<PAGE>   1
                                                                   EXHIBIT 10.2
                                                                           

         THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
         REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THUS MAY
         NOT BE TRANSFERRED UNLESS REGISTERED UNDER THAT ACT OR UNLESS AN
         EXEMPTION FROM REGISTRATION IS AVAILABLE.



                              AMENDED AND RESTATED
                             CONVERTIBLE NEGOTIABLE
                                PROMISSORY NOTE


$1,500,000                                                      November 3, 1995



FOR VALUE RECEIVED, DECORA INDUSTRIES, INC., a Delaware corporation ("Payor"),
hereby promises to pay to the order of ROBERT W. JOHNSON IV, his heirs,
executors, personal representatives and assigns ("Holder"), the principal sum
of One Million, Five Hundred Thousand Dollars ($1,500,000), with interest from
the date hereof on unpaid principal at the rate of twelve percent (12%) per
annum, all principal due and payable May 3, 1998 and all interest due and
payable in accordance herewith.

In consideration of this Amended and Restated Note, Payor shall concurrently
issue to Holder 309,400 fully paid and nonassessable shares of its common
stock, par value $0.01 per share (the "Common Stock") as a closing fee.

The outstanding principal balance of this Note may be prepaid at any time in
whole or in part by the Payor, without penalty; provided that in any event
Holder is provided seventy five (75) days, advance written notice of any
proposed prepayment during which time Holder may convert this Note pursuant to
the terms hereof.

Interest shall be payable once in advance representing interest payable with
respect to the term of November 3, 1995 through May 3, 1998 concurrently with
the execution and delivery of this Amended Note and shall consist of 472,689
fully paid and nonassessable shares of the Common Stock; provided that if the
Note is converted or prepaid in full prior to May 4, 1997, then Payor shall be
entitled to offset from the Note balance, $180,000 which is equal to the
pre-paid interest for the period May 4, 1997 to May 3, 1998.

Such interest was calculated in accordance with the following formula: The
outstanding principal balance of this Note was calculated as of November 3,
1995 and was multiplied by twelve percent (12%) multiplied by 2.5, in order to
provide total interest of $450,000 payable during the term of November 3, 1995
through May 3, 1998.  Interest payable was then divided by a price per share of
$0.952 calculated as the Market Value of a share of Common Stock.  "Market
Value"





<PAGE>   2
means:  the average closing bid and asked prices for the 20 days prior to
November 3, 1995; as quoted on the NASDAQ Association of Securities Dealers
Automatic Quotation System ("NASDAQ").

If any of the following events (each is herein referred to as an "Event of
Default") shall occur:

                 (i)      default shall occur in the performance of or
         compliance with any covenant contained in Section 5.09 of the Amended
         and Restated Note and Warrant Purchase Agreement by and between Payor
         and Holder of even date herewith (the "Purchase Agreement");

                 (ii)     material default shall occur in the performance of or
         compliance with any other covenant contained herein or in the Purchase
         Agreement which shall continue uncured for more than ten (10) days
         after the occurrence of such default;

                 (iii)    if any representation or warranty to Purchaser made
         in writing by the Payor in the Purchase Agreement or in any other
         agreement, document and instrument contemplated hereby and thereby,
         shall prove to have been false or inaccurate in any material respect
         on the date as of which made;

                 (iv)     all or any part of the principal or interest due
         under this Note is not paid when and as the same shall become due and
         payable, whether at the maturity thereof, by acceleration, by notice
         of prepayment or otherwise;

                 (v)      any default in excess of $250,000 shall occur in the
         making of the payment of the principal of or interest on any other
         indebtedness of Payor or any of its Subsidiaries (as defined in the
         Purchase Agreement) for borrowed money, as and when the same shall
         become due and payable by the lapse of time, by declaration, by call
         for redemption or otherwise;

                 (vi)     default or the happening of any event shall occur
         under any indenture, agreement or other instrument under which any
         indebtedness of Payor or any of its Subsidiaries for borrowed money is
         or may be issued, and such default or event shall continue for a
         period of time sufficient to permit the acceleration of the maturity
         of any indebtedness of Payor or any of its Subsidiaries outstanding
         thereunder;

                 (vii)    a receiver, conservator, custodian, liquidator or
         trustee of Payor or any of its Subsidiaries or of all or any of the
         property of any of them is appointed by court order and such order
         remains in effect for more than sixty (60) days; or an order for
         relief is entered under the federal bankruptcy laws with respect to
         Payor or any of its Subsidiaries; or any of its material property is
         sequestered by court order and such order remains in effect for more
         than sixty (60) days; or a petition is filed against Payor or any of
         its Subsidiaries under the bankruptcy, reorganization, arrangement,
         insolvency, readjustment





                                      - 2 -
<PAGE>   3
         of debt, dissolution or liquidation law of any jurisdiction, whether
         now or hereafter in effect, and is not dismissed within sixty (60)
         days after such filing;

                 (viii)   Payor or any of its Subsidiaries files a petition in
         voluntary bankruptcy or seeking relief under any provision of any
         bankruptcy, reorganization, arrangement, insolvency, readjustment of
         debt, dissolution or liquidation law of any jurisdiction, whether now
         or hereafter in effect, or consents to the filing of any petition
         against it under any such law;

                 (ix)     Payor or any of its Subsidiaries makes an assignment
         for the benefit of its creditors, or admits in writing its inability
         to pay, or in fact does not pay, its debts generally as they become
         due, or consents to the appointment of a receiver, conservator,
         custodian, liquidator or trustee of Payor or any of its Subsidiaries,
         or of all or any part of the property of any of them;

                 (x)      final judgment for the payment of money in excess of
         $250,000 shall be rendered by a court of record against Payor or any
         of its Subsidiaries, and Payor or such Subsidiary shall not (1)
         discharge the same (by insurance or otherwise) or provide for its
         discharge in accordance with its terms, or (2) procure a stay of
         execution thereof within sixty (60) days from the date of entry
         thereof and within said period of sixty (60) days, or such longer
         period during which execution of such judgment shall have been stayed,
         appeal therefrom and cause the execution thereof to be stayed during
         such appeal;

                 (xi)     a breach of any term or provision of the Series A
         Warrant, dated as of November 3, 1992 to purchase 225,000 shares of
         Common Stock granted to Holder, or of the Series B Warrant, dated as
         of November 3, 1992 to purchase 100,000 shares of Common Stock also
         granted to Holder, or of the Class C Warrant dated as of November 3,
         1995 (collectively, the "Warrants"); or

                 (xii)    Payor is delisted or otherwise removed from the
         NASDAQ system and is not on the same or next business day listed on
         any national securities exchange;

then, when any Event of Default described in clause (iii), (vi), (x) or (xi)
above has occurred and shall be continuing, this Note shall, upon written or
facsimile notice from Holder, forthwith be due and payable, if not already due
and payable; and when any Event of Default described in clause (i), (ii), (iv),
(v), (vii), (viii), (ix) or (xii) above has occurred, then, at the option of
Holder, the principal of this Note shall be immediately due and payable, by
acceleration, without presentment, demand or notice of any kind, upon the
occurrence thereof.

In addition to the acceleration of this Note upon the occurrence of any of the
foregoing events, Payor agrees that, if Payor completes a registered public
offering of its securities while any obligation remains outstanding under this
Note, then Payor shall at the option of Holder immediately deliver to Holder,
as a prepayment of principal due under this Note (but not





                                      - 3 -
<PAGE>   4
exceeding the outstanding principal balance of this Note then outstanding), one
hundred percent (100%) of the net proceeds of such offering in excess of
$4,000,000.

Failure by Payor to fulfill any of the obligations set forth in the immediately
preceding paragraph shall also constitute an "Event of Default".  At the option
of Holder, the principal of this Note shall be immediately due and payable, by
acceleration, without presentment, demand or notice of any kind, upon the
occurrence of such failure.

If any principal or installment of interest is not paid in full on the due date
hereof (whether by maturity or acceleration or otherwise), then the outstanding
principal balance of this Note and any overdue installment of interest thereon
(to the extent permitted by applicable law) shall bear additional interest from
the due date of such payment, or from and after an Event of Default, at a rate
equal to the lesser of (i) the highest rate allowed by applicable law, or (ii)
sixteen percent (16%) per annum (the "Default Rate") until the amount due is
paid.  If payment of this Note is accelerated, then the outstanding principal
balance hereof shall bear interest at the Default Rate from and after the Event
of Default, and at the option of Holder, payment of interest shall be made in
cash.  Payor agrees to reimburse Holder for all reasonable out-of-pocket costs
and expenses incurred by him in any effort to collect this Note, whether or not
suit is filed, including reasonable compensation to Payor's attorneys for
services rendered in connection therewith, and pay interest on such costs and
expenses to the extent not paid when demanded at the Default Rate.  If this
Note is not paid when due, whether at maturity or by acceleration, the
undersigned promises to pay Holder's costs of collection, which costs shall
include, but shall not be limited to, reasonable attorneys' fees and court
costs incurred by any holder hereof on account of such collection, whether or
not suit is filed hereon.

All agreements herein are expressly limited so that in no event whatsoever,
whether by reason of advancement of the proceeds hereof, acceleration of
maturity of the unpaid principal balance hereof, or otherwise, shall the amount
paid or agreed to be paid to Holder for the use or forbearance of the money to
be advanced hereunder exceed the highest lawful rate permissible under
applicable law.  If, due to any circumstances whatsoever, fulfillment of any
provision hereof, or of the Purchase Agreement, or of any of the Warrants, at
the time performance of such provision shall be due, shall involve transcending
the limit of validity prescribed by law which a court of competent jurisdiction
may deem applicable hereto, then, ipso facto, the obligation to be fulfilled
shall be reduced to the limit of such validity, and if, under any
circumstances, Holder shall ever receive as interest an amount which would
exceed the highest lawful rate, such amount which would be excessive interest
shall be applied to the reduction of the unpaid principal balance due hereunder
and not to the payment of interest.  At the option of Holder, if a court of
competent jurisdiction determines that any amounts otherwise to be paid
hereunder exceed the highest permissible lawful rate, or if Payor asserts the
amounts otherwise to be paid hereunder exceed the highest permissible lawful
rate, then Holder shall have the right to accelerate the maturity of the entire
unpaid principal balance and accrued interest due under this Note, immediately
upon notice to Payor.





                                      - 4 -

<PAGE>   5
Payor authorizes any attorney at law to appear in any court of record in the
State of New York, or in any other state or territory of the United States,
after this Note becomes due, either by lapse of time or by operation of any
provision of acceleration contained herein, and waive the issuance and service
of process, enter appearance and confess a judgment or enter a confession of
judgment against Payor in favor of any holder of this Note, for the amount then
due, together with costs that the undersigned has promised to pay herein, and
thereupon to release all errors and waive all rights of appeal and stay of
execution.  Any reorganization, consolidation, merger, sale or similar
transaction involving Payor shall not impair the authority herein granted as to
the survivor or survivors of Payor.

Payor has executed and delivered to the attorney for Holder the affidavit which
is required under New York State CPLR Section 3218(a) to enter such a
confession of judgment against Payor.  Said affidavit shall be held in escrow
by the attorney for Holder until such time as Holder may be entitled to such
confession of judgment against Payor, at which time such attorney is authorized
to file such affidavit with the appropriate County Clerk and enter the judgment
based thereon.  In no event, however, shall execution be issued upon such
judgment for more than the  sum actually due hereunder plus the costs Payor has
promised to pay herein, and, immediately upon the entry of such judgment,
Holder shall file with said County Clerk a partial satisfaction of judgment for
any amount which has been paid and is no longer due.

In connection herewith, Holder shall receive the right to convert the
outstanding principal balance of this Note, from time to time, into shares of
Common Stock, as set forth herein.

         (a)     CONVERSION OF NOTE. At the sole election of Holder hereof,
Holder may convert, without forfeiture of any prepaid interest (except as set
forth in the fourth paragraph hereof), all or any part of the principal balance
due under this Note (in increments of $100,000) into shares of Common Stock at
the conversion rate of $1.70 per share (the "Initial Conversion Price") as may
be adjusted from time to time as hereinafter set forth.  Notwithstanding the
foregoing, if this Note has not been paid in full on or before May 3, 1998 and
the Holder exercises the Series C Warrant dated as of November 3, 1995, then
this Note shall not be convertible.  The shares of Common Stock deliverable
upon such conversion, and as adjusted from time to time, are hereinafter
sometimes referred to as "Note Shares" and the conversion price of each share
of Common Stock in effect at any time and as adjusted from time to time is
hereinafter sometimes referred to as the "Conversion Price".  The right to
convert may be exercised at any time prior to the due date of this Note by
presentation and surrender of this Note to Payor at its principal office, with
the Purchase Form annexed hereto duly executed.  If this Note should be
exercised in part only, Payor shall, upon surrender of this Note for
cancellation, execute and deliver a new Note evidencing the principal balance
of the remaining obligation of Payor to Holder.  Upon receipt by Payor of this
Note at its office, in proper form for conversion, Holder shall be deemed to be
the holder of record of the shares of Common Stock issuable upon such
conversion, notwithstanding that the stock transfer books of Payor shall then
be closed or that certificates representing such shares of Common Stock shall
not then be actually delivered to Holder.  The Note Shares shall be "restricted
securities" as defined in the Securities Act of 1933,





                                      - 5 -
<PAGE>   6
as amended (the "Securities Act").  Certificates for the shares so purchased
shall be delivered to Holder within a reasonable time, not exceeding ten days,
after rights represented by this Note shall have been exercised.

         (b)     SHARES TO BE FULLY PAID; RESERVATION OF SHARES.  Payor
covenants and agrees:

                 (1)      that all Note Shares shall, upon issuance, be fully
         paid and nonassessable and free from all taxes, liens and charges with
         respect to the issue thereof;

                 (2)      without limiting the generality of the foregoing,
         that Payor will, from time to time, take all such action as may be
         required to assure that the par value per share of the Common Stock is
         at all times equal to or less than the then effective Conversion Price
         per share of the Common Stock issuable pursuant to this Note;

                 (3)      that, during the period within which interest is
         payable on this Note and the rights represented by this Note may be
         exercised, Payor shall at all times have authorized, and reserved for
         the purpose of issue upon payment of interest on this Note and the
         exercise of the rights evidenced by this Note, a sufficient number of
         shares, of Common Stock to provide for the payment of interest and the
         exercise of the rights represented by this Note;

                 (4)      that Payor will take all such action as may be
         necessary to assure that the Note Shares may be issued without
         violation of any applicable law or regulation or of any requirements
         of any domestic securities exchange or the NASDAQ system upon which
         any capital stock of Payor may be listed, provided Holder provides
         Payor with such information as Payor shall reasonably request and that
         is necessary to comply with the requirements of any such exchange or
         system;

                 (5)      that no person has any preemptive or other right with
         respect to the issuance of any Note Shares; and

                 (6)      that Payor will not take any action which would
         result in any adjustment of the Conversion Price if the total number
         of shares of Common Stock issuable after such action upon payment of
         interest on the Note or conversion of the Note, together with all
         shares of Common Stock then outstanding and all shares of Common Stock
         then issuable upon exercise of all Options (as hereinafter defined)
         and upon conversion of all Convertible Securities (as hereinafter
         defined) then outstanding, would exceed the total number of shares of
         Common Stock then authorized by Payor's certificate of incorporation
         (as then amended or restated).  In the event any stock or securities
         of Payor other than the Common Stock are issuable upon the exercise
         hereof, the Payor will take or refrain from taking any action referred
         to in clauses (1) through (6) of this Section (b) as though such
         clauses applied to such other shares or securities then issuable upon
         the exercise hereof.





                                      - 6 -
<PAGE>   7
         (c)     FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the payment of interest on or conversion
of this Note.  With respect to any fraction of a share called for upon any
interest payment hereunder or conversion hereof, Payor shall pay to Holder an
amount in cash equal to such fraction multiplied by the current market value of
a share, determined as follows:

                 (1)      If the Common Stock is listed on a domestic
         securities exchange or admitted to unlisted trading privileges on such
         exchange or listed for trading on the NASDAQ system, the current
         market value shall be the last reported sale price of the Common Stock
         on such exchange or system on the last business day prior to the date
         of an interest payment on this Note or conversion of this Note, as the
         case may be, or if no such sale is made on such day, the average
         closing bid and asked prices for such day on such exchange or system;

                 (2)      If the Common Stock is not so listed or admitted to
         unlisted trading privileges, the current market value shall be the
         mean of the last reported bid and asked prices reported by the
         National Quotation Bureau, Inc., or any similar successor
         organization, on the last business day prior to the date of exercise
         of this Note; or

                 (3)      If the Common Stock is not so listed or admitted to
         unlisted trading privileges and bid and asked prices are not so
         reported, the current market value shall be an amount not less than
         the book value thereof as at the end of the most recent fiscal year of
         Payor ending prior to the date of an interest payment on this Note or
         conversion of this Note, as the case may be, determined in such
         reasonable manner as may be prescribed by the Board of Directors of
         Payor.

         (d)     TRANSFER OR ASSIGNMENT OF NOTE.  This Note is freely
transferable and may be assigned or hypothecated from the date hereof.

         (e)     RIGHTS OF HOLDER. Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in Payor, either at law or equity, and
the rights of Holder are limited to those expressed in this Note and are not
enforceable against Payor except to the extent set forth herein.

         (f)     ANTI-DILUTION PROVISIONS. The Conversion Price and the number
and kind of securities purchasable upon the conversion of this Note shall be
subject to adjustment from time to time upon the happening of certain events as
hereinafter provided.  The Conversion Price in effect at any time and the
number and kind of securities purchasable upon conversion of the Note shall be
subject to adjustment as follows:

                 (1)      Issuance of Common Stock.  If and whenever after
         November 3, 1992 Payor shall issue or sell (or be deemed to issue or
         sell as provided hereunder) any shares of its Common Stock for a
         consideration per share less than the Conversion Price in effect





                                      - 7 -

<PAGE>   8
         immediately prior to the time of such issue or sale (other than shares
         of Common Stock issued pursuant to this Note and the Warrants and the
         shares of Common Stock listed as pending issuance, and the shares of
         Common Stock listed as being issuable pursuant to options pending
         issuance, in Schedule 3.02 to the Note and Warrant Purchase Agreement
         dated as of November 3, 1992), then, forthwith upon such issue or
         sale, the Conversion Price shall be reduced to the price, calculated
         to the nearest cent, determined by dividing (i) the sum of (A) the
         number of shares of Common Stock outstanding immediately prior to such
         issue or sale multiplied by the then existing Conversion Price and (B)
         the consideration, if any, received by Payor upon such issue or sale,
         by (ii) the total number of shares of Common Stock outstanding
         immediately after such issue or sale.

                          (i)     Issuance of Rights or Options.  In case at
                 any time Payor shall in any manner grant (whether directly or
                 by assumption in a merger or otherwise), after the date
                 hereof, any rights to subscribe for or to purchase, or any
                 options for the purchase of (such rights or options being
                 herein called "Options"), Common Stock or any stock or
                 securities convertible into or exchangeable for Common Stock
                 (such convertible or exchangeable stock or securities being
                 herein called "Convertible Securities") whether or not such
                 Options or the right to convert or exchange any such
                 Convertible Securities are immediately exercisable, and the
                 price per share for which Common Stock is issuable upon the
                 exercise of such Options or upon conversion or exchange of
                 such Convertible Securities (determined as provided in the
                 following sentence) shall be less than the Conversion Price in
                 effect immediately prior to the time of granting such Options,
                 then the total maximum number of shares of Common Stock
                 issuable upon the exercise of all such Options or upon
                 conversion or exchange of the total maximum amount of such
                 Convertible Securities issuable upon the exercise of such
                 Options shall be deemed to have been issued for such price per
                 share as of the date of granting of such Options and
                 thereafter shall be deemed to be outstanding.  The price per
                 share for which Common Stock is issuable, as referred to in
                 the preceding sentence, shall be determined by dividing (A)
                 the sum of (1) the total amount, if any, received or
                 receivable by Payor as consideration for the granting of such
                 Options, plus (2) the minimum aggregate amount of additional
                 consideration payable to Payor upon the exercise of all such
                 Options, plus (3) in the case of all such Options that relate
                 to Convertible Securities, the minimum aggregate amount of
                 additional consideration, if any, payable upon the issue or
                 sale of all such Convertible Securities (to the extent not
                 counted in clause (2) hereof) and upon the conversion or
                 exchange of all such Convertible Securities into Common Stock,
                 by (B) the total maximum number of shares of Common Stock
                 issuable upon the exercise of such Options or upon the
                 conversion or exchange of all such Convertible Securities
                 issuable upon the exercise of such Options; the consideration
                 received or receivable by Payor shall in each case be
                 determined in accordance with Section (f)(l)(v) hereof.
                 Except as otherwise provided in Section (f)(1)(iii) hereof, no
                 adjustment of the Conversion Price shall be made upon the
                 actual issue of such Common Stock or of such





                                      - 8 -

<PAGE>   9
                 Convertible Securities upon exercise of such Options or upon
                 the actual issue of such Common Stock upon conversion or
                 exchange of such Convertible Securities.

                        (ii)    Issuance of Convertible Securities.  In case
                 Payor shall in any manner issue (whether directly or by
                 assumption in a merger or otherwise) or sell, after the date
                 hereof, any Convertible Securities, whether or not the rights
                 to exchange or convert thereunder are immediately exercisable,
                 and the price per share for which Common Stock is issuable
                 upon such conversion or exchange (determined as provided in
                 the following sentence) shall be less than the Conversion
                 Price in effect immediately prior to the time of such issue or
                 sale, then the total maximum number of shares of Common Stock
                 issuable upon conversion or exchange of all such Convertible
                 Securities shall be deemed to have been issued for such price
                 per share as of the date of the issue or sale of such
                 Convertible Securities and thereafter shall be deemed to be
                 outstanding, provided that (A) except as otherwise provided in
                 Section (f)(l)(iii) below, no adjustment of the Conversion
                 Price shall be made upon the actual issue of such Common Stock
                 upon conversion or exchange of such Convertible Securities,
                 and (B) if any such issue or sale of such Convertible
                 Securities is made upon exercise of any Options for which
                 adjustments of the Conversion Price have been or are to be
                 made pursuant to Section (f)(1)(i) hereof, no further
                 adjustment of the Conversion Price shall be made by reason of
                 such issue or sale.  The price per share for which Common
                 Stock is issuable, as referred to in the preceding sentence,
                 shall be determined by dividing (A) the sum of (1) the total
                 amount received or receivable by  Payor as consideration for
                 the issue or sale of such Convertible Securities, plus (2) the
                 minimum aggregate amount of additional consideration, if any,
                 payable upon the conversion or exchange of such Convertible
                 Securities into Common Stock, by (B) the total maximum number
                 of shares of Common Stock issuable upon the conversion or
                 exchange of such Convertible Securities; the consideration
                 received or receivable by Payor shall in each case be
                 determined in accordance with Section (f)(l)(v) hereof.

                          (iii)   Change in Option Price or Conversion Rate.
                 Upon the happening of any of the following events, namely, if
                 the purchase price provided for in any outstanding Option
                 referred to in Section (f)(1)(i) hereof, the additional
                 consideration, if any, payable upon the conversion or exchange
                 of any outstanding Convertible Securities referred to in
                 Section (f)(1)(i) or (f)(l)(ii) hereof, or the rate at which
                 any such Convertible Securities are convertible into or
                 exchangeable for Common Stock shall change at any time (other
                 than under or by reason of provisions designed to protect
                 against dilution), the Conversion Price in effect at the time
                 of such event shall forthwith be readjusted to the Conversion
                 Price that would have been in effect at such time had such
                 Options or Convertible Securities provided for such changed
                 purchase price, additional consideration or conversion rate,
                 as the case may be, at the time initially granted, issued or
                 sold.  On the





                                      - 9 -

<PAGE>   10
                 expiration of any option referred to in Section (f)(1)(i)
                 hereof prior to the exercise thereof or the termination of any
                 right to convert or exchange any Convertible Securities
                 referred to in Section (f)(1)(i) or (f)(1)(ii) hereof prior to
                 the exercise of such rights, the Conversion Price then in
                 effect hereunder shall forthwith be increased (but in no case
                 shall such Conversion Price be increased to a price greater
                 than the Initial Conversion Price) to the Conversion Price
                 that would have been in effect at the time of such expiration
                 or termination had such Option or Convertible Security, to the
                 extent outstanding immediately prior to such expiration or
                 termination never been issued, and the Common Stock issuable
                 thereunder shall no longer be deemed to be outstanding for the
                 purposes of any calculation under Section (f)(1)(i) or
                 (f)(1)(ii) hereof.  If the purchase price provided for in any
                 Option referred to in Section (f)(1)(i) hereof or the
                 additional consideration, if any, payable upon the conversion
                 or exchange of any Convertible Securities issuable upon the
                 exercise of any such Options or upon the conversion or
                 exchange of any Convertible Securities referred to in Section
                 (f)(1)(ii) hereof and still outstanding shall decrease, or the
                 number of shares of Common Stock issuable upon conversion or
                 exchange of any such Convertible Securities shall increase, at
                 any time under or by reason of provisions with respect thereto
                 designed to protect against dilution, then in case of the
                 delivery of Common Stock upon the exercise of any such Option
                 or upon conversion or exchange of any such Convertible
                 Security, the Conversion Price then in effect hereunder shall
                 forthwith be adjusted to the Conversion Price which would have
                 obtained had Section (f)(1)(i) and (f)(1)(ii) hereof and the
                 provisions of this Section (f)(1)(iii) hereof never been given
                 effect in relation to such Option or Convertible Securities
                 and had the Conversion Price been adjusted pursuant to Section
                 (f)(1) hereof at the time of delivery of such shares of Common
                 Stock based on the consideration received (or deemed received
                 under Section (f)(l)(v) hereof) for such Common Stock,
                 determined as of the date of such delivery, provided that such
                 adjustment of the Conversion Price shall be made only if as a
                 result thereof the Conversion Price then in effect hereunder
                 is thereby reduced.

                          (iv)    Stock Dividends.  In case Payor shall declare
                 a dividend or make any other distribution upon any stock of
                 Payor payable in Common Stock, Options or Convertible
                 Securities, any Common Stock, Options or Convertible
                 Securities, as the case may be, issuable in payment of such
                 dividend or distribution shall be deemed to have been issued
                 or sold without consideration for purposes of the calculations
                 to be made under this Section (f). If Payor shall at any time
                 prior to payment in full of this Note declare a dividend
                 payable in cash on its Common Stock and at substantially the
                 same time offer its stockholders a right to purchase Common
                 Stock from the proceeds of such dividend or for an amount
                 substantially equal to such dividend, then, in such case, all
                 Common Stock so issued shall, for purpose of this Note, be
                 deemed to have been issued as a stock dividend.





                                     - 10 -

<PAGE>   11
                        (v)     Consideration for Securities.  In case any
                 shares of Common Stock, Options or Convertible Securities
                 shall be issued or sold by Payor for cash, the consideration
                 received therefor shall be deemed to be the amount received by
                 Payor thereof, provided that in no case shall any deduction be
                 made for any commissions, discounts or other expenses incurred
                 by Payor for any underwriting of the issue or otherwise in
                 connection therewith.  In case any shares of Common Stock,
                 Options or Convertible Securities shall be issued or sold for
                 a consideration other than cash, the amount of the
                 consideration other than cash received by Payor shall be
                 deemed to be the fair value of such consideration as
                 determined reasonably and in good faith by the Board of
                 Directors of Payor (irrespective of the accounting treatment
                 thereof).  In case any Common Stock, Options or Convertible
                 Securities shall be issued in connection with any merger or
                 consolidation in which Payor is the surviving corporation
                 (other than any consolidation or merger in which the
                 previously outstanding shares of Common Stock of Payor shall
                 be changed into or exchanged for the stock or other securities
                 of another corporation) the amount of consideration therefor
                 shall be deemed to be the fair value as determined reasonably
                 and in good faith by the Board of Directors of Payor
                 (irrespective of the accounting treatment thereof) of such
                 portion of the assets and business of the non-surviving
                 corporation as such Board may determine to be attributable to
                 such shares of Common Stock, Options or Convertible
                 Securities, as the case may be.  In the event of any
                 consolidation or merger of Payor in which Payor is not the
                 surviving corporation or in which the previously outstanding
                 shares of Common Stock of Payor shall be changed into or
                 exchanged for the stock or other securities of another
                 corporation, or in the event of any sale of all or
                 substantially all of the assets of Payor for stock or other
                 securities of any corporation, Payor shall be deemed to have
                 issued a number of shares of its Common Stock equal to the
                 number of shares of Common Stock used for computing the actual
                 exchange ratio on which the transaction was predicated and for
                 a consideration equal to the fair market value on the date of
                 transaction of all such stock or securities of the other
                 corporation received by the holders of the capital stock of
                 Payor or by Payor and if such calculation results in
                 adjustment of the Conversion Price, the determination of the
                 number of shares of Common Stock issuable upon conversion of
                 the Note immediately prior to such merger, consolidation or
                 sale, for purposes of Section (f)(4) hereof shall be made
                 after giving effect to such adjustment of the Conversion
                 Price.

                        (vi)    Record Date.  In case Payor shall take a record
                 of the holders of its Common Stock for the purpose of
                 entitling them to receive a dividend or other distribution
                 payable in Common Stock, Options or Convertible Securities,
                 then such record date shall be deemed to be the date of the
                 issue or sale of the shares of Common Stock deemed to have
                 been issued or sold upon the declaration of such dividend or
                 the making of such other distribution or the date of the
                 granting of such right of subscription or purchase, as the
                 case may be.





                                     - 11 -

<PAGE>   12
                          (vii)   Treasury Shares.  The number of shares of
                 Common Stock outstanding at any given time shall not include
                 shares owned or held by or for the account of Payor, and the
                 disposition or reissuance of any such shares shall be
                 considered an issue or sale of Common Stock for the purposes
                 of this Section (f).

                 (2)      Liquidating Dividends.  Payor will not declare a
         dividend upon the Common Stock payable otherwise than out of
         consolidated earnings or consolidated earned surplus, determined in
         accordance with generally accepted accounting principles, including
         the making of appropriate deductions for minority interests, if any,
         in subsidiaries, and otherwise than in Common Stock, unless Payor
         shall pay over to Holder, on the dividend payment date, the cash,
         stock or other securities and other property that Holder would have
         received if Holder had converted this Note in full to purchase Common
         Stock and had been the record holder of such Common Stock on the date
         on which a record is taken for the purpose of such dividend, or, if a
         record is not taken, the date as of which the holders of Common Stock
         of record entitled to such dividend are to be determined.  For the
         purposes of the foregoing, a dividend other than in cash shall be
         considered payable out of earnings or surplus (other than revaluation
         or paid in surplus) only to the extent that such earnings or surplus
         are charged an amount equal to the fair value of such dividend as
         determined reasonably and in good faith by the Board of Directors of
         Payor.

                 (3)      Subdivision of Combination of Stock.  In case Payor
         shall at any time subdivide its outstanding shares of Common Stock
         into a greater number of shares, the Conversion Price in effect
         immediately prior to such subdivision shall be proportionately
         reduced, and conversely, in case the outstanding shares of Common
         Stock shall be combined into a smaller number of shares, the
         Conversion Price in effect immediately prior to such combination shall
         be proportionately increased.

                 (4)      Merger, Sale, Reorganization, Reclassification or
         Consolidation.  If any capital reorganization or reclassification of
         the capital stock of Payor, or any consolidation or merger of Payor
         with another corporation, or the sale of all or substantially all of
         its assets to another corporation shall be effected in such a way that
         holders of Common Stock shall be entitled to receive stock, securities
         or assets with respect to or in exchange for Common Stock, then, as a
         condition of such reorganization, reclassification, consolidation,
         merger or sale, lawful and adequate provisions shall be made whereby
         Holder shall thereafter have the right to purchase and receive upon
         the basis and upon the terms and conditions specified in this Note and
         in lieu of the shares of the Common Stock immediately theretofore
         purchasable and receivable upon the exercise of the rights represented
         hereby, such shares of stock, securities or assets as may be issued or
         payable with respect to or in exchange for a number of outstanding
         shares of such Common Stock equal to the number of shares of such
         stock immediately theretofore purchasable and receivable upon the
         exercise of the rights represented hereby had such reorganization,
         reclassification, consolidation, merger or sale not taken place, and
         in any such case appropriate provision shall be made with respect to
         the rights and interests of Holder to





                                     - 12 -

<PAGE>   13
         the end that the provisions hereof (including, without limitation,
         provisions for adjustment of the Conversion Price and Note Shares upon
         the conversion of this Note) shall thereafter be applicable, as nearly
         as may be, in relation to any shares of stock, securities or assets
         thereafter deliverable upon the exercise of the rights represented
         hereby (including an immediate adjustment, by reason of such
         consolidation or merger, of the Conversion Price to the value for the
         Common Stock reflected by the terms of such consolidation or merger if
         the value so reflected is less than the Conversion Price in effect
         immediately prior to such consolidation or merger).  In the event of a
         merger or consolidation of Payor with or into another corporation as a
         result of which a number of shares of common stock of the successor or
         surviving corporation greater or lesser than the number of shares of
         Common Stock of Payor outstanding immediately prior to such merger or
         consolidation are issuable to holders of Common Stock of Payor, then
         the Conversion Price in effect immediately prior to such merger or
         consolidation shall be adjusted in the same manner as though there
         were a subdivision or combination of the outstanding shares of Common
         Stock of Payor outstanding immediately prior to such merger or
         consolidation.  Payor shall not effect any such consolidation, merger
         or sale, unless prior to the consummation thereof the successor or
         surviving corporation (if other than Payor) resulting from such
         consolidation or merger or the corporation purchasing such assets, as
         the case may be, shall assume by written instrument executed and
         mailed or delivered to Holder hereof at the last address of Holder
         appearing on the books of Payor, the obligation to deliver to Holder
         such shares of stock, securities or assets as, in accordance with the
         foregoing provisions, Holder may be entitled to purchase or receive
         hereunder.  If a purchase, tender or exchange offer is made to and
         accepted by the holders of more than fifty percent (50%) of the
         outstanding shares of Common Stock of Payor, Payor shall not effect
         any consolidation, merger or sale with the Person (as hereinafter
         defined) having made such offer or with any Affiliate (as hereinafter
         defined) of such Person, unless prior to the consummation of such
         consolidation, merger or sale Holder shall have been given a
         reasonable opportunity to then elect to receive either the stock,
         securities or assets then issuable upon the conversion of this Note
         or, if different, the stock, securities or assets, or the equivalent,
         issued to previous holders of the Common Stock in accordance with such
         offer, computed as though Holder had been, at the time of such offer,
         a holder of the stock, securities or assets then purchasable upon the
         conversion of this Note.  As used in this Section (f)(4), the term
         "Person" shall include an individual, a partnership, a corporation, a
         trust, a joint venture, an unincorporated organization and a
         government or any department or agency thereof, and an "Affiliate" of
         any Person shall mean any Person directly or indirectly controlling,
         controlled by or under direct or indirect common control with, such
         other Person.  A Person shall be deemed to control a corporation if
         such Person possesses, directly or indirectly, the power to direct or
         cause the direction of the management and policies of such
         corporation, whether through the ownership of voting securities, by
         contract or otherwise.

                 (5)      Notice of Adjustment.  Whenever the Conversion Price
         is adjusted, as herein provided, Payor shall promptly cause a notice
         setting forth the adjusted Conversion





                                     - 13 -

<PAGE>   14
         Price and adjusted number of Note Shares issuable upon conversion of
         the Note, setting forth in reasonable detail the method of calculation
         and the facts upon which such calculation is based, to be mailed to
         Holder of the Note at Holder's last address as shown on the books of
         Payor.  Payor may retain a firm of independent certified public
         accountants selected by the Board of Directors (who may be the regular
         accountants employed by Payor) to make any computation required by
         this Section (f), and a certificate signed by such firm shall be
         conclusive evidence of the correctness of such adjustment.

                 (6)      Other Notices.  In case at any time:

                          (i)     Payor shall declare any cash dividend upon
                 its Common Stock;

                          (ii)    Payor shall declare any dividend upon its
                 Common Stock payable in stock or make any special dividend or
                 other distribution (other than regular cash dividends) to the
                 holders of its Common Stock;

                          (iii)   Payor shall offer for subscription to the
                 holders of any of its Common Stock any additional shares of
                 stock of any class or other rights;

                          (iv)    there shall be any capital reorganization,
                 reclassification of the capital stock of Payor or
                 consolidation or merger of Payor with, or sale of all or
                 substantially all of its assets to, another corporation;

                          (v)     there shall be a voluntary or involuntary
                 dissolution, liquidation or winding up of Payor; or

                          (vi)    there shall be any subdivision or combination
                 of the outstanding shares of Common Stock into, respectively,
                 a greater or lesser number of shares of Common Stock;

         then, in any one or more of said cases, Payor shall give, by first
         class mail, postage prepaid, addressed to Holder at the address of
         Holder as shown on the books of Payor, (i) at least twenty (20) days
         prior written notice of the date on which the books of Payor shall
         close or a record shall be taken for such dividend, distribution or
         subscription rights or for determining rights to vote in respect of
         any such reorganization, reclassification, consolidation, merger,
         sale, dissolution, liquidation or winding up and (ii) in the case of
         such reorganization, reclassification, consolidation, merger, sale,
         dissolution, liquidation or winding up, at least twenty (20) days
         prior written notice of the date when the same shall take place.  Any
         notice required by clause (i) above shall also specify, in the case of
         any such dividend, distribution or subscription rights, the date on
         which the holders of Common Stock shall be entitled thereto, and any
         notice required by clause (ii) above shall also specify the date on
         which the holders of Common Stock shall be entitled to exchange their
         Common Stock for securities or other property deliverable upon such
         reorganization,





                                     - 14 -

<PAGE>   15
         reclassification, consolidation, merger, sale, dissolution,
         liquidation or winding up, as the case may be.

                 (7)      Duty to make Fair Adjustments in Certain Cases.  If
         any event occurs as to which in the opinion of either the Board of
         Directors of Payor or Holder of the Note the other provisions of this
         Section (f) are not strictly applicable or if strictly applicable
         would not fairly protect the purchase rights of the Note in accordance
         with the essential intent and principles of such provisions, then the
         Board of Directors and Holder shall mutually agree upon an adjustment
         in the application of such provisions, in accordance with such
         essential intent and principles, so as to protect such purchase rights
         as aforesaid, but in no eventhall any such adjustment have the effect
         of increasing the Conversion Price as otherwise determined pursuant to
         this Section (f) except in the event of an increase in option price,
         additional consideration or conversion rate as contemplated by Section
         (f)(1)(iii) hereof, or a combination of shares of the type contemplated
         in Section (f)(3) hereof and then in no event to an amount larger than
         the Conversion Price as adjusted pursuant to Section (f)(1)(iii) or
         (f)(3) hereof.

                 (8)      Share Adjustment.  Whenever the Conversion Price
         payable upon conversion of this Note is adjusted pursuant to Sections
         (f)(1), (f)(3), (f)(4), (f)(7) and (f)(9) hereof, the number of Note
         Shares purchasable upon conversion of this Note shall simultaneously
         be adjusted by multiplying the number of Note Shares initially
         issuable upon conversion of this Note by the Conversion Price in
         effect on the date hereof and dividing the product so obtained by the
         Conversion Price, as adjusted.

                 (9)      Minimum Adjustment.  No adjustment in the Conversion
         Price shall be required unless such adjustment would require an
         increase or decrease of at least five cents ($0.05) in such price;
         provided, however, that any adjustments which by reason of this
         Section (f)(9) are not required to be made shall be carried forward
         and taken into account in any subsequent adjustment required to be
         made hereunder.  All calculations under this Section (f) shall be made
         to the nearest cent or to the nearest one-hundredth of a share, as the
         case may be.  Anything in this Section (f) to the contrary
         notwithstanding, Payor shall be entitled, but shall not be required,
         to make such changes in the Conversion Price, in addition to those
         required by this Section (f), as it, in its sole discretion, shall
         determine to be advisable in order that any dividend or distribution
         in shares of Common Stock, subdivision, reclassification or
         combination of Common Stock, issuance of warrants to purchase Common
         Stock or liquidating dividends referred to hereinabove in this Section
         (f) hereafter made by Payor to the holders of its Common Stock shall
         not result in any tax to the holders of its Common Stock or securities
         convertible into Common Stock.

         (g)     OFFICER'S CERTIFICATE.  Whenever the Conversion Price shall be
adjusted as required by the provisions of the foregoing Section (f), Payor
shall forthwith file in the custody of its Secretary or an Assistant Secretary
at its principal office an officer's certificate showing the adjusted
Conversion Price determined as herein provided, setting forth in reasonable
detail the





                                     - 15 -

<PAGE>   16
facts requiring such adjustment, including a statement of the number of
additional shares of Common Stock, if any, and such other facts as shall be
necessary to show the reason for and the manner of computing such adjustment.
Each such officer's certificate shall be made available at all reasonable times
for inspection by Holder or any holder of a Note executed and delivered
pursuant to Section (a) hereof and Payor shall, forthwith after each such
adjustment, mail a copy by certified mail of such certificate to Holder or any
such holder.

         (h)     REGISTRATION UNDER THE SECURITIES ACT OF 1933.

                 (1)      Piggyback Registration.  The shares of Common Stock
issuable upon conversion of this Note have not been registered under the
Securities Act, the New York Martin Act, as amended, or under the laws of any
other state.  If while any obligation remains outstanding under this Note Payor
proposes to register any security under the Securities Act on any registration
form (otherwise than for the registration of securities to be offered and sold
pursuant to (a) an employee benefit plan, (b) a dividend or interest
reinvestment plan, (c) other similar plans or (d) reclassifications of
securities, mergers, consolidations and acquisitions of assets on Form S-4 or
any successor thereto) prescribed by the Securities and Exchange Commission
(the "Commission") permitting a secondary offering or distribution, not less
than sixty (60) days prior to each such registration, Payor shall give to the
holders of the Note or Note Shares written notice of such proposal which shall
describe in detail the proposed registration and distribution (including those
jurisdictions where registration or qualification under the securities or blue
sky laws is intended) and, upon the written request of any holder of a Note or
Note Shares given within thirty (30) days after the date of any such notice,
proceed to include in such registration such shares of Common Stock as have
been requested by any such holder to be included in such registration.  Any
holder of a Note or Note Shares shall in its request describe briefly the
proposed disposition of such shares of Common Stock.  Payor will in each
instance use its best efforts to cause any Note Shares (the holders of which
shall have so requested registration thereof) to be registered under the
Securities Act and qualified under the securities or blue sky laws of any
jurisdiction requested by a prospective seller, all to the extent necessary to
permit the sale or other disposition thereof (in the manner stated in such
request) by a prospective seller of the securities so registered.  Payor agrees
that any Note Shares so registered shall be offered on terms no less favorable
than those applicable to the shares offered by Payor or other selling
stockholders.

                 If the managing underwriter, who shall be selected by Payor to
manage the distribution of the shares of Common Stock being registered, advises
Payor in writing that, in its opinion, the inclusion of the shares of Common
Stock requested to be included in such registration by a holder of the Note or
Note Shares with the securities being registered by Payor and other prospective
sellers would have a materially adverse affect on the distribution of all such
securities, then (a) Payor shall include in such registration the Note Shares
on a pari passu basis with shares of other selling stockholders or (b) any
holder of a Note or Note Shares may, at its sole option, delay its offering and
sale for a period not to exceed 120 days after the effective date of such
registration as such managing underwriter shall reasonably request.  In the
event of such delay,





                                     - 16 -

<PAGE>   17
Payor shall use its best efforts to effect any registration or qualification
under the Securities Act and the securities or blue sky laws of any
jurisdiction as may be necessary to permit such prospective seller to make its
proposed offering and sale following the end of such period of delay.

                 Holder or the holders of Note Shares who have requested shares
of Common Stock to be included in a registration pursuant to this Section
(h)(1) by acceptance hereof or thereof, agrees to execute an underwriting
agreement with such underwriter that is (i) reasonably satisfactory to such
holder and (ii) in customary form.

                 Nothing in this Section (h)(1) shall be deemed to require
Payor to proceed with any registration of its securities after giving the
notice herein provided.

                 (2)      Demand Registration.  At any time while any
obligation remains outstanding under this Note that Payor is required to file
reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), the holders of the Note and the holders of any
Note Shares may, on up to two (2) separate occasions, require Payor to effect
the registration of the Note Shares pursuant to the provisions of this Section
(h)(2); provided that Note Shares payable as an interest installment shall not
be eligible for registration unless this Note has been converted in whole into
Note Shares.  If the holders of the Note and the holders of any Note Shares
representing a total of more than fifty percent (50%) of the shares of Common
Stock issuable upon the payment of interest on the Note or the conversion of
the Note shall give notice to Payor to the effect that such holders intend to
(i) transfer all or any part of the Note Shares or (ii) convert all or any part
of the Note and transfer all or any part of the Note Shares under such
circumstances that a public distribution (within the meaning of the Securities
Act) of the Note Shares will be involved, and the aggregate number of Note
Shares to be transferred as described in the foregoing clauses (i) and (ii) is
equal to at least twenty-five percent (25%) of the aggregate number of shares
then issuable upon conversion of the Note, then Payor shall, within thirty days
after receipt of such notice, file a registration statement pursuant to the
Securities Act to the end that such shares may be sold under the Securities Act
as promptly as is practicable thereafter and Payor will use its best efforts to
cause any such registration statement to become effective and to keep the
prospectus included therein current for 135 days after the effective date
thereof or until the distribution shall have been completed, whichever first
occurs; provided that such holders shall furnish Payor with appropriate
information (relating to the intention of such holders) in connection therewith
as Payor may reasonably request in writing.  If at the time Payor receives
notice pursuant to this Section (h)(2) it would be impossible or impracticable
to include Payor's most recent fiscal year-end financial statements as the most
recent certified financial statements required to be included therein and
provided that an Event of Default does not then exist, Payor's obligation to
effect a registration pursuant to this Section (h)(2) shall be suspended until
Payor's next fiscal year-end financial statements must be filed with the
Commission in accordance with the Commission's rules.  The managing underwriter
for any offering made pursuant to this Section (h)(2) shall be selected by the
holders of a majority of the Note or Note Shares requiring registration
hereunder, subject to the consent, not unreasonably withheld, of Payor.





                                     - 17 -

<PAGE>   18
                 (3)      Registration and Qualification Procedures. Whenever
Payor is required by the provisions of this Section (h) to use its best efforts
to effect the registration of any of its securities under the Securities Act,
Payor will, as expeditiously as is possible:

                          (i)     prepare and file with the Commission  a
                 registration statement with respect to such securities;

                          (ii)    prepare and file with the Commission such
                 amendments and supplements to such registration statement and
                 the prospectus used in connection therewith as may be
                 necessary to keep such registration statement effective and
                 the prospectus current and to comply with the provisions of
                 the Securities Act with respect to the sale of all securities
                 covered by such registration statement whenever the seller of
                 such securities shall desire to sell the same; provided,
                 however, that Payor shall have no obligation to file any
                 amendment or supplement at its own expense more than nine (9)
                 months after the effective date of such registration
                 statement;

                          (iii)   furnish to each seller such number of copies
                 of preliminary prospectuses and prospectuses and each
                 supplement or amendment thereto and such other documents as
                 each seller may reasonably request in order to facilitate the
                 sale or other disposition of the securities owned by such
                 seller in conformity with (A) the requirements of the
                 Securities Act and (B) the seller's proposed method of
                 distribution;

                          (iv)    register or qualify the securities covered by
                 such registration statement under the securities or blue sky
                 laws of such jurisdictions within the United States as each
                 seller shall reasonably request, and do such other reasonable
                 acts and things as may be required of it to enable each seller
                 to consummate the sale or other disposition in such
                 jurisdictions of the securities owned by such seller;
                 provided, however, that Payor shall not be required to (A)
                 qualify as a foreign corporation or consent to a general and
                 unlimited service of process in any such jurisdictions, (B)
                 qualify as a dealer in securities, or (C) in the case of a
                 registration described in Section (h)(1) hereof, register or
                 qualify at its own expense securities of such seller in any
                 jurisdiction not described in the notice of Payor referred to
                 in the first paragraph of Section (h)(1) hereof, in any case
                 in order to accomplish any of the foregoing;

                          (v)     furnish, at the request of any seller on the
                 date such securities are delivered to the underwriters for
                 sale pursuant to such registration or, if such securities are
                 not being sold through underwriters, on the date the
                 registration statement with respect to such securities becomes
                 effective, (A) an opinion, dated such date, of the counsel
                 representing Payor for the purposes of such registration,
                 addressed to the underwriters, if any, and to the seller
                 making such request,





                                     - 18 -

<PAGE>   19
                 covering such legal matters with respect to the registration
                 in respect of which such opinion is being given as the seller
                 of such securities may reasonably request and are customarily
                 included in such opinions, at such times as such opinions are
                 customarily given, and (B) letters dated, respectively, (1)
                 the effective date of the registration statement and (2) the
                 date such securities are delivered to the underwriters, if
                 any, for sale pursuant to such registration, from a firm of
                 independent certified public accountants of recognized
                 standing selected by Payor, addressed to the underwriters, if
                 any, and to the seller making such request, covering such
                 financial, statistical and accounting matters with respect to
                 the registration statement in respect of which such letters
                 are being given as the seller of such securities may
                 reasonably request and are customarily included in such
                 letters and at such times as such letters are customarily
                 given;

                          (vi)    otherwise use its best efforts to comply with
                 all applicable rules and regulations of the Commission, and
                 make available to its security holders as soon as reasonably
                 practicable, but not later than sixteen (16) months after the
                 effective date of the registration statement, an earnings
                 statement covering a period of at least twelve (12) months 
                 beginning after the effective date of the registration 
                 statement, which earnings statement shall satisfy the 
                 provisions of Section 11(a) of the Securities Act;

                          (vii)   enter into and perform an underwriting
                 agreement with the managing underwriter, if any, selected as
                 provided in Section (h), as the case may be, containing
                 customary terms of offer and sale of the securities, payment
                 provisions, underwriting discounts and commissions,
                 representatives, warranties, covenants, indemnities, terms and
                 conditions; and

                          (viii)  keep each seller advised in writing as to the
                 initiation and progress of any registration under Section
                 (h), as the case may be.

                 (4)      Allocation of Expenses.  If Payor is required by the
provisions of Section (h) to use its best efforts to effect the registration or
qualification under the Securities Act or any state securities or blue sky laws
of any of the Note Shares, Payor will pay all expenses in connection therewith,
including, without limitation, (i) all expenses incident to filing with the
National Association of Securities Dealers, Inc., (ii) registration or listing
fees, (iii) printing expenses, (iv) accounting and legal fees and expenses, (v)
expenses of any special audits incident to or required by any such registration
or qualification, (vi) premiums for insurance in such amount, if any, deemed
appropriate by the managing underwriter, (vii) expenses of complying with the
securities or blue sky laws of any jurisdictions in connection with such
registration or qualification and (viii) stamp and stock transfer taxes;
provided, however, Payor shall not be liable for any discounts or commissions
to any underwriter.






                                     - 19 -
<PAGE>   20
                 (5)      Indemnification.  In connection with any registration
or qualification of securities under Section (h) hereof, Payor hereby
indemnities Holder and the holders of any Note Shares and each underwriter
thereof, including each person, if any, who controls Holder or such stockholder
or underwriter within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, against all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation) arising
out of or based upon (i) any untrue, or alleged untrue, statement of a material
fact contained in any registration statement, preliminary prospectus,
prospectus or notification or offering circular or other similar document (as
amended or supplemented if Payor shall have furnished any amendments or
supplements thereto); (ii) any omission, or alleged omission, to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading; or (iii) any violation by Payor of any
federal, state or common law rule or regulation applicable to Payor and
relating to action or inaction required of Payor in connection with any such
registration, except insofar as such losses, claims, damages, liabilities or
expenses arise out of or are based upon any untrue statement or alleged untrue
statement or omission or alleged omission based solely upon information
furnished in writing to Payor by Holder or any such stockholder or underwriter
expressly for use therein.  Payor and each officer, director and controlling
person of Payor or underwriter within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act are hereby indemnified by
Holder and by the holders of any shares of Common Stock issuable upon the
conversion hereof against all losses, claims, damages, liabilities and expenses
(including reasonable costs of investigation) arising out of or based upon any
untrue, or alleged untrue, statement of a material fact contained in any
registration statement, preliminary prospectus or notification or offering
circular (as amended or supplemented if Payor shall have furnished any
amendments or supplements thereto) or arising out of or are based upon any
omission, or alleged omission, to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
only to the extent that such untrue statement or alleged untrue statement or
omission or alleged omission was based solely upon information furnished in
writing to Payor by Holder or any such stockholder expressly for use therein;
provided, however, that, with respect to any untrue statement or omission or
alleged untrue statement or omission made in any preliminary prospectus, the
indemnity agreement contained in this sentence shall not apply to the extent
that any loss, claim, damage, liability or expense results from the fact that a
current copy of the prospectus was not sent or given to the person asserting
any loss, claim, damage, liability or expense at or prior to the written
confirmation of the sale of the Common Stock concerned to such person if it is
determined that it was the responsibility of Payor or any of its directors,
officers or agents, or any underwriter to provide such Person with a current
copy of the prospectus and such current copy of the prospectus would have cured
the defect giving rise to such loss, claim, damage, liability or expense.

                          Promptly upon receipt by a party indemnified under
this Section (h)(5) of notice of the commencement of any action against such
indemnified party in respect of which indemnity or reimbursement may be sought
against any indemnifying party under this Section (h)(5), such indemnified
party shall notify the indemnifying party in writing of the commencement of
such action, but the failure so to notify the indemnifying party shall not
relieve it of any





                                     - 20 -

<PAGE>   21
liability which it may have to any indemnified party, unless such failure shall
materially adversely affect the defense of such action.  In case notice of
commencement of any such action shall be given to the indemnifying party as
above provided, the indemnifying party shall be entitled to participate in and,
to the extent it may wish, jointly with any other indemnifying party similarly
notified, to assume the defense of such action at its own expense, with counsel
chosen by it and satisfactory to such indemnified party.  The indemnified party
shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
(other than reasonable costs of investigation) shall be paid by the indemnified
party unless (i) the indemnifying party agrees to pay the same, (ii) the
indemnifying party fails to assume the defense of such action with counsel
reasonably satisfactory to the indemnified party, or (iii) the named parties to
any such action (including any impleaded parties) have been advised by such
counsel that representation of such indemnified party and the indemnifying
party by the same counsel would be inappropriate under applicable standards of
professional conduct (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of such indemnified
party).  No indemnifying party shall be liable for any settlement entered into
without its consent.

                          If the indemnification provided in this Section
(h)(5) shall for any reason be unenforceable by an indemnified party, although
otherwise available in accordance with its terms, then each indemnifying party
shall, in lieu of indemnifying such indemnified party, contribute to the amount
paid or payable by such indemnified party as a result of the losses, claims,
damages, liabilities or expenses with respect to which such indemnified party
has claimed indemnification, in such proportion as is appropriate to reflect
the relative fault of the indemnified party on the one hand and the
indemnifying party on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses, as
well as other relevant equitable considerations.  Payor, Holder and each holder
of Note Shares agree that it would not be just and equitable if contribution
pursuant hereto were to be determined by pro rata allocation or by any other
method of allocation which does not take into account such equitable
considerations.  The amount paid or payable by an indemnified party as a result
of losses, claims, damages, liabilities or expenses referred to herein shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending against any
action or claim which is the subject hereof.  No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation.

                          Holder and each holder of Note Shares bearing the
legend required by Section (1) hereof, by acceptance hereof or thereof, as the
case may be, agrees to the indemnification provisions of this Section (h).

         (i)     LISTING.  If any shares of Common Stock required to be
reserved for issue upon the payment of interest hereon or the conversion hereof
require registration with or approval of any governmental authority under any
federal or state law, or listing on any domestic securities exchange or the
NASDAQ system, before such shares may be issued upon such payment or





                                     - 21 -

<PAGE>   22
conversion, as the case may be, Payor will, at its expense and as expeditiously
as possible, use its best efforts to cause such shares to be duly registered or
approved or listed on the relevant domestic securities exchange or system, as
the case may be.

         (j)     CLOSING OF BOOKS.  Payor will at no time close its transfer
books against the transfer of any Note Shares in any manner which interferes
with the timely payment of interest or the conversion of this Note.

         (k)     INVESTMENT REPRESENTATIONS.  Holder, by acceptance hereof, and
with reference to this Note and the shares of Common Stock issuable upon
conversion of this Note, represents and warrants to Payor that: Holder is
acquiring such securities for investment and not with a view to or in
connection with any offering or distribution, and Holder has no present
intention of selling or otherwise disposing of such securities.

         (l)     SECURITIES LEGEND.  This Note as well as, if necessary, the
securities issued for payment of interest on this Note and in the event of the
conversion of this Note for shares of the Common Stock, will bear substantially
the following legend:

                 "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
                 REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
                 THUS MAY NOT BE TRANSFERRED UNLESS REGISTERED UNDER THAT ACT
                 OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE."

         (m)     TRANSFERABILITY. Any shares of Common Stock acquired hereunder
can be sold or disposed of when Payor shall have received a copy of an opinion
of counsel to Holder (which opinion is reasonably acceptable to Payor) which
states that the sale or other disposition thereof may be effected without
registration under the Securities Act in accordance with any rules or
regulations promulgated thereunder then obtaining to which such shares are
subject; provided, that any such sale or disposition is made in accordance with
the terms of the opinion of counsel.

         (n)     DESCRIPTIVE HEADINGS.  The descriptive headings of the several
Sections of this Note are inserted for convenience of reference only and do not
constitute a part of this Note.

         (o)     LEGAL EFFECT. This Note is being executed and delivered within
the State of New York and shall be construed and enforced in accordance with
the laws of said State.

         (p)     DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to Holder, upon any breach or default of Payor
under this Note, shall impair any such right, power or remedy of Payor or shall
be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; and
any waiver of any single breach or default shall not be deemed a waiver of any





                                     - 22 -

<PAGE>   23
other breach or default theretofore or thereafter occurring.  Any waiver,
permit, consent or approval of any kind or character on the part of any such
Holder of any provisions or conditions of this Note must be made in writing and
shall be effective only to the extent specifically set forth in such writing.
All remedies, under either this Note or by law or otherwise afforded to Payor,
shall be cumulative and not alternative.

         (q)     REPLACEMENT.  This Amended and Restated Convertible Promissory
Note constitutes the continuation of indebtedness outstanding under the
Convertible Promissory Note dated November 3, 1992 (the "Existing Note");
provided that nothing herein shall constitute, or shall be deemed to
constitute, a payment, settlement, or novation of the indebtedness evidenced by
the Existing Note or to release or otherwise adversely affect any right of
Holder against Payor.


BY SIGNING THIS PAPER, PAYOR GIVES UP ITS RIGHT TO NOTICE AND COURT TRIAL.  IF
PAYOR DOES NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST PAYOR WITHOUT
PAYOR'S PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM
PAYOR REGARDLESS OF ANY CLAIMS PAYOR MAY HAVE AGAINST ANY HOLDER, WHETHER FOR
FAILURE TO COMPLY WITH THE TERMS OF THIS NOTE OR ANY OTHER CAUSE.


                                      DECORA INDUSTRIES, INC.



                                      By:
                                         --------------------------------------
                                      Its:
                                         --------------------------------------



DO NOT DESTROY THIS ORIGINAL NOTE: When paid, this original Note must be
surrendered to Payor for cancellation and retention.





                                     - 23 -

<PAGE>   24
                                 PURCHASE FORM


Dated:              , 199
      --------------     --

         The undersigned hereby irrevocably elects to convert the within Note
to the extent of purchasing _____ shares of Common Stock.


                     INSTRUCTIONS FOR REGISTRATION OF STOCK


Name
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Address
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                  (Please typewrite or print in block letters)

Signature
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