Exhibit 10.4


NEITHER THIS NOTE, NOR ANY SECURITY  ISSUABLE UPON CONVERSION  HEREOF,  HAS BEEN
REGISTERED  UNDER  THE  SECURITIES  ACT OF 1933,  AS  AMENDED  (THE  "ACT"),  OR
APPLICABLE  STATE  SECURITIES  LAWS.  NO INTEREST IN THIS NOTE MAY BE OFFERED OR
SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE  REGISTRATION  STATEMENT UNDER THE ACT,
OR (ii) AN  EXEMPTION  FROM  REGISTRATION  UNDER THE ACT WHERE  THE  HOLDER  HAS
FURNISHED TO THE COMPANY AN OPINION OF ITS COUNSEL  REASONABLY  SATISFACTORY  TO
THE COMPANY THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE.

                                 MEDIABAY, INC.

               9% CONVERTIBLE SENIOR SUBORDINATED PROMISSORY NOTE
                              DUE DECEMBER 31, 2004

$1,984,250                                                          May 14, 2001


     MEDIABAY,  INC.  (together with its successors,  the "Company"),  a Florida
corporation,  for value  received,  hereby  promises to pay to Norton Herrick or
registered assigns (the "Holder"), the principal sum of ONE MILLION NINE HUNDRED
EIGHTY FOUR THOUSAND TWO HUNDRED FIFTY DOLLARS ($1,984,250) on December 31, 2004
(the  "Maturity  Date"),  and to pay  interest on the unpaid  principal  balance
hereof from the date  hereof to the  Maturity  Date at the rate of nine  percent
(9.0%) per annum, in arrears,  quarterly on March 31, June 30,  September 30 and
December  31 in each year,  commencing  on June 30,  2001,  until the  principal
amount hereof shall become due and payable; and to pay on demand interest on any
overdue  principal  (including  any overdue  partial  payment of  principal  and
principal  payable at the  maturity  hereof),  and (to the extent  permitted  by
applicable  law) on any overdue  installment  of interest  (the due date of such
payments to be determined without giving effect to any grace period) at the rate
of eleven percent (11.0%) per annum. This Note amends, restates and replaces the
Company's   obligations  under  the  certain   $1,984,250   Convertible   Senior
Subordinated  Promissory  Note Due  December  31,  2004 issued by the Company on
December 15, 2000, which replaced the Company's obligations, solely with respect
to Norton Herrick under the certain $15,000,000  Convertible Senior Subordinated
Promissory  Note Due  December  31, 2004  issued by the Company on December  31,
1998, and this Note continues to be secured by that certain  Security  Agreement
made and entered into as of December  30, 1998 by and among the Company,  Norton
Herrick and the other Parties that are signatories thereto.

1. Interest and Payment

     1.1  Interest  shall be computed  on the basis of a 360-day  year of twelve
30-day  months for the actual time  elapsed.  Subject to the  provisions of this
Section 1 and the terms of the Senior Credit Agreement (as defined herein),  all
interest  payments to be paid in cash to Holder  hereunder shall accrue until 10
days  following the date that the Senior Debt (as defined  herein) has been paid
in full.

<PAGE>

     1.2 At the option of the Holder,  the Company may pay a scheduled  interest
payment  (in  whole or in part) by  delivering  to the  Holder a number of whole
shares of common stock,  without par value ("Common Stock"),  of the Company, in
lieu of paying such  interest  in cash,  equal to the  quotient of dividing  the
amount of accrued and unpaid interest  payable on such interest  payment date by
an amount equal to the then current  Conversion Price (as hereinafter  defined).
No  fractional  shares of Common  Stock  will be issued to the Holder in lieu of
cash interest. Instead of any fractional share which would otherwise be issuable
in lieu of cash interest,  the Company will calculate and pay a cash  adjustment
in respect of such fraction (calculated to the nearest 1/100th of a share) in an
amount  equal to the  same  fraction  of the  Conversion  Price at the  close of
business on the fifth business day immediately  preceding such interest  payment
date. The Holder may exercise its option to cause the Company to issue shares of
Common Stock, in lieu of cash interest  payable on an interest  payment date, by
giving the Company  written  notice of its exercise of such option at least five
business days prior to such  interest  payment date and the Company will deliver
or cause its  transfer  agent to deliver,  to the Holder or its designee on such
interest payment date, duly executed certificates for the number of whole shares
of Common Stock so issuable to the Holder  registered  in the  Holder's  name or
such other  name or names and in such  denominations  as the  Holder  shall have
designated in its notice of exercise, and, if applicable, a check payable to the
Holder for any cash adjustment in lieu of a fractional share.

     1.3 Except as provided in Section 1.2 hereof, payments of principal, Change
in Control Purchase Price (as hereinafter defined), if any, and accrued interest
shall be made in such coin or currency of the United States of America as at the
time of payment is legal  tender for the payment of public and private  Debts to
the Holder hereof at its address shown in the register maintained by the Company
for such purpose.

     1.4 (a) The Company shall pay all amounts payable with respect to this Note
(without any presentment of this Note) by crediting,  by federal funds bank wire
transfer,  the account of the Holder in any bank in the United States of America
as may be designated in writing by the Holder or in such other manner or to such
other address in the United States of America as may be designated in writing by
the Holder (and as to which,  absent  subsequent  notice  from the  Holder,  the
Company may conclusively  rely).  Annex 1 shall be deemed to constitute  notice,
direction  or  designation  (as  appropriate)  by the  payee of this Note to the
Company with respect to payments to be made to such payee as above provided.  In
the absence of such written direction,  all amounts payable with respect to this
Note shall be paid by check  mailed and  addressed  to the Holder at its address
shown in the register maintained by the Company pursuant to Section 2.1.

     (b) All payments received on account of this Note shall be applied first to
the  payment  of  accrued  and  unpaid  interest  on this  Note  and then to the
reduction  of the  unpaid  principal  amount of this  Note.  In case the  entire
principal  amount of this Note is paid or this Note is purchased by the Company,
this Note shall be surrendered to the Company for  cancellation and shall not be
reissued,  and no Note shall be issued in lieu of the paid  principal  amount of
any Note.


                                      -2-
<PAGE>

     1.5 (a) If any  payment due on account of this Note shall fall due on a day
other than a business day, then such payment shall be made on the first business
day following  the day on which such payment shall have so fallen due;  provided
that if all or any  portion  of such  payment  shall  consist  of a  payment  of
interest,  for purposes of  calculating  such  interest,  such payment  shall be
deemed to have been  originally due on such first  following  Business Day, such
interest  shall accrue and be payable to (but not  including) the actual date of
payment,  and the  amount  of the  next  succeeding  interest  payment  shall be
adjusted accordingly.

     (b) Any  payment  to be made to the Holder on account of this Note shall be
deemed to have been  made on the  business  day such  payment  actually  becomes
available  at such  Holder's  bank prior to the close of  business of such bank,
provided that interest for one day at the non-default interest rate of this Note
shall be due on the amount of any such payment that actually  becomes  available
to the Holder at the Holder's bank after 1:00 p.m. (local time of such bank).

     1.6 The Company may, upon at least three business days prior written notice
to the Holder specifying the date of the prepayment (the "Prepayment  Date") and
the principal amount to be prepaid,  prepay the unpaid principal balance of this
Note in whole at any time or in part  from  time to  time,  without  penalty  or
premium,  in multiples of $100,000 (or if the  outstanding  principal  amount is
less than  $100,000 at such time,  then such  principal  amount)  together  with
interest  on the  principal  amount  being  prepaid  accrued  to the  designated
Prepayment Date.

     1.7 In the  event of a Change  in  Control,  the  Company  will,  within 15
business days after the occurrence of such event,  give notice of such Change in
Control to the Holder.  Such notice shall  contain an  irrevocable  offer to the
Holder to repurchase  this Note on a date (the "Change in Control Payment Date")
that is not less than the later of (a) thirty (30) days and not more than ninety
(90) days after the date of such  notice or (b) five (5) days  after  payment in
full of the Debt  outstanding  under the Senior Credit  Facility,  at a purchase
price equal to 100% of the aggregate  principal  amount thereof and all interest
(in shares of Common Stock) accrued and unpaid on such  principal  amount to the
Change in Control Payment Date (the "Change in Control  Purchase  Price").  Each
such notice shall: (i) be dated the date of the sending of such notice;  (ii) be
executed by an executive  officer of the Company;  (ii)  specify,  in reasonable
detail, the nature and date of the Change in Control; (iv) specify the Change in
Control Payment Date; (v) specify the principal amount of this Note outstanding;
(vi) specify the interest that would be due on this Note,  accrued to the Change
in Control  Payment Date; and (vii) specify that this Note shall be purchased at
the Change in Control Purchase Price. The Holder shall have the option to accept
or reject such offered  payment.  In order to accept such offered  payment,  the
Holder shall cause a notice of such acceptance to be delivered to the Company at
least five days prior to the Change in Control Payment Date. A failure to accept
in writing such  written  offer of payment as provided in this Section 1.7, or a
written  rejection of such offered  prepayment,  shall be deemed to constitute a
rejection  of such  offer.  The offered  payment  shall be made at the Change in
Control Purchase Price determined as of the Change in Control Payment Date.


                                      -3-
<PAGE>

     1.8 Upon any partial  payment of the outstanding  principal  amount of this
Note, the Holder shall mark this Note with a notation of the principal amount so
paid and the date of such payment.

2. Registration; Exercise; Substitution

     2.1 The Company will keep at its principal  executive office a register for
the  registration  and transfer of this Note. The name and address of the Holder
of this Note,  each transfer  hereof made in accordance  with Section 2.2(a) and
the name and address of each transferee of this Note shall be registered in such
register. The person in whose name this Note shall be registered shall be deemed
and  treated  as the owner and  holder  thereof,  and the  Company  shall not be
affected by any notice or knowledge to the  contrary,  other than in  accordance
with Section 2.2(a)

     2.2 (a) Upon  surrender of this Note at the principal  executive  office of
the Company,  duly endorsed or accompanied  by a written  instrument of transfer
duly executed by the Holder or the Holder's attorney duly authorized in writing,
the Company  will  execute and  deliver,  at the  Company's  expense  (except as
provided in Section 2.2(c)), a new Note (or Notes) in exchange  therefor,  in an
aggregate  principal  amount  equal  to  the  unpaid  principal  amount  of  the
surrendered Note. Subject to Section 2.2(b), the new Note(s) shall be registered
in such name(s) as the Holder may request. Each such new Note shall be dated and
bear  interest  from the date to which  interest  shall  have  been  paid on the
surrendered Note or dated the date of the surrendered Note, if no interest shall
have been paid thereon. Each such new Note shall carry the same rights to unpaid
interest and interest to accrue on the unpaid  principal  amount thereof as were
carried by the Note so exchanged or transferred.

     (b) This Note has been acquired for investment and has not been  registered
under the securities  laws of the United States of America or any state thereof.
Accordingly,  notwithstanding Section 2.2(a), neither this Note nor any interest
thereon  may be  offered  for  sale,  sold  or  transferred  in the  absence  of
registration and  qualification of this Note under applicable  federal and state
securities laws or an opinion of counsel of the Holder  reasonably  satisfactory
to the Company that such registration and  qualification are not required.  This
Note  shall  not be  transferred  in  denominations  of less than  $100,000  and
integral multiples  thereof,  provided that the Holder may transfer this Note as
an entirety regardless of the principal amount thereof.

     (c) The Company may require  payment of a sum sufficient to cover any stamp
tax or governmental change imposed in respect of any such transfer of this Note.

     2.3 Upon  receipt by the  Company  from the Holder of  evidence  reasonably
satisfactory  to the Company of the loss,  theft,  destruction  or mutilation of
this  Note  (which  evidence  shall  be,  if  the  Holder  is  the  payee  or an
institutional investor,  notice from the payee or such institutional investor of
such loss, theft, destruction or mutilation), and (a) in the case of loss, theft
or destruction,  of indemnity reasonably satisfactory to the Company;  provided,
however,  that if the  Holder is the  payee or an  institutional  investor,  the
unsecured  agreement of indemnity  of the payee or such  institutional  investor
shall be  deemed  to be  satisfactory;  or (b) in the case of  mutilation,  upon
surrender and cancellation  thereof; the Company at its own expense will execute
and deliver,  in lieu thereof,  a replacement  Note,  dated and bearing interest
from the date


                                      -4-
<PAGE>

to which  interest  shall  have been paid on such  lost,  stolen,  destroyed  or
mutilated  Note or dated the date of such lost,  stolen,  destroyed or mutilated
Note, if no interest shall have been paid thereon.

     2.4 The Company will pay taxes (if any) due (but not, in any event,  income
taxes of the  Holder)  in  connection  with  and as the  result  of the  initial
issuance  of this  Note and in  connection  with  any  modification,  waiver  or
amendment of this Note and shall save the Holder harmless, without limitation as
to time, against any and all liabilities with respect to all such taxes.

3. Subordination

     3.1 Notwithstanding  any other provision  contained in this Agreement,  the
Subordinated  Debt is  subordinate  and junior in right of payment to all Senior
Debt to the extent provided in this Section 3.

     3.2  In  the  event  of:  (a)  any  insolvency,  bankruptcy,  receivership,
liquidation,   reorganization,   readjustment,   composition  or  other  similar
proceeding  relating to the Company;  (b) any  proceeding  for the  liquidation,
dissolution  or other  winding-up  of the  Company,  voluntary  or  involuntary,
whether or not involving insolvency or bankruptcy  proceedings;  (c) any general
assignment  by the  Company  for the  benefit  of  creditors;  or (d) any  other
marshaling of the assets of the Company;  all Senior Debt shall first be paid in
full, in cash or Cash  Equivalents  (as defined in Section 8 hereof and, for all
purposes of this Section 3, as so defined),  before any payment or distribution,
whether in cash,  securities or other  property,  shall be made to any holder of
any  Subordinated  Debt on  account of any  Subordinated  Debt.  Any  payment or
distribution,  whether  in  cash,  securities  or  other  property  (other  than
securities  of the Company or any other  corporation  provided  for by a plan of
reorganization or readjustment,  the payment of which is subordinated,  at least
to the extent provided in this Section 3 with respect to  Subordinated  Debt, to
the payment of all Senior  Debt at the time  outstanding  and to any  securities
issued in respect thereof under any such plan of reorganization or readjustment,
but only if the rights of the  holders of the Senior  Debt are not  impaired  by
such plan without their consent), which would otherwise (but for this Section 3)
be payable or  deliverable  in respect of  Subordinated  Debt,  shall be paid or
delivered  directly  to the  holders  of  Senior  Debt in  accordance  with  the
priorities  then existing  among such holders,  until all Senior Debt shall have
been paid in full, in cash or Cash Equivalents.

     3.3 If any  holder of  Subordinated  Debt  does not file a proper  claim or
proof of Debt  therefor  prior to 20 days before the  expiration  of the time to
file such  claim or  proof,  then the  Senior  Agent is  hereby  authorized  and
empowered (but not obligated) as the agent and  attorney-in-fact for such holder
for the specific and limited  purpose set forth in this Section 3.3 to file such
claim or proof for or on  behalf of such  holder;  provided,  however,  that the
Senior Agent shall have,  prior to taking any such  action,  given 15 days prior
written  notice (which notice may be given up to 60 days prior to the expiration
of the time to file such  claim or proof) to such  holder of  Subordinated  Debt
that it intends to file such claim or proof of Debt.  In no event may the Senior
Agent or any holder of the Senior Debt vote any claim on behalf of any holder of
the Subordinated Debt, and such agency and appointment of attorney-in-fact shall
not extend to any such right to vote any such claim.


                                      -5-
<PAGE>

     3.4 If (a) the Company  shall  default in the payment or  prepayment of any
principal of,  premium,  if any, or interest on, or commitment  fee or letter of
credit fee or Administrative Agent fee or indemnity under Section 2.9 or 2.11 or
11.4(c) (or comparable  sections under any  replacement  Senior Debt) in respect
of, any Senior Debt (a "Senior  Payment  Default") when the same becomes due and
payable, whether at maturity, at a date fixed for prepayment,  by declaration of
acceleration  or  otherwise,  or  shall  fail to  comply  with any  covenant  or
agreement in respect of Senior Debt which covenant or agreement  default results
in  actual   acceleration  of  the  maturity  of  such  Senior  Debt  ("Covenant
Acceleration");  and (b) the  Company  receives  from the Senior  Agent  written
notice of the happening of such Senior Payment Default or Covenant Acceleration,
stating that such notice is a payment  blockage  notice pursuant to this Section
3.4;  no direct or  indirect  payment (in cash,  property  or  securities  or by
set-off  or  otherwise)  shall be made or  agreed to be made on  account  of any
Subordinated Debt, or as a sinking fund for any Subordinated Debt, or in respect
of any  redemption,  retirement,  purchase,  prepayment or other  acquisition or
payment of any Subordinated  Debt,  unless and until such Senior Payment Default
shall have been cured or waived or otherwise  shall have ceased to exist or such
Covenant  Acceleration  shall have been  rescinded and the  underlying  covenant
default shall have been cured or waived or shall have otherwise ceased to exist.

     The Company shall give prompt written notice to each holder of Subordinated
Debt of its receipt of any such notice from the Senior  Agent under this Section
3.4.

     3.5 If (a) any Significant  Nonpayment Default shall have occurred; and (b)
the Company and the Holder receive from the Senior Agent written notice (a "Stop
Payment  Notice")  of the  happening  of such  Significant  Nonpayment  Default,
stating that such notice is a payment  blockage  notice pursuant to this Section
3.5;  no direct or  indirect  payment (in cash,  property  or  securities  or by
set-off  or  otherwise)  shall be made or agreed to be made for or on account of
any  Subordinated  Debt, or as a sinking fund for any  Subordinated  Debt, or in
respect of any redemption, retirement, repurchase, prepayment, purchase or other
acquisition or payment of any Subordinated  Debt, for a period (each, a "Payment
Blockage  Period")  commencing on the date such Stop Payment Notice is delivered
to the Company and ending on the  earliest  to occur of the  following:  (a) the
time as of which each  Significant  Nonpayment  Default  which is the subject of
such Stop Payment  Notice shall have been waived or cured  (whether by amendment
of any provisions of the Senior Credit Agreement or otherwise),  (b) a number of
days shall have elapsed as is necessary to prevent the total number of days that
a Stop Payment  Notice (or Stop Payment  Notices in the event that more than one
Stop Payment Notice has been given) is in effect during any  consecutive 365 day
period  from  exceeding  180  days in the  aggregate,  and  (c) the  date of the
repayment  in  full  in cash or Cash  Equivalents  of the  Senior  Debt  and the
termination  of any  commitment  to make further loans or advances in respect of
the Senior  Debt;  provided,  however,  that (i) the Senior  Agent  shall not be
permitted to issue a Stop Payment  Notice more than six times in the  aggregate;
(ii)  only  two  Stop  Payment  Notices  may  be  issued  in any  period  of 365
consecutive  days;  (iii) Payment Blockage Periods may not be in effect for more
than 180 days  (whether or not such days are  consecutive)  during any period of
365  consecutive  days, and if any Payment  Blockage  Period is in effect on the
181st day in any period of 365 consecutive  days,  such Payment  Blockage Period
will terminate  immediately;  and (iv) no Payment Blockage Period may be imposed
as a result of a Significant Nonpayment Default which served as the


                                      -6-
<PAGE>

basis for or was continuing during any previous Payment Blockage Period,  unless
any such  Significant  Nonpayment  Default  shall  have been  cured or waived or
otherwise  ceased to exist for a period  of not less  than 60  consecutive  days
after the date that the previous Stop Payment Notice was given.

     3.6 If, at any time during which the Senior  Credit  Facility is in effect,
the Holder  elects to exercise  any Remedies in respect of any Event of Default,
the Holder shall deliver to the Company and to the Senior Agent  written  notice
(an  "Enforcement  Notice")  specifying the Event or Events of Default which are
the basis for the exercise of such Remedies and stating that the Holder  intends
to  exercise  Remedies;  provided,  however,  that the  failure to deliver  such
Enforcement  Notice to the Senior  Agent  shall not affect the  validity  of the
Enforcement Notice as between such holder or holders and the Company.

     3.7 Notwithstanding anything contained in this Note to the contrary, for so
long as any amount is outstanding under the Senior Credit Facility including any
letter of credit reimbursement obligations or commitments,  the Holder shall not
exercise  any  Remedies  in respect  thereof  during  any period (a  "Standstill
Period") commencing on the first date the Holder, but for the provisions of this
Section 3, would have been entitled to exercise any Remedies and ending upon the
earliest of:

          (a) the date which is 10 business days after the Enforcement Notice is
     delivered  to the Company  and the Senior  Agent  pursuant to Section  3.6;
     provided,  however,  that if any Payment  Blockage  Period arising from the
     giving of a Stop  Payment  Notice is in  effect on such 10th  business  day
     after the  Enforcement  Notice is so  delivered,  this  clause (a) shall be
     ineffective to terminate such Standstill Period;

          (b) in the  event  that a Payment  Blockage  Period  arising  from the
     giving  of a Stop  Payment  Notice  is in  effect  on the date  which is 10
     business days after an  Enforcement  Notice is delivered to the Company and
     the Senior Agent  pursuant to Section 3.6, the  expiration  of such Payment
     Blockage Period;

          (c) the date that any holder of any Senior Debt commences the exercise
     of any Remedies in respect of such Senior Debt; and

          (d) the first date upon  which any of the Events of Default  described
     in Section 7.1(f) and (g) shall have occurred and be continuing  beyond any
     period of grace  specified  therein;  and,  in such  event,  the  automatic
     acceleration of this Note  contemplated in respect of such Event of Default
     pursuant to Section 7.2(a) shall occur  immediately upon the termination of
     the Standstill Period.

     3.8 If (a) any payment or  distribution  shall be paid to or  collected  or
received  by any holders of  Subordinated  Debt in  contravention  of any of the
terms of this Section 3 but whether or not any Stop Payment  Notice or (pursuant
to Section 3.4) payment blockage notice shall theretofore have been given (i.e.,
if paid, collected or received at a time when either such notice could have been
given had the Senior Agent been aware of circumstances  giving rise to the right
to deliver any such  notice);  and (b) the Senior Agent shall have  notified the
holders  of


                                      -7-
<PAGE>

Subordinated  Debt in  writing,  within 30 days  after the date such  payment or
distribution is made, of the facts by reason of which such payment or collection
or receipt so contravenes this Section 3 or constituted a Significant Nonpayment
Default;  then such  holders of  Subordinated  Debt will deliver such payment or
distribution,  to the extent  necessary to pay all such Senior Debt in full,  in
cash or Cash  Equivalents,  to the Senior Agent, on behalf of the holders of the
Senior Debt,  and,  until so delivered,  the same shall be held in trust by such
holders of Subordinated Debt as the property of the holders of such Senior Debt.
If any amount is  delivered  to the Senior  Agent  pursuant to this Section 3.8,
whether or not such amounts have been applied to the payment of Senior Debt, and
the  outstanding  Senior Debt shall  thereafter be paid in full, in cash or Cash
Equivalents,  by the Company or  otherwise  other than  pursuant to this Section
3.8,  the holders of Senior Debt shall  return to such  holders of  Subordinated
Debt an amount  equal to the amount  delivered  to such  holders of Senior  Debt
pursuant to this  Section  3.8, so long as after the return of such  amounts the
Senior Debt shall remain indefeasibly paid in full, in cash or Cash Equivalents.

     3.9  Except as  provided  in this  Section  3, the rights set forth in this
Section  3 of the  holders  of  the  Senior  Debt  as  against  each  holder  of
Subordinated  Debt shall remain in full force and effect  without regard to, and
shall not be impaired by:

          (a) any act or failure to act on the part of the Company;

          (b) any  extension or  indulgence in respect of or change in the time,
     manner or place of any payment or prepayment of the Senior Debt or any part
     thereof or in respect of any other  amount  payable to any holder of Senior
     Debt,  including,  without  limitation,  any  increase  in the Senior  Debt
     resulting  from  extension  of  additional  credit  to the  Company  or any
     subsidiary or otherwise and permitted by Section 6.3(iii) or (iv) hereof;

          (c) any amendment,  modification,  restatement,  refinancing or waiver
     of, or addition or supplement to, or deletion from, or compromise, release,
     consent or other  action in respect of, any of the terms of any Senior Debt
     or any other agreement which may be relating to any Senior Debt, other than
     such as would  cause  all or any  portion  of such Debt to fail to meet the
     definition of "Senior Debt;"

          (d) any exercise or  non-exercise  by any holder of Senior Debt of any
     right, power, privilege or remedy under or in respect of any Senior Debt or
     Subordinated  Debt or any waiver of any such  right,  power,  privilege  or
     remedy or any  default in respect  of any Senior  Debt or the  Subordinated
     Debt,  any dealing with or action  against or  application of proceeds from
     any  collateral  security  therefor  or any receipt by any holder of Senior
     Debt of any  security,  or any  failure  by any  holder of  Senior  Debt to
     perfect a security  interest in, or any release by any such Senior Debt of,
     any  security  for or  guaranty  of the  payment of any Senior  Debt or any
     manner of sale or other  disposition  of any  assets of the  Company or any
     subsidiary;

          (e)  any  merger  or  consolidation  of  the  Company  or  any  of its
     subsidiaries into or with any other  subsidiaries of the Company or into or
     with any  person,  or any  transfer  of any or all of the  property  of the
     Company  or any of its  subsidiaries  to any other  person  or any


                                      -8-
<PAGE>

     change,   restructuring  or  termination  of  the  corporate  structure  or
     existence of the Company or any of its subsidiaries;

          (f) the  absence  of any  notice  to, or  knowledge  by, any holder of
     Subordinated  Debt of the  existence or occurrence of any of the matters or
     events set forth in the foregoing clauses (a) through (e);

          (g) any  lack of  validity  or  enforceability  of any  instrument  or
     agreement  evidencing or securing any Senior Debt or any other agreement or
     instrument relating thereto; or

          (h) any other circumstance which might otherwise  constitute a defense
     available to, or a discharge of, the Company or any holder of  Subordinated
     Debt.

     3.10  Each  holder  of  Subordinated  Debt and the  Company  hereby  waives
promptness, diligence, notice of appearance and any other notice with respect to
any of the Senior Debt and these  provisions and any requirement that any holder
of the Senior Debt protect,  secure,  perfect or insure any security interest or
lien or any  property  subject  thereto or exhaust  any right to take any action
against the Company or any other person or entity or any collateral.

     3.11 The Company will,  and will use its  reasonable  efforts to cause each
holder of  Subordinated  Debt to, at the  Company's  expense and at any time and
from time to time,  promptly  execute and deliver  all further  instruments  and
documents,  and take all further actions, that may be necessary or desirable, or
that any holder of any Senior Debt may reasonably  request,  in order to protect
any right or interest granted or purported to be granted under this Section 3 or
enable the holders of the Senior Debt to exercise  and enforce  their rights and
remedies under these provisions.

     3.12 Each  holder of  Subordinated  Debt  waives any and all notices of the
acceptance  of the  provisions  of this Section 3 or of the  creation,  renewal,
extension or accrual, now or at any time in the future, of any Senior Debt.

     3.13  The  obligations  of each  holder  of  Subordinated  Debt  under  the
provisions  set forth in this Section 3 shall  continue to be  effective,  or be
reinstated,  as the case may be, as to any payment in respect of any Senior Debt
that is  rescinded  or must  otherwise  be returned by the holder of such Senior
Debt  upon  the  occurrence  or  as a  result  of  any  bankruptcy  or  judicial
proceeding, all as though such payment had not been made.

     3.14  Nothing  contained  in this  Section 3 shall  impair,  as between the
Company and any holder of  Subordinated  Debt,  the obligation of the Company to
pay to such holder the  principal  thereof and interest  thereon as and when the
same shall become due and payable in  accordance  with the terms  thereof and to
comply with each and every  provision  of this Note or prevent any holder of any
Subordinated  Debt from  exercising  all rights,  powers and remedies  otherwise
permitted by applicable law or under this Note, all subject to the rights of the
holders  of  the  Senior  Debt  hereunder  including  rights  to  receive  cash,
securities or other property  otherwise payable or deliverable to the holders of
Subordinated Debt.


                                      -9-
<PAGE>

     3.15  Upon  the  payment  in  full  of all  Senior  Debt,  the  holders  of
Subordinated Debt shall be subrogated to all rights of any holder of Senior Debt
to receive any further payments or  distributions  applicable to the Senior Debt
until the  Subordinated  Debt shall have been paid in full, and such payments or
distributions  received  by the holders of  Subordinated  Debt by reason of such
subrogation, of cash, securities or other property which otherwise would be paid
or distributed to the holders of Senior Debt,  shall, as between the Company and
its creditors  other than the holders of Senior Debt,  on the one hand,  and the
holders of  Subordinated  Debt,  on the other hand, be deemed to be a payment by
the Company on account of Senior Debt and not on account of  Subordinated  Debt.
Notwithstanding  the  foregoing  provisions  of this  Section  3.15 or any other
provision of this Note each holder of  Subordinated  Debt hereby  waives any and
all exoneration  and impairment  defenses that it may at any time have by law or
otherwise in respect of subrogation rights.

     3.16 Each holder of Subordinated Debt, by its acceptance thereof,  shall be
deemed to acknowledge and agree that the foregoing subordination provisions are,
and are intended to be, an inducement to and a  consideration  of each holder of
any Senior  Debt,  whether  such Senior  Debt was created or acquired  before or
after the creation of Subordinated  Debt, to acquire and hold, or to continue to
hold,  such  Senior  Debt,  and such  holder  of  Senior  Debt  shall be  deemed
conclusively  to have relied on such  subordination  provisions in acquiring and
holding,  or in continuing to hold, such Senior Debt. Each such holder of Senior
Debt is  intended to be, and is, a third party  beneficiary  of this  Section 3.
Each holder of Subordinated Debt acknowledges and agrees that the provisions set
forth in this Section 3 shall be enforceable against such holder of Subordinated
Debt by the holders of the Senior Debt.  Notwithstanding  anything  contained in
this Note to the contrary,  none of the provisions of this Section 3 (including,
without  limitation,  this  Section  3.16 and defined  terms used  herein)  may,
directly or indirectly, be amended, modified, supplemented or waived without the
prior  written  consent of the  Senior  Agent,  on behalf of the  holders of the
Senior Debt.

     3.17  Notwithstanding  the  other  provisions  of  this  Section  3.17,  no
amendment to or  refinancing  of the Senior Debt or any  agreement or instrument
related  thereto shall be entitled to the benefits of this Section 3 without the
consent of the Holder to the extent that such amendment would prohibit  directly
and expressly the Company or any subsidiary  from making  scheduled  payments in
respect of the Subordinated  Debt in accordance with the terms of this Agreement
as in effect on the date hereof or as may be amended to the extent  permitted by
the Senior Credit Agreement;  provided that no change of financial  covenants or
increase in the restrictiveness of negative covenants or events of default under
the Senior Debt documents  (that do not by their terms refer to this Note) shall
be deemed to constitute a prohibition  from making scheduled  payments,  even if
the ultimate  effect of any such change would cause the Company to be in default
under the Senior Debt if such a scheduled payment were made.

     3.18 This Note ranks (i) pari passu with all other Senior Subordinated Debt
and (ii) subordinate to the Senior Credit  Agreement and the Huntingdon  Secured
Subordinated  Note as such terms are  defined in the  Senior  Credit  Agreement.
Accordingly,  notwithstanding  any discrepancy as to the  identification in such
definition  by  date  and  amount  of  any  particular  9%  Convertible   Senior
Subordinated  Promissory  Note due  December  31,  2004,  this Note is deemed


                                      -10-
<PAGE>

to constitute one of the Notes comprising  "Senior  Subordinated Debt" under and
as defined in the Senior  Credit  Agreement  and  (except  that this Note is not
secured by any  collateral  or  Subsidiary  Guarantees)  is entitled to the same
rights and subject to the same restrictions as are accorded to such other Notes.

     3.19 As used  in  this  Section  3 and  elsewhere  in this  Agreement,  the
following terms have the respective meanings set forth below:

     "Credit  Facility"  means  and  includes  a  credit  agreement  or  similar
agreement  pursuant  to which the  lender or  lenders  commit(s)  to permit  the
Company,  subject  to the  conditions  therein,  to  obtain  from  time  to time
thereunder  term or revolving  loans and/or  letters of credit and  periodically
repay the same. "Junior  Subordinated Debt" means any Debt of the Company or any
subsidiary which is (a) issued on or after the Issue Date of this Note and which
is expressly subordinated in right of payment to any Debt of the Company, or (b)
owing to any  subsidiary  or  affiliate  of the  Company.  "Remedies"  means and
includes,  with respect to any Debt (including,  without limitation,  the Senior
Debt and the Subordinated  Debt):

          (a) the acceleration of the maturity of any of such Debt;

          (b) the  exercise of any put right or other  similar  right to require
     the Company or any  subsidiary to repurchase  any of such Debt prior to the
     stated maturity thereof;

          (c) the collection or commencement of proceedings against the Company,
     any subsidiary thereof or any other person obligated on such Debt or any of
     their respective property, to enforce or collect any of such Debt;

          (d) taking  possession  of or  foreclosing  upon  (whether by judicial
     proceedings or otherwise) any Liens or other  collateral  security for such
     Debt;  or  causing a  marshaling  of any  property  of the  Company  or any
     subsidiary;

          (e) the  making of a demand in respect  of any  Guaranty  given by the
     Company or any subsidiary of the Company of such Debt; or

          (f)  commencing  or joining in or causing  the  Company to commence or
     join in or assist the Company in  commencing,  any proceeding of the nature
     referred to in Section 7.1(f) or 7.1(g).

     3.20  exercising  any other remedies with respect to such Debt or any claim
with respect thereto.

     "Senior Agent" means,  for so long as the Senior Credit  Agreement  remains
outstanding, the administrative agent in respect of the Senior Credit Agreement,
and  thereafter,  any one  agent or  lender  in  respect  of the  Senior  Credit
Facility, or a representative of either,  designated in writing to the Holder by
the Company as being the "Senior Agent".

     "Senior Credit  Agreement"  means the Amended and Restated Credit Agreement
dated


                                      -11-
<PAGE>

as  of  the  date  hereof  among  the  Company,   ING  (U.S.)   Capital  LLC  as
administrative  agent  (together  with its  successors in such capacity) and the
banks,  financial institutions and other institutional lenders from time to time
named  therein,  as  it  may  be  amended,   supplemented,   extended,  renewed,
refinanced, restated or replaced in whole or in part.

     "Senior Credit Facility" means and includes:

          (a) the Senior Credit Agreement; and

          (b)  any  Credit  Facility  (whether  or not  secured),  which  Credit
     Facility has refinanced in whole or in part the Senior Debt governed by the
     terms of a Senior  Credit  Facility  which the  Company has  designated  in
     writing  to the Holder as being the  "Senior  Credit  Facility;"  provided,
     however,  that, by making such designation,  the predecessor  Senior Credit
     Facility  shall  cease  to be the  Senior  Credit  Facility  (but  any Debt
     outstanding or incurred  thereunder shall continue to be Senior Debt for so
     long as such Debt meets the definition thereof).

     "Senior  Debt"  means  and  includes  all   obligations,   liabilities  and
indebtedness  of the  Company  now  or  hereafter  existing,  whether  fixed  or
contingent,  and whether for principal or interest  (including  interest (at the
rate  specified in the  applicable  Senior Credit  Facility)  accruing after the
filing of a petition under the Bankruptcy Code,  whether or not allowed),  fees,
expenses, indemnification or otherwise (including letter of credit reimbursement
obligations whether or not any draw has occurred), in respect of:

          (c) the Senior Credit Facility;

          (d) the $800,000 principal amount 9% Convertible  Senior  Subordinated
     Promissory  Note Due December 31, 2002 issued by the Company to  Huntingdon
     Corporation on the Issue Date;

          (e) the 9% Convertible  Senior Promissory Notes Due September 30, 2002
     in the  aggregate  principal  amount of up to  $3,000,000  issued (or to be
     issued) by the  Company to  Huntingdon  Corporation  on and after the Issue
     Date; and

          (f) any other Debt of the  Company  owing to the  Senior  Agent or any
     lender  under  the  Senior  Credit  Facility  (whether  or not such  lender
     continues to be a lender  thereunder) with respect to any obligations under
     Bank Hedge Agreements (as defined in the Senior Credit  Agreement)  related
     to the Senior Credit  Agreement  that are or may become owed by the Company
     directly  or  indirectly,  other than Debt  incurred  pursuant  to a Senior
     Credit Facility.

     Notwithstanding the foregoing,  in no event shall "Senior Debt" include any
Junior Subordinated Debt.

     "Senior Subordinated Debt" means this Note, the $3,000,000 principal amount
9% Convertible Senior Subordinated  Promissory Note due December 31, 2004 issued
by the Company  payable to Evan Herrick and the $4,200,000  principal  amount 9%
Convertible  Promissory Note issued by the Company payable to ABC Investment LLC
and any guaranties  thereof  permitted to be issued by the  Subsidiaries  of the
Company from time to time  pursuant to Section  6.2(c)(iv)  of the Senior Credit
Agreement,  as the same may be amended,  modified or  supplemented  from time to
time


                                      -12-
<PAGE>

consistent  with  the  terms  of  this  Agreement  and any  further  amendments,
restatements or assignments of any such Notes whether in different denominations
or otherwise.

     "Significant Nonpayment Default" means and includes:

          (g) an event of default under the Senior Credit Facility in respect of
     the  failure  of the  Company  to  comply  with any  material  covenant  or
     agreement in respect of the Senior Credit Facility or documents executed or
     delivered in connection  therewith (it being understood that the provisions
     of Sections 2.13,  5.2, 5.5, 5.6, 5.7 and 5.13,  Article 6 and Article 8 of
     the  Senior  Credit  Agreement,  as in  effect on the date  hereof  and any
     comparable  provisions  in effect  after  the date  hereof,  are  "material
     covenants" for such purpose);  and any event of default under Sections 9.2,
     9.5, 9.7 through 9.14  (inclusively)  under the Senior Credit Agreement (or
     any comparable provision in effect after the date hereof); and

          (h) an event of  default in  respect  of the  Senior  Credit  Facility
     arising out of any Event of Default in respect of this Note.

     "Subordinated  Debt" means and includes all  obligations,  liabilities  and
indebtedness  of the  Company  now  or  hereafter  existing,  whether  fixed  or
contingent,  and whether for principal,  interest  (including  interest accruing
after the filing of a petition under the Federal  Bankruptcy Code, to the extent
allowed), fees, expenses, indemnification or otherwise, in respect of this Note.

4.  Conversion

     4.1 The Holder may convert the outstanding  principal  amount of this Note,
and  accrued  and unpaid  interest  thereon  (or a portion  of such  outstanding
principal  amount as provided in Section 4.3) into fully paid and  nonassessable
shares of Common Stock of the Company ("Conversion Shares") at any time prior to
the time the outstanding  principal  amount of this Note, and accrued and unpaid
interest thereon is paid in full, at the Conversion Price then in effect, except
that if this  Note is to be  prepaid  in  full or  repurchased  pursuant  to the
provisions  hereof,  such  conversion  right  shall  terminate  at the  close of
business on the Prepayment  Date or the Change in Control  Purchase Date, as the
case may be. The number of shares of Common Stock  issuable  upon  conversion of
this Note shall be determined by dividing the principal  amount (and accrued and
unpaid  interest,  if any) to be converted by the conversion  price in effect on
the Conversion Date (the "Conversion  Price").  The initial  Conversion Price is
$.56 and is subject to adjustment as provided in this Section 4.

     The  provisions of this Note that apply to  conversion  of the  outstanding
principal amount of this Note and accrued and unpaid interest thereon also apply
to a partial  conversion of this Note.  The Holder is not entitled to any rights
of a holder of Conversion  Shares until the Holder has converted this Note (or a
portion thereof) into Conversion  Shares,  and only to the extent that this Note
is deemed to have been  converted into  Conversion  Shares under this Section 4.

     4.2 To convert all or a portion of this Note,  the Holder must (a) complete
and sign a notice of  election  to  convert  substantially  in the form  annexed
hereto (each, a "Conversion Notice"), (b) surrender the Note to the Company, (c)
furnish  appropriate  endorsements  or  transfer  documents  if  required by the
Company and (d) pay any transfer or similar tax, if


                                      -13-
<PAGE>

required. The date on which the Holder satisfies all of such requirements is the
conversion date (the  "Conversion  Date").  As soon as  practicable,  and in any
event within three (3) business  days,  after the  Conversion  Date, the Company
will  deliver,  or cause to be delivered,  to the Holder a  certificate  for the
number of whole Conversion  Shares issuable upon such conversion and a check for
any  fractional  Conversion  Share  determined  pursuant  to Section 4.4 and for
interest on this Note  accrued and unpaid  through the  Conversion  Date (unless
such  interest  has also been  converted  as  permitted  by this Section 4). The
person in whose name the certificate  for Conversion  Shares is to be registered
shall become the  shareholder  of record on the  Conversion  Date and, as of the
Conversion  Date, the rights of the Holder shall cease as to the portion thereof
so converted;  provided,  however,  that no surrender of a Note on any date when
the stock  transfer  books of the Company  shall be closed shall be effective to
constitute  the person  entitled  to receive  the  Conversion  Shares  upon such
conversion as the shareholder of record of such Conversion  Shares on such date,
but such  surrender  shall be effective  to  constitute  the person  entitled to
receive such  Conversion  Shares as the  shareholder  of record  thereof for all
purposes at the close of business on the next succeeding day on which such stock
transfer books are open;  provided  further that such conversion shall be at the
Conversion  Price  in  effect  on the  date  that  this  Note  shall  have  been
surrendered  for  conversion,  as if the stock transfer books of the Company had
not been closed.

     4.3 In the case of a partial conversion of this Note, upon such conversion,
the Company  shall  execute  and  deliver to the  Holder,  at the expense of the
Company,  a new Note in an aggregate  principal  amount equal to the unconverted
portion  of the  principal  amount.  This  Note  may be  converted  in part in a
principal  amount equal  $100,000 or an integral  multiple  thereof,  unless the
outstanding  principal amount of this Note is less than $100,000, in which case,
only such  outstanding  principal amount and accrued and unpaid interest thereon
is convertible into Conversion Shares.

     4.4 No fractional Conversion Shares shall be issued upon conversion of this
Note.  Instead of any  fractional  Conversion  Share  which would  otherwise  be
issuable  upon  conversion of this Note,  the Company shall  calculate and pay a
cash  adjustment in respect of such fraction  (calculated to the nearest 1/100th
of a share) in an amount equal to the same fraction of the  Conversion  Price at
the close of business on the Conversion Date.

     4.5 The issuance of certificates for Conversion  Shares upon the conversion
of any Security shall be made without charge to the Holder for such certificates
or for  any tax in  respect  of the  issuance  of such  certificates,  and  such
certificates shall be issued in the name of, or in such names as may be directed
by, the  Holder;  provided,  however,  that in the event that  certificates  for
Conversion Shares are to be issued in a name or names other than the name of the
Holder,  such Note, when surrendered for conversion,  shall be accompanied by an
instrument of transfer,  in form  satisfactory to the Company,  duly executed by
the Holder or his duly authorized attorney; and provided further, moreover, that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer  involved in the issuance and delivery of any such  certificates
in a name or names other than that of the Holder,  and the Company  shall not be
required  to issue or deliver  such  certificates  unless or until the person or
persons  requesting  the


                                      -14-
<PAGE>

issuance  thereof shall have paid to the Company the amount of such tax or shall
have  established to the satisfaction of the Company that such tax has been paid
or is not applicable.

     4.6 (a) In case the Company  shall at any time after the date hereof issue,
grant or sell any Additional Stock (as hereinafter defined) for a consideration,
exercise or conversion  price per share less than the Conversion Price in effect
immediately  prior to the issuance or sale of such Additional  Stock, or without
consideration,  then forthwith upon such issuance or sale, the Conversion  Price
shall (upon such issuance or sale) be reduced to a price  determined by dividing
(i) an amount equal to the sum of (a) the total number of shares of Common Stock
outstanding  immediately  prior  to  such  issuance  or sale  multiplied  by the
Conversion Price then in effect, plus (b) the consideration, if any, received by
the Company  upon such  issuance or sale,  by (ii) the total number of shares of
Common Stock  outstanding  immediately  after such  issuance or sale;  provided,
however,  that in no event shall the  Conversion  Price be adjusted  pursuant to
this  computation  to an  amount in  excess  of the  Conversion  Price in effect
immediately  prior to such  computation,  except as provided  in 4.6(d)  hereof.
"Additional Stock" shall mean Common Stock or options,  warrants or other rights
to acquire or securities  convertible  into or exchangeable for shares of Common
Stock,  including  shares held in the Company's  treasury,  and shares of Common
Stock issued upon the  exercise of any options,  rights or warrants to subscribe
for shares of Common  Stock and shares of Common Stock issued upon the direct or
indirect  conversion or exchange of securities for shares of Common Stock, other
than:

          (A) This Note.

          (B) Common Stock issued or issuable upon conversion of this Note.

          (C) Common Stock issued or issuable upon the conversion or exercise of
     options,  warrants, rights and other securities or debt convertible into or
     exercisable or exchangeable for Common Stock outstanding on the date hereof
     or issued on the date hereof;

          (D) Common Stock or options,  warrants,  stock appreciation  rights or
     other rights  available for future grant under the  Company's  stock option
     plans or stock  incentive plan or any future stock option or incentive plan
     approved by the Company's shareholders;

          (E) Common Stock  issuable upon exercise of options,  warrants,  stock
     appreciation  rights or other rights  outstanding  or available  for future
     grant under the Company's stock option plans or stock incentive plan or any
     future  stock  option  or  incentive   plan   approved  by  the   Company's
     shareholders;   provided,   that,   any  such  options,   warrants,   stock
     appreciation  rights  or other  rights  provide  for an  exercise  price or
     conversion  price at least  equal to the lesser of the Market  Price or the
     last sale price of the  Common  Stock on the day of or day prior to (i) the
     date of approval of such grant by the Board of  Directors  or (ii) the date
     of execution of an agreement relating to such grant;

          (F)  Warrants  to be  issued  in  connection  with the  Senior  Credit
     Agreement and shares of Common Stock  issuable  upon the exercise  thereof,
     and

          (G) Common Stock or options,  warrants,  rights or other securities or
     debt convertible into, or exercisable or exchangeable for, Common Stock (or
     shares of Common Stock issuable upon the conversion or exercise thereof) in
     connection with future acquisitions.


                                      -15-
<PAGE>

          (H) Common Stock or options,  warrants,  rights or other securities or
     debt  issuable as a result of  anti-dilution  adjustments  to any  options,
     warrants, rights or other securities or debt; and

          (I) The convertible  notes  evidencing the additional  $2,000,000 Debt
     permitted  under Section  6.3(L) hereof and the Common Stock  issuable upon
     conversion  thereof.  (b) For the purpose of any  computation to be made in
     accordance with Section 4.6(a), the following provisions shall apply:

               (i) In case of the issuance or sale of shares of Common Stock for
          a consideration  part or all of which shall be cash, the amount of the
          cash  consideration  therefor shall be deemed to be the amount of cash
          received by the Company for such shares (or, if shares of Common Stock
          are offered by the Company for subscription,  the subscription  price,
          or, if such  securities  shall be sold to  underwriters or dealers for
          public offering  without a subscription  offering,  the initial public
          offering price) before deducting  therefrom any  compensation  paid or
          discount  allowed in the sale,  underwriting  or  purchase  thereof by
          underwriters or dealers or others performing similar services,  or any
          expenses incurred in connection therewith.

               (ii) In the case of the  issuance  or sale  (otherwise  than as a
          dividend or other  distribution on any stock of the Company) of shares
          of Common  Stock  for a  consideration  part or all of which  shall be
          other than cash, the amount of the  consideration  therefor other than
          cash shall be deemed to be the fair market value of such consideration
          as determined in good faith by the Board of Directors.

               (iii) The  reclassification  of  securities  of the Company other
          than shares of Common Stock into securities including shares of Common
          Stock shall be deemed to involve the issuance of such shares of Common
          Stock for a  consideration  other than cash  immediately  prior to the
          close of business on the date fixed for the  determination of security
          holders  entitled  to  receive  such  shares,  and  the  value  of the
          consideration  allocable  to such  shares  of  Common  Stock  shall be
          determined as provided in Section 4.6(b)(ii).

               (iv) In the case of the issuance of options,  rights, or warrants
          to  purchase  or  subscribe  for  shares of Common  Stock,  securities
          convertible  into or  exchangeable  for  shares  of Common  Stock,  or
          options,  rights or warrants to  purchase  or  subscribe  for any such
          convertible or exchangeable securities, the following provisions shall
          apply:

          (B) The aggregate  maximum  number of shares of Common Stock  issuable
     under such  options,  rights or  warrants  shall be deemed to be issued and
     outstanding at the time such options,  rights or warrants were issued,  and
     shall be deemed  to be  issued  for a  consideration  equal to the  minimum
     purchase price per share  provided for in such options,  rights or warrants
     at the time of issuance  plus the  consideration,  if any,  received by the
     Company in  connection  with sale or  issuance of such  options,  rights or
     warrants;  provided, however, that upon the expiration or other termination
     of such  options,  rights or warrants,  if any thereof  shall not have been
     exercised,  the  number of shares of Common  Stock  deemed to be issued and


                                      -16-
<PAGE>

     outstanding pursuant to this subsection (A) shall be reduced by such number
     of shares as to which options, warrants and/or rights shall have expired or
     terminated unexercised,  and such number of shares of Common Stock shall no
     longer be deemed to be issued and  outstanding,  and the  Conversion  Price
     then in effect shall  forthwith be readjusted  and  thereafter be the price
     which it would have been had such  adjustment been made on the basis of the
     issuance  only of shares of Common Stock  actually  issued or issuable upon
     the exercise of those options,  rights or warrants as to which the exercise
     of  rights  shall  not have  expired  or  terminated  unexercised.

          (C) The aggregate  maximum  number of shares of Common Stock  issuable
     upon conversion or exchange of any  convertible or exchangeable  securities
     shall be deemed to be issued and  outstanding  at the time of  issuance  of
     such securities, and shall be deemed to be issued for a consideration equal
     to the consideration received by the Company in connection with the sale of
     such securities plus the consideration,  if any,  receivable by the Company
     upon the conversion or exchange thereof;  provided,  however, that upon the
     termination  of the  right to  convert  or  exchange  such  convertible  or
     exchangeable securities (whether by reason of redemption or otherwise), the
     number of  shares  deemed to be issued  and  outstanding  pursuant  to this
     subsection  (B) shall be reduced  by such  number of shares as to which the
     conversion or exchange rights shall have expired or terminated unexercised,
     and such  number  of shares  shall no  longer  be  deemed to be issued  and
     outstanding  and the  Conversion  Price then in effect  shall  forthwith be
     readjusted  and  thereafter  be the price which it would have been had such
     adjustment  been made on the basis of the issuance only of shares  actually
     issued or issuable upon the conversion or exchange of those  convertible or
     exchangeable securities as to which the conversion or exchange rights shall
     not have expired or terminated unexercised.

          (D) If any change  shall occur in the price per share  provided for in
     any  of  the   options,   rights  or   warrants   referred  to  in  Section
     4.6(b)(iv)(A),  or in the price per share at which the securities  referred
     to in Section 4.6(b)(iv)(B) are convertible or exchangeable,  such options,
     rights or warrants or  conversion or exchange  rights,  as the case may be,
     shall be deemed to have expired or  terminated  on the date when such price
     change  became  effective  in  respect  of shares  not  theretofore  issued
     pursuant to the exercise or conversion or exchange thereof, and the Company
     shall be  deemed to have  issued  upon  such  date new  options,  rights or
     warrants or  convertible  or  exchangeable  securities  at the new price in
     respect of the number of shares issuable upon the exercise of such options,
     rights or warrants or the  conversion  or exchange of such  convertible  or
     exchangeable securities.

          (E) Except as otherwise provided in this Section 4.6(b), no adjustment
     of the  Conversion  Price  shall be made upon the actual  issuance  of such
     Common  Stock upon  exercise  of  options,  rights or  warrants or upon the
     actual  issuance of such Common  Stock upon  conversion  or exchange of any
     convertible or exchangeable securities.

     (c) In case the Company shall pay or make a dividend or other  distribution
to all holders of its Common  Stock in shares of Common  Stock,  the  Conversion
Price in effect at the opening of business  on the day next  following  the date
fixed for the determination of shareholders entitled to receive such dividend or
other  distribution  shall be reduced by multiplying  such Conversion Price by a
fraction,  of which the numerator  shall be the number of shares of Common Stock
outstanding  at the close of business on the date fixed for such


                                      -17-
<PAGE>

determination,  and the  denominator  shall be the sum of the  numerator and the
total number of shares  constituting such dividend or other  distribution,  such
reduction to become effective  immediately  after the opening of business on the
day next  following the date fixed for such  determination.  For the purposes of
this  Section  4.6(c),  the  number  of  shares  of  Common  Stock  at any  time
outstanding shall not include shares of Common Stock held in the treasury of the
Company.  The  Company  will not pay any  dividend or make any  distribution  on
shares of Common Stock held in the treasury of the Company.

     (d) In the event that the Company shall at any time prior to the conversion
in full of the Note declare a dividend (other than a dividend  consisting solely
of shares of Common  Stock or a cash  dividend  or  distribution  payable out of
current or retained  earnings) or otherwise  distribute to its holders of Common
Stock  any  monies,  assets,   property,   rights,  evidences  of  indebtedness,
securities (other than shares of Common Stock), whether issued by the Company or
by another person or entity,  or any other thing of value, the Holder or Holders
of the Note to the extent of the unconverted portion thereof shall thereafter be
entitled,  in  addition  to the  shares  of  Common  Stock or  other  securities
receivable  upon the conversion  thereof,  to receive,  upon  conversion of such
unconverted  portion of the Note,  the same monies,  property,  assets,  rights,
evidences  of  indebtedness,  securities  or any other  thing of value that they
would  have  been   entitled  to  receive  at  the  time  of  such  dividend  or
distribution.  At the time of any such  dividend  or  distribution,  the Company
shall  make  appropriate  reserves  to  ensure  the  timely  performance  of the
provisions of this Subsection.

     (e) In case the outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock,  the  Conversion  Price in effect at
the opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately reduced, and, conversely, in case the
outstanding  shares of Common Stock shall each be combined into a smaller number
of shares of Common  Stock,  the  Conversion  Price in effect at the  opening of
business  on the day  following  the day upon  which  such  combination  becomes
effective shall be proportionately increased, such reduction or increase, as the
case may be, to become  effective  immediately  after the opening of business on
the day following the day upon which such  subdivision  or  combination  becomes
effective.

     (f) In case the  Company  shall fail to take a record of the holders of its
shares of Common Stock for the purpose of  entitling  them to receive a dividend
or other  distribution  payable in shares of Common Stock, then such record date
shall be deemed to be the date of the issue of the shares of Common Stock deemed
to have been  issued as a result of the  declaration  of such  dividend or other
distribution  or the  date of the  granting  of such  right of  subscription  or
purchase, as the case may be.

     4.7 No adjustment  in the  Conversion  Price shall be required  unless such
adjustment  would require an increase or decrease of at least one cent ($.01) in
the Conversion Price; provided, however, that any adjustments which by reason of
this Section 4.7 are not required to be made shall be carried  forward and taken
into account in any subsequent adjustment.


                                      -18-
<PAGE>

     4.8 Notice of Certain Events.

     (a) In the event that: (i) the Company takes any action which would require
an  adjustment  in the  Conversion  Price;  (ii) the  Company  takes any  action
described  in Section  4.9(a),  (b) or (c); or (iii) there is a  dissolution  or
liquidation of the Company; the Holder may wish to convert this Note into shares
of Conversion  Shares prior to the record date for or the effective  date of the
transaction  so that such Holder may receive the  securities  or assets  which a
holder  of  shares of Common  Stock on that  date may  receive.  Therefore,  the
Company  shall give notice to the Holder in  accordance  with the  provisions of
this Section 4.8 stating the proposed  record or effective date, as the case may
be, which notice shall be given prior to the proposed  record or effective  date
and, in any case, no later than notice of such  transaction  is given to holders
of Common  Stock.  Failure to give such notice or any defect  therein  shall not
affect the validity of any transaction  referred to in clause (i), (ii) or (iii)
of this Section.

     (b)  Upon  the  occurrence  of  each  adjustment  or  readjustment  of  the
Conversion Price pursuant to this Section 4, the Company, at its expense,  shall
promptly  compute such  adjustment or  readjustment in accordance with the terms
hereof and prepare and furnish to each Holder a  statement,  signed by its chief
financial officer,  setting forth such adjustment or readjustment and showing in
reasonable detail the facts upon which such adjustment or readjustment is based.
The Company shall,  upon the written request at any time of any Holder,  furnish
or cause to be furnished  to such Holder a like  certificate  setting  forth (i)
such  adjustment  and  readjustment,  (ii) the  Conversion  Price at the time in
effect,  and (iii) the number of shares of Common Stock and the amount,  if any,
of other property which at the time would be received upon the Conversion of the
portion of this Note specified in such request.

     4.9 If any of the following shall occur, namely:

          (a) any  reclassification  or change of  outstanding  shares of Common
     Stock  issuable  upon  conversion  of this Note (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);

          (b) any consolidation or merger to which the Company is a party, other
     than a merger in which the Company is the continuing  corporation and which
     does not result in any  reclassification of, or change (other than a change
     in name,  or 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)  in,
     outstanding shares of Common Stock; or

          (c) any sale or conveyance of all or substantially all of the property
     or business of the Company and its subsidiaries as an entirety;

then the Company, or such successor or purchasing  corporation,  as the case may
be,  shall,  as  a  condition  precedent  to  such   reclassification,   change,
consolidation, merger, sale or conveyance, execute and deliver to the Holder, an
agreement in form  satisfactory  to the Holder  providing  that the Holder shall
have the right to convert  this Note into the kind and amount of shares of stock
and  other  securities  and  property  (including  cash)  receivable  upon  such
reclassification,  change, consolidation, merger, sale or conveyance by a holder
of the number of shares of Common Stock deliverable upon conversion of this Note
immediately prior to such reclassification,  change, consolidation, merger, sale
or conveyance.  Such agreement  shall provide for  adjustments of the Conversion
Price  which  shall  be as  nearly  equivalent  as  may  be  practicable  to the
adjustments of the  Conversion  Price


                                      -19-
<PAGE>

provided  for in this  Section  4. If,  in the  case of any such  consolidation,
merger,  sale  or  conveyance,  the  stock  or  other  securities  and  property
(including  cash)  receivable  thereupon  by a holder of Common  Stock  includes
shares of stock or other securities and property of a corporation other than the
successor or purchasing corporation,  as the case may be, in such consolidation,
merger,  sale or conveyance,  then such agreement shall also be executed by such
other  corporation and shall contain such  additional  provisions to protect the
interests  of the Holder as the Board of  Directors  shall  reasonably  consider
necessary by reason of the  foregoing.  The provisions of this Section 4.9 shall
similarly  apply  to  successive  reclassifications,   changes,  consolidations,
mergers,  sales or conveyances.

     4.10 The Company shall at all times reserve and keep  available,  free from
preemptive rights,  out of its authorized and unissued Common Stock,  solely for
the  purpose  of  effecting  the  conversion  of this Note,  the full  number of
Conversion Shares then issuable upon the conversion in full of this Note.

     4.11 If the Company or an affiliate of the Company  shall at any time after
the date hereof and prior to the conversion of the Note in full issue any rights
to subscribe  for shares of Common Stock or any other  securities of the Company
or of such affiliate to all the  shareholders of the Company,  the Holder of the
unconverted portion of the Note shall be entitled,  in addition to the shares of
Common Stock or other  securities  receivable  upon the Conversion  thereof,  to
receive  such  rights  at the time  such  rights  are  distributed  to the other
shareholders of the Company.

5. Affirmative Covenants

     The Company  covenants  that on and after the Issue Date and so long as any
portion of the Note shall be outstanding:

     5.1 The  Company  will,  and will  cause each of its  Subsidiaries  to, pay
before they  become  delinquent:  (a) all taxes,  assessments  and  governmental
charges or levies imposed upon it or its property; and (b) all claims or demands
of materialmen,  mechanics, carriers, warehousemen, vendors, landlords and other
like  persons  that,  if unpaid,  might by law become a Lien upon its  property;
provided,  that items of the foregoing  description  need not be paid so long as
such items are being contested in good faith and by appropriate  proceedings and
as to which  appropriate  reserves in accordance with GAAP have been established
and  maintained  with  respect  thereto,  unless  and until  any Lien  resulting
therefrom attaches to its property and becomes enforceable,  unless such Lien is
effectively stayed or fully bonded pending the disposition of such proceedings.

     5.2 The Company will, and will cause each of its subsidiaries to:

          (a) maintain its property that is reasonably  necessary in the conduct
     of its business as it is currently  being  conducted in good working  order
     and condition,  ordinary wear and tear,  obsolescence  and insured casualty
     losses excepted;

          (b) maintain,  with  insurers  reasonably  believed to be  financially
     sound and  reputable,  insurance  with respect to its property and business
     against  such  casualties  and


                                      -20-
<PAGE>

     contingencies,  of such types and in such  amounts as is  customary  in the
     case  of  corporations  engaged  in the  same  or a  similar  business  and
     similarly situated;

          (c) keep proper books of record and account, in which full and correct
     entries shall be made of all dealings and transactions of or in relation to
     the properties and business thereof;

          (d) do or cause to be done all things reasonably necessary to preserve
     and keep in full force and effect its corporate existence, corporate rights
     (charter and  statutory) and corporate  franchises,  except as permitted by
     Section 6.1;

          (e) comply, in all material respects,  with all applicable laws, rules
     and regulations (including,  without limitation,  ERISA, Environmental Laws
     and Environmental Permits) and obtain all licenses, permits, franchises and
     other  governmental  authorizations  necessary  for  the  ownership  of its
     properties and the conduct of its business,  except where its obligation to
     so comply being contested in good faith and by appropriate  proceedings and
     adequate resources have been established are being maintained in accordance
     with GAAP,  and except  where  failure to comply  could not  reasonably  be
     expected to have a Material Adverse Effect; and

          (f) conduct its business so as not to become  subject to any liability
     under any Environmental Law that,  individually or in the aggregate,  could
     reasonably be expected to have a Material  Adverse  Effect and except where
     any  such  liability  is  being  contested  in good  faith  by  appropriate
     proceedings  and  adequate  reserves  have been  established  and are being
     maintained in accordance with GAAP.

     5.3 The  Company  will  conduct,  and  cause  each of its  subsidiaries  to
conduct,  all  transactions  otherwise  permitted by this Note with any of their
Affiliates on terms that are fair and  reasonable  and no less  favorable to the
Company or any such subsidiary than it could obtain in a comparable  arms-length
transaction with a person not an Affiliate; provided, however, that this Section
5.3 shall not be deemed to prohibit any transactions  solely between the Company
and  its  wholly-owned  subsidiaries  carried  out in  the  ordinary  course  of
business, subject, however, to any applicable provisions of Section 6.

     5.4 The Company  shall  deliver to the Holder,  except during any period in
which the Holder or an  Affiliate  thereof is serving as a director or executive
officer of the Company:

          (a) as soon as  available  and in any event  within  thirty  (30) days
     after  the  end  of  each  month  which  is not a  fiscal  quarter  end,  a
     consolidated  balance sheet,  statement of income and cash flows commencing
     April  1999,  of the Company  and its  subsidiaries,  as of the end of such
     month and for the period  commencing  at the end of the previous  month and
     ending with the end of such month and consolidated  statement of income and
     a consolidated statement of cash flows of the Company and its subsidiaries,
     for the period  commencing  at the end of the  previous  fiscal year of the
     Company and ending with the end of such month,  setting  forth in each case
     commencing April 2000 in comparative form the corresponding figures for the


                                      -21-
<PAGE>

     corresponding period of the prior fiscal year, all in reasonable detail and
     duly certified by the chief financial officer of the Company.

          (b) as soon as  practicable  after the end of each of the first  three
     quarterly  fiscal  periods in each fiscal year of the  Company,  and in any
     event within 55 days thereafter: (i) a consolidated balance sheet as at the
     end of such quarter;  and (ii)  consolidated  statements of income and cash
     flows for such  quarter and (in the case of the second and third  quarters)
     for the  portion of the  fiscal  year  ending  with such  quarter;  for the
     Company and its  subsidiaries,  setting forth in each case, in  comparative
     form,  the  financial  statements  for  the  corresponding  periods  in the
     previous fiscal year, all in reasonable detail, prepared in accordance with
     GAAP applicable to quarterly financial statements generally,  and certified
     as complete and correct by the Chief Financial Officer of the Company,  and
     accompanied  by the  certificate  required by Section 5.5;  provided,  that
     timely  delivery of copies of the Company's  Quarterly  Report on Form 10-Q
     filed with the Securities and Exchange  Commission  ("SEC") shall be deemed
     to  satisfy  the  requirements  of  this  Section  5.4(b)  so  long as such
     Quarterly Report contains or is accompanied by the information specified in
     this Section 5.4(b);

          (c) as soon as  practicable  after the end of each  fiscal year of the
     Company,  and in any event within 110 days  thereafter:  (i) a consolidated
     balance sheet as at the end of such year; and (ii) consolidated  statements
     of income,  stockholders'  equity  and cash  flows for such  year;  for the
     Company and its  subsidiaries,  setting  forth,  in  comparative  form, the
     financial statement for the previous fiscal year, all in reasonable detail,
     prepared in accordance  with GAAP, and  accompanied by: (A) an audit report
     thereon of independent  certified public accountants of recognized national
     standing,  which report shall state without  qualifications  related to the
     scope of the audit,  the  compliance of the audit with  generally  accepted
     auditing  standards or the ability of the Company or a material  subsidiary
     thereof to continue as a going concern, that such financial statements have
     been prepared and are in  conformity  with GAAP;  and (B) the  certificates
     required by Section 5.5 and Section 5.6; provided,  that timely delivery of
     the  Company's  Annual  Report on Form 10-K for such fiscal year filed with
     the SEC shall be deemed to satisfy the  requirements of this Section 5.4(c)
     so long as such Annual Report contains or is accompanied by the reports and
     other information otherwise specified in this Section 5.4(c);

          (d) promptly upon their becoming available, and in any event within 15
     days  thereafter:  (i) each financial  statement,  report,  notice or proxy
     statement sent by the Company to stockholders generally;  (ii) each regular
     or periodic report  (including,  without  limitation,  each Form 10-K, Form
     10-Q and Form 8-K),  any  registration  statement  which  shall have become
     effective  with respect to a public  offering of  securities of the Company
     for its own account, and all amendments thereto filed by the Company or any
     subsidiary thereof with the SEC;

          (e) within 15 business days after any executive officer of the Company
     becoming  aware  (i) of the  existence  of any  condition  or  event  which
     constitutes  a Default or an Event of  Default;  or (ii) that the holder of
     any Debt in a  principal  amount of $400,000 or more (other than this Note)
     shall have given notice or taken any other action with respect to a claimed
     or  default  or event of  default;  a notice  specifying  the nature of the
     claimed  Default,  Event of Default or default or event of default  and the
     notice  given or action  taken (if any) by such  holder


                                      -22-
<PAGE>

     of Debt  (other  than this Note) and what  action the  Company is taking or
     proposes to take with respect thereto;

          (f) promptly upon receipt thereof, a copy of each report or management
     letter  submitted to the Company or any  subsidiary  thereof by independent
     accountants in connection with any annual, interim or special audit made of
     the books of the Company or such subsidiary;

          (g)  promptly  after the  commencement  of any  action  or  proceeding
     relating  to the Company or any  subsidiary  thereof in any court or before
     any court, other governmental authority or arbitration tribunal as to which
     there is a reasonable  possibility of an adverse determination and that, if
     adversely  determined,  would  have a  Material  Adverse  Effect,  a notice
     specifying  the nature and period of existence  thereof and what action the
     Company  or such  subsidiary  is taking or  proposes  to take with  respect
     thereto; and

          (h) with  reasonable  promptness,  such other data and  information as
     from time to time may be reasonably requested by the Holder.

     5.5 Each set of financial  statements  delivered to the Holder  pursuant to
Section  5.4(a),  Section  5.4(b),  or Section  5.4(c) shall be accompanied by a
certificate of the Chief Financial  Officer,  setting forth a statement that the
signer has  reviewed the  relevant  terms  hereof and has made,  or caused to be
made,  under his  supervision  or authority,  a review of the  transactions  and
conditions  of the  Company  and its  subsidiaries  from  the  beginning  of the
accounting period covered by the income statements being delivered  therewith to
the date of the  certificate  and that such review shall not have  disclosed the
existence  during  such  period of any  condition  or event that  constitutes  a
Default or an Event of Default  or, if any such  condition  or event  existed or
exists,  specifying  the nature and period of existence  thereof and what action
the Company shall have taken or proposes to take with respect thereto.

     5.6 Each set of annual financial  statements  delivered pursuant to Section
5.4(c) shall be  accompanied by a certificate  of the  accountants  that audited
such financial statements, stating that they have reviewed this Note and stating
further,  whether,  in making their audit, such accountants have become aware of
any  condition or event that then  constitutes a Default or an Event of Default,
and, if such accountants are aware that any such condition or event then exists,
specifying the nature and period of existence thereof.

     5.7 The Company  will,  except during any period in which the Holder or any
Affiliate  thereof is serving as a director or executive officer of the Company,
permit  the  representatives  of the  Holder  to visit  and  inspect  any of the
properties  of the  Company or any of its  Subsidiaries,  to  examine  all their
respective books of account,  records,  reports and other papers, to make copies
and extracts therefrom,  and to discuss their respective  affairs,  finances and
accounts  with  their  respective  executive  officers  and  independent  public
accountants  (and by this provision the Company  authorizes said  accountants to
discuss the  finances  and affairs of the Company and its  Subsidiaries)  all at
such reasonable times and as often as may be reasonably requested.  At all times
during  which  there  exists a Default or Event of  Default,  except  during any
period in which the Holder or any Affiliate  thereof is serving as a director or
executive  officer of the Company,


                                      -23-
<PAGE>

expenses incurred by the Holder of this Note in connection with this Section 5.7
shall be reimbursed by the Company to the Holder.

     5.8 The Company will make all payments and otherwise perform,  or cause the
relevant subsidiary of the Company to pay or otherwise perform,  all obligations
in  respect of all leases of real  property  to which the  Company or any of its
subsidiaries is a party, keep such leases in full force and effect and not allow
such leases to lapse or be  terminated  or any rights to renew such leases to be
forfeited  or  canceled,  notify  the  Holder of any  default  by any party with
respect  to such  leases  (except  during  any period in which the Holder or any
Affiliate  thereof is serving as a director or executive officer of the Company)
and  cooperate  with the Holder in all  respects to cure any such  default,  and
cause each of its  subsidiaries to do so except,  in any case, where the failure
to do so,  either  individually  or in the  aggregate,  could not  reasonably be
expected to have a Material Adverse Effect and except where its failure to do so
is being contested in good faith and by proper proceedings.

     5.9  The  Company  will  perform  and  observe,   and  cause  each  of  its
subsidiaries to perform and observe, all of the material terms and provisions of
each Material  Contract (as that term is defined in the Senior Credit Agreement)
to which it is a party to be  performed or observed by it,  maintain,  and cause
each of its subsidiaries to maintain, each such Material Contract to which it is
a  party  in  full  force  and  effect,  and  enforce,  and  cause  each  of its
subsidiaries to enforce,  each such Material  Contract to which it is a party in
accordance  with its  terms,  except  where  the  failure  to do so would not be
reasonably likely to have a Material Adverse Effect and except where its failure
to do so is being contested in good faith and by proper proceedings.

     5.10 The Company will perform and observe, or cause the relevant subsidiary
of the Company to perform and observe,  all of the material terms and provisions
of  each  Acquisition  Obligation  to be  performed  or  observed  by it or such
subsidiary,  maintain each such Acquisition Obligation in full force and effect,
enforce each such Acquisition  Obligation in accordance with its terms, take all
such  action to such end as may be from  time to time  requested  by the  Holder
required  in  order  to  enforce  its  material  rights  under  the  Acquisition
Obligations  and,  upon request of the Holder,  make to each other party to each
such  Acquisition  Obligation  such  demands  and  requests  for  action  or for
information  and  reports as the  Company or any  subsidiary  of the  Company is
entitled to make under such Acquisition  Obligation required in order to enforce
its material rights under the Acquisition Obligations.

     5.11 The Company shall  promptly,  and in any case within 30 days after the
date  hereof,  cause  each of its  existing  direct  and  indirect  wholly-owned
subsidiaries  and any such  subsidiaries of the Company  hereafter formed and/or
acquired  by the  Company  (or any  subsidiary  of the  Company) to issue to the
Holder a guaranty of the Company's obligations under this Note, which guaranties
shall be substantially  similar to the Subsidiary  Guaranties issued pursuant to
the Senior Credit Agreement, except that such guaranties will be subordinated to
the obligations of such subsidiaries  under the Subsidiary  Guaranties issued or
to be issued by such subsidiaries  under the Senior Credit Agreement  consistent
with the  subordination  provisions  set forth in Section 3 of this  Note,  will
guaranty the obligations of the Company under


                                      -24-
<PAGE>

this Note and will otherwise be in form and substance reasonably satisfactory to
the Holder and the Senior Agent.

6. Negative Covenants

     6.1 The Company  will not, and will not permit any  subsidiary  thereof to,
(a) merge with or into or  consolidate  with any other person,  permit any other
person to merge or consolidate with or into it, or (b) sell all or substantially
all of its property to any other person;  provided,  however, that the foregoing
restriction  does not apply to the merger or  consolidation  of the Company with
another  corporation or transfer of all or substantially  all of the property of
the Company to any other person if: (i) the  corporation  that results from such
merger or consolidation or to which all or substantially  all of the property of
the Company is transferred (the "Surviving  Corporation") (x) is organized under
the  laws  of,  and  conducts   substantially   all  of  its  business  and  has
substantially all of its properties  within, the United States of America or any
jurisdiction  or  jurisdictions   thereof  and  (y)  has  shareholders'   equity
immediately  after  such  transaction  that is  equal  to or  greater  than  the
shareholders' equity of the Company immediately prior to such transaction;  (ii)
the due and  punctual  payment of the  principal  of, and interest on this Note,
according to their tenor, and the due and punctual performance and observance of
all the covenants in this Note, to be performed or observed by the Company,  are
expressly assumed pursuant to such assumption agreements and instruments in such
forms as shall be approved  reasonably by the Holder, or assumed by operation of
law,  by  the  Surviving  Corporation;  and  (iii)  immediately  prior  to,  and
immediately  after the consummation of the transaction,  and after giving effect
thereto,  no Default or Event of Default exists or would exist.  Notwithstanding
the foregoing, a subsidiary of the Company may merge into the Company so long as
the Company is the Surviving  Corporation,  and a subsidiary of the Company, may
merge with or into a  wholly-owned  subsidiary  of the Company,  so long as such
wholly-owned subsidiary is the Surviving Corporation.  Notwithstanding  anything
contained herein to the contrary,  the Company may (i) sell all or substantially
all of its  property  to, or enter  into a merger  transaction  with,  any other
person if such sale or merger  follows and is the result of an  acceleration  of
the Senior Debt and the  transaction  has been  approved by the Senior Agent and
the banks which are parties to the Senior Credit Agreement.

     6.2 The Company will not, and will not permit any subsidiary of the Company
to,  sell,  lease as lessor,  transfer  or  otherwise  dispose  of its  property
(collectively, "Transfers"), except:

          (A)  Transfers of inventory and of  unnecessary,  obsolete or worn-out
     assets,  in each case in the ordinary  course of business of the Company or
     such subsidiary;

          (B)  Transfers  from a  subsidiary  of the Company to the Company or a
     wholly-owned   subsidiary  of  the  Company,  or  from  the  Company  to  a
     wholly-owned  subsidiary of the Company  provided such subsidiary  issues a
     guaranty of the Company's  obligations  under this Note consistent with the
     provisions of Section 5.11;

          (C) any other  Transfer  at any time of any  property  to a person for
     such  consideration as determined,  in each case by the Board of Directors,
     in its good faith opinion, to be in the best interest of the Company and to
     reflect the fair market value of such property if the conditions  specified
     in each of the  following  clauses  (A) and (B)  would  be  satisfied  with
     respect


                                      -25-
<PAGE>

     to such  Transfer:  (A) the sum of: (1) the book value of such  property at
     the  time of  Transfer;  plus (2) the  aggregate  book  value of all  other
     property  Transferred (other than in transactions  described in clauses (A)
     and (B) above),  after the Issue Date, would not exceed 25% of consolidated
     total assets of the Company and its subsidiaries  (determined in accordance
     with GAAP) measured as of the last day of the immediately  preceding fiscal
     quarter  of  the  Company;   and  (B)  immediately  before  and  after  the
     consummation of the Transfer,  and after giving effect thereto,  no Default
     or Event of Default would exist;

          (D) any other  Transfer of property to the extent that the proceeds of
     such Transfer,  net of transaction costs and expenses incurred and actually
     paid in connection with such Transfer  (including sales,  transfer or gains
     taxes),  within 365 days after such  Transfer are applied by the Company or
     such subsidiary (A) to fund its working capital and capital  expenditure or
     acquisitions  requirements,  and/or (B) to pay or prepay a principal amount
     of Debt  of the  Company  or any  subsidiary  thereof  (other  than  Junior
     Subordinated  Debt)  equal to the  amount  of such net  proceeds;  and,  in
     connection  with  any such  payment,  the  Company  shall  pay all  accrued
     interest  thereon and any premium or make-whole  amount required to be paid
     in connection therewith; provided, however, that in the event that any Debt
     so prepaid is not Senior Debt, then the Company shall prepay, together with
     such  prepayment of such other Debt, a proportional  and ratable  principal
     amount of this Note pursuant to Section 1.6.;

          (E) any Transfers pursuant to the Acquisition Obligations; and

          (F) any other  Transfer  permitted to be made by the Company or any of
     its  subsidiaries  consistent with the terms of the Senior Credit Agreement
     as in effect on the Issue Date.

     6.3 The Company will not, and will not permit any subsidiary  to,  directly
or indirectly, create, incur, assume, guarantee, or otherwise become directly or
indirectly liable with respect to, any Debt, other than:

          (A) this Note and any guaranties thereof;

          (B) Debt owing by the Company to any  wholly-owned  subsidiary  of the
     Company and Debt of a subsidiary  of the Company  owing to the Company or a
     wholly-owned subsidiary of the Company;

          (C) Debt existing or incurred on the Issue Date and listed on Schedule
     6.3 (including Debt under the Senior Credit Agreement);

          (D) Debt incurred  under the Senior Credit  Facility from time to time
     following the Issue Date;

          (E) Debt incurred or created to refinance any of the Debt permitted by
     clauses (C) and (D) of this Section 6.3,  provided that in the case of Debt
     listed on Schedule  6.3 (other than Senior Debt and  refinancing  thereof),
     the  principal  amount does not exceed the  principal  amount of Debt being
     refinanced;

          (F) Debt (other  than this Note) owing by the Company or a  subsidiary
     thereof to Norton  Herrick,  Evan Herrick,  Michael  Herrick  and/or Howard
     Herrick   (together,   the


                                      -26-
<PAGE>

     "Herricks") and/or any of their respective Affiliates;

          (G) Debt  incurred by the Company or a  subsidiary  thereof to finance
     the payment of the Change in Control Purchase Price of this Note;

          (H) Debt,  in  addition  to the Debt  permitted  to be incurred by the
     clauses (A) through (G) of this Section 6.3, in the principal amount at any
     time outstanding not to exceed $1,000,000;

          (I) Any Guaranties  made or issued by the Company of Debt permitted to
     be incurred by any of its  subsidiaries  pursuant to clauses (E), (F), (G),
     and (H) above and clauses (J) and (K) below and  Guaranties  made or issued
     by  subsidiaries  of the  Company of Debt  permitted  to be incurred by the
     Company  pursuant to clauses  (C),  (D),  (E),  (F),  (G) and (H) above and
     clauses (J) and (K) below;

          (J) Up to  $1,500,000  of  additional  Debt on the  same  terms as the
     $1,500,000 Convertible Senior Promissory Note Due September 30, 2002 issued
     to Huntingdon Corporation on the date hereof; and

          (K) Any other Debt  permitted  to be incurred by the Company or any of
     its  subsidiaries  consistent with the terms of the Senior Credit Agreement
     as in effect on the Issue Date.

     6.4 Except for Debt listed on Schedule  6.3, the Company will not, and will
not permit any subsidiary  thereof to, incur,  assume or Guaranty any Debt which
is  subordinated  in right of payment  to any other  Debt of the  Company or any
subsidiary thereof, unless such Debt is also subordinated in right of payment to
the  obligations  of the  Company in  respect  of this Note on terms  reasonably
acceptable  to the Holder.  Except for Debt listed on Schedule 6.3 and permitted
by  Section  6.3(K)  hereof,  the  Company  will not,  and will not  permit  any
subsidiary  thereof  to,  incur or create any Debt in favor of an  Affiliate  or
another  subsidiary  (other than Debt in favor of the Company or a  wholly-owned
subsidiary  thereof  which  is a  guarantor  of Debt  under  the  Senior  Credit
Facility)  unless  such Debt is also  subordinated  in right of  payment  to the
obligations  of the  Company  in  respect  of  this  Note  on  terms  reasonably
acceptable to the Holders.

     6.5 The Company  will not, and will not permit any  subsidiary  thereof to,
engage in any  business if, as a result,  the general  nature of the business in
which the Company and its subsidiaries,  taken as a whole, would then be engaged
would be substantially  changed from the general nature of the business in which
the Company  and the  Subsidiaries,  taken as a whole,  are engaged on the Issue
Date.

7. Events of Default

     7.1 An "Event of Default" exists at any time if any of the following occurs
(whether  such  occurrence  shall be  voluntary  or come about or be effected by
operation of law or otherwise):


                                      -27-
<PAGE>

          (a) The Company  defaults in the payment of the principal of this Note
     when due (whether at the Maturity  Date or any  Prepayment  Date) or in the
     payment of the Change in Control Purchase Price when due or defaults in the
     payment  of any  accrued  interest  on this Note when due and such  default
     continues  for a period of 30  business  days after the date such  interest
     became due;

          (b) The Company or any subsidiary  thereof defaults in the performance
     or  observance  of any of the  covenants  contained  in  Section  5.2(d) or
     Section 6 hereof or defaults in the performance or observance of any of the
     covenants  contained  in Sections  5.2(e),  5.3, 5.4 (e) or 5.10 hereof and
     such default remains uncured for more than 30 days;

          (c) The Company or any subsidiary  thereof defaults in the performance
     of any covenants  contained in this Note, and such default remains uncured,
     after notice and an opportunity to cure, for more than 60 days;

          (d) Any warranty, representation or other statement by or on behalf of
     the  Company  contained  in  this  Note  or in any  certificate,  financial
     statement,  report or  notice  furnished  after  the date  hereof to Holder
     pursuant  to  the  terms  of  this  Note,  or  in  any  written  amendment,
     supplement,  modification or waiver with respect to any such document shall
     be false or misleading in any material respect when made;

          (e) Either (i) the Company or any subsidiary thereof fails to pay when
     due and within any applicable  period of grace,  any principal of, premium,
     if any,  or  interest  in  respect  of any Debt for  borrowed  money of the
     Company  or such  subsidiary  in the  aggregate  principal  amount  of $2.0
     million;  or (ii) any event  shall  occur or any  condition  shall exist in
     respect of such Debt, or under any  agreement  securing or relating to such
     Debt,  and in either case,  as a result  thereof:  (A) the maturity of such
     Debt, or a material portion thereof, is accelerated, or (B) any one or more
     of the holders  thereof or a trustee  therefor is  permitted to require the
     Company  or such  subsidiary  to  repurchase  such  Debt  from the  holders
     thereof,  and any such trustee or holder exercises such option;  or (C) any
     such one or more of such holders or such trustee  declares an  acceleration
     of the maturity of such Debt;

          (f) a receiver, liquidator, custodian or trustee of the Company or any
     subsidiary  thereof or of all or any  substantial  part of the  property of
     either is  appointed  by court  order and such order  remains in effect for
     more than 60 days;  or an order for relief is entered  with  respect to the
     Company or any such subsidiary, or the Company or any subsidiary thereof is
     adjudicated a bankrupt or insolvent;  or all or any substantial part of the
     property of the Company or any  subsidiary  thereof is sequestered by court
     order  and such  order  remains  in  effect  for more  than 60 days;  or an
     involuntary  case or  proceeding  is  commenced  against the Company or any
     subsidiary   thereof  under  the  Federal  Bankruptcy  Code  or  any  other
     bankruptcy reorganization,  arrangement,  insolvency, readjustment of debt,
     dissolution  or  liquidation  law  of  any  jurisdiction,  whether  now  or
     hereafter in effect, and is not dismissed within 60 days after such filing;

          (g) The Company or any subsidiary  thereof:  (i) commences a voluntary
     case or  proceeding  or seeks  relief  under any  provision  of the Federal
     Bankruptcy  Code  or any  other  bankruptcy,  reorganization,  arrangement,
     insolvency,  readjustment  of debt,  dissolution or


                                      -28-
<PAGE>

     liquidation law of any jurisdiction, whether now or hereafter in effect, or
     consents  to the filing of any  petition  against it under any such law; or
     (ii) makes an assignment for the benefit of creditors, or admits in writing
     its inability or fails,  to pay its debts  generally as they become due, or
     consents to the  appointment  of a receiver,  liquidator  or trustee of the
     Company  or a  subsidiary  thereof or of all or a  substantial  part of its
     property; or

          (h)  A  final,   non-appealable  judgment  or  final,   non-appealable
     judgments  for the payment of money  aggregating  in excess of $2.0 million
     (in excess of any insurance  relating to such judgments or judgments or any
     claim or claims  underlying  such  judgment or  judgments  and the relevant
     insurer or insurers shall not have denied liability under such insurance or
     rejected  any  claims  made with  respect  thereto)  is or are  outstanding
     against one or more of the Company and its subsidiaries and any one of such
     judgments  shall have been  outstanding for more than 60 days from the date
     of its entry and shall not have been discharged in full or stayed; or

          (i) The Note  shall  cease to be in full  force and effect or shall be
     declared  by a court of  competent  jurisdiction  to be void,  voidable  or
     unenforceable,  or the  validity  or  enforceability  of the Note  shall be
     contested by the Company or any Affiliate,  or the Company or any Affiliate
     shall deny that the Company has any further  liability or obligation  under
     the Note.

7.2 Default Remedies

     (a) If any Event of Default specified in Section 7.1(f) or (g) shall exist,
the  principal  amount  of this  Note at the  time  outstanding,  together  with
interest accrued and unpaid thereon, shall automatically  immediately become due
and payable, without presentment,  demand, protest or notice of any kind, all of
which are hereby expressly waived.

     (b) Subject to Section 3.6 and Section 3.7, if any Event of Default,  other
than those specified in Section 7.1(a), shall exist, the Holder may exercise any
right,  power or  Remedy  permitted  to such  Holder by law,  and shall  have in
particular,  without  limiting the  generality  of the  foregoing,  the right to
declare the entire  principal  of, and all interest  accrued and unpaid on, this
Note then outstanding to be, and this Note shall thereupon become, forthwith due
and payable,  without any  presentment,  demand,  protest or other notice of any
kind, all of which are hereby expressly waived,  and the Company shall forthwith
pay to the Holder such principal and interest.

     (c) Subject to Sections 3.6 and 3.7,  during the continuance of an Event of
Default  described in Section 7.1(a) and  irrespective of whether the Note shall
have become due and payable  pursuant to Section 7.2(b),  the Holder may, at the
Holder's  option,  by notice in writing to the  Company,  declare the  principal
amount of this Note at the time  outstanding,  and accrued  and unpaid  interest
thereon, to be, and the same shall thereupon become,  forthwith due and payable,
without any  presentment,  demand,  protest or other notice of any kind,  all of
which are hereby  expressly  waived,  and the Company shall forthwith pay to the
Holder such principal and interest.


                                      -29-
<PAGE>

     (d)  During the  continuance  of an Event or Default  and  irrespective  of
whether this Note shall become due and payable  pursuant to Section 7.2(a),  (b)
or (c) and irrespective of whether the Holder shall otherwise have pursued or be
pursuing any other  rights or Remedies,  subject to Section 3.6 and Section 3.7,
the Holder may  proceed to protect  and  enforce  its rights  under this Note by
exercising  such  Remedies as are  available  to such holder in respect  thereof
under  applicable  law,  either by suit in equity or by action at law,  or both,
whether for specific  performance of any agreement contained herein or in aid of
the exercise of any power granted herein.

     (e) No course of dealing on the part of the Holder nor any delay or failure
on the part of the Holder to  exercise  any right  shall  operate as a waiver of
such right or otherwise prejudice the Holder's rights, powers and Remedies.  All
rights  and  Remedies  of the  Holder  hereunder  and under  applicable  law are
cumulative  to, and not  exclusive  of, any other  rights or Remedies the Holder
would otherwise have.

     (f) The rights of the Holder to receive  payments  in respect of this Note,
and to exercise  any  Remedies,  solely as between the Holder and the holders of
the Senior Debt,  shall be subject in all respects to the  provisions of Section
3;  provided,  however,  that all such rights  shall  remain  unconditional  and
absolute as between the Holder and the Company.

     7.3 If a declaration  is made pursuant to Section 7.2(b) arising solely out
of an Event of Default  described in Section  7.1(e)  regarding the Senior Debt,
then and in every  such  case,  if the  holders  of the  Senior  Debt waive such
default in respect of the Senior Debt or such default is cured,  and the holders
of the Senior Debt rescind or annul any and all accelerations of the maturity of
all or any portion of the Senior Debt and any required or demanded repurchase of
all or any portion  thereof,  then,  upon  written  notice to the Holder of such
events with respect to the Senior Debt, any declaration made pursuant to Section
7.2(b) and the consequences thereof, shall automatically and without any further
action on the part of the Holder, be annulled and rescinded;  provided, however,
that at the time such  declaration  is deemed  annulled  and  rescinded:  (i) no
judgment or decree  shall have been entered for the payment of any moneys due on
or pursuant to this Note; and (ii) no other Default or Event of Default shall be
continuing;  provided further that no such rescission and annulment shall extend
to or affect  any  subsequent  Default  or Event of  Default or impair any right
consequent thereon.

8. Interpretation of this Note

     8.1 As used herein,  the following  terms have the respective  meanings set
forth below or set forth in the Section hereof following such term:

     "Affiliate"  means and includes  with  respect to any person,  at any time,
each other person (other than, with respect to the Company,  a subsidiary of the
Company):  (a) that  directly or indirectly  through one or more  intermediaries
controls, or is controlled by, or is under common control with, such person; (b)
that  beneficially owns or holds five percent or more of any class of the Voting
Stock of such  person;  (c) five percent or more of the Voting Stock (or if such
other person is not a corporation,  five percent or more of the equity interest)
of which is beneficially owned or held by such person; or (d) that is an officer
or director of or holds a position of comparable  authority with


                                      -30-
<PAGE>

such person; at such time; provided,  however,  that no person holding this Note
shall be  deemed to be an  "Affiliate"  of the  Company  solely by virtue of the
ownership of such securities.  As used in this  definition:  "control" means the
possession,  directly  or  indirectly,  of the  power to  direct  or  cause  the
direction  of the  management  and  policies  of a person,  whether  through the
ownership of voting securities,  by contract or otherwise.

     "Applicable  Interest  Law" means any  present  or future  law  (including,
without  limitation,  the laws of the State of New York and the United States of
America)  which has  application  to the interest and other charges  pursuant to
this Note.

     "Board of  Directors"  means,  at any time,  the board of  directors of the
Company or any committee  thereof  that, in the instance,  shall have the lawful
power to exercise the power and authority of such board of directors.

     "Capital Lease" means, at any time, a lease of any property with respect to
which the lessee is required to recognize  the  acquisition  of an asset and the
incurrence of a liability in accordance with GAAP.

     "Cash Equivalents" means, for all purposes of Section 3 hereof, equivalents
of cash that are  acceptable  to the  Senior  Agent in its  reasonable  business
judgment.

     "Change in Control"  means,  at any time, an occurrence or event or failure
of an event to occur,  as a result of which a person or group of related persons
(other than the Herricks,  an Affiliate of any of the Herricks, or any trust for
the benefit of any of the  Herricks)  acquires more than 50% of the Voting Stock
of the Company.

     "Debt"  with  respect  to  any  person,  means,  without  duplication,  the
liabilities of such person with respect to: (a) borrowed money; (b) the deferred
purchase price of property acquired by such person  (excluding  accounts payable
and accrued expenses  arising in the ordinary course of business,  but including
all  liabilities  created or arising under any  conditional  sale or other title
retention  agreement  with respect to any such  property);  (c)  borrowed  money
secured by any Lien  existing on property  owned by such person  (whether or not
such  liabilities  have been assumed);  (d) Capital  Leases of such person;  (e)
letters of credit,  bankers acceptances or similar instruments serving a similar
function  issued or accepted by banks and other financial  institutions  for the
account of such person  (whether or not  representing  obligations  for borrowed
money),  other than undrawn  trade  letters of credit in the ordinary  course of
business;  (f) Swaps of such person;  and (g) any Guaranty of such person of any
obligation or liability of another  person of  obligations of the type listed in
clause (a) through clause (f) of this  definition of Debt;  provided that,  with
respect to the Company,  Debt shall not include any unfunded  obligations  which
may now or  hereafter  exist with respect to  Company's  Plans.  As used in this
definition,  "Swaps" means, with respect to any person, obligations with respect
to interest  rate swaps and currency  swaps and similar  obligations  obligating
such person to make payments,  whether  periodically  or upon the happening of a
contingency,  except that if any agreement relating to such obligation  provides
for the netting of amounts  payable by and to such person  thereunder  or if any
such agreement  provides for the simultaneous  payment of amounts by and to such
person,  then in each such case, the amount of such obligations shall be the net
amount  thereof.  The aggregate net obligation of Swaps at any time shall be the
aggregate  amount of the obligations of such person under all Swaps assuming all
such  Swaps had been  terminated  by such  person as of the end of the then most
recently ended fiscal quarter of such person.  If such net


                                      -31-
<PAGE>

aggregate  obligation  shall be an amount owing to such person,  then the amount
shall be deemed to be zero. Unless the context otherwise requires,  "Debt" means
Debt of the Company or of a subsidiary of the Company.

     "Default"  means any event which,  with the giving of notice or the passage
of time, or both, would become an Event of Default.

     "Environmental  Law" means any law,  statute or  regulation  enacted by any
governmental  authority  in  connection  with or relating to the  protection  or
regulation  of the  environment,  including,  without  limitation,  those  laws,
statutes and regulations regulating the disposal, removal, production,  storing,
refining,  handling,  transferring,  processing  or  transporting  of  Hazardous
Materials and any applicable orders, decrees or judgments issued by any court of
competent  jurisdiction in connection with any of the foregoing.  "Environmental
Permit" means any permit, approval, identification number or other authorization
required by any Environmental Law.

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  as
amended from time to time.

     "ERISA Affiliate" means any trade or business (whether or not incorporated)
that is treated as a single employer together with the Company under Section 414
of the IRC.

     "GAAP" means  accounting  principles  as  promulgated  from time to time in
statements,  opinions and  pronouncements by the American Institute of Certified
Public  Accountants  and the Financial  Accounting  Standards  Board and in such
statements,  opinions and  pronouncements of such other entities with respect to
financial   accounting  of  for-profit  entities  as  shall  be  accepted  by  a
substantial segment of the accounting profession in the United States.

     "Guaranty"  means  with  respect to any person  (for the  purposes  of this
definition,  the  "Guarantor")  any  obligation  (except the  endorsement in the
ordinary course of business of negotiable instruments for deposit or collection)
of such person guaranteeing or in effect guaranteeing any indebtedness, dividend
or other  obligation of any other person (the "Primary  Obligor") in any manner,
whether  directly or  indirectly,  including,  without  limitation,  obligations
incurred through an agreement, contingent or otherwise, by the Guarantor: (a) to
purchase such indebtedness or obligation or any property  constituting  security
therefor; (b) to advance or supply funds (i) for the purchase or payment of such
indebtedness,  dividend or obligation;  or (ii) to maintain  working  capital or
other balance sheet condition or any income  statement  condition of the Primary
Obligor or  otherwise  to advance or make  available  funds for the  purchase or
payment of such indebtedness,  dividend or obligation;  (c) to lease property or
to purchase  securities or other property or services  primarily for the purpose
of assuring the owner of such  indebtedness  or obligation of the ability of the
Primary  Obligor  to make  payment of the  indebtedness  or  obligation;  or (d)
otherwise to assure the owner of the  indebtedness  or obligation of the Primary
Obligor against loss in respect thereof.

     "Hazardous Material" means all or any of the following: (a) substances that
are defined or listed in, or otherwise  classified  pursuant to, any  applicable
Environmental Laws as "hazardous substances",  "hazardous materials", "hazardous
wastes", "toxic substances" or any other formulation intended to define, list or
classify  substances by reason of deleterious  properties such as  ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, "TLCP toxicity"
or "EP toxicity";  (b)


                                      -32-
<PAGE>

oil, petroleum or petroleum derived substances, natural gas, natural gas liquids
or  synthetic  gas  and  drilling  fluids,  produced  waters  and  other  wastes
associated with the exploration, development or production of crude oil, natural
gas or geothermal  resources;  (c) any flammable substances or explosives or any
radioactive  materials;  (d) asbestos or urea  formaldehyde in any form; and (e)
dielectric fluid  containing  levels of  polychlorinated  biphenyls in excess of
fifty parts per million.

     "IRC" means the Internal Revenue Code of 1986,  together with all rules and
regulations promulgated pursuant thereto, as amended from time to time.

     "Issue Date" means the tenth (10th) day following the Company's issuance of
a press  release  and written  notice to its  shareholders  of the  transactions
contemplated hereby in accordance with the Rules of the Nasdaq Stock Market.

     "Lien" means any interest in property  securing an obligation owed to, or a
claim by, a person other than the owner of such  property  (for purposes of this
definition,  the  "Owner"),  whether  such  interest is based on the common law,
statute or  contract,  and  includes  but is not  limited  to: (a) the  security
interest lien arising from a mortgage, encumbrance,  pledge, conditional sale or
trust receipt or a lease, consignment or bailment for security purposes, and the
filing of any  financing  statement  under the  Uniform  Commercial  Code of any
jurisdiction,  or an agreement to give any of the foregoing;  (b)  reservations,
exceptions,  encroachments,  easements,  rights-of-way,  covenants,  conditions,
restrictions,  leases and other title exceptions and encumbrances affecting real
property;  and (c) any interest in any property held by the owner evidenced by a
conditional sale agreement, Capital Lease or other arrangement pursuant to which
title to such  property has been  retained by or vested in some other person for
security  purposes.  The term "Lien" does not include negative pledge clauses in
loan agreements and equal and ratable security clauses in loan agreements.

     "Material  Adverse Effect" means, with respect to any event or circumstance
(either   individually   or  in  the   aggregate   with  all  other  events  and
circumstances),  an effect caused  thereby or resulting  therefrom that would be
materially  adverse  as to, or in  respect  of:  (a) the  business,  operations,
profits,  financial condition or properties of the Company and its subsidiaries,
taken as a whole;  (b) the  ability of the  Company to perform  its  obligations
under this Note; or (c) the validity or enforceability of this Note.

     "Market  Price"  shall mean the  average of the daily  closing  prices of a
share of Common Stock for the 10 consecutive  trading days immediately  prior to
the day in  question.  The  closing  price  for each  day  shall be (a) the last
reported  sales price or, in the case no such  reported sale takes place on such
day, the average of the reported closing bid and asked prices, in either case on
the principal national  securities  exchange on which the Common stock is listed
or  admitted  to trading  or, if the Common  Stock is not listed or  admitted to
trading on any national  securities  exchange,  on The Nasdaq Stock Market, Inc.
("Nasdaq"),  (b) if the Common Stock is not listed or admitted to trading on any
national securities exchange or quoted on Nasdaq, the average of the closing bid
and asked  prices in the  over-the-counter  market as  furnished by any New York
Stock Exchange member firm reasonably  selected from time to time by the Company
for that  purpose,  or (c) if the  Common  Stock is not  listed or  admitted  to
trading on any national  securities exchange or quoted on Nasdaq and the average
price cannot be determined as  contemplated by clause (b), the fair market value
of the Common Stock as determined in good faith by resolution of the independent
directors of the Company.  For the purposes of the preceding sentence,  the term
"trading day" shall mean each Monday, Tuesday,  Wednesday,  Thursday and Friday,
other than any day on which  securities  are not traded on such  exchange  or in
such market.


                                      -33-
<PAGE>

     "Note" means this $1,984,250 9% Convertible  Senior  Subordinated  Note due
December 31, 2004 issued by the Company,  as the same may be amended,  modified,
supplemented, refunded, refinanced or extended from time to time.

     "Plan"  means an  "employee  benefit  plan" (as defined in section  3(3) of
ERISA) that is or,  within the preceding  five years,  has been  established  or
maintained,  or to which  contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA  Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.

     "Voting Stock" means with respect to any  corporation,  any shares of stock
of such corporation  whose holders are entitled under ordinary  circumstances to
vote for the election of directors of such corporation  (irrespective of whether
at the time any stock of any other  class or  classes  shall  have or might have
voting power by reason of the happening of any contingency), and, in the case of
the Company,  shall  include the Common  Stock.  Except as  otherwise  provided,
references herein to "Voting Stock" shall mean Voting Stock of the Company.

     8.2  (a)  Unless  otherwise  provided  herein,  all  financial   statements
delivered in connection herewith will be prepared in accordance with GAAP. Where
the  character or amount of any asset or liability or item of income or expense,
or any consolidation or other accounting  computation is required to be made for
any  purpose  hereunder,  it shall be done in  accordance  with GAAP;  provided,
however, that if any term defined herein includes or excludes amounts,  items or
concepts  that would not be included in or excluded  from such term if such term
were defined with reference  solely to GAAP, such term will be deemed to include
or exclude such amounts, items or concepts as set forth herein.

Whenever  accounting  amounts of a group of persons are to be  determined  "on a
consolidated  basis" it shall  mean  that,  as to  balance  sheet  amounts to be
determined as of a specific time, the amount that would appear on a consolidated
balance  sheet  of such  persons  prepared  as of such  time,  and as to  income
statement amounts to be determined for a specific period,  the amount that would
appear on a consolidated income statement of such persons prepared in respect of
such period, in each case with all transactions  among such persons  eliminated,
and prepared in accordance with GAAP except as otherwise required hereby.

     8.3 Where any provision  herein refers to action to be taken by any person,
or which  such  person  is  prohibited  from  taking,  such  provision  shall be
applicable  whether such action is taken  directly or indirectly by such person,
including  actions taken by or on behalf of any partnership in which such person
is a general partner.

     8.4 (a) The  titles  of the  Sections  of this  Note  appear as a matter of
convenience  only,  do not  constitute  a part  hereof  and shall not affect the
construction  hereof.  The words  "herein,"  "hereof,"  "hereunder" and "hereto"
refer  to this  Note  as a whole  and not to any  particular  Section  or  other
subdivision. References to Annexes and Sections are, unless otherwise specified,
references to Sections of this Note.  References  to Annexes and Schedules  are,
unless otherwise specified, references to Schedules attached to this Note.


                                      -34-
<PAGE>

     (b) Each covenant  contained  herein shall be construed  (absent an express
contrary provision herein) as being independent of each other covenant contained
herein,  and compliance  with any one covenant shall not (absent such an express
contrary  provision)  be  deemed  to excuse  compliance  with one or more  other
covenants.

     8.5 THIS  NOTE  SHALL  BE  GOVERNED  BY,  AND  CONSTRUED  AND  ENFORCED  IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF FLORIDA,  WITHOUT REGARD TO ANY CHOICE
OF LAW  RULES  WHICH  WOULD  REQUIRE  THE  APPLICATION  OF THE LAW OF ANY  OTHER
JURISDICTION.  IN ADDITION,  THE PARTIES HERETO  SELECT,  TO THE EXTENT THEY MAY
LAWFULLY  DO SO, THE  INTERNAL  LAWS OF THE STATE OF  FLORIDA AS THE  APPLICABLE
INTEREST LAW.

9. Miscellaneous

     9.1 All  communications  under this Note  shall be in writing  and shall be
delivered either by nationwide  overnight  courier or by facsimile  transmission
(confirmed  by delivery by nationwide  overnight  courier sent on the day of the
sending of such facsimile transmission).  Communications to the Company shall be
addressed as set forth on Annex 1, or at such other address of which the Company
shall have notified the Holder.  Communications to the Holder shall be addressed
as set forth on Annex 1, or at such other  address of which  such  Holder  shall
have  notified  the Company  (and the Company  shall  record such address in the
register  for the  registration  and transfer of this Note).  Any  communication
addressed and delivered as herein  provided  shall be deemed to be received when
actually  delivered to the address of the addressee  (whether or not delivery is
accepted)  or  received  by  the  telecopy   machine  of  the   recipient.   Any
communication   not  so   addressed   and   delivered   shall  be   ineffective.
Notwithstanding the foregoing provisions of this Section 9.1, service of process
in any suit, action or proceeding arising out of or relating to this Note or any
transaction  contemplated  hereby,  or any  action or  proceeding  to execute or
otherwise  enforce any judgment in respect of any breach  hereunder or under any
document hereby, shall be delivered in the manner provided in Section 9.6(c).

     9.2 All warranties, representations, statements of fact, certifications and
covenants  contained in this Note or in any  certificate,  financial  statement,
report or notice  delivered or provided  hereunder  shall be  considered to have
been  relied upon by the other party  hereto and shall  survive the  delivery to
such party  regardless  of any  investigation  made by or on behalf of any party
hereto.  All  statements  in any  certificate,  delivered  pursuant to the terms
hereof  shall  constitute   warranties  and   representations   hereunder.   All
obligations  hereunder (other than payment of this Note, but including,  without
limitation,  reimbursement  obligations in respect of costs,  expenses and fees)
shall survive the payment of this Note and the  termination  hereof.  Subject to
the preceding, this Note embodies the entire agreement and understanding between
the  Company  and  the  Holder,   and  supersedes   all  prior   agreements  and
understandings, relating to the subject matter hereof.

     9.3 The provisions hereof are intended to be for the benefit of the Holder,
from time to time,  of this Note,  and shall be  enforceable  by any such Holder
whether or not an express  assignment to such Holder of rights  hereunder  shall
have been made by the payee or his


                                      -35-
<PAGE>

successors  or assigns.  In the event that the payee named  herein  transfers or
assigns  less than all of this Note,  the term  "Holder" as used herein shall be
deemed to refer to the assignor and assignee or assignees hereof,  collectively,
and any action permitted to be taken by the Holder hereunder shall be taken only
upon the  consent or  approval  of persons  comprising  the Holder that own that
percentage  interest in the principal amount of this Note as shall be designated
by the payee named herein at the time of such assignment.  Anything contained in
this  Section  9.3  notwithstanding,  the  Company  may  not  assign  any of its
respective  rights,  duties or  obligations  hereunder  other  without the prior
written  consent of the Holder.  For  purposes of the  avoidance  of doubt,  the
Holder of this Note shall be permitted  to pledge or  otherwise  grant a lien in
and to this Note; provided,  however,  that any such pledgee or holder of a Lien
shall not be considered a Holder  hereunder  until it shall have foreclosed upon
this Note in  accordance  with  applicable  law and  informed  the  Company,  in
writing, of the same.

     9.4 This Note may be amended,  and the observance of any term hereof may be
waived,  with (and only with) the written consent of the Company and the Holder,
provided,  how-ever,  that without the written  consent of the holders of Senior
Debt, no amendment,  supplement or  modification of the provisions of Section 3,
or any defined  term to the extent used  therein,  shall be  effective as to any
holder of Senior Debt who has not  consented to such  amendment,  supplement  or
modification.

     9.5 Any  amendment  or waiver  consented to as provided in this Section 9.4
shall be binding  upon the then  current  Holder and upon each future  holder of
this Note and upon the  Company  whether or not this Note shall have been marked
to indicate such  amendment or waiver.  No such amendment or waiver shall extend
to or affect any obligation,  covenant,  agreement,  Default or Event of Default
not expressly amended or waived or impair any right consequent thereon.

     9.6 The Company  shall pay when billed the  reasonable  costs and  expenses
(including reasonable attorneys' fees) incurred by the Holder in connection with
the  considera-tion,  negotiation,  preparation or execution of any  amendments,
waivers,  consents,  standstill  agreements  and other similar  agreements  with
respect to this Note  (whether or not any such  amendments,  waivers,  consents,
standstill agreements or other similar agreements are executed).

     9.7  At  any  time  when  the  Company   and  the  Holder  are   conducting
restructuring or workout  negotiations in respect hereof,  or a Default or Event
of Default  exists,  the Company shall pay when billed the reasonable  costs and
expenses  (including  reasonable  attorneys'  fees and the fees of  professional
advisors) incurred by the Holder in connection with the assessment,  analysis or
enforcement  of any  rights  or  remedies  that are or may be  available  to the
Holder.

     9.8 If the Company shall fail to pay when due any principal of, or interest
on, this Note, the Company shall pay to the Holder,  to the extent  permitted by
law,  such  amounts  as shall be  sufficient  to cover the  costs and  expenses,
including but not limited to reasonable  attorneys' fees, incurred by the Holder
in collecting any sums due on this Note.

     9.9 THE PARTIES HERETO VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT ANY OF
THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY


                                      -36-
<PAGE>

LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE OR TRANSACTIONS
CONTEMPLATED HEREBY.

     9.10 ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE
OR  TRANSACTIONS  CONTEMPLATED  HEREBY OR ANY ACTION OR PROCEEDING TO EXECUTE OR
OTHERWISE  ENFORCE ANY  JUDGMENT IN RESPECT OF ANY BREACH UNDER THIS NOTE MAY BE
BROUGHT BY SUCH PARTY IN ANY FEDERAL  DISTRICT COURT LOCATED IN NEW YORK COUNTY,
NEW YORK,  OR ANY NEW YORK STATE COURT  LOCATED IN NEW YORK COUNTY,  NEW YORK AS
SUCH PARTY MAY IN ITS SOLE DISCRETION  ELECT,  AND BY THE EXECUTION AND DELIVERY
OF THIS NOTE, THE PARTIES HERETO IRREVOCABLY AND  UNCONDITIONALLY  SUBMIT TO THE
NON-EXCLUSIVE  IN PERSONAM  JURISDIC-TION  OF EACH SUCH  COURT,  AND EACH OF THE
PARTIES  HERETO  IRREVOCABLY  WAIVES AND AGREES NOT TO ASSERT IN ANY  PROCEEDING
BEFORE ANY TRIBUNAL, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, ANY CLAIM THAT
IT IS NOT  SUBJECT  TO THE IN  PERSONAM  JURISDICTION  OF  ANY  SUCH  COURT.  IN
ADDITION,  EACH OF THE PARTIES HERETO IRREVOCABLY  WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION  THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE IN ANY SUIT,  ACTION OR  PROCEEDING  ARISING OUT OF OR RELATING TO THIS
NOTE OR TRANSACTION  CONTEMPLATED  HEREBY BROUGHT IN ANY SUCH COURT,  AND HEREBY
IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

     9.11 EACH PARTY HERETO IRREVOCABLY AGREES THAT PROCESS PERSONALLY SERVED OR
SERVED BY U.S. EXPRESS,  REGISTERED OR CERTIFIED MAIL OR BY NATIONWIDE OVERNIGHT
COMMERCIAL  COURIER OR DELIVERY  SERVICE AT THE  ADDRESSES  PROVIDED  HEREIN FOR
NOTICES SHALL  CONSTITUTE,  TO THE EXTENT PERMITTED BY LAW,  ADEQUATE SERVICE OF
PROCESS IN ANY SUIT,  ACTION OR  PROCEEDING  ARISING  OUT OF OR RELATING TO THIS
NOTE OR TRANSACTION  CONTEMPLATED HEREBY, OR ANY ACTION OR PROCEEDING TO EXECUTE
OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH HEREUNDER. RECEIPT OF
PROCESS SO SERVED  SHALL BE  CONCLUSIVELY  PRESUMED AS  EVIDENCED  BY A DELIVERY
RECEIPT FURNISHED BY THE UNITED STATES POSTAL SERVICE OR ANY COMMERCIAL DELIVERY
SERVICE.

     9.12 NOTHING  HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OF ANY
HOLDER OF THIS NOTE TO SERVE ANY  WRITS,  PROCESS  OR  SUMMONSES  IN ANY  MANNER
PERMITTED BY APPLICABLE LAW OR TO OBTAIN  JURISDICTION  OVER THE COMPANY IN SUCH
OTHER JURISDICTION,  AND IN SUCH OTHER MANNER, AS MAY BE PERMITTED BY APPLICABLE
LAW.


                                      -37-
<PAGE>

     IN WITNESS WHEREOF,  the Company has caused this Promissory Note to be duly
executed   and   delivered   by  one  of  its  duly   authorized   officers   or
representatives.

                              MEDIABAY, INC.

                              By:
                                 -----------------------------------------------
                                       Name: John Levy
                                       Title: Executive Vice President and Chief
                                                Financial Officer


                                      -38-
<PAGE>



                                     Annex I

1.   Holder's Payment Instructions
            Citibank
            153 E. 53rd Street
            New York, NY 10043
            ABA # 021000089
            Credit: Norton Herrick
            Account #  37101489

2.   Addresses for Notices
     (a)  If to the Company, to:
                      MediaBay, Inc.
                      2 Ridgedale Avenue - Suite 300
                      Cedar Knolls, NJ 07927
                      Attention: Chief Financial Officer
                      Telephone No.: 973-539-9528
                      Facsimile No.: 973-539-1273

                      with a copy to:

                      Blank Rome Tenzer Greenblatt LLP
                      405 Lexington Avenue
                      New York, New York 10174
                      Attention: Robert J. Mittman, Esq.
                      Telephone No.: (212) 885-5555
                      Facsimile No.: (212) 885-5001

     (b)  If to the payee, to:
                      Mr. Norton Herrick
                      2 Ridgedale Avenue- Suite 300
                      Cedar Knolls, NJ 07927
                      Telephone No.: 973-539-9528
                      Facsimile No.: 973-539-1237


                                      -39-
<PAGE>


                          [FORM OF ELECTION TO CONVERT]

     The undersigned hereby  irrevocably elects to exercise its right,  pursuant
to the 9% Convertible Senior Subordinated  Promissory Note due December 31, 2004
(the "Note") of MediaBay,  Inc.  (the  "Company") in the  outstanding  principal
amount of $_________, which Note is tendered herewith, to convert $__________ of
the amount outstanding under the Note to __________________ shares of the common
stock of the Company (the  "Shares"),  all in  accordance  with the terms of the
Note. The undersigned  requests that a Certificate for such Shares be registered
in the name of  ______________,  whose  address is  ____________,  and that such
Certificate    be   delivered   to    ________________,    whose    address   is
_________________,  [and  that a  replacement  Note in the  principal  amount of
$___________,  representing  the  balance of the  principal  amount  outstanding
thereunder  after giving effect to this  conversion,  be issued in the amount of
$_________ and delivered to ___________, whose address is ____________].

Dated:                        Signature: _______________________________________

                              (Signature must conform in all respects to name of
                              holder as specified on the face of the Note.)

                              ____________________________________________
                              ____________________________________________
                              (Insert Social Security or Other
                              Identifying Number of Holder)


                                      -40-
<PAGE>


                                  Schedule 6.3


1.   Debt  incurred  under  the  $3,000,000   Convertible  Senior   Subordinated
     Promissory Note Due December 31, 2004 issued to Evan Herrick.

2.   Debt  incurred  under  the  $4,200,000   Convertible  Senior   Subordinated
     Promissory Note Due December 31, 2004 issued to ABC Investment, L.L.C.

3.   Debt incurred under the $2,500,000 Senior Promissory Note Due September 30,
     2002 issued to Huntingdon Corporation.

4.   Debt incurred under the $800,000 Convertible Senior Subordinated Promissory
     Note Due December 31, 2002 issued to Huntingdon Corporation.


                                      -41-