GARDENBURGER INC
EXHIBIT 10.3
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>6
<FILENAME>gbamnote.txt
<DESCRIPTION>EXHIBIT 10.3
<TEXT>

                                                                  EXECUTION COPY


THE SECURITY  REPRESENTED BY THIS INSTRUMENT WAS ORIGINALLY  ISSUED ON MARCH 27,
1998, AND HAS NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THE TRANSFER OF SUCH SECURITY IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE NOTE
PURCHASE  AGREEMENT  DATED AS OF MARCH 27, 1998,  AS IN EFFECT FROM TIME TO TIME
(THE "NOTE PURCHASE AGREEMENT"),  BETWEEN THE ISSUER (THE "COMPANY") AND CERTAIN
INVESTOR(S),  AND THE COMPANY  RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH
SECURITY  UNTIL  SUCH  CONDITIONS  HAVE  BEEN  FULFILLED  WITH  RESPECT  TO SUCH
TRANSFER.  UPON WRITTEN REQUEST,  A COPY OF SUCH CONDITIONS WILL BE FURNISHED BY
THE COMPANY TO THE HOLDER HEREOF WITHOUT CHARGE.

THE SECURITY  REPRESENTED  BY THIS  INSTRUMENT  AND THE  INDEBTEDNESS  EVIDENCED
HEREBY  ARE  SUBJECT  TO  THE  SUBORDINATION  PROVISIONS  OF THE  NOTE  PURCHASE
AGREEMENT,  WHICH AMONG OTHER THINGS  SUBORDINATES THE COMPANY'S  OBLIGATIONS TO
THE   INVESTOR(S)  TO  THE  COMPANY'S   OBLIGATION  TO  THE  HOLDERS  OF  SENIOR
INDEBTEDNESS  AS DEFINED IN THE NOTE  PURCHASE  AGREEMENT.  EACH  HOLDER OF THIS
NOTE, BY ITS  ACCEPTANCE  HEREOF,  SHALL BE BOUND BY THE PROVISIONS OF SUCH NOTE
PURCHASE AGREEMENT.

                               GARDENBURGER, INC.

                              AMENDED AND RESTATED
                      CONVERTIBLE SENIOR SUBORDINATED NOTE


Original Date of Issuance:  March 27, 1998
New Date of Issuance:  January 10, 2002                           $17,364,375


            Gardenburger, Inc., an Oregon corporation (the "COMPANY"), for value
received,  hereby  promises  to pay to the order of  Dresdner  Kleinwort  Benson
Private Equity  Partners LP, a Delaware  limited  partnership  ("DRESDNER"),  or
registered  assigns,  the  principal  amount of Seventeen  Million Three Hundred
Sixty Four Thousand Three Hundred  Seventy Five dollars  ($17,364,375)  on March
31, 2005 (the "MATURITY  DATE") together with interest  thereon  calculated from
September 30, 2001 in  accordance  with the  provisions  contained  herein.  The
Company will  maintain a register in which it will record the initial  ownership
of the  Convertible  Notes (as defined  below) and changes in the  ownership  of
Convertible  Notes of which it receives  notice.  The holder of this Convertible
Note indicated at any time in such register will be the  "REGISTERED  HOLDER" of
this Convertible Note.

            This Amended and Restated  Convertible Senior Subordinated Note (the
"CONVERTIBLE   NOTE")  was  issued  in  exchange  for  the  Convertible   Senior
Subordinated  Note  issued  to  Dresdner  on March  27,  1998 (as  amended,  the
"ORIGINAL  NOTE") pursuant to a Note Purchase



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<PAGE>

Agreement,  dated as of March  27,  1998 (as in effect  from  time to time,  the
"PURCHASE AGREEMENT"), among the Company and Dresdner, and this Convertible Note
is one of the  "CONVERTIBLE  NOTES" referred to in the Purchase  Agreement.  The
Purchase  Agreement  contains  terms  governing the rights of the holder of this
Convertible  Note,  and all  provisions  of the  Purchase  Agreement  are hereby
incorporated in this Convertible Note in full by reference. Except as defined in
SECTION 9 of this  Convertible  Note or otherwise  indicated in this Convertible
Note, each  capitalized  term used in this  Convertible Note has the meaning set
forth in the Purchase Agreement.

            1. PAYMENT OF PRINCIPAL.

            (a)  SCHEDULED  PAYMENT.  The  Company  will pay the  entire  unpaid
principal  amount of this  Convertible  Note on the Maturity Date plus a premium
equal to twenty percent (20%) of the sum of (i) the unpaid  principal  amount of
this  Convertible  Note, plus (ii) all accrued and unpaid interest thereon as of
the date of payment.

            (b)  OPTIONAL  PREPAYMENT.  Subject to  paragraph 2H of the Purchase
Agreement, the Company may prepay the principal amount of this Convertible Note,
in  whole  or in any  $1,000  increment,  at any  time  and  from  time to time;
provided,  however,  if any such  optional  prepayment  occurs  (which shall not
include any  prepayment  made under SECTION 1(d),  and 1(e) and 1(f)),  then the
Company shall pay a pre-payment  premium to the then Registered  Holder equal to
twenty percent (20%) of the sum of (i) the principal  amount of this Convertible
Note being prepaid,  plus (ii) all accrued and unpaid interest thereon as of the
date of prepayment.  The holder of this  Convertible Note may convert all or any
portion of the outstanding principal amount of this Convertible Note pursuant to
SECTION 5 until such time as such amount has been paid.  The Company  shall mail
written notice by overnight  delivery (with a copy sent by facsimile on the date
mailed) of each such optional prepayment (which shall not include any prepayment
made  under  SECTION  1(d),  1(e)  and  1(f))  of any  Convertible  Note to each
Registered  Holder  of the  Convertible  Notes  not more than 20 nor less than 5
business days prior to the date on which such optional prepayment is to be made.
Upon mailing any such notice of optional  prepayment,  the Company  shall become
obligated to prepay the principal amount of Convertible  Notes specified in such
notice,  together with the applicable pre-payment premium and all unpaid accrued
interest thereon, at the time of the optional prepayment specified therein.

            (c) OTHER  PREPAYMENTS OR  ACQUISITIONS.  The Company shall not, nor
shall  it  permit  any  Subsidiary  to,  prepay  any  principal  amount  of  any
Convertible Note or otherwise acquire any Convertible Notes, except as expressly
authorized herein.

            (d) SPECIAL  PREPAYMENTS FOR A CHANGE OF CONTROL OR SALE EVENT. If a
Change of Control has occurred,  the Company obtains  knowledge that a Change of
Control is proposed  to occur or a Sale Event is proposed to occur,  the Company
shall give written notice within five business days of such Change of Control or
the date it obtains  knowledge of such proposed  Change of Control or Sale Event
describing in reasonable  detail the material terms and date of  consummation or
proposed consummation thereof to the Registered Holder of this Convertible Note,
and the Company shall give the Registered Holder of this Convertible Note prompt
written  notice  of any  material  change  in the  terms or  timing  of any such
transaction.  The  Registered  Holder of this  Convertible  Note may require the
Company to prepay all or any



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<PAGE>

portion of the unpaid  principal  amount of this  Convertible Note (along with a
pre-payment  premium equal to 20% of the sum of (i) the principal amount of this
Convertible Note the Registered Holder has elected to have pre-paid and (ii) all
accrued and unpaid interest  thereon) by giving written notice to the Company of
such election  prior to the later of (a) the  twenty-first  day after receipt of
the  Company's  notice  and (b) the fifth day prior to the  consummation  of the
Change of Control or Sale Event, as the case may be.

            Upon receipt of any such election, the Company shall be obligated to
prepay  the  unpaid  principal  amount  of this  Convertible  Note as  specified
therein, together with the applicable pre-payment premium and all unpaid accrued
interest thereon, on the later of (a) the occurrence of the Change of Control or
Sale  Event,  as the case may be,  and (b) the fifth  day  after  the  Company's
receipt of such election.  If any proposed  Change of Control or Sale Event does
not  occur,  all  requests  for  prepayment  in  connection  therewith  shall be
automatically rescinded;  provided, that, if there has been a material change in
the  terms or the  timing  of the  transaction,  the  Registered  Holder of this
Convertible Note may rescind such Registered  Holder's request for prepayment by
giving written  notice of such  rescission to the Company.  Notwithstanding  the
foregoing,  at any  time  prior  to the date  the  Company  makes a  pre-payment
pursuant to this SECTION 1(d), the  Registered  Holder may elect (by delivery of
written notice to the Company) to receive such payment,  in whole or in part, in
shares of Common  Stock with a Market  Price as of the date of payment  equal to
the amount of  principal,  premium  and/or  interest the  Registered  Holder has
elected to receive in shares of Common Stock  rather than cash.  Notwithstanding
that the payment to the Registered Holders under this SECTION 1(d) is restricted
by the Senior Credit Agreement, failure to make such payment shall constitute an
Event of Default. In addition,  the provisions of this SECTION 1(d) shall in any
event be  subject  to the  subordination  provisions  set forth in the  Purchase
Agreement.

            (e) SPECIAL  PREPAYMENTS  FOR A MANAGEMENT  CHANGE.  If a Management
Change has occurred or the Company obtains knowledge that a Management Change is
about to occur,  the Company shall give written notice within five business days
of such Management Change to the Registered Holder of this Convertible Note. The
Registered Holder of this Convertible Note may require the Company to prepay all
or any portion of the unpaid  principal  amount of this  Convertible Note (along
with a pre-payment  premium equal to 20% of the sum of (i) the principal  amount
of this Convertible Note the Registered  Holder has elected to have pre-paid and
(ii) all accrued and unpaid  interest  thereon) by giving  written notice to the
Company of such  election  prior to the  twenty-first  day after  receipt of the
Company's notice of such Management  Change.  Upon receipt of any such election,
the Company  shall be  obligated to prepay the unpaid  principal  amount of this
Convertible Note as specified therein,  together with the applicable pre-payment
premium  and all unpaid  accrued  interest  thereon,  on the fifth day after the
Company's receipt of such election.  Notwithstanding the foregoing,  at any time
prior to the date the Company makes a pre-payment pursuant to this SECTION 1(e),
the  Registered  Holder may elect (by delivery of written notice to the Company)
to receive such  payment,  in whole or in part, in shares of Common Stock with a
Market Price as of the date of payment equal to the amount of principal, premium
and/or interest the Registered Holder has elected to receive in shares of Common
Stock  rather  than cash.  Notwithstanding  that the  payment to the  Registered
Holders under this SECTION 1(e) is  restricted  by the Senior Credit  Agreement,
failure to make such payment shall constitute an Event of Default.  In addition,
the  provisions  of this  SECTION


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<PAGE>

1(e) shall in any event be subject to the subordination  provisions set forth in
the Purchase Agreement.

            (f)  SPECIAL  PREPAYMENTS  OUT OF EXCESS  CASH  FLOW;  ASSET  SALES;
INSURANCE  PROCEEDS;  DEBT AND EQUITY  OFFERINGS.  In  addition  to and  without
limiting any provision of this Convertible Note or the Purchase  Agreement,  (i)
after the Senior  Indebtedness  has been  indefeasibly  paid in full in cash, if
Company sells any of its assets or properties  (other than sales of inventory in
the  ordinary  course of business or sales of other assets the proceeds of which
are  reinvested   within  20  Business  Days  in  similar  assets   constituting
"Collateral" under the Senior Credit Agreement),  sells or issues any securities
(debt or equity),  capital stock, or ownership interests,  receives any property
damage or  insurance  award which is not used to repair or replace the  property
covered thereby,  incurs any Indebtedness,  except for Permitted Indebtedness or
receives  life  insurance  proceeds,  then it shall,  apply 100% of the proceeds
thereof to the prepayment of this Convertible  Note, to be applied in the manner
set forth below,  such payment to be made at such time as the Registered  Holder
shall decide in its sole  discretion,  and (ii) until such time as the principal
of this Convertible Note, all accrued and unpaid interest thereon, and all other
obligations of the Company  hereunder and thereunder  are  indefeasibly  paid in
full in cash and fully performed, the Applicable ECF Percentage of the Company's
Excess  Cash  Flow for each  fiscal  year  shall be paid by the  Company  to the
Registered  Holder as a prepayment of this Convertible Note to be applied in the
manner set forth below.  Such payments  described in the  foregoing  clause (ii)
shall be made no later than thirty (30) calendar days after  preparation  of the
Company's  audited  financial  statements,  but in any event not later  than one
hundred and twenty (120) calendar days after the end of the fiscal year to which
such Excess Cash Flow relates. All prepayments of this Convertible Note required
by this  SECTION  1(f) shall  first be applied  to all unpaid  accrued  interest
thereon, with 83.33% of the remainder of such prepayment amount to be applied to
unpaid  principal,  and  16.67% of such  remainder  to be paid as a  pre-payment
premium (i.e., a 20% pre-payment premium on the principal amount so prepaid).

            2. INTEREST.  Beginning on January 10, 2002, interest will accrue at
the rate of ten percent (10%) per annum  thereafter  (in each case,  computed on
the basis of a 360-day  year,  as  appropriate,  and the  actual  number of days
elapsed in any year) on the unpaid  principal  amount of this  Convertible  Note
outstanding  from time to time, or (if less) at the highest rate then  permitted
under applicable law.  Interest which accrued prior to January 10, 2002 shall be
payable as set forth in the Original Note. Interest accruing hereunder,  and any
interest  accruing  as  provided  in SECTION  4(b)(iii),  will be payable to the
Registered  Holder to the  extent  any Excess  Availability  (as  defined in the
Senior  Credit  Agreement)  exists in cash (and any  interest  not so paid shall
accrue in accordance  with the terms hereof),  in arrears,  on each March 31 and
September  30 (each an  "INTEREST  PAYMENT  DATE")  and will be  payable  to the
Registered  Holder  in cash in any  event  on the  Maturity  Date in the  manner
described  herein  (including  SECTION 1(a)).  Any accrued interest which is not
paid in cash on any March 31 or September 30 will bear  interest at such rate as
provided herein until such interest is paid.  Interest will accrue on any amount
of  principal  or  interest  until such time as  payment  therefor  is  actually
delivered to the Registered Holder of this Convertible Note.

            Notwithstanding the foregoing, on any Interest Payment Date, if, and
to the extent  that,  the payment of interest in cash would cause the Company to
have no Excess Availability (as defined in the Senior Credit Agreement) or be in
breach of SECTION 7.1 of the Senior  Credit



                                       4
<PAGE>

Agreement,  the Company may, at its  election,  pay the interest  payable to the
Registered  Holder on such Interest  Payment Date by delivery to the  Registered
Holder of a number of shares of Common Stock equal to (a) the amount of interest
accrued as of such  Interest  Payment  Date divided by (b) the lesser of (x) the
Conversion Price and (y) the Market Price per share of the Common Stock, in each
case, as of such Interest Payment Date; provided, that the Company may make such
election only if the Liquidity Test (as herein  defined) has been met as of such
Interest  Payment Date. If the Company makes such election,  the Company may pay
the Registered  Holder cash in lieu of issuing any  fractional  shares of Common
Stock. As of any Interest Payment Date, the "LIQUIDITY TEST" shall be met if the
Registered  Holder receives  shares of Common Stock which the Registered  Holder
can immediately sell to any Person without violating the Securities Act and such
shares are received by the  Registered  Holder no later than the fifth day after
the applicable Interest Payment Date; provided,  however, that,  notwithstanding
the  foregoing,  the  Liquidity  Test  shall not be met if either (i) the Market
Price per share of Common  Stock has been below $5.00 per share (such  number to
be  appropriately  adjusted for any stock  split,  reverse  stock  split,  stock
dividend or other  subdivision or combination of Common Stock after the original
date of issuance of this Convertible Note) for each of the 90 days prior to such
Interest Payment Date, (ii) the average daily trading volume of the Common Stock
as quoted in the NASDAQ  System for the 30 business  days prior to such Interest
Payment Date is less than 15,000 shares per day, (iii) at any time prior to such
Interest  Payment Date, the Company has received a notice from a Person with the
requisite  authority  which states that the Common Stock has been  delisted from
the NASDAQ System and the Common Stock is not listed on the New York or American
Stock Exchange,  or (iv) an Event of Default (as herein defined) has occurred at
or prior to and is continuing as of such Interest Payment Date.

            3.  APPLICATION OF PAYMENTS;  PRO RATA PAYMENTS.  Subject to SECTION
1(f),  all  payments  (whether  schedules,  optional or special)  shall  include
payment  of  accrued  interest  and  pre-payment  premium  with  respect  to all
pre-payments on the principal amount so paid, and shall be applied to payment of
interest  before  application  to  principal.  Except as otherwise  permitted by
SECTIONS  1(d),  1(e)  or  1(f)  hereof,  all  payments  to the  holders  of the
Convertible Notes (whether for principal,  interest,  premium or otherwise) will
be made pro rata among such holders  based upon the aggregate  unpaid  principal
amount of the Convertible  Notes held by each such holder.  By its acceptance of
this  Convertible  Note, the holder of this  Convertible Note agrees that if any
holder  of  a  Convertible   Note  obtains  any  payment   (whether   voluntary,
involuntary,  by application  of offset or otherwise) of principal,  interest or
any other amount with respect to any Convertible Note in excess of such holder's
pro rata share of such payments obtained by all holders of the Convertible Notes
(unless  permitted by SECTIONS  1(d),  1(e) or 1(f)  hereof)),  such holder will
purchase from the other holders of the Convertible  Notes such  participation in
the  Convertible  Notes held by them as is  necessary  to cause such  holders to
share the excess payment  ratably among each of them as provided in this SECTION
3.

            4. EVENTS OF DEFAULT.

            (a)  DEFINITION.  An  "EVENT  OF  DEFAULT"  will be  deemed  to have
occurred if:

            (i) the  Company  fails to pay any  amount of the  principal  of any
Convertible Note as and when required  pursuant to the terms of such Convertible
Note or the Purchase Agreement;

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<PAGE>


            (ii) the  Company  fails to pay any  amount of the  interest  on any
Convertible Note within five (5) days of when such payment is required  pursuant
to the terms of such Convertible Note or the Purchase Agreement;

            (iii) the  Company  fails to  perform  or observe  any  covenant  or
agreement contained in paragraphs 2C or 2G of the Purchase Agreement;

            (iv) the Company  fails to perform or observe any other  covenant or
agreement  contained in the Convertible  Notes, the Purchase Agreement or any of
the other  Investment  Documents,  and such failure is not cured within ten (10)
days after the occurrence of such failure;

            (v) any representation, warranty, statement or information contained
in the  Purchase  Agreement or any other  Investment  Document or required to be
furnished  to any  holder of the  Convertible  Notes  pursuant  to the  Purchase
Agreement  or any  other  Investment  Document  is  false or  misleading  in any
material respect on the date made or furnished;

            (vi) the  Company  or any  Subsidiary  makes an  assignment  for the
benefit  of  creditors  or  admits in  writing  its  inability  to pay its debts
generally  as they  become  due;  or an order,  judgment  or  decree is  entered
adjudicating the Company or any Subsidiary  bankrupt or insolvent;  or any order
for relief with respect to the Company or any  Subsidiary  is entered  under the
Federal  Bankruptcy Code; or the Company or any Subsidiary  petitions or applies
to any  tribunal  for the  appointment  of a  custodian,  trustee,  receiver  or
liquidator of the Company or any Subsidiary,  or of any substantial  part of the
assets of the Company or any Subsidiary, or commences any proceeding (other than
a proceeding for the voluntary  liquidation  and  dissolution of any Subsidiary)
relating to the Company or any Subsidiary  under any bankruptcy  reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation law of
any  jurisdiction;  or any such petition or  application  is filed,  or any such
proceeding is commenced,  against the Company or any  Subsidiary  and either (A)
the Company or any such  Subsidiary by any act  indicates its approval  thereof,
consent  thereto or  acquiescence  therein or (B) such petition,  application or
proceeding is not dismissed within 30 days;

            (vii) a judgment in excess of $250,000  (exclusive  of insurance) is
rendered  against the Company or any Subsidiary  and, within 30 days after entry
thereof,  such judgment is not  discharged in full or execution  thereof  stayed
pending  appeal,  or within 30 days after the expiration of any such stay,  such
judgment is not discharged in full; or

            (viii) the Company or any Subsidiary  defaults in the performance of
any obligation or agreement,  including with respect to any Indebtedness, if the
effect of such  default is to cause an amount  exceeding  $250,000 to become due
prior  to its  stated  maturity  or to  permit  the  holder  or  holders  of any
obligation  or  agreement  to cause an amount  exceeding  $250,000 to become due
prior to its stated maturity.

                                       6
<PAGE>


The foregoing will constitute  Events of Default  whatever the reason or cause
for any such Event of Default and whether it is  voluntary or  involuntary  or
is effected by operation of law or pursuant to any  judgment,  decree or order
of any  court  or any  order,  rule or  regulation  of any  administrative  or
governmental body.

            (b) CONSEQUENCES OF EVENTS OF DEFAULT.

            (i) If any Event of  Default  (other  than an Event of  Default of a
type  described  in  SECTIONS  4(a)(iii)  and  4(a)(vi))  has  occurred  and  is
continuing,  then the holder or holders  of a majority  of the unpaid  principal
amount of the Convertible  Notes then outstanding may declare (by written notice
delivered to the Company) all or any portion of the outstanding principal amount
of the  Convertible  Notes  (together with all accrued  interest  thereon) to be
immediately  due and  payable  and may  demand  immediate  payment of all or any
portion  of the  outstanding  principal  amount  of the  Convertible  Notes  and
interest thereon in accordance with paragraph 2H of the Purchase Agreement.

            (ii) If an  Event  of  Default  of the type  described  in  SECTIONS
4(a)(iii) or 4(a)(vi) has occurred,  then the aggregate  principal amount of the
Convertible  Notes  (together  with all accrued  interest  thereon and all other
amounts due and payable with respect  thereto) will become  immediately  due and
payable without any action on the part of the holders of the Convertible  Notes.
Subject to paragraph 2H of the Purchase Agreement,  the Company will immediately
pay to the holders of the  Convertible  Notes all  amounts due and payable  with
respect to the Convertible Notes upon the occurrence of such Event of Default.

            (iii) If any  Event  of  Default  of a type  described  in  SECTIONS
4(a)(i) or 4(a)(ii)  has occurred and is  continuing,  the interest  rate on the
Convertible  Notes will  increase  immediately  by an  increment of 3 percentage
points (i.e., 300 basis points),  to the extent permitted by applicable law. Any
such increase of the interest rate  resulting from the operation of this SECTION
4(b)(iii)  will  terminate as of the close of business on the next date on which
no Event of Default  exists  (subject to subsequent  increases  pursuant to this
Section).

            (iv) Each holder of the  Convertible  Notes will also have any other
rights which such holder may have been afforded  under any contract or agreement
at any time and any  other  rights  which  such  holder  may  have  pursuant  to
applicable law. The Company hereby waives  diligence,  presentment,  protest and
demand  and  notice of  protest  and  demand,  dishonor  and  nonpayment  of the
Convertible  Notes,  and expressly  agrees that the  Convertible  Notes,  or any
payment  thereunder,  may be  extended  from  time to time and that the  holders
thereof may accept  security for the Convertible  Notes or release  security for
the  Convertible  Notes,  all without in any way  affecting the liability of the
Company thereunder.

                                       7
<PAGE>


            5. CONVERSION.

            (a) CONVERSION PROCEDURE.

            (i) VOLUNTARY CONVERSION. At any time and from time to time prior to
the payment of this  Convertible  Note in full,  the holder of this  Convertible
Note may  convert  all or any  portion  of the unpaid  principal  amount of this
Convertible  Note plus any  unpaid  accrued  interest  thereon  into a number of
shares of the Conversion  Stock  determined by dividing (A) the unpaid principal
and  interest  amount  designated  by such  holder to be  converted,  by (B) the
Conversion Price then in effect.

            (ii)  EFFECTIVENESS  OF  CONVERSION.  Except as  otherwise  provided
herein,  each  conversion of this  Convertible  Note will be deemed to have been
effected as of the close of business on the date on which this  Convertible Note
has been  surrendered for conversion at the office of the Company  specified for
delivery of notices  pursuant to the  Purchase  Agreement.  At such time as such
conversion has been effected,  the rights of the holder of this Convertible Note
as such holder to the extent of the  conversion  will  cease,  and the Person or
Persons in whose name or names any  certificate  or  certificates  for shares of
Conversion  Stock are to be issued upon such  conversion  will be deemed to have
become  the  holder  or  holders  of record of the  shares of  Conversion  Stock
represented thereby.

            (iii)  CONTINGENT  CONVERSION.  Notwithstanding  any other provision
hereof,  if a conversion of all or any portion of this Convertible Note is to be
made in connection with a registered  public  offering,  a Change of Control,  a
Sale Event, a Management  Change,  a proposed sale of the underlying  Conversion
Stock or any other  transaction  or  event,  then such  conversion  may,  at the
election  of the  holder  of this  Convertible  Note,  be  conditioned  upon the
consummation of such  transaction or the occurrence of such event, in which case
such conversion  will not be deemed to be effective  until such  consummation or
occurrence.

            (iv) ACTIONS BY THE COMPANY.  As soon as possible after a conversion
has been effected (but in any event within five business days  thereafter),  the
Company will deliver to the  converting  holder a  certificate  or  certificates
representing the number of shares of Conversion Stock issuable by reason of such
conversion,  in such name or names and such denomination or denominations as the
converting  holder has specified,  and a new Convertible  Note  representing any
portion of the principal  amount which was represented by this  Convertible Note
but which was not converted.

            (v)  CHARGES,  ETC.  The  issuance  of  certificates  for  shares of
Conversion  Stock upon  conversion of any principal  amount of this  Convertible
Note will be made without charge to the holder of this  Convertible  Note or the
Conversion  Stock to be issued for any issuance tax in respect  thereof or other
cost incurred by the Company in connection  with such conversion and the related
issuance of shares of Conversion  Stock.  Upon  conversion  of this  Convertible
Note, the Company will take all such actions as are necessary in order to insure
that the  Conversion  Stock  issuable  with respect to such  conversion  will be
validly  issued,  fully  paid and  nonassessable,  free and clear of all  taxes,

                                       8
<PAGE>

liens,  charges and  encumbrances  with  respect to the  issuance  thereof.  The
Company will not close its books against the transfer of this  Convertible  Note
or of Conversion  Stock issued or issuable upon  conversion of this  Convertible
Note  in any  manner  which  interferes  with  the  timely  conversion  of  this
Convertible  Note. The Company will assist and cooperate with any holder of this
Convertible  Note or Conversion Stock issuable upon any such conversion which is
required to make any governmental  filings or obtain any  governmental  approval
prior  to  or in  connection  with  the  conversion  of  this  Convertible  Note
(including making any filings required to be made by the Company).

            (vi)  RESERVATION.  The Company  will at all times  reserve and keep
available out of its authorized but unissued shares of Conversion Stock,  solely
for the purpose of issuance upon the conversion of the Convertible  Notes,  such
number  of  shares of  Conversion  Stock  issuable  upon the  conversion  of all
outstanding  Convertible  Notes.  All shares of  Conversion  Stock  which are so
issuable  will,  when  issued,  be duly  and  validly  issued,  fully  paid  and
nonassessable and free from all taxes, liens and charges.  The Company will take
all  such  actions  as may be  necessary  to  assure  that all  such  shares  of
Conversion  Stock may be so issued  without  violation of any  applicable law or
governmental  regulation or any requirements of any domestic securities exchange
upon which shares of Conversion  Stock may be listed (except for official notice
of issuance  which will be  immediately  delivered by the Company upon each such
issuance).  The Company will not take any action which would cause the number of
authorized but unissued shares of Conversion Stock to be less than the number of
such shares issuable upon  conversion in full of the  Convertible  Notes and the
conversion,  exercise or exchange in full of all other Equity  Securities of the
Company then outstanding.

            (vii) RELATED CONVERSION. If any Conversion Stock issuable by reason
of  conversion  of this  Convertible  Note is  immediately  convertible  into or
immediately  exchangeable for any other stock or securities of the Company, then
the Company will, at the converting  holder's  option and upon surrender of this
Convertible  Note by such holder as provided  herein  together  with any notice,
statement  or payment  required  to effect such  conversion  or exchange of such
Conversion  Stock,  deliver to such holder (or as  otherwise  specified  by such
holder) a certificate or certificates  representing the stock or securities into
which the shares of Conversion  Stock issuable by reason of such  conversion are
so  convertible  or  exchangeable,  registered in such name or names and in such
denomination or denominations as such holder has specified.

            (b) CONVERSION PRICE.

            (i) The initial  Conversion  Price as of the original  issuance date
was $12.90.  In order to prevent dilution of the conversion rights granted under
the Convertible  Notes,  the Conversion Price will be subject to adjustment from
time to time as provided in this SECTION 5(b), it being  acknowledged and agreed
that since such date, the  Conversion  Price has been adjusted from time to time
as is reflected on the Company's books and records.

            (ii) If and  whenever on or after the  original  date of issuance of
this Convertible Note the Company issues or sells, or in accordance with SECTION
5(c) is


                                       9
<PAGE>

deemed to have issued or sold,  any  Conversion  Stock for a  consideration  per
share which is less than the  Conversion  Price in effect  immediately  prior to
such issuance or sale, then  immediately upon such issue or sale or deemed issue
or sale the Conversion  Price will be reduced to the Conversion Price determined
by  dividing  (A) an  amount  equal  to the sum of (x) the  product  derived  by
multiplying the Conversion  Price in effect  immediately  prior to such issue or
sale or deemed issue or sale by the number of shares of Conversion  Stock Deemed
Outstanding  immediately  prior to such  issue or sale or deemed  issue or sale,
plus (y) the  consideration,  if any, received by the Company upon such issue or
sale or deemed issue or sale,  by (B) the number of shares of  Conversion  Stock
Deemed Outstanding immediately after such issue or sale or deemed issue or sale;
provided  that no adjustment  in the  Conversion  Price will be made pursuant to
this SECTION 5(b) in connection with any Exempt Issuance.

            (c) EFFECT ON CONVERSION  PRICE OF CERTAIN  EVENTS.  For purposes of
determining  the  adjusted  Conversion  Price under  SECTION 5(b) and only if an
adjustment to the Conversion Price is required under SECTION 5(b), the following
will be applicable:

            (i)  ISSUANCE  OF RIGHTS OR  OPTIONS.  If the  Company in any manner
grants or sells any Options and the price per share for which  Conversion  Stock
is issuable upon the exercise of such Options, or upon conversion or exchange of
any Convertible  Securities issuable upon exercise of such Options, is less than
the Conversion Price in effect  immediately prior to the time of the granting or
sale of such  Options,  then the maximum  number of shares of  Conversion  Stock
issuable  upon the exercise of such Options,  or upon  conversion or exchange of
the maximum amount of such Convertible  Securities issuable upon the exercise of
such Options,  will be deemed to be outstanding and to have been issued and sold
by the  Company at the time of the  granting  or sale of such  Options  for such
price per share. For purposes of this SECTION 5(c)(i),  the "price per share for
which  Conversion  Stock is  issuable  upon  exercise of such  Options,  or upon
conversion or exchange of any Convertible  Securities  issuable upon exercise of
such  Options"  will be  determined  by dividing (A) the total  amount,  if any,
received or receivable by the Company as consideration  for the granting or sale
of such Options,  plus the minimum aggregate amount of additional  consideration
payable to the Company upon the exercise of all such  Options,  plus in the case
of such Options which relate to Convertible  Securities,  the minimum  aggregate
amount of  additional  consideration,  if any,  payable to the Company  upon the
issuance or sale of such  Convertible  Securities and the conversion or exchange
thereof,  by (B) the maximum number of shares of Conversion  Stock issuable upon
the  exercise  of such  Options or upon the  conversion  or exchange of all such
Convertible Securities issuable upon the exercise of such Options. No adjustment
of the Conversion Price will be made upon the actual issuance of such Conversion
Stock or of such  Convertible  Securities  upon the  exercise of such Options or
upon the actual issuance of such Conversion Stock upon conversion or exchange of
such Convertible Securities.

            (ii)  ISSUANCE  OF  CONVERTIBLE  SECURITIES.  If the  Company in any
manner issues or sells any  Convertible  Securities  and the price per share for
which  Conversion  Stock is issuable upon conversion or exchange thereof is less
than the Conversion Price in effect  immediately prior to the time of such issue
or sale,  then the


                                       10
<PAGE>

maximum  number  of shares of  Conversion  Stock  issuable  upon  conversion  or
exchange of all such Convertible Securities will be deemed to be outstanding and
to have been issued and sold by the Company at the time of the  issuance or sale
of such  Convertible  Securities  for such price per share.  For the purposes of
this  SECTION  5(b)(ii),  the  "price  per share for which  Conversion  Stock is
issuable upon conversion or exchange thereof" will be determined by dividing (a)
the total amount received or receivable by the Company as consideration  for the
issue or sale of such Convertible Securities,  plus the minimum aggregate amount
of additional consideration,  if any, payable to the Company upon the conversion
or exchange  thereof,  by (b) the maximum  number of shares of Conversion  Stock
issuable upon the conversion or exchange of all such Convertible Securities.  No
adjustment  of the  Conversion  Price will be made upon the actual issue of such
Conversion Stock upon conversion or exchange of such Convertible Securities, and
if any such issue or sale of such  Convertible  Securities is made upon exercise
of any Options for which  adjustments of the Conversion Price had been or are to
be made pursuant to other provisions of this SECTION 5(c), no further adjustment
of the Conversion Price will be made by reason of such issue or sale.

            (III) CHANGE IN OPTION  PRICE OR  CONVERSION  RATE.  If the purchase
price provided for in any Option, the additional  consideration (if any) payable
upon the issue, conversion or exchange of any Convertible Security, the quantity
of  Conversion  Stock  issuable   directly  or  indirectly  upon  the  exercise,
conversion  or exchange of any Option or  Convertible  Security,  or the rate at
which  any  Convertible   Security  is  convertible  into  or  exchangeable  for
Conversion  Stock  changes  at any  time,  then the  Conversion  Price in effect
immediately prior to the time of such change will be adjusted immediately to the
Conversion Price which would have been in effect at such time had such Option or
Convertible  Security  originally  provided  for such  changed  purchase  price,
additional  consideration,  changed quantity or changed  conversion rate, as the
case may be, at the time initially granted,  issued or sold; provided that in no
event will the Conversion Price be increased pursuant to this SECTION 5(c)(iii).
For purposes of this  SECTION  5(c),  if the terms of any Option or  Convertible
Security which was  outstanding as of the date of the original  issuance of this
Convertible  Note  are  changed  in the  manner  described  in  the  immediately
preceding sentence,  then such Option or Convertible Security and the Conversion
Stock deemed  issuable upon  exercise,  conversion  or exchange  thereof will be
deemed to have been issued as of the date of such  change;  provided  that in no
event will the Conversion Price be increased pursuant to this SECTION 5(c)(III).

            (IV) CALCULATION OF CONSIDERATION RECEIVED. If any Conversion Stock,
Options  or  Convertible  Securities  are  issued or sold or deemed to have been
issued or sold for cash, then the consideration received therefor will be deemed
to be the net amount received by the Company therefor.  If any Conversion Stock,
Options or Convertible  Securities are issued or sold for a consideration  other
than cash, then the amount of the consideration  other than cash received by the
Company  will  be the  fair  value  of such  consideration,  except  where  such
consideration consists of securities,  in which case the amount of consideration
received  by the  Company  will be the  Market  Price  thereof as of the date of
receipt. If any Conversion Stock,  Options or Convertible  Securities are issued
to the owners of the non-surviving entity in connection with any


                                       11
<PAGE>

merger  in which  the  Company  is the  surviving  entity,  then the  amount  of
consideration  therefor  will be deemed to be the fair value of such  portion of
the net assets and business of the  non-surviving  entity as is  attributable to
such Conversion Stock,  Options or Convertible  Securities,  as the case may be.
The fair  value of any  consideration  other  than cash and  securities  will be
determined jointly by the Company and the holder or holders of a majority of the
outstanding  unpaid principal  amount of the Convertible  Notes. If such parties
are unable to reach agreement within a reasonable period of time, then such fair
value will be determined by an appraiser jointly selected by the Company and the
holder or holders of a majority of the outstanding  unpaid  principal  amount of
the Convertible  Notes.  The  determination  of such appraiser will be final and
binding upon the Company and all holders of Convertible  Notes, and the fees and
expenses of such appraiser will be borne by the Company.

            (v) INTEGRATED  TRANSACTIONS.  If any Option is issued in connection
with the issue or sale of other securities of the Company,  together  comprising
one integrated  transaction in which no specific  consideration  is allocated to
such  Options by the parties  thereto,  the Options  will be deemed to have been
issued without consideration.

            (vi) TREASURY SHARES.  The disposition of any Conversion Stock owned
or held  by the  Company  or any  Subsidiary  (including  in  treasury)  will be
considered an issue or sale of Conversion Stock.

            (vii) RECORD DATE.  If the Company  takes a record of the holders of
Conversion  Stock for the purpose of entitling them (A) to receive a dividend or
other  distribution   payable  in  Conversion  Stock,   Options  or  Convertible
Securities  or (B) to subscribe  for or purchase  Conversion  Stock,  Options or
Convertible  Securities,  then such record date will be deemed to be the date of
the issue or sale of the shares of  Conversion  Stock deemed to have been issued
or sold upon the  declaration  of such  dividend  or the  making  of such  other
distribution  or the  date of the  granting  of such  right of  subscription  or
purchase, as the case may be.

            (d)  SUBDIVISION OR COMBINATION OF CONVERSION  STOCK. If the Company
at any time subdivides (by any stock split,  stock dividend or otherwise) one or
more classes of its outstanding shares of Conversion Stock into a greater number
of  shares,  then the  Conversion  Price  in  effect  immediately  prior to such
subdivision will be proportionately reduced. If the Company at any time combines
(by reverse  stock split or  otherwise)  one or more classes of its  outstanding
shares of Conversion Stock into a smaller number of shares,  then the Conversion
Price in effect  immediately  prior to such combination will be  proportionately
increased.

            (E) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.

            (i) ORGANIC CHANGE DEFINED.  Any  recapitalization,  reorganization,
reclassification, consolidation, merger, sale of all or substantially all of the
Company's assets or other transaction,  which in each case is effected in such a
manner that holders of Conversion Stock are entitled to receive (either directly
or upon subsequent  liquidation) stock,  securities or cash or other assets with
respect to or in  exchange  for  Conversion  Stock is  referred  to herein as an
"ORGANIC CHANGE."

                                       12
<PAGE>


            (ii) PROVISIONS FOR ORGANIC CHANGE. Prior to the consummation of any
Organic Change, the Company will make lawful and adequate provision (in form and
substance satisfactory to the holder or holders of a majority of the outstanding
unpaid  principal  amount of the Convertible  Notes then  outstanding) to insure
that each  holder of any  Convertible  Note  will  thereafter  have the right to
acquire  and  receive,  in lieu of or addition to (as the case may be) shares of
Conversion  Stock  immediately  theretofore  acquirable and receivable  upon the
conversion of such holder's Convertible Note, such shares of stock,  securities,
cash or other  assets as may be issued or payable with respect to or in exchange
for the number of shares of Conversion Stock immediately  theretofore acquirable
and  receivable  upon  conversion  of such  holder's  Convertible  Note had such
Organic Change not taken place. In any such case, appropriate provision (in form
and  substance  satisfactory  to the  holder or  holders  of a  majority  of the
outstanding  unpaid principal amount of the Convertible  Notes then outstanding)
will be made with respect to such  holder's  rights and interests to insure that
the provisions of this SECTION 5 and SECTIONS 6 and 7 hereof will  thereafter be
applicable in relation to any shares of stock, securities,  cash or other assets
thereafter  deliverable upon the conversion of the Convertible Notes (including,
in the case of any such  consolidation,  merger or sale in which  the  successor
entity or purchasing entity is other than the Company,  an immediate  adjustment
of the Conversion  Price to the value for the Conversion  Stock reflected by the
terms of such  consolidation,  merger  or sale,  and a  corresponding  immediate
adjustment in the number of shares of Conversion Stock acquirable and receivable
upon conversion of the Convertible Notes;  provided that no such adjustment will
increase the Conversion Price as otherwise determined pursuant to this SECTION 5
or decrease the number of shares of Conversion Stock issuable upon conversion of
the Convertible  Notes then  outstanding).  The Company will not effect any such
consolidation,  merger or sale,  unless prior to the consummation  thereof,  the
successor  entity (if other than the Company)  resulting from  consolidation  or
merger or the entity  purchasing  such assets assumes by written  instrument (in
form  satisfactory  to the holder or holders  of a majority  of the  outstanding
unpaid  principal  amount  of  the  Convertible  Notes  then  outstanding),  the
obligation to deliver to each such holder such shares of stock, securities, cash
or other assets as, in accordance with the foregoing provisions, such holder may
be entitled to acquire.

            (f) CERTAIN EVENTS.  If any event occurs of the type contemplated by
the  provisions  of  this  SECTION  5 but  not  expressly  provided  for by such
provisions  (including,  without limitation,  the granting of stock appreciation
rights, phantom stock rights or other rights or securities with equity or profit
participation  features),  then the  Company's  board of directors in good faith
will make an appropriate adjustment in the Conversion Price so as to protect the
rights of the holders of the Convertible Notes; provided that no such adjustment
will  increase the  Conversion  Price as otherwise  determined  pursuant to this
SECTION 5 or decrease the number of shares of  Conversion  Stock  issuable  upon
conversion of the Convertible Notes then outstanding.

            (g)  NOTICES.  Immediately  upon any  adjustment  of the  Conversion
Price,  the  Company  will send  written  notice  thereof  to the holder of this
Convertible  Note,  setting  forth  in  reasonable  detail  and  certifying  the
calculation  of such  adjustment.  The Company will send  written  notice to the
holder of this  Convertible Note at least 20 days prior to the date on which the
Company  closes its books or takes a record (A) with  respect to any dividend or
distribution


                                       13
<PAGE>

upon the Conversion Stock, (B) with respect to any pro rata  subscription  offer
to  holders  of  Conversion  Stock or (C) for  determining  rights  to vote with
respect to or to participate in any Organic Change,  dissolution or liquidation.
The Company will also give at least 20 days prior  written  notice to the holder
of this Convertible Note of the date on which any Organic Change, dissolution or
liquidation will take place.

            6.  LIQUIDATING  DIVIDENDS.  If the Company declares a dividend upon
the  Conversion  Stock payable  otherwise than in cash out of earnings or earned
surplus (determined in accordance with generally accepted accounting principles,
consistently  applied)  except  for  a  stock  dividend  payable  in  shares  of
Conversion  Stock (a "LIQUIDATING  DIVIDEND"),  then the Company will pay to the
holder of this  Convertible  Note at the time of payment thereof the Liquidating
Dividend  which would have been paid to the holder of this  Convertible  Note on
the Conversion Stock had this Convertible Note been fully converted  immediately
prior to the date on which a record is taken for such Liquidating  Dividend (or,
if no record is taken,  the date as of which the record  holders  of  Conversion
Stock entitled to such dividends are to be determined).

            7. PURCHASE  RIGHTS.  If at any time the Company  grants,  issues or
sells any Equity  Securities  or other  property  pro rata to the holders of any
class of Conversion  Stock,  then each holder of the  Convertible  Notes will be
entitled to acquire,  upon the terms  applicable  to such holders of  Conversion
Stock, the aggregate Equity Securities or other property which such holder could
have acquired if such holder had held the number of shares of  Conversion  Stock
acquirable upon conversion of such holder's  Convertible Note immediately before
the date on which a record  is taken  for the  grant,  issuance  or sale of such
Equity Securities or other property (or, if no such record is taken, the date as
of which the record  holders of Conversion  Stock are to be  determined  for the
grant, issue or sale of such Equity Securities or other property).

            8. AMENDMENT AND WAIVER. The provisions of the Convertible Notes may
be amended  and the Company may take any action  herein  prohibited,  or omit to
perform any act herein  required to be  performed by it, only if the Company has
obtained  the  written  consent of the  holder or  holders of a majority  of the
unpaid  principal amount of the outstanding  Convertible  Notes at the time such
action is  taken,  and any  matter as to which  such  written  consent  has been
obtained will be effective as against all holders of Convertible Notes; provided
that no such action will (a)  decrease  the rate at which or the manner in which
interest  accrues on the  Convertible  Notes or the times at which such interest
becomes payable,  (b) change any provision relating to the scheduled payments of
principal  on the  Convertible  Notes,  (c)  increase  the  Conversion  Price or
decrease  the number of shares or the class of stock into which the  Convertible
Notes are  convertible,  or (d) the  percentage  required  to approve any change
described  in clauses  (a),  (b) and (c) above and this clause (d),  without the
written  consent of the holders at least 90% of the unpaid  principal  amount of
the Convertible Notes then outstanding.

            9. DEFINITIONS. For purposes of the Convertible Notes, the following
capitalized terms have the following meaning.

            "APPLICABLE  ECF  PERCENTAGE"  shall mean the applicable  percentage
indicated below based on the applicable fiscal year end and the amount of Excess
Cash Flow for such period:

                                       14
<PAGE>


         FISCAL YEAR END      EXCESS CASH FLOW     APPLICABLE ECF PERCENTAGE
      --------------------  --------------------  ----------------------------
      September 30, 2002     $0    = $2,000,000     37.5%
                                   > $2,000,000     25.0% of Excess Cash Flow
                                                    over $2,000,000 and 37.5% of
                                                    Excess Cash Flow up to
                                                    $2,000,000

      September 30, 2003     $0    = $6,000,000     37.5%
                                   > $6,000,000     25.0% of Excess Cash Flow
                                                    over $6,000,000 and 37.5% of
                                                    Excess Cash Flow up to
                                                    $6,000,000

      September 30, 2004     $0    = $8,000,000     37.5%
        and each year              > $8,000,000     25.0% of Excess Cash Flow
        thereafter                                  over $8,000,000 and 37.5% of
                                                    Excess Cash Flow up to
                                                    $8,000,000


            "CAPITAL  EXPENDITURES"  shall mean,  for any Quarterly Test Period,
the sum  (without  duplication)  of all  expenditures  (whether  paid in cash or
accrued as  liabilities)  during the Quarterly Test Period that are or should be
treated as capital expenditures under GAAP.

            "COMMON STOCK" means the Company's  Common Stock, no par value,  and
any capital stock of any class of the Company hereafter  authorized which is not
limited to a fixed sum or  percentage  of par or stated  value in respect to the
rights of the holders thereof to participate in dividends or in the distribution
of assets upon any liquidation, dissolution or winding up of the Company.

            "CONVERSION  STOCK" means Common Stock;  provided that if there is a
change such that the  securities  issuable upon  conversion  of the  Convertible
Notes are issued by an entity other than the Company or there is a change in the
type or class of securities so issuable,  then the term "CONVERSION  STOCK" will
mean shares of the security issuable upon conversion of this Convertible Note if
such security is issuable in shares, or the smallest unit in which such security
is issuable if such security is not issuable in shares.

            "CONVERSION STOCK DEEMED  OUTSTANDING" means, at any given time, the
number of shares of Conversion Stock actually outstanding at such time, plus the
number of shares of  Conversion  Stock  deemed  to be  outstanding  pursuant  to
SECTIONS  5(c)(i)  and  5(c)(ii)  hereof,  regardless  of  whether  or  not  the
applicable Options and Convertible  Securities are actually  exercisable at such
time, but excluding any shares of Conversion  Stock issuable upon  conversion of
the Convertible Notes.

            "CONVERTIBLE  SECURITIES"  means any Equity  Securities  directly or
indirectly convertible into or exchangeable for Conversion Stock.

            "EXCESS  CASH  FLOW"  shall  mean,  for  any  fiscal  year,  without
duplication,  an amount equal to the sum of (i)  consolidated net income or loss
of the  Company  for such  period,  PLUS (ii) an amount  equal to the  amount of
depreciation  expenses,  amortization  expense  (including the  amortization  of
goodwill),  accrued  non-cash  interest  expense and all other non-



                                       15
<PAGE>

cash charges deducted in arriving at such  consolidated net income or loss, PLUS
(iii) an amount equal to the  aggregate  net cash  proceeds of the sale,  lease,
transfer or other disposition of assets by the Company during such period to the
extent not (a) reinvested in other assets constituting  "Collateral" pursuant to
and as defined in the Senior Credit  Agreement  upon which Agent has a first and
prior Lien  pursuant to and as defined in the Senior  Credit  Agreement,  or (b)
required  to be  applied  to  special  prepayments  or  payments  on the  Senior
Indebtedness or this Convertible Note, PLUS (iv) an amount equal to the net loss
on the sale,  lease,  transfer  or other  disposition  of assets by the  Company
during such period to the extent deducted in arriving at such  consolidated  net
income or loss, PLUS (v) the other amount of any tax refunds or credits received
by the Company during such period, LESS (vi) an amount equal to the non-financed
Capital  Expenditures of the Company for such period, LESS (vii) an amount equal
to the sum of payments  required by and actually paid pursuant to SECTION 2.8(a)
of the Senior Credit  Agreement,  LESS (viii) all voluntary  prepayments  on the
Convertible Note in excess of required payments actually made during such period
to the extent permitted under the Senior Credit  Agreement,  LESS (ix) an amount
equal to the net gain on the  sale,  lease,  transfer  or other  disposition  of
assets,  other than sales in the  ordinary  course of  business,  by the Company
during such period to the extent included in arriving at such  consolidated  net
income  or loss,  LESS (x) an  amount  equal to the  increase  in the  Company's
working capital during such period.

            "EXEMPT  ISSUANCE"  means the  issuance of any Common Stock or other
securities  upon the exercise of any ID Warrant,  any Management  Options or the
Wenner Stock Option,  in each case, in  accordance  with its terms,  or upon the
conversion  of any  Convertible  Notes or any  issuance of any ID  Warrant,  any
Permitted ESO Issuances, the warrants issued to the Registered Holder on the New
Date of Issuance or any issuance of shares of the Company's  Preferred Stock, no
par value, in exchange for shares of the Company's  Preferred Stock  outstanding
on the New Date of Issuance (and warrants  issued to holders  thereof on the New
Date of Issuance).

            "GAAP" means generally accepted accounting  principles in the United
States  of  America  in  effect  from  time  to time as  applied  by  nationally
recognized accounting firms.

            "MARKET  PRICE" of any  security  means the  average of the  closing
prices  of such  security's  sales on all  securities  exchanges  on which  such
security  may at the time be  listed,  or, if there has been no sale on any such
exchange on any day, then the average of the highest bid prices of such security
on all such exchanges at the end of such day, or, if on any day such security is
not so listed,  then the representative bid price of such security quoted in the
NASDAQ  System as of 4:00 P.M.,  New York time,  on such day,  or, if on any day
such security is not quoted in the NASDAQ System,  then the highest bid price of
such security on such day in the domestic over-the-counter market as reported by
the  National   Quotation  Bureau,   Incorporated,   or  any  similar  successor
organization,  in each such case, averaged over a period of 5 days consisting of
the day as of which  "MARKET  PRICE" is being  determined  and the 4 consecutive
business  days prior to such day. If at any time such  security is not listed on
any securities  exchange or quoted in the NASDAQ System or the  over-the-counter
market,  then the  "MARKET  PRICE"  will be the fair  value  thereof  determined
jointly by the Company and the Registered Holder or Holders of a majority of the
unpaid principal amount of the Convertible Notes outstanding at the time of such
determination. If such parties are unable to reach agreement within a reasonable
period of time, then such fair value will be determined by an appraiser  jointly
selected by the Company  and the  Registered  Holder or Holders of a majority of
the



                                       16
<PAGE>

unpaid principal amount of the Convertible Notes outstanding at the time of such
determination.  The  determination  of such  appraiser will be final and binding
upon the parties,  and the fees and expenses of such  appraiser will be borne by
the Company.

            "NEW DATE OF ISSUANCE" means January 10, 2002.

            "OPTIONS"  means any Equity  Securities  directly or  indirectly  to
subscribe for or purchase Conversion Stock or Convertible Securities.

            "PERMITTED  INDEBTEDNESS"  has the  meaning  set forth in the Senior
Credit Agreement.

            "PERSON"  means an  individual,  a  partnership,  a  corporation,  a
limited liability  company,  an association,  a joint stock company,  a trust, a
joint venture,  an unincorporated  organization and a governmental entity or any
department, agency or political subdivision thereof.

            "QUARTERLY  TEST PERIOD" means the twelve month period ending on the
last day of each March, June, September and December of each year.

            10. NOTE TRANSFERABLE.  Subject to the transfer  conditions referred
to in the legend endorsed on this  Convertible  Note, this  Convertible Note and
all rights hereunder are  transferable,  in whole or in part,  without charge to
the  Registered  Holder,  upon  surrender  of this  Convertible  Note,  properly
endorsed for  transfer,  at the office of the Company  specified for delivery of
notices pursuant to the Purchase Agreement.

            11. NOTE EXCHANGEABLE FOR DIFFERENT DENOMINATIONS.  This Convertible
Note is exchangeable,  upon the surrender of this Convertible Note by the holder
at the office of the Company  specified for delivery of notices  pursuant to the
Purchase Agreement,  for new Convertible Notes of like tenor representing in the
aggregate  the  rights  under  this  Convertible  Note,  and  each of  such  new
Convertible Notes will represent such portion of such rights as is designated by
the holder at the time of such surrender.

            12. REPLACEMENT. Upon receipt of evidence reasonably satisfactory to
the Company (it being agreed that an affidavit of the Registered  Holder will be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate  evidencing this  Convertible  Note, and in the case of any such
loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to
the Company (it being  agreed that if the holder is a financial  institution  or
other institutional investor its own agreement will be satisfactory), or, in the
case of any such mutilation upon surrender of such certificate, the Company will
(at  its  expense)  execute  and  deliver  in lieu  of  such  certificate  a new
certificate of like kind representing the same rights  represented by such lost,
stolen,  destroyed  or  mutilated  certificate  and dated the date of such lost,
stolen, destroyed or mutilated certificate.

            13.  CANCELLATION.  After all principal and accrued  interest at any
time owed on this Convertible Note have been paid in full, this Convertible Note
will be surrendered to the Company for cancellation and will not be reissued.

                                       17
<PAGE>


            14.  PAYMENTS  AND  NOTICES.  All  cash  payments  to be made to the
holders of the Convertible  Notes will be made in the lawful money of the United
States of America in  immediately  available  funds.  Payments of principal  and
interest in respect of this Convertible Note will be delivered to the Registered
Holder at such Registered  Holder's  address as it appears in the records of the
Company,  or at such other  address  as the  Registered  Holder  may  specify by
written notice to the Company.  Notices to be given pursuant to this Convertible
Note will be given in the manner provided in the Purchase Agreement.

            15. DESCRIPTIVE HEADINGS; GOVERNING LAW. The descriptive headings of
the several  Sections of this Convertible Note are inserted for convenience only
and do not constitute a part of this Convertible  Note. The corporate law of the
State of  Oregon  (as in  effect  from  time to time)  will  govern  all  issues
concerning  the relative  rights of the Company and its  securityholders  to the
extent  of  matters  addressed  therein.  All  other  questions  concerning  the
construction,  validity, enforcement and interpretation of this Convertible Note
will be governed by the  internal law of the State of New York,  without  giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
law of any  jurisdiction  other  than  the  State of New  York.  As used in this
Convertible   Note,  the  term   "including"  is  used  by  way  of  example  or
illustration, and not as a limitation.

            16.  BUSINESS  DAYS.  If any  payment is due, or any time period for
giving notice or taking action expires, on a day which is a Saturday,  Sunday or
legal holiday in the State of New York or the State of Oregon,  then the payment
will be due and payable on, and the time period will  automatically  be extended
to, the next business day immediately  following such Saturday,  Sunday or legal
holiday,  and interest  will  continue to accrue at the required rate under this
Convertible Note until any such payment is made.

            17. USURY LAWS. It is the intention of the Company and the holder of
this  Convertible  Note to conform  strictly to all applicable usury laws now or
hereafter in force, and any interest payable under this Convertible Note will be
subject to  reduction  to the amount not in excess of the maximum  legal  amount
allowed  under the  applicable  usury laws as now or hereafter  construed by the
courts  having   jurisdiction  over  such  matters.  If  the  maturity  of  this
Convertible  Note is  accelerated  by reason of an election by the holder hereof
resulting  from an Event of  Default,  voluntary  prepayment  by the  Company or
otherwise,  then earned  interest may never include more than the maximum amount
permitted by law, computed from the date hereof until payment,  and any interest
in excess of the maximum amount permitted by law will be canceled  automatically
and, if  theretofore  paid,  will at the option of the holder  hereof  either be
rebated to the Company or credited on the principal  amount of this  Convertible
Note, or if this Convertible Note has been paid, then the excess will be rebated
to the Company.  The aggregate of all interest (whether  designated as interest,
service charges, points or otherwise) contracted for, chargeable,  or receivable
under this Convertible Note will under no circumstances exceed the maximum legal
rate upon the unpaid principal balance of this Convertible Note remaining unpaid
from time to time.  If such interest does exceed the maximum legal rate, it will
be deemed a mistake  and such  excess  will be  canceled  automatically  and, if
theretofore paid,  rebated to the Company or credited on the principal amount of
this Convertible  Note, or if this  Convertible Note has been repaid,  then such
excess will be rebated to the Company.

                                       18
<PAGE>


            18. SEVERABILITY.  If any provision of this Convertible Note is held
by any court of competent  jurisdiction  to be illegal,  void or  unenforceable,
such  provision  will be of no force and effect,  but such holding shall have no
effect upon the enforceability of any other provision.

            19. GENERAL. This Convertible Note:

            (a)  constitutes,  together  with  the  Purchase  Agreement  and the
Ancillary Agreements, the entire agreement among the parties with respect to the
subject matter hereof;

            (b)  supersedes  any and all prior  understandings  relating to such
subject matter; and

            (c) will be binding upon and inure to the benefit of the parties and
their respective heirs, executors, administrators, successors and assigns.

            20. WAIVER OF JURY TRIAL.  THE COMPANY  (AND,  BY ITS  ACCEPTANCE OF
THIS CONVERTIBLE NOTE, THE HOLDER HEREOF) HEREBY WAIVES, TO THE EXTENT PERMITTED
BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO,
IN  CONNECTION  WITH,  OR  ARISING  OUT OF THIS  CONVERTIBLE  NOTE OR ANY  OTHER
INVESTMENT DOCUMENT OR THE VALIDITY, PROTECTION,  INTERPRETATION,  COLLECTION OR
ENFORCEMENT THEREOF.

            21. NO STRICT  CONSTRUCTION.  The Company and the initial  holder of
this Convertible Note have participated  jointly in the negotiation and drafting
of this  Convertible  Note.  In the event an  ambiguity or question of intent or
interpretation  arises,  this  Convertible  Note will be construed as if drafted
jointly by the Company and the holder  hereof,  and no  presumption or burden of
proof will arise favoring or disfavoring  any Person by virtue of the authorship
of any of the provisions of this Convertible Note.

            22. U.S.  WITHHOLDING  TAX. It is intended that interest paid on the
obligation  qualify for the exemption from U.S.  withholding  tax as a portfolio
debt instrument under Section 871(h) or 881(c) of the IRC.

            23.  SUBORDINATION.  The indebtedness  evidenced by this Convertible
Note (i) is and shall be senior to any and all  Indebtedness  of the Corporation
other  than the Senior  Indebtedness  (to the extent  provided  in the  Purchase
Agreement) and all other Convertible  Notes, (ii) shall rank pari-passu with all
other  Convertible  Notes,  and (iii) is not and shall not be pari-passu with or
subordinated  to claims of any trade or similar  creditors of the Company except
as may be required by bankruptcy or other laws affecting the rights of creditors
generally.

                                  * * * * *


                                       19
<PAGE>





            IN WITNESS  WHEREOF,  the Company has  executed and  delivered  this
Amended and Restated  Convertible Senior Subordinated Note on the date specified
above.

                                          GARDENBURGER, INC.


                                          By:  /s/ Scott C. Wallace
                                              ---------------------------
                                          Name: Scott C. Wallace
                                          Title: President & CEO


                                       20

</TEXT>
</DOCUMENT>
