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                                                                     EXHIBIT 4.2

                                                                DRAFT OF 2/20/01

                                    AMENDED
                        7.0% CONVERTIBLE PROMISSORY NOTE,
                                   SERIES A-1

$                                                             New York, New York
                                                               February __, 2001

               THIS AMENDED 7.0% CONVERTIBLE PROMISSORY NOTE, SERIES A-1 WAS
               AMENDED PURSUANT TO THE RESTRUCTURING AGREEMENT DATED AS OF
               FEBRUARY __, 2001 BETWEEN QUOKKA SPORTS INC. AND THE PARTIES
               NAMED ON SCHEDULE 1.1 THERETO AND AMENDS AND RESTATES IN ITS
               ENTIRETY CERTAIN OF THE 7.0% CONVERTIBLE SUBORDINATED PROMISSORY
               NOTES ORIGINALLY ISSUED ON SEPTEMBER 15, 2000 PURSUANT TO NOTE
               PURCHASE AGREEMENT DATED AS OF SEPTEMBER 15, 2000 BETWEEN QUOKKA
               SPORTS, INC., GE CAPITAL EQUITY INVESTMENTS, INC. AND THE OTHER
               PURCHASERS NAMED ON SCHEDULE 1.1 THERETO.

               THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
               1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE
               OFFERED OR SOLD EXCEPT IN COMPLIANCE THEREWITH. THIS NOTE IS ALSO
               SUBJECT TO RESTRICTIONS ON TRANSFER SET FORTH IN THE NOTEHOLDERS
               AGREEMENT, DATED AS OF SEPTEMBER 15, 2000 (THE "NOTEHOLDERS
               AGREEMENT"), AS SUCH AGREEMENT MAY BE AMENDED, SUPPLEMENTED OR
               OTHERWISE MODIFIED FROM TIME TO TIME.

        FOR VALUE RECEIVED, the undersigned, QUOKKA SPORTS, INC., a Delaware
corporation (the "COMPANY"), promises to pay to ____________ (the "INVESTOR"),
in lawful money of the United States and in immediately available funds, the
principal amount of $-Field_2-- (together with increases to such amount
pursuant to Section 1 below, the "FACE AMOUNT") together with interest thereon
calculated from the date hereof and delay or default payments ("PAYMENTS")
thereon, all in accordance with the provisions of this Note or such other amount
determined pursuant to Section 2 hereof. The Face Amount set forth above
represents the sum of (i) the Original Face Amount of this Note as of September
15, 2000, the date of original issuance, plus (ii) all accrued interest
(including penalty interest) through the date hereof and other Payments.

        This Amended Note was amended pursuant to the Restructuring Agreement
dated as of February __, 2001 (the "AGREEMENT") between the Company and the
parties set forth in Schedule 1.1 thereto (the "PARTICIPATING NOTEHOLDERS") and
amends and restates in its entirety the Notes originally issued to the
Participating Noteholders pursuant to the Note Purchase Agreement dated

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as of September 15, 2000 (the "NOTE PURCHASE AGREEMENT") among the Company, GE
Capital Equity Investments, Inc. and the other parties thereto. Unless the
context otherwise requires, as used herein, "NOTE" means any of the 7.0%
Convertible Promissory Notes, Series A-1 issued pursuant to the Note Purchase
Agreement and amended pursuant to the Agreement and any other similar
convertible promissory notes issued by the Company in exchange for, or to effect
a transfer of, any Note and "NOTES" means all such Notes in the aggregate.

        1. ACCRUAL OF INTEREST. Except as otherwise expressly provided in
Section 6 hereof, interest shall accrue at the rate of seven percent (7.0%) per
annum (based on a year of 365 days for the actual days elapsed), accruing daily
and compounded quarterly, on each Interest Payment Date on the Face Amount and,
if not paid in cash on the Interest Payment Date (as defined below) shall
result, on each Interest Payment Date, in a corresponding increase in the then
outstanding Face Amount of the Notes.

        2. PAYMENT OF PRINCIPAL AND INTEREST ON NOTE.

               (a)    SCHEDULED PAYMENT OF PRINCIPAL.

                      (i) The Company shall pay an amount determined pursuant to
Section 2.1(a)(ii) or amounts determined pursuant to Section 2.1(a)(iii), as
applicable, which may exceed the Face Amount with any excess being treated as a
payment of premium), together with all accrued and unpaid interest and Payments
thereon, if any, in cash (or in kind to the extent permitted by the Agreement)
to the holder of this Note on the earlier to occur of (x) a Change of Control
Transaction or Permitted Asset Sale, as applicable, and (y) September 15, 2005
(the "FINAL MATURITY DATE"). For purposes of the foregoing, a "CHANGE OF CONTROL
TRANSACTION" shall mean the merger or consolidation of the Company with or into
another Person or the merger of another Person with or into the Company, the
sale, lease, transfer or conveyance, in a transaction or series of transactions,
of all or substantially all the assets of the Company to another Person, the
acquisition of beneficial ownership (as defined in Rule 13d-3 under the Exchange
Act without regard to the 60-day exercise period) by any person (as defined in
Section 13(d) of the Exchange Act) together with its affiliates and associates
(as each of such terms are defined in Rule 405 under the Securities Act) of
securities constituting in excess of 50% of the Company's voting power
(excluding in all cases beneficial ownership of Notes, Amended Notes or Warrants
to the extent such securities are not convertible as a result of applicable
conversions on limitation contained therein) (such beneficial ownership, the
"CONTROLLING EQUITY INTEREST EVENT").

                      (ii) In the event that this Note shall be payable as a
result of the occurrence of a Change of Control Transaction, the payment due
with respect to this Note shall equal this Note's proportionate share (together
with other outstanding 7.0% Convertible Promissory Notes, Series A-1) of an
amount in cash or Permitted Common Stock Consideration equal to the product of
(A) 0.45 multiplied by (B) a fraction, the numerator of which is the principal
amount plus accrued interest of Notes issued in connection with the Closing
minus the principal amount plus accrued interest of Notes converted prior to the
redemption date and the denominator of which is the principal amount plus
accrued interest of Notes issued in connection with the Closing, times (C) the
amount by which the Change of Control Net Sale Proceeds from such Change of
Control Transaction exceed the Liquidation Value of the PIK Preferred Shares

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and Management Incentive Payment (such amount, the "BASE AMOUNT"). For purposes
of the foregoing, "CHANGE OF CONTROL NET SALE PROCEEDS" shall mean the gross
cash proceeds or other non-cash consideration permitted under the Agreement (the
"PERMITTED COMMON STOCK CONSIDERATION") from such Change of Control Transaction,
in each case less the fees of investment bankers and finders, if any, and
severance payments paid, or expected to be paid, to senior management or
executive members of the board of the Company not exceeding the maximum amount
set forth on Schedule 2.17(g) to the Agreement in connection with such Change of
Control Transaction; provided that in the case of a Controlling Equity Interest
Event, the Change of Control Net Sale Proceeds shall mean an amount necessary to
pay the sum of (i) the Liquidation Value of the PIK Preferred Shares (as
contemplated by Section 11 hereof), (ii) the Management Incentive Payment and
(iii) the aggregate outstanding Face Amount of the Notes, together with interest
and Payments thereon through the date of repayment; and provided, further, that
in connection with a Change of Control Transaction involving a merger or
consolidation of the Company with or into another Person or the merger of
another Person with or into the Company, the gross sale proceeds (as used for
purposes of determining the Change of Control Net Sale Proceeds) shall be
determined based upon the value of the aggregate consideration paid directly or
indirectly by or on behalf of such other Person (or any affiliate thereof), to
all holders of the Company's securities (including, without limitation, holders
of the Company's Common Stock, PIK Preferred Shares, Notes, Amended Notes and
Warrants), in connection with such transaction, calculated as if such
transaction constituted the acquisition of a 100% interest in the Company
without regard to whether such entity was a stockholder of the Company prior to
effecting such transaction. The Company shall not permit a Change of Control
Transaction to occur unless the consideration therefore is payable entirely in
cash or Permitted Common Stock Consideration. The amount payable pursuant to a
Change of Control Transaction calculated as determined above shall represent
payment in full of this Note and in the event that no amount shall be payable
pursuant to the Change of Control Transaction pursuant to such calculation, this
Note shall be deemed paid in full and shall be extinguished.


                      (iii) In the event that this Note shall be payable as a
result of the occurrence of a Permitted Asset Sale, the payment then due with
respect to this Note shall equal this Note's proportionate share (together with
other outstanding 7.0% Convertible Promissory Notes, Series A-1) of an amount in
cash or Permitted Common Stock Consideration equal to the product of (A) 0.45
multiplied by (B) a fraction, the numerator of which is the principal amount
plus accrued interest of Notes issued in connection with the Closing minus the
principal amount plus accrued interest of Notes converted prior to the
redemption date and the denominator of which is the principal amount plus
accrued interest of Notes issued in connection with the Closing, times (C) the
amount by which the Asset Sale Net Sale Proceeds from all Permitted Asset Sales
that have occurred, together exceed the Liquidation Value of the PIK Preferred
Shares and Management Incentive Payment (such amount, the "BASE AMOUNT"). For
purposes of the foregoing, "ASSET SALE NET SALE PROCEEDS" shall mean the gross
cash proceeds or Permitted Common Stock Consideration from such Permitted Asset
Sale, in each case less the fees of investment bankers and finders, if any, and
severance payments of senior management associated with such Permitted Asset
Sale not exceeding the maximum amount set forth in Section 2.17(g) of the
Agreement, in connection with such Permitted Asset Sale. The Company shall not
permit a Permitted Asset Sale to occur unless the consideration therefore is
payable entirely in cash or Permitted Common Stock Consideration. The amount
payable pursuant to a

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Permitted Asset Sale calculated as determined above shall reduce the Face Amount
of this Note by the amount of such cash payment or Permitted Common Stock
Consideration. In the event the Asset Sale Net Proceeds payable pursuant to a
Permitted Asset Sale shall be less than $2,500,000, the Company shall hold such
proceeds in a segregated account for the benefit of the persons entitled thereto
and shall pay such amounts (together with any interest earned thereon) to the
persons entitled thereto upon the occurrence of an additional Permitted Asset
Sale which results in the cumulative proceeds available for distribution
exceeding $2,500,000 or upon a Change of Control Transaction. In no event shall
the Company accept non-cash consideration in connection with any Permitted Asset
Sale if the value thereof (determined as provided in the Agreement) is less than
$2,500,000.

               (b) PAYMENT OF INTEREST. Commencing on December 31, 2000, the
Company shall pay interest on this Note quarterly in arrears on March 31, June
30, September 30 and December 31 of each year and on the Final Maturity Date, or
if any such day is not a business day, on the next succeeding business day (each
an "INTEREST PAYMENT DATE") to holders of record on the immediately preceding
March 15, June 15, September 15 and December 15, respectively. Any interest and
Payments payable on this Note shall be paid, at the Company's option, either in
cash or by adding an amount equal to the interest and Payments payable on such
Interest Payment Date ("PIK INTEREST") to the then outstanding Face Amount of
this Note on such Interest Payment Date. If the Company chooses to pay the
interest and Payments due on a particular Interest Payment Date in cash, the
Company shall deliver an irrevocable written notice in the form of Exhibit 1 to
the holder of this Note five (5) business days prior to such Interest Payment
Date. Following each Interest Payment Date in which the Company has elected not
to pay interest due on such Interest Payment Date in cash, the Company shall
promptly deliver a written notice to the holder of this Note specifying (a) the
amount of the increase to the Face Amount of this Note as a result of the
interest and Payments on the immediately preceding Interest Payment Date and (b)
the aggregate Face Amount of this Note immediately following such Interest
Payment Date. If no such notice is delivered, by default PIK Interest will be
paid on the Interest Payment Date.

               (c) PRO RATA PAYMENT. The Company agrees that any payments to the
holders of the Notes (including, without limitation, upon acceleration pursuant
to Section 6) (whether for principal, interest, or otherwise) shall be made pro
rata among all such holders based upon the aggregate unpaid principal amount of
the Notes held by each such holder. If any holder of a Note obtains any payment
(whether voluntary, involuntary, by application of offset or otherwise) of
principal, interest or Payments on such Note in excess of such holder's pro rata
share of payments obtained by all holders of the Notes, such holder shall make
payments to the other holders of the Notes based on such participation in the
Notes held by them as is necessary to cause such holders to share the excess
payment ratably among each of them as provided in this Section 2(c).

        3. OPTIONAL REDEMPTION.

               (a) OPTIONAL REDEMPTION. At such time as no PIK Preferred Shares
are outstanding, the Company, at its option, upon written notice redeem the
Notes, in whole but not in part and from all but not less than all the holders
of the Notes, to the extent it has funds legally available and irrevocably
reserved therefor and such redemption is not prohibited by the terms of

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its outstanding indebtedness, at the redemption price of 100% of the Face Amount
thereof, plus an amount equal to the accrued and unpaid interest and Payments
thereon, if any, to the redemption date; provided the Company intends and has
the financial resources and ability to repurchase all of the outstanding Notes,
and certifies to those facts in it written notice of redemption.

               (b) PAYMENT OF REDEMPTION PRICE.

                      (i) The amount of the redemption price on the Notes
redeemed, on any redemption set forth herein, shall be paid to the holders of
the Notes in cash or Permitted Common Stock Consideration as provided herein.

                      (ii) The Company's written notice shall specify the time
and place of the redemption of all but not less than all the Notes, calling upon
each holder of record to surrender to the Company on the redemption date at the
place designated in the notice all the Notes still owned of record by such
holder on the redemption date. The date such written notice is received by a
holder is the "REDEMPTION RECORD DATE." The redemption date shall be not fewer
than three (3) nor more than five (5) trading days after the Redemption Record
Date. Such written redemption notice will be of no effect unless (i) there shall
be Effective Registration and (ii) the Company shall have complied with its
obligations to convert Notes pursuant to the terms of Section 4 hereof, in the
case of each of clause (i) and clause (ii), during the period of the Redemption
Record Date through the redemption date, inclusive. On or after the redemption
date, each holder of Notes to be redeemed shall present and surrender such
holder's Notes to the Company at the place designated in the redemption notice
and thereupon the redemption price of the Notes, and any unpaid interest and
Payments thereon to the redemption date, shall be paid in cash to or on the
order of the person whose name appears in the Note Register (as herein defined)
as the owner thereof, and each surrendered Note shall be canceled by the
Company. Any notice of redemption by the Company shall be irrevocable, and any
failure by the Company to redeem all the unconverted Notes for cash on the
redemption date under this Section 3 shall result (without limiting the holder's
other rights under Section 6 and the other provisions of the Transaction
Documents) in the automatic and permanent termination of all its rights under
this Section 3.

                      (iii) If a notice of redemption has been given pursuant to
this Section 3 and any holder of Notes shall, prior to the close of business on
the business day immediately preceding the redemption date, give written notice
to the Company pursuant to Section 4 below of the conversion of any or all of
the Notes held by the holder and to be redeemed, then such redemption shall not
become effective as to such Notes to be converted and such conversion shall
become effective as provided in Section 4 below.

        4. CONVERSION RIGHTS; ADJUSTMENTS. The holders of the Notes shall have
conversion rights as follows (the "CONVERSION RIGHTS"):

               (a) HOLDER'S RIGHT TO CONVERT. At any time the Face Amount of
this Note plus all accrued and unpaid interest and Payments thereon shall be
convertible, in whole or in part (subject to Section 15 hereof), at the option
of the holder thereof, at any time and from time to time into fully paid and
nonassessable shares of the Company's Common Stock, par value

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$.0001 per share (the "COMMON STOCK") at the then effective Conversion Rate (as
defined below) (each such conversion, a "HOLDER'S OPTIONAL CONVERSION").

        The "CONVERSION RATE", as of any Conversion Date (as defined below),
shall equal an amount determined by dividing (i) the portion of the Face Amount
proposed to be converted into common stock outstanding on such date, plus the
ratable portion of any accrued and unpaid interest and Payments on the Notes
proposed to be converted into common stock, by (ii) the Conversion Price (as
defined below) in effect as of such Conversion Date. The Conversion Price at
which shares of Common Stock shall be deliverable upon conversion of the Notes
without the payment of additional consideration by the holder thereof (the
"CONVERSION PRICE") shall initially be $0.75. Such initial Conversion Price and
the rate at which the Notes may be converted into shares of Common Stock, shall
be subject to adjustment as provided below.

               (b) FRACTIONAL SHARES. No fractional shares of Common Stock shall
be issued upon conversion of the Notes. In lieu of fractional shares, the
Company shall pay cash equal to such fraction multiplied by the Closing Price
per share of Common Stock on the trading date immediately preceding the related
Conversion Date (as defined below).

               (c) MECHANICS OF CONVERSION.

                      (i) In order to exercise its rights pursuant to a holder's
Optional Conversion, the holder shall deliver written notice in the form of
Exhibit 2 to the Company stating that such holder elects to convert all or part
of the Face Amount, plus the ratable portion of any accrued but unpaid interest
and Payments, represented by such Note or Notes. Such notice shall state the
Face Amount, plus the ratable portion of any accrued but unpaid interest and
Payments, of Notes which the holder seeks to convert and shall be accompanied
within one (1) trading day by the Note or Notes subject to conversion. The date
contained in the notice shall be the conversion date ("CONVERSION DATE") and the
holder shall be deemed to own the underlying Common Stock as of such date. As
soon as practicable (but no later than three days) after the Conversion Date,
the Company shall promptly issue and deliver at such office to such holder a
certificate or certificates for the number of shares of Common Stock to which
such holder is entitled (which number of shares may be reduced by the Company in
accordance with Section 16 hereof so as not to exceed the Holder's pro rata
share of the Maximum Share Amount) and, in the case where only part of a Note is
converted, the Company shall execute and deliver (at its own expense) a new Note
of any authorized denomination as requested by a holder in an aggregate
principal amount equal to and in exchange for the unconverted portion of the
principal amount of the Note so surrendered. Notwithstanding anything to the
contrary in this Section 4, in the case where only a part of a Note is
converted, the amount of the unconverted portion of such Note shall be at least
$10,000. In lieu of delivering physical certificates representing the Common
Stock issuable upon conversion of Notes, provided the Company's transfer agent
is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon request of the holder, the Company
shall use its reasonable best efforts to cause its transfer agent to
electronically transmit the shares of Common Stock issuable upon conversion or
exercise to the holder, by crediting the account of holder's prime broker with
DTC through its Deposit Withdrawal Agent Commission ("DWAC") system. The time
periods for delivery described above shall apply to the electronic transmittals
through the DWAC system. The parties agree to coordinate with DTC to accomplish
this objective. The

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conversions pursuant to Sections 4 shall be deemed to have been made immediately
prior to the close of business on the Conversion Date. The person or persons
entitled to receive the Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such Common Shares
at the close of business on the Conversion Date.

                      (ii) The Company shall at all times during which the Notes
shall be outstanding, reserve and keep available out of its authorized but
unissued stock, for the purpose of effecting the conversion of the Notes, such
number of its duly authorized shares of Common Stock as shall from time to time
be sufficient to effect the conversion of 125% of the outstanding Notes. Before
taking any action which would cause an adjustment reducing the Conversion Price
below the then par value of the shares of Common Stock issuable upon conversion
of the Notes, the Company will take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock at such
adjusted Conversion Price.

                      (iii) All Notes (or the portions thereof) which shall have
been surrendered for conversion as herein provided shall no longer be deemed to
be outstanding and all rights with respect to such Notes, including the rights,
if any, to receive interest, notices and consent rights shall immediately cease
and terminate on the Conversion Date, except only the right of the holders
thereof to receive shares of Common Stock or cash, as the case may be, in
exchange therefor, and, if applicable, cash for any fractional shares of Common
Stock. Any Notes, to the extent so converted, shall be retired and canceled.

                      (iv) If a Holder's Optional Conversion is in connection
with an underwritten offering of securities registered pursuant to the
Securities Act of 1933, as amended, the conversion may, at the option of any
holder tendering Notes for conversion, be conditioned upon the closing with the
underwriter of the sale of securities pursuant to such offering, in which event
the holders entitled to receive the Common Stock issuable upon such conversion
of the Notes shall not be deemed to have converted such Notes until immediately
prior to the closing of the sale of securities.

               (d) ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES.

                      (i) SPECIAL DEFINITIONS. For purposes of this Section
4(d), the following definitions shall apply:

                             (A) "OPTION" shall mean Rights, options or warrants
to subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities, other than such Rights, options or warrants granted to employees,
directors or bona fide consultants of the Company pursuant to plans or
arrangements approved by the Company's board of directors.

                             (B) "CONVERTIBLE SECURITIES" shall mean any
evidences of indebtedness, shares or other securities directly or indirectly
convertible into or exchangeable for Common Stock.

                             (C) "ADDITIONAL SHARES OF COMMON STOCK" shall mean
all shares of Common Stock issued (or, pursuant to Section 4(d)(ii) below,
deemed to be issued) by

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the Company after September 15, 2000 (the "ISSUE DATE") other than the Reserved
Employee Shares.

                             (D) "RIGHTS TO ACQUIRE COMMON STOCK" (or "RIGHTS")
shall mean all rights issued by the Company to acquire Common Stock whether by
exercise of a warrant, option or similar call, or conversion of any existing
instruments, in either case for consideration fixed, in amount or by formula, as
of the date of issuance.

                             (E) "RESERVED EMPLOYEE SHARES" shall mean shares of
Common Stock issued after the Issue Date to employees, directors or bona fide
consultants of the Company or any affiliate, pursuant to stock purchase or stock
option plans or arrangements approved by the Company's board of directors or
shares issued after repurchase pursuant to any restricted stock purchase
agreement following a termination, in an aggregate amount of up to the sum of
(i) 16,031,363 shares of Common Stock, (ii) an additional 1,500,000 shares of
Common Stock for each twelve month period that begins (each January 31st) after
the Issue Date while the Notes are outstanding and (iii) that number of
additional shares of Common Stock equal to 10% of the number of shares of Common
Stock issued as consideration in an acquisition of a business, assets or a legal
entity that is permitted pursuant to the provisions of the Noteholders Agreement
and is approved by the Company's board of directors.

                      (ii) ISSUE OF SECURITIES DEEMED ISSUE OF ADDITIONAL SHARES
OF COMMON STOCK. If the Company at any time or from time to time after the Issue
Date issues (other than pursuant to the Transaction Documents) any Options or
Convertible Securities or Rights to Acquire Common Stock, then the maximum
number of shares of Common Stock (as set forth in the instrument relating
thereto without regard to any provision contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options, Rights to
Acquire Common Stock or, in the case of Convertible Securities, the conversion
or exchange of such Convertible Securities, shall be deemed to be Additional
Shares of Common Stock issued as of the time of such issue; provided, however,
that in any such case:

                            (A) No further adjustment in the Conversion Price
shall be made upon the subsequent issue of shares of Common Stock upon the
exercise of such Options, Rights or conversion or exchange of such Convertible
Securities;

                            (B) Upon the expiration or termination of any
unexercised Option, Right or Convertible Security issued or granted after the
Issue Date, the Conversion Price shall be adjusted immediately to reflect the
applicable Conversion Price which would have been in effect had such Option,
Right or Convertible Security (to the extent outstanding immediately prior to
such expiration or termination) never been issued; and

                            (C) In the event of any change in the number of
shares of Common Stock issuable upon the exercise, conversion or exchange of any
Option, Right or Convertible Security, including, but not limited to, a change
resulting from the anti-dilution provisions thereof, the Conversion Price then
in effect shall forthwith be readjusted to such Conversion Price as would have
been obtained had the Conversion Price adjustment that was originally made upon
the issuance of such Option, Right or Convertible Security which were not
exercised or converted prior to such change been made upon the basis of such
change, but no

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further adjustment shall be made for the actual issuance of Common Stock upon
the exercise or conversion of any such Option, Right or Convertible Security.

                      (iii) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK.

                             (A) If the Company shall at any time after the
Issue Date issue Additional Shares of Common Stock (including Additional Shares
of Common Stock deemed to be issued pursuant to Section 4(d)(ii) but excluding
shares issued as a dividend or distribution as provided in Section 4(g) or upon
a stock split or combination as provided in Section 4(e)), without
consideration, or for a consideration per share less than the average Closing
Price per share of Common Stock for the ten (10) consecutive trading days
immediately preceding the date of such issue (the "MARKET PRICE"), then and in
such event, the Conversion Price shall be reduced, concurrently with such
issuance, to a price (calculated to the nearest cent) determined by multiplying
such Conversion Price by a fraction, the numerator of which shall be the sum of
(A) the number of shares of Common Stock outstanding immediately prior to such
issuance plus (B) the number of shares of Common Stock which the aggregate
consideration received by the Company for the total number of Additional Shares
of Common Stock so issued would purchase at the Market Price per share of Common
Stock on the date immediately prior to such issue and the denominator of which
shall be the sum of (1) the number of shares of Common Stock outstanding
immediately prior to such issuance plus (2) the number of such Additional Shares
of Common Stock so issued.

                             (B) If the Company shall at any time after the
Issue Date issue Additional Shares of Common Stock (including Additional Shares
of Common Stock deemed to be issued pursuant to Section 4(d)(ii), but excluding
shares issued as a dividend or distribution as provided in Section 4(g) or upon
a stock split or combination as provided in Section 4(e)), for a consideration
per share less than the Conversion Price (as adjusted) on the date of and
immediately prior to such issue, then and in such event, the Conversion Price
shall be reduced, concurrently with such issuance, to a price (calculated to the
nearest cent) determined by multiplying such Conversion Price by a fraction, the
numerator of which shall be the sum of (A) the number of shares of Common Stock
outstanding immediately prior to such issuance plus (B) the number of shares of
Common Stock which the aggregate consideration received by the Company for the
total number of Additional Shares of Common Stock so issued would purchase if
the amount paid for such shares was equal to the Conversion Price and the
denominator of which shall be the sum of (1) the number of shares of Common
Stock outstanding immediately prior to such issuance plus (2) the number of such
Additional Shares of Common Stock so issued.

                             (C) If the Company shall at any time after the
Issue Date issue Additional Shares of Common Stock (including Additional Shares
of Common Stock deemed to be issued pursuant to Section 4(d)(ii), but excluding
shares issued as a dividend or distribution as provided in Section 4(g) or upon
a stock split or combination as provided in Section 4(e)), for a consideration
per share that is less than the Fair Market Value and less than the Conversion
Price (as adjusted), in each case on the date of and immediately prior to such
issue, then and in such event, the Conversion Price shall be reduced, to equal
the lesser of (a) the Conversion Price as

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adjusted pursuant to Section 4(d)(iii)(a) or (b) the Conversion Price as
adjusted pursuant to Section 4(d)(iii)(b).

        Notwithstanding the foregoing, the applicable Conversion Price shall not
be reduced if the amount of such reduction would be an amount less than $.01,
but any such amount shall be carried forward and reduction with respect thereto
made at the time of and together with any subsequent reduction which, together
with such amount and any other amount or amounts so carried forward, shall
aggregate $.01 or more. No adjustment of the Conversion Price pursuant to this
Section 4(d) shall have the effect of increasing the Conversion Price above the
Conversion Price in effect immediately prior to such adjustment except for
reverse stock splits.

                      (iv) DETERMINATION OF CONSIDERATION. For purposes
of this Section 4(d), "FAIR MARKET VALUE" of the consideration received by the
Company for the issue of any Additional Shares of Common Stock shall be computed
as follows:

                             (A) CASH AND PROPERTY. Such consideration shall:

                                    (1) insofar as it consists of cash, be
computed at the aggregate of cash received by the Company, excluding amounts
paid or payable for accrued interest or accrued dividends;

                                    (2) insofar as it consists of property other
than cash, be computed at the Fair Market Value thereof at the time of such
issue, as determined in good faith by the Company's board of directors with the
assistance of qualified professionals, as necessary; and

                                    (3) in the event Additional Shares of Common
Stock are issued together with other shares or securities or other assets of the
Company for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (1) and (2) above, as
determined in good faith by the Company's board of directors.

                             (B) OPTIONS, RIGHTS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Company for Additional Shares of Common
Stock deemed to have been issued pursuant to Section 4(d)(ii), relating to
Options, Rights and Convertible Securities, shall be determined by dividing

                                    (1) the total amount, if any, received or
receivable by the Company as consideration for the issue of such Options, Rights
or Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to the Company upon the exercise of such Options, Rights
or the conversion or exchange of such Convertible Securities, by

                                    (2) the maximum number of shares of Common
Stock (as set forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options, Rights or the conversion or exchange of such
Convertible Securities.

                                       10
<PAGE>   11

               (e) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company
shall at any time or from time to time after the Issue Date effect a subdivision
of the outstanding Common Stock, the Conversion Price then in effect immediately
before that subdivision shall be proportionately decreased. If the Company shall
at any time or from time to time after the Issue Date combine the outstanding
shares of Common Stock, the Conversion Price then in effect immediately before
the combination shall be proportionately increased. Any adjustment under this
paragraph shall become effective at the close of business on the date the
subdivision or combination becomes effective.

               (f) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the
event the Company at any time or from time to time after the Issue Date shall
make or issue a dividend or other distribution payable in Additional Shares of
Common Stock, then and in each such event the Conversion Price shall be
decreased as of the time of such issuance, by multiplying such Conversion Price
by a fraction, the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such issuance and the denominator
of which shall be the total number of shares of Common Stock outstanding
immediately prior to such issuance plus the number of such Additional Shares of
Common Stock issuable in payment of such dividend or distribution.

               (g) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event the Company at any time, or from time to time after the Issue Date shall
make or issue, a dividend or other distribution payable in securities of the
Company (other than shares of Common Stock) or other assets or properties
(including, without limitation, cash dividends), then and in each such event
provision shall be made so that the holders of the Notes shall receive in
addition to the number of shares of Common Stock receivable upon conversion of
the Notes, the amount of securities of the Company or other assets or properties
that they would have received had their Notes been converted into Common Stock
on the date of such event and had thereafter, during the period from the date of
such event to and including the Conversion Date, retained such securities or
other assets or properties receivable by them as aforesaid during such period
giving application to all adjustments called for during such period, under this
paragraph with respect to the rights of the holders of the Notes; provided that,
in the event rights or benefits under such securities, assets or properties
shall terminate prior to the time that the holder of this Note may elect to
convert this Note into shares of Common Stock, such amount of securities, assets
or properties that the holder would have received had such holder converted his
or her notes immediately prior to the distribution shall be distributed to the
holder of this Note on the date the securities, assets or properties are
distributed to the holders of Common Stock.

               (h) NO RECLASSIFICATION, RECAPITALIZATION, EXCHANGE OR
SUBSTITUTION. The Common Stock issuable upon the conversion of the Notes shall
not be changed into the same or a different number of shares of any class or
classes of stock, whether by capital reorganization, reclassification,
recapitalization or otherwise (other than (x) a subdivision or combination of
shares or (y) merger, consolidation or asset sale permitted under the
Noteholders' Agreement and in which at least 90% of the Net Proceeds are applied
to the redemption of the PIK Preferred Shares until such PIK Preferred Shares
are redeemed in accordance with the terms thereof and the Notes are redeemed in
accordance with the provisions hereof).

                                       11
<PAGE>   12


               (i) NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the provisions of this
Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Notes against impairment to the extent required hereunder. Nothing in this
Section 4 shall affect the continued accrual of interest on the Notes in
accordance with the terms of this Note.

               (j) CERTIFICATE AS TO ADJUSTMENTS. 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 furnish to each holder, if
any, of Notes outstanding a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment are based and shall file a copy of such certificate with its
corporate records. The Company shall, upon the reasonable written request of any
holder of Notes, furnish or cause to be furnished to such holder a similar
certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Price then in effect, and (iii) the number of shares of Common Stock
and the amount, if any, of other property which then would be received upon the
conversion of Notes. Despite such adjustment or readjustment, the form of each
or all Notes, if the same shall reflect the initial or any subsequent Conversion
Price, need not be changed in order for the adjustments or readjustments to be
valid in accordance with the provisions of this Note, which shall control.

               (k) NOTICE OF RECORD DATE.  In the event:

                      (i) that the Company declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or other securities of
the Company;

                      (ii) that the Company subdivides or combines its
outstanding shares of Common Stock;

                      (iii) of any reclassification of the Common Stock of the
Company (other than a subdivision or combination of its outstanding shares of
Common Stock or a stock dividend or stock distribution thereon);

                      (iv) of any Capital Reorganization; or

                      (v) of the involuntary or voluntary dissolution,
liquidation or winding up of the Company;

        THEN the Company shall cause to be filed at its principal office, and
shall cause to be mailed to the holders of the Notes at their last addresses as
shown on the records of the Company, at least ten (10) days prior to the record
date specified in (A) below or twenty (20) days prior to the date specified in
(B) below, a notice stating

                            (A) the record date of such dividend, distribution,
subdivision or combination, or, if a record is not to be taken, the date as of
which the holders of Common

                                       12
<PAGE>   13

Stock of record to be entitled to such dividend, distribution, subdivision or
combination are to be determined, or

                             (B) the date on which such reclassification,
Capital Reorganization, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such reclassification, Capital
Reorganization, dissolution or winding up.

        5.  [INTENTIONALLY OMITTED]

        6.  EVENTS OF DEFAULT.

               (a) DEFINITION. For purposes of this Note, an Event of Default
shall be deemed to have occurred if:

                      (i) the Company fails to pay when due the principal of or
premium, if any, on any Note when due at its stated maturity, upon optional
redemption, upon required repurchase, upon declaration or otherwise;

                      (ii) (A) the Company or any of its Subsidiaries makes an
assignment for the benefit of creditors, (B) an order, judgment or decree is
entered adjudicating the Company or any of its Subsidiaries bankrupt or
insolvent, (C) any order for relief with respect to the Company or any of its
Subsidiaries is entered under the Bankruptcy Reform Act, Title 11 of the United
States Code, (D) the Company or any of its Subsidiaries petitions or applies to
any tribunal for the appointment of a custodian, trustee, receiver or liquidator
of the Company or any of its Subsidiaries or of any substantial part of the
assets of the Company or any of its Subsidiaries, or commences any proceeding
relating to the Company or any of its Subsidiaries under any bankruptcy
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, or (E) any such petition or application is
filed, or any such proceeding is commenced, against the Company or any of its
Subsidiaries and either (1) the Company or any of its Subsidiaries by any act
indicates its approval thereof, consent thereto or acquiescence therein or (2)
such petition, application or proceeding is not dismissed within sixty (60)
days;

                      (iii) a judgment in excess of $1,000,000 (net of any
insurance coverage accepted by the carrier) is rendered against the Company and,
within sixty (60) days after entry thereof, such judgment is not discharged or
execution thereof stayed pending appeal, or within sixty (60) days after the
expiration of any such stay, such judgment is not discharged or paid; provided
that if such unstayed or undischarged judgment exceeds 20% of the sum of the
Company's cash on hand and Cash Equivalents (as defined in the Noteholders
Agreement), in each case at the Initial Closing under the Agreement, the
judgment shall be deemed for purposes of remedies to be an event of default
under Section 6(a)(v);

                      (iv) the Company defaults under any mortgage, indenture,
agreement or instrument under which there may be issued or by which there may be
secured or evidenced any indebtedness for money borrowed by the Company or any
of its Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Subsidiaries) the aggregate outstanding


                                       13
<PAGE>   14

principal amount of which exceeds $4,000,000, other than indebtedness owed to
the Company or any of its Subsidiary, whether such indebtedness or guarantee now
exists, or is created after the date hereof which default:

                             (A) is caused by a failure to pay principal of, or
interest or premium, if any, on such indebtedness prior to the expiration of the
grace period provided in such indebtedness ("payment default"); or

                             (B) results in the acceleration of such
indebtedness prior to its maturity ("cross acceleration provision");

                      (v) failure of the Company to redeem all the unconverted
Notes for cash on the redemption date if the Company has elected to exercise its
optional redemption rights pursuant to Section 3 or the failure of the Company
to comply with its obligations under Section 4;

                      (vi) an Interfering Event (as defined in the Investors'
Rights Agreement) with respect to any Investor;

                      (vii) only to the extent not otherwise covered under (i)
through (vi) above, the failure to comply with the terms of or a breach of a
covenant or a breach of a representation or warranty (except for an immaterial
breach of a representation or warranty not otherwise qualified by materiality)
contained in the Transaction Documents or the Restructuring Documents for a
period of three (3) days following notice of such failure from holders of the
Notes, provided that such notice shall be required only to the extent such
breach is curable.

               (b) CONSEQUENCES OF EVENTS OF DEFAULT.

                      (i) Subject to the provisions of Section 11 of this Note,
if an Event of Default has occurred pursuant to Sections 6(a)(i), (v) or (vi) of
this Note, then the holder of the Note may declare all or any portion of the
outstanding Face Amount of and accrued but unpaid interest and Payments on the
Note due and payable and demand immediate payment of the Premium Redemption
Price thereon. If an Event of Default specified in Section 6(a)(ii) occurs, all
of the Notes shall automatically and immediately become due and payable at the
Premium Redemption Price. The Company shall give prompt written notice of any
such demand to the other holders, if any, of any portion of the Notes, each of
which may demand immediate payment of all or any portion of such holder's
portion of the Notes. If any holder of the Notes demands immediate payment of
all or any portion of such holder's portion of the Notes, the Company shall,
subject to the other provisions of this Note (including Section 11), immediately
pay the Premium Redemption Price in cash to such holder.

                      (ii) Subject to the provisions of Section 11 of this Note,
if an Event of Default has occurred pursuant to Sections 6(a)(iii), (iv) or
(vii) of this Note, then (in addition to the other remedies available) the
holders of not less than 25% of the aggregate principal amounts of all Notes
then outstanding may declare, by written notice to the Company, all or any
portion of the Notes due and payable at the applicable Premium Redemption Price.

                                       14
<PAGE>   15

                      (iii) During the continuance of an Event of Default, the
interest on the Note shall accrue at a rate of eleven percent (11.0%) per annum
(based on a year of 365 days) on the Face Amount, plus any accrued but unpaid
interest and Payments hereon.

                      (iv) Subject to the other provisions of this Note
(including Section 11), each holder of any portion of this Note shall also have,
upon the occurrence and continuance of an Event of Default, any other rights
which such holder may have pursuant to applicable law or contract.

        7. AMENDMENT AND WAIVER. Except as otherwise expressly provided herein,
the provisions of this Note (and all other outstanding Notes) may be amended and
the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company has obtained the
written consent of the holders of at least a majority of the aggregate principal
amount then outstanding of the Notes; provided that no such action shall change
(i) the amount of Notes whose holders must consent to an amendment, (ii) the
stated rate of or extend the stated time for or manner in which interest accrues
or payment of interest is made on any Note, (iii) reduce the amount of or any
provision relating to the scheduled payment of principal on the Notes, (iv)
reduce the amount, including any applicable premium payable upon the redemption
of any Note, change the time at which any Note may be redeemed or amend the
conversion rights as set forth under Section 4, (v) modify the provisions of
Section 11 in a manner adverse to the holders of any Notes, (vi) make any Note
payable in any money or at any place other than as stated in the Note, (vii)
impair the right of any holder to receive payment of, premium, if any, principal
and interest on such holder's Notes on or after the due dates therefore or to
institute suit for the enforcement of any payment on or with respect to such
holder's Notes, [or (ix) make any change in this Section 7 with respect to
provisions requiring each holder's consent or in the waiver provisions, in each
such case without the consent of the applicable holder if such change is adverse
to such holder.

        8. PLACE OF PAYMENT. Payments of principal and interest and all notices
and other communications to the Investor hereunder or with respect hereto are to
be delivered to the Investor by wire transfer of immediately available funds to
the account identified on Schedule 1.1 attached to the Agreement or to such
other address or to the attention of such other person as specified by prior
written notice to the Company, including any transferee of this Note.

        9. COSTS OF COLLECTION. In the event that the Company fails to pay when
due (including, without limitation upon acceleration in connection with an Event
of Default) the full amount of principal and/or interest hereunder, the Company
shall indemnify and hold harmless the holder of any portion of this Note from
and against all reasonable costs and expenses incurred in connection with the
enforcement of this provision or collection of such principal and interest,
including, without limitation, reasonable attorneys' fees and expenses.

        10. WAIVERS. The Company hereby waives presentment, demand, notice,
protest and all other demands and notices in connection with the delivery,
acceptance, performance, default or enforcement of this Note.

        11. RANKING. The Company agrees, and by the acceptance hereof each
holder agrees, this Note shall constitute a senior unsubordinated obligation of
the Company and shall rank pari

                                       15
<PAGE>   16

passu with all other senior, unsubordinated obligations of the Company.
Notwithstanding the foregoing, the Holder of this Note expressly consents to the
redemption of the PIK Preferred Shares prior to the payment of this Note upon
the occurrence of a Change of Control Transaction or Permitted Asset Sale.

        12. BENEFITS OF THE AGREEMENT. The Investor and all transferees (to the
extent permitted in the Agreement) shall be entitled to the rights and benefits
granted to them in the Agreement.

        13. REGISTRATION OF TRANSFER AND EXCHANGE GENERALLY.

               (a) REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE
GENERALLY. The Company shall keep at its principal executive offices a register
(the register maintained in such being herein sometimes collectively referred to
as the "NOTE REGISTER") in which the Company shall provide for the registration
of Notes and of transfers and exchanges of Notes.

        Subject to the provisions of the Noteholders Agreement regarding
restrictions on transfer and provided the transferee agrees to be bound by the
terms of the Note Purchase Agreement, upon surrender for registration of
transfer of any Note at its principal executive office, the Company shall
execute and deliver, in the name of the designated transferee or transferees,
one or more new Notes in denominations of not less than $500,000 each (provided
that if necessary to enable the registration by a holder of its entire holding
of Notes, one Note may be in a denomination of less than $500,000) or integral
multiples thereof, of a like aggregate principal amount and bearing such
restrictive legends as may be required by law.

        At the option of a holder, Notes may be exchanged for other Notes of any
authorized denominations, of a like aggregate principal amount and bearing such
restrictive legends as may be required by law upon surrender of the Notes to be
exchanged at the Company's principal executive offices. Whenever any Notes are
so surrendered for exchange, the Company shall execute and make available for
delivery the Notes which the holder making the exchange is entitled to receive.

        All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Company, evidencing the same debt, and
entitled to the same benefits as the Notes surrendered upon such registration of
transfer or exchange.

        Every Note presented or surrendered for registration of transfer or for
exchange shall (if so required by the Company) be duly endorsed, or be
accompanied by a written instrument of transfer, in form satisfactory to the
Company, duly executed by the holder thereof or his attorney duly authorized in
writing.

        No service charge shall be made for any registration of transfer or
exchange of Notes.

               (b) MUTILATED, DESTROYED, LOST AND STOLEN NOTES. If any mutilated
Note is surrendered to the Company, the Company shall execute and make available
for delivery in exchange therefor a new Note of like tenor and principal amount
and bearing a number not contemporaneously outstanding.

                                       16
<PAGE>   17


        If there shall be delivered to the Company (i) evidence to its
reasonable satisfaction of the destruction, loss or theft of any Note and (ii)
such security or indemnity as may be required by the Company to save itself
harmless, then, in the absence of notice to the Company that such Note has been
acquired by a protected purchaser, the Company shall execute and make available
for delivery, in lieu of any such destroyed, lost or stolen Note, a new Note of
like tenor and principal amount and bearing a number not contemporaneously
outstanding.

        In case any such mutilated, destroyed, lost or stolen Note has become or
is about to become due and payable, the Company in its discretion may, instead
of issuing a new Note, pay such Note, subject to the holders' conversion rights
pursuant to Section 3 hereof.

        Every new Note issued pursuant to this Section in lieu of any mutilated,
destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Note shall be at any time enforceable by anyone.

        The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.

        14. GOVERNING LAW. THIS NOTE AND THE RIGHTS AND DUTIES OF THE COMPANY
AND THE HOLDER HEREOF SHALL BE GOVERNED BY, CONSTRUED IN AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
EXECUTED AND TO BE PERFORMED ENTIRELY WITHIN THAT STATE. THE COMPANY AND THE
HOLDER HEREBY SUBMIT TO THE EXCLUSIVE PERSONAL JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND IF SUCH COURT SHALL NOT
HAVE JURISDICTION TO HEAR SUCH MATTER, TO THE NEW YORK STATE SUPREME COURT
LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK AND WAIVES ANY OBJECTION AS
TO VENUE IN EITHER SUCH LOCATION. THE COMPANY AND THE HOLDER WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER
THIS NOTE.

        15. LIMITATIONS ON HOLDER'S RIGHT TO CONVERT.

               (a) Notwithstanding anything to the contrary contained herein,
the number of shares of Common Stock that may be acquired by the holder upon
conversion of this Note pursuant to the terms hereof shall not exceed a number
that, when added to the total number of shares of Common Stock deemed
beneficially owned by such holder (other than by virtue of the ownership of
securities or rights to acquire securities that have limitations on the holder's
right to convert, exercise or purchase similar to the limitation set forth
herein), together with all shares of Common Stock deemed beneficially owned
(other than by virtue of the ownership of securities or rights to acquire
securities that have limitations on the right to convert, exercise or purchase
similar to the limitation set forth herein) by the holder's "affiliates" (as
defined in Rule 144 of the Act) ("AGGREGATION PARTIES") that would be aggregated
for purposes of determining whether a group under Section 13(d) of the
Securities Exchange Act of 1934 as amended, exists, would

                                       17
<PAGE>   18

exceed 9.99% (or 4.99% to the extent the Holder so provides in the Agreement) of
the total issued and outstanding shares of the Common Stock (the "RESTRICTED
OWNERSHIP PERCENTAGE").

               (b) The Holder covenants at all times on each day (each such day
being referred to as a "COVENANT DAY") as follows: During the balance of such
Covenant Day and the succeeding sixty-one (61) days (the balance of such
Covenant Day and the succeeding 61 days being referred to as the "COVENANT
PERIOD") such holder will not acquire shares of Common Stock pursuant to any
right existing at the commencement of the Covenant Period to the extent the
number of shares so acquired by such holder and its Aggregation Parties
(ignoring all dispositions) would exceed:

                (x) the Restricted Ownership Percentage of the total number of
                shares of Common Stock outstanding at the commencement of the
                Covenant Period,

                minus

                (y) the number of shares of Common Stock owned by such holder
                and its Aggregation Parties at the commencement of the Covenant
                Period.

        A new and independent covenant will be deemed to be given by the holder
as of each moment of each Covenant Day. No covenant will terminate, diminish or
modify any other covenant. The holder agrees to comply with each such covenant.
This Section 15 controls in the case of any conflict with any other provision of
any other agreement to which the Company and the holder may be a party.

               (c) The Company's obligation to issue shares of Common Stock
which would exceed such limits referred to in this Section 15 shall be suspended
to the extent necessary until such time, if any, as shares of Common Stock may
be issued in compliance with such restrictions.

        16. INCORPORATION OF TERMS. All capitalized terms not otherwise defined
in this Note shall have the definition set forth in the Agreement.

                                       18
<PAGE>   19


        IN WITNESS WHEREOF, the Company has executed and delivered this Amended
Note (which amends the Note originally issued on September 15, 2000) on February
__, 2001.

                                                   QUOKKA SPORTS, INC.



                                                   By:
                                                      --------------------------
                                                      Name:
                                                      Title:



<PAGE>   20

                                    EXHIBIT 1

                                PAYMENT STATEMENT

Date:
     ----------------

To:                              ("HOLDER")
     ---------------------------

Re:     7% CONVERTIBLE PROMISSORY NOTE, SERIES A-1 ("NOTE") OF QUOKKA SPORTS,
        INC. (THE "COMPANY").

        The Company hereby irrevocably elects to pay interest on the Note, for
the Interest Payment Date indicated below, in the following manner (the Company
should check its selection):

                    cash interest; or
               ----

                    PIK Interest.
               ----

               Interest Payment Date:
                                     --------------------------

               If the selection above is PIK Interest, the Company should fill
        in the following:

               Outstanding Principal Amount prior
               to issuance of this Payment Statement:      US$
                                                              -------------
               PIK Interest:                               US$
                                                              -------------
               Outstanding Principal Amount after
               issuance of this Payment Statement:         US$
                                                              -------------

        The Company hereby certifies to the Holder, its successors and assigns
that the Face Amount due under the Note after delivery of this Payment Statement
equals the amount indicated below. Capitalized terms used in this Payment
Statement and not otherwise defined shall have the meaning ascribed thereto in
the Note.

        IN WITNESS WHEREOF, this Payment Statement has been duly executed and
delivered on the date first written above.

                                                   QUOKKA SPORTS, INC.



                                                   By:
                                                      --------------------------
                                                      Name:
                                                      Title:



<PAGE>   21

                                    EXHIBIT 2

                      (TO BE EXECUTED BY REGISTERED HOLDER
                            IN ORDER TO CONVERT NOTE)

                                CONVERSION NOTICE
                                       FOR
                 7% CONVERTIBLE PROMISSORY NOTE DUE, SERIES A-1


        The undersigned, as Holder of the 7% Convertible Promissory Note, Series
A-1 of QUOKKA SPORTS, INC. (the "COMPANY"), in the outstanding principal amount
of U.S. $_____________ (the "Note"), hereby elects to convert that portion of
the outstanding principal amount of the Note shown on the next page into shares
of Common Stock, $.0001 par value per share (the "COMMON STOCK"), of the Company
according to the conditions of the Note, as of the date written below. The
undersigned hereby requests that share certificates for the Common Stock to be
issued to the undersigned pursuant to this Conversion Notice be issued in the
name of, and delivered to, the undersigned or its designee as indicated below.
If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto. No fee
will be charged to the Holder for any conversion, except for transfer taxes, if
any.

Conversion Information:           NAME OF HOLDER:
                                                 -------------------------------

                                  By:
                                     -------------------------------------------
                                     Print Name:
                                     Print Title:

                                     Print Address of Holder:

                                     -------------------------------------------

                                     -------------------------------------------

                                     Issue Common Stock to:
                                                           ---------------------
                                     at:
                                        ----------------------------------------

                                     Electronically transmit and credit Common
                                     Stock to:              at:
                                              --------------   -----------------


                                     -------------------------------------------
                                     Date of Conversion


                                     -------------------------------------------
                                     Applicable Conversion Price

                THE COMPUTATION OF THE NUMBER OF COMMON SHARES TO
                  BE RECEIVED IS SET FORTH ON THE ATTACHED PAGE



<PAGE>   22




Page 2 to Conversion Notice for:
                                ------------------------------------------------
                                               (NAME OF HOLDER)



              COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED
<TABLE>
<CAPTION>


<S>     <C>                                                          <C>
A.      Face Amount converted:                                       $
                                                                      --------

B.      Accrued, unpaid interest on Face Amount converted:           $
                                                                      --------

C.      Delay payments due Holder on Face Amount converted:          $
                                                                      --------

TOTAL DOLLAR AMOUNT CONVERTED (TOTAL OF A + B + C)                   $
                                                                      --------

                                                                     =========

Conversion Price                                                     $
                                                                      --------

Number of Shares of Common Stock = Total dollar amount converted =   $
                                   -----------------------------      --------
                                            Conversion Price         $
                                                                      --------
Number of shares of Common Stock =
                                  ------------------------
</TABLE>


If the conversion is not being settled by DTC, please issue and deliver _____
certificate(s) for shares of Common Stock in the following amount(s):


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Please issue and deliver _____ new Note(s) in the following amounts:


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