Document:

EXHIBIT 4.2

                       SENIOR CONVERTIBLE PROMISSORY NOTE

$                                                                    May 7, 2001

         FOR VALUE RECEIVED, LADENBURG THALMANN FINANCIAL SERVICES
INC., a Florida corporation ("Maker"), having an address at 1055 Stewart Avenue,
Bethpage, New York 11714, hereby promises to pay to ______________ a
___________corporation, its successors and/or permitted assigns (any of which is
hereinafter referred to as "Holder"), at ____________________, in lawful money
of the United States, the sum of _____________________ ($__) on December 31,
2005. Interest on the unpaid principal amount of this Note shall be paid at the
rate of seven and one half percent (7-1/2%) per annum on each March 31, June 30,
September 30 and December 31, commencing June 30, 2001 or the lesser of fifteen
percent(15%) per annum or the maximum interest rate permitted by applicable law
following an Event of Default. At the Holder's request payments shall be made by
wire transfer to an account designated by the Holder. If a payment date is not a
business day, payment may be made on the next business day and interest shall
accrue for the intervening period. This Note may not be prepaid.

         The Holder may, with or without notice to the Maker or any guarantor or
other party liable herefor, extend or renew this Note, or extend the time for
making payment of any amount provided for herein, or accept any amount in
advance, all without affecting the liability of the Maker or any other party or
guarantor liable herefor.

         This Note is issued pursuant to the terms of that certain Stock
Purchase Agreement ("Stock Purchase Agreement") dated February 8, 2001, as
amended, between the Maker, New Valley Corporation, Ladenburg, Thalmann Group
Inc., Ladenburg, Thalmann & Co. Inc. and Berliner Effektengesellschaft AG. and
the Holder and the Maker are entitled to the benefits provided for therein.
Terms used but not defined herein shall have their respective meanings assigned
in the Stock Purchase Agreement. This Note is entitled to the benefits of the
security for the payment hereof provided pursuant to that certain Pledge and
Security Agreement dated May 7, 2001 between the Maker, the Secured Parties
named therein and U.S. Bank Trust National Association, as Collateral Agent
("Pledge Agreement").

         1.       Conversion of Note

                  The principal of and accrued interest on this Note shall be
convertible, in whole or in part, at any time, at the election of the Holder,
into that number of fully paid and non-assessable shares of the Maker's common
stock, par value $0.0001 per share ("Common Stock"), determined by dividing the
amount of principal and interest to be so converted by the "Conversion Price"
(as hereinafter defined) in effect at the time notice of conversion is given to
the Maker as set forth below. As used herein, "Conversion Price" means,
initially, $2.0836498. The Conversion Price shall be decreased from time to
time, as set forth in the Stock Purchase Agreement, as amended, by the amount
obtained by taking the product of $2.0836498 and the Final Purchase Price

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Adjustment Percentage (as such term is defined in the Stock Purchase Agreement,
as amended). Notwithstanding the foregoing, the Conversion Price of this Note
may not be decreased below a price that would result in the total number of
additional shares of Common Stock being issuable upon conversion of this Note as
a result of such adjustment, when added to the additional number of shares of
Common Stock being issued to the Sellers under Section 2.4(b)(i) of the Stock
Purchase Agreement, exceeding 80% of the sum of (x) the number of additional
shares to be issued and issuable to the Sellers under Section 2.4(b) of the
Stock Purchase Agreement and (y) the number of additional shares of Common Stock
issuable to Frost as a result of the Conversion Price Adjustment (as such term
is defined in the Loan Agreement, dated as of February 8, 2001, as amended,
between the Maker and Frost).

                  If, at any time after the date hereof, there occurs, with
respect to the Common Stock, a reclassification, stock split, stock dividend,
spin-off or distribution, share combination or other similar change affecting
the Common Stock as a whole and all holders thereof or if the Maker shall
consolidate with, or merge with or into, any other entity, sell or transfer all
or substantially all its assets or engage in any reorganization,
reclassification or recapitalization which is effected in such a manner that the
holders of Common Stock are entitled to receive stock, securities, cash or other
assets with respect to or in exchange for Common Stock (each, an "Adjustment
Event"), the Conversion Price and the kind and amount of stock, securities, cash
or other assets issuable upon conversion of this Note in effect at the time of
the record date for such dividend or distribution or of the effective date of
such share combination, split, consolidation, merger, sale, transfer,
reorganization, reclassification or recapitalization shall be appropriately
adjusted so that the conversion of the Note after such time shall entitle the
Holder to receive the aggregate number of shares of Common Stock or securities,
cash and other assets which, if this Note hade been converted immediately prior
to such time, the Holder would have owned upon such conversion and been entitled
to receive by virtue of such Adjustment Event, provided that if the kind or
amount of securities, cash and other property is not the same for each share of
Common Stock held immediately prior to such reclassification, change,
consolidation, merger, sale, transfer, or conveyance, any Holder who fails to
exercise any right of election shall receive per share the kind and amount of
securities, cash or other property received per share by a plurality of such
shares.

                  Promptly after an Adjustment Event, the Maker shall mail to
the Holder a notice of the adjustment together with a certificate from the
Maker's independent public accountants briefly stating the facts requiring the
adjustment and the manner of computing it.

                  If (i) the Maker takes any action that would cause an
Adjustment Event, (ii) there is a liquidation or dissolution of the Maker or
(iii) the Maker declares a cash dividend, the Maker shall mail to the Holder a
notice stating the proposed record date for a dividend or distribution or the
proposed effective date of a subdivision, combination, reclassification,
consolidation, merger, transfer, lease, liquidation or dissolution, the Maker
shall mail the notice at least 15 days before such date.

                  If, during any period of twenty (20) consecutive trading days,
the closing sale price of the Common Stock is at least $8.00 per share (as
adjusted for all Adjustment Events occurring after the date of this Note), the
principal of and all accrued interest on this Note shall be automatically

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converted, without further action on the part of the Holder, into shares of
Common Stock at the Conversion Price in effect on the last Trading Day of such
period.

                  In connection with any conversion of this Note, the Holder
shall surrender this Note and deliver it, together with written instructions to
convert in the form attached hereto, to the Maker at its principal executive
office. The date of such delivery shall be deemed the date of conversion. The
Maker shall, as soon as practicable, issue and deliver to a location in the
United States designated by the Holder certificates representing the securities
(or other assets) to which the Holder is entitled as a result of such conversion
together with a note for the unconverted balance.

                  The Maker shall not be required to issue fractions of shares
of Common Stock upon conversion and in lieu thereof any fractional share shall
be rounded up or down to the nearest whole share. The Maker shall reserve and
shall at all times have reserved out of its authorized but unissued shares of
Common Stock sufficient shares of Common Stock to permit the conversion of the
unpaid principal amount and accrued interest as provided for herein. The Maker
shall list such shares on any national securities exchange on which the Common
Stock is then listed. If the Holder converts this Note, the Maker shall pay any
documentary, stamp or similar issue or transfer tax due on such conversion
except that the Holder shall pay any such tax due because the shares are issued
in a name other than the Holder's.

                  The certificates representing shares of Common Stock issued
upon conversion of this Note shall bear a legend to the effect that such shares
are not registered under the 1933 Act and may not be sold, assigned or otherwise
transferred or hypothecated except in accordance with the registration
provisions of the 1933 Act or an exemption therefrom and in accordance with the
provisions of that certain Investor Rights Agreement dated as of February 8,
2001 among New Valley Corporation, Ladenburg, Thalmann Group Inc., Berliner
Effektengesellschaft AG, the Maker, Frost- Nevada, Limited Partnership and the
Principals party thereto ("Investor Rights Agreement"). This legend shall be
removed on receipt of an opinion of counsel reasonably satisfactory to the Maker
that such legend is no longer required.

         2.       Change of Control

                  (i) Promptly after the occurrence of a Change of Control (as
         hereinafter defined) (the date of such occurrence being the "Change of
         Control Date"), the Maker shall commence (or cause to be commenced) an
         offer to purchase all outstanding Notes pursuant to the terms described
         in paragraph (iii) of this "Change of Control" section (the "Change of
         Control Offer") at a purchase price equal to the unpaid principal
         amount of this Note and accrued interest thereon (the "Change of
         Control Amount") on the Change of Control Payment Date (as hereinafter
         defined), and shall purchase (or cause the purchase of) any Notes
         tendered in the Change of Control Offer pursuant to the terms hereof.
         As used in this Note, the term "Notes" means all Convertible Promissory
         Notes of the Maker of like tenor to this Note (except as to principal
         amount, interest rate and Conversion Price). The Change of Control
         Amount shall be payable in cash.

                  (ii) Within 10 days following a Change in Control Date, the
         Maker shall send, by first-class mail, postage prepaid, a notice to the
         Holder. Such notice shall contain all instructions and materials

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         necessary to enable the Holder to tender this Note pursuant to the
         Change of Control Offer and shall state:

                           (a) that a Change of Control has occurred, that a
                  Change of Control Offer is being made pursuant to this "Change
                  of Control" section and that all Notes validly tendered and
                  not withdrawn will be accepted for payment;

                           (b) the Change of Control Amount and the purchase
                  date (which must be no earlier than 10 days nor later than 20
                  days from the date such notice is mailed, other than as may be
                  required by law) (the "Change of Control Payment Date");

                           (c) that any Notes not tendered will continue to
                  accrue interest;

                           (d) that, unless the Maker defaults in making payment
                  therefor, any Note accepted for payment pursuant to the Change
                  of Control Offer shall cease to accrue interest after the
                  Change of Control Payment Date;

                           (e) that holders electing to have any Notes purchased
                  pursuant to a Change of Control Offer will be required to
                  surrender such Notes, properly endorsed for transfer, together
                  with such other customary documents as the Maker may
                  reasonably request to the Maker at the address specified in
                  the notice prior to the close of business on the business day
                  prior to the Change of Control Payment Date;

                           (f) that holders of Notes will be entitled to
                  withdraw their election if the Maker receives, not later than
                  two business days prior to the Change of Control Payment Date,
                  a telegram, facsimile transmission or letter setting forth the
                  name of the holder, the principal amount of the Notes the
                  holder delivered for purchase and a statement that such holder
                  is withdrawing its election to have such Notes purchased;

                           (g) that holders who tender only a portion of their
                  Notes will, upon purchase of the Notes tendered, be issued a
                  Note representing the Notes not purchased; and

                           (h) the circumstances and relevant facts regarding
                  such Change of Control (including information with respect to
                  pro forma historical income, cash flow and capitalization
                  after giving effect to such Change of Control).

                  (iii) The Maker will comply with any tender offer rules under
         the Exchange Act which then may be applicable in connection with any
         offer made by the Maker to repurchase the Notes as a result of a Change
         of Control. If the provisions of any securities laws or regulations
         conflict with provisions of this Note, in reliance on an opinion of
         counsel, the Maker may comply with the applicable securities laws and
         regulations and shall not be deemed to have breached its obligation
         under this Note by virtue thereof.

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                  (iv) On the Change of Control Payment Date, the Maker shall
         (A) accept for payment the Notes validly tendered pursuant to the
         Change of Control Offer, (B) pay to the holders of Notes so accepted
         the Change of Control Amount therefor in cash as provided above and (C)
         cancel each surrendered Note. Unless the Maker defaults in the payment
         for the Notes tendered pursuant to the Change of Control Offer,
         interest will cease to accrue with respect to the Notes tendered and
         all rights of holders of such tendered Notes will terminate, except for
         the right to receive payment therefor on the Change of Control Payment
         Date.

                  (v) To accept the Change of Control Offer, the holder of a
         Note shall deliver, prior to the close of business on the business day
         prior to the Change of Control Payment Date, written notice to the
         Maker (or an agent designated by the Maker for such purpose) of such
         holder's acceptance, together with the Notes with respect to which the
         Change of Control Offer is being accepted, duly endorsed for transfer.

                  (vi) For the avoidance of doubt, nothing in this "Change of
         Control" section shall restrict the right of the holders of Notes, in
         connection with a Change of Control, to convert and to receive the kind
         and amount of consideration payable to holders of Common Stock in
         respect of the Common Stock into which the Notes may be converted.

                  (vii)    As used in this "Change of Control" section,

                  "Change of Control" means: (a) the sale, lease, transfer,
                  conveyance, merger, consolidation or other disposition (other
                  than a merger or consolidation that does not result in any
                  change in the Maker's stock and in which a majority of the
                  successor's voting securities is held by holders of the
                  Maker's Common Stock immediately before such transaction ), in
                  one or a series of related transactions, of all or
                  substantially all the assets of the Maker and its
                  subsidiaries, taken as a whole, to any "person" (as such term
                  is used in Section 13(d)(3) of the Exchange Act), (b) the
                  consummation of any transaction (including any merger or
                  consolidation) the result of which is that any "person" (as
                  defined above), other than the Principals party to the
                  Investor Rights Agreement, New Valley Corporation, Ladenburg,
                  Thalmann Group Inc., Berliner Effektengesellschaft AG and Dr.
                  Phillip Frost, individually or collectively, becomes the
                  beneficial owner (as determined in accordance with Rules 13d-3
                  and 13d-5 under the Exchange Act, except that a person will be
                  deemed to have beneficial ownership of all Voting Securities
                  (as hereinafter defined) that such person has the right to
                  acquire, whether such right is exercisable immediately or only
                  after the passage of time), directly or indirectly, of more
                  than 50% of the Voting Securities of the Maker, or (c) the
                  first day on which a majority of the members of the Board of
                  Directors of the Maker are not Continuing Directors;

                  "Continuing Directors" means individuals who constituted the
                  Board of Directors of the Maker on the date hereof (the
                  "Incumbent Directors"); provided that any individual becoming
                  a director after the date hereof shall be considered to be an
                  Incumbent Director if such individual's election, appointment
                  or nomination was recommended or approved by at least
                  two-thirds of the other Incumbent Directors continuing in

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                  office following such election, appointment or nomination
                  present, in person or by telephone, at any meeting of the
                  Board of Directors of the Maker, after the giving of a
                  sufficient notice to each Incumbent Director so as to provide
                  a reasonable opportunity for such Incumbent Directors to be
                  present at such meeting; and

                  "Voting Securities" means securities of the Maker ordinarily
                  having the power to vote for the election of directors of the
                  Maker.

         3.       Events of Default

                  Upon the occurrence of any of the following events (herein
called "Events of Default"):

                  (i) The Maker shall fail to make any payment of principal on
         this Note on the date specified herein for such payment;

                  (ii) The Maker shall fail to make any payment of interest on
         this Note or any other payment due under this Note or the Pledge
         Agreement within ten (10) days after it is due;

                  (iii) (a) The Maker or Ladenburg shall commence, or consent to
         the entry of an order for relief in, any proceeding or other action
         relating to it in bankruptcy or seek reorganization, arrangement,
         readjustment of its debts, receivership, dissolution, liquidation,
         winding-up, composition or any other relief under any bankruptcy law,
         or under any other insolvency, reorganization, liquidation,
         dissolution, arrangement, composition, readjustment of debt or any
         other similar act or law, of any jurisdiction, domestic or foreign, now
         or hereafter existing; or (b) the Maker or Ladenburg shall admit the
         material allegations of any petition or pleading in connection with any
         such proceeding; or (c) the Maker or Ladenburg shall apply for, or
         consent or acquiesce to, the appointment of a receiver, conservator,
         trustee or similar officer for it or for all or a substantial part of
         its property; or (d) the Maker or Ladenburg shall make a general
         assignment for the benefit of creditors; or (e) the Maker or Ladenburg
         shall become unable, admit in writing its inability or fail generally
         to pay its debts as they become due;

                  (iv) (a) The commencement of any proceedings or the taking of
         any other action against the Maker or Ladenburg in bankruptcy or
         seeking reorganization, arrangement, readjustment of its debts,
         liquidation, dissolution, arrangement, composition, or any other relief
         under any bankruptcy law or any other similar act or law of any
         jurisdiction, domestic or foreign, now or hereafter existing and the
         continuance of any of such events for sixty (60) days undismissed,
         unbonded or undischarged; or (b) the appointment of a receiver,
         conservator, trustee or similar officer for the Maker or Ladenburg for
         any of its property and the continuance of any of such events for sixty
         (60) days undismissed, unbonded or undischarged; or (c) the issuance of
         a warrant of attachment, execution or similar process against any of
         the property of the Maker or Ladenburg and the continuance of such
         event for sixty (60) days undismissed, unbonded and undischarged;

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                  (v) The Maker or Ladenburg shall default with respect to any
         indebtedness of $250,000 or more for borrowed money if either (a) such
         default is a payment default or the effect of such default is to
         accelerate the maturity of such indebtedness (in each instance giving
         effect to any applicable grace periods) or (b) the holder of such
         indebtedness declares the Maker or Ladenburg to be in default (giving
         effect to any applicable grace periods);

                  (vi) The failure by the Maker to observe any of the covenants
         contained in this Note (other than the covenants to pay principal and
         interest and the covenants in Sections 2 or 5) or in the Pledge
         Agreement (other than Section 4.14) which failure is not cured within
         30 days after notice thereof is given to the Maker by any of the
         Secured Parties thereunder (or, if such failure is not capable of being
         cured within such 30-day period, the failure of the Maker to continue
         to proceed in a diligent matter to effect such cure);

                  (vii) The failure by the Maker to observe any of the covenants
         contained in Sections 2 or 5 of this Note or in Section 4.14 of the
         Pledge Agreement or the lien of Pledge Agreement will at any time not
         constitute a first perfected lien on the collateral intended to be
         covered thereby; or

                  (viii) Any judgment or judgments against the Maker or
         Ladenburg or any attachment, levy or execution against any of its
         properties for any amount in excess of $250,000 in the aggregate shall
         remain unpaid, or shall not be released, discharged, dismissed, stayed
         or fully bonded for a period of sixty (60) days or more after its
         entry, issue or levy, as the case may be;

then, and in any such event, the Holder, at its option and with written notice
to the Maker, may declare the entire principal amount of this Note then
outstanding together with accrued unpaid interest thereon immediately due and
payable, and the same shall forthwith become immediately due and payable without
presentment, demand, protest, or other notice of any kind, all of which are
expressly waived. The Events of Default listed herein are solely for the purpose
of protecting the interests of the Holder of this Note. If the Note is not paid
in full upon acceleration, as required above, interest shall accrue on the
outstanding principal of and interest on this Note from the date of the Event of
Default up to and including the date of payment at a rate equal to the lesser of
fifteen percent (15%) per annum or the maximum interest rate permitted by
applicable law.

                  Upon the occurrence a default under this Note (whether or not
it has become an Event of Default), the Maker agrees to pay the costs, expenses,
attorneys' and other fees paid or incurred by the Holder, or adjudged by a
court, including: (i) costs of suit and such amount as the court adjudges for
the fees of an attorney in an action to enforce this Note in whole or in part;
and (ii) reasonable costs of collection, costs and expenses of, and attorneys'
fees incurred or paid towards, the collection, enforcement, or sale of this Note
in whole or in part, or of any security for it.

         4.       Payment of Claims

                  Pursuant to Section 7.6 of the Stock Purchase Agreement, the
Maker may offset against amounts due under this Note any amounts owed by the
Holder to the Maker except that, prior to December 31, 2005, the Maker shall not
offset against amounts due under this Note any Claims against the Holder prior

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to settlement or the entry of a final judgment and the expiration of all
applicable appeal periods and the failure of the Holder to pay such Claim within
ten (10) Business Days after such settlement or expiration. If any payment of
the indemnity obligations of the Holder pursuant to Section 8.1 of the Stock
Purchase Agreement is required to be made, the Holder may satisfy such payment
by delivery to the Maker of Notes acquired by it pursuant to the Stock Purchase
Agreement in a principal amount, together with accrued interest, equal to the
amount of the Claims for which payment is required in which case the Maker will
issue a new Note to the Holder for the remainder.

         5.       Consolidation and Mergers.

                  The Maker shall not consolidate or merge into, or transfer or
lease all or substantially all of its assets to, any person unless (1) the
person is a corporation; (2) the person assumes in a writing reasonably
acceptable to the Holder all the obligations of the Maker under this Note; and
(3) immediately after the transaction no Event of Default exists. The surviving,
transferee or lessee corporation shall be the successor Maker, but the
predecessor Maker in the case of a transfer or lease shall not be released from
the obligation to pay the principal of and interest of this Note.

         6.       Additional Provisions

                  The Maker and each other party liable herefor, whether
principal, endorser, guarantor or otherwise, jointly and severally hereby (i)
waive presentment, demand, protest, notice of dishonor and/or protest, notice of
non-payment and all other notices or demands in connection with the delivery,
acceptance, performance, default, enforcement or guaranty of this Note, and (ii)
waive recourse to suretyship defenses generally, including extensions of time,
releases of security and other indulgences which may be granted from time to
time by the Holder to the Maker or any party liable herefor.

                  Nothing contained in this Note or in any other agreement
between the Maker and the Holder shall require the Maker to pay, or the Holder
to accept, interest in an amount which would subject the Holder to any penalty
or forfeiture under applicable law. In no event shall the total of all charges
payable hereunder, whether of interest or of such other charges which may or
might be characterized as interest, exceed the maximum rate permitted to be
charged under applicable law. Should the Holder receive any payment which is or
would be in excess of that permitted to be charged under such applicable law,
such payment shall have been and shall be deemed to have been made in error and
shall automatically be applied to reduce the principal balance outstanding on
this Note.

                  The Holder shall not, by any act, delay, omission or
otherwise, be deemed to have waived any of its rights and/or remedies hereunder,
and no waiver whatsoever shall be valid unless in writing, signed by the Holder,
and then only to the extent therein set forth. The making of any demands or the
giving of any notices by the Holder or a waiver by the Holder of any right
and/or remedy hereunder on any one occasion shall not be construed as a bar to
or waiver of any right and/or remedy which the Holder would otherwise have on
any future occasion. All rights and remedies of the Holder shall be cumulative
and may be exercised singly or concurrently.

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                  The terms and provisions hereof shall survive the payment,
cancellation or surrender of this Note. Any instrument taken by the Holder in
payment of, or for application against, any obligation of the Maker or any other
party liable herefor shall not operate as a discharge of such obligation until
the instrument is finally paid, notwithstanding the fact that a bank may be the
maker, drawer or acceptor of such instrument.

                  This Note may be assigned by the Holder only as permitted by
the provisions of the Investor Rights Agreement. In the event of a permitted
assignment of less than the entire unpaid principal amount of this Note, at the
request of the Holder the Maker shall issue new Notes to the transferee and the
Holder in the amounts assigned and not assigned, respectively. If this Note is
lost, destroyed or wrongfully taken, the Maker shall issue a replacement Note.
The Maker may require a reasonable indemnity bond.

                  The authority to assert, and to determine to defend against,
claims with respect to this Note on behalf of the Maker shall be vested solely
in the Enforcement Committee established under the Stock Purchase Agreement.
This Note may not be amended and no rights of the Maker hereunder may be waived
except with the consent of the Enforcement Committee.

                  This Note shall be governed by, and construed in accordance
with, the law of the State of New York without giving effect to principles of
conflicts of law. The provisions of Section 10.2 (Notices) and 10.12 of the
Stock Purchase Agreement (Consent to Jurisdiction and Service of Process) shall
apply to this Note as if fully set forth herein. THE MAKER HEREBY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
THIS NOTE OR ANY TRANSACTION RELATING THERETO.

                                      LADENBURG THALMANN FINANCIAL SERVICES INC.

                                      By: ______________________________________
                                            Name:
                                            Title:

                                        9EXHIBIT 4.3

                       SENIOR CONVERTIBLE PROMISSORY NOTE

$10,000,000.00                                                      May 7, 2001

         FOR VALUE RECEIVED, LADENBURG THALMANN FINANCIAL SERVICES
INC., a Florida corporation ("Maker"), having an address at 1055 Stewart Avenue,
Bethpage, New York 11714, hereby promises to pay to Frost-Nevada, Limited
Partnership, a Nevada limited partnership, its successors and/or permitted
assigns (any of which is hereinafter referred to as "Holder"), at 3500 Lakeside
Court, Suite 200, Reno, Nevada 89509, in lawful money of the United States, the
sum of Ten Million Dollars and No Cents ($10,000,000.00) on December 31, 2005.
Interest on the unpaid principal amount of this Note shall be paid at the rate
of eight and one-half percent (8-1/2%) per annum on each March 31, June 30,
September 30 and December 31, commencing June 30, 2001 or the lesser of fifteen
percent (15%) per annum or the maximum interest rate permitted by applicable law
following an Event of Default. At the Holder's request payments shall be made by
wire transfer to an account designated by the Holder. If a payment date is not a
business day, payment may be made on the next business day and interest shall
accrue for the intervening period. This Note may not be prepaid.

         The Holder may, with or without notice to the Maker or any guarantor or
other party liable herefor, extend or renew this Note, or extend the time for
making payment of any amount provided for herein, or accept any amount in
advance, all without affecting the liability of the Maker or any other party or
guarantor liable herefor.

         This Note is issued pursuant to the terms of that certain Loan
Agreement ("Loan Agreement") dated as of February 8, 2001, as amended, between
the Maker and Frost-Nevada, Limited Partnership and the Maker and the Holder are
entitled to the benefits provided for therein. Terms used but not defined herein
shall have their respective meanings assigned in the Loan Agreement. This Note
is entitled to the benefits of the security for the payment hereof provided
pursuant to that certain Pledge and Security Agreement dated May 7, 2001 between
the Maker, the Secured Parties party thereto and US Bank Trust National
Association, as Collateral Agent ("Pledge Agreement").

         1.       Conversion of Note

                  The principal of and accrued interest on this Note shall be
convertible, in whole or in part, at any time, at the election of the Holder,
into that number of fully paid and non-assessable shares of the Maker's common
stock, par value $0.0001 per share ("Common Stock"), determined by dividing the
amount of principal and interest to be so converted by the "Conversion Price"
(as hereinafter defined) in effect at the time notice of conversion is given to
the Maker as set forth below. As used herein, "Conversion Price" means,
initially, $1.5390594. The Conversion Price shall be decreased ("Conversion

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Price Adjustment") by the amount obtained by taking the product of $1.5390594
and the Final Purchase Price Adjustment Percentage (as such term is defined in
the Stock Purchase Agreement, as amended). Notwithstanding the foregoing, if the
Conversion Price, after adjustment as set forth in the previous sentence, would
not yield a number of shares of Common Stock equal to at least the sum of (x)
5,000,000 shares of Common Stock and (y) 20% of the sum of (i) the additional
shares issuable to Lender as a result of the Conversion Price Adjustment and
(ii) all other shares of Common Stock to be issued and issuable to LTGI and
Berliner pursuant to Section 2.4 of the Stock Purchase Agreement, the Conversion
Price will be further adjusted such that Lender, upon conversion of this Note,
will receive such sum of 5,000,000 shares of Common Stock and 20% of the total
number of additional shares issuable as a result of the Conversion Price
Adjustment and Section 2.4 of the Stock Purchase Agreement.

                  If, at any time after the date hereof, there occurs, with
respect to the Common Stock, a reclassification, stock split, stock dividend,
spin-off or distribution, share combination or other similar change affecting
the Common Stock as a whole and all holders thereof or if the Maker shall
consolidate with, or merge with or into, any other entity, sell or transfer all
or substantially all its assets or engage in any reorganization,
reclassification or recapitalization which is effected in such a manner that the
holders of Common Stock are entitled to receive stock, securities, cash or other
assets with respect to or in exchange for Common Stock (each, an "Adjustment
Event"), the Conversion Price and the kind and amount of stock, securities, cash
or other assets issuable upon conversion of this Note in effect at the time of
the record date for such dividend or distribution or of the effective date of
such share combination, split, consolidation, merger, sale, transfer,
reorganization, reclassification or recapitalization shall be appropriately
adjusted so that the conversion of the Note after such time shall entitle the
Holder to receive the aggregate number of shares of Common Stock or securities,
cash and other assets which, if this Note hade been converted immediately prior
to such time, the Holder would have owned upon such conversion and been entitled
to receive by virtue of such Adjustment Event, provided that if the kind or
amount of securities, cash and other property is not the same for each share of
Common Stock held immediately prior to such reclassification, change,
consolidation, merger, sale, transfer, or conveyance, any Holder who fails to
exercise any right of election shall receive per share the kind and amount of
securities, cash or other property received per share by a plurality of such
shares.

                  Promptly after an Adjustment Event, the Maker shall mail to
the Holder a notice of the adjustment together with a certificate from the
Maker's independent public accountants briefly stating the facts requiring the
adjustment and the manner of computing it.

                  If (i) the Maker takes any action that would cause an
Adjustment Event, (ii) there is a liquidation or dissolution of the Maker or
(iii) the Maker declares a cash dividend, the Maker shall mail to the Holder a
notice stating the proposed record date for a dividend or distribution or the
proposed effective date of a subdivision, combination, reclassification,
consolidation, merger, transfer, lease, liquidation or dissolution, the Maker
shall mail the notice at least 15 days before such date.

                  If, during any period of twenty (20) consecutive trading days,
the closing sale price of the Common Stock is at least $8.00 per share (as
adjusted for all Adjustment Events occurring after the date of this Note), the

                                        2

<Page>

principal of and all accrued interest on this Note shall be automatically
converted, without further action on the part of the Holder, into shares of
Common Stock at the Conversion Price in effect on the last trading day of such
period.

                  In connection with any conversion of this Note, the Holder
shall surrender this Note and deliver it, together with written instructions to
convert in the form attached hereto, to the Maker at its principal executive
office. The date of such delivery shall be deemed the date of conversion. The
Maker shall, as soon as practicable, issue and deliver to a location in the
United States designated by the Holder certificates representing the securities
(or other assets) to which the Holder is entitled as a result of such conversion
together with a note representing the unconverted balance.

                  The Maker shall not be required to issue fractions of shares
of Common Stock upon conversion and in lieu thereof any fractional share shall
be rounded up or down to the nearest whole share. The Maker shall reserve and
shall at all times have reserved out of its authorized but unissued shares of
Common Stock sufficient shares of Common Stock to permit the conversion of the
unpaid principal amount and accrued interest as provided for herein. The Maker
shall list such shares on any national securities exchange on which the Common
Stock is then listed. If the Holder converts this Note, the Maker shall pay any
documentary, stamp or similar issue or transfer tax due on such conversion,
except that the Holder shall pay any such tax due because the shares are issued
in a name other than the Holder's.

                  The certificates representing shares of Common Stock issued
upon conversion of this Note shall bear a legend to the effect that such shares
are not registered under the 1933 Act and may not be sold, assigned or otherwise
transferred or hypothecated except in accordance with the registration
provisions of the 1933 Act or an exemption therefrom and in accordance with the
provisions of that certain Investor Rights Agreement dated as of February 8,
2001 among New Valley Corporation, Ladenburg, Thalmann Group Inc., Berliner
Effektengesellschaft AG, the Maker and the Principals party thereto and
Frost-Nevada, Limited Partnership ("Investor Rights Agreement"). This legend
shall be removed on receipt of an opinion of counsel reasonably satisfactory to
the Maker that such legend is no longer required.

         2.       Change of Control

                  (i) Promptly after the occurrence of a Change of Control (as
         hereinafter defined) (the date of such occurrence being the "Change of
         Control Date"), the Maker shall commence (or cause to be commenced) an
         offer to purchase all outstanding Notes pursuant to the terms described
         in paragraph (iii) of this "Change of Control" section (the "Change of
         Control Offer") at a purchase price equal to the unpaid principal
         amount of this Note and accrued interest thereon (the "Change of
         Control Amount") on the Change of Control Payment Date (as hereinafter
         defined), and shall purchase (or cause the purchase of) any Notes
         tendered in the Change of Control Offer pursuant to the terms hereof.
         As used in this Note, the term "Notes" means all Convertible Promissory
         Notes of the Maker of like tenor to this Note (except as to principal
         amount, interest rate and Conversion Price). The Change of Control
         Amount shall be payable in cash.

                  (ii) Within 10 days following a Change in Control Date, the
         Maker shall send, by first-class mail, postage prepaid, a notice to the
         Holder. Such notice shall contain all instructions and materials

                                        3

<Page>

         necessary to enable the Holder to tender this Note pursuant to the
         Change of Control Offer and shall state:

                           (a) that a Change of Control has occurred, that a
                  Change of Control Offer is being made pursuant to this "Change
                  of Control" section and that all Notes validly tendered and
                  not withdrawn will be accepted for payment;

                           (b) the Change of Control Amount and the purchase
                  date (which must be no earlier than 10 days nor later than 20
                  days from the date such notice is mailed, other than as may be
                  required by law) (the "Change of Control Payment Date");

                           (c) that any Notes not tendered will continue to
                  accrue interest;

                           (d) that, unless the Maker defaults in making payment
                  therefor, any Note accepted for payment pursuant to the Change
                  of Control Offer shall cease to accrue interest after the
                  Change of Control Payment Date;

                           (e) that holders electing to have any Notes purchased
                  pursuant to a Change of Control Offer will be required to
                  surrender such Notes, properly endorsed for transfer, together
                  with such other customary documents as the Maker may
                  reasonably request to the Maker at the address specified in
                  the notice prior to the close of business on the business day
                  prior to the Change of Control Payment Date;

                           (f) that holders of Notes will be entitled to
                  withdraw their election if the Maker receives, not later than
                  two business days prior to the Change of Control Payment Date,
                  a telegram, facsimile transmission or letter setting forth the
                  name of the holder, the principal amount of the Notes the
                  holder delivered for purchase and a statement that such holder
                  is withdrawing its election to have such Notes purchased;

                           (g) that holders who tender only a portion of their
                  Notes will, upon purchase of the Notes tendered, be issued a
                  Note representing the Notes not purchased; and

                           (h) the circumstances and relevant facts regarding
                  such Change of Control (including information with respect to
                  pro forma historical income, cash flow and capitalization
                  after giving effect to such Change of Control).

                  (iii) The Maker will comply with any tender offer rules under
         the Exchange Act which then may be applicable in connection with any
         offer made by the Maker to repurchase the Notes as a result of a Change
         of Control. If the provisions of any securities laws or regulations
         conflict with provisions of this Note, in reliance on an opinion of
         counsel, the Maker may comply with the applicable securities laws and
         regulations and shall not be deemed to have breached its obligation
         under this Note by virtue thereof.

                  (iv) On the Change of Control Payment Date, the Maker shall
         (A) accept for payment the Notes validly tendered pursuant to the
         Change of Control Offer, (B) pay to the holders of Notes so accepted

                                       4

<Page>

         the Change of Control Amount therefor in cash as provided above and (C)
         cancel each surrendered Note. Unless the Maker defaults in the payment
         for the Notes tendered pursuant to the Change of Control Offer,
         interest will cease to accrue with respect to the Notes tendered and
         all rights of holders of such tendered Notes will terminate, except for
         the right to receive payment therefor on the Change of Control Payment
         Date.

                  (v) To accept the Change of Control Offer, the holder of a
         Note shall deliver, prior to the close of business on the business day
         prior to the Change of Control Payment Date, written notice to the
         Maker (or an agent designated by the Maker for such purpose) of such
         holder's acceptance, together with the Notes with respect to which the
         Change of Control Offer is being accepted, duly endorsed for transfer.

                  (vi) For the avoidance of doubt, nothing in this "Change of
         Control" section shall restrict the right of the holders of Notes, in
         connection with a Change of Control, to convert and to receive the kind
         and amount of consideration payable to holders of Common Stock in
         respect of the Common Stock into which the Notes may be converted.

                  (vii)    As used in this "Change of Control" section,

                  "Change of Control" means: (a) the sale, lease, transfer,
                  conveyance, merger, consolidation or other disposition (other
                  than a merger or consolidation that does not result in any
                  change in the Maker's stock and in which a majority of the
                  successor's voting securities is held by holders of the
                  Maker's Common Stock immediately before such transaction ), in
                  one or a series of related transactions, of all or
                  substantially all the assets of the Maker and its
                  subsidiaries, taken as a whole, to any "person" (as such term
                  is used in Section 13(d)(3) of the Exchange Act), (b) the
                  consummation of any transaction (including any merger or
                  consolidation) the result of which is that any "person" (as
                  defined above), other than the Principals party to the
                  Investor Rights Agreement, New Valley Corporation, Ladenburg,
                  Thalmann Group Inc., Berliner Effektengesellschaft AG and Dr.
                  Phillip Frost, individually or collectively, becomes the
                  beneficial owner (as determined in accordance with Rules 13d-3
                  and 13d-5 under the Exchange Act, except that a person will be
                  deemed to have beneficial ownership of all Voting Securities
                  (as hereinafter defined) that such person has the right to
                  acquire, whether such right is exercisable immediately or only
                  after the passage of time), directly or indirectly, of more
                  than 50% of the Voting Securities of the Maker, or (c) the
                  first day on which a majority of the members of the Board of
                  Directors of the Maker are not Continuing Directors;

                  "Continuing Directors" means individuals who constituted the
                  Board of Directors of the Maker on the date hereof (the
                  "Incumbent Directors"); provided that any individual becoming
                  a director after the date hereof shall be considered to be an
                  Incumbent Director if such individual's election, appointment
                  or nomination was recommended or approved by at least
                  two-thirds of the other Incumbent Directors continuing in
                  office following such election, appointment or nomination
                  present, in person or by telephone, at any meeting of the
                  Board of Directors of the Maker, after the giving of a

                                        5

<Page>

                  sufficient notice to each Incumbent Director so as to provide
                  a reasonable opportunity for such Incumbent Directors to be
                  present at such meeting; and

                  "Voting Securities" means securities of the Maker ordinarily
                  having the power to vote for the election of directors of the
                  Maker.

         3.       Events of Default

                  Upon the occurrence of any of the following events (herein
called "Events of Default"):

                  (i) The Maker shall fail to make any payment of principal on
         this Note on the date specified herein for such payment;

                  (ii) The Maker shall fail to make any payment of interest on
         this Note or any other payment due under this Note or the Pledge
         Agreement within ten (10) days after it is due;

                  (iii) (a) The Maker or Ladenburg shall commence, or consent to
         the entry of an order for relief in, any proceeding or other action
         relating to it in bankruptcy or seek reorganization, arrangement,
         readjustment of its debts, receivership, dissolution, liquidation,
         winding-up, composition or any other relief under any bankruptcy law,
         or under any other insolvency, reorganization, liquidation,
         dissolution, arrangement, composition, readjustment of debt or any
         other similar act or law, of any jurisdiction, domestic or foreign, now
         or hereafter existing; or (b) the Maker or Ladenburg shall admit the
         material allegations of any petition or pleading in connection with any
         such proceeding; or (c) the Maker or Ladenburg shall apply for, or
         consent or acquiesce to, the appointment of a receiver, conservator,
         trustee or similar officer for it or for all or a substantial part of
         its property; or (d) the Maker or Ladenburg shall make a general
         assignment for the benefit of creditors; or (e) the Maker or Ladenburg
         shall become unable, admit in writing its inability or fail generally
         to pay its debts as they become due;

                  (iv) (a) The commencement of any proceedings or the taking of
         any other action against the Maker or Ladenburg in bankruptcy or
         seeking reorganization, arrangement, readjustment of its debts,
         liquidation, dissolution, arrangement, composition, or any other relief
         under any bankruptcy law or any other similar act or law of any
         jurisdiction, domestic or foreign, now or hereafter existing and the
         continuance of any of such events for sixty (60) days undismissed,
         unbonded or undischarged; or (b) the appointment of a receiver,
         conservator, trustee or similar officer for the Maker or Ladenburg for
         any of its property and the continuance of any of such events for sixty
         (60) days undismissed, unbonded or undischarged; or (c) the issuance of
         a warrant of attachment, execution or similar process against any of
         the property of the Maker or Ladenburg and the continuance of such
         event for sixty (60) days undismissed, unbonded and undischarged;

                  (v) The Maker or Ladenburg shall default with respect to any
         indebtedness of $250,000 or more for borrowed money if either (a) such
         default is a payment default or the effect of such default is to

                                        6

<Page>

         accelerate the maturity of such indebtedness (in each instance giving
         effect to any applicable grace periods) or (b) the holder of such
         indebtedness declares the Maker or Ladenburg to be in default (giving
         effect to any applicable grace periods);

                  (vi) The failure by the Maker to observe any of the covenants
         contained in this Note (other than the covenants to pay principal and
         interest and the covenants in Sections 2 or 5) or in the Pledge
         Agreement (other than Section 4.14) which failure is not cured within
         30 days after notice thereof is given to the Maker by any of the
         Secured Parties thereunder (or, if such failure is not capable of being
         cured within such 30-day period, the failure of the Maker to continue
         to proceed in a diligent matter to effect such cure);

                  (vii) The failure by the Maker to observe any of the covenants
         contained in Sections 2 or 5 of this Note or in Section 4.14 of the
         Pledge Agreement or the lien of Pledge Agreement will at any time not
         constitute a first perfected lien on the collateral intended to be
         covered thereby; or

                  (viii) Any judgment or judgments against the Maker or
         Ladenburg or any attachment, levy or execution against any of its
         properties for any amount in excess of $250,000 in the aggregate shall
         remain unpaid, or shall not be released, discharged, dismissed, stayed
         or fully bonded for a period of sixty (60) days or more after its
         entry, issue or levy, as the case may be;

then, and in any such event, the Holder, at its option and with written notice
to the Maker, may declare the entire principal amount of this Note then
outstanding together with accrued unpaid interest thereon immediately due and
payable, and the same shall forthwith become immediately due and payable without
presentment, demand, protest, or other notice of any kind, all of which are
expressly waived. The Events of Default listed herein are solely for the purpose
of protecting the interests of the Holder of this Note. If the Note is not paid
in full upon acceleration, as required above, interest shall accrue on the
outstanding principal of and interest on this Note from the date of the Event of
Default up to and including the date of payment at a rate equal to the lesser of
fifteen percent (15%) per annum or the maximum interest rate permitted by
applicable law.

                  Upon the occurrence of a default under this Note (whether or
not it has become an Event of Default), the Maker agrees to pay the costs,
expenses, attorneys' and other fees paid or incurred by the Holder, or adjudged
by a court, including: (i) costs of suit and such amount as the court adjudges
for the fees of an attorney in an action to enforce this Note in whole or in
part; and (ii) reasonable costs of collection, costs and expenses of, and
attorneys' fees incurred or paid towards, the collection, enforcement, or sale
of this Note in whole or in part, or of any security for it.

         4.       Consolidation and Mergers.

                  The Maker shall not consolidate or merge into, or transfer or
lease all or substantially all of its assets to, any person unless (1) the
person is a corporation; (2) the person assumes in a writing reasonably
acceptable to the Holder all the obligations of the Maker under this Note; and
(3) immediately after the transaction no Event of Default exists. The surviving,

                                        7

<Page>

transferee or lessee corporation shall be the successor Maker, but the
predecessor Maker in the case of a transfer or lease shall not be released from
the obligation to pay the principal of and interest of this Note.

         5.       Additional Provisions

                  The Maker and each other party liable herefor, whether
principal, endorser, guarantor or otherwise, jointly and severally hereby (i)
waive presentment, demand, protest, notice of dishonor and/or protest, notice of
non-payment and all other notices or demands in connection with the delivery,
acceptance, performance, default, enforcement or guaranty of this Note, and (ii)
waive recourse to suretyship defenses generally, including extensions of time,
releases of security and other indulgences which may be granted from time to
time by the Holder to the Maker or any party liable herefor.

                  Nothing contained in this Note or in any other agreement
between the Maker and the Holder shall require the Maker to pay, or the Holder
to accept, interest in an amount which would subject the Holder to any penalty
or forfeiture under applicable law. In no event shall the total of all charges
payable hereunder, whether of interest or of such other charges which may or
might be characterized as interest, exceed the maximum rate permitted to be
charged under applicable law. Should the Holder receive any payment which is or
would be in excess of that permitted to be charged under such applicable law,
such payment shall have been and shall be deemed to have been made in error and
shall automatically be applied to reduce the principal balance outstanding on
this Note.

                  The Holder shall not, by any act, delay, omission or
otherwise, be deemed to have waived any of its rights and/or remedies hereunder,
and no waiver whatsoever shall be valid unless in writing, signed by the Holder,
and then only to the extent therein set forth. The making of any demands or the
giving of any notices by the Holder or a waiver by the Holder of any right
and/or remedy hereunder on any one occasion shall not be construed as a bar to
or waiver of any right and/or remedy which the Holder would otherwise have on
any future occasion. All rights and remedies of the Holder shall be cumulative
and may be exercised singly or concurrently.

                  The terms and provisions hereof shall survive the payment,
cancellation or surrender of this Note. Any instrument taken by the Holder in
payment of, or for application against, any obligation of the Maker or any other
party liable herefor shall not operate as a discharge of such obligation until
the instrument is finally paid, notwithstanding the fact that a bank may be the
maker, drawer or acceptor of such instrument.

                  This Note may be assigned by the Holder only as permitted by
the provisions of the Investor Rights Agreement. In the event of a permitted
assignment of less than the entire unpaid principal amount of this Note, at the

                                        8

<Page>

request of the Holder the Maker shall issue new Notes to the transferee and the
Holder in the amounts assigned and not assigned, respectively. If this Note is
lost, destroyed or wrongfully taken, the Maker shall issue a replacement Note.
The Maker may require a reasonable indemnity bond.

                  This Note shall be governed by, and construed in accordance
with, the law of the State of New York without giving effect to principles of
conflicts of law. The Maker hereby irrevocably appoints the President of GBI
Capital Management Corp., at its offices at 1055 Stewart Avenue, Bethpage, New
York 11714, its lawful agent and attorney to accept and acknowledge service of
any and all process against it in any action, suit or proceeding arising out of
or relating to this Note and upon whom such process may be served, with the same
effect as if the Maker were a resident of the State of New York and had been
lawfully served with such process in such jurisdiction, and waives all claims of
error by reason of such service. The Maker will enter into such agreements with
such agents as may be necessary to constitute and continue the appointment of
such agents hereunder. In the event that such agent and attorney resigns or
otherwise becomes incapable of acting as such, the Maker will appoint a
successor agent and attorney in the City of New York, reasonably satisfactory to
the Holder, with like powers. The Maker hereby irrevocably submits to the
exclusive jurisdiction of the United States District Court for the Southern
District of New York or any court of the State of New York located in the
Borough of Manhattan in the City of New York in any such action, suit or
proceeding arising out of or relating to this Note or any transaction relating
thereto, and agrees that any such action, suit or proceeding shall be brought
only in such court, provided, however, that such consent to jurisdiction is
solely for the purpose referred to in this paragraph and shall not be deemed to
be a general submission to the jurisdiction of said courts or in the State of
New York other than for such purpose. The Maker hereby irrevocably waives, to
the fullest extent permitted by Law, any objection that it may now or hereafter
have to the laying of the venue of any such action, suit or proceeding brought
in such a court and any claim that any such action, suit or proceeding brought
in such a court has been brought in an inconvenient forum. THE MAKER HEREBY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF THIS NOTE OR ANY TRANSACTION RELATING THERETO.

                                      LADENBURG THALMANN FINANCIAL SERVICES INC.

                                        /s/ Victor M. Rivas
                                    By: ________________________________________
                                            Name:    Victor M. Rivas
                                            Title:   CEO

                                        9

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