conversion  Default and any subsequent  Conversion Default and (ii) the right to
have the Conversion Price with respect to subsequent  conversions  determined in
accordance with Article V.A) for the Corporation's failure to convert the Notes.

            M. Obligation to Cure. If the Corporation is prohibited from issuing
shares  of  Common  Stock to a Holder  for any  reason,  the  Corporation  shall
immediately  notify  the  Holders  of Notes of such  occurrence  and shall  take
immediate  action  (including,  if  necessary,   seeking  the  approval  of  its
stockholders) to eliminate any prohibitions under applicable law or the rules or
regulations  of any  stock  exchange,  interdealer  quotation  system  or  other
self-regulatory  organization  with  jurisdiction over the Corporation or any of
its securities on the Corporation's ability to issue shares of Common Stock.

            N. Remedies Cumulative.  The remedies provided in this Note shall be
cumulative and in addition to all other remedies  available  under this Note, at
law or in  equity  (including  a decree of  specific  performance  and/or  other
injunctive  relief),  and nothing  herein shall limit a Holder's right to pursue
actual  damages for any failure by the  Corporation  to comply with the terms of
this Note. The Corporation  acknowledges  that a breach by it of its obligations
hereunder will cause  irreparable
                                      -21-
<PAGE>

harm to the  Holders of the Notes and that the remedy at law for any such breach
may be inadequate.  The Corporation  therefore  agrees, in the event of any such
breach or threatened breach, that the Holders of the Notes shall be entitled, in
addition to all other  available  remedies,  to an  injunction  restraining  any
breach,  without the necessity of showing  economic loss and without any bond or
other security being required.

            O. Trading Days.  For purposes of this Note,  the term "trading day"
means any day on which  NASDAQ  or, if the  Common  Stock is not then  traded on
NASDAQ, the principal United States securities  exchange or trading market where
the Common Stock is then listed or traded, is open for trading.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

                                      -22-
<PAGE>

            IN WITNESS WHEREOF,  Borrower has caused this Convertible Note to be
executed by its duly authorized officer.

                                       LUMENON INNOVATIVE LIGHTWAVE
                                         TECHNOLOGY, INC.

                                       By:
                                          --------------------------------------
                                         Name:  S. Iraj Najafi
                                         Title:  President

                                      -23-
<PAGE>
                                                                       Exhibit 1
                                                                       ---------
                              NOTICE OF CONVERSION

To:         Lumenon Innovative Lightwave Technology, Inc.
            9060 Ryan Avenue
            Dorval Quebec H9P WMB
            Canada
                        Attention:
                                   ------------------
                        Telecopy:   (514) 331-3738

The undersigned hereby elects to convert  $____________  principal amount of the
Note (the "Conversion"), into shares of common stock ("Common Stock") of Lumenon
Innovative  Lightwave  Technology,  Inc.  (the  "Corporation")  according to the
conditions of the Convertible Note dated ____________,  2000 (the "Note"), as of
the date written  below.  If securities are to be issued in the name of a person
other than the undersigned,  the undersigned will pay all transfer taxes payable
with respect  thereto.  No fee will be charged to the Holder for any conversion,
except for transfer taxes, if any.

The Corporation shall electronically transmit the Common Stock issuable pursuant
to this Notice of  Conversion to the account of the  undersigned  or its nominee
(which is  ________________)  with DTC  through  its  Deposit  Withdrawal  Agent
Commission System ("DTC Transfer").

In the event of partial exercise,  please reissue an appropriate Note(s) for the
principal balance which shall not have been converted.

Check Box if Applicable:

            / /         In lieu of receiving the shares of Common Stock issuable
                        pursuant  to this  Notice  of  Conversion  by way of DTC
                        Transfer,  the  undersigned  hereby  requests  that  the
                        Corporation  issue and deliver to the undersigned or its
                        nominee   (if    applicable)    physical    certificates
                        representing such shares of Common Stock.

                                 Date of Conversion:
                                                    ----------------------------

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

                                 Amount  of  Accrued  and  Unpaid
                                 Interest on the Principal Amount
                                 to be converted, if any:
                                                         -----------------------

                                 Default  Amount to be converted,
                                 if any:
                                        ----------------------------------------

                                 Number of Shares of
                                 Common Stock to be Issued:
                                                    ----------------------------

                                 Signature:
                                           -------------------------------------

                                 Name:
                                      ------------------------------------------

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

                                      -25-EXHIBIT B
                                                                   to Securities
                                                                        Purchase
                                                                       Agreement

                  VOID  AFTER 5:00  P.M.,  NEW YORK CITY TIME,  ON THE
                  FIFTH ANNIVERSARY OF ISSUANCE

                  THIS WARRANT AND THE SHARES  ISSUABLE  UPON EXERCISE
                  OF THIS WARRANT HAVE NOT BEEN  REGISTERED  UNDER THE
                  SECURITIES ACT OF 1933, AS AMENDED (THE  "SECURITIES
                  ACT"),  OR THE  SECURITIES  LAWS OF ANY STATE OF THE
                  UNITED  STATES  OR  ANY  OTHER   JURISDICTION.   THE
                  SECURITIES  REPRESENTED HEREBY MAY NOT BE OFFERED OR
                  SOLD IN THE  ABSENCE  OF AN  EFFECTIVE  REGISTRATION
                  STATEMENT  FOR  THE  SECURITIES   UNDER   APPLICABLE
                  SECURITIES LAWS UNLESS OFFERED,  SOLD OR TRANSFERRED
                  PURSUANT  TO  AN   AVAILABLE   EXEMPTION   FROM  THE
                  REGISTRATION REQUIREMENTS OF THOSE LAWS.

                                         Right to Purchase _________ Shares of
                                         Common Stock, par value $.001 per share

Date: July 25, 2000

                  LUMENON INNOVATIVE LIGHTWAVE TECHNOLOGY, INC.
                             STOCK PURCHASE WARRANT

            THIS CERTIFIES THAT, for value  received,  ________________________,
or its  registered  assigns,  is entitled to purchase  from  LUMENON  INNOVATIVE
LIGHTWAVE TECHNOLOGY,  INC., a corporation organized under the laws of the State
of Delaware (the "Company"),  at any time or from time to time during the period
specified in Section 2 hereof,  ________________________  (_________) fully paid
and  nonassessable  shares of the Company's  common  stock,  par value $.001 per
share (the  "Common  Stock"),  at an  exercise  price per share  (the  "Exercise
Price")  calculated as follows:  in the event the Volume Weighted  Average Price
(as defined  below) for the Common Stock for the five  consecutive  trading days
immediately  preceding  the Vesting Date (as defined in Section 2 below) is less
than or equal to $30.00  (subject to  equitable  adjustments  for stock  splits,
stock dividends,  recapitalization  and similar events prior to the Vesting Date
(collectively,  "Equitable Adjustments")), then the initial Exercise Price shall
be $10.00  (subject  to  Equitable  Adjustments);  and in the  event the  Volume
Weighted  Average  Price for the Common Stock for the five  consecutive  trading
days immediately preceding the Vesting Date exceeds $30.00 (subject to Equitable
Adjustments),  but is less than $70.00 (subject to Equitable Adjustments),  then
the initial  Exercise Price shall be equal to the sum of (i) $10.00  (subject to
Equitable  Adjustments)  and (ii) the

<PAGE>

product  of (A) the amount by which the Volume  Weighted  Average  Price for the
Common Stock for the five  consecutive  trading days  immediately  preceding the
Vesting Date exceeds $30.00 (subject to Equitable  Adjustments) and (B) 0.5; and
in the event that the Volume Weighted Average Price for the Common Stock for the
five  consecutive  trading days  immediately  preceding the Vesting Date exceeds
$70.00 (subject to Equitable  Adjustments),  the initial Exercise Price shall be
$30.00 (subject to Equitable Adjustments);  provided, however, in no event shall
the initial  Exercise Price exceed the  consideration  per share (which shall be
determined in accordance  with the  provisions of Section 4(b) hereof) for which
the Company shall issue shares of Common Stock in connection  with the Company's
then most recent  equity  financing  of at least  $5,000,000  (other than a firm
commitment  underwritten  public  offering of  securities  registered  under the
Securities  Act of 1933).  The  number of  shares  of Common  Stock  purchasable
hereunder  (the  "Warrant  Shares")  and  the  Exercise  Price  are  subject  to
adjustment as provided in Section 4 hereof.  The term "Volume  Weighted  Average
Price" means the Volume  Weighted  Average Price for any security as of any date
as reported by Bloomberg Financial Markets (or a comparable reporting service of
national reputation selected by the Corporation and reasonably acceptable to the
Purchasers (as defined in that certain Securities Purchase  Agreement,  dated as
of July 25, 2000, by and among the Company and the other signatory  thereto (the
"Securities  Purchase  Agreement"))  holding a majority  of the  Warrant  Shares
(assuming full exercise of all of the Warrants (as defined below) without regard
to any limitations on exercise  contained  herein or in the Securities  Purchase
Agreement)  ("Majority  Holders")  if  Bloomberg  Financial  Markets is not then
reporting  Volume  Weighted  Average  Prices  of such  security)  (collectively,
"Bloomberg"),  or if the foregoing does not apply,  the last reported sale price
of such security in the over-the-counter market on the electronic bulletin board
for such security as reported by Bloomberg, or, if no sale price is reported for
such security by  Bloomberg,  the average of the bid prices of all market makers
for such  security as reported in the "pink  sheets" by the  National  Quotation
Bureau, Inc., in each case for such date or, if such date was not a trading date
for such  security,  on the next preceding date which was a trading date. If the
Volume  Weighted  Average  Price cannot be  calculated  for such  security as of
either of such dates on any of the foregoing  bases, the Volume Weighted Average
Price of such security on such date shall be the fair market value as reasonably
determined by an investment  banking firm selected by the Company and reasonably
acceptable to the Majority Holders, with the costs of such appraisal to be borne
by the Company. The term "Warrants" means this Warrant and the other warrants of
the  Company  issued  pursuant  to  this  Securities  Purchase  Agreement.   All
references herein to monetary  denominations  shall refer to lawful money of the
United States of America.

            This  Warrant is  subject to the  following  terms,  provisions  and
conditions:

            1. Manner of Exercise; Issuance of Certificates; Payment for Shares.
Subject to the provisions hereof, including, without limitation, the limitations
contained  in Section 7 hereof,  this  Warrant  may be  exercised  by the holder
hereof,  in whole or in part, by the surrender of this Warrant,  together with a
completed  exercise  agreement  in  the  form  attached  hereto  (the  "Exercise
Agreement"),  to the Company by 11:59 p.m.  New York time on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof) and upon (i) payment
to the Company in cash,  by certified or

                                      -2-

<PAGE>

official bank check or by wire  transfer for the account of the Company,  of the
Exercise  Price for the Warrant  Shares  specified in the Exercise  Agreement or
(ii) if the holder is  permitted  to effect a Cashless  Exercise  (as defined in
Section 12(c) below)  pursuant to Section 12(c) hereof,  delivery to the Company
of a written notice of an election to effect a Cashless Exercise for the Warrant
Shares  specified in the  Exercise  Agreement.  The Warrant  Shares so purchased
shall be deemed to be issued to the holder hereof or such holder's designee,  as
the record  owner of such  shares,  as of the close of  business  on the date on
which  this  Warrant  shall have been  surrendered  and the  completed  Exercise
Agreement  shall have been  delivered  and payment shall have been made for such
shares as set forth  above or, if such day is not a  business  day,  on the next
succeeding  business  day. The Warrant  Shares so  purchased,  representing  the
aggregate  number  of  shares  specified  in the  Exercise  Agreement,  shall be
delivered to the holder  hereof  within a reasonable  time,  not  exceeding  two
business  days,  after this Warrant shall have been so exercised  (the "Delivery
Period").  If the Company's  transfer agent is  participating  in the Depository
Trust Company ("DTC") Fast Automated Securities Transfer program, and so long as
the  certificates  therefor do not bear a legend and the holder is not obligated
to return such  certificate for the placement of a legend  thereon,  the Company
shall cause its transfer agent to electronically  transmit the Warrant Shares so
purchased  to the holder by  crediting  the account of the holder or its nominee
with  DTC  through  its  Deposit   Withdrawal  Agent  Commission   system  ("DTC
Transfer").  If  the  aforementioned  conditions  to  a  DTC  Transfer  are  not
satisfied,  the  Company  shall  deliver  to the  holder  physical  certificates
representing the Warrant Shares so purchased.  Further,  the holder may instruct
the  Company to deliver to the holder  physical  certificates  representing  the
Warrant  Shares so  purchased  in lieu of  delivering  such shares by way of DTC
Transfer. Any certificates so delivered shall be in such denominations as may be
requested by the holder  hereof,  shall be registered in the name of such holder
or such other name as shall be designated by such holder and, following the date
on which the  Warrant  Shares  have been  registered  under the  Securities  Act
pursuant to that certain  Registration  Rights  Agreement,  dated as of July 25,
2000,  by  and  between  the  Company  and  the  other  signatory  thereto  (the
"Registration Rights Agreement") or otherwise may be sold by the holder pursuant
to Rule 144 promulgated  under the Securities Act (or a successor  rule),  shall
not bear any restrictive  legend. If this Warrant shall have been exercised only
in part, then the Company shall, at its expense, at the time of delivery of such
certificates,  deliver to the holder a new  Warrant  representing  the number of
shares with respect to which this Warrant shall not then have been exercised.

            If, at any time, a holder of this Warrant  submits this Warrant,  an
Exercise  Agreement and payment to the Company of the Exercise Price for each of
the Warrant Shares  specified in the Exercise  Agreement,  and the Company fails
for any reason to deliver,  on or prior to the fifth  business day following the
expiration  of the Delivery  Period for such  exercise,  the number of shares of
Common Stock to which the holder is entitled  upon such  exercise (an  "Exercise
Default"),  then the Company shall pay to the holder payments ("Exercise Default
Payments") for an Exercise  Default in the amount of (a) (N/365),  multiplied by
(b) the amount by which the Market  Price (as defined in Section  4(l) below) on
the  date  the  Exercise  Agreement  giving  rise  to the  Exercise  Default  is
transmitted  in accordance  with this Section 1 (the  "Exercise  Default  Date")
exceeds the Exercise Price in respect of such Warrant Shares,  multiplied by (c)
the number of shares of Common  Stock the  Company  failed to so deliver in such
Exercise  Default,  multiplied by (d) .24, where N =

                                      -3-

<PAGE>

the number of days from the  Exercise  Default Date to the date that the Company
effects  the full  exercise  of this  Warrant  which  gave rise to the  Exercise
Default.  The accrued  Exercise Default Payment for each calendar month shall be
paid in cash not later  than the fifth day of the month  following  the month in
which it has accrued.

                  Nothing herein shall limit the holder's right to pursue actual
damages for the Company's  failure to maintain a sufficient number of authorized
shares of Common Stock as required  pursuant to the terms of Section 3(b) hereof
or to otherwise  issue  shares of Common Stock upon  exercise of this Warrant in
accordance with the terms hereof,  and the holder shall have the right to pursue
all  remedies  available  at law or in equity  (including  a decree of  specific
performance and/or injunctive relief).

            2. Period of Exercise. This Warrant is immediately  exercisable,  at
any time or from time to time on or after  January 25, 2002 of this  Warrant (as
such date may be accelerated  pursuant to the Notes and the Registration  Rights
Agreement, the "Vesting Date") and before 5:00 p.m., New York City time, on July
25, 2005 (the "Exercise Period").

            3. Certain  Agreements of the Company.  The Company hereby covenants
and agrees as follows:

               (a)  Shares to be Fully  Paid.  All  Warrant  Shares  will,  upon
issuance in accordance with the terms of this Warrant, be validly issued,  fully
paid, and nonassessable and free from all taxes, liens, claims and encumbrances.

               (b)  Reservation  of Shares.  During  the  Exercise  Period,  the
Company  shall at all times have  authorized,  and  reserved  for the purpose of
issuance upon exercise of this Warrant,  a sufficient number of shares of Common
Stock to provide for the exercise in full of this Warrant (without giving effect
to the limitations on exercise set forth in Section 7(g) hereof).

               (c) Listing. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of this Warrant upon each national
securities  exchange or automated quotation system, if any, upon which shares of
Common  Stock are then listed or become  listed  (subject to official  notice of
issuance upon exercise of this Warrant) and shall maintain, so long as any other
shares of Common Stock shall be so listed,  such listing of all shares of Common
Stock from time to time  issuable  upon the  exercise of this  Warrant;  and the
Company  shall  so  list on  each  national  securities  exchange  or  automated
quotation  system,  as the case may be, and shall  maintain such listing of, any
other shares of capital stock of the Company  issuable upon the exercise of this
Warrant if and so long as any  shares of the same class  shall be listed on such
national securities exchange or automated quotation system.

               (d)  Certain  Actions  Prohibited.   The  Company  will  not,  by
amendment  of its  charter or through  any  reorganization,  transfer of assets,
consolidation,  merger,  dissolution,  issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or
                                      -4-

<PAGE>
performance of any of the terms to be observed or performed by it hereunder, but
will at all times in good faith assist in the carrying out of all the provisions
of this  Warrant  and in the  taking  of all such  action as may  reasonably  be
requested by the holder of this Warrant in order to protect the economic benefit
inuring to the holder hereof and the exercise privilege of the holder of this

Warrant  against  dilution or other  impairment,  consistent  with the tenor and
purpose of this Warrant.  Without limiting the generality of the foregoing,  the
Company  (i) will not  increase  the par value of any  shares  of  Common  Stock
receivable  upon the exercise of this Warrant  above the lowest  Exercise  Price
then in  effect,  and (ii) will take all such  actions  as may be  necessary  or
appropriate  in order that the Company may validly and legally  issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant.

               (e) Successors and Assigns. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all of the Company's assets.

               (f) Blue Sky Laws.  The Company  shall,  on or before the date of
issuance  of  any  Warrant  Shares,  take  such  actions  as the  Company  shall
reasonably  determine are necessary to qualify the Warrant Shares for, or obtain
exemption  for the Warrant  Shares for,  sale to the holder of this Warrant upon
the exercise hereof under applicable securities or "blue sky" laws of the states
of the United States,  and shall provide evidence of any such action so taken to
the holder of this  Warrant  prior to such  date;  provided,  however,  that the
Company shall not be required in connection  therewith or as a condition thereto
to (a) qualify to do business in any  jurisdiction  where it would not otherwise
be required to qualify but for this Section 3(f),  (b) subject itself to general
taxation  in any such  jurisdiction,  (c) file a general  consent  to service of
process in any such  jurisdiction,  (d) provide any undertakings  that cause the
Company  undue  expense  or  burden,  or (e) make any  change in its  charter or
bylaws,  which in each case the Board of Directors of the Company  determines to
be contrary to the best interests of the Company and its stockholders.

            4. Antidilution Provisions. During the Exercise Period, the Exercise
Price and the number of Warrant Shares  issuable  hereunder  shall be subject to
adjustment from time to time as provided in this Section 4.

               In the event that any  adjustment  of the  Exercise  Price(s)  as
required herein results in a fraction of a cent, such Exercise Price(s) shall be
rounded up or down to the nearest cent.

               (a) Adjustment of Exercise Price(s). Except as otherwise provided
in Sections 4(c) and 4(e) hereof, if and whenever during the Exercise Period the
Company issues or sells,  or in accordance with Section 4(b) hereof is deemed to
have issued or sold,  any shares of Common Stock for no  consideration  or for a
consideration  per share less than the Market Price on the Measurement  Date (as
such terms are  hereinafter  defined) (a "Dilutive  Issuance"),  then  effective
immediately upon the Dilutive  Issuance,  the Exercise Price(s) will be adjusted
in accordance with the following formula:

                                      -5-

<PAGE>

                        E'   =   E    x           O + P/M
                                            -------------
                                                    CSDO

                        where:

                       E'   =   the adjusted Exercise Price;
                       E    =   the Exercise Price on the Measurement Date;
                       M    =   the Market Price on the Measurement Date;
                       O    =   the number of shares of Common
                                Stock outstanding immediately prior to the
                                Dilutive Issuance;
                       P    =   the aggregate consideration,
                                calculated as set forth in Section 4(b)
                                hereof, received by the Company upon such
                                Dilutive Issuance; and
                       CSDO =   the total  number of shares of
                                Common Stock Deemed Outstanding (as defined
                                in Section 4(l)(i) below) immediately after
                                the Dilutive Issuance.

Notwithstanding  the  foregoing,  no  adjustment  shall be made pursuant to this
Section  4(a) if such  adjustment  would  result in an increase in the  Exercise
Price.

               (b) Effect on Exercise  Price(s) of Certain Events.  For purposes
of determining  the adjusted  Exercise  Price(s) under Section 4(a) hereof,  the
following will be applicable:

                   (i)  Issuance  of Rights or  Options.  If the  Company in any
manner  issues  or  grants  any  warrants,  rights or  options,  whether  or not
immediately  exercisable,  to subscribe for or to purchase Common Stock or other
securities  exercisable,  convertible  into or  exchangeable  for  Common  Stock
("Convertible Securities") (such warrants, rights and options to purchase Common
Stock or Convertible  Securities are  hereinafter  referred to as "Options") and
the price per share for which Common Stock is issuable upon the exercise of such
Options is less than the Market Price in effect on the Measurement  Date ("Below
Market  Options"),  then the  maximum  total  number of  shares of Common  Stock
issuable  upon the  exercise of all such Below  Market  Options  (assuming  full
exercise, conversion or exchange of Convertible Securities, if applicable) will,
as of the date of the issuance or grant of such Below Market Options,  be deemed
to be outstanding and to have been issued and sold by the Company for such price
per share.  For  purposes of the  preceding  sentence,  the "price per share for
which Common Stock is issuable  upon the exercise of such Below Market  Options"
is determined by dividing (i) the total amount,  if any,  received or receivable
by the Company as  consideration  for the issuance or granting of all such Below
Market Options,  plus the minimum aggregate amount of additional  consideration,
if any,  payable to the  Company  upon the  exercise  of all such  Below  Market
Options,  plus, in the case of Convertible Securities issuable upon the exercise
of such  Below  Market  Options,  the  minimum  aggregate  amount of  additional
consideration  payable upon the exercise,  conversion or exchange thereof at the
time such  Convertible  Securities  first  become  exercisable,  convertible  or
exchangeable,  by (ii) the  maximum  total  number of  shares  of  Common  Stock
issuable  upon the  exercise of all such Below  Market  Options  (assuming  full
conversion of Convertible Securities,  if applicable).  No further adjustment to
the Exercise

                                      -6-

<PAGE>
Price(s)  will be made upon the actual  issuance of such  Common  Stock upon the
exercise  of such Below  Market  Options  or upon the  exercise,  conversion  or
exchange of Convertible  Securities  issuable upon exercise of such Below Market
Options.  If, in any case,  the total number of shares of Common Stock  issuable
upon  exercise  of any Below  Market  Options or upon  exercise,  conversion  or
exchange of any Convertible Securities is not, in fact, issued and the rights to
exercise  such  option or to  exercise,  convert or  exchange  such  Convertible
Securities  shall have expired or terminated,  the Exercise Price then in effect
will be readjusted to the Exercise  Price which would have been in effect at the
time of such  expiration  or  termination  had  such  Below  Market  Options  or
Convertible  Securities,  to the extent  outstanding  immediately  prior to such
expiration or termination  (other than in respect of the actual number of shares
of Common Stock issued upon exercise or conversion thereof), never been issued.

                   (ii) Issuance of Convertible Securities.

                        (A) If the  Company  in any  manner  issues or sells any
Convertible Securities, whether or not immediately convertible (other than where
the same are issuable  upon the exercise of Options) and the price per share for
which Common Stock is issuable  upon such  exercise,  conversion or exchange (as
determined  pursuant  to Section  4(b)(ii)(B)  if  applicable)  is less than the
Market Price in effect on the Measurement Date, then the maximum total number of
shares of Common Stock issuable upon the exercise, conversion or exchange of all
such  Convertible  Securities  will,  as of the  date  of the  issuance  of such
Convertible Securities,  be deemed to be outstanding and to have been issued and
sold by the Company for such price per share.  For the purposes of the preceding
sentence,  the "price per share for which  Common  Stock is  issuable  upon such
exercise,  conversion  or  exchange"  is  determined  by dividing  (i) the total
amount,  if any,  received or receivable by the Company as consideration for the
issuance or sale of all such  Convertible  Securities  (taking  into account the
value of any  warrants  or other  securities  issued to the  purchasers  of such
Convertible  Securities),  plus  the  minimum  aggregate  amount  of  additional
consideration,  if any, payable to the Company upon the exercise,  conversion or
exchange  thereof  at  the  time  such   Convertible   Securities  first  become
exercisable,  convertible or  exchangeable,  by (ii) the maximum total number of
shares of Common Stock issuable upon the exercise, conversion or exchange of all
such Convertible Securities. No further adjustment to the Exercise Price(s) will
be made upon the actual issuance of such Common Stock upon exercise,  conversion
or exchange of such Convertible Securities.

                        (B) If the  Company  in any  manner  issues or sells any
Convertible  Securities  with a  fluctuating  conversion  or  exercise  price or
exchange ratio (a "Variable  Rate  Convertible  Security"),  then the "price per
share for which  Common  Stock is issuable  upon such  exercise,  conversion  or
exchange" for purposes of the calculation  contemplated  by Section  4(b)(ii)(A)
shall be deemed to be the  lowest  price per  share  which  would be  applicable
(assuming all holding period and other conditions to any discounts  contained in
such  Convertible  Security  have been  satisfied)  if the  Market  Price on the
Measurement Date was 75% of the Market Price on such date (the "Assumed Variable
Market Price").  Further, if the Market Price at any time or times thereafter is
less than or equal to the Assumed Variable Market Price last used for making any
adjustment  under this Section 4 with respect to any Variable  Rate  Convertible
Security,  the Exercise

                                      -7-

<PAGE>
Price(s)  in effect  at such  time  shall be  readjusted  to equal the  Exercise
Price(s) which would have resulted if the Assumed  Variable  Market Price at the
time of issuance of the Variable Rate  Convertible  Security had been 75% of the
Market Price existing at the time of the adjustment required by this sentence.

                   (iii) Change in Option Price or Conversion  Rate. If there is
a change at any time in (i) the amount of  additional  consideration  payable to
the Company  upon the  exercise of any  Options;  (ii) the amount of  additional
consideration,  if any, payable to the Company upon the exercise,  conversion or
exchange  of any  Convertible  Securities;  or  (iii)  the  rate  at  which  any
Convertible Securities are convertible into or exchangeable for Common Stock (in
each such case, other than under or by reason of provisions  designed to protect
against  dilution),  the Exercise  Price(s) in effect at the time of such change
will be readjusted to the Exercise  Price(s)  which would have been in effect at
such time had such Options or Convertible  Securities still outstanding provided
for such changed  additional  consideration  or changed  conversion rate, as the
case may be, at the time initially granted, issued or sold.

                   (iv)  Calculation of  Consideration  Received.  If any Common
Stock, Options or Convertible  Securities are issued,  granted or sold for cash,
the  consideration  received  therefor  for purposes of this Warrant will be the
amount  received  by  the  Company  therefor,  before  deduction  of  reasonable
commissions,  underwriting  discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or sale.
In case any Common Stock,  Options or Convertible  Securities are issued or sold
for a consideration part or all of which shall be other than cash, including, in
the case of a strategic  or similar  arrangement  in which the other entity will
provide services to the Company, purchase services from the Company or otherwise
provide intangible consideration to the Company, the amount of the consideration
other than cash received by the Company  (including the net present value of the
contribution  expected by the Company for the  provided or  purchased  services)
will  be the  fair  market  value  of  such  consideration,  except  where  such
consideration consists of securities,  in which case the amount of consideration
received  by the  Company  will be the  Market  Price  thereof as of the date of
receipt. In case any Common Stock, Options or Convertible  Securities are issued
in  connection  with any  merger or  consolidation  in which the  Company is the
surviving corporation, the amount of consideration therefor will be deemed to be
the fair  market  value of such  portion of the net assets and  business  of the
non-surviving  corporation as is attributable  to such Common Stock,  Options or
Convertible Securities,  as the case may be. The Company shall calculate,  using
standard  commercial  valuation methods appropriate for valuing such assets, the
fair market value of any consideration other than cash or securities;  provided,
however,  that if the holder  hereof  does not agree to such fair  market  value
calculation  within three business days after receipt  thereof from the Company,
then such fair market value will be  determined  in good faith by an  investment
banker  or other  appropriate  expert of  national  reputation  selected  by the
Company and reasonably  acceptable to the holder hereof,  with the costs of such
appraisal to be borne by the Company.

                   (v)  Exceptions  to  Adjustment  of  Exercise  Price(s).   No
adjustment  to the Exercise  Price(s)  will be made (i) upon the exercise of any
warrants,  options or convertible  securities

                                      -8-

<PAGE>
issued and  outstanding  on July 25, 2000 and set forth on Schedule  3(d) of the
Securities Purchase Agreement in accordance with the terms of such securities as
of such date;  (ii) upon the grant or exercise of any stock or options which may
hereafter be granted or exercised under any employee benefit plan of the Company
now existing or to be implemented in the future, so long as the issuance of such
stock or options is approved by a majority  of the  non-employee  members of the
Board of Directors of the Company or a majority of the members of a committee of
non-employee  directors established for such purpose; (iii) upon the issuance of
any Notes or Warrants in accordance  with the terms of the  Securities  Purchase
Agreement; or (iv) upon conversion of the Notes or exercise of the Warrants.

               (c)  Subdivision or Combination of Common Stock.  If the Company,
at any time during the Exercise  Period,  subdivides (by any stock split,  stock
dividend, recapitalization,  reorganization,  reclassification or otherwise) its
shares of Common Stock into a greater number of shares,  then, after the date of
record  for  effecting  such  subdivision,   the  Exercise  Price(s)  in  effect
immediately prior to such subdivision will be  proportionately  reduced.  If the
Company,  at any time during the Exercise  Period,  combines  (by reverse  stock
split,  recapitalization,  reorganization,  reclassification  or otherwise)  its
shares of Common Stock into a smaller number of shares,  then, after the date of
record  for  effecting  such  combination,   the  Exercise  Price(s)  in  effect
immediately prior to such combination will be proportionately increased.

               (d) Adjustment in Number of Shares.  Upon each  adjustment of the
Exercise  Price(s)  pursuant to the  provisions of Section  4(c),  the number of
shares of Common  Stock  issuable  upon  exercise  of this  Warrant at each such
Exercise  Price shall be adjusted by  multiplying a number equal to the Exercise
Price in effect  immediately prior to such adjustment by the number of shares of
Common  Stock  issuable  upon  exercise of this Warrant at such  Exercise  Price
immediately prior to such adjustment and dividing the product so obtained by the
adjusted Exercise Price.

               (e)  Consolidation,  Merger or Sale. In case of any consolidation
of the Company with, or merger of the Company into, any other corporation, or in
case of any sale or conveyance of all or substantially  all of the assets of the
Company  other than in  connection  with a plan of complete  liquidation  of the
Company at any time during the  Exercise  Period,  then as a  condition  of such
consolidation,  merger or sale or  conveyance,  adequate  provision will be made
whereby  the holder of this  Warrant  will have the right to acquire and receive
upon exercise of this Warrant in lieu of the shares of Common Stock  immediately
theretofore  acquirable upon the exercise of this Warrant, such shares of stock,
securities,  cash or assets as may be issued or  payable  with  respect to or in
exchange  for the  number  of shares of  Common  Stock  immediately  theretofore
acquirable and receivable upon exercise of this Warrant had such  consolidation,
merger or sale or conveyance not taken place. In any such case, the Company will
make  appropriate  provision  to insure that the  provisions  of this  Section 4
hereof  will  thereafter  be  applicable  as nearly as may be in relation to any
shares of stock or securities  thereafter  deliverable upon the exercise of this
Warrant.  The  Company  will not  effect  any  consolidation,  merger or sale or
conveyance unless prior to the consummation  thereof, the successor  corporation
(if other than the Company) assumes by written  instrument the obligations under
this Warrant and the  obligations  to deliver to the holder of this Warrant such
shares of stock,

                                      -9-

<PAGE>
securities or assets as, in accordance with the foregoing provisions, the holder
may be entitled to acquire.  Notwithstanding the foregoing,  in the event of any
consolidation  of the Company  with,  or merger of the Company  into,  any other
corporation, or the sale or conveyance of all or substantially all of the assets
of the  Company,  at any time  during  the  Exercise  Period,  the holder of the
Warrant shall, at its option, have the right to receive, in connection with such
transaction,  cash  consideration  equal to the fair  value of this  Warrant  as
determined  in  accordance  with  customary  valuation  methodology  used in the
investment banking industry.

               (f) Distribution of Assets.  In case the Company shall declare or
make any distribution of its assets (or rights to acquire its assets) to holders
of Common Stock as a partial liquidating dividend,  stock repurchase,  by way of
return of capital or otherwise  (including any dividend or  distribution  to the
Company's  shareholders  of cash or shares  (or  rights to  acquire  shares)  of
capital  stock of a  subsidiary)  (a  "Distribution"),  at any time  during  the
Exercise Period, then the holder of this Warrant shall be entitled upon exercise
of this  Warrant for the  purchase  of any or all of the shares of Common  Stock
subject  hereto,  to receive the amount of such  assets (or rights)  which would
have been  payable to the holder had such  holder been the holder of such shares
of  Common  Stock on the  record  date  for the  determination  of  shareholders
entitled to such  Distribution.  If the Company  distributes  rights,  warrants,
options or any other form of convertible securities and the right to exercise or
convert such  securities  would expire in accordance with its terms prior to the
exercise of the Warrants,  then the terms of such securities  shall provide that
such exercise or convertibility right shall remain in effect until 30 days after
the date the holders of the  Warrants  receive such  securities  pursuant to the
exercise hereof.

               (g) Notice of Adjustment.  Upon the occurrence of any event which
requires any adjustment of the Exercise  Price(s),  then, and in each such case,
the  Company  shall give  notice  thereof to the holder of this  Warrant,  which
notice shall state the Exercise Price(s)  resulting from such adjustment and the
increase or decrease in the number of Warrant  Shares  purchasable  at each such
price  upon  exercise,   setting  forth  in  reasonable  detail  the  method  of
calculation and the facts upon which such calculation is based. Such calculation
shall be certified by the chief financial officer of the Company.

               (h) Minimum  Adjustment of Exercise  Price.  No adjustment of the
Exercise Price shall be made in an amount of less than $.01, but any such lesser
adjustment  shall be carried  forward and shall be made at the time and together
with the next  subsequent  adjustment  which,  together with any  adjustments so
carried forward, shall amount to not less than $.01.

               (i) No Fractional  Shares.  No fractional  shares of Common Stock
are to be issued upon the exercise of this Warrant,  but the Company shall pay a
cash  adjustment  in respect of any  fractional  share which would  otherwise be
issuable in an amount equal to the same  fraction of the Market Price of a share
of Common Stock on the date of such exercise.

                                      -10-

<PAGE>

               (j) Other Notices. In case at any time:

                   (i) the Company  shall  declare any dividend  upon the Common
Stock  payable  in shares  of stock of any class or make any other  distribution
(other than dividends or distributions  payable in cash out of retained earnings
consistent with the Company's past practices with respect to declaring dividends
and making distributions) to the holders of the Common Stock;

                   (ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;

                   (iii)  there  shall  be  any  capital  reorganization  of the
Company,  or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially  all of its assets to,
another corporation or entity; or

                   (iv) there shall be a voluntary or  involuntary  dissolution,
liquidation or winding-up of the Company;

then,  in each such case,  the Company  shall give to the holder of this Warrant
(a) notice of the date or estimated date on which the books of the Company shall
close or a record  shall be taken for  determining  the holders of Common  Stock
entitled to receive any such dividend,  distribution,  or subscription rights or
for  determining  the holders of Common Stock entitled to vote in respect of any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation  or  winding-up  and  (b) in the  case of any  such  reorganization,
reclassification,  consolidation,  merger,  sale,  dissolution,  liquidation  or
winding-up,  notice of the date (or, if not then known,  a  reasonable  estimate
thereof by the Company)  when the same shall take place.  Such notice shall also
specify  the date on which the  holders of Common  Stock  shall be  entitled  to
receive such dividend, distribution, or subscription rights or to exchange their
Common Stock for stock or other  securities  or property  deliverable  upon such
reorganization,  reclassification,  consolidation,  merger,  sale,  dissolution,
liquidation,  or  winding-up,  as the case may be. Such notice shall be given at
least 30 days prior to the record date or the date on which the Company's  books
are closed in  respect  thereto.  Failure to give any such  notice or any defect
therein shall not affect the validity of the proceedings  referred to in clauses
(i), (ii),  (iii) and (iv) above.  Notwithstanding  the  foregoing,  the Company
shall publicly disclose the substance of any notice delivered hereunder prior to
delivery of such notice to the holder of this Warrant.

               (k) Certain Events.  If, at any time during the Exercise  Period,
any event occurs of the type  contemplated by the adjustment  provisions of this
Section 4 but not expressly  provided for by such  provisions,  the Company will
give notice of such event as provided in Section 4(g) hereof,  and the Company's
Board of Directors will make an appropriate  adjustment in the Exercise Price(s)
and the  number of  shares of Common  Stock  acquirable  upon  exercise  of this
Warrant at each such  Exercise  Price so that the rights of the holder  shall be
neither enhanced nor diminished by such event.

                                      -11-

<PAGE>

               (l) Certain Definitions.

                   (i) "Common Stock Deemed  Outstanding"  shall mean the number
of shares of Common Stock actually  outstanding  (not including shares of Common
Stock  held  in the  treasury  of the  Company),  plus  (x) in the  case  of any
adjustment  required by Section 4(a) resulting from the issuance of any Options,
the maximum total number of shares of Common Stock issuable upon the exercise of
the Options for which the  adjustment  is required  (including  any Common Stock
issuable  upon  the  conversion  of  Convertible  Securities  issuable  upon the
exercise of such  Options),  and (y) in the case of any  adjustment  required by
Section 4(a)  resulting  from the issuance of any  Convertible  Securities,  the
maximum  total  number of shares of Common  Stock  issuable  upon the  exercise,
conversion or exchange of the Convertible Securities for which the adjustment is
required, as of the date of issuance of such Convertible Securities, if any.

                   (ii) "Market Price," as of any date, (i) means the average of
the closing bid prices for the shares of Common  Stock as reported on the NASDAQ
National Market  ("NASDAQ") by Bloomberg for the five  consecutive  trading days
immediately  preceding such date, or (ii) if NASDAQ is not the principal trading
market for the shares of Common  Stock,  the  average of the last  reported  bid
prices as reported by Bloomberg on the principal  trading  market for the Common
Stock during the same period,  or, if there is no bid price for such period, the
last reported sales price as reported by Bloomberg for such period,  or (iii) if
market value cannot be calculated as of such date on any of the foregoing bases,
the Market Price shall be the average fair market value as reasonably determined
by an investment banking firm selected by the Company and reasonably  acceptable
to the holder,  with the costs of the appraisal to be borne by the Company.  The
manner of  determining  the Market  Price of the  Common  Stock set forth in the
foregoing  definition  shall apply with respect to any other security in respect
of which a determination as to market value must be made hereunder.

                   (iii)  "Common  Stock,"  for  purposes  of  this  Section  4,
includes  the  Common  Stock and any  additional  class of stock of the  Company
having no preference as to dividends or distributions  on liquidation,  provided
that the shares  purchasable  pursuant to this Warrant shall include only Common
Stock in respect of which this Warrant is exercisable,  or shares resulting from
any  subdivision  or  combination  of such Common  Stock,  or in the case of any
reorganization,   reclassification,   consolidation,  merger,  or  sale  of  the
character  referred to in Section 4(e) hereof,  the stock or other securities or
property provided for in such Section.

                   (iv) "Measurement Date" means (i) for purposes of any private
offering of  securities  under  Section 4(2) of the  Securities  Act of 1933, as
amended,  the date that the  Company  enters  into  legally  binding  definitive
agreements for the issuance and sale of such securities and (ii) for purposes of
any other issuance of securities, the date of issuance thereof.

            5. Issue Tax. The issuance of  certificates  for Warrant Shares upon
the exercise of this Warrant shall be made without  charge to the holder of this
Warrant or such shares for any issuance  tax or other costs in respect  thereof,
provided  that the  Company  shall not be  required  to pay any tax

                                      -12-

<PAGE>

which may be payable in respect of any  transfer  involved in the  issuance  and
delivery of any certificate in a name other than the holder of this Warrant.

            6. No Rights or Liabilities as a Shareholder. This Warrant shall not
entitle the holder  hereof to any voting rights or other rights as a shareholder
of the  Company.  No provision of this  Warrant,  in the absence of  affirmative
action by the holder hereof to purchase Warrant Shares,  and no mere enumeration
herein of the rights or privileges of the holder hereof,  shall give rise to any
liability  of such  holder for the  Exercise  Price or as a  shareholder  of the
Company,  whether  such  liability is asserted by the Company or by creditors of
the Company.

            7. Transfer, Exchange, Redemption and Replacement of Warrant.

               (a) Restriction on Transfer.  This Warrant and the rights granted
to the holder hereof are  transferable,  in whole or in part,  upon surrender of
this Warrant,  together with a properly executed assignment in the form attached
hereto,  at the office or agency of the  Company  referred  to in  Section  7(e)
below,  provided,  however,  that any transfer or assignment shall be subject to
the  conditions  set forth in Sections 7(f) and (g) hereof and to the provisions
of Sections 2(f) and 2(g) of the Securities Purchase Agreement.  Each transferee
of this Warrant or any portion hereof shall be bound by the selling restrictions
set forth in Section 4(k) of the Securities Purchase Agreement, which Section is
incorporated  herein by reference.  Until due  presentment  for  registration of
transfer  on the books of the  Company,  the  Company  may treat the  registered
holder hereof as the owner and holder  hereof for all purposes,  and the Company
shall not be affected by any notice to the contrary. Notwithstanding anything to
the contrary  contained herein,  the registration  rights described in Section 8
hereof are assignable only in accordance with the provisions of the Registration
Rights Agreement.

               (b)  Warrant  Exchangeable  for  Different  Denominations.   This
Warrant is  exchangeable,  upon the surrender hereof by the holder hereof at the
office or agency of the  Company  referred  to in Section  7(e)  below,  for new
Warrants of like tenor of different denominations  representing in the aggregate
the  right to  purchase  the  number of  shares  of  Common  Stock  which may be
purchased  hereunder,  each of such  new  Warrants  to  represent  the  right to
purchase  such number of shares (at the  Exercise  Price  therefor)  as shall be
designated by the holder hereof at the time of such surrender.

               (c) Replacement of Warrant.  Upon receipt of evidence  reasonably
satisfactory to the Company of the loss,  theft,  destruction,  or mutilation of
this  Warrant and, in the case of any such loss,  theft,  or  destruction,  upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the  Company,  or,  in the  case of any  such  mutilation,  upon  surrender  and
cancellation  of this  Warrant,  the Company,  at its expense,  will execute and
deliver, in lieu thereof, a new Warrant of like tenor.

               (d) Cancellation; Payment of Expenses. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided in
this Section 7, this  Warrant

                                      -13-

<PAGE>

shall be promptly  canceled  by the  Company.  The  Company  shall pay all taxes
(other than securities  transfer taxes) and all other expenses (other than legal
expenses,  if any,  incurredby the Holder or transferees) and charges payable in
connection with the preparation, execution, and delivery of Warrants pursuant to
this Section 7. The Company  shall  indemnify  and  reimburse the holder of this
Warrant  for all  losses  and  damages  arising as a result of or related to any
breach of the terms of this  Warrant,  including  costs and expenses  (including
reasonable   legal  fees)  incurred  by  such  holder  in  connection  with  the
enforcement of its rights hereunder.

               (e)  Warrant  Register.   The  Company  shall  maintain,  at  its
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the holder hereof),  a register for this Warrant,  in
which the Company  shall record the name and address of the person in whose name
this Warrant has been issued, as well as the name and address of each transferee
and each prior owner of this Warrant.

               (f) Exercise or Transfer Without Registration. If, at the time of
the surrender of this Warrant in  connection  with any  exercise,  transfer,  or
exchange of this  Warrant,  this Warrant (or, in the case of any  exercise,  the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act and under  applicable  state  securities  or blue sky laws,  the Company may
require, as a condition of allowing such exercise,  transfer,  or exchange,  (i)
that the holder or transferee of this  Warrant,  as the case may be,  furnish to
the  Company a written  opinion  of  counsel  (which  opinion  shall be in form,
substance   and  scope   customary   for  opinions  of  counsel  in   comparable
transactions)  to the effect that such  exercise,  transfer,  or exchange may be
made without  registration  under the Securities Act and under  applicable state
securities  or blue sky laws,  (ii) that the holder or  transferee  execute  and
deliver to the Company an investment letter in form and substance  acceptable to
the Company and (iii) that the transferee be an "accredited investor" as defined
in Rule 501(a)  promulgated  under the  Securities  Act;  provided  that no such
opinion,  letter,  or status as an  "accredited  investor"  shall be required in
connection with a transfer pursuant to Rule 144 under the Securities Act.

               (g) Additional  Restrictions on Exercise or Transfer. In no event
shall the holder of this  Warrant have the right to exercise any portion of this
Warrant for shares of Common  Stock or to dispose of any portion of this Warrant
to the extent  that such right to effect  such  exercise  or  disposition  would
result in the  holder or any of its  affiliates  beneficially  owning  more than
4.99% of the  outstanding  shares of Common  Stock.  To the extent the holder of
this Warrant owns other securities with a limitation on conversion,  exercise or
disposition  analogous to the  limitation  set forth in this Section  7(g),  the
limitations  on  conversion,  exercise and  disposition of this Warrant and such
securities  shall be applied  collectively  to all such  securities  so that the
holder of this  Warrant  may  select  the  order in which it wishes to  convert,
exercise or dispose of such  securities and the holder of this Warrant will only
have the right to effect  conversions,  exercises and  dispositions  of all such
securities to the extent that such  conversions,  exercises and  dispositions do
not result in the holder or any of its affiliates  beneficially owning more than
4.99% of the  outstanding  shares of Common Stock.  For purposes of this Section
7(g),  beneficial ownership shall be determined in accordance with Section 13(d)
of the  Securities  Exchange  Act of 1934,  as  amended,  and  Regulation  13D-G

                                      -14-

<PAGE>

thereunder. The restriction contained in this Section 7(g) shall not be altered,
amended,  deleted or changed in any manner  whatsoever  unless the  holders of a
majority of the outstanding  shares of Common Stock,  the holder of this Warrant
and the Majority Holders shall approve, in writing, such alteration,  amendment,
deletion or change.

            8.  Registration  Rights.  The initial  holder of this  Warrant (and
certain  assignees  thereof) is  entitled  to the  benefit of such  registration
rights in respect  of the  Warrant  Shares as are set forth in the  Registration
Rights  Agreement,  including  the  right  to  assign  such  rights  to  certain
assignees, as set forth therein.

            9. Notices.  Any notices required or permitted to be given under the
terms of this  Warrant  shall be sent by certified  or  registered  mail (return
receipt  requested)  or  delivered  personally  or by  courier  or by  confirmed
telecopy,  and shall be effective  five days after being placed in the mail,  if
mailed,  or upon receipt or refusal of receipt,  if delivered  personally  or by
courier,  or by  confirmed  telecopy,  in each case  addressed  to a party.  The
addresses for such communications shall be:

                    If to the Company:

                    Lumenon Innovative Lightwave Technology, Inc.
                    8851 Trans-Canada Highway
                    St. Laurent, Quebec H4S 1Z6
                    Canada
                    Attention:  Vincent Belanger
                    Telecopy:   (514) 331-3738

                    with copies to:

                    De Grandpre Chaurette Levesque
                    2000 Avenue McGill College, Suite 1600
                    Montreal, Quebec H3A 3H3
                    Canada
                    Attention:  Pierre Barnard
                    Telecopy:   (514)499-0469

                    and:

                    Olshan Grundman Frome Rosenzweig &
                    Wolosky, LLP
                    505 Park Avenue
                    New York, NY  10022
                    Attention:  David J. Adler
                    Telecopy:   (212)935-1787

If to the holder,  at such address as such holder shall have provided in writing
to the  Company,  or at such other  address as such holder  furnishes  by notice
given in accordance with this Section 9.

                                      -15-

<PAGE>

            10. Governing Law;  Jurisdiction.  This Warrant shall be governed by
and construed in accordance with the laws of the State of Delaware.  The Company
irrevocably consents to the jurisdiction of the United States federal courts and
state courts located in the State of Delaware in any suit or proceeding based on
or arising under this Warrant and irrevocably  agrees that all claims in respect
of such  suit or  proceeding  may be  determined  in such  courts.  The  Company
irrevocably  waives any  objection  to the laying of venue and the defense of an
inconvenient  forum to the  maintenance of such suit or proceeding.  The Company
further  agrees that service of process upon the Company  mailed by certified or
registered  mail shall be deemed in every respect  effective  service of process
upon the Company in any such suit or proceeding. Nothing herein shall affect the
holder's  right to serve  process  in any other  manner  permitted  by law.  The
Company  agrees  that a  final  non-appealable  judgment  in any  such  suit  or
proceeding  shall be conclusive  and may be enforced in other  jurisdictions  by
suit on such judgment or in any other lawful manner.

            11. Miscellaneous.

                (a) Amendments.  Except as provided in Section 7(g) hereof, this
Warrant and any provision hereof may only be amended by an instrument in writing
signed by the Company and the holder hereof.

                (b)  Descriptive  Headings.  The  descriptive  headings  of  the
several  Sections of this Warrant are  inserted for purposes of reference  only,
and shall not  affect  the  meaning  or  construction  of any of the  provisions
hereof.

                (c) Cashless Exercise.  Notwithstanding anything to the contrary
contained in this Warrant,  if the resale of the Warrant Shares by the holder is
not then registered  pursuant to an effective  registration  statement under the
Securities  Act, or if there is not  reserved  pursuant  to Article  IV.A of the
Notes a sufficient number of shares of Common Stock to permit full conversion of
the Notes and full  exercise of the  Warrants,  this Warrant may be exercised at
any time  during the  Exercise  Period by  presentation  and  surrender  of this
Warrant to the Company at its principal  executive offices with a written notice
of the holder's intention to effect a cashless exercise, including a calculation
of the  number  of shares of Common  Stock to be issued  upon such  exercise  in
accordance  with the terms  hereof (a  "Cashless  Exercise").  In the event of a
Cashless  Exercise,  in lieu of paying the  Exercise  Price in cash,  the holder
shall  surrender  this  Warrant  for that  number  of  shares  of  Common  Stock
determined  by  multiplying  the  number  of  Warrant  Shares  to which it would
otherwise  be  entitled  by a  fraction,  the  numerator  of which  shall be the
difference between the last reported sale price per share of the Common Stock on
the date of exercise (as reported on NASDAQ, or if not so reported,  as reported
on the principle  United States  securities  market on which the Common Stock is
then traded) and the Exercise Price,  and the denominator of which shall be such
last reported sale price per share of Common Stock.

                (d) Trading Day. For purposes of this Warrant, the term "trading
day" means any day on which NASDAQ or, if the Common Stock is not then traded on
NASDAQ, the principal
                                      -17-

<PAGE>

United States  securities  exchange or trading  market where the Common Stock is
then listed or traded, is open for trading.

                  [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

                                      -18-
<PAGE>

            IN WITNESS  WHEREOF,  the  Company  has caused  this Stock  Purchase
Warrant to be signed by its duly authorized officer.

                                         LUMENON INNOVATIVE LIGHTWAVE
                                         TECHNOLOGY, INC.

                                         By:
                                            -----------------------------------
                                         Name:  S. Iraj Najafi
                                              ---------------------------------
                                         Title: President
                                               --------------------------------

                                      -19-

<PAGE>

                           FORM OF EXERCISE AGREEMENT

         (To be Executed by the Holder in order to Exercise the Warrant)

To:   Lumenon Innovative Lightwave Technology, Inc.
      8851 Trans-Canada Highway
      St. Laurent, Quebec H4S 1Z6
      Canada
      Attention:  Vincent Belanger
      Telecopy:   (514) 331-3738

            The undersigned hereby  irrevocably  exercises the right to purchase
_____________  shares  of the  Common  Stock  of  LUMENON  INNOVATIVE  LIGHTWAVE
TECHNOLOGY,  INC.,  a  corporation  organized  under  the  laws of the  State of
Delaware (the "Company"),  evidenced by the attached Warrant and [herewith makes
payment of the  Exercise  Price with  respect  to such  shares in full]  [hereby
elects to effect a  Cashless  Exercise  (as  defined  in  Section  11(c) of such
Warrant], all in accordance with the conditions and provisions of such Warrant.

            The  undersigned  agrees not to offer,  sell,  transfer or otherwise
dispose of any Common Stock  obtained on exercise of the  Warrant,  except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws.

            / /         The  undersigned  requests  that the  Company  cause its
                        transfer  agent to  electronically  transmit  the Common
                        Stock  issuable  pursuant to this Exercise  Agreement to
                        the account of the  undersigned or its nominee (which is
                        _________________)   with  DTC   through   its   Deposit
                        Withdrawal  Agent  Commission  System ("DTC  Transfer"),
                        provided that such transfer  agent  participates  in the
                        DTC Fast Automated Securities Transfer program.

            / /         In lieu of receiving the shares of Common Stock issuable
                        pursuant  to  this  Exercise  Agreement  by  way  of DTC
                        Transfer,  the  undersigned  hereby  requests  that  the
                        Company cause its transfer agent to issue and deliver to
                        the undersigned physical certificates  representing such
                        shares of Common Stock.

            The undersigned requests that a Warrant representing any unexercised
portion hereof be issued, pursuant to the Warrant, in the name of the Holder and
delivered to the undersigned at the address set forth below:

Dated:
      -----------------------

                                                --------------------------------
                                                Signature of Holder

                                                Name of Holder (Print)

                                                Address:

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

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

                                      -20-

<PAGE>

                               FORM OF ASSIGNMENT

            FOR VALUE  RECEIVED,  the  undersigned  hereby sells,  assigns,  and
transfers  all the  rights of the  undersigned  under the within  Warrant,  with
respect  to the  number  of shares of Common  Stock  covered  thereby  set forth
hereinbelow, to:

Name of Assignee               Address                     No of Shares

,      and      hereby      irrevocably       constitutes      and      appoints
_____________________________________  as agent and attorney-in-fact to transfer
said Warrant on the books of the  within-named  corporation,  with full power of
substitution in the premises.

Dated: _____________________, ____

In the presence of

__________________________________

                                             Name:
                                                  ------------------------------
                                             Signature:
                                                       -------------------------
                                             Title of Signing Officer or Agent
                                             (if any):

                                             Address:

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

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

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

                                             Note:   The  above   signature
                                             should correspond exactly with the
                                             name on the face of the within
                                             Warrant.

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