Unsecured Subordinated Installment Note

UNSECURED SUBORDINATED INSTALLMENT NOTE


$1,919,000 October 1, 1996
Murrieta, California


FOR VALUE RECEIVED, the undersigned, Exotic Materials, Inc., a California corporation (the "Borrower"), promises to pay to the order of Vitec Group US Holdings, Inc., a Delaware corporation (the "Creditor"), the principal amount of One Million Nine Hundred Nineteen Thousand Dollars ($1,919,000), or such lesser amount as may be outstanding on April 30, 2005, together with interest on the principal amount outstanding, from the date hereof until the principal amount of this Note is paid in full, at a rate equal to nine percent (9%) per annum, calculated on the basis of a year of 365 or 366 days, as the case may be, and paid for the actual number of days elapsed (including the first day of the relevant period but excluding the last day). Any overdue principal of this Note shall bear interest, payable on demand, for each day until paid at a rate equal to ten (10%) per annum, but in no event shall such penalty interest exceed the maximum amount of interest permitted by applicable law.


1. Installment payments. On April 30, 1997, and each April 30 thereafter during the term of this Note, the Borrower shall pay to the Creditor the amount set forth below. Such payments shall be applied first against any accrued but unpaid interest then the balance of any such payment against the principal then outstanding under the Note. Exhibit A attached hereto, allocates each of the following installment payments between interest and principal.


April 30, 1997 .................... $128,300
April 30, 1998 .................... 190,000
April 30, 1999 .................... 230,000
April 30, 2000 .................... 270,000
April 30, 2001 .................... 310,000
April 30, 2002 .................... 350,000
April 30, 2003 .................... 390,000
April 30, 2004 .................... 430,000
April 30, 2005 .................... 795,624


2. Subordination. The Borrower's payment obligations hereunder are subordinated in right of payment to any indebtedness of the Borrower incurred for working capital purposes not exceeding $1,000,000 in principal amount outstanding at any time (the "Working Capital Facility"), provided, that so long as no default shall have occurred and be continuing under the Working Capital Facility, the Borrower's payment obligations under this Note shall not be impaired. If a default shall have occurred and be continuing under the Working Capital Facility, the Borrower shall not make any further payments to the Creditor, and the Creditor shall hold any amounts thereafter received from the Borrower in trust for the holders of the Working Capital Facility and pay over such amounts to such holders to be applied as required under the Working Capital Facility.


3. Payment. Payments under this Note shall be made at the offices of the Creditor, at c/o M. Martell, Abberley Koolman, 521 Fifth Avenue, New York, New York 10175-0050, or at such other place or places within the United States as may be specified by the Creditor in a written notice to the Borrower.


4. Covenants. Until the principal of and accrued interest on all indebtedness evidenced by this Note has been paid in full, the Borrower agrees that it shall not:


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(a) Liens. Create, incur, assume or suffer to exist any mortgage, pledge, encumbrance, security interest, lien or charge of any kind upon any of its properties or assets (including the right to receive income) whether now owned or hereafter acquired, except (i) liens for taxes not delinquent, or being contested in good faith and the payment of which is secured in a manner satisfactory to the Creditor, (ii) liens not delinquent created by statute in connection with worker's compensation, unemployment insurance, social security and similar statutory obligations, (iii) purchase money security interests in machinery, equipment, fixtures, or other personal property, not including inventory or supplies, purchased by the Borrower and given to secure the deferred purchase price, provided that no such purchase money security interest shall extend to or cover any assets of the Borrower other than the asset being purchased and that the security interest in the asset being purchased shall secure only the purchase price thereof, and (iv) liens securing the Working Capital Facility.


(b) Merger. Merge or consolidate or amalgamate with any other person or take any other action having a similar effect; provided, however, that this Section shall not prohibit any merger or acquisition of or by the Borrower if the Borrower shall be the surviving or continuing corpo ...