<PAGE>

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAW. THESE SECURITIES MAY NOT BE TRANSFERRED WITHOUT SUCH
REGISTRATION OR EXEMPTION THEREFROM.

                      DIPLOMAT DIRECT MARKETING CORPORATION
                               ECOLOGY KIDS, INC.
                            BROWNSTONE HOLDINGS, INC.
                                 LEW MAGRAM LTD.
                             DIPLOMAT HOLDINGS, INC.

               12.00% Subordinated Debenture Due June ______, 2003




$5,000,000.00                                           ____________, ____ 1998


         FOR VALUE RECEIVED, DIPLOMAT DIRECT MARKETING CORPORATION, a Delaware
corporation (the "Company"), DIPLOMAT HOLDINGS, INC., a California corporation
(a "Co-Maker"), BROWNSTONE HOLDINGS, INC., a Delaware corporation (a"Co-Maker"),
ECOLOGY KIDS, INC., a Delaware corporation (a "Co-Maker") and LEW MAGRAM LTD., a
New York corporation (a" Co-Maker"), collectively the "Borrowers," jointly and
severally promise to pay to the order of SIRROM CAPITAL CORPORATION d/b/a TANDEM
CAPITAL, a Tennessee corporation ("Purchaser"), pursuant to the Debenture
Purchase Agreement (as hereinafter defined) at such place as Purchaser may from
time to time designate in writing, in lawful money of the United States of
America and in immediately available funds, the principal sum of Five Million
Dollars ($5,000,000.00) and any accrued but unpaid interest thereon.

         This Debenture is referred to in and is executed and delivered pursuant
to, a Debenture Purchase Agreement dated of even date herewith between the
Borrowers and Purchaser (the "Debenture Purchase Agreement"), to which reference
is hereby made for a statement of the terms and conditions under which this
Debenture may be repaid and accelerated. Capitalized terms not otherwise defined
herein shall have the meanings ascribed to them in the Debenture Purchase
Agreement.

         Interest shall accrue from the date of issue of this Debenture at the
rate of 12.00% per annum, payable quarterly by automatic debit on the first day
of each March, June, September and December, commencing September 1, 1998, and
ending at maturity, to mature on June _____, 2003.

<PAGE>

         Interest shall be computed on the basis of a 360-day year and the
actual number of days elapsed.

         Any principal payment due under this Debenture not paid when due,
whether at stated maturity, by notice of repayment, by acceleration or
otherwise, and any accrued but unpaid interest not paid when due, shall, to the
extent permitted by applicable law, thereafter bear interest (compounded monthly
and payable upon demand) at an annual rate of 17.00% in respect of such
principal and such unpaid interest until such unpaid amounts have been paid in
full (whether before or after judgment).

         This Debenture is subject to prepayment or optional redemption by the
Borrowers as provided by the Debenture Purchase Agreement. All payments made
hereunder shall be applied first to interest and then to outstanding principal.

         If payment hereunder becomes due and payable on a Saturday, Sunday, or
other day on which banks in Tennessee or New York are authorized to close, the
due date thereof shall be extended to the next succeeding business day.

         Demand, presentment, protest, diligence, notice of dishonor, and any
other formality are hereby expressly waived by the Borrowers and any endorser or
guarantor.

         If there is any default under this Debenture, and this Debenture is
placed in the hands of an attorney for collection, or is collected through any
court, including any bankruptcy court, each Borrower promises to pay to the
order of the holder hereof such holder's reasonable attorneys' fees and court
costs actually incurred in collecting or attempting to collect or securing or
attempting to secure this Debenture or enforcing the holder's rights with
respect to the Collateral, to the extent allowed by the laws of the State of New
York or any state in which any Collateral is situated. The Borrowers hereby
consent to jurisdiction, service of process, and venue in the federal and state
courts having jurisdiction in the State of Tennessee or in the State of New
York, for the purpose of any action arising out of any obligations hereunder,
and expressly waive jury trial and any and all objections as to jurisdiction,
service of process, and venue in such courts.

         THIS DEBENTURE HAS BEEN DELIVERED IN, AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF, THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICTS OF
LAW PROVISIONS THEREOF.

         The holder of this Debenture may, with or without notice to any party,
and without affecting the obligations of any maker, surety, guarantor, endorser,
accommodation party, or any other party to this Debenture (i) extend the time
for payment of either principal or interest from time to time, (ii) release or
discharge any one or more parties liable on this Debenture, (iii) suspend the
right to enforce this Debenture with respect to any persons, (iv) change,
exchange, or release any property in which the holder has any interest securing
this Debenture, (v) justifiably or otherwise, impair any 

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<PAGE>

of the Collateral or suspend the right to enforce against any such Collateral,
and (vi) at any time it deems it necessary or proper, call for and, should it be
made available, accept, as additional security, the signature or signatures of
additional parties or a security interest in property of any kind or description
or both.

         This Debenture is subordinated to certain other indebtedness to the
extent and with the effect set forth in the Debenture Purchase Agreement.

         This Debenture is registered on the books of the Borrowers and is
transferable only by surrender thereof at the principal office of the Company or
such other address as the Company shall have advised the holder of the Debenture
in writing, duly endorsed or accompanied by a written instrument of transfer
duly executed by the registered holder of this Debenture or its attorney duly
authorized in writing. Payment of or on account of principal, premium, if any,
and interest on this Debenture shall be made only to or upon the order in
writing of the registered holder thereof.

         Any provision herein, or in the Debenture Purchase Agreement, or any
other document executed or delivered in connection herewith or therewith, or in
any other agreement or commitment, whether written or oral, expressed or
implied, to the contrary notwithstanding, neither the Purchaser nor any holder
hereof shall in any event be entitled to receive or collect, nor shall any
amounts received hereunder be credited, so that Purchaser or any holder hereof
shall be paid, as interest, a sum greater than the maximum amount permitted by
applicable law to be charged to the person primarily obligated to pay this
Debenture at the time in question. If any construction of this Debenture or the
Debenture Purchase Agreement, or any and all other papers, agreements or
commitments, indicate a different right given to Purchaser or any holder hereof
to ask for, demand, or receive any larger sum as interest, such is a mistake in
calculation or wording which this clause shall override and control, it being
the intention of the parties that this Debenture, the Debenture Purchase
Agreement, and all other documents executed or delivered in connection herewith
shall in all ways comply with applicable law and proper adjustments shall
automatically be made accordingly. If Purchaser or any holder hereof ever
receives, collects, or applies as interest, any sum in excess of the maximum
amount permitted by applicable law, if any, such excess amount shall be applied
to the reduction of the unpaid principal balance of this Debenture, and if this
Debenture is paid in full, any remaining excess shall be paid to the Borrowers.
In determining whether or not the interest paid or payable, under any specific
contingency, exceeds the maximum amount permitted by applicable law, if any, the
Borrowers and any holder hereof shall, to the maximum extent permitted under
applicable law; (i) characterize any non-principal payment as an expense or fee
rather than as interest, and (ii) "spread" the total amount of interest
throughout the entire term of this Debenture.

                     [rest of page intentionally left blank]

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<PAGE>

         IN WITNESS WHEREOF, each Borrower has caused this Debenture to be
executed in its corporate name by the undersigned officer, thereunto duly
authorized.

DIPLOMAT DIRECT MARKETING                     ECOLOGY KIDS, INC.
  CORPORATION


By: ___________________________               By:______________________________

Title:_________________________               Title:___________________________


BROWNSTONE HOLDINGS, INC.                     LEW MAGRAM LTD.


By:____________________________               By:______________________________

Title:_________________________               Title:___________________________


DIPLOMAT HOLDINGS, INC.


By:____________________________

Title:_________________________

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