FORM OF NOTE

REGISTERED # ____________


                      FORTUNE NATURAL RESOURCES CORPORATION
                  12% CONVERTIBLE SUBORDINATED PROMISSORY NOTE
                              DUE DECEMBER 31, 2007

$______________                                             November _____, 1997



         THIS NOTE IS ISSUED  PURSUANT  TO AN  EXEMPTION  FROM THE  REGISTRATION
         PROVISIONS OF THE SECURITIES ACT OF 1933 (THE "ACT") AND  QUALIFICATION
         PROVISIONS  OF APPLICABLE  STATE  SECURITIES  LAWS.  NEITHER IT NOR THE
         SHARES OF COMMON  STOCK  INTO  WHICH IT CAN BE  CONVERTED  CAN BE SOLD,
         HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS REGISTERED PURSUANT TO THE
         ACT AND  QUALIFIED  UNDER  APPLICABLE  STATE LAW OR, IN THE  OPINION OF
         COUNSEL TO MAKER, AN EXEMPTION THEREFROM IS AVAILABLE.

FOR VALUE RECEIVED, the undersigned,  FORTUNE NATURAL RESOURCES  CORPORATION,  a
Delaware  corporation  with offices at One Commerce Green, 515 West Greens Road,
Suite 720, Houston, Texas 77067 ("Maker"), promises to pay to __________________
__________  with  an  address   at_____________________________   ("Payee"),  on
December 31, 2007 except as otherwise provided herein (the "Maturity Date"), the
principal  amount of  ($____________  ) Dollars  in lawful  money of the  United
States of America (the "Principal) together with all accrued interest.

This Note is one of a series of notes  (collectively the "Notes"),  all with the
same  terms and  conditions  as those set forth  herein,  which may be issued by
Maker up to the aggregate principal amount of Four Million Five Hundred Thousand
($4,500,000)  Dollars.  Each Note is part of an offering  of up to Four  Million
Five Hundred  Thousand  ($4,500,000)  Dollars in aggregate  principal  amount of
Notes (the  "Offering")  being  conducted  by Maker on a One Million Two Hundred
Fifty Thousand  ($1,250,000)  Dollars aggregate principal amount minimum or none
to Four Million Five Hundred Thousand  ($4,500,000)  Dollars aggregate principal
amount maximum best efforts basis.  The Offering will terminate on the sooner of
the sale of all of the Notes or October 31, 1997 (unless extended to December 1,
1997).

The Note is (i) subordinated to certain of Maker's  indebtedness  defined herein
as "Senior  Debt" and "Senior  Bank Debt";  and (ii)  convertible  into  Maker's
common stock, par value $0.01 per share (the "Common  Stock"),  all as set forth
below.  It bears simple  interest (the  "Interest") at the annual rate of twelve
percent (12%), payable, in arrears, on the Interest

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<PAGE>

Payment  Dates (as  defined in  SECTION 1 below),  until the  Principal  and all
accrued Interest thereon (collectively the "Obligations") shall be paid in full.

1.       Interest.
         --------

Maker  will pay  Interest  on the first  day of each  January,  April,  July and
October (the "Interest Payment Dates")  commencing on January 1, 1998.  Interest
on the Note will accrue from the most  recent  date to which  interest  has been
paid or, if no  interest  has been paid,  from the date of delivery of the Note.
Interest  will be  computed  on the  basis of a  360-day  year of  twelve 30 day
months.

2.       Method of Payment.
         -----------------

Maker will pay  Principal and Interest in money of the United States that at the
time of payment is legal  tender for the  payment of public and  private  debts.
Maker  may,  however,  pay  Principal  and  Interest  by its  check,  subject to
collection,  payable in such  money.  It may mail an  Interest  check to Payee's
address as it first  appears on this Note or such other  address as Payee  shall
give by notice to Maker.  Payee  must  surrender  this Note to Maker to  collect
Principal payments.

3.       Conversion.
         ----------

(a) Payee's right to Convert. Payee shall have the right, at any time commencing
on May 1, 1999 until the close of business on the business day preceding the day
the  Obligations are paid in full, to cause the conversion of all or any portion
(if such  portion is Fifty  Thousand  [$50,000]  Dollars or a whole  multiple of
Fifty Thousand [$50,000] Dollars) of the Principal  outstanding at the time such
conversion is effected  (the  "Convertible  Obligations")  into shares of Common
Stock (the  "Underlying  Shares").  Payee  shall  forfeit all accrued but unpaid
Interest upon  conversion.  The price for  conversion,  subject to adjustment as
provided in SECTION 4 below,  shall be the lower of (i) $3.00 per share, or (ii)
5% above the average  Closing Prices of the Common Stock for the 60 calendar day
period  immediately  preceding May 1, 1999.  Anything to the contrary  contained
herein not withstanding,  on the first occasion,  if at all, that Maker prior to
May 1, 1999,  issues  any shares of Common  Stock  (other  than for any  purpose
listed in  Paragraph 4 (a) below,  or in  satisfaction  of any exercise of stock
options or stock purchase warrants) for a per share  consideration less than the
conversion  price in effect on the date of such  issue,  it  shall,  within  ten
business days after such issuance,  give notice of such issuance to Payee. Payee
shall have the one-time right (the "Alternate  Conversion  Right"),  exercisable
within 20 business  days  thereafter  (the  "Alternate  Conversion  Right Notice
Period") to convert all, but not less than all, the Convertible Obligations into
Underlying Shares at a price equal to the conversion price in effect immediately
prior to such  action (the  "Existing  Conversion  Price")  reduced by an amount
equal to the number obtained by dividing the number of shares of Common Stock so
issued and  outstanding by the total number of shares of Common Stock issued and
outstanding  after such  issuance,  multiplying  the quotient by the  difference
between  the  Existing  Conversion  Price and the price of the  shares of Common
Stock so issued and subtracting the result from the Existing  Conversion  Price.
In the case of an issue of  additional  shares  of Common  Stock  for cash,  the
consideration  received by Maker  therefor  shall be deemed to be the gross cash
proceeds  received for such shares. In the case of an issuance of such shares of
Common  Stock for other than cash,  the value of the  consideration  received by
Maker  therefor  shall be deemed to be that placed thereon by the parties to the
transaction  or, if no such value is stated,  by the Board of Directors of Maker
acting in good faith and with  respect to all  aspects of the  transaction.  The
term "issue" shall be deemed to include the sale or other  

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<PAGE>

disposition  of shares of Common  Stock held in Maker's  treasury but not of any
derivative  security  convertible  into  Common  Stock.  The number of shares of
Common Stock  outstanding  at any given time shall not include  shares of Common
Stock in Maker's treasury.  The Alternate Conversion Right shall lapse and cease
to exist if not exercised by Payee within the Alternate  Conversion Right Notice
Period. No fractional shares shall be issued on conversion.

(b) Definition of Closing Price. The "Closing Price" for each day shall mean the
last  reported  sales price  regular way or, in case no such reported sale takes
place on such day,  the  closing  bid price  regular  way, 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, the highest reported bid price as furnished
by the National  Association  of  Securities  Dealers,  Inc.  through  NASDAQ or
similar  organization if NASDAQ is no longer reporting such  information,  or by
the National Daily Quotation Bureau or similar  organization if the Common Stock
is not then quoted on an inter-dealer  quotation system. If on any such date the
Common  Stock is not  quoted  by any such  organization,  the fair  value of the
Common Stock on such date, as determined by Maker's Board of Directors, shall be
used.

(c) Manner of  Conversion.  Payee may  exercise his  conversion  right by giving
notice thereof to Maker setting forth the amount of the Convertible  Obligations
to be  converted.  Within 15 days after the giving of such  notice  Maker  shall
issue the number of Underlying Shares into which the Convertible Obligations are
to be converted in accordance  with the conversion  price and deliver to Payee a
certificate or certificates therefor,  registered in his name, representing such
Shares  against  delivery to Maker of this Note  marked paid in full.  If only a
portion of the  Convertible  Obligations  then  outstanding is converted,  Maker
shall  deliver  to Payee,  together  with the  aforesaid  certificate(s),  a new
promissory note, in form and substance  identical to this Note,  except that the
principal  amount  thereof  shall  equal that  portion of the  Obligations  then
outstanding  which has not been  converted.  Payee shall represent in writing to
Maker  prior to the  receipt of the  Underlying  Shares that such Shares will be
acquired  by him for  investment  only and not for  resale or with a view to the
distribution  thereof,  and shall agree that any  certificates  representing the
Shares may bear a legend,  conspicuously noting such restriction, as Maker shall
deem  reasonably  necessary  or  desirable  to  enable  it to  comply  with  any
applicable federal or state laws or regulations.

(d) Taxes on Shares Issued.  The issue of stock  certificates  on conversions of
this Note shall be made  without  charge to Payee for any tax in respect of such
issue. Maker shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of Common Stock in
any name other than that of Payee,  and Maker  shall not be required to issue or
deliver any  certificates  representing  such Common  Stock unless and until the
person or  persons  requesting  the issue  thereof  shall have paid to Maker the
amount of such tax or shall have  established to the  satisfaction of Maker that
such tax has been paid.

(e) Covenants of Maker Relating to Conversion.  Maker  covenants and agrees that
from and after the date  hereof and until the date of  repayment  in full of the
Obligations:

         (i)  it  shall  provide,  free  from  preemptive  rights,  out  of  its
         authorized but unissued shares,  or out of shares held in its treasury,
         sufficient  shares to provide for the conversion of this Note from time
         to time as the Note presented for conversion;

         (ii) all shares which may be issued upon  conversion  of this Note will
         upon 


                                       3
<PAGE>

          issue be validly issued, fully paid and non-assessable,  free from all
          taxes,  liens and charges with respect to the issue thereof,  and will
          not be subject to the preemptive rights of any stockholder of Maker;

         (iii) if any shares of Common  Stock to be provided  for the purpose of
         conversion  of this Note require  registration  with or approval of any
         governmental  authority  under any  federal  or state law  before  such
         shares may be validly issued upon conversion,  Maker will in good faith
         and as expeditiously as possible  endeavor to secure such  registration
         or  approval,  as the case may be, and  Maker's  obligation  to deliver
         shares of the Common Stock upon conversion of this Note shall be abated
         until such registration or approval is obtained; and

         (iv) if, and thereafter so long as, the Common Stock shall be listed on
         any national securities exchange, Maker will, if permitted by the rules
         of such  exchange,  list  and keep  listed  and for sale so long as the
         Common Stock shall be so listed on such exchange,  upon official notice
         of issuance, all Common Stock issuable upon conversion of this Note.

4.       Adjustment in Conversion Price.
         ------------------------------

(a) Adjustment  for Change in Capital  Stock.  Except as provided in PARAGRAPH 4
(M) below, if Maker shall (i) declare a dividend on its outstanding Common Stock
in shares of its capital  stock,  (ii) subdivide its  outstanding  Common Stock,
(iii) combine its outstanding  Common Stock into a smaller number of shares,  or
(iv) issue any shares of its  capital  stock by  reclassification  of its Common
Stock (including any such reclassification in connection with a consolidation or
merger in which Maker is the continuing corporation), then in each such case the
conversion  privilege and the conversion  price in effect  immediately  prior to
such action shall be adjusted so that if the Note is thereafter converted, Payee
may receive the number and kind of shares which he would have owned  immediately
following  such action if he had  converted the Note  immediately  prior to such
action. Such adjustment shall be made successively  whenever such an event shall
occur. The adjustment shall become effective  immediately  after the record date
in the case of a dividend or distribution  and  immediately  after the effective
date in the case of a subdivision, combination or reclassification.  If after an
adjustment  Payee upon conversion of this Note may receive shares of two or more
classes of capital stock of Maker,  Maker's Board of Directors  shall  determine
the allocation of the adjusted  conversion  price between the classes of capital
stock. After such allocation,  the conversion  privilege and conversion price of
each class of capital  stock shall  thereafter be subject to adjustment on terms
comparable to those applicable to Common Stock in this SECTION 4.

(b)  Subscription  Offerings.  In case Maker shall issue to all of its  existing
stockholders  rights,  options,  or warrants  entitling  the holders  thereof to
subscribe  for or  purchase  Common  Stock (or  securities  convertible  into or
exchangeable  for  Common  Stock) at a price per share (or  having a  conversion
price per share, in the case of a security  convertible into or exchangeable for
Common  Stock)  less than the  Current  Market  Price per share (as  defined  in
PARAGRAPH (D) below) on the record date for the  determination  of  stockholders
entitled to receive such  rights,  then in each such case the  conversion  price
shall be adjusted by  multiplying  the  conversion  price in effect  immediately
prior to such record or  granting  date by a  fraction,  of which the  numerator
shall be the  number of shares of Common  Stock  outstanding  on such  record or
granting  date plus the  number of shares of Common  Stock  which the  aggregate
offering  price of the total  number of shares of Common  Stock so to be offered
(or the aggregate initial  conversion price of the convertible  securities so to
be  offered)  would  purchase  at such  Current  Market  Price  and

                                       4
<PAGE>


of  which  the  denominator  shall be the  number  of  shares  of  Common  Stock
outstanding on such record or granting date plus the number of additional shares
of Common  Stock to be offered for  subscription  or purchase (or into which the
convertible  or   exchangeable   securities  so  to  be  offered  are  initially
convertible or  exchangeable).  Such  adjustment  shall become  effective at the
close of business on such record date;  provided,  however,  that, to the extent
the shares of Common Stock (or securities  convertible  into or exchangeable for
shares of  Common  Stock)  are not  delivered,  the  conversion  price  shall be
readjusted after the expiration of such rights,  options,  or warrants (but only
to the extent that this Note is not  converted  after such  expiration),  to the
conversion price which would then be in effect had the adjustments made upon the
issuance of such rights or warrants been made upon the basis of delivery of only
the  number  of  shares  of Common  Stock  (or  securities  convertible  into or
exchangeable  for  shares  of  Common  Stock)  actually  issued.   In  case  any
subscription  price may be paid in a consideration part or all of which shall be
in a form  other  than  cash,  the  value  of  such  consideration  shall  be as
determined in good faith by Maker's  Board of Directors.  Shares of Common Stock
owned by or held for the account of Maker or any majority-owned subsidiary shall
not be deemed outstanding for the purpose of any such computation.

(c) Other Rights to Acquire Common Stock. In case Maker shall  distribute to all
holders of its Common stock evidences of its  indebtedness or assets  (excluding
cash dividends or distributions  paid from retained earnings of Maker) or rights
or warrants to subscribe or purchase  (excluding  those referred to in PARAGRAPH
(B)  above),  then in each such case the  conversion  price shall be adjusted so
that the same shall equal the price  determined by  multiplying  the  conversion
price in effect immediately prior to the date of such distribution by a fraction
of which the numerator  shall be the Current  Market Price per share (as defined
in PARAGRAPH (D) below) of the Common Stock on the Record Date  mentioned  below
less the then fair market value (as  determined by the Board of Directors of the
Company)  of  the  portion  of  the  assets  or  evidences  of  indebtedness  so
distributed  or of such  rights or  warrants  applicable  to one share of Common
Stock,  and the  denominator  shall be the Current Market Price per share of the
Common Stock.  Such  adjustment  shall become  effective  immediately  after the
Record Date for the  determination  of  shareholders  entitled  to receive  such
distribution.

(d) Current Market Price. For the purpose of any computation  under PARAGRAPHS 4
(B) and (C) above,  the "Current  Market Price" per share of Common Stock on any
date shall be deemed to be the  average of the daily  Closing  Prices for the 30
consecutive trading days commencing 45 trading days before such date.

(e) Action to Permit Valid  Issuance of Common  Stock.  Before taking any action
which would cause an adjustment reducing the conversion price below the then par
value,  if any, of the shares of Common Stock  issuable  upon  conversion of the
Notes,  the Company will take all corporate  action which may, in the opinion of
its  counsel,  be  necessary  in order that the  Company may validly and legally
issue shares of such Common Stock at such adjusted conversion price.

(f) Minimum Adjustment.  No adjustment in the conversion price shall be required
if such adjustment is less than 1% of the Existing  Conversion Price;  provided,
however,  that any  adjustments  which by reason of this PARAGRAPH 4 (F) are not
required  to be made shall be  carried  forward  and taken  into  account in any
subsequent  adjustment.  All calculations  under this SECTION 4 shall be made to
the nearest cent or to the nearest one-hundredth of a share, as the case may be.
Anything to the contrary  notwithstanding,  Maker shall be entitled to make such
reductions  in the  conversion  price,  in  addition  to those  required by this
PARAGRAPH 4 (F), as it in its  discretion  shall  determine  to be  advisable in
order that any 

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<PAGE>

stock dividends, subdivision of shares, distribution of rights to purchase stock
or securities,  or distribution of securities  convertible  into or exchangeable
for  stock  hereafter  made by the  Company  to its  stockholders  shall  not be
taxable.

(g) Referral of  Adjustment.  In any case in which this SECTION 4 shall  require
that an adjustment in the conversion price be made effective as of a record date
for a specified  event,  if the Note shall have been converted after such record
date Maker may elect to defer  until the  occurrence  of such  event  issuing to
Payee the  shares,  if any,  issuable  upon such  conversion  over and above the
shares,  if any,  issuable upon such  conversion on the basis of the  conversion
price in effect prior to such adjustment;  provided,  however,  that Maker shall
deliver to Payee a due bill or other appropriate  instrument  evidencing Payee's
right to  receive  such  additional  shares  upon the  occurrence  of the  event
requiring such adjustment.

(h) Number of Shares.  Upon each adjustment of the conversion  price as a result
of the  calculations  made in PARAGRAPHS 4 (A) through (C) above, the Note shall
thereafter  evidence the right to purchase,  at the adjusted  conversion  price,
that  number of shares  (calculated  to the nearest  one-hundredth)  obtained by
dividing  (i)  the  product   obtained  by  multiplying  the  number  of  shares
purchasable  upon  conversion  of the Note prior to  adjustment of the number of
shares by the  conversion  price in effect prior to adjustment of the conversion
price by (ii) the  conversion  price in  effect  after  such  adjustment  of the
conversion price.

(i) When No Adjustment  Required.  No adjustment  need be made for a transaction
referred  to in  PARAGRAPHS  4 (A) through  (C) above if Payee is  permitted  to
participate in the transaction on a basis no less favorable than any other party
and at a level which would preserve Payee's  percentage equity  participation in
the Common Stock upon  conversion of the Note.  No  adjustment  need be made for
sales of Common Stock pursuant to a Company plan for  reinvestment  of dividends
or interest,  the granting of options and/or the exercise of options outstanding
under any of Maker's currently  existing stock option plans, the exercise of any
other of Maker's  currently  outstanding  options,  or any currently  authorized
warrants, whether or not outstanding. No adjustment need be made for a change in
the  par  value  or no par  value  of the  Common  Stock.  If the  Note  becomes
convertible  solely into cash, no adjustment need be made  thereafter.  Interest
will not accrue on the cash.

(j) Notice of Adjustment. Whenever the conversion price is adjusted, Maker shall
promptly  mail to Payee a notice of the  adjustment  together with a certificate
from Maker's Chief Financial Officer briefly stating (i) the facts requiring the
adjustment,  (ii) the adjusted  conversion price and the manner of computing it,
and the date on which such adjustment becomes  effective.  The certificate shall
be evidence that the adjustment is correct, absent manifest error.

(k) Voluntary Reduction. Maker from time to time may reduce the conversion price
by any  amount  for any  period of time if the period is at least 20 days and if
the reduction is irrevocable during the period. Whenever the conversion price is
reduced,  Maker shall mail to Payee a notice of the reduction.  Maker shall mail
the notice at least 15 days before the date the reduced  conversion  price takes
effect.  The notice shall state the reduced  conversion  price and the period it
will be in effect. A reduction of the conversion price does not change or adjust
the  conversion  price  otherwise  in effect for  purposes of  PARAGRAPHS  4 (A)
through (C) above.

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<PAGE>

(l) Notice of Certain  Transactions.  If (i) Maker  takes any action  that would
require an adjustment  in the  conversion  price  pursuant to this SECTION 4; or
(ii) there is a liquidation or dissolution of Maker, Maker shall mail to Payee a
notice stating the proposed  record date for a distribution or effective date of
a  reclassification,  consolidation,  merger,  transfer,  lease,  liquidation or
dissolution.  Maker  shall  mail the notice at least 15 days  before  such date.
Failure to mail the notice or any defect in it shall not affect the  validity of
the transaction.

(m)  Reorganization of Company.  If Maker and/or the holders of Common Stock are
parties to a merger, consolidation or a transaction in which (i) Maker transfers
or leases  substantially all of its assets;  (ii) Maker  reclassifies or changes
its  outstanding  Common  Stock;  or (iii) the  Common  Stock is  exchanged  for
securities,  cash or other assets; the person who is the transferee or lessee of
such assets or is  obligated to deliver  such  securities,  cash or other assets
shall  assume the terms of this Note.  If the issuer of  securities  deliverable
upon  conversion  of the Note is an affiliate of the  surviving,  transferee  or
lessee  corporation,  that issuer shall join in such assumption.  The assumption
agreement shall provide that the Payee may convert the  Convertible  Obligations
into the kind and amount of securities, cash or other assets which he would have
owned immediately after the consolidation,  merger,  transfer, lease or exchange
if he had  converted  the Note  immediately  before  the  effective  date of the
transaction.  The assumption agreement shall provide for adjustments which shall
be as nearly  equivalent as may be practical to the adjustments  provided for in
this  SECTION 4. The  successor  company  shall  mail to Payee a notice  briefly
describing the assumption agreement. If this Paragraph applies,  PARAGRAPH 4 (A)
above does not apply.

(n) Maker  Determination  Final.  Any  determination  that Maker or its Board of
Directors must make pursuant to SECTION 3 or this SECTION 4 shall be conclusive,
absent manifest error.

5.       Right to Registration.
         ---------------------

(a)  Payee's  Demand  Right  to  Registration.   Upon  receipt  of  notice  (the
"Registration  Request  Notice")  requesting  registration  under the Act of the
Underlying  Shares from the holders of the majority of such Shares,  on only one
occasion,  after December 31, 1997, and through one year after the date on which
all of the Notes have been repaid  and/or  converted,  Maker will offer to Payee
the   opportunity  to  include  this  Note  and  his   Underlying   Shares  (the
"Registerable Securities") in such registration. Maker will use its best efforts
to file with the  Securities  and  Exchange  Commission  (the  "Commission")  as
promptly as  practicable,  a registration  statement  (the "Demand  Registration
Statement"),  utilizing year end audited financial statements,  and will use its
best efforts to have the Demand  Registration  Statement  declared effective and
remain  effective until the earliest of two years  thereafter,  the date all the
Registerable Securities registered thereby have been sold, or, in the reasonable
opinion of maker's  counsel,  the  Registerable  Securities may be sold publicly
without  registration.  Maker  will also use its best  efforts  to  qualify  the
Registerable  Securities  under the  securities  laws of the state  where  Payee
resides  provided Maker is not required to execute a general  consent to service
or to qualify to do business  in such  state.  This offer to Payee shall be made
within 20 days after Maker receives the  Registration  Request Notice.  If Payee
elects  to  include  his  Registerable  Securities  in the  Demand  Registration
Statement, he will, in a timely fashion, provide Maker and its counsel with such
information and execute such documents as Maker's counsel may reasonably require
to prepare and process the Demand Registration Statement. If Payee elects not to
include his Registerable  Securities in the "Demand Registration  Statement," he
shall have no further rights to the registration of his Registerable  Securities
under this PARAGRAPH 5 (A).

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<PAGE>

(b) Payee's  "Piggy  Back"  Registration  Rights.  If at any time after the date
hereof,  Maker  proposes  to file a  Registration  Statement  under the Act with
respect  to any of its  securities  (except  one  relating  to stock  option  or
employee  benefit  plans),  Maker shall give written  notice of its intention to
effect such  filing to Payee at least 30 days prior to filing such  Registration
Statement (the "Piggy-Back Registration Statement"). If Payee desires to include
his Registerable  Securities in the Piggy-Back  Registration Statement, he shall
notify Maker in writing  within 15 days after receipt of such notice from Maker,
in which  event Maker  shall  include  Payee's  Registerable  Securities  in the
Piggy-Back  Registration  Statement. If Payee elects to include his Registerable
Securities in the  Piggy-Back  Registration  Statement as set forth  herein,  he
shall, in a timely fashion,  provide Maker and its counsel with such information
and execute such documents as its counsel may reasonably  require to prepare and
process the  Piggy-Back  Registration  Statement.  Anything to the  contrary not
withstanding,   in  the  event  that  the  offering  for  which  the  Piggy-Back
Registration Statement has been filed is to be effected by an underwriter,  such
underwriter  may  exclude  the  Registerable   Securities  from  the  Piggy-Back
Registration Statement.

(c) Copies of Registration Statements and Prospectuses. Maker will provide Payee
with a copy of the Demand  Registration  Statement  or  Piggy-Back  Registration
Statement,  as the case may be, and any  amendments  thereto,  and copies of the
final  prospectus  included  therein in such  quantities  as may  reasonably  be
required to permit Payee to sell his  Registerable  Securities  after the Demand
Registration Statement or Piggy-Back Registration Statement, as the case may be,
is declared effective by the Commission.

(d) Maker's  Obligation  to Bear Expenses of  Registration.  Maker will bear all
expenses (except  underwriting  discounts and commission,  if any, and the legal
fees and expenses,  if any, of counsel to Payee) necessary and incidental to the
performance of its obligations under this SECTION 5.

(e)  Indemnification.  Maker and Payee, if Payee's  Registerable  Securities are
included in a Registration  Statement  pursuant to this SECTION 5, shall provide
appropriate cross indemnities to each other covering the information supplied by
the indemnifying party for inclusion in the Registration Statement.

(f)  Cancellation  of  Registration   Rights.   Anything  to  the  contrary  not
withstanding,  Maker shall not be required to  register  any  Underlying  Shares
which, in the reasonable opinion of Maker's counsel, may be sold pursuant to the
exemption  from  registration  provided by Section  (k) of Rule 144  promulgated
under the Act.

6.       Subordination; Pari Passu with other Notes.
         ------------------------------------------

(a) Senior Debt. This Note is  subordinated to Senior Debt,  which means (a) all
obligations and indebtedness of Maker, including but not limited to indebtedness
to Credit  Lyonnais New York Branch,  as agent (the  "Agent") for itself and the
other lenders now or hereafter  party to that certain Credit  Agreement dated as
of July 11, 1997 among Maker,  Agent and such lenders,  as modified,  amended or
supplemented (the "Credit  Agreement") and the $1,028,000 in principal amount of
debentures  due  December  31, 1997 and all accrued  interest  thereon,  whether
outstanding  on the date  hereof  or  hereafter  created,  and all  indebtedness
secured  by  assets  of Maker  having a value  (as  determined  by the  Board of
Directors of Maker) of more than 50% of the outstanding principal amount of such
indebtedness or $100,000,  whichever is less, (i) for borrowed  money,  (ii) for
money borrowed by others and  guaranteed,  directly or indirectly,  by Maker, or
(iii) constituting 

                                       8
<PAGE>

purchase  money  indebtedness  for the  payment of which  Maker is  directly  or
contingently  liable,  unless , in any such case,  by the  express  terms of the
instrument  creating or evidencing  such  indebtedness  it is provided that such
indebtedness  is not  superior  in right  of  payment  to this  Note or to other
indebtedness which is pari passu with, or subordinated to this Note, and (b) any
deferrals, renewals, increases or extensions of any such Senior Debt. As used in
the  preceding  sentence  the term  "purchase  money  indebtedness"  shall  mean
indebtedness  evidenced by a note,  debenture,  bond or other similar instrument
issued to or assumed for a vendor as all or part of the  purchase  price of such
asset  acquired by Maker.  Senior Debt must be paid before the Note may be paid.
This Note shall be paid on a pari passu basis with all other Notes. Upon request
of Maker Payee shall  execute  such  subordination  agreements  with  holders of
Senior Debt as shall be reasonably requested.

(b)  Subordination  to Senior  Bank Debt;  Restrictions  on  Subordinated  Debt.
Anything  in  this  Note  to  the  contrary  notwithstanding,  the  indebtedness
evidenced by this Note,  including without  limitation,  principal,  premium, if
any,  and  interest and any and all fees,  expenses,  indemnities  and all other
monies  owing at any time  pursuant  to or in  connection  with  this  Note (the
"Subordinated  Debt"),  shall be  subordinate  and  junior  to all  Senior  Debt
evidenced  by the Credit  Agreement  and the other  documents,  instruments  and
agreements  executed  in  connection   therewith,   and  all  modifications  and
amendments thereto and all substitutions or replacements thereof  (collectively,
the "Senior Bank Debt"), to the extent set forth below:

         (i) If a Default  (as defined in the Credit  Agreement)  or a Potential
         Default (as defined in the Credit Agreement) shall occur,  then, unless
         and until such Default or Potential Default shall have been remedied by
         indefeasible payment in full of all of the Senior Bank Debt in cash, or
         otherwise cured, or expressly waived in writing by all affected holders
         of Senior  Bank Debt,  the Maker  shall not make and the holder of this
         Note  shall not  accept or  receive,  any  direct or  indirect  payment
         (whether of principal,  interest or other  amounts) of or on account of
         any Subordinated  Debt,  whether in cash or other property or by setoff
         or in any other manner;

         (ii)  In  the  event  of  any  insolvency,   bankruptcy,   liquidation,
         reorganization  or  other  similar  proceedings,  or  any  receivership
         proceedings in connection therewith,  relative to the Maker, and in the
         event of any  proceedings  for voluntary  liquidation,  dissolution  or
         other winding up of the Maker,  whether or not involving  insolvency or
         bankruptcy  proceedings,  then all  Senior  Bank  Debt  shall  first be
         indefeasibly paid in full and in cash before any payment is made of, or
         on account of, any Subordinated Debt;

         (iii) In any of the proceedings  referred to in subparagraph (2) above,
         the   holder  of  this  Note   hereby   absolutely,   irrevocably   and
         unconditionally  assigns  and sets over to Agent  all of his  rights to
         vote to  approve  or reject  any plan of  reorganization  in respect of
         Maker or any of its  subsidiaries,  and any payment or  distribution of
         any kind or character whether in cash, property,  stock or obligations,
         which may be  payable  or  deliverable  by the Maker in respect of this
         Note shall be paid or delivered  directly to Agent,  for the benefit of
         the holders of Senior Bank Debt for the ratable  application in payment
         thereof in accordance  with the  priorities  then  existing  among such
         holders,  unless  and  until  all  Senior  Bank  Debt  shall  have been
         indefeasibly paid in full and in cash;

                                       9
<PAGE>

         (iv) In the event of any of the  proceedings  referred to in  paragraph
         (2) above, the holder of this Note will, at the Agent's  request,  file
         any claim,  proof of claim or other  instrument  of  similar  character
         necessary  to  enforce  the  obligation  of the Maker in respect of the
         Subordinated  Debt.  In the event that the  holder of this Note  should
         fail to take such  action  requested  by the Agent,  the Agent may,  as
         attorney-in-fact  for the  holder of this  Note,  take  such  action on
         behalf of the holder of this Note,  and the holder of this Note  hereby
         irrevocably  appoints the Agent as  attorney-in-fact  for the holder of
         this Note to demand,  sue for,  collect  and  receive  any and all such
         moneys,  dividends or other assets and give acquittance therefor and to
         file any claim, proof of claim or other instrument of similar character
         and to take such other  proceedings  in Agent's  own  name(s) or in the
         name of the  holder of this Note as the  Agent  may deem  necessary  or
         advisable for the  enforcement of the terms contained in this Note; and
         the holder of this Note will  execute  and  deliver to Agent such other
         and  further  powers  of  attorney  or other  instruments  as Agent may
         request in order to accomplish the foregoing;


         (v)  Notwithstanding  the holder of this Note's rights under applicable
         law or any provision of this Note to the  contrary,  the holder of this
         Note hereby  acknowledges and agrees that he shall not take,  pursue or
         engage in, directly or indirectly,  any Enforcement Action (hereinafter
         defined) unless the Senior Bank Debt has been indefeasably paid in full
         (A) if a Default  (as defined in the Credit  Agreement)  or a Potential
         Default (as defined in the Credit Agreement) has occurred which has not
         been cured or waived by the  holders of the Senior  Bank Debt and which
         Default or Potential  Default  results in the full amount of the Senior
         Bank Debt being  declared due and payable,  or (B) during the period of
         time commencing on the date that Agent obtains actual  knowledge that a
         Default or Potential  Default has occurred which permits the holders of
         the Senior Bank Debt to declare any  amounts  thereof due and  payable,
         and  ending  on the  earlier  of the  date on  which  such  Default  or
         Potential Default shall have been cured or waived by the holders of the
         Senior Bank Debt or the 90th day after the commencement of such period.
         As  used  herein  the  term  "Enforcement  Action"  means  any  of  the
         following:  (1) the  holder  of this  Note  shall  (A)  accelerate  the
         Subordinated  Debt or any portion thereof,  or (B) take any Enforcement
         Action or exercise any remedies against Maker to collect or enforce any
         of its obligations and indebtedness  under this Note; or (2) the holder
         of this Note acquiesces in,  petitions,  or otherwise invokes or causes
         any other person to invoke the process of the United States of America,
         any  state  or  other  political   subdivision  thereof  or  any  other
         jurisdiction, any entity exercising executive,  legislative,  judicial,
         regulatory,  or administrative functions of or pertaining to government
         for the purpose of commencing or sustaining a case against Maker, under
         a federal or state bankruptcy, insolvency, or similar law or appointing
         a receiver, liquidator, assignee, trustee, custodian,  sequestrator, or
         other  similar  official of Maker or all of any part of its property or
         assets or ordering  the  winding-up  or  liquidation  of the affairs of
         Maker.  The holder of this Note hereby  waives any right it may have to
         require  that the holders of the Senior Bank Debt marshal any assets of
         Maker in favor of the holder of this Note.

         (vi) The  holder  of this Note  shall not  institute  any  judicial  or
         administrative  proceeding  against  Maker or the holders of the Senior
         Bank Debt which  directly or indirectly  would  interfere with or delay
         the  exercise  by Agent or the holders of the Senior Bank Debt of their
         rights and  remedies  in respect of any  property of Maker or any other
         obligor of the Senior Bank Debt  constituting  collateral  security for
         the Senior  Bank Debt or under the  Senior  Credit  Agreement.  Without
         limiting the 

                                       10
<PAGE>

          generality  of  the  foregoing,  in  the  event  of  a  bankruptcy  or
          insolvency  of Maker,  the  holder of this Note shall not object to or
          oppose any  efforts by the  holders of the Senior  Bank Debt to obtain
          relief from the automatic  stay under Section 362 of the United States
          Bankruptcy Code or to seek to cause such entity's bankruptcy estate to
          abandon property (or any portion thereof) that is subject to liens and
          security  interests in favor of the Agent or the holders of the Senior
          Bank Debt.

          (vii) If any  payment or  distribution  of any  character,  whether in
          cash, securities or other property, shall be received by the holder of
          this Note (other  than  payments or  distributions  consisting  of the
          Underlying  Shares made in exchange  for the  Convertible  Obligations
          pursuant to Paragraph 3 of this Note) in  contravention  of any of the
          terms of this Note and before all the Senior Bank Debt shall have been
          indefeasibly  paid in full and in cash,  such payment or  distribution
          shall be  received  in trust for the  benefit  of the  holders  of the
          Senior Bank Debt at the time  outstanding  and shall forthwith be paid
          over or  delivered  and  transferred  to the  Agent  for  the  ratable
          application in payment  thereof in accordance with the priorities then
          existing among such holders;

          (viii)  Payment  of the  Subordinated  Debt will not be secured by any
          security interest or lien on any assets of, or by a guaranty from, any
          obligor of the Senior  Bank Debt  unless all Senior Bank Debt has been
          indefeasibly paid in full and in cash; and

          (ix) The amount,  the rate of interest  charged,  or the time,  place,
          manner, terms or amount of interest payments of this Note,  including,
          without  limitation,  the  provisions of this  Paragraph 6, may not be
          altered in any fashion  (provided,  however,  that maker and Payee may
          agree  to alter  the  number  of  Underlying  Shares  into  which  the
          Convertible  Obligations  may be converted  pursuant to Paragraph 3 of
          this Note),  and, no portion of the  principal  owing with  respect to
          this note may be paid prior to the  Maturity  Date,  without,  in each
          instance, the prior express written consent of Agent unless all Senior
          Bank Debt has been indefeasibly paid in full and in cash.

          (x) Notwithstanding  anything herein to the contrary,  nothing in this
          Paragraph  6 shall  limit the  rights of Maker and the  holder of this
          Note to agree to any changes in the conversion provisions of this Note
          which might  result in the  issuance of a greater or lesser  number of
          shares of common stock in  satisfaction of Maker's  obligations  under
          this Note or the timing of such conversion of Maker's  obligation into
          common stock.

(c) Rights of Holders of Senior Bank Debt. The subordination  provisions of this
Note shall be deemed a  continuing  offer to all  holders of Senior Bank Debt to
act in reliance on such provisions (but no such reliance shall be required to be
proven to receive the benefits hereof) and may be enforced by such holders,  and
no right of Agent or any  present or future  holder of any  senior  Bank Debt to
enforce  subordination  as provided in this Note shall at any time in any way be
prejudiced  or impaired by any act or failure to act on the part of the Maker or
by  any  act  or  failure  to  act  by  Agent  or  any  such  holder,  or by any
non-compliance  by the Maker with the terms,  provisions  and  covenants of this
Note.

Without in any way  limiting the  generality  of the  foregoing,  the holders of
Senior Bank Debt may, at any time and from time to time,  without the consent of
or notice to the holder of this Note,  and without  impairing or  releasing  the
subordination  provided in this Note or the obligations  hereunder of the holder
of this Note to the  holders  of  Senior  Bank  Debt,  do any one or more of the
following:  (i) change the manner,  place or terms of payment or extend the time
of payment of, or renew or alter,  or waive  defaults under Senior Bank Debt, or
otherwise  amend  or  supplement  in any  manner  the  Senior  Bank  Debt or any
instrument evidencing the same or any agreement under which the Senior Bank Debt
is  outstanding;  (ii) release any person or entity liable in any manner for the
payment or  collection  of Senior Bank Debt;  (iii) sell,  exchange,  release or
otherwise  deal with all or any part of the property by  whomsoever  at any time
pledged or mortgaged to secure,  or howsoever  securing,  any of the Senior Bank
Debt;  (iv) exercise or refrain from exercising any rights against the Maker and
any other person or entity, including any guarantor or surety; and (v) apply any
sums, by whomsoever paid or however realized, to Senior Bank Debt.

7.       Covenants.
         ---------

Maker  covenants  and agrees  that from and after the date  hereof and until the
date of repayment in full of the  Obligations it shall comply with the following
conditions:

                                       11
<PAGE>

          (i) Maintenance of Existence and Conduct of Business. Maker shall, and
          shall cause each of its subsidiaries, if any, to (A) do or cause to be
          done all  things  necessary  to  preserve  and keep in full  force and
          effect its corporate existence and rights; and (B) continue to conduct
          its business so that the business  carried on in connection  therewith
          may be properly and advantageously conducted at all times.

          (ii) Books and  Records.  Maker  shall,  and shall  cause each of its
          subsidiaries,  if any, to keep  adequate  books and records of account
          with respect to its business activities.

          (iii)   Insurance.   Maker   shall,   and  shall  cause  each  of  its
          subsidiaries,  if any, to maintain  insurance  policies  insuring such
          risks as are  customarily  insured  against  by  companies  engaged in
          businesses similar to those operated by Maker or such subsidiaries, as
          the cash may be. All such  plicies  are to be carried  with  reputable
          insurance  carriers  and shall be in such  amounts as are  customarily
          insured  against by  companies  with  similar  assets  and  properties
          engaged in a similar business.

          (iv)  Compliance  with law.  Maker shall,  and shall cause each of its
          subsidiaries,  if any,  to comply in all  material  respects  with all
          federal, state and local laws and regulations applicable to it or such
          subsidiaries,  as the case  may be,  which if  breached  would  have a
          material adverse effect on Maker's or such subsidiaries',  as the case
          may be, business or financial condition.

8.       Representations and Warranties of Maker.
         ---------------------------------------

Maker  represents  and warrants  that it: (i) is a corporation  duly  organized,
validly  existing and in good  standing  under the laws of the State of Delaware
and has all requisite  corporate power to carry on its business as now conducted
and to own its  properties  and assets it now owns;  (ii) is duly  qualified  or
licensed  to do  business  as a  foreign  corporation  in good  standing  in the
jurisdictions  in which  ownership  of property  or the conduct of its  business
requires such qualification except jurisdictions in which the failure to qualify
to do business will have no material adverse effect on its business,  prospects,
operations,  properties, assets or condition (financial or otherwise); (iii) has
full  power and  authority  to  execute  and  deliver  this  Note,  and that the
execution  and delivery of this Note will not result in the breach of or default
under,  with or without  the giving of notice  and/or the  passage of time,  any
other agreement,  arrangement or indenture to which it is a party or by which it
may be bound, or the violation of any law, statute,  rule,  decree,  judgment or
regulation  binding upon it; and (iv) has taken and will take all acts required,
including but not limited to authorizing  the signatory  hereof on its behalf to
execute this Note,  so that upon the  execution  and  delivery of this Note,  it
shall constitute the valid and legally binding  obligation of Maker  enforceable
in accordance with the terms thereof.

9.       Defaults and Remedies.
         ---------------------

(a) Events of Default.  The  occurrence  or  existence of any one or more of the
following  events or  conditions  (regardless  of the  reasons  therefor)  shall
constitute an "Event of Default" hereunder:

          (i) Maker shall fail to make any payment of Principal or Interest when
          due and  payable or  declared  due and  payable  pursuant to the terms
          hereof and such failure  shall remain  uncured for a period of 15 days
          after notice thereof has been given by Payee to Maker;

                                       12
<PAGE>

          (ii) Maker  shall fail at any time to be in material  compliance  with
          any of the covenants set forth in Paragraph 3 (c) or Section 7 of this
          Note, or shall fail at any time to be in material  compliance  with or
          neglect to perform, keep or observe any of the provisions of this Note
          to be  complied  with,  performed,  kept or observed by Maker and such
          failure  shall  remain  uncured  for a period of 30 days after  notice
          thereof has been given by Payee or the Agent to Maker;

          (iii) Any  representation or warranty made in this Note by Maker shall
          be untrue or  incorrect  in any  material  respect as of the date when
          made or deemed made;

          (iv) A case or proceeding shall have been commenced  against Maker, or
          any  of  its  subsidiaries,  if  any,  in  a  court  having  competent
          jurisdiction  seeking a decree or order in respect of Maker, or any of
          its subsidiaries, (A) under Title 11 of the United States Code, as now
          constituted or hereafter  amended,  or any other  applicable  federal,
          state or foreign  bankruptcy  or other  similar law; (B)  appointing a
          custodian, receiver, liquidator, assignee, trustee or sequestrator (or
          similar  official)  of Maker,  or any of its  subsidiaries,  or any of
          their  respective  properties;  or  (C)  ordering  the  winding-up  or
          liquidation of the affairs of Maker, or any of its  subsidiaries,  and
          such case or proceeding  shall remain  unstayed or  undismissed  for a
          period of 90  consecutive  days or such court  shall enter a decree or
          order granting the relief sought in such case or proceeding; or

          (v)  Maker,  or any of its  subsidiaries,  if any,  shall  (A)  file a
          petition  seeking  relief under Title 11 of the United States Code, as
          now constituted or hereafter amended, or any other applicable federal,
          state or foreign  bankruptcy  or other  similar law; or (B) consent to
          the institution of proceedings thereunder or to the filing of any such
          petition or to the  appointment  of or the taking of  possession  by a
          custodian, receiver, liquidator, assignee, trustee or sequestrator (or
          similar  official)  of Maker,  or any of its  subsidiaries,  or any of
          their respective properties.

(b) Remedies. Upon the occurrence of an event of Default specified in Paragraphs
9 (iv) and (v) above,  all  Obligations  then remaining  unpaid  hereunder shall
immediately  become due and payable without  notice.  Upon the occurrence of any
other Event of Default,  the holders of at least 51% in principal  amount of the
Notes may thereafter,  at their option  immediately by notice to Maker,  declare
all Obligations  then remaining  unpaid  hereunder  immediately due and payable,
whereupon the same shall  forthwith  mature and become due and payable,  without
any further notice to Maker and without presentment,  demand,  protest or notice
of  protest,  all of which are hereby  waived by Maker.  Upon a  declaration  of
acceleration,  the entire  Obligations  then remaining  unpaid  hereunder  shall
become  immediately  due and  payable  in full  plus all  reasonable  costs  and
expenses of the collection and  enforcement of this Note,  including  reasonable
attorney's  fees and  expenses,  all of which  shall be added to the  amount due
under this Note. The rights,  powers,  privileges and remedies of Payee pursuant
to the terms  hereof  are  cumulative  and not  exclusive  of any other  rights,
powers,  privileges  and  remedies  which  Payee may have under this Note or any
other instrument or agreement.

10.      Maker's Right to Prepay.
         -----------------------

Maker  may not repay  this Note or any  portion  thereof  prior to May 1,  1999.
Thereafter, Maker may prepay this Note or any portion thereof at any time on not
less  than 30 nor more  than 60 day's  notice  to Payee  together  with  accrued
Interest  to the date fixed for  repayment.  The  repayment  price shall be on a
decreasing  scale  commencing at 110% on May 1, 1999 and decreasing by 0.56% per
month to 100% on November 1, 2000 as follows:

                                       13
<PAGE>

                     Percent of                        Percent of
     Date            Principal          Date           Principal
     ----            ---------    -----------------    ---------

May 1, 1999           110.00      February 1, 2000       104.96
June 1, 1999          109.44      March 1, 2000          104.40
July 1, 1999          108.88      April 1, 2000          103.84
August 1, 1999        108.32      May 1, 2000            103.28
September 1, 1999     107.76      June 1, 2000           102.72
October 1, 1999       107.20      July 1, 2000           102.16
November 1, 1999      106.64      August 1, 2000         101.60
December 1, 1999      106.08      September 1, 2000      101.04
January 1, 2000       105.52      October 1, 2000        100.48

Repayment  after October 1, 2000 will be at 100% of  Principal.  Anything to the
contrary  not  withstanding,  Maker may prepay this Note at any time after April
30, 1999 on 30 day's notice  without any premium or penalty if the Closing Price
of the Common Stock for 30 consecutive  trading days  immediately  preceding the
day on which the repayment notice is sent equals or exceeds $4.50 per share.

11.      Acknowledgment of Payee's Investment Representations.
         ----------------------------------------------------

By  accepting  this Note,  Payee  acknowledges  that this Note has not been and,
except as provided  herein,  will not be  registered  under the Act or qualified
under  any  state  securities  laws  and  that the  transferability  thereof  is
restricted by the registration provisions of the Act as well as such state laws.
Based upon the  representations  and agreements  being made by him herein,  this
Note is being  issued to him  pursuant to an  exemption  from such  registration
provided  by  Section  4 (2) of the  Act and  applicable  state  securities  law
qualification exemptions. Payee represents that he is acquiring the Note for his
own account, for investment purposes only and not with a view to resale or other
distribution  thereof,  nor with  the  intention  of  selling,  transferring  or
otherwise  disposing  of all or any  part  of it for  any  particular  event  or
circumstance,  except  selling,  transferring  or disposing of it only upon full
compliance  with all applicable  provisions of the Act, the Securities  Exchange
Act of 1934, the Rules and Regulations promulgated by the Commission thereunder,
and any applicable state  securities laws. Payee further  understands and agrees
that no transfer of this Note shall be valid unless made in compliance  with the
restrictions  set forth on the front of this Note,  effected on Maker's books by
the  registered  holder hereof,  in person or by an attorney duly  authorized in
writing, and similarly noted hereon. Maker may charge Payee a reasonable fee for
any re registration, transfer or exchange of this Note.

12.      Limitation of Liability.
         -----------------------

A director,  officer, employee or stockholder,  as such, of Maker shall not have
any  liability  for any  obligations  of Maker  under this Note or for any claim
based on, in respect or by reason of such obligations or their creation.  Payee,
by accepting this Note,  waives and releases all such liability.  The waiver and
release are part of the consideration for the issuance of this Note.

13.      Limitation of Interest Payments.
         -------------------------------

Nothing contained in this Note or in any other agreement between Maker and Payee
requires  Maker to pay or Payee to  accept  Interest  in an amount  which  would
subject Payee to any penalty or  forfeiture  under  applicable  law. In no event
shall the total of all charges payable hereunder, whether of Interest or of such
other  charges  which may or might be  characterized  as  interest,  exceed  the
maximum rate permitted to be charged under the laws of the States of New York or
Texas.  Should Payee  receive any payment which is or would be in excess of that
permitted to be charged under such laws,  such payment shall have been and shall
be deemed to have been made in error  and  shall  automatically  be  applied  to
reduce the Principal outstanding on this Note.

                                       14
<PAGE>

14.      Reservation of Shares
         ---------------------

Maker shall at all times reserve and keep  available out of its  authorized  but
unissued  stock,  for the  purpose  of  effecting  the  issuance  of stock  upon
conversion  of this  Note,  such  number of shares as shall from time to time be
sufficient  to effect the issuance of shares of Common Stock upon  conversion of
this Note.

15.      Miscellaneous.
         -------------

(a)  Effect of  Forbearance.  No  forbearance,  indulgence,  delay or failure to
exercise any right or remedy by Payee with respect to this Note shall operate as
a waiver or as an acquiescence in any default.

(b) Effect of Single or Partial Exercise of Right. No single or partial exercise
of any right or remedy by Payee  shall  preclude  any other or further  exercise
thereof or any exercise of any other right or remedy by Payee.

(c) Governing Law. This Note shall be construed and enforced in accordance with,
and the rights of the parties  shall be governed  by, the  internal  laws of the
State of Texas applicable to contracts made and to be performed  entirely within
such State.

(d) Headings. The headings and captions of the various paragraphs herein are for
convenience  of  reference  only and shall in no way  modify any of the terms or
provisions of this Note.

(e) Loss,  Theft,  Destruction or Mutilation.  Upon receipt by Maker of evidence
reasonably satisfactory to it of loss, theft,  destruction or mutilation of this
Note, Maker shall make and deliver or caused to be made and delivered to Payee a
new Note of like tenor in lieu of this Note.

(f)  Modification  of Note or  Waiver of Terms  Thereof  Relating  to Payee.  No
modification  or waiver of any of the provisions of this Note shall be effective
unless in  writing  and signed by Payee and then only to the extent set forth in
such writing,  nor shall any such modification or waiver be applicable except in
the  specific  instance for which it is given.  This Note may not be  discharged
orally but only in writing duly executed by Payee.

(g)  Notice.  All  offers,  acceptances,  notices,  requests,  demands and other
communications  under  this Note shall be in writing  and,  except as  otherwise
provided  herein,  shall be deemed to have been  given  only when  delivered  in
person,  via  facsimile  transmission  if receipt  thereof is  confirmed  by the
recipient,  or, if mailed,  when mailed by certified or registered mail prepaid,
to the parties at their  respective  addresses first set forth above, or at such
other address as may be given in writing in future by either party to the other.

                                       15
<PAGE>

(h)  Successors  and  Assigns.  This  Note  shall be  binding  upon  Maker,  its
successors,  assigns and  transferees,  and shall inure to the benefit of and be
enforceable by Payee and its successors and assigns.

(i)  Severability.  If one or more of the  provisions  or  portions of this Note
shall be deemed by any court or quasi-judicial  authority to be invalid, illegal
or unenforceable in any respect, the invalidity,  illegality or unenforceability
of the remaining  provisions,  or portions of provisions  contained herein shall
not in any way be  affected  or  impaired  thereby,  so long as this Note  still
expresses  the intent of the  parties.  If the intent of the  parties  cannot be
preserved,  this  Agreement  shall either be  renegotiated  or rendered null and
void.

IN WITNESS  WHEREOF,  Maker has caused this Note to be executed on its behalf by
an officer thereunto duly authorized as of the date set forth above.

                                       Fortune Natural Resources Corporation
                                       a Delaware corporation

         [SEAL]

                                       By:  
                                            ------------------------------------
                                            Tyrone J. Fairbanks, President
                                            and Chief Executive Officer

ATTEST:  
         -----------------------------
         Dean W. Drulias, Secretary