Document:

To:      Laurus Master Fund, Ltd.
         c/o Ironshore Corporate Services, Ltd.
         P.O. Box 1234 G.T
         Queensgate House
         South Church Street
         Grand Cayman, Cayman Islands

Date: April 2, 2004

To Whom It May Concern:

1. To secure the payment of all  Obligations  (as  hereafter  defined),  Synergy
Brands,  Inc.,  a  Delaware  corporation  (the  "Company")  each  of  the  other
undersigned  parties  (other than Laurus Master Fund,  Ltd  "Laurus"))  and each
other entity that is required to enter into this Master Security Agreement (each
an  "Assignor",  collectively,  the  "Assignors")  hereby  assigns and grants to
Laurus a continuing security interest in all of the following property now owned
or at any time hereafter acquired by any Assignor,  or in which any Assignor now
have or at any time in the future may acquire any right,  title or interest (the
"Collateral"): all accounts, inventory, equipment, goods, documents, instruments
(including,  without  limitation,  promissory notes),  contract rights,  general
intangibles (including,  without limitation, payment intangibles and an absolute
right to license on terms no less  favorable  than those current in effect among
our affiliates,  but not own intellectual  property),  chattel paper, supporting
obligations,  investment property  (including,  without  limitation,  all equity
interests  owned  by any  Assignor),  letter-of-credit  rights,  trademarks  and
tradestyles  in which any Assignor now have or hereafter  may acquire any right,
title or  interest,  all  proceeds  and  products  thereof  (including,  without
limitation,   proceeds  of  insurance)   and  all   additions,   accessions  and
substitutions thereto or therefore.  In the event any Assignor wishes to finance
the acquisition of any hereafter  acquired  equipment and/or inventory , in each
case, in the ordinary  course of business and have obtained a commitment  from a
financing  source to finance such equipment or inventory from an unrelated third
party,  Laurus agrees to, upon the request of the respective  Assignor,  release
its  security  interest on such  hereafter  acquired  equipment  or inventory so
financed by such third  party  financing  source.  Except as  otherwise  defined
herein,  all capitalized  terms used herein shall have the meaning provided such
terms in the Securities Purchase Agreement referred to below.

2. The term  "Obligations"  as used  herein  shall mean and  include  all debts,
liabilities and obligations  owing by each Assignor to Laurus arising under, out
of, or in connection with: (i) that certain Securities  Purchase Agreement dated
as of the date hereof by and  between  the  Company and Laurus (the  "Securities
Purchase Agreement"), (ii) that certain Secured Convertible Note dated as of the
date hereof made by the Company in favor of Laurus (the "Term Note"), (iii) that
certain  Warrant  dated as of the date  hereof  made by the  Company in favor of
Laurus (the "Warrant"),  (iv) that certain  Subsidiary  Guaranty dated as of the
date  hereof  made by certain  Subsidiaries  of the  Company,  (the  "Subsidiary
Guaranty"),  (v) that certain Registration Rights Agreement dated as of the date
hereof  by and  between  the  Company  and  Laurus  (the "  Registration  Rights
Agreement"),  (vi) this Master  Security  Agreement,  (vii) that  certain  Stock
Pledge  Agreement  dated as of the date hereof among the Company and Laurus (the
"Stock Pledge Agreement"),  (viii) that certain Escrow Agreement dated as of the
date hereof among the Company,  Laurus and the escrow agent  referred to therein
(the  "Escrow  Agreement"),  and (ix) that  certain  Intercompany  Subordination
Agreement dated as of the date hereof among the Company, certain Subsidiaries of
the  Company  and  Laurus  (the  "Intercompany  Subordination  Agreement")  (the
Securities  Purchase  Agreement,  the Term Note, the Warrant,  the  Registration
Rights Agreement,  the Subsidiary Guaranty, this Master Security Agreement,  the
Stock Pledge Agreement, the Escrow Agreement and the Intercompany  Subordination
Agreement, as each may be amended, modified,  restated or supplemented from time
to time, are  collectively  referred to as the  "Documents"),  and in connection
with any  documents,  instruments  or  agreements  relating  to or  executed  in
connection  with the  Documents  or any  documents,  instruments  or  agreements
referred to therein or otherwise, and in connection with any other indebtedness,
obligations or  liabilities  of any Assignor to Laurus,  whether now existing or
hereafter arising, direct or indirect,  liquidated or unliquidated,  absolute or
contingent,  due or not due and whether  under,  pursuant to or  evidenced  by a
note, agreement,  guaranty,  instrument or otherwise, in each case, irrespective
of the genuineness,  validity, regularity or enforceability of such Obligations,
or of any  instrument  evidencing  any of the  Obligations  or of any collateral
therefor or of the existence or extent of such  collateral,  and irrespective of
the allowability,  allowance or disallowance of any or all of the Obligations in
any case  commenced by or against any  Assignor  under Title 11,  United  States
Code,  including,  without  limitation,  obligations  or  indebtedness  of  each
Assignor for  post-petition  interest,  fees,  costs and charges that would have
accrued or been added to the Obligations but for the commencement of such case.

<PAGE>

3. Each Assignor hereby jointly and severally represents, warrants and covenants
to Laurus that:

(a) it is a corporation,  partnership or limited liability company,  as the case
may be, validly  existing,  in good standing and organized  under the respective
laws of its  jurisdiction  of  organization,  as set forh on Schedule A and each
Assignor  will  provide  Laurus  thirty (30) days' prior  written  notice of any
change in any of its respective jurisdiction of organization;

(b)  its  legal  name  is  as  set  forth  in  its  respective   Certificate  of
Incorporation  or other  organizational  document  (as  applicable)  as  amended
through  the date hereof on Schedule A and it will  provide  Laurus  thirty (30)
days' prior written notice of any change in any of its legal names;

(c) its organizational  identification number (if applicable) is as set forth on
Schedule A hereto and it will  provide  Laurus  thirty (30) days' prior  written
notice of any change in any of its organizational identification numbers;

(d) it is the  lawful  owner of the  respective  Collateral  and it has the sole
right to grant a  security  interest  therein  and will  defend  the  Collateral
against all claims and demands of all persons and entities;

(e) it will keep its respective  Collateral  free and clear of all  attachments,
levies,  taxes,  liens,  security  interests and  encumbrances of every kind and
nature ("Encumbrances"),  except (i) Encumbrances securing the Obligations, (ii)
Encumbrances  securing  indebtedness  of any Assignor owed to IIG Capital LLC or
any of its affiliates  under  agreements  currently in place on the date hereof,
and (iii) to the extent said Encumbrance does not secure  indebtedness in excess
of $100,000 and such  Encumbrance  is removed or otherwise  released  within ten
(10) days of the creation thereof;

(f) it will, at its and the other  Assignors  joint and several cost and expense
keep the  Collateral in good state of repair  (ordinary  wear and tear excepted)
and will not waste or destroy the same or any part thereof  other than  ordinary
course  discarding  of items  no  longer  used or  useful  in its or such  other
Assignors' business;

(g) it will not without Laurus' prior written consent, sell, exchange,  lease or
otherwise dispose of the Collateral, whether by sale, lease or otherwise, except
for the sale of inventory and collections of accounts receivable in the ordinary
course of business and for the disposition or transfer in the ordinary course of
business during any fiscal year of obsolete and worn-out  equipment or equipment
no longer necessary for its ongoing needs, having an aggregate fair market value
of not more than $25,000 and only to the extent that:

     (i) the proceeds of any such  disposition  are used to acquire  replacement
     Collateral which is subject to Laurus' security interest hereunder,  or are
     used to repay  Obligations or to pay general  corporate  expenses (it being
     understood  that  such  replacement  Collateral  may also be  subject  to a
     security interest in favor of IIG Capital LLC); and

     (ii)  following the  occurrence  of an Event of Default which  continues to
     exist  the  proceeds  of which  are  remitted  to Laurus to be held as cash
     collateral for the Obligations;

(h) it will insure or cause the Collateral to be insured with Laurus' name as an
additional insured against loss or damage by fire, theft,  burglary,  pilferage,
loss in transit and such other  hazards as Laurus  shall  specify in amounts and
under  policies by insurers as is customary in the case of companies  engaged in
businesses  similar to the Company's  business and all premiums thereon shall be
paid by such  Assignor  and copies of the policies  delivered to Laurus.  If any
such  Assignor  fails to do so,  Laurus may procure such  insurance and the cost
thereof shall be promptly  reimbursed by the  Assignors,  jointly and severally,
and shall constitute Obligations;

     (i) it will at all reasonable times allow Laurus or Laurus' representatives
     free access to and the right of inspection of the Collateral;

<PAGE>

(j) such  Assignor  (jointly  and  severally  with each other  Assignor)  hereby
indemnifies and saves Laurus harmless from all loss,  costs,  damage,  liability
and/or expense, including reasonable attorneys' fees, that Laurus may sustain or
incur to enforce  payment,  performance or fulfillment of any of the Obligations
and/or  in  the  enforcement  of  this  Master  Security  Agreement  or  in  the
prosecution or defense of any action or proceeding  either against Laurus or any
Assignor  concerning any matter growing out of or in connection with this Master
Security  Agreement,  and/or any of the Obligations and/or any of the Collateral
except  to the  extent  caused  by  Laurus'  own  gross  negligence  or  willful
misconduct  (as determined by a court of competent  jurisdiction  in a final and
nonappealable decision).

4. The occurrence of any of the following  events or conditions shall constitute
an "Event of Default":

(a)  Breach of any  covenant,  warranty,  representation  or  statement  made or
furnished  to Laurus by any Assignor or on any  Assignor's  benefit was false or
misleading  in any material  respect when made or  furnished,  and if subject to
cure, shall not be cured for a period of fifteen (15) days;

(b) the loss, theft, substantial damage, destruction,  sale or encumbrance to or
of any of the  Collateral  or the  making of any  levy,  seizure  or  attachment
thereof or thereon except to the extent:

     (i) such loss is covered by  insurance  proceeds  which are used to replace
     the item or repay Laurus; or

     (ii) said levy,  seizure or  attachment  does not  secure  indebtedness  in
     excess of  $100,000  and such  levy,  seizure  or  attachment  has not been
     removed or otherwise  released  within ten (10) days of the creation or the
     assertion thereof;

(b) any Assignor shall become insolvent, cease operations,  dissolve,  terminate
our  business  existence,  make 0 an  assignment  for the benefit of  creditors,
suffer the appointment of a receiver, trustee, liquidator or custodian of all or
any part of Assignors' property;

(c) any proceedings under any bankruptcy or insolvency law shall be commenced by
or against any  Assignor  and if  commenced  against any  Assignor  shall not be
dismissed within thirty (30) days;

(d) the Company shall repudiate, purport to revoke or fail to perform any or all
of its obligations  under the Note (after passage of applicable cure period,  if
any) in any material respect; or

(e) an  Event of  Default  shall  have  occurred  under  and as  defined  in the
Securities Purchase Agreement or in any other Document .

5. Upon the  occurrence  of any  Event of  Default  and at any time  thereafter,
Laurus may declare all Obligations  immediately due and payable and Laurus shall
have the remedies of a secured party provided in the Uniform  Commercial Code as
in effect in the State of New York,  this  Agreement and other  applicable  law.
Upon the occurrence of any Event of Default and at any time  thereafter,  Laurus
will have the right to take  possession of the  Collateral  and to maintain such
possession  on our premises or to remove the  Collateral  or any part thereof to
such other  premises as Laurus may desire.  Upon  Laurus'  request,  each of the
Assignors  shall  assemble or cause the  Collateral  to be assembled and make it
available to Laurus at a place  designated  by Laurus.  If any  notification  of
intended disposition of any Collateral is required by law, such notification, if
mailed,  shall be deemed  properly and  reasonably  given if mailed at least ten
(10) days before such  disposition,  postage prepaid,  addressed to any Assignor
either at such  Assignor's  address shown herein or at any address  appearing on
Laurus' records for such Assignor. Any proceeds of any disposition of any of the
Collateral  shall be  applied  by  Laurus  to the  payment  of all  expenses  in
connection with the sale of the Collateral, including reasonable attorneys' fees
and other  legal  expenses  and  disbursements  and the  reasonable  expense  of
retaking, holding, preparing for sale, selling, and the like, and any balance of
such proceeds may be applied by Laurus toward the payment of the  Obligations in
such order of application as Laurus may elect, and each Assignor shall be liable
for any deficiency.

<PAGE>

6. If any Assignor  defaults in the  performance  or  fulfillment  of any of the
terms,  conditions,  promises,  covenants,  provisions  or  warranties  on  such
Assignor's  part to be performed  or fulfilled  under or pursuant to this Master
Security  Agreement,  Laurus  may,  at its option  without  waiving its right to
enforce this Master Security Agreement according to its terms, immediately or at
any time  thereafter and without notice to any Assignor,  perform or fulfill the
same or cause the  performance or  fulfillment  of the same for each  Assignor's
joint and several  account  and at each  Assignor's  joint and several  cost and
expense, and the cost and expense thereof (including reasonable attorneys' fees)
shall be added to the  Obligations  and shall be payable on demand with interest
thereon at the highest rate permitted by law.

7. Each Assignor  appoints  Laurus,  any of Laurus'  officers,  employees or any
other person or entity whom Laurus may designate as our attorney,  with power to
execute  such  documents  in  each  of our  behalf  and to  supply  any  omitted
information and correct patent errors in any documents  executed by any Assignor
or, in the event that such  Assignor  does not act in a prompt  manner,  on such
Assignor's  behalf;  to  file  financing  statements  against  us  covering  the
Collateral;  to sign our name on  public  records;  and to do all  other  things
Laurus deems necessary as allowed under applicable law, to carry out this Master
Security  Agreement.  Each Assignor hereby ratifies and approves all acts of the
attorney  and  neither  Laurus nor the  attorney  will be liable for any acts of
commission or omission,  nor for any error of judgment or mistake of fact or law
other than gross  negligence or willful  misconduct (as determined by a court of
competent jurisdiction in a final and non-appealable decision). This power being
coupled with an interest,  is  irrevocable  so long as any  Obligations  remains
unpaid.

8. No delay or failure on Laurus'  part in  exercising  any right,  privilege or
option  hereunder  shall  operate  as a waiver  of such or of any  other  right,
privilege,  remedy or option,  and no waiver  whatever  shall be valid unless in
writing,  signed by Laurus and then only to the extent therein set forth, and no
waiver by Laurus of any default  shall  operate as a waiver of any other default
or of  the  same  default  on a  future  occasion.  Laurus'  books  and  records
containing  entries  with  respect to the  Obligations  shall be  admissible  in
evidence in any action or proceeding. Laurus shall have the right to enforce any
one or more of the remedies  available to Laurus,  successively,  alternately or
concurrently.  Each Assignor  agrees to join with Laurus in executing  financing
statements or other instruments to the extent required by the Uniform Commercial
Code in form  satisfactory  to Laurus and in executing  such other  documents or
instruments  as may be required or deemed  necessary  by Laurus for  purposes of
affecting or continuing Laurus' security interest in the Collateral.

<PAGE>

9.  This  Master  Security  Agreement  shall be  governed  by and  construed  in
accordance  with the laws of the  State of New  York and  cannot  be  terminated
orally. All of the rights, remedies,  options, privileges and elections given to
Laurus  hereunder shall inure to the benefit of Laurus'  successors and assigns.
The term "Laurus" as herein used shall include Laurus, any parent of Laurus, any
of Laurus'  subsidiaries and any co-subsidiaries of Laurus' parent,  whether now
existing or  hereafter  created or acquired,  and all of the terms,  conditions,
promises, covenants,  provisions and warranties of this Agreement shall inure to
the benefit of the foregoing and shall bind the representatives,  successors and
assigns of each  Assignor and each of the  foregoing.  Laurus and each  Assignor
hereby (a) waive any and all right to trial by jury in  litigation  relating  to
this  Agreement  and the  transactions  contemplated  hereby,  (b) submit to the
nonexclusive  jurisdiction of any New York State court sitting in the borough of
Manhattan,  the city of New York and (c)  waive  any  objection  Laurus  or each
Assignor may have as to the bringing or maintaining of such action with any such
court.

10. All  notices  from Laurus to any  Assignor  shall be  sufficiently  given if
mailed or delivered to such Assignor's address set forth below.

                                               Very truly yours,
                                               SYNERGY BRANDS, INC.

                                               By:
                                               Name:
                                               Title:
                                               Address

                                               PHS GROUP, INC.

                                               By:
                                               Name:
                                               Title:
                                               Address:

                                               GRAN RESERVE CORPORATION

                                               By:
                                               Name:
                                               Title:
                                               Address:

                                               ACKNOWLEDGED:
                                               LAURUS MASTER FUND, LTD.

                                               By:
                                               Name:
                                               Title:

<PAGE>

                                   SCHEDULE A

                                    Assignor
                          Jurisdiction of Organization
                       Organization Identification Number

                              Synergy Brands, Inc.
                                    Delaware
                                   22-2993066

                                 PHS Group, Inc.
                                  Pennsylvania
                                   22-3611766

                            Gran Reserve Corporation
                                     Florida
                                   27-0026581THIS NOTE AND THE COMMON SHARES  ISSUABLE UPON  CONVERSION OF THIS NOTE HAVE NOT
BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED,  OR ANY STATE
SECURITIES  LAWS.  THIS NOTE AND THE COMMON SHARES  ISSUABLE UPON  CONVERSION OF
THIS NOTE MAY NOT BE SOLD,  OFFERED  FOR SALE,  PLEDGED OR  HYPOTHECATED  IN THE
ABSENCE OF AN  EFFECTIVE  REGISTRATION  STATEMENT AS TO THIS NOTE UNDER SAID ACT
AND ANY APPLICABLE  STATE  SECURITIES  LAWS OR AN OPINION OF COUNSEL  REASONABLY
SATISFACTORY TO SYNERGY BRANDS, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

                          SECURED CONVERTIBLE TERM NOTE

FOR  VALUE  RECEIVED,   SYNERGY  BRANDS,   INC.,  a  Delaware  corporation  (the
"Borrower"),  hereby promises to pay to LAURUS MASTER FUND,  LTD., c/o Ironshore
Corporate  Services Ltd.,  P.O. Box 1234 G.T.,  Queensgate  House,  South Church
Street, Grand Cayman,  Cayman Islands,  Fax:  345-949-9877 (the "Holder") or its
registered  assigns or successors in interest,  on order, the sum of ONE MILLION
FIVE HUNDRED THOUSAND Dollars ($1,500,000), together with any accrued and unpaid
interest hereon, on April 2, 2007 (the "Maturity Date") if not sooner paid.

Capitalized  terms  used  herein  without  definition  shall  have the  meanings
ascribed to such terms in that certain Securities Purchase Agreement dated as of
the date hereof between the Borrower and the Holder (the "Purchase Agreement").

The following terms shall apply to this Note:

                                    ARTICLE I
                             INTEREST & AMORTIZATION

1.1(a) Interest Rate. Subject to Sections 4.10 and 5.6 hereof,  interest payable
on this Note shall accrue at a rate per annum (the "Interest Rate") equal to the
"prime rate"  published in The Wall Street Journal from time to time, plus three
(3%). The prime rate shall be increased or decreased as the case may be for each
increase or decrease  in the prime rate in an amount  equal to such  increase or
decrease in the prime rate;  each  change to be  effective  as of the day of the
change in such rate.  Subject to Section 1.1(b) hereof,  the Interest Rate shall
not be less than seven percent and shall not exceed 12%.  Interest  shall be (i)
calculated  on the basis of a 360 day year,  (ii) payable  monthly,  in arrears,
commencing  on May 1, 2004 and on the  first  business  day of each  consecutive
calendar month  thereafter  until the Maturity Date (and on the Maturity  Date),
whether by acceleration or otherwise (each, a "Repayment Date"). Notwithstanding
anything to the contrary  contained in Section  1.1(a) or (b), in no event shall
the Interest Rate be less than zero percent (0%).

1.1 (b) Interest Rate  Adjustment.  The Interest Rate shall be calculated on the
last  business  day of each  month  hereafter  until the  Maturity  Date (each a
"Determination Date") and shall be subject to adjustment as set forth herein. If
(i) the Borrower shall have registered the shares of the Borrower's common stock
underlying each of the conversion of the Note and that certain warrant issued to
Holder on a  registration  statement  declared  effective by the  Securities and
Exchange  Commission (the "SEC"), and (ii) the market price (the "Market Price")
of the Common Stock as reported by Bloomberg,  L.P. on the Principal  Market (as
defined  below)  for  the  five  (5)  trading  days   immediately   preceding  a
Determination  Date exceeds the then  applicable  Fixed  Conversion  Price by at
least twenty five percent (25%),  the Interest Rate for the succeeding  calendar
month shall  automatically be reduced by 200 basis points (200 b.p.) (2.0.%) for
each  incremental  twenty five percent (25%) increase in the Market Price of the
Common  Stock  above the then  applicable  Fixed  Conversion  Price.  If (i) the
Borrower shall not have  registered  the shares of the  Borrower's  common stock
underlying the conversion of the Note and that certain  warrant issued to Holder
on a  registration  statement  declared  effective by the SEC and which  remains
effective,  and (ii)  the  Market  Price of the  Common  Stock  as  reported  by
Bloomberg,  L.P.  on  the  principal  market  for  the  five  (5)  trading  days
immediately  preceding a Determination  Date exceeds the then  applicable  Fixed
Conversion  Price by at least twenty five percent  (25%),  the Interest Rate for
the  succeeding  calendar  month shall  automatically  be decreased by 100 basis
points  (100 b.p.)  (1.0.%)  for each  incremental  twenty  five  percent  (25%)
increase in the Market Price of the Common Stock above the then applicable Fixed
Conversion Price.

1.2 Minimum Monthly  Principal  Payments.  Amortizing  payments of the aggregate
principal  amount  outstanding  under  this  Note at any  time  (the  "Principal
Amount")  shall begin on October 1, 2004 and shall  recur on the first  business
day of each  succeeding  month  thereafter  until the  Maturity  Date (each,  an
"Amortization  Date").  Subject  to  Article  3 below,  beginning  on the  first
Amortization  Date,  the Borrower  shall make monthly  payments to the Holder on
each Repayment  Date,  each in the amount of $50,000,  together with any accrued
and unpaid interest to date on such portion of the Principal Amount plus any and
all other  amounts  which are then owing  under this Note but have not been paid
(collectively,   the  "Monthly  Amount").  Any  Principal  Amount  that  remains
outstanding on the Maturity Date shall be due and payable on the Maturity Date.

<PAGE>

                                   ARTICLE II
                              CONVERSION REPAYMENT

2.1 (a)  Payment of Monthly  Amount in Cash or Common  Stock.  Each month by the
tenth (10th) business day prior to each  Amortization  Date (the "Notice Date"),
the Holder shall  deliver to Borrower a written  notice in the form of Exhibit B
attached hereto converting the Monthly Amount payable on the next Repayment Date
in either cash or Common  Stock,  or a combination  of both (each,  a "Repayment
Notice").  If a Repayment Notice is not delivered by the Holder on or before the
applicable  Notice Date for such Repayment Date, then the Borrower shall pay the
Monthly  Amount due on such  Repayment  Date in cash. Any portion of the Monthly
Amount paid in cash on a Repayment  Date,  shall be paid to the Holder an amount
equal to 103% of the  principal  portion of the Monthly  Amount due and owing to
Holder on the  Repayment  Date.  If the Holder  converts all or a portion of the
Monthly Amount in shares of Common Stock as provided herein,  the number of such
shares to be issued by the Borrower to the Holder on such  Repayment  Date shall
be the number determined by dividing (x) the portion of the Monthly Amount to be
paid in shares of Common  Stock,  by (y) the then  applicable  Fixed  Conversion
Price. For purposes hereof, the initial "Fixed Conversion Price" means $5.00.

(b) Monthly Amount Conversion  Guidelines.  Subject to Sections 2.1(a), 2.2, and
3.2 hereof,  the Holder shall convert all or a portion of the Monthly Amount due
on each Repayment Date in shares of Common Stock if the average closing price of
the Common Stock as reported by Bloomberg,  L.P. on the Principal Market for the
five (5) trading days immediately preceding such Repayment Date was greater than
115% of the Fixed Conversion  Price,  provided,  however,  that such conversions
shall not exceed  twenty five  percent  (25%) of the  aggregate  dollar  trading
volume of the  Common  Stock  for the five (5) day  trading  period  immediately
preceding  delivery of a Notice of Conversion  to the Borrower.  Any part of the
Monthly  Amount due on a Repayment  Date that the Holder has not converted  into
shares of Common Stock shall be paid by the  Borrower in cash on such  Repayment
Date.  Any part of the Monthly  Amount due on such  Repayment Date which must be
paid in cash (as a result of the  closing  price of the  Common  Stock on one or
more of the five (5) trading days preceding the applicable  Repayment Date being
less than 115% of the Fixed Conversion  Price) shall be paid in cash at the rate
of 103% of the Monthly Amount otherwise due on such Repayment Date, within three
(3) business days of the applicable Repayment Date.

2.2 No Effective Registration.  Notwithstanding anything to the contrary herein,
none of the  Borrower's  obligations  to the Holder may be converted into Common
Stock  unless (i) either (x) an effective  current  Registration  Statement  (as
defined in the  Registration  Rights  Agreement)  covering  the shares of Common
Stock to be issued in connection with  satisfaction of such obligations  exists,
or (y) an  exemption  from  registration  of the Common  Stock is  available  to
pursuant  to Rule 144 of the  Securities  Act,  and  (ii) no  Event  of  Default
hereunder exists and is continuing, unless such Event of Default is cured within
any  applicable  cure period or is otherwise  waived in writing by the Holder in
whole or in part at the Holder's option.

Any amounts converted by the Holder pursuant to this Section 2.2 shall be deemed
to constitute  payments of outstanding  fees,  interest and principal arising in
connection  with  Monthly  Amounts  for  the  remaining   Repayment   Dates,  in
chronological order.

2.4 Optional  Redemption in Cash. The Borrower will have the option of prepaying
this Note  ("Optional  Redemption") by paying to the Holder a sum of money equal
to one  hundred  twenty  percent  (120%)  of the  principal  amount of this Note
together  with  accrued and unpaid  interest  thereon and any and all other sums
due,  accrued or payable to the Holder  arising under this Note,  the Securities
Purchase  Agreement,   or  any  Related  Agreement  (the  "Redemption   Amount")
outstanding on the day written notice of redemption (the "Notice of Redemption")
is given to the Holder. The Notice of Redemption shall specify the date for such
Optional  Redemption (the  "Redemption  Payment Date") which date shall be seven
(7) business  days after the date of the Notice of Redemption  (the  "Redemption
Period").  A Notice of  Redemption  shall not be  effective  with respect to any
portion  of this Note for which the  Holder  has a pending  election  to convert
pursuant to Section  3.1,  or for  conversions  initiated  or made by the Holder
pursuant to Section 3.1 during the  Redemption  Period.  The  Redemption  Amount
shall be determined as if such Holder's conversion  elections had been completed
immediately  prior to the date of the Notice of  Redemption.  On the  Redemption
Payment Date, the Redemption Amount must be paid in good funds to the Holder. In
the event the  Borrower  fails to pay the  Redemption  Amount on the  Redemption
Payment Date as set forth herein,  then such Redemption  Notice will be null and
void.

<PAGE>

                                   ARTICLE III
                                CONVERSION RIGHTS

3.1. Holder's  Conversion  Rights.  The Holder shall have the right, but not the
obligation,  to convert  all or any  portion of the then  aggregate  outstanding
principal amount of this Note,  together with interest and fees due hereon, into
shares of Common  Stock  subject to the terms and  conditions  set forth in this
Article III. The Holder may exercise such right by delivery to the Borrower of a
written  notice of  conversion  not less than one (1) day prior to the date upon
which such conversion  shall occur.  The date upon which such  conversion  shall
occur is (the "Conversion Date").

3.2 Conversion  Limitation.  Notwithstanding  anything  contained  herein to the
contrary,  the Holder shall not be entitled to convert  pursuant to the terms of
this Note an amount that would be  convertible  into that  number of  Conversion
Shares which would exceed the difference  between the number of shares of Common
Stock  beneficially  owned by such Holder or issuable  upon exercise of warrants
held by such Holder and 4.99% of the  outstanding  shares of Common Stock of the
Borrower.  For the purposes of the immediately  preceding  sentence,  beneficial
ownership  shall be determined in accordance  with Section 13(d) of the Exchange
Act and Regulation  13d-3  thereunder.  The Holder may void the Conversion Share
limitation  described  in this  Section  3.2 upon 75 days  prior  notice  to the
Borrower or without any notice requirement upon an Event of Default.

3.3 Mechanics of Holder's Conversion. (a) In the event that the Holder elects to
convert  this Note into  Common  Stock,  the Holder  shall  give  notice of such
election by delivering an executed and completed  notice of conversion  ("Notice
of  Conversion")  to the Borrower and such Notice of Conversion  shall provide a
breakdown in reasonable  detail of the Principal  Amount,  accrued  interest and
fees being  converted.  On each Conversion Date (as hereinafter  defined) and in
accordance with its Notice of Conversion,  the Holder shall make the appropriate
reduction to the Principal  Amount,  accrued interest and fees as entered in its
records and shall provide  written notice thereof to the Borrower within two (2)
business  days  after  the  Conversion  Date.  Each  date on which a  Notice  of
Conversion is delivered or  telecopied  to the Borrower in  accordance  with the
provisions  hereof shall be deemed a Conversion Date (the "Conversion  Date"). A
form of Notice of Conversion  to be employed by the Holder is annexed  hereto as
Exhibit A.

(b) Pursuant to the terms of the Notice of  Conversion,  the Borrower will issue
instructions  to the transfer agent  accompanied by an opinion of counsel within
two (2)  business  days of the date of the delivery to Borrower of the Notice of
Conversion  and shall  cause the  transfer  agent to transmit  the  certificates
representing the Conversion Shares to the Holder by crediting the account of the
Holder's designated broker with the Depository Trust Corporation ("DTC") through
its  Deposit  Withdrawal  Agent  Commission  ("DWAC")  system  within  three (3)
business  days after  receipt by the Borrower of the Notice of  Conversion  (the
"Delivery Date"). In the case of the exercise of the conversion rights set forth
herein the conversion  privilege  shall be deemed to have been exercised and the
Conversion  Shares  issuable upon such  conversion  shall be deemed to have been
issued upon the date of receipt by the Borrower of the Notice of Conversion. The
Holder  shall be treated for all  purposes  as the record  holder of such Common
Stock,  unless the Holder  provides the  Borrower  written  instructions  to the
contrary.

<PAGE>

3.4 Conversion Mechanics.

(a) The number of shares of Common  Stock to be issued upon each  conversion  of
this Note shall be  determined  by dividing  that portion of the  principal  and
interest  and  fees  to be  converted,  if any,  by the  then  applicable  Fixed
Conversion  Price.  In the event of any  conversions  of  outstanding  principal
amount under this Note in part  pursuant to this Article III,  such  conversions
shall be  deemed to  constitute  conversions  of  outstanding  principal  amount
applying to Monthly Amounts for the remaining  Repayment Dates in  chronological
order.  By way of  example,  if the  original  principal  amount of this Note is
$1,500,000 and the Holder converted  $100,000 of such original  principal amount
prior to the first Repayment Date, then (1) the principal  amount of the Monthly
Amount due on the first Repayment Date would equal $0, (2) the principal  amount
of the Monthly  Amount due on the second  Repayment  Date would equal $0 and (3)
the  principal  amount of the Monthly  Amount due on the third  Repayment  Dates
would be $50,000.

(b) The Fixed Conversion Price and number and kind of shares or other securities
to be issued upon conversion is subject to adjustment from time to time upon the
occurrence of certain events, as follows:

A. Stock Splits,  Combinations and Dividends.  If the shares of Common Stock are
subdivided  or  combined  into a greater or  smaller  number of shares of Common
Stock,  or if a dividend is paid on the Common Stock in shares of Common  Stock,
the Fixed Conversion Price or the Conversion Price, as the case may be, shall be
proportionately  reduced in case of  subdivision  of shares or stock dividend or
proportionately  increased in the case of  combination  of shares,  in each such
case by the ratio which the total number of shares of Common  Stock  outstanding
immediately after such event bears to the total number of shares of Common Stock
outstanding immediately prior to such event.

B. During the period the conversion right exists, the Borrower will reserve from
its  authorized  and  unissued  Common  Stock a  sufficient  number of shares to
provide for the issuance of Common Stock upon the full  conversion of this Note.
The Borrower represents that upon issuance, such shares will be duly and validly
issued, fully paid and non-assessable.  The Borrower agrees that its issuance of
this Note shall constitute full authority to its officers,  agents, and transfer
agents who are charged with the duty of executing and issuing stock certificates
to execute and issue the necessary  certificates for shares of Common Stock upon
the conversion of this Note.

C. Share  Issuances.  Subject to the  provisions  of this  Section  3.4,  if the
Borrower  shall at any time prior to the  conversion or repayment in full of the
Principal Amount issue any shares of Common Stock or securities convertible into
Common  Stock  to a person  other  than  the  Holder  (except  (i)  pursuant  to
Subsections  A  or B  above;  (ii)  pursuant  to  options,  warrants,  or  other
obligations  to issue  shares  outstanding  on the date hereof,  which  options,
warrants  or other  obligations  are  either (i) set forth in the  Exchange  Act
Filings,  (ii) set forth in a Schedule to the  Purchase  Agreement  and/or (iii)
disclosed  in writing to the Holder);  or (iii)  pursuant to options that may be
issued under any employee  incentive  stock option  and/or any  qualified  stock
option plan adopted by the Borrower) for a  consideration  per share (the "Offer
Price")  less  than the  Fixed  Conversion  Price in  effect at the time of such
issuance,  then the Fixed  Conversion  Price shall be immediately  reset to such
lower Offer Price at the time of issuance of such securities.

D. Reclassification, etc. If the Borrower at any time shall, by reclassification
or  otherwise,  change the Common  Stock into the same or a different  number of
securities of any class or classes, this Note, as to the unpaid Principal Amount
and accrued interest  thereon,  shall thereafter be deemed to evidence the right
to purchase an adjusted  number of such  securities  and kind of  securities  as
would have been issuable as the result of such change with respect to the Common
Stock immediately prior to such reclassification or other change.

<PAGE>

3.5 Issuance of New Note.  Upon any partial  conversion of this Note, a new Note
containing  the same date and  provisions of this Note shall,  at the request of
the Holder, be issued by the Borrower to the Holder for the principal balance of
this Note and interest which shall not have been converted or paid. The Borrower
will  pay no  costs,  fees or any  other  consideration  to the  Holder  for the
production and issuance of a new Note.

                                   ARTICLE IV
                                EVENTS OF DEFAULT

Upon the occurrence and continuance of an Event of Default beyond any applicable
grace period, the Holder may make all sums of principal, interest and other fees
then remaining unpaid hereon and all other amounts payable hereunder immediately
due and  payable.  In the event of such an  acceleration,  within  five (5) days
after written notice from Holder to Borrower (each  occurrence  being a "Default
Notice  Period")  the amount  due and owing to the  Holder  shall be 120% of the
outstanding  principal  amount of the Note (plus accrued and unpaid interest and
fees, if any) (the "Default Payment"). If, with respect to any Event of Default,
the Borrower cures the Event of Default,  the Event of Default will be deemed to
no longer exist and any rights and remedies of Holder  pertaining  to such Event
of Default will be of no further force or effect.  The Default  Payment shall be
applied first to any fees due and payable to Holder  pursuant to the Note or the
Related Agreements, then to accrued and unpaid interest due on the Note and then
to outstanding principal balance of the Note.

The occurrence of any of the following  events set forth in Sections 4.1 through
4.10, inclusive, is an "Event of Default":

4.1 Failure to Pay Principal,  Interest or other Fees. The Borrower fails to pay
when due any  installment  of  principal,  interest  or  other  fees  hereon  in
accordance  herewith,  , and in any such case, such failure shall continue for a
period of five (5) days following the date upon which any such payment was due.

4.2 Breach of Covenant.  The Borrower breaches any covenant or any other term or
condition of this Note or the Purchase Agreement in any material respect, or the
Borrowers or any of its Subsidiaries  breaches any covenant or any other term or
condition of any Related  Agreement in any material  respect and, any such case,
such  breach,  if subject to cure,  continues  for a period of twenty  (20) days
after the occurrence thereof.

4.3 Breach of  Representations  and Warranties.  Any  representation or warranty
made by the Borrower in this Note or the Purchase Agreement,  or by the Borrower
or any of its Subsidiaries in any Related Agreement, shall, in any such case, be
false or misleading in any material respect on the date that such representation
or warranty was made or deemed made.

4.4 Receiver or Trustee.  The Borrower or any of its Subsidiaries  shall make an
assignment  for the  benefit  of  creditors,  or  apply  for or  consent  to the
appointment  of a receiver  or trustee for it or for a  substantial  part of its
property  or  business;  or  such a  receiver  or  trustee  shall  otherwise  be
appointed.

4.5  Judgments.  Any money  judgment,  writ or similar  final  process  shall be
entered or filed against the Borrower or any of its Subsidiaries or any of their
respective  property or other assets for more than $150,000 in the aggregate for
all such money  judgments,  writs or similar final  processes,  and shall remain
unvacated, unbonded or unstayed for a period of forty five (45) days.

4.6   Bankruptcy.   Bankruptcy,   insolvency,   reorganization   or  liquidation
proceedings  or other  proceedings or relief under any bankruptcy law or any law
for the relief of debtors  shall be instituted by or against the Borrower or any
of its Subsidiaries.

4.7 Stop Trade. An SEC stop trade order or Principal  Market trading  suspension
of the Common Stock shall be in effect for five (5) consecutive days or five (5)
days  during a period of ten (10)  consecutive  days,  excluding  in all cases a
suspension  of all trading on a Principal  Market,  provided  that the  Borrower
shall not have been able to cure such trading suspension within thirty (30) days
of the  notice  thereof or list the Common  Stock on  another  Principal  Market
within sixty (60) days of such  notice.  The  "Principal  Market" for the Common
Stock shall include the NASD OTC Bulletin Board, NASDAQ SmallCap Market,  NASDAQ
National  Market  System,  American Stock  Exchange,  or New York Stock Exchange
(whichever  of the foregoing is at the time the  principal  trading  exchange or
market for the Common  Stock),  or any securities  exchange or other  securities
market on which the Common Stock is then being listed or traded.

<PAGE>

4.8 Failure to Deliver Common Stock or Replacement Note. The Borrower shall fail
(i) to timely  deliver  Common  Stock to the Holder  pursuant to and in the form
required by this Note, and Section 9 of the Purchase Agreement,  if such failure
to timely  deliver Common Stock shall not be cured within five (5) business days
or (ii) to deliver a  replacement  Note to Holder  within ten (10) business days
following the required date of such issuance pursuant to this Note, the Purchase
Agreement  or  any  Related   Agreement  (to  the  extent  required  under  such
agreements).

4.9 Default Under Related  Agreements or Other  Agreements.  The  occurrence and
continuance of any Event of Default (as defined in any Related Agreement) or any
event of default (or similar term) under any  agreement or document  relating to
any indebtedness  incurred by the Borrower or any of its  Subsidiaries  from IIG
Capital LLC or any of its affiliates.

4.10  Change in  Control.  Any  "person"  or "group"  (as such terms are used in
Sections  13(d) and 14(d) of the  Securities  Exchange Act of 1934),  other than
Lloyd Miller or Mair Faibish,  shall hold 40% or more of the outstanding  voting
equity interests of the Company (on a fully diluted basis).

                           DEFAULT RELATED PROVISIONS

4.11 Payment Grace Period.  Following the occurrence and continuance of an Event
of Default beyond any applicable cure period  hereunder,  the Borrower shall pay
the Holder a default  interest rate of two percent (2%) per month on all amounts
due and owing under the Note,,  which  default  interest  shall be payable  upon
demand.

4.12 Conversion  Privileges.  The conversion privileges set forth in Article III
shall remain in full force and effect immediately from the date hereof and until
this Note is paid in full.

4.13 Cumulative Remedies. The remedies under this Note shall be cumulative.

                                    ARTICLE V
                                  MISCELLANEOUS

5.1 Failure or  Indulgence  Not  Waiver.  No failure or delay on the part of the
Holder hereof in the exercise of any power,  right or privilege  hereunder shall
operate as a waiver  thereof,  nor shall any single or partial  exercise  of any
such power,  right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.  All rights and remedies existing hereunder
are  cumulative  to, and not  exclusive  of, any  rights or  remedies  otherwise
available.

5.2  Notices.  Any notice  herein  required or permitted to be given shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party  notified,  (b) when sent by  confirmed  telex or facsimile if sent during
normal  business hours of the recipient,  if not, then on the next business day,
(c) five days after having been sent by  registered  or certified  mail,  return
receipt  requested,  postage  prepaid,  or (d)  one  day  after  deposit  with a
nationally  recognized  overnight  courier,  specifying next day delivery,  with
written  verification  of  receipt.  All  communications  shall  be  sent to the
Borrower  at  the  address  provided  in  the  Purchase  Agreement  executed  in
connection  herewith,  and to the Holder at the address provided in the Purchase
Agreement  for such  Holder,  with a copy to John E.  Tucker,  Esq.,  825  Third
Avenue,  14th Floor, New York, New York 10022,  facsimile number (212) 541-4434,
or at such other address as the Borrower or the Holder may designate by ten days
advance written notice to the other parties hereto. A Notice of Conversion shall
be deemed given when made to the Borrower pursuant to the Purchase Agreement.

5.3  Amendment  Provision.  The term "Note" and all reference  thereto,  as used
throughout this instrument,  shall mean this instrument as originally  executed,
or if later amended or supplemented, then as so amended or supplemented, and any
successor instrument issued pursuant to Section 3.5 hereof, as it may be amended
or supplemented.

<PAGE>

5.4  Assignability.  This  Note  shall  be  binding  upon the  Borrower  and its
successors  and  assigns,  and shall  inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder in accordance with the
requirements of the Purchase  Agreement.  This Note shall not be assigned by the
Borrower without the consent of the Holder.

5.5  Governing  Law.  This Note shall be governed by and construed in accordance
with  the  laws of the  State of New  York,  without  regard  to  principles  of
conflicts  of laws.  Any  action  brought  by  either  party  against  the other
concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in the state of
New York.  Both  parties and the  individual  signing this Note on behalf of the
Borrower  agree to submit to the  jurisdiction  of such courts.  The  prevailing
party  shall  be  entitled  to  recover  from the  other  party  its  reasonable
attorney's  fees and  costs.  In the event  that any  provision  of this Note is
invalid or unenforceable  under any applicable statute or rule of law, then such
provision  shall  be  deemed  inoperative  to the  extent  that it may  conflict
therewith  and shall be deemed  modified to conform with such statute or rule of
law. Any such provision which may prove invalid or  unenforceable  under any law
shall  not  affect  the  validity,  unenforceability  or  meaning  of any  other
provision of this Note . Nothing  contained herein shall be deemed or operate to
preclude the Holder from bringing suit or taking other legal action  against the
Borrower in any other  jurisdiction to collect on the Borrower's  obligations to
Holder, to realize on any collateral or any other security for such obligations,
or to enforce a judgment or other court in favor of the Holder.

5.6 Maximum  Payments.  Nothing contained herein shall be deemed to establish or
require  the  payment of a rate of  interest  or other  charges in excess of the
maximum  permitted  by  applicable  law.  In the event that the rate of interest
required to be paid or other charges  hereunder exceed the maximum  permitted by
such law,  any  payments in excess of such  maximum  shall be  credited  against
amounts owed by the Borrower to the Holder and thus refunded to the Borrower.

5.7  Security  Interest  and  Guarantee.  The Holder has been granted a security
interest in certain  assets of the Borrower and its  Subsidiaries  as more fully
described in the Master  Security  Agreement  and the Stock Pledge  Agreement in
each case dated as of the date hereof.  The  obligations  of the Borrower  under
this Note are guaranteed by certain Subsidiaries of the Borrower pursuant to the
Subsidiary Guaranty dated as of the date hereof.

5.8 Construction. Each party acknowledges that its legal counsel participated in
the  preparation  of this  Note  and,  therefore,  stipulates  that  the rule of
construction  that  ambiguities  are to be resolved  against the drafting  party
shall  not be  applied  in the  interpretation  of this  Note to favor any party
against the other.

5.9 Cost of  Collection.  If  default is made in the  payment of this Note,  the
Borrower  shall  pay  to  Holder  reasonable  costs  of  collection,   including
reasonable attorney's fees.

       [Balance of page intentionally left blank; signature page follows.]

<PAGE>

IN WITNESS  WHEREOF,  the Borrower has caused this  Convertible  Term Note to be
signed in its name effective as of this 2nd day of April, 2004.

                                                     SYNERGY BRANDS, INC.

                                                     By:
                                                     Name:
                                                     Title:

WITNESS:

<PAGE>

                                    EXHIBIT A

                              NOTICE OF CONVERSION

(To be  executed  by the Holder in order to convert all or part of the Note into
Common Stock

[Name and Address of Holder]

The  Undersigned  hereby  converts  $_________  of the principal due on [specify
applicable  Repayment  Date] under the  Convertible  Term Note issued by SYNERGY
BRANDS,  INC.  dated April __,  2004 by  delivery  of Shares of Common  Stock of
SYNERGY  BRANDS,  INC. on and subject to the conditions set forth in Article III
of such Note.

1.       Date of Conversion         -----------------------

2.       Shares To Be Delivered:    -----------------------

                                                     By:
                                                     Name:
                                                     Title:

<PAGE>

                                    EXHIBIT B

                                CONVERSION NOTICE

(To be  executed  by the  Holder  in order to  convert  all or part of a Monthly
Amount into Common Stock)

[Name and Address of Holder]

Holder  hereby  converts  $_________  of the  Monthly  Amount  due  on  [specify
applicable  Repayment  Date] under the  Convertible  Term Note issued by SYNERGY
BRANDS,  INC.  dated April __,  2004 by  delivery  of Shares of Common  Stock of
SYNERGY  BRANDS,  INC. on and subject to the conditions set forth in Article III
of such Note.

1.       Fixed Conversion Price:                 $
                                                  -------------------------

2.       Amount to be paid:                      $
                                                  -------------------------

3.       Shares To Be Delivered (2 divided by 1):
                                                  -------------------------

4.       Cash payment to be made by Borrower :    $
                                                  -------------------------

Date: ____________                                   LAURUS  MASTER FUND, LTD.

                                                     By:
                                                     Name:
                                                     Title:

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