Document:

EXHIBIT 4.6

                               COMDIAL CORPORATION

         PRIVATE PLACEMENT SUBSCRIPTION AGREEMENT (this "Subscription
Agreement") made as of this __ day of September, 2002 between Comdial
Corporation, a corporation organized under the laws of the State of Delaware
with offices at 106 Cattlemen Road, Sarasota, Florida 34232 (the "Company"), and
Winfield Capital Corp., a New York corporation with offices at 237 Mamaroneck
Avenue, White Plains, New York 10605 (the "Subscriber").

         WHEREAS, the Company is offering to the Subscriber in a private
placement (this "Offering") up to $2,000,000 principal amount of 12% senior
subordinated secured convertible promissory notes substantially in the form
attached as Appendix A hereto (the "Senior Notes") and two-year warrants
substantially in the form attached as Appendix B hereto (the "Senior Note
Warrants") to purchase up to 5,500,000 shares of common stock at an exercise
price of $.01 per share (i.e. 275,000 Senior Note Warrants for each $100,000 of
Senior Notes) and the Subscriber desires to acquire the principal amount of
Senior Notes set forth on the signature page hereof; and

         WHEREAS, the Company is concurrently offering to accredited investors
in a private placement (the "Concurrent Placement") a minimum of 100 (the
"Minimum Offering") and a maximum of 140 (the "Maximum Offering") units
("Units") on the terms and conditions set forth herein and in the related
Confidential Offering Memorandum dated September 11, 2002 (together with all the
Exhibits and supplements thereto, the "Memorandum"); provided, however, that the
Minimum Offering and Maximum Offering shall be reduced to the extent of the
Senior Notes purchased in this Offering; and

         WHEREAS, Commonwealth Associates, L.P. is acting as the placement agent
for this Offering and the Concurrent Placement (the "Placement Agent"); and

         WHEREAS, the Senior Notes shall be (i) secured by a junior lien on the
Company's assets pursuant to the terms of a security agreement in the form
attached as Appendix C hereto (the "Security Agreement") and (ii) subject to one
or more subordination agreements with the Company's senior lenders in the forms
to be delivered (collectively, the "Subordination Agreement"); and

         WHEREAS, each Unit in the Concurrent Placement shall consist of: (i)
$100,000 principal amount of 7% senior subordinated secured convertible
promissory notes substantially in the form attached as Exhibit (ii) to the
Memorandum (the "Notes"), which Notes shall be subordinated to the Senior Notes
and (ii) two-year warrants (the "Warrants") substantially in the forms attached
as Exhibit (iii) to the Memorandum to purchase 500,000 shares of Common Stock at
an exercise price of $.01 per share; and

         WHEREAS, Warrants to purchase 100,000 shares included in each Unit
shall be subject to forfeiture in the event the Notes are repaid in full within
18-months after the initial closing of the Concurrent Placement (the "Initial
Closing"); and

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         WHEREAS, up to 40 Units of the Concurrent Placement may be purchased by
investors upon cancellation of outstanding 7% senior subordinated secured
promissory notes issued by the Company in June, July and August 2002; and

         WHEREAS, the Company can force conversion of the Notes into shares of
the Company's common stock at the conversion rate of $.33 per share (subject to
adjustment) on the terms and subject to the conditions set forth in the Notes
(the "Automatic Conversion Shares"); and

         WHEREAS, the shares of common stock issuable upon exercise of the
Senior Note Warrants and the Warrants (collectively, the "Warrant Shares") and
the Automatic Conversion Shares are entitled to registration rights on the terms
set forth in this Subscription Agreement; and

         WHEREAS, the Subscriber is delivering simultaneously herewith a
completed confidential investor questionnaire (the "Questionnaire").

         NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto do hereby agree as follows:

         I.    SUBSCRIPTION FOR SECURITIES AND REPRESENTATIONS BY AND COVENANTS
               OF SUBSCRIBER

         1.1 SUBSCRIPTION FOR SECURITIES. Subject to the terms and conditions
hereinafter set forth, the Subscriber hereby subscribes for and agrees to
purchase from the Company the principal amount of Senior Notes set forth on the
signature page and the applicable number of Senior Note Warrants (collectively,
the "Note Securities") and the Company agrees to sell the Note Securities to the
Subscriber for a purchase price equal to the face amount of the Senior Notes.
The purchase price is payable by certified or bank check made payable to
"American Stock Transfer & Trust Company as escrow agent for Comdial
Corporation" or by wire transfer of funds, contemporaneously with the execution
and delivery of this Subscription Agreement. American Stock Transfer & Trust
Company (the "Escrow Agent") shall act as such in accordance with the terms and
conditions of an escrow agreement to be entered into among the Placement Agent,
the Company and the Escrow Agent.

         1.2 RELIANCE ON EXEMPTIONS. The Subscriber acknowledges that this
Offering has not been reviewed by the United States Securities and Exchange
Commission (the "SEC") or any state agency because of the Company's
representations that this is intended to be a nonpublic offering exempt from the
registration requirements of the Securities Act of 1933, as amended (the "1933
Act") and state securities laws. The Subscriber understands that the Company is
relying in part upon the truth and accuracy of, and the Subscriber's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of the Subscriber set forth herein and in the Questionnaire in
order to determine the availability of such exemptions and the eligibility of
the Subscriber to acquire the Note Securities.

         1.3 INVESTMENT PURPOSE. The Subscriber represents that the Note
Securities are being purchased for its own account, for investment purposes only
and not for distribution or resale to others in contravention of the
registration requirements of the 1933 Act. The Subscriber

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agrees that it will not sell or otherwise transfer the Note Securities, the
Warrant Shares or, if applicable, the Automatic Conversion Shares (collectively,
the "Securities") unless they are registered under the 1933 Act or unless an
exemption from such registration is available.

         1.4 ACCREDITED INVESTOR. The Subscriber represents and warrants that it
is an "accredited investor" as such term is defined in Rule 501 of Regulation D
promulgated under the 1933 Act, as indicated by its responses to the
Questionnaire, and that it is able to bear the economic risk of any investment
in the Note Securities. The Subscriber further represents and warrants that the
information furnished in the Questionnaire is accurate and complete in all
material respects.

         1.5 RISK OF INVESTMENT. The Subscriber recognizes that the purchase of
the Note Securities involves a high degree of risk in that: (i) an investment in
the Company is highly speculative and only investors who can afford the loss of
their entire investment should consider investing in the Company and the Note
Securities; (ii) transferability of the Note Securities is limited; and (iii)
the Company may require substantial additional funds to operate its business and
there can be no assurance that the Maximum Offering will be completed or that
any other funds will be available to the Company, in addition to all of the
other risks set forth in the Company's SEC Documents (as defined in Section 2.5
hereof).

         1.6 INFORMATION. The Subscriber acknowledges that the Company has made
available for its review: (a) the Company's Annual Report on Form 10-K for the
year ended December 31, 2001, (b) the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 2002, (c) the Company's Proxy Statement
for the annual meeting of shareholders held on May 17, 2002, (d) the Company's
Proxy Statement for the special meeting of shareholders to be held on August 26,
2002, (e) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 2002, and (f) the Company's Current Reports on Form 8-K filed
with the SEC on April 10, 2002, July 5, 2002, July 24, 2002, August 5, 2002,
August 7, 2002, August 27, 2002 and September 6, 2002 and hereby represents
that: (i) the Subscriber has been furnished by the Company during the course of
this transaction with all information regarding the Company which it has
requested; and (ii) that the Subscriber has been afforded the opportunity to ask
questions of and receive answers from duly authorized officers of the Company
concerning the terms and conditions of this Offering, and any additional
information which it has requested, if any.

         1.7 NO REPRESENTATIONS. The Subscriber hereby represents that, except
as expressly set forth in (a) this Subscription Agreement, (b) the Memorandum,
(c) the Senior Notes, (d) the Senior Note Warrants, (e) the Security Agreement,
(f) the Subordination Agreement, and (g) all exhibits, schedules and appendices
which are part of the aforementioned documents, (collectively, the "Offering
Documents"), no representations or warranties have been made to the Subscriber
by the Company or any agent, employee or affiliate of the Company, including the
Placement Agent, and in entering into this transaction the Subscriber is not
relying on any information other than that contained in the Offering Documents,
the SEC Documents and the results of independent investigation by the
Subscriber.

         1.8 TAX CONSEQUENCES. The Subscriber acknowledges that this Offering
may involve tax consequences (including original issuance discount issues) and
that the contents of the Offering Documents do not contain tax advice or
information. The Subscriber acknowledges

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that he must retain his own professional advisors to evaluate the tax and other
consequences of an investment in the Note Securities.

         1.9 TRANSFER OR RESALE. The Subscriber understands that Rule 144 (the
"Rule") promulgated under the 1933 Act requires, among other conditions, a
one-year holding period prior to the resale (in limited amounts) of securities
acquired in a non-public offering without having to satisfy the registration
requirements under the 1933 Act. The Subscriber understands and hereby
acknowledges that the Company is under no obligation to register the Note
Securities under the 1933 Act, with the exception of certain registration rights
covering the resale of the Warrant Shares and Automatic Conversion Shares set
forth in Article V hereof.

         1.10 LEGENDS. The Subscriber understands that the certificates or other
instrument representing the Securities, until such time as they have been
registered under the 1933 Act, shall bear a restrictive legend in substantially
the following form (and a stop-transfer order may be placed against transfer of
such certificates or other instruments):

         THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
         REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
         APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
         OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
         ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
         SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
         APPLICABLE STATE SECURITIES LAWS, OR (B) AN OPINION OF
         COUNSEL, IN A REASONABLY ACCEPTABLE FORM, THAT REGISTRATION
         IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES
         LAWS, OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
         ACT.

The legend set forth above shall be removed and the Company shall issue a
certificate or other instrument without such legend to the holder of the
Securities upon which it is stamped, if (a) such Securities are being sold by
the holder pursuant to an effective registration statement under the 1933 Act,
(b) such holder delivers to the Company an opinion of counsel, in a reasonably
satisfactory and acceptable form to the Company directed to the Company or
expressly providing that the Company may rely thereon, that a disposition of the
Securities is being made pursuant to an exemption from such registration, or (c)
such holder provides the Company with reasonable assurance that a disposition of
the Securities will be made pursuant to the Rule.

         1.11 NO GENERAL SOLICITATION. The Subscriber represents that the
Subscriber was not induced to invest by any of the following: (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over the news or radio; and
(ii) any seminar or meeting whose attendees were invited by any general
solicitation or advertising.

         1.12 VALIDITY; ENFORCEMENT. The Subscriber represents and warrants
that: (a) it is authorized and otherwise duly qualified to purchase and hold the
Note Securities; and (b) that this Subscription Agreement has been duly and
validly authorized, executed and delivered and constitutes the legal, binding
and enforceable obligation of the undersigned.

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         1.13 ADDRESS. The Subscriber hereby represents that the address of
Subscriber furnished at the end of this Subscription Agreement is the
Subscriber's principal business address.

         1.14 NO HEDGING TRANSACTIONS. The Subscriber hereby agrees not to
engage in any Hedging Transaction until such time as the Warrant Shares have
been registered for resale under the 1933 Act or may otherwise be sold in the
public market without an effective registration statement under the 1933 Act.
"Hedging Transaction" means any short sale (whether or not against the box) or
any purchase, sale or grant of any right (including, without limitation, any put
or call option) with respect to any security (other than a broad-based market
basket or index) that includes, relates to or derives any significant part of
its value from the Company's Common Stock or any rights, warrants, options or
other securities that are convertible into, or exercisable or exchangeable for,
Common Stock.

         1.15 PLACEMENT AGENT. The Subscriber agrees that neither the Placement
Agent or any of its directors, officers, employees or agents shall be liable to
the Subscriber for any action taken or omitted to be taken by it in connection
therewith, except for willful misconduct or gross negligence.

         1.16 NASD MEMBER. The Subscriber acknowledges that if it is a
Registered Representative of a NASD member firm, the Subscriber must give such
firm notice required by the NASD's Rules of Fair Practice, receipt of which must
be acknowledged by such firm on the signature page hereof.

         1.17 SUBORDINATION AGREEMENTS. The Subscriber agrees to enter into a
Subordination Agreement with any lender of Senior Indebtedness (as defined in
the Security Agreement) containing substantially the same terms as agreed to by
the holders of the Notes sold in the Concurrent Placement.

         II.   REPRESENTATIONS BY THE COMPANY

The Company represents and warrants to the Subscriber, except as set forth in
the disclosure schedules attached hereto:

         2.1 SECURITIES LAW COMPLIANCE. The offer, offer for sale, and sale of
the Note Securities have not been registered under the 1933 Act. The Note
Securities are to be offered, offered for sale and sold in reliance upon the
exemptions from the registration requirements of Section 4 of the 1933 Act. The
Company will use its best efforts to conduct this Offering in compliance with
the requirements of Regulation D of the General Rules and Regulations under the
1933 Act and applicable state "blue sky" laws, and the Company will file all
appropriate notices of offering with the SEC. The Company has prepared the
Offering Documents. The Offering Documents will not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements therein, in light of the circumstances in which they were made,
not misleading. If at any time prior to the completion of this Offering or other
termination of this Subscription Agreement any event shall occur as a result of
which it might become necessary to amend or supplement the Offering Documents so
that they do not include any untrue statement of any material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances then

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existing, not misleading, the Company will promptly notify the Subscriber and
will supply the Subscriber with amendments or supplements correcting such
statement or omission.

         2.2 ORGANIZATION AND QUALIFICATION. The Company is duly organized and
validly existing in good standing under the laws of the jurisdiction in which it
is organized, and has the requisite power and authorization to own its
properties and to carry on its business as now being conducted except as may be
provided by the Company's agreements with Bank of America. The Company is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect. As used in this Subscription Agreement, "Material
Adverse Effect" means any material adverse effect on the business, properties,
assets, operations, results of operations, financial condition or prospects of
the Company, or on the transactions contemplated hereby, or by the other
Offering Documents or the agreements and instruments to be entered into in
connection herewith or therewith, or on the authority or ability of the Company
to perform its obligations under the Offering Documents. The Company does not
have any operating subsidiaries other than as set forth in Schedule 2.4 to this
Agreement and all of the non-operating subsidiaries are wholly-owned by the
Company.

         2.3 CAPITALIZATION. The authorized, issued and outstanding capital
stock of the Company prior to the consummation of the transactions contemplated
hereby is set forth in Schedule 2.3 to this Subscription Agreement. All of such
outstanding shares have been and are, or upon issuance will be duly authorized,
validly issued, fully paid and non-assessable. Except as disclosed in Schedule
2.3, (i) no shares of the Company's capital stock are subject to preemptive
rights under Delaware law or any other similar rights or any liens or
encumbrances suffered or permitted by the Company; (ii) there are no outstanding
debt securities issued by the Company; (iii) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, any shares of capital stock of the Company, or contracts, commitments,
understandings or arrangements by which the Company is or may become bound to
issue additional shares of capital stock of the Company or options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for, any
shares of capital stock of the Company; (iv) there are no agreements or
arrangements under which the Company is obligated to register the sale of any of
their securities under the 1933 Act; (v) there are no outstanding securities of
the Company that contain any redemption or similar provisions, and there are no
contracts, commitments, understandings or arrangements by which the Company is
or may become bound to redeem a security of the Company; (vi) there are no
securities or instruments containing anti-dilution or similar provisions that
will be triggered by the issuance of the Securities as described in the Offering
Documents that shall not have been waived prior to the Initial Closing; and
(vii) the Company does not have any stock appreciation rights or "phantom stock"
plans or agreements or any similar plan or agreement. To the knowledge of the
Company, all prior sales of securities of the Company were either registered
under the 1933 Act and applicable state securities laws or exempt from such
registration, and, to the knowledge of the Company, no security holder has any
rescission rights with respect thereto.

         2.4 SUBSIDIARIES AND INVESTMENTS. Other than as set forth in Schedule
2.4 to this Subscription Agreement, the Company has no subsidiaries, and the
Company does not own,

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directly or indirectly, any capital stock or other equity ownership or
proprietary interests in any other corporation, association, trust, partnership,
joint venture or other entity.

         2.5 SEC DOCUMENTS; FINANCIAL STATEMENTS. Since December 31, 2001, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting requirements
of the Securities Exchange Act of 1934 (the "Exchange Act") (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein being hereinafter referred to as the "SEC Documents"). The
Company has made available to the Subscriber or its representatives copies of
the SEC Documents. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Exchange Act and the rules
and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (a) as may be
otherwise indicated in such financial statements or the notes thereto, or (b) in
the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments that would not be material). The Company has no reason to believe
its independent auditors will withhold their consent to the inclusion of their
audit opinion concerning the Company's financial statements which are to be
included in any Registration Statement.

         2.6 ABSENCE OF CHANGES. Since June 30, 2002, other than as set forth in
the SEC Documents and Schedule 2.6 to this Subscription Agreement, the Company
has not (i) incurred any debts, obligations or liabilities, absolute, accrued,
contingent or otherwise, whether due or to become due, except current
liabilities incurred in the usual and ordinary course of business and consistent
with past practices, having individually or in the aggregate a Material Adverse
Effect, (ii) made or suffered any changes in its contingent obligations by way
of guaranty, endorsement (other than the endorsement of checks for deposit in
the usual and ordinary course of business), indemnity, warranty or otherwise,
(iii) discharged or satisfied any liens or paid any obligation or liability
other than current liabilities shown on the balance sheet dated as of June 30,
2002, and current liabilities incurred since the date of the balance sheet dated
as of June 30, 2002, in each case in the usual and ordinary course of business
and consistent with past practices, (iv) mortgaged, pledged or subjected to lien
any of its assets, tangible or intangible, (v) sold, transferred or leased any
of its assets except in the usual and ordinary course of business and consistent
with past practices, (vi) cancelled or compromised any debt or claim, or waived
or released any right, of material value, (vii) suffered any physical damage,
destruction or loss (whether or not covered by insurance) adversely affecting
the properties, business or prospects of the Company, (viii) entered into any
transaction other than in the usual and ordinary course of business except for
this Subscription Agreement and the other Offering Documents and the related
agreements referred to herein and therein, (ix) encountered

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any labor difficulties or labor union organizing activities, (x) made or granted
any wage or salary increase or entered into any employment agreement, (xi)
issued or sold any shares of capital stock or other securities or granted any
options with respect thereto, or modified any equity security of the Company,
(xii) declared or paid any dividends on or made any other distributions with
respect to, or purchased or redeemed, any of its outstanding equity securities,
(xiii) suffered or experienced any change in, or condition affecting, its
condition (financial or otherwise), properties, assets, liabilities, business
operations, results of operations or prospects other than changes, events or
conditions in the usual and ordinary course of its business and consistent with
past practices, having (either by itself or in conjunction with all such other
changes, events and conditions) a Material Adverse Effect or (xiv) made any
change in the accounting principles, methods or practices followed by it or
depreciation or amortization policies or rates theretofore adopted.

         2.7 TITLE. Except as set forth in or contemplated by Schedule 2.7 to
this Subscription Agreement, the Company has good and marketable title to all
properties and assets owned by it, free and clear of all liens, charges,
encumbrances or restrictions, except such as are not significant or important in
relation to the Company's business; all of the material leases and subleases
under which the Company is the lessor or sublessor of properties or assets or
under which the Company holds properties or assets as lessee or sublessee are in
full force and effect, and the Company is not in default in any material respect
with respect to any of the terms or provisions of any of such leases or
subleases, and no material claim has been asserted by anyone adverse to rights
of the Company as lessor, sublessor, lessee or sublessee under any of the leases
or subleases mentioned above, or affecting or questioning the right of the
Company to continued possession of the leased or subleased premises or assets
under any such lease or sublease. The Company owns or leases all such properties
as are necessary to its operations as described in the Offering Documents.

         2.8 PROPRIETARY RIGHTS. Except as set forth on Schedule 2.8, the
Company owns, or is duly licensed to use or possess, or possesses exclusive and
enforceable rights to use all patents, patent applications, trademarks, service
marks, copyrights, trade secrets, processes, formulations, technology or
know-how used in the conduct of its business (the "Proprietary Rights"). Except
as set forth on Schedule 2.8 to this Subscription Agreement, the Company has not
received any notice of any claims, nor does it have any knowledge of any
threatened claims, and knows of no facts which would form the basis of any
claim, asserted by any person to the effect that the sale or use of any product
or process now used or offered by the Company or proposed to be used or offered
by the Company infringes on any patents or infringes upon the use of any such
Proprietary Rights of another person and, to the best of the Company's
knowledge, no others have infringed the Company's Proprietary Rights.

         2.9 LITIGATION. Except as set forth in or contemplated by Schedule 2.9
to this Subscription Agreement, there is no material action, suit,
investigation, customer complaint, claim or proceeding at law or in equity by or
before any arbitrator, court, governmental instrumentality or agency,
self-regulatory organization or body or public board now pending or, to the
knowledge of the Company, threatened against the Company of any of the Company's
officers or directors in their capacities as such (or basis therefor known to
the Company), the adverse outcome of which would have a Material Adverse Effect.
Except as set forth on Schedule 2.9, the Company is not subject to any judgment,
order, writ, injunction or decree of

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any Federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign that have a
Material Adverse Effect.

         2.10 NON-DEFAULTS; NON-CONTRAVENTION. Except as set forth in or
contemplated by Schedule 2.10 to this Subscription Agreement, the Company is not
in violation of or default under, nor will the execution and delivery of this
Subscription Agreement or any of the other Offering Documents or consummation of
the transactions contemplated herein or therein result in a violation of or
constitute a default in the performance or observance of any obligation under:
(i) its Certificate of Incorporation, or its By-laws; or (ii) any indenture,
mortgage, contract, material purchase order or other agreement or instrument to
which the Company is a party or by which it or its property is bound, where such
violation or default would have a Material Adverse Effect; or (iii) any material
order, writ, injunction or decree of any court of any Federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign (including, to the Company's knowledge,
federal and state securities laws and regulations ),where such violation or
default would have a Material Adverse Effect, and there exists no condition,
event or act that constitutes a default under any of the foregoing, which in
either case would have a Material Adverse Effect.

         2.11 TAXES. The Company has filed all tax returns that are required to
be filed by it or otherwise met its disclosure obligations to the relevant
agencies and all such returns are true and correct. The Company has paid or
adequately provided for all tax liabilities of the Company as reflected on such
returns or pursuant to any assessments received by it or that it is obligated to
withhold from amounts owing to any employee, creditor or third party. The
Company has properly accrued all taxes required to be accrued by GAAP
consistently applied. The income tax returns of the Company have not been
audited by any government or regulatory authorities with in the last five years.
The Company has not waived any statute of limitations with respect to taxes or
agreed to any extension of time with respect to any tax assessment or
deficiency.

         2.12 COMPLIANCE WITH LAWS; LICENSES, ETC. Except as set forth on
Schedule 2.12, the Company has not received notice of any violation of or
noncompliance with any laws, ordinances, regulations and orders applicable to
its business that would have a Material Adverse Effect and that has not been
cured. The Company has all material licenses and permits and other governmental
certificates, authorizations and permits and approvals (collectively,
"Licenses") required by every government or regulatory body for the operation of
its business as currently conducted and the use of its properties. The Licenses
are in full force and effect and to the Company's knowledge no violations
currently exist in respect of any License and no proceeding is pending or
threatened to revoke or limit any thereof.

         2.13 AUTHORIZATION; ENFORCEMENT; VALIDITY. The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Subscription Agreement and the other Offering Documents,
to file and perform its obligations under the Offering Documents, and to issue
the Securities in accordance with the terms of the Offering Documents. The
execution and delivery of the Offering Documents by the Company and the
consummation by the Company of the transactions contemplated by the Offering
Documents, including without limitation the issuance of the Securities, have
been duly authorized by the Company's board of directors and no further consent
or authorization is required by the

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Company, its board of directors or its stockholders. This Section 2.13 is
subject to the exceptions set forth on Schedule 2.13.

         2.14 AUTHORIZATION OF SECURITIES. The issuance, sale and delivery of
the Senior Notes and the Senior Note Warrants have been duly authorized by all
requisite corporate action of the Company. When so issued, sold and delivered in
accordance with the Offering Documents for the consideration set forth therein,
the Senior Notes and the Senior Note Warrants will be duly executed, issued and
delivered and will constitute valid and legal obligations of the Company
enforceable in accordance with their respective terms and, in each case, will
not be subject to preemptive or any other similar rights of the stockholders of
the Company or others which rights shall not have been waived prior to the
Initial Closing. Prior to the Initial Closing, the Warrant Shares will be duly
reserved for issuance upon exercise of all or any of the Senior Note Warrants
and when so issued, sold, paid for and delivered for the consideration set forth
in the Offering Documents, the Warrant Shares will be validly issued and
outstanding, fully paid and nonassessable, and not subject to preemptive or any
other similar rights of the stockholders of the Company or others which rights
shall not have been waived prior to the Initial Closing. This Section 2.14 is
subject to the exceptions set forth on Schedule 2.14.

         2.15 EXEMPTION FROM REGISTRATION. Assuming the accuracy of the
information provided by the respective Subscribers in the Subscription
Agreements, the offer and sale of the Note Securities pursuant to the terms of
this Subscription Agreement are exempt from the registration requirements of the
1933 Act and the rules and regulations promulgated thereunder. To the Company's
knowledge, the Company is not disqualified from the exemption under Regulation D
by virtue of the disqualifications contained in Rule 505(b)(2)(iii) or Rule 507
promulgated thereunder.

         2.16 REGISTRATION RIGHTS. Except as set forth in Schedule 2.16 to this
Subscription Agreement, no person has any right to cause the Company to effect
registration under the 1933 Act of any securities of the Company.

         2.17 BROKERS. Neither the Company nor any of its officers, directors,
employees or stockholders has employed any broker or finder in connection with
the transactions contemplated by this Subscription Agreement.

         2.18 TITLE TO SECURITIES. When the Note Securities have been duly
delivered to the Subscriber and payment shall have been made therefor, the
Subscriber shall receive from the Company good and marketable title to such
securities free and clear of all liens, encumbrances and claims whatsoever (with
the exception of claims arising through the acts or omissions of the purchasers
and except as arising from applicable federal and state securities laws), and
the Company shall have paid all taxes, if any, in respect of the original
issuance thereof.

         2.19 TAKEOVER PROTECTIONS; RIGHTS AGREEMENT. The Company and the board
of directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Certificate of Incorporation or the laws of
the state of its incorporation which is or could become applicable to the
Subscriber as a result of the transactions contemplated by this Subscription
Agreement, including without limitation, the Company's issuance of the
Securities and the Subscriber's ownership of the

                                       10

<PAGE>

Securities. The Company has not adopted a shareholder rights plan or similar
arrangement relating to accumulations of beneficial ownership of Common Stock or
a change in control of the Company. Notwithstanding the forgoing, the Company's
certificate of incorporation allows for the issuance of blank check preferred
stock without the vote of its stockholders.

         2.20 RIGHT OF FIRST REFUSAL. No person, firm or other business entity
is a party to any agreement, contract or understanding, written or oral
entitling such party to a right of first refusal with respect to offerings by
the Company other than Commonwealth Associates, L.P.

         2.21 CONSENTS. Except as contemplated by this Subscription Agreement,
to the Company's knowledge, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency or any regulatory or self-regulatory agency in order for it
to execute, deliver or perform any of its obligations under or contemplated by
the Offering Documents. Except as otherwise provided in the Offering Documents,
all consents, authorizations, orders, filings and registrations that the Company
is required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof. The Company is unaware of any facts or
circumstances that might prevent the Company from obtaining or effecting any of
the foregoing.

         2.22 NO GENERAL SOLICITATION. None of the Company, any of its
affiliates, and, to the Company's knowledge, any person acting on its behalf,
has engaged in any form of general solicitation or general advertising (within
the meaning of Regulation D under the 1933 Act) in connection with the offer or
sale of the Securities.

         2.23 NO INTEGRATED OFFERING. None of the Company, any of its
affiliates, and any person acting on its behalf has, directly or indirectly,
made any offers or sales of any security or solicited any offers to buy any
security, under circumstances that would require registration of the Securities
under the 1933 Act or cause this Offering or the Concurrent Placement to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including without limitation,
under the rules and regulations of any exchange or automated quotation system on
which any of the securities of the Company are listed or designated, if such
integration would adversely impact the Company's ability to complete this
Offering or the Concurrent Placement or any subsequent registration of the
Securities. None of the Company, its affiliates and any person acting on its
behalf have taken any action or steps referred to in the preceding sentence that
would require registration of any of the Securities under the 1933 Act or cause
this Offering or the Concurrent Placement to be integrated with other offerings.

         2.24 FOREIGN CORRUPT PRACTICES. Neither the Company nor any director,
officer, agent, employee or other person acting on behalf of the Company has, in
the course of its actions for, or on behalf of, the Company, (i) used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds, (ii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended, or (iii) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
any foreign or domestic government official or employee.

                                       11

<PAGE>

         2.25 BOARD OBSERVER. The Company covenants and agrees that the
Subscriber shall have the right to have an observer present at all meetings of
the board of directors until such time as the Senior Notes have been repaid in
full or converted into Automatic Conversion Shares. Such observer shall receive
with respect to all meetings the same notice, expense reimbursement and
materials as the members of the board. Attendance by such observer may be in
person or by telephone

         III.  TERMS OF SUBSCRIPTION

         3.1 OFFERING PERIOD. The offering period for this Offering and the
Concurrent Placement will continue until the earlier of (a) 11:59 PM Eastern
time on September 27, 2002 or (b) the sale of the Maximum Offering (the
"Termination Date"). Provided the Minimum Offering shall have been subscribed
for on or prior to the Termination Date, funds representing the sale thereof
shall have cleared, and all conditions to closing in the Agency Agreement have
been satisfied or waived and neither the Company nor the Placement Agent have
notified the other that they do not intend to effect the closing of the Minimum
Offering. The Initial Closing shall take place at the offices of counsel to the
Placement Agent, Loeb & Loeb, 345 Park Avenue, New York, New York 10154, or such
other location as mutually agreed to by the Company and the Placement Agent
within three business days thereafter. At the Initial Closing, payment for the
Note Securities issued and sold by the Company shall be made against delivery of
the Senior Notes and the Senior Note Warrants. Subsequent closings (each of
which shall be deemed a "Closing" hereunder) shall take place at any time prior
to the Termination Date as may be mutually agreed to by the Company and the
Placement Agent. The date of the last closing of this Offering and the
Concurrent Placement is hereinafter referred to as the "Final Closing" and the
date of any Closing hereunder is hereinafter referred to as a "Closing Date."

         3.2 EXPENSES. Simultaneously with payment for and delivery of the Note
Securities at each Closing, the Company shall pay to the Placement Agent a cash
fee equal to 7% of the gross proceeds of the Note Securities sold and shall
issue to the Placement Agent and its designees five-year warrants (the "Agent's
Warrants") to purchase that number of shares of Common Stock as equals 10% of
the Warrant Shares issuable upon exercise of the Warrants sold in the Offering
at an exercise price of $.01 per share. The Company shall also reimburse the
Placement Agent for actual out-of-pocket expenses incurred in connection with
this Offering, including, without limitation, the reasonable fees and expenses
of its counsel (Loeb & Loeb LLP), due diligence investigation expenses, travel
and mailing expenses. The Company shall also pay all expenses in connection with
the qualification of the Securities under the blue sky laws of the states which
the Placement Agent shall designate, including legal fees, filing fees and
disbursements of Placement Agent's counsel in connection with such blue sky
matters.

         3.3 ESCROW. Pending the sale of the Note Securities, all funds paid
hereunder shall be deposited by the Company in escrow with the Escrow Agent. If
the Company shall not have obtained the Minimum Offering on or before the
Termination Date, then this subscription shall be void and all funds paid
hereunder by the Subscriber, without interest, shall be promptly returned to the
Subscriber, subject to Section 3.5 hereof.

         3.4 CERTIFICATES. The Subscriber hereby authorizes and directs the
Company, upon each Closing in the Offering, to deliver the Notes and Warrants to
be issued to such Subscriber pursuant to this Subscription Agreement either (a)
to the Subscriber's address

                                       12

<PAGE>

indicated in the Questionnaire, or (b) directly to the Subscriber's account
maintained with the Placement Agent, if any.

         3.5 RETURN OF FUNDS. The Subscriber hereby authorizes and directs the
Company to return any funds for unaccepted subscriptions to the same account
from which the funds were drawn, including any customer account maintained with
the Placement Agent.

         IV.   CONDITIONS TO CLOSING. The Subscriber's obligation to purchase
               the Note Securities is subject to the satisfaction of the
               following conditions, any one or more of which may be waived or
               modified by the Subscribers.

         4.1 BANK RESTRUCTURING. ComVest Venture Partners, L.P. or the Company,
as its assignee, shall have completed the acquisition of the debt and shares of
preferred stock held by Bank of America, N.A (collectively, the "BOA Debt") and
the BOA Debt shall have been restructured on terms acceptable to the Company and
the Placement Agent.

         4.2 NEW PROCEEDS. The Company (or the Escrow Agent, as applicable) will
have received and closed on at least $10,000,000 in the aggregate from this
Offering, the Concurrent Placement, a new senior credit facility and amounts
available under letters of credit posted on the Company's behalf by Bank of
America, N.A. or a new senior lender, if any.

         4.3 MATERIAL ADVERSE EVENT. There shall not have occurred, at any time
prior to the closing of this subscription (i) any domestic or international
event, act or occurrence that has materially disrupted, or in the Subscriber's
opinion will in the immediate future materially disrupt, the securities markets;
(ii) a general suspension of, or a general limitation on prices for, trading in
securities on the New York Stock Exchange or the Nasdaq - Amex Stock Exchange;
(iii) any outbreak of major hostilities or other national or international
calamity; (iv) any banking moratorium declared by a state or federal authority;
(v) any moratorium declared in foreign exchange trading by major international
banks or other persons; (vi) any material interruption in the mail service or
other means of communication within the United States; (vii) any material
adverse change in the business, properties, assets, results of operations, or
financial condition of the Company; or (viii) any material adverse change in the
market for securities in general or in political, financial, or economic
conditions.

         4.4 INCREASE IN AUTHORIZED CAPITAL STOCK. The Company shall have
obtained approval from the Board and the written consent of holders of a
majority of the Company's outstanding Common Stock of an increase in the number
of authorized shares of Common Stock to not less than 500,000,000.

         V.    REGISTRATION RIGHTS

         5.1 AUTOMATIC REGISTRATION. The Company hereby agrees with the holders
of the Securities or their transferees (other than a transferee who acquires
shares pursuant to Rule 144 or an effective registration statement)
(collectively, the "Holders") that no later than four months following the date
of the Initial Closing, the Company shall prepare and file a registration
statement under the 1933 Act with the SEC covering the resale of the Warrant
Shares and, if applicable, the Automatic Conversion Shares (collectively, the
"Reserved Shares"), and

                                       13

<PAGE>

the Company will use its reasonable best efforts to cause such registration to
become effective within three months thereafter. In the event that the Company's
registration statement has not been declared effective by the SEC within seven
months following the date of the Initial Closing or if the registration
statement has been suspended beyond 60 days in any one instance or a total of 90
days in any 365-day period, the Company shall pay to the Holders a cash fee
equal to 1.5% of the principal amount of the Notes until such time as the
registration is effective or the suspension ceases and the prospectus may be
used. The Company's obligation to keep the registration statement effective
shall continue until the earlier of (a) the date that all of the Reserved Shares
have been sold pursuant to Rule 144 under the 1933 Act or an effective
registration statement, or (b) such time as the Reserved Shares are eligible for
immediate resale pursuant to Rule 144(k) under the 1933 Act.

         5.2 "PIGGYBACK" REGISTRATION RIGHTS. At any time after the Initial
Closing, if the Company shall determine to proceed with the actual preparation
and filing of a new registration statement under the 1933 Act in connection with
the proposed offer and sale of any of its securities by it or any of its
security holders (other than a registration statement on Form S-4, S-8 or other
limited purpose form), the Company will give written notice of its determination
to all record holders of the Reserved Shares. Upon the written request from any
Holders (the "Requesting Holders"), within 15 days after receipt of any such
notice from the Company, the Company will, except as herein provided, cause all
of the Reserved Shares covered by such request (the "Requested Stock") held by
the Requesting Holders to be included in such registration statement, all to the
extent requisite to permit the sale or other disposition by the prospective
seller or sellers of the Requested Stock; provided, further, that nothing herein
shall prevent the Company from, at any time, abandoning or delaying any
registration. If any registration pursuant to this Section 5.2 shall be
underwritten in whole or in part, the Company may require that the Requested
Stock be included in the underwriting on the same terms and conditions as the
securities otherwise being sold through the underwriters. In such event, the
Requesting Holders shall, if requested by the underwriters, execute an
underwriting agreement containing customary representations and warranties by
selling stockholders and a lock-up on Reserved Shares not being sold. If in the
good faith judgment of the managing underwriter of such public offering the
inclusion of all of the Requested Stock would reduce the number of shares to be
offered by the Company or interfere with the successful marketing of the shares
of stock offered by the Company, the number of shares of Requested Stock
otherwise to be included in the underwritten public offering may be reduced pro
rata (by number of shares) among the Requesting Holders and all other holders of
registration rights who have requested inclusion of their securities or excluded
in their entirety if so required by the underwriter. To the extent only a
portion of the Requested Stock is included in the underwritten public offering,
those shares of Requested Stock which are thus excluded from the underwritten
public offering and any other securities of the Company held by such holders
shall be withheld from the market by the Holders thereof for a period, not to
exceed 90 days, which the managing underwriter reasonably determines is
necessary in order to effect the underwritten public offering. The obligation of
the Company under this Section 5.2 shall not apply after the earlier of (a) the
date that all of the Reserved Shares have been sold pursuant to Rule 144 under
the 1933 Act or an effective registration statement, or (b) such time as the
Reserved Shares are eligible for immediate resale pursuant to Rule 144(k) under
the 1933 Act.

                                       14

<PAGE>

         5.3 REGISTRATION PROCEDURES. To the extent required by Sections 5.1 or
5.2, the Company will:

         (a) prepare and file with the SEC a registration statement with respect
to such securities, and use its reasonable best efforts to cause such
registration statement to become and remain effective;

         (b) prepare and file with the SEC such amendments to such registration
statement and supplements to the prospectus contained therein as may be
necessary to keep such registration statement effective;

         (c) furnish to the Holders participating in such registration and to
the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities;

         (d) use its reasonable best efforts to register or qualify the
securities covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as the Holders may reasonably request in
writing within 20 days following the original filing of such registration
statement, except that the Company shall not for any purpose be required to
execute a general consent to service of process or to qualify to do business as
a foreign corporation in any jurisdiction wherein it is not so qualified;

         (e) notify the Holders, promptly after it shall receive notice thereof,
of the time when such registration statement has become effective or a
supplement to any prospectus forming a part of such registration statement has
been filed;

         (f) notify the Holders promptly of any request by the SEC for the
amending or supplementing of such registration statement or prospectus or for
additional information;

         (g) prepare and file with the SEC, promptly upon the request of any
Holders, any amendments or supplements to such registration statement or
prospectus which, in the opinion of counsel for such Holders (and concurred in
by counsel for the Company), is required under the 1933 Act or the rules and
regulations thereunder in connection with the distribution of Common Stock by
such Holders;

         (h) prepare and promptly file with the SEC and promptly notify such
Holders of the filing of such amendment or supplement to such registration
statement or prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such securities is
required to be delivered under the 1933 Act, any event shall have occurred as
the result of which any such prospectus or any other prospectus as then in
effect would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading; and

         (i) advise the Holders, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the SEC
suspending the effectiveness of such registration statement or the initiation or
threatening of any proceeding for that purpose

                                       15

<PAGE>

and promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such stop order should be issued.

         The Holders shall cooperate with the Company in providing the
information necessary to effect the registration of their Reserved Shares,
including completion of customary questionnaires. Failure to do so may result in
exclusion of such Holders' Reserved Shares from the registration statement.

         5.4 EXPENSES.

         (a) With respect to the any registration required pursuant to Section
5.1 or 5.2 hereof, all fees, costs and expenses of and incidental to such
registration, inclusion and public offering (as specified in paragraph (b)
below) in connection therewith shall be borne by the Company, provided, however,
that the Holders shall bear their pro rata share of the underwriting discount
and commissions and transfer taxes.

         (b) The fees, costs and expenses of registration to be borne by the
Company as provided in paragraph (a) above shall include, without limitation,
all registration, filing, and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, fees of counsel to the
Holders (not to exceed $15,000 in the aggregate) and all legal fees and
disbursements and other expenses of complying with state securities or blue sky
laws of any jurisdictions in which the securities to be offered are to be
registered and qualified (except as provided in 5.4(a) above). Fees and
disbursements of counsel for the Holders in excess of $15,000 and any other
expenses incurred by the Holders not expressly included above shall be borne by
the Holders (on a pro rata basis if and to the extent required by state
securities laws).

         5.5 INDEMNIFICATION.

         (a) The Company will indemnify and hold harmless each Holder of
Reserved Shares which are included in a registration statement pursuant to the
provisions of Sections 5.1 and 5.2 hereof, its directors and officers, and any
underwriter (as defined in the 1933 Act) for such Holder and each person, if
any, who controls such Holder or such underwriter within the meaning of the 1933
Act, from and against, and will reimburse such Holder and each such underwriter
and controlling person with respect to, any and all loss, damage, liability,
cost and expense to which such Holder or any such underwriter or controlling
person may become subject under the 1933 Act or otherwise, insofar as such
losses, damages, liabilities, costs or expenses are caused by any untrue
statement or alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, damage, liability,
cost or expenses arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity with
information furnished by or on behalf of such Holder, such underwriter or such
controlling person in writing specifically for use in the preparation thereof.

                                       16

<PAGE>

         (b) Each Holder of Reserved Shares included in a registration pursuant
to the provisions of Sections 5.1 or 5.2 hereof will indemnify and hold harmless
the Company, its directors and officers, any controlling person and any
underwriter from and against, and will reimburse the Company, its directors and
officers, any controlling person and any underwriter with respect to, any and
all loss, damage, liability, cost or expense to which the Company or any
controlling person and/or any underwriter may become subject under the 1933 Act
or otherwise, insofar as such losses, damages, liabilities, costs or expenses
are caused by any untrue statement or alleged untrue statement of any material
fact contained in such registration statement, any prospectus contained therein
or any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was so made in reliance upon and in
strict conformity with written information furnished by or on behalf of such
Holder specifically for use in the preparation thereof.

         (c) Promptly after receipt by an indemnified party pursuant to the
provisions of paragraph (a) or (b) of this Section 5.5 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of said paragraph
(a) or (b), promptly notify the indemnifying party of the commencement thereof;
but the omission to so notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise under this
Section except to the extent the defense of the claim is prejudiced. In case
such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party shall
have the right to participate in, and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party,
provided, however, if counsel for the indemnifying party concludes that a single
counsel cannot under applicable legal and ethical considerations, represent both
the indemnifying party and the indemnified party, the indemnified party or
parties have the right to select separate counsel to participate in the defense
of such action on behalf of such indemnified party or parties; provided that
there shall be no more than one such separate counsel. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party pursuant to the provisions of said paragraph (a) or (b) for any legal or
other expense subsequently incurred by such indemnified party in connection with
the defense thereof other than reasonable costs of investigation, unless (i) the
indemnified party shall have employed counsel in accordance with the provisions
of the preceding sentence, (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after the notice of the commencement
of the action or (iii) the indemnifying party has, in its sole discretion,
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying party.

               VI. MISCELLANEOUS

         6.1 NOTICE. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Subscription Agreement
must be in writing and will be deemed to have been delivered: (a) upon receipt,
when delivered personally, (b) upon

                                       17

<PAGE>

receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party),
or (c) one (1) business day after deposit with an overnight courier service, in
each case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:

If to the Company:

Comdial Corporation
106 Cattlemen Road
Sarasota, Florida 34232
Telephone:  (941) 922-3800
Facsimile:  (941) 925-7989
Attention:  Paul K. Suijk, Chief Financial Officer

With a copy to:

Greenberg Traurig, LLP
MetLife Building
200 Park Avenue
New York, New York  10166
Telephone:  (212) 801-9323
Facsimile:  (212) 801-6400
Attention:  Alan I. Annex

If to the Subscriber, to its address and facsimile number set forth at the end
of this Subscription Agreement, or to such other address and/or facsimile number
and/or to the attention of such other person as specified by written notice
given to the Company five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (a) given by the recipient of such notice,
consent, waiver or other communication, (b) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission, or (c)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (a), (b) or (c) above, respectively.

         6.2 ENTIRE AGREEMENT; AMENDMENT. This Subscription Agreement supersedes
all other prior oral or written agreements between the Subscriber, the Company,
their affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Subscription Agreement and the instruments referenced
herein contain the entire understanding of the parties with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Subscriber makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Subscription Agreement may be amended or waived other than by an instrument
in writing signed by the Company and the holders of at least a majority of the
principal amount of the Senior Notes then outstanding or if prior to the
Closing, the Subscriber (the "Required Holders"), or if the Notes have been
repaid or converted in full, the holders of at least a majority of the Reserved
Shares then outstanding. Without the written consent of all holders, no such
amendment shall be effective to the extent that it applies to less than all of
the holders of the

                                       18

<PAGE>

Securities then outstanding on a uniform non-discriminatory basis or increases
the liability of a holder.

         6.3 SEVERABILITY. If any provision of this Subscription Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Subscription Agreement in that jurisdiction or the validity or
enforceability of any provision of this Subscription Agreement in any other
jurisdiction.

         6.4 GOVERNING LAW; JURISDICTION; JURY TRIAL. All questions concerning
the construction, validity, enforcement and interpretation of this Subscription
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of New
York. Each party hereby irrevocably submits to the exclusive jurisdiction of the
federal courts sitting in the Southern District of New York, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Subscription Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law. Each party
hereby irrevocably waives any right it may have, and agrees not to request, a
jury trial for the adjudication of any dispute hereunder or in connection with
or arising out of this Subscription Agreement or any transaction contemplated
hereby.

         6.5 HEADINGS. The headings of this Subscription Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Subscription Agreement.

         6.6 SUCCESSORS AND ASSIGNS. This Subscription Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns, including any purchasers of the Notes and Warrants. The
Company shall not assign this Subscription Agreement or any rights or
obligations hereunder without the prior written consent of the holders of at
least a majority the Securities then outstanding, except by merger or
consolidation. The Subscriber may assign some or all of its rights hereunder
without the consent of the Company, provided, however, that any such assignment
shall not release the Subscriber from its obligations hereunder unless such
obligations are assumed by such assignee and the Company has consented to such
assignment and assumption, which consent shall not be unreasonably withheld.

         6.7 SURVIVAL. The representations and warranties of the Company and the
Subscriber contained in Articles I and II and the agreements set forth in this
Article VI shall survive the Final Closing for a period of two years.

                                       19

<PAGE>

         6.8 FURTHER ASSURANCES. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Subscription Agreement and the consummation of
the transactions contemplated hereby.

         6.9 NO STRICT CONSTRUCTION. The language used in this Subscription
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party, notwithstanding anything herein to the contrary.

         6.10 LEGAL REPRESENTATION. The Subscriber acknowledges that: (a) it has
read this Subscription Agreement and the exhibits hereto; (b) it understands
that the Company has been represented in the preparation, negotiation, and
execution of this Subscription Agreement by Greenberg Traurig, LLP, counsel to
the Company; (c) it understands that the Placement Agent has been represented by
Loeb & Loeb LLP and that such counsel has not represented and is not
representing the Subscriber; (d) it has either been represented in the
preparation, negotiation, and execution of this Subscription Agreement by legal
counsel of its own choice, or has chosen to forgo such representation by legal
counsel after being advised to seek such legal representation; and (e) it
understands the terms and consequences of this Subscription Agreement and is
fully aware of its legal and binding effect.

         6.11 EXPENSES OF ENFORCEMENT. The Company shall pay all fees and
expenses (including reasonable fees and expenses of counsel and other
professionals) incurred by the Subscriber or any successor holder of Securities
in enforcing any of its rights and remedies under this Subscription Agreement.

         6.12 CONFIDENTIALITY; REQUIRED PRESS RELEASE. The Subscriber agrees
that it shall keep confidential and not divulge, furnish or make accessible to
anyone, the confidential information concerning or relating to the business or
financial affairs of the Company, if any, contained in the Offering Documents to
which it becomes privy until such information has been publicly disclosed by the
Company or until such information is no longer material. The Company agrees that
within two business days after the closing of this Offering and the Concurrent
Placement, it shall issue a press release which shall set forth all of the
material terms of this Offering and the Concurrent Placement, including pricing.

         6.13 COUNTERPARTS. This Subscription Agreement may be executed in two
or more identical counterparts, all of which shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.

         6.14 INCREASE IN AUTHORIZED SHARES. The Company hereby agrees that it
will (a) file an information statement with the SEC with respect to the increase
in its authorized shares described in Section 4.4 hereof within ten (10)
business days after the Initial Closing; (b) mail such information statement to
its stockholders five (5) days after clearance by the SEC; (c) file an amendment
to its certificate of incorporation effecting such increase twenty (20) days

                                       20

<PAGE>

after the date of such mailing; and (d) immediately thereafter reserve for
issuance a sufficient number of shares to provide for conversion of the Notes
pursuant to Section 6 thereof (assuming a lowest possible conversion price of
$.05 per share).

                  [remainder of page intentionally left blank]

                                       21

<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Subscription
Agreement as of the day and year first written above.

WINFIELD CAPITAL CORP.

By:
   -----------------------------------------
Signature

--------------------------------------------
Name and Title [please print]

--------------------------------------------
Address of Subscriber

--------------------------------------------
Taxpayer Identification Number of Subscriber

-------------------------------------------------------------------
Name of Holder(s) as it should appear on the security certificates*
[please print]

*Please provide the exact names that you wish to see on the certificates
(1) For individuals, print full name of subscriber.
(2) For joint, print full name of subscriber and all co-subscribers.
(3) For corporations, partnerships, LLC, print full name of entity, including
    "&," "Co.," "Inc.," "etc.," "LLC," "LP," etc.
(4) For Trusts, print trust name (please contact your trustee for the exact name
    that should appear on the certificates). (5) For IRA account maintained at
    Commonwealth, print "Wexford Clearing Corp. as C/F FBO [client name]."

LRX-
-------------------------------------------     Subscription Accepted:
Subscriber's Account Number at                  Comdial Corporation
Commonwealth Associates, if applicable

Dollar Amount of Senior Notes Subscribed        By:
For:                                              ------------------------------
                                                Name:  Nickolas A. Branica
                                                Title: Chief Executive Officer

$
-------------------------------------------
                                                $
                                                 -----------------------------
                                                Amount of Subscription Accepted

**If Subscriber is a Registered                 The undersigned NASD member firm
Representative with an NASD member firm         acknowledges receipt of the
or an affiliated person of an NASD              notice required by Rule 3040 of
member firm, have the acknowledgement to        the NASD Conduct Rules.
the right signed by the appropriate
party

                                                --------------------------------
                                                Name of NASD Member

                                                By
                                                  ------------------------------
                                                Authorized Officer Accepted

                                       22EXHIBIT 4.7

THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE BEEN
ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE TRANSFERRED UNTIL (i) A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (ii)
RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE SECURITIES ACT IS NOT REQUIRED
IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS SUCH TRANSFER IN VIOLATION OF
ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND SHALL BE ENDORSED UPON ANY
NOTE ISSUED IN EXCHANGE FOR THIS NOTE OR ANY SECURITIES ISSUABLE UPON CONVERSION
OF THIS NOTE.

THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE COMPANY AND PAYEE HEREUNDER ARE
SUBJECT TO THE SUBORDINATION PROVISIONS SET FORTH IN SECTION 2 HEREOF. IN THE
EVENT OF A CONFLICT BETWEEN ANY TERMS OF THIS NOTE AND THE TERMS OF SUCH SECTION
2, THE TERMS OF SECTION 2 SHALL GOVERN.

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

                               COMDIAL CORPORATION

No. WC-1                                                             $2,000,000
September 27, 2002

                12% Senior Subordinated Secured Convertible Note

     Comdial Corporation, a Delaware corporation (the "Company"), for value
received, hereby promises to pay to the order of Winfield Capital Corp. (the
"Payee") at the offices of the Company on the earlier of (the "Maturity Date"):
(i) September 27, 2005; (ii) a merger or combination of the Company in which the
shareholders of the Company prior to the transaction own less than a majority of
the outstanding shares of the surviving or combined entity after such
transaction; (iii) the sale of all or substantially all of the assets of the
Company to one or more third parties; or (iv) the purchase by a single entity or
person or group of affiliated entities or persons of issued and outstanding
shares of the Company representing more than 50% of the voting power; the
principal sum of Two Million ($2,000,000) or such lesser principal amount as
shall at such time be outstanding hereunder (the "Principal Amount"). The
Maturity Date set forth in clause (i) may be extended by the Company for up to
one year (the "Extension Option") upon notice to the Payee, subject to the
provisions of Section 3B hereof. Each payment by the Company pursuant to this
Note shall be made without set-off or counterclaim and shall be made in lawful
currency of the United States of America and in immediately available funds.

     Interest on this Note shall accrue on the Principal Amount outstanding from
time to time at a rate per annum computed in accordance with Section 3 hereof
and shall be payable quarterly in arrears on each of March 31, June 30,
September 30 and December 31 commencing December 31, 2002 (each, an "Interest
Payment Date") or earlier upon conversion of this Note pursuant to the
provisions of Sections 6A or 6B hereof. All payments by the Company hereunder
shall be applied first to pay any interest which is due, but unpaid, then to
reduce the Principal Amount.

     The Company (i) waives presentment, demand, protest or notice of any kind
in connection with this Note and (ii) agrees to pay to the Payee, on demand, all
costs and expenses (including reasonable legal fees and expenses) incurred in

<PAGE>

connection with the enforcement and collection or this Note.

     This Note is issued in connection with a private placement (the
"Placement") through Commonwealth Associates, L.P. ("Commonwealth") of identical
notes (together with this Note, the "Senior Notes") and common stock purchase
warrants (the "Warrants") pursuant to a subscription agreement (the
"Subscription Agreement") between the Company and the Payee, copies of which are
available for inspection at the Company's principal office. Notwithstanding any
provision to the contrary contained herein, this Note is subject and entitled to
those terms, conditions, covenants and agreements contained in the Subscription
Agreement that are expressly applicable to the Senior Notes. Any transferee of
this Note, by its acceptance hereof, assumes the obligations of the Payee in the
Subscription Agreement with respect to the conditions and procedures for
transfer of this Note. Reference to the Subscription Agreement shall in no way
impair the absolute and unconditional obligation of the Company to pay both
principal hereof and interest hereon as provided herein.

     The obligations of the Company under the Senior Notes are secured by a
junior lien on substantially all of the Company's assets, including its
intellectual property rights, as set forth in and pursuant to a General Security
Agreement (the "Security Agreement") of even date herewith.

     The Company is issuing 7% senior subordinated secured convertible
promissory notes (the "Concurrent Notes") in connection with a private placement
through Commonwealth as placement agent (the "Concurrent Placement"). The Senior
Notes shall be senior in right of payment and security to the Concurrent Notes.

     1. Prepayment. This Note may be prepaid in whole or in part at any time
upon fifteen (15) days' prior written notice to the Payee. This Note must be
prepaid to the extent of (i) not less than fifty percent (50%) of the amount of
any net proceeds in excess of five million dollars (after payment of
commissions) received from the sale of securities by the Company in any
financing transaction resulting in gross proceeds of at least five million
dollars and (ii) commencing September 27, 2004, not less than fifty percent
(50%) of Excess Cash Flow. "Excess Cash Flow" shall mean as of the applicable
Interest Payment Date, (i) the Company's operating cash flow for the quarterly
period ending the calendar month immediately preceding such Interest Payment
Date (the "Relevant Quarter"), minus (without duplication of deductions) (ii)
the sum of: (a) the Company's debt service for the Relevant Quarter (exclusive
of mandatory prepayments made pursuant to this Section 1); (b) aggregate capital
expenditures incurred by the Company during the Relevant Quarter; (c) optional
prepayments made pursuant to this Section 1 during the Relevant Quarter; and (d)
taxes paid by the Company during the Relevant Quarter.

     2. Subordination. The Company, for itself, its successors and assigns,
covenants and agrees, and the Payee and each successive holder of this Note, by
its acceptance of this Note, likewise covenants and agrees (expressly for the
benefit of the present and future holders of the Senior Debt (as hereinafter
defined)), that the payment of principal of, and interest on, this Note is
hereby expressly subordinated in right of payment to the prior payment in full
of the principal of, premium (if any) and interest on, all Senior Debt of the
Company (other than the Senior Notes), hereafter incurred or created. "Senior
Debt" means, collectively, (i) all Indebtedness for Borrowed Money (and all
renewals, extensions, refundings, amendments and modifications of any such

                                       2
<PAGE>

Indebtedness for Borrowed Money) up to a maximum principal amount of
$15,000,000; and (ii) all payment obligations of the Company pursuant to any
capitalized lease with an entity that is not an affiliate of the Company, unless
by the terms of the instrument creating or evidencing any such indebtedness it
is expressly provided that such indebtedness is not superior in right of payment
to the Senior Notes.

     "Indebtedness for Borrowed Money" means (i) all secured payment obligations
of the Company to a bank, insurance company, finance company or other
institutional lender or other entity regularly engaged in the business of
extending credit in the form of borrowed money, (each of the foregoing, an
"Institutional Lender") in respect of extensions of credit to the Company (or to
a subsidiary of the Company to the extent such obligations are guaranteed by the
Company pursuant to a written guarantee executed by the appropriate officers of
the Company) and any pledgor or guarantor of letters of credit posted on behalf
of the Company and (ii) all obligations, contingent or otherwise, relative to
the face amount of all asset-based letters of credit, whether or not drawn, and
banker's acceptances, in each case issued for the account of the Company (other
than such as may be for the benefit of an affiliate of the Company).

     The provisions of this Section 2 are not for the benefit of the Company,
but are solely for the purpose of defining the relative rights of the holders of
the Senior Debt, on the one hand, and the holders of the Senior Notes, on the
other hand. Nothing contained herein (i) shall impair, as between the Company
and the holder of this Note, the obligations of the Company, which are absolute
and unconditional, to pay to the holder hereof all amounts payable in respect of
this Note as and when the same shall become due and payable in accordance with
the terms hereof or (ii) is intended to or shall affect the relative rights of
the holder of this Note and the creditors of the Company, or (iii) shall prevent
the holder of this Note from exercising all rights, powers and remedies
otherwise permitted by applicable law or upon a default or Event of Default
under this Note as set forth in these subordination provisions.

     3. Computation of Interest. All computations of interest hereunder shall be
made based on the actual number of days elapsed in a
year of 365 days (including the first day but excluding the last day during
which any such Principal Amount is outstanding).

     A. Base Interest Rate. Subject to Sections 3B and 3C below, the outstanding
Principal Amount shall bear interest at the rate of twelve percent (12%) per
annum.

     B. Penalty Interest. In the event the Extension Option is exercised by the
Company or this Note is not otherwise repaid on the Maturity Date, the rate of
interest applicable to the unpaid Principal Amount shall be adjusted to
seventeen percent (17%) per annum from the Maturity Date until repayment;
provided, that in no event shall the interest rate exceed the Maximum Rate
provided in Section 3C below.

     C. Maximum Rate. In the event that it is determined that, under the laws
relating to usury applicable to the Company or the indebtedness evidenced by
this Note ("Applicable Usury Laws"), the interest charges and fees payable by
the Company in connection herewith or in connection with any other document or
instrument executed and delivered in connection herewith cause the effective
interest rate applicable to the indebtedness evidenced by this Note to exceed
the maximum rate allowed by law (the "Maximum Rate"), then such interest shall
be recalculated for the period in question and any excess over the Maximum Rate
paid with respect to such period shall be credited, without further agreement or
notice, to the Principal Amount outstanding hereunder to reduce said balance by

                                       3
<PAGE>

such amount with the same force and effect as though the Company had
specifically designated such extra sums to be so applied to principal and the
Payee had agreed to accept such extra payment(s) as a premium-free prepayment.
All such deemed prepayments shall be applied to the principal balance payable at
maturity. In no event shall any agreed-to or actual exaction as consideration
for this Note exceed the limits imposed or provided by Applicable Usury Laws in
the jurisdiction in which the Company is resident applicable to the use or
detention of money or to forbearance in seeking its collection in the
jurisdiction in which the Company is resident.

     4. Covenants of Company.

          A. Affirmative Covenants. So long as this Note shall be outstanding,
the Companycovenants and agrees to the following:

               (i) Taxes and Levies. The Company will promptly pay and discharge
all material taxes, assessments, and governmental charges or levies imposed upon
the Company or upon its income and profits, or upon any of its property, before
the same shall become delinquent, as well as all material claims for labor,
materials and supplies which, if unpaid, might become a lien or charge upon such
properties or any part thereof; provided, however, that the Company shall not be
required to pay and discharge any such tax, assessment, charge, levy or claim so
long as the validity thereof shall be contested in good faith by appropriate
proceedings and the Company shall set aside on its books adequate reserves in
accordance with generally accepted accounting principles ("GAAP") with respect
to any such tax, assessment, charge, levy or claim so contested.

               (ii) Maintenance of Existence. The Company will do or cause to be
done all things reasonably necessary to preserve and keep in full force and
effect its corporate existence, rights and franchises and comply with all laws
applicable to the Company, except where the failure to comply would not have a
material adverse effect on the Company or otherwise in connection with an
acquisition of the Company.

               (iii) Maintenance of Property. The Company will at all times
maintain, preserve, protect and keep its property used or useful in the conduct
of its business in good repair, working order and condition, and from time to
time make all needful and proper repairs, renewals, replacements and
improvements thereto as shall be reasonably required in the conduct of its
business.

               (iv) Books and Records. The Company will at all times keep true
and correct books, records and accounts reflecting all of its business affairs
and transactions in accordance with GAAP.

               (v) Notice of Certain Events. The Company will give written
notice (with a description in reasonable detail) to the Payee within 48 hours of
the occurrence of any Event of Default or any event which, with the giving of
notice or the lapse of time, would constitute an Event of Default.

                                       4
<PAGE>

               (vi) Board Designee. The Company shall appoint one director to
the Board of Directors designated by the holders of 50% of the outstanding
principal amount of the Senior Notes and the Concurrent Notes or Commonwealth on
behalf of such holders.

               (vii) Board Observer. The Payee shall have the right to have an
observer present at all meetings of the Board of Directors. Such observer will
receive notice of such meetings at the same time and in the same manner as given
to the Board members, will be given copies of the same materials given to the
Board members in connection with such meetings and shall be reimbursed for
expenses incurred in attending such meetings to the same extent and in the same
manner as Board members. Attendance by Payee's observer may be in person or by
telephone.

               (viii) Monthly Financial Statements. Until such time as the
shares of common stock underlying the Warrants have been registered for resale
under the Securities Act, the Company shall prepare and deliver to the Payee
unaudited monthly financial statements within thirty (30) days following the end
of each month.

               (ix) Reporting Obligations. In the event the Company is no longer
a "reporting company" under the Securities Exchange Act of 1934 (the "Exchange
Act"), the Company shall deliver to Payee (a) quarterly and annual reports in
substantially the same form and by such dates as required by the Exchange Act
and (b) notice of the initiation of any lawsuits in excess of $1,000,000 to
which the Company is a party.

               (x) SBA Reporting Requirements. The Company shall, if and when
requested by Payee, use its reasonable best efforts to respond in a timely
fashion at its reasonable expense to all Small Business Administration reporting
requirements.

          B. Negative Covenants. So long as this Note shall be outstanding, the
Company covenants and agrees to the following:

               (i) Liquidation, Dissolution. The Company will not liquidate or
dissolve, consolidate with, or merge into or with, any corporation or entity,
except that (1) any wholly-owned subsidiary may merge with another wholly-owned
subsidiary or with the Company (so long as the Company is the surviving
corporation and no Event of Default shall occur as a result thereof) and (2) the
Company may complete a merger or consolidation if the surviving entity has cash
and cash equivalents and/or net assets which are either (a) equal to or greater
than the then outstanding Principal Amount and accrued interest on the Senior
Notes or (b) equal to or greater than the Company's cash and cash equivalents
and/or net assets immediately prior to such merger or consolidation.

               (ii) Sales of Assets. The Company will not sell, transfer, lease
or otherwise dispose of, or grant options, warrants or other rights with respect
to, all or substantially all of its properties or assets to any person or entity
other than in connection with a transaction covered by clause (i) above unless
this Note is repaid in full prior to or in connection with such transaction;
provided that this clause (ii) shall not restrict any disposition made in the
ordinary course of business and consisting of

                                       5
<PAGE>

                    (a) capital goods which are obsolete or have no remaining
useful life; or

                    (b) finished goods inventories.

               (iii) Transactions with Affiliates. The Company will not enter
into any transaction, including, without limitation, the purchase, sale, lease
or exchange of property, real or personal, the purchase or sale of any security,
the borrowing or lending of any money, or the rendering of any service, with any
person or entity affiliated with the Company (including officers, directors and
shareholders owning 3% or more of the Company's outstanding capital stock),
except (a) transactions valued at less than $25,000 entered into in the ordinary
course of and pursuant to the reasonable requirements of its business and upon
fair and reasonable terms not less favorable than would be obtained in a
comparable arms-length transaction with any other person or entity not
affiliated with the Company, (b) transactions with Commonwealth or any of its
affiliates, or (c) transactions approved by a majority of the independent
members of the Board of Directors.

               (iv) Investments. The Company will not purchase, own, invest in
or otherwise acquire, directly or indirectly, any stock or other securities or
make or permit to exist any investment or capital contribution or acquire any
interest whatsoever in any other person or entity or permit to exist any loans
or advances for such purposes except for investments in direct obligations of
the United States of America or any state thereof or any agency thereof,
obligations guaranteed by the United States of America or any state thereof and
certificates of deposit or other obligations of any bank or trust company
organized under the laws of the United States or any state thereof and having
capital and surplus of at least $500,000,000; provided, however, that nothing
contained in this clause (iv) shall preclude the Company from making
acquisitions, organizing and making advances to subsidiaries, and entering into
joint ventures or other business arrangements for the purpose of expanding its
business.

               (v) Proration of Payments. The Company shall not make or permit
any payment or other recovery (whether voluntary, involuntary, by application of
setoff or otherwise) on account of the Principal Amount or interest payable
hereunder in excess of the Payee's pro rata share of payments then being made in
respect of all Senior Notes.

               (vi) Indebtedness. Except for the Senior Debt, the Company will
not create, incur, assume or suffer to exist, contingently or otherwise, any
indebtedness for borrowed money that is either (i) pari passu or senior in right
of payment to the Senior Notes, (ii) subordinated in right of payment to the
Senior Notes if such indebtedness is due and payable prior to the Maturity Date,
or (iii) at the time of incurrence would preclude the timely repayment of this
Note or otherwise render the Company unable to pay its debts as they become due.
Notwithstanding the foregoing, Payee acknowledges that the issuance of the
Concurrent Notes as part of the Concurrent Placement is permitted hereunder.

               (vii) Negative Pledge. The Company will not hereafter create,
incur, assume or suffer to exist any mortgage, pledge, hypothecation,
assignment, security interest, encumbrance, lien (statutory or other),
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including any conditional sale or other title

                                       6
<PAGE>

retention agreement and any financing lease) (each, a "Lien") upon any of its
property, revenues or assets, whether now owned or hereafter acquired, except:

                    (a) Liens granted to secure indebtedness incurred to finance
the acquisition (whether by purchase or capitalized lease) of tangible assets,
but only on the assets acquired with the proceeds of such indebtedness;

                    (b) Liens for taxes, assessments or other governmental
charges or levies not at the time delinquent or thereafter payable without
penalty or being contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside on its
books;

                    (c) Liens of carriers, warehousemen, mechanics, materialmen
and landlords incurred in the ordinary course of business for sums not overdue
or being contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on its
books;

                    (d) Liens (other than Liens arising under the Employee
Retirement Income Security Act of 1974, as amended, or Section 412(n) of the
Internal Revenue Code of 1986, as amended) incurred in the ordinary course of
business in connection with workers' compensation, unemployment insurance or
other forms of governmental insurance or benefits, or to secure performance of
tenders, statutory obligations, leases and contracts (other than for borrowed
money) entered into in the ordinary course of business or to secure obligations
on surety or appeal bonds;

                    (e) judgment Liens in existence less than sixty (60) days
after the entry thereof or with respect to which execution has been stayed;

                    (f) rights of return granted by the Company to supply
houses; and

                    (g) any other Permitted Liens (as defined in the Security
Agreement).

               (viii) Dividends. The Company will not declare or pay any
dividends or distributions on its outstanding capital stock other than as may be
provided for in any currently existing certificates of designation or
certificates of amendment with respect to shares of preferred stock.

               (ix) Acceleration of Payments. The Company shall not make any
accelerated payment under any agreement, lease, loan or any other similar
instrument, whether due to settlement, entry of judgment or otherwise, which
shall exceed $50,000 in any one instance or $100,000 in the aggregate.
Notwithstanding the preceding sentence, the Company shall be permitted to pay
the accounts payable reflected on the balance sheet of the Company contained in
the most recently filed Quarterly Report on Form 10-Q and other payables which
are incurred in the ordinary course of business.

                                       7
<PAGE>

               (x) Executive Compensation and Retention. Except as the Company
may be obligated to do pursuant to any existing employment agreement and except
for options and bonuses to be granted to executive officers as set forth on
Schedule 2.3 to the Subscription Agreement, the Company shall not increase the
cash or non-cash compensation payable to Nickolas A. Branica, Paul K. Suijk,
Ralph R. Dyer, Kenneth W. Noack and Carla K. Luke, or hire any new senior
executives without the approval of the majority of the independent members of
the Board.

               (xi) Issuance of Securities. Except as otherwise provided for
herein, the Company shall not, without the prior written consent of the Required
Holders, issue any securities that are redeemable or otherwise provide for cash
payments to the holders thereof if such payments can be made prior to the
Maturity Date.

          5. Events of Default.

               A. The term "Event of Default" shall mean any of the events set
forth in this Section 5A:

                    (i) Non-Payment of Obligations. The Company shall default in
the payment of the Principal Amount when and as the same shall become due and
payable, whether by acceleration or otherwise, or shall default in the payment
of accrued interest on this Note which default shall not be cured within ten
(10) business days after the applicable Interest Payment Date.

                    (ii) Non-Performance of Affirmative Covenants. The Company
shall default in any material respect in the due observance or performance of
any covenant set forth in Section 4A, which default shall continue uncured for
ten (10) days.

                    (iii) Non-Performance of Negative Covenants. The Company
shall default in any material respect in the due observance or performance of
any covenant set forth in Section 4B.

                    (iv) Non-Performance of Other Obligations. The Company shall
default in the due observance or performance of any other material covenant or
agreement on the part of the Company to be observed or performed pursuant to the
terms hereof, which default shall continue uncured for five (5) days after such
default has been discovered by the Company.

                    (v) Bankruptcy, etc. The Company shall:

                         (a) apply for, consent to, or acquiesce in, the
appointment of a trustee, receiver, sequestrator or other custodian for the
Company or any of its property, or make a general assignment for the benefit of
creditors;

                         (b) in the absence of such application, consent or
acquiesce in, permit or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian for the Company or for any part of its property;

                         (c) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or proceeding under
any bankruptcy or insolvency law, or any dissolution, winding up or liquidation

                                       8
<PAGE>

proceeding, in respect of the Company and, if such case or proceeding is not
commenced by the Company or converted to a voluntary case, such case or
proceeding shall be consented to or acquiesced in by the Company or shall result
in the entry of an order for relief or shall remain for 60 days undismissed; or

                         (d) take any corporate or other action authorizing or
in furtherance of, any of the foregoing.

                    (vi) Breach of Representations or Warranties. Any material
representation or warranty of the Company contained in the Subscription
Agreement or Warrants is or shall be incorrect in any material respect when
made.

                    (vii) Cross-Acceleration. Any indebtedness for borrowed
money of the Company or any subsidiary in an aggregate principal amount
exceeding $50,000 (1) shall be duly declared to be or shall become due and
payable prior to the stated maturity thereof, or (2) shall not be paid as and
when the same becomes due and payable, including any applicable grace period.

                    (viii) Cross-Default. The occurrence of an Event of Default
under the Concurrent Notes.

               B. Action if Bankruptcy. If any Event of Default described in
clauses (v)(a) through (c) of Section 5A shall occur, the outstanding Principal
Amount of this Note and all other obligations hereunder shall automatically be
and become immediately due and payable, without notice or demand.

               C. Action if Other Event of Default. If any Event of Default
(other than any Event of Default described in clauses (v)(a) through (c) of
Section 5A) shall occur for any reason, whether voluntary or involuntary, and be
continuing, the Payee may, upon notice to the Company, declare all or any
portion of the outstanding Principal Amount of this Note, together with interest
accrued thereon to be due and payable and any or all other obligations hereunder
to be due and payable, whereupon the full unpaid Principal Amount, such accrued
interest and any and all other such obligations which shall be so declared due
and payable shall be and become immediately due and payable, without further
notice, demand, or presentment.

               D. Remedies. Subject to the provisions of Section 5C and 7A
hereof, in case any Event of Default shall occur and be continuing, the holders
of not less than 25% of the outstanding aggregate Principal Amount of the Senior
Notes may proceed to protect and enforce their rights by a proceeding seeking
the specific performance of any covenant or agreement contained in this Note or
in aid of the exercise of any power granted in this Note or may proceed to
enforce the payment of this Note or to enforce any other legal or equitable
rights as such holders shall determine.

          6. Conversion of Note.

               A. Automatic Conversion. The Company shall have the right, at its
sole discretion, to convert the outstanding Principal Amount into Common Stock
at a conversion price equal to $0.33 per share (the "Automatic Conversion
Price"), subject to adjustment pursuant to Section 6D, if: (i) the average

                                       9
<PAGE>

closing price per share of the Company's Common Stock equals or exceeds $1.00
for twenty (20) consecutive trading days ending within five days of the notice
to the Payee of conversion pursuant to this Section 6B; (ii) the Common Stock is
then trading on the Nasdaq SmallCap Market, the Nasdaq National Market or a
national securities exchange; (iii) either a registration statement covering the
resale of the Conversion Shares has been declared effective by the Securities
and Exchange Commission and remains effective or Rule 144(k) is available for
resale of the Conversion Shares; and (iv) the Conversion Shares are not subject
to any contractual restrictions on transferability with the Company, its
underwriter or agent. Upon conversion of this Note pursuant to this Section 6B,
all accrued and unpaid interest shall be due and payable in cash. The shares of
Common Stock issuable upon conversion of this Note in accordance with Sections
6A and 6B hereof are referred to herein as the "Conversion Shares."

               B. Optional Conversion upon certain Event of Default. In the
event that the Company defaults in the payment of any Principal Amount under
this Note when due (at the Maturity Date, by acceleration or otherwise), the
Payee shall have the right, at its option, to convert all or any of the
outstanding Principal Amount and any accrued but unpaid interest into shares of
Common Stock at a conversion price per share equal to the lesser of (i) the
Automatic Conversion Price and (ii) 90% of the average closing price of the
Common Stock for the five trading days immediately prior to the date of the
notice of conversion (or, if the Common Stock has ceased trading, the average
closing price for the last five available trading days). Upon cancellation of
this Note pursuant to this Section 6B, all accrued and unpaid interest shall be
due and payable in cash.

               C. Adjustment of Automatic Conversion Price. The Automatic
Conversion Price in effect at any time and the number and kind of securities
issuable upon conversion of the Senior Notes shall be subject to adjustment from
time to time upon the happening of certain events as follows:

                    (i) In case the Company shall hereafter (a) declare a
dividend or make a distribution on its outstanding shares of Common Stock in
shares of Common Stock, (b) subdivide or reclassify its outstanding shares of
Common Stock into a greater number of shares, or (c) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, the
Automatic Conversion Price in effect at the time of such dividend or
distribution or of the effective date of such subdivision, combination or
reclassification shall be adjusted so that it shall equal the price determined
by multiplying the Automatic Conversion Price by a fraction, the denominator of
which shall be the number of shares of Common Stock outstanding after giving
effect to such action, and the numerator of which shall be the number of shares
of Common Stock outstanding immediately prior to such action. Such adjustment
shall be made successively whenever any event listed above shall occur.

                    (ii) In case the Company shall fix a record date for the
issuance of rights or warrants to all holders of its Common Stock entitling them
to subscribe for or purchase shares of Common Stock (or securities convertible
into Common Stock) at a price (the "Subscription Price") (or having a conversion
price per share) less than the Automatic Conversion Price on such record date,
the Automatic Conversion Price shall be adjusted so that the same shall equal
the price determined by multiplying the Automatic Conversion Price in effect
immediately prior to the date of such issuance by a fraction, the numerator of
which shall be the sum of (x) the number of Common Stock Equivalents Outstanding

                                       10
<PAGE>

(as defined below) on the record date mentioned below and (y) the number of
additional shares of Common Stock which the aggregate offering price of the
total number of shares of Common Stock so offered (plus the aggregate conversion
price of the convertible securities so offered) would purchase at the Automatic
Conversion Price in effect immediately prior to the issuance, and the
denominator of which shall be the sum of (x) the number of Common Stock
Equivalents Outstanding on such record date and (y) the number of additional
shares of Common Stock offered for subscription or purchase (or into which the
convertible securities so offered are convertible). For purposes of this Section
6C, "Common Stock Equivalents Outstanding" shall mean the number of shares of
Common Stock that is equal to the sum of (1) all shares of Common Stock of the
Company that are outstanding at the time in question, plus (2) all shares of
Common Stock of the Company issuable, directly or indirectly, upon conversion of
all shares of preferred stock or other stock or other securities convertible
into or exchangeable, directly or indirectly, for shares of Common Stock without
the payment of additional consideration ("Convertible Securities") that are
outstanding at the time in question. Such adjustment shall be made successively
whenever such rights or warrants are issued and shall become effective
immediately after the record date for the determination of shareholders entitled
to receive such rights or warrants; and to the extent that shares of Common
Stock are not delivered (or securities convertible into Common Stock are not
delivered) after the expiration of such rights or warrants the Automatic
Conversion Price shall be readjusted to the Automatic Conversion Price which
would then be in effect had the adjustments made upon the issuance of such
rights or warrants been made upon the basis of delivery of only the number of
shares of Common Stock (or securities convertible into Common Stock) actually
delivered.

                    (iii) In case the Company shall hereafter distribute to the
holders of its Common Stock evidences of its indebtedness or assets (excluding
cash dividends or distributions and dividends or distributions referred to in
Subsection (i) above) or subscription rights or warrants (excluding those
referred to in Subsection (ii) above), then in each such case the Automatic
Conversion Price in effect thereafter shall be determined by multiplying the
Automatic Conversion Price in effect immediately prior thereto by a fraction,
the numerator of which shall be (x) the total number of Common Stock Equivalents
Outstanding multiplied by the current market price per share of Common Stock,
less (y) the fair market value (as determined by the Company's Board of
Directors) of said assets or evidences of indebtedness so distributed or of such
rights or warrants, and the denominator of which shall be the total number of
Common Stock Equivalents Outstanding multiplied by such current market price per
share of Common Stock. Such adjustment shall be made successively whenever such
a record date is fixed. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of shareholders entitled to receive such
distribution.

                    (iv) In case the Company shall hereafter issue shares of its
Common Stock (excluding shares (a) issued in any of the transactions described
in Subsections (i), (ii) or (v), (b) issued to shareholders of any corporation
which merges into the Company in proportion to their stock holdings of such
corporation immediately prior to such merger, upon such merger, (c) issued in a
bona fide public offering pursuant to a firm commitment underwriting, (d) issued
in connection with an acquisition of a business or technology which has been
approved by a majority of the Company's non-employee directors, (e) issued in
connection with the payment of interest or dividends with respect to any

                                       11
<PAGE>

securities issued to investors or Commonwealth and/or their designees in
connection with the Placement or upon conversion or exercise of such securities,
or (f) issued upon exercise of options, warrants, convertible securities and
convertible debentures) for a consideration per share (the "Offering Price")
less than the Automatic Conversion Price, the Automatic Conversion Price shall
be adjusted immediately thereafter so that it shall equal the price determined
by multiplying the Automatic Conversion Price in effect immediately prior
thereto by a fraction, the numerator of which shall be the sum of (x) the number
of Common Stock Equivalents Outstanding immediately prior to the issuance of
such additional shares and (y) the number of shares of Common Stock which the
aggregate consideration received for the issuance of such additional shares
would purchase at the Automatic Conversion Price in effect immediately prior to
the issuance, and the denominator of which shall be the number of Common Stock
Equivalents Outstanding immediately after the issuance of such additional
shares. Such adjustment shall be made successively whenever such an issuance is
made, and to the extent that shares of Common Stock (or securities convertible
into Common Stock), expire, are cancelled or are redeemed after their issuance,
the Automatic Conversion Price shall be readjusted to the Automatic Conversion
Price that would then be in effect had the adjustments made upon the issuance of
convertible securities been made upon the basis of delivery of only the number
of shares of Common Stock (or securities convertible into Common Stock) actually
issued.

                    (v) In case the Company shall hereafter issue any securities
convertible into or exercisable or exchangeable for its Common Stock (excluding
(a) securities issued in transactions described in Subsections (ii), (iii) and
(iv)(a) through (f), (b) options granted to the Company's officers, directors,
employees and consultants under a plan or plans adopted by the Company's Board
of Directors, if such options would otherwise be included in this Subsection (v)
(but only to the extent that the aggregate number of shares issuable upon
exercise of the options excluded hereby and issued after the date hereof, shall
not exceed 10% of the Company's Common Stock outstanding, on a fully diluted
basis, at the time of any issuance unless such excess issuances are approved by
the non-employee members of the Company's Board of Directors or by a committee
comprised of a majority of non-employee directors) and (c) options, warrants,
convertible securities and convertible debentures outstanding as of the date
hereof or upon issuance, or subsequent exercise or conversion of, or in
connection with the payment of in kind interest or dividends with respect to,
any securities issued to investors or Commonwealth and/or their designees in
connection with the Placement, or upon conversion or exercise of such
securities) for a consideration per share of Common Stock (the "Exchange Price")
initially payable and thereafter deliverable upon conversion, exercise or
exchange of such securities (determined as provided in Subsection (vii) below)
less than the Automatic Conversion Price, the Automatic Conversion Price shall
be adjusted immediately thereafter so that it shall equal the price determined
by multiplying the Automatic Conversion Price in effect immediately prior
thereto by a fraction, the numerator of which shall be the sum of (x) the number
of Common Stock Equivalents Outstanding immediately prior to the issuance of
such securities and (y) the number of shares of Common Stock which the aggregate
consideration paid for such securities (plus the aggregate exercise price if
such convertible securities are options or warrants) would purchase the
Automatic Conversion Price and the denominator of which shall be the sum of (x)
the number of Common Stock Equivalents Outstanding immediately prior to such
issuance and (y) the maximum number of shares of Common Stock of the Company
deliverable upon conversion, exercise or exchange of such securities at the
initial Exchange Price. Such adjustment shall be made successively whenever such

                                       12
<PAGE>

an issuance is made; and to the extent that shares of Common Stock are not
delivered after the expiration of such securities the Automatic Conversion Price
shall be readjusted to the Automatic Conversion Price which would then be in
effect had the adjustments made upon the issuance of such securities been made
upon the basis of delivery of only the number of shares of Common Stock actually
delivered.

                    (vi) No adjustment in the Automatic Conversion Price shall
be required unless such adjustment would require an increase or decrease of at
least one cent ($0.01) in such price (subject to adjustment for stock splits and
similar events); provided, however, that any adjustments which by reason of this
Section 6C are not required to be made shall be carried forward and taken into
account in any subsequent adjustment required to be made hereunder.

                    (vii) For purposes of any computation respecting
consideration received pursuant to Subsections (iv) and (v) above, the following
shall apply:

                         (a) in the case of the issuance of shares of Common
Stock for cash, the consideration shall be the amount of such cash, provided
that in no case shall any deduction be made for any commissions, discounts or
other expenses incurred by the Company for any underwriting of the issue or
otherwise in connection therewith;

                         (b) in the case of the issuance of shares of Common
Stock for a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board of Directors of the Company (irrespective
of the accounting treatment thereof), whose determination shall be conclusive;
and

in the case of the issuance of securities convertible into or exchangeable for
shares of Common Stock, the aggregate consideration received therefor shall be
deemed to be the consideration received by the Company for the issuance of such
securities plus the additional minimum consideration, if any, to be received by
the Company upon the conversion or exchange thereof (the consideration in each
case to be determined in the same manner as provided in clauses (a) and (b) of
this Subsection (vii)).

                    (viii) All calculations under this Section 6C 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 6C to the contrary notwithstanding, the Company
shall be entitled, but shall not be required, to make such changes in the
conversion price, in addition to those required by this Section 6C, as it shall
determine, in its sole discretion, to be advisable in order that any dividend or
distribution in shares of Common Stock, or any subdivision, reclassification or
combination of Common Stock, hereafter made by the Company shall not result in
any Federal Income tax liability to the holders of Common Stock or securities
convertible into Common Stock (including the Senior Notes).

                    (ix) In the event that at any time, as a result of an
adjustment made pursuant to Subsection (i) above, the Payee thereafter shall
become entitled to receive any shares of the Company, other than Common Stock,
thereafter the number of such other shares so receivable upon conversion of this
Note shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the Common
Stock contained in Subsections (i) to (viii), inclusive above.

                                       13
<PAGE>

               D. Mechanics of Conversion.

                    (i) Optional Conversion. Before the Payee shall be entitled
to convert this Note into the Conversion Shares pursuant to Section 6C hereof,
the Payee shall surrender this Note, duly endorsed, at the office of the
Company, and shall give written notice to the Company at its principal corporate
office, of the election to convert some or all of the Principal Amount of the
same and shall state therein the name or names in which the certificate or
certificates for the Conversion Shares are to be issued. The Company shall,
within three (3) business days thereafter, issue and deliver to the Company's
transfer agent appropriate written instructions and any required legal opinion
to immediately issue and deliver to the Payee a certificate or certificates for
the number of Conversion Shares to which such holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of the Note to be
converted, and the person or persons entitled to receive the Conversion Shares
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such securities as of such date. If less than the entire
Principal Amount is converted, the amount converted shall be treated as a
payment of the Principal Amount in the order of maturity.

                    (ii) Automatic Conversion. Before the Company shall be
entitled to convert this Note into the Conversion Shares pursuant to Section 6A
hereof, the Company shall deliver to the Payee at its address appearing on the
records of the Company a written notice of the imminent conversion of this Note
(the "Conversion Notice"), requesting surrender of this Note for cancellation
and written instructions regarding the registration and delivery of certificates
for the Conversion Shares. In the event the Payee receives a Conversion Notice,
the Payee shall be required to surrender this Note for cancellation within five
business days of the Conversion Notice (the "Conversion Date"), but the failure
of the Payee so to surrender this Note shall not affect the conversion of the
outstanding Principal Amount into Conversion Shares, provided that if the Note
is not surrendered, an affidavit of lost note shall be provided. No holder of
this Note shall be entitled upon conversion of this Note to have the Conversion
Shares registered in the name of another person or entity without first
complying with all applicable restrictions on the transfer of this Note. In the
event the Payee does not provide the Company with written instructions regarding
the registration and delivery of certificates for the Conversion Shares, the
Company shall issue such shares in the name of the Payee and shall forward such
certificates to the Payee at its address appearing on the records of the
Company. The person entitled to receive the Conversion Shares shall be deemed to
have become the holder of record of such shares at the close of business on the
Conversion Date and the person entitled to receive share certificates for the
Conversion Shares shall be regarded for all corporate purposes after the
Conversion Date as the record holder of the number of Conversion Shares to which
it is entitled upon the conversion. The Company may rely on record ownership of
this Note for all corporate purposes, notwithstanding any contrary notice. After
the Conversion Date, this Note shall, until surrendered to the Company,
represent the right to receive the Conversion Shares; provided, however, that
the Company shall have no obligation to issue the Conversion Shares until the
Payee has delivered either this Note or an affidavit of loss.

               E. Cash Payments. No fractional shares (or scrip representing
fractional shares) of Common Stock shall be issued upon conversion of this Note.
In the event that the conversion of the Principal Amount of this Note would
result in the issuance of a fractional share of Common Stock the Company shall

                                       14
<PAGE>

pay a cash adjustment in lieu of such fractional share to the holder of this
Note based upon the applicable conversion price.

               F. Stamp Taxes, etc. The Company shall pay all documentary, stamp
or other transactional taxes attributable to the issuance or delivery of shares
of Common Stock upon conversion of this Note; provided, however, that the
Company shall not be required to pay any taxes which may be payable in respect
of any transfer involved in the issuance or delivery of any certificate for such
shares in a name other than that of the holder of this Note, and the Company
shall not be required to issue or deliver any such certificate unless and until
the person requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the Company's satisfaction that
such tax has been paid.

               G. Validity of Stock. All shares of Common Stock that may be
issued upon conversion of this Note will, upon issuance by the Company in
accordance with the terms of this Note, be validly issued, free from all taxes
and liens with respect to the issuance thereof (other than those created by the
holders), free from all pre-emptive or similar rights and fully paid and
non-assessable.

               H. Reservation of Shares. The Company covenants and agrees that
it shall use its reasonable best efforts to file, within 60 days after the
initial issuance of the Notes, an amendment to its certificate of incorporation
increasing the authorized number of shares of Common Stock to not less than
500,000,000 and to thereafter reserve the maximum number of shares of Common
Stock available for issuance and/or delivery upon conversion of the Notes
(assuming a lowest possible default conversion price of $.05 per share) out of
its authorized but unissued shares.

               I. Notice of Certain Transactions. In case at any time:

                    (i) The Company shall declare any dividend upon, or other
distribution in respect of, its Common Stock;

                    (ii) The Company shall offer for subscription to the holders
of its Common Stock any additional shares of stock of any class or any other
securities convertible into shares of stock or any rights to subscribe thereto;

                    (iii) There shall be any capital reorganization or
reclassification of the capital stock of the Company, or a sale of all or
substantially all of the assets of the Company, or a consolidation or merger of
the Company with another corporation (other than a merger with a subsidiary in
which merger the Company is the continuing corporation and which does not result
in any reclassification); or

                    (iv) There shall be a voluntary or involuntary dissolution;
liquidation or winding up of the Company;

then, in any one or more of said cases, the Company shall cause to be mailed to
the Payee at the earliest practicable time (and, in any event not less than 10
days before any record date or other date set for definitive action), written
notice of the date on which the books of the Company shall close or a record
shall be taken for such dividend, distribution or subscription rights or such

                                       15
<PAGE>

reorganization, reclassification, sale, consolidation, merger or dissolution,
liquidation or winding-up shall take place, as the case may be. Such notice
shall also set forth such facts as shall indicate the effect of such action (to
the extent such effect may be known at the date of such notice) on the
applicable conversion price and the kind and amount of the shares of stock and
other securities and property deliverable upon the conversion of this Note. Such
notice shall also specify the date as of which the holders of the Common Stock
of record shall participate in said dividend, distribution or subscription
rights or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification, sale,
consolidation, merger or dissolution, liquidation or winding-up, as the case may
be.

          Nothing herein shall be construed as the consent of the holder of this
Note to any action otherwise prohibited by the terms of this Note or as a waiver
of any such prohibition.

               J. Notice of Maturity Date. The Company shall give written notice
to the Payee not less than 10 business days prior to the occurrence of an event
described in clause (ii), (iii) or (iv) of the first paragraph of this Note
which is expected to result in the Maturity Date.

          7. Amendments and Waivers.

               A. The provisions of this Note, including, but not limited to,
any decision to convert the Note, any waiver of the restrictive covenants or
adjustment provision and any change to a conversion price, may from time to time
be amended, modified or waived, if such amendment, modification or waiver is in
writing and consented to by the Company and the Holders of not less than 50% in
aggregate Principal Amount of the Senior Notes then outstanding (the "Required
Holders"); provided, however, that no such amendment, modification or waiver
which would (i) modify this Section 7A, (ii) extend the Maturity Date for more
than one year, or (iii) reduce the Principal Amount or any amounts payable
hereunder or (iv) not be uniform and non-discriminatory as to any particular
Note, shall be made without the consent of the Payee of each Note so affected.

               B. Except as provided herein, no failure or delay on the part of
the Payee in exercising any power or right under this Note shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power or
right preclude any other or further exercise thereof or the exercise of any
other power or right. No notice to or demand on the Company in any case shall
entitle it to any notice or demand in similar or other circumstances. No waiver
or approval by the Payee shall, except as may be otherwise stated in such waiver
or approval, be applicable to subsequent transactions. No waiver or approval
hereunder shall require any similar or dissimilar waiver or approval thereafter
to be granted hereunder.

               C. To the extent that the Company makes a payment or payments to
the Payee, and such payment or payments or any part thereof are subsequently for
any reason invalidated, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then to the extent of such recovery, the
obligation or part thereof originally intended to be satisfied, and all rights
and remedies therefor, shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not
occurred.

                                       16
<PAGE>

               D. After any waiver, amendment or supplement under this section
becomes effective, the Company shall mail to the Payee a copy thereof.

          8. Miscellaneous

               A. Registered Holder. The Company may consider and treat the
person in whose name this Note shall be registered as the absolute owner thereof
for all purposes whatsoever (whether or not this Note shall be overdue) and the
Company shall not be affected by any notice to the contrary. In case of transfer
of this Note by operation of law, the transferee agrees to notify the Company of
such transfer and of its address, and to submit appropriate evidence regarding
such transfer so that this Note may be registered in the name of the transferee.
This Note is transferable only on the books of the Company by the Holder hereof,
in person or by attorney, on the surrender hereof, duly endorsed. Communications
sent to any registered owner shall be effective as against all Holders or
transferees of the Note not registered at the time of sending the communication.

               B. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York. Sections 5-1401 and 5-1402 of
the General Obligations Law of the State of New York shall apply to this Note
and the Company hereby waives any right to stay or dismiss on the basis of forum
non conveniens any action or proceeding brought before the courts of the State
of New York sitting in New York County or of United States of America for the
Southern District of New York and hereby submits to the jurisdiction of such
courts.

               C. Notices. Unless otherwise provided, all notices required or
permitted under this Note shall be in writing and shall be deemed effectively
given (i) upon personal delivery to the party to be notified, (ii) upon
confirmed delivery by Federal Express or other nationally recognized courier
service providing next-business-day delivery, or (iii) three business days after
deposit with the United States Postal Service, by registered or certified mail,
postage prepaid and addressed to the party to be notified, in each case at the
address set forth below, or at such other address as such party may designate by
written notice to the other party (provided that notice of change of address
shall be effective upon receipt by the party to whom such notice is addressed).
If sent to Payee, notices shall be sent to the address set forth in the
Subscription Agreement.

                    If sent to the Company, notices shall be sent to the
following address:

                                       17
<PAGE>

                           Comdial Corporation
                           106 Cattlemen Road
                           Sarasota, Florida 34232
                           Attention:  Paul Suijk

               D. Parties in Interest. All covenants, agreements and
undertakings in this Note binding upon the Company or the Payee shall bind and
inure to the benefit of the successors and permitted assigns of the Company and
the Payee, respectively, whether so expressed or not.

               E. Waiver of Jury Trial. THE PAYEE AND THE COMPANY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS NOTE OR ANY OTHER DOCUMENT OR INSTRUMENT
EXECUTED AND DELIVERED IN CONNECTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE PAYEE OR
THE COMPANY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PAYEE'S PURCHASE OF
THIS NOTE.

          IN WITNESS WHEREOF, the Company has caused this Note to be signed in
its name by its duly authorized officer.

                                        COMDIAL CORPORATION

                                        By
                                           ---------------------
                                           Name: Nickolas A. Branica
                                           Title: Chief Executive Officer

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