Exhibit (10)(eee)(iii)

                         HMG DIGITAL TECHNOLOGIES CORP.

                          SUBORDINATED PROMISSORY NOTE

$1,600,000                                                Date: October 30, 1996

      FOR VALUE RECEIVED, HMG DIGITAL TECHNOLOGIES CORP., a Delaware corporation
(the "Payor"), hereby unconditionally promises to pay to the order of William H.
Smith as Trustee (the "Trustee") of the William H. Smith Trust under trust
agreement dated November 13, 1978, as amended (the "Payee") at 26479 Greythorne
Trail, Farmington Hills, Michigan 48334, or such other place as the holder
hereof may hereafter designate in writing, the principal sum of One Million Six
Hundred Thousand ($1,600,000) Dollars in lawful money of the United States of
America.

      This Note is one of a series of Subordinated Notes in the aggregate
principal amount of $2,000,000 (each a "Note" and collectively, the "Notes"),
identical in all respects except as to principal amount and payee, issued by
Payor.

      1. Definitions

            "ANBC" means American National Bank and Trust Company of Chicago.

            "Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute.

            "Business Day" means a day, other than a Saturday or Sunday, on
which banks in New York, New York are open for the transaction of banking
business.

            "Hauppauge" means Hauppauge Record Manufacturing Ltd., a New York
corporation and an indirectly wholly-owned Subsidiary of the Payor.
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            "Hauppauge Loan Agreement" means the Amended and Restated Loan and
Security Agreement entered into as of October 30, 1996 between Hauppauge and
ANBC, as such agreement may be further amended, restated, supplemented or
otherwise modified from time to time.

            "Insolvency or Liquidation Proceedings" means (a) any insolvency or
bankruptcy case or proceeding (including any case under the Bankruptcy Code), or
any 


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receivership, liquidation, reorganization or other similar case or
proceeding, relative to the Payor or to its assets, or (b) any liquidation,
dissolution, reorganization or winding up of the Payor, whether voluntary or
involuntary and whether or not involving solvency or bankruptcy, or (c) any
assignment for the benefit of creditors or any other marshalling of assets and
liabilities of the Payor.

            "Interest Payment Date" means for any year, the last Business Day in
each March, June, September and December of that year.

            "Parent" means Allied Digital Technologies Corp., a Delaware
corporation.

            "Person" means any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation, the
government of any country or sovereign state, or of any state, province,
municipality, or other political subdivision thereof, or any department, agency,
public corporation or other instrumentality of any of the foregoing, or any
other entity.

      2. Payments

            2.1 Principal. Subject to the other provisions of this Note, the
principal amount of this Note shall be due and payable on December 31, 1998
(such date, as the same may be extended pursuant to the provisions of this
Section 2.1 being referred to as the "Maturity Date"). If Hauppauge is
prohibited by the Hauppauge Loan Agreement from distributing funds in amounts
which will enable Payor to pay the entire principal amount of this Note on any
Maturity Date, then (i) such portion of the principal that is permitted to be
paid on such date shall be paid, (ii) the Maturity Date with respect to the
remaining principal shall automatically be extended to the Interest Payment Date
that next follows such Maturity Date until all such remaining principal has been
paid (and any Default hereunder on account of the failure to 


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make such payment shall be waived until January 1, 2001); provided that in no
event shall the Maturity Date be later than January 1, 2001, and (iii) until
paid, any remaining principal shall bear interest at the rate provided in
paragraph 2.2 hereof.

            2.2 Interest. Subject to the other terms of this Note and the terms
of the Hauppauge Loan Agreement, the Payor shall pay interest in cash quarterly
in arrears on the principal balance of this Note outstanding from time to time
from the date hereof until such principal is fully paid at a rate of ten (10%)
percent per annum. Notwithstanding the foregoing, to the extent Hauppauge is
permitted by the Hauppauge Loan Agreement to distribute funds in amounts which
otherwise are intended to enable Payor to pay or advance payments of interest
hereunder, Payor shall pay or advance such interest in accordance with the terms
of the Hauppauge Loan Agreement. Interest shall be calculated daily on the
unpaid principal balance of this Note at the close of business on each day and
on the basis of the actual number of days elapsed over a 360-day year. Accrued
interest shall be payable on each Interest Payment Date, commencing on December
31, 1996, and concurrently with each payment of principal under this Note;
provided that to the extent Hauppauge is permitted by the Hauppauge Loan
Agreement to distribute funds in amounts which otherwise are intended to enable
Payor to pay or advance interest hereunder, Payor shall pay or advance such
interest in accordance with the terms of the Hauppauge Loan Agreement. In no
event shall the rate of Interest hereunder exceed the maximum rate of interest
permitted by the laws governing this Note. If the interest collected should
exceed the maximum amount permitted by such laws, such excess shall be deemed
received on the account of, and shall automatically be applied to reduce, the
principal balance of this Note. In the event Hauppauge is prohibited by the
Hauppauge Loan Agreement from distributing funds in amounts which will enable
Payor to pay the entire interest due on this Note, such amounts shall be
deferred without interest until the Maturity Date.


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<PAGE>

            2.3 Payments. All payments of principal and interest hereunder shall
be payable in lawful money of the United States of America, in immediately
available funds.

            2.4 Prepayment of Principal. As long as the Hauppauge Loan Agreement
is in effect or any obligations to ANBC pursuant to the Hauppauge Loan Agreement
or the Financing Agreements referred to therein remain outstanding, principal
and interest on this Note may not be prepaid without the prior written consent
of ANBC.

      3. Default; Rights and Remedies of the Payees.

            3.1 Defaults. It shall constitute a default ("Default") if any one
or more shall occur:

            (a) Payor fails to pay (i) principal on this Note, when due or
            declared due (whether at scheduled maturity, required prepayment,
            acceleration, demand or otherwise) or (ii) interest within ten days
            of the date such interest is due or declared due (whether at
            scheduled maturity, required prepayment, acceleration, demand or
            otherwise); or

            (b) Payor shall commence (i) any case, proceeding or other action
            under the Bankruptcy Code or law of any jurisdiction, domestic or
            foreign, relating to bankruptcy, insolvency, reorganization,
            arrangement, adjustment, winding-up, liquidation, dissolution,
            composition or other relief with respect to its debts; (ii) any
            Insolvency or Liquidation Proceeding; or (iii) any case, proceeding
            or other action seeking appointment of a receiver, custodian or
            other similar official for it or for all or any substantial part of
            its assets, or making a general assignment for the benefit of its
            creditors; or


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<PAGE>

            (c) There shall be commenced against Payor any case, proceeding or
            other action of a nature referred to in clause (b) above which (i)
            results in the entry of an order for relief or any such adjudication
            or appointment, or (ii) remains undismissed, undischarged or
            unbonded for a period of sixty (60) days; or

            (d) There shall be commenced against Payor any case, proceeding or
            other action seeking issuance of a warrant of attachment, execution,
            distraint or process against all or any substantial part of its
            assets which results in the entry of an order for such relief which
            shall not have been vacated, discharged, stayed or bonded pending
            appeal within sixty (60) days from the entry thereof.

            3.2 Remedies. If a Default shall have occurred, Payee (or, if Payee
shall have assigned any of its interest hereunder, the holder of this Note) may,
without notice to or demand on Payor (except as provided below) do one or more
of the following at any time or times thereafter and in any order: (a) declare
any or all of the obligations hereunder (including, without limitation,
principal and interest) to be immediately due and payable; and (b) pursue
Payee's other rights and remedies under this Note and applicable law. Payee
shall give Payor contemporaneous notice of any action described in clause (a)
above.

            3.3 Waiver of Demand. Demand, presentment, protest and notice of
nonpayment are hereby waived by Payor. Payor also waives the benefit of all
valuation, appraisal and exemption laws.

            3.4 Waiver. Payee's failure, at any time or times hereafter, to
require strict performance by Payor of any provision of this Note shall not
waive, affect or diminish any right of Payee thereafter to demand strict
compliance and performance therewith. Any suspension or 


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waiver by Payee of a Default by Payor under this Note shall not suspend, waive
or effect any other Default by Payor under this Note, whether the same is prior
or subsequent thereto and whether of the same or of a different kind or
character. None of the undertakings, agreements, warranties, covenants and
representations of Payor contained in this Note and no Default by Payor under
this Note shall be deemed to have been suspended or waived by Payee unless such
suspension or waiver is in writing, and directed to Payor specifying such
suspension or waiver. All defaults shall continue until the same are waived by
Payee in accordance with the preceding sentence.

      4. Successors and Assigns; Entire Agreement. The terms and provisions
hereof shall inure to the benefit of, and be binding upon, the respective
successors and permitted assigns of the Payee and the Payor. As long as the
Hauppauge Loan Agreement is in effect or any obligations to ANBC pursuant to the
Hauppauge Loan Agreement or the Financing Agreements referred to therein remain
outstanding, the provisions of Section 2.4, Section 5 and this Section 4 of this
Note shall also inure to the benefit of ANBC. As long as the Hauppauge Loan
Agreement is in effect or any obligations to ANBC pursuant to the Hauppauge Loan
Agreement or the Financing Agreements referred to therein remain outstanding,
the Payee may assign or grant participation in all or any part of this Note and
his related rights and remedies upon the prior written consent of ANBC. The
Payor may not assign any part of its obligations to the Payee without the
Payee's prior written consent. This Note sets forth the entire agreement and
understanding among the parties as to the subject matter hereof and merges and
supersedes all prior discussions, agreements and understandings of any and every
nature among them, relating to the subject matter hereof.

      5. Modification of this Note. This Note may not be changed, modified or
terminated orally, but only by an agreement in writing signed by the party to be
bound by it. As long as the Hauppauge Loan Agreement is in effect or any


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obligations by Payor to ANBC pursuant to the Hauppauge Loan Agreement remain
outstanding, no change to or modification of this Note may be made without the
prior written consent of ANBC, except for changes and modifications which extend
the maturity of, or decrease the rate of interest payable under, this Note or
modify the provisions in this Note to make them less burdensome to Payor. No
act, failure or delay by the Payee shall constitute a waiver of any of its
rights and remedies. Any written waiver shall be applicable only in the specific
instance for which it is given.

      6. Governance by New York Law. This Note shall be governed by, and
construed and enforced in accordance with, the laws of the State of New York,
without regard to the conflict of laws provisions thereof.

      7. Extension of Time For Payment. The holder of this Note at the holder's
option may extend the time for payment of this Note, postpone the enforcement
hereof, or grant any other indulgences, without affecting or diminishing the
holder's rights to recourse against the Payor, endorsers, sureties or
guarantors, which right is expressly reserved.

      8. Expenses and Fees. The Payor shall pay all costs and expenses,
including, without limitation, reasonable attorneys' fees and disbursements,
paid or incurred by the holder in connection with collecting or enforcing this
Note.

      9. Waivers of Notice. The Payor, endorsers, sureties and guarantors of
this Note waive presentment for payment, demand, protest, notice of protest and
notice of dishonor hereof, and all other notices to which they may be entitled.

      10. Restricted Transactions. Neither the Payor nor any affiliate of the
Payor shall consent to or permit any payment (whether interest or principal),
acquisition, redemption or other distribution in respect of any of the 


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Notes unless prior to or concurrently with such transaction, each holder of a
Note is offered the opportunity to participate pro rata in such transaction upon
the same terms and conditions, including the amount of consideration, for all
holders of the Notes.

      IN WITNESS WHEREOF, the Payor has caused this Note to be executed by its
duly authorized officer on the date first above written.

                             HMG DIGITAL TECHNOLOGIES CORP.


                             By: /s/ George Fishman
                                -------------------------------------
                                Name: George Fishman
                                Title: Chief Executive Officer

                                15 Gilpin Avenue
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                             Address

                                Hauppauge, New York 11788
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                             City, State, Zip Code


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