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.

                              AUDIO BOOK CLUB, INC.

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


$14,000,000.00                                                 December 31, 1998


     AUDIO BOOK CLUB,  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 FOURTEEN
MILLION DOLLARS ($14,000,000) on December 31, 2004 (the "Maturity Date"), and to
pay interest on the unpaid principal balance hereof from December 7, 1998 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 March 31, 1999, 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.

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.

     1.2 At the option of the Holder,  the Company may pay a scheduled  interest
payment in 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



<PAGE>



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.

     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


                                       -2-

<PAGE>



$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")
specified  in such  notice  that is not less than  thirty (30) days and not more
than ninety (90) days after the date of such notice,  at a purchase  price equal
to 100% of the aggregate  principal  amount thereof and all interest 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.

     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

                            
                                       -3-

<PAGE>



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 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

                            
                                       -4-

<PAGE>



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.

     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 2.10 or 2.12
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

                            
                                       -5-

<PAGE>



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 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

                            
                                       -6-

<PAGE>



     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  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;

                            
                                       -7-

<PAGE>



          (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  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.


                            
                                       -8-

<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 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.


                            
                                       -9-

<PAGE>



          "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;

               (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); or

               (g)  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,  Fleet  National  Bank,  as  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 Credit Agreement dated as of the
     date hereof among the Company,  Fleet National Bank 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

                            
                                      -10-

<PAGE>



          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:

               (a) the Senior Credit Facility; and

               (b) 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.

          "Significant Nonpayment Default" means and includes:

               (a) 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 2.14,  5.2, 5.5, 5.6, 5.7,
          5.13 and 5.14, 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

               (b) 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

                            
                                      -11-

<PAGE>



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 $11.125  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 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

                            
                                      -12-

<PAGE>



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  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) Warrants to purchase Common Stock issued to the Holder on the
          date hereof (the "Warrants").

               (C) Common Stock issued or issuable upon  conversion of this Note
          or exercise of the Warrants.

               (D)  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;


                            
                                      -13-

<PAGE>



               (E) The grant of options,  warrants, stock appreciation rights or
          other  rights  available  for future grant under the  Company's  stock
          option plan or any future stock option or incentive  plan  approved by
          the Company's shareholders;

               (F) 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 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 (as hereinafter defined)
          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;


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

               (H) 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.

The term "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.

          (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

                            
                                      -14-

<PAGE>



          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:

                    (A) 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  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.

                    (B) 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

                            
                                      -15-

<PAGE>



               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.

                    (C)  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.

                    (D) 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 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  shareholders  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.

                            
                                      -16-

<PAGE>



          (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.

     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:


                            
                                      -17-

<PAGE>



          (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 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.

                            
                                      -18-

<PAGE>




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 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  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.

                            
                                      -19-

<PAGE>




     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, the
transactions contemplated hereby, the issuance and exercise of the Warrants, the
provisions  of a certain  letter  agreement  dated the date  hereof  between the
Company  and such  payee (the  "Letter  Agreement")  or  payments  pursuant  the
Acquisition  Documents  and the  Future  Acquisition  Puts (as  those  terms are
defined  in  the  Senior  Credit  Agreement,   collectively,   the  "Acquisition
Obligations" and, individually, an "Acquisition Obligation").

     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
     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-QSB
     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

                            
                                      -20-

<PAGE>



     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-KSB 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-KSB, Form
     10-QSB 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 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 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.


                            
                                      -21-

<PAGE>



     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,  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

                            
                                      -22-

<PAGE>



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 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") (a) 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  (b)  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  and  (ii) in
compliance with Section 6.19 of the Senior Credit Agreement, transfer its assets
to a wholly-owned  subsidiary so long as such subsidiary executes and delivers a
guaranty in favor of the Holder  that is  reasonably  acceptable  to the Holder,
subordinated on terms and conditions  acceptable to the Senior Agent  consistent
with the terms of subordination set forth in Section 3 hereof.

     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:

                            
                                      -23-

<PAGE>




          (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  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;


                            
                                      -24-

<PAGE>



          (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  on the  Issue  Date and  listed  on  Schedule  6.3
     (including  Debt under the Senior  Credit  Agreement,  provided  that loans
     thereunder  shall not exceed an aggregate of $34 million plus an additional
     $6 million to be used  solely for working  capital  and  general  corporate
     purposes of the Company, including, but not limited to, acquisitions);

          (D) Debt incurred  under the Senior Credit  Facility from time to time
     following the Issue Date,  provided that loans  thereunder shall not exceed
     an aggregate of $34 million plus an additional $6 million to be used solely
     for  working  capital  and  general  corporate  purposes  of  the  Company,
     including, but not limited to, acquisitions;

          (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 Debt incurred  under the Senior Credit  Facility)
     incurred  or  assumed  in  connection  with  "Permitted  Acquisitions"  and
     "Permitted  Club  Acquisitions"  (as those  terms are defined in the Senior
     Credit Agreement);

          (G) Debt incurred in connection  with conversion of the obligations of
     the  Company  or any  subsidiary  thereof  under the  Acquisition  Puts (as
     defined  in the  Senior  Credit  Agreement)  pursuant  to the  terms of the
     Acquisition  Documents (as defined in the Senior  Credit  Agreement) or the
     conversion of obligations under Future  Acquisition Puts (as defined in the
     Senior Credit Agreement) into Debt of the Company or its subsidiaries under
     the terms of the agreements governing such Future Acquisition Puts;

          (H) Debt (other  than this Note) owing by the Company or a  subsidiary
     thereof to Norton Herrick, Michael Herrick and/or Howard Herrick (together,
     the "Herricks") and/or any of their respective Affiliates;

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

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

          (K) 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),
     (H), (I), (J) and (L) above 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), (H), (I), (J) and (L) above; and


                            
                                      -25-

<PAGE>



          (L) 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 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.  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):

          (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

                            
                                      -26-

<PAGE>



     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 of 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 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.


                            
                                      -27-

<PAGE>



          (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.

          (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.

                            
                                      -28-

<PAGE>



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 such person; at such time; provided,
     however, that no person holding this Note or Warrants 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 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

                            
                                      -29-

<PAGE>



     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
     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

                            
                                      -30-

<PAGE>



     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) 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 December 31, 1998

          "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.


                            
                                      -31-

<PAGE>



          "Note" means and includes each 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.

          "Warrant"  means each warrant to purchase Common Stock issued pursuant
     to the Warrant  Agreement  dated as of the date hereof  between the Company
     and the Holder, pursuant to which the Warrants were issued.

     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.

     (b) 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.

                            
                                      -32-

<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 9.7(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 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

                            
                                      -33-

<PAGE>



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 (a) 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,  however,  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.

     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.

     9.5 (a) The Company shall pay when billed the reasonable costs and expenses
(including reasonable attorneys' fees) incurred by the Holder in connection with
the  consideration,  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).

     (b)  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.

     (c) 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.

     9.6 (a) THE PARTIES HERETO  VOLUNTARILY AND  INTENTIONALLY  WAIVE ANY RIGHT
ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS NOTE OR TRANSACTIONS CONTEMPLATED HEREBY.

          (b) 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

                            
                                      -34-

<PAGE>



     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  JURISDICTION 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.

          (c) 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.

          (d) 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.



                            
                                      -35-

<PAGE>



     IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly  executed  and  delivered  by one of its  duly  authorized  officers  or
representatives.


                                        AUDIO BOOK CLUB, INC.



                                        By: /s/ JOHN LEVY
                                            -----------------------------------
                                            Name:  John Levy
                                            Title: Executive Vice President and 
                                                      Chief Financial Officer

                            
                                      -36-

<PAGE>

                                  Schedule 6.3


1.   Debt incurred under the Senior Credit Agreement on the Issue Date
 
2.   Debt in the principal  amount of $50,000,  together  with accrued  interest
     thereon at the annual rate of 10%,  evidenced by a promissory note of Radio
     Spirits, Inc., payable to Charles Michelson Inc., which Debt was assumed by
     Classic Radio Holding Corp. ("CRHC")

3.   Debt in the amount of approximately $17,330 representing royalties owing to
     Audrey Chratens by Radio Spirits, Inc. Such Debt was assumed by CHRC.

4.   Debt of an immaterial  amount owing under a lease for mail system equipment
     due to Pitney Bowes Credit Corporation.