Document:

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                                                                    EXHIBIT 4.05

                        REDEMPTION AND EXCHANGE AGREEMENT

          REDEMPTION AND EXCHANGE AGREEMENT (this "AGREEMENT"), dated as of
January 12, 2001, by and between SmartSources.com, Inc., a Colorado corporation,
with headquarters located at 2030 Marine Drive, Suite 100, North Vancouver,
British Columbia, V7P 1V7 (the "COMPANY"), and RGC International, LDC, a Cayman
Islands limited duration company (the "BUYER").

          WHEREAS:

          A.   The Buyer, pursuant to the Securities Purchase Agreement, dated
February 24, 2000, by and between the Company and the Buyer (the "SECURITIES
PURCHASE AGREEMENT"), (i) purchased (a) convertible debenture of the Company in
the aggregate principal amount of Five Million Dollars ($5,000,000) (the
"DEBENTURE"), convertible into shares of common stock, no par value, of the
Company (the "COMMON STOCK"), and (b) warrants to purchase Three Hundred Thirty
Thousand (330,000) shares of Common Stock (the "WARRANTS") and (ii) entered into
a certain Registration Rights Agreement, dated February 24, 2000, with the
Company (the "REGISTRATION RIGHTS AGREEMENT") (the Securities Purchase
Agreement, the Registration Rights Agreement, the Debenture and the Warrants are
collectively referred to herein as the "INVESTMENT DOCUMENTS");

          B.   The Company has authorized the redemption of a portion of the
Debenture for $1,300,000 (the "CASH AMOUNT") and the exchange of the remainder
of the Debenture and the Warrants for a Promissory Note in the principal amount
of $2,860,000, in the form attached hereto as EXHIBIT "A" (the "NOTE");

          C.   The Buyer wishes to have a portion of the Debenture redeemed for
the Cash Amount and to exchange the remaining amount of the Debenture and the
Warrants for the Note;

          D.   The Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D ("REGULATION D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 ACT");

          E.   All capitalized terms used but not defined in this Agreement
shall have the meanings ascribed to them in the Securities Purchase Agreement;
and

          NOW THEREFORE, the Company and the Buyer hereby agrees as follows:

          1.        PURCHASE AND SALE OF DEBENTURES AND WARRANTS.

               a.   PARTIAL REDEMPTION. At the Closing (as defined below), the
Company shall redeem $1,300,000 principal amount of the Debenture and wire the
Cash Amount in immediately

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available funds to the Buyer pursuant to the wiring instructions provided to the
Company by the Buyer.

               b.   EXCHANGE OF DEBENTURE. At the Closing (as defined below),
the Company shall exchange the remaining amount of the Debenture and the
Warrants for the Note.

               c.   CANCELLATION AND TERMINATION; RELEASE. By and upon the
signing of this Agreement, the Securities Purchase Agreement, Sections 2, 3, 4,
8 and 9 of the Registration Rights Agreement, the Debenture, the Warrants and
the irrevocable authorization and direction dated February 24, 2000 to the
Transfer Agent ("IRREVOCABLE AUTHORIZATION"), shall be terminated and cancelled
and shall be of no further force or effect, and neither of the parties shall
have any further rights or obligations whatsoever under any of such agreements
and instruments. At the Closing, Buyer hereby agrees to cancel, as of the
Closing Date, the Debenture and the Warrants. The parties agree (a) that the
furnishing of a copy of this Agreement to the Transfer Agent shall constitute
notice to the Transfer Agent of the termination of the Irrevocable
Authorization, and (b) to promptly sign and deliver to the Transfer Agent such
further documents of termination and direction as may be required by the
Transfer Agent to effect the same. Except as to the obligations of the Company
under the Note and the rights and obligations of the parties arising under this
Agreement and Sections 1, 5, 6, 7, 10 and 11 of the Registration Rights
Agreement (only to the extent that securities have been registered and re-sold
pursuant to the Registration Rights Agreement prior to the date of this
Agreement), each of the parties hereto hereby forever releases, surrenders,
waives and abandons any and all claims, rights, obligations, rights of action
whether in contract or tort, of any and every type whatsoever, known or unknown,
past, present or future (expressly assuming all risk thereof and associated
therewith) against the other party, its officers, directors, employees,
shareholders, affiliates or other agents or persons acting on its behalf (the
"RELEASED PARTIES").

               d.   MANDATORY REDEMPTION NOTICE WITHDRAWAL. The Mandatory
Redemption Notice dated November 10, 2000, which was delivered by the Buyer to
the Company pursuant to the Debenture, is hereby withdrawn as of the Closing
Date (as defined below).

               e.   CLOSING DATE. Subject to the satisfaction (or waiver) of
the conditions thereto set forth in Section 5 and Section 6 below, the
consummation of the transactions contemplated by this Agreement (the "CLOSING
DATE") shall be 12:00 noon Eastern Standard Time on January 12, 2001 or such
other mutually agreed upon time. The closing of the transactions contemplated by
this Agreement (the "CLOSING") shall occur on the Closing Date at the offices of
Akerman, Senterfitt & Edison, P.A. at SunTrust International Center, One S.E.
Third Avenue, 28th Floor, Miami, Florida 33131, or at such other location as may
be agreed to by the parties.

          2.   BUYER'S REPRESENTATIONS AND WARRANTIES. The Buyer represents and
warrants to the Company solely as to such Buyer that:

               a.   INVESTMENT PURPOSE. As of the date hereof, the Buyer is
purchasing the Note for its own account and not with a present view towards the
public sale or distribution thereof, except pursuant to sales registered or
exempted from registration under the 1933 Act; provided, however, that by making
the representations herein, the Buyer does not agree to hold the Note for

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any minimum or other specific term and reserves the right to dispose of the Note
at any time in accordance with or pursuant to an exemption under the 1933 Act.

               b.   TRANSFER OR RE-SALE. The Buyer understands that (i) the
sale or re-sale of the Note has not been and is not being registered under the
1933 Act or any applicable state securities laws, and the Note may not be
transferred unless (a) the Buyer shall have delivered to the Company an opinion
of counsel (which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions) to the effect that the Note to
be sold or transferred may be sold or transferred pursuant to an exemption from
the registration requirements of the 1933 Act; or (b) the Note is sold or
transferred to an "affiliate" (as defined in Rule 144 promulgated under the 1933
Act (or a successor rule) ("RULE 144")) of the Buyer who agrees to sell or
otherwise transfer the Note only in accordance with this Section 2(b) and who is
an Accredited Investor under the 1933 Act; or (c) the Note is sold pursuant to
Rule 144(k); and (ii) neither the Company nor any other person is under any
obligation to register the Note under the 1933 Act or any state securities laws
or to comply with the terms and conditions of any exemption thereunder.
Notwithstanding the foregoing or anything else contained herein to the contrary,
the Note may be pledged as collateral in connection with a bona fide margin
account or other lending arrangement.

               c.   LEGENDS. The Buyer understands that the Note may bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such Note):

               "The securities represented by this Note have not
               been registered under the Securities Act of 1933,
               as amended. The securities may not be sold,
               transferred or assigned in the absence of an
               effective registration statement for the
               securities under said Act, or an opinion of
               counsel, in form, substance and scope customary
               for opinions of counsel in comparable
               transactions, that registration is not required
               under said Act or unless sold pursuant to Rule 144
               under said Act."

          The legend set forth above shall be removed and the Company shall
issue the Note without such legend to the holder of the Note upon which it is
stamped, if, unless otherwise required by applicable state securities laws, (a)
the Note may be sold pursuant to Rule 144 without any restriction as to the
number of securities as of a particular date that can immediately be sold, or
(b) such holder provides the Company with an opinion of counsel, in form,
substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a re-sale or transfer of the Note may be made
without registration under the 1933 Act and such re-sale or transfer is
effected.

               d.   AUTHORIZATION; ENFORCEMENT. This Agreement has been duly and
validly authorized. This Agreement has been duly executed and delivered on
behalf of the Buyer, and this Agreement constitutes the valid and binding
agreement of the Buyer enforceable in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting creditors rights generally or general principles of equity.

          3.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Buyer that:
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               a.   ORGANIZATION AND QUALIFICATION. The Company and each of its
Subsidiaries (as defined below), if any, is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated, with full power and authority (corporate and other) to
own, lease, use and operate its properties and to carry on its business as and
where now owned, leased, used, operated and conducted. The Company and each of
its Subsidiaries is duly qualified as a foreign corporation to do business and
is in good standing in every jurisdiction in which its ownership or use of
property or the nature of the business conducted by it makes such qualification
necessary except where the failure to be so qualified or in good standing would
not have a Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any material
adverse effect on (i) the Note, (ii) the business, operations, assets, financial
condition, results of operations, properties or prospects of the Company and its
Subsidiaries, if any, taken as a whole, (iii) the transactions contemplated
hereby or by the agreements or the guarantees to be entered into in connection
herewith by the Company or its Subsidiaries or (iv) the authority or the ability
of the Company to perform its obligation under this Agreement or the Note.
"SUBSIDIARIES" means any corporation or other organization, whether incorporated
or unincorporated, in which the Company owns, directly or indirectly, any equity
or other ownership interest.

               b.   AUTHORIZATION; ENFORCEMENT. (i) The Company has all
requisite corporate power and authority to enter into and perform this Agreement
and the Note and to consummate the transactions contemplated hereby and thereby
and to issue and deliver the Note, in accordance with the terms hereof and
thereof, (ii) the execution and delivery of this Agreement and the Note by the
Company and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by the Company's Board of Directors and no
further consent or authorization of the Company, its Board of Directors, or its
stockholders is required, (iii) this Agreement and the Note have been duly
executed and delivered by the Company, and (iv) this Agreement constitutes, and
upon execution and delivery by the Company of the Note, such instrument will
constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency or similar laws affecting
creditors rights generally or general principles of equity.

               c.   CAPITALIZATION. As of the date hereof, the authorized
capital stock of the Company consists of (i) 50,000,000 shares of Common Stock,
of which 12,055,300 shares are issued and outstanding, 1,385,000 shares are
reserved for issuance pursuant to the Company's stock option plans, and
1,675,000 shares are reserved for issuance pursuant to securities exercisable
for, or convertible into or exchangeable for shares of Common Stock; and (ii) no
shares of preferred stock. All of such outstanding shares of capital stock are,
or upon issuance will be, duly authorized, validly issued, fully paid and
nonassessable. No shares of capital stock of the Company are subject to
preemptive rights or any other similar rights of the stockholders of the Company
or any liens or encumbrances imposed through the actions or failure to act of
the Company. Except as disclosed in SCHEDULE 3(c), as of the effective date of
this Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe for, puts, calls, rights of first refusal, agreements, understandings,
claims or other commitments or rights of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for any shares of
capital stock of the Company or any of its Subsidiaries, or arrangements by
which the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries and
(ii) there are no agreements or arrangements under which the Company or any of
its Subsidiaries is obligated to register the sale of any of its or their
securities under the 1933 Act. The Company has

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furnished to the Buyer true and correct copies of the Company's Certificate of
Incorporation as in effect on the date hereof ("CERTIFICATE OF INCORPORATION"),
the Company's By-laws, as in effect on the date hereof (the "BY-LAWS"), and the
terms of all securities convertible into or exercisable for Common Stock of the
Company and the material rights of the holders thereof in respect thereto. The
Company shall provide the Buyer with a written update of this representation
signed by the Company's Chief Executive or Chief Financial Officer on behalf of
the Company as of the Closing Date.

               d.   NO CONFLICTS. The execution, delivery and performance of
this Agreement and the Note by the Company and the consummation by the Company
of the transactions contemplated hereby and thereby will not (i) conflict with
or result in a violation of any provision of the Certificate of Incorporation or
By-laws or (ii) except as set forth on SCHEDULE 3(d), violate or conflict with,
or result in a breach of any provision of, or constitute a default (or an event
which with notice or lapse of time or both could become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture, patent, patent license or instrument
to which the Company or any of its Subsidiaries is a party (assuming exclusively
for the purposes of this representation and warranty that the actions
contemplated by Section 1(c) of this Agreement have been consummated), or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and regulations of
any self-regulatory organizations to which the Company or its securities are
subject) applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or affected
(except for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect). Neither the Company nor any of its Subsidiaries
is in violation of its Certificate of Incorporation, By-laws or other
organizational documents and neither the Company nor any of its Subsidiaries is
in default (and no event has occurred which with notice or lapse of time or both
could put the Company or any of its Subsidiaries in default) under, and neither
the Company nor any of its Subsidiaries has taken any action or failed to take
any action that would give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its Subsidiaries is a party or by which any property or
assets of the Company or any of its Subsidiaries is bound or affected (assuming
exclusively for the purposes of this representation and warranty that the
actions contemplated by Section 1(c) of this Agreement have been consummated),
except for possible defaults as would not, individually or in the aggregate,
have a Material Adverse Effect. The businesses of the Company and its
Subsidiaries, if any, are not being conducted, and shall not be conducted so
long as a Buyer holds the Note, in violation of any law, ordinance or regulation
of any governmental entity the violation of which could have a Material Adverse
Effect. Except as specifically contemplated by this Agreement, the Company is
not required to obtain any consent, authorization or order of, or make any
filing or registration with, any court, governmental agency, regulatory agency,
self regulatory organization or stock market or any third party in order for it
to execute, deliver or perform any of its obligations under this Agreement or
the Note in accordance with the terms hereof or thereof. Except as disclosed in
SCHEDULE 3(d), all consents, authorizations, orders, filings and registrations
which the Company is required to obtain pursuant to the preceding sentence have
been obtained or effected on or prior to the date hereof.

               e.   DISCLOSURE. All information relating to or concerning the
Company or any of its Subsidiaries set forth in this Agreement and provided to
the Buyer in connection with the
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transactions contemplated hereby is true and correct in all material respects
and the Company has not omitted to state any material fact necessary in order to
make the statements made herein or therein, in light of the circumstances under
which they were made, not misleading. No event or circumstance has occurred or
exists with respect to the Company or any of its Subsidiaries or its or their
business, properties, operations or financial conditions, which has not been
publicly announced or disclosed but under applicable law, rule or regulation,
requires public disclosure or announcement by the Company (assuming for this
purpose that the Company's reports filed under the 1934 Act are being
incorporated into an effective registration statement filed by the Company under
the 1933 Act).

               f.   SOLVENCY. The Company (both before and after giving effect
to the transactions contemplated by this Agreement) is solvent and currently the
Company has no information that would lead it to reasonably conclude that the
Company would not have the ability to, nor does it intend to take any action
that would impair its ability to, pay its debts from time to time incurred in
connection therewith as such debts mature (assuming exclusively for the purposes
of this representation and warranty that the actions contemplated by Section
1(c) of this Agreement have been consummated). Upon the closing of the
transactions contemplated by this Agreement, the Company does not anticipate
receiving a qualified opinion from its auditors with respect to its most recent
fiscal year end.

               g.   ABSENCE OF CERTAIN CHANGES. Except as disclosed on Schedule
3(g) or disclosed in the SEC Documents filed since June 30, 2000, since June 30,
2000, there has been no changes or developments in the Company or its business,
that would, or would reasonably be expected to, have a Material Adverse Effect.

          4.   COVENANTS.

               a.   BEST EFFORTS. The parties shall use their best efforts to
satisfy timely each of the conditions described in Section 5 and 6 of this
Agreement.

               b.   EXPENSES. Each of the parties to this Agreement shall bear
their own expenses in connection with this Agreement and the transactions
contemplated hereby.

          5.   CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The obligation of
the Company hereunder to deliver the Cash Amount and the Note at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions thereto, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion:

               a.   The Buyer shall have executed this Agreement and delivered
the same to the Company.

               b.   The Buyer shall have delivered the Warrants and Debenture
to the Company.

               c.   No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority
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over the matters contemplated hereby which prohibits the consummation of any of
the transactions contemplated by this Agreement.

          6.   CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE. The obligations
of the Buyer at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for such Buyer's sole benefit and may be waived by such Buyer at
any time in its sole discretion:

               a.   The Company shall have executed this Agreement and the Note,
and delivered the same to the Buyer.

               b.   The Company shall have delivered the Cash Amount.

               c.   The representations and warranties of the Company shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at such time (except for representations and
warranties that speak as of a specific date, which representations and
warranties shall be true and correct as of such date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. Except as set
forth on SCHEDULE 6(b), the representations and warranties of the Company set
forth in Sections 3(g)-SEC Documents; Financial Statements; 3(i)-Absence of
Litigation, 3(j) - Patents, Copyrights, etc., and 3(m)-Certain Transactions of
the Securities Purchase Agreement shall be true and correct in all material
respects as though made at Closing. The Buyer shall have received a certificate
or certificates, executed by the chief executive officer of the Company, dated
as of the Closing Date, to the foregoing effect and as to such other matters as
may be reasonably requested by such Buyer including, but not limited to
certificates with respect to the Company's Certificate of Incorporation, By-laws
and Board of Directors' resolutions relating to the transactions contemplated
hereby.

               d.   No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.

               e.   The Buyer shall have received opinion of the Company's
counsel, dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer and in substantially the same form as EXHIBIT "B"
attached hereto.

               f.   The Buyer shall have received an officer's certificate
described in Section 3(c) above, dated as of the Closing Date.

               g.   Nifco Investments Ltd., SmartSources.com Technologies Inc.
and Intelli Trade Inc. shall each have executed and delivered a Subsidiary
Guarantee in the form attached hereto as EXHIBIT "C" (collectively, the
"GUARANTEES").
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          7.   GOVERNING LAW; MISCELLANEOUS.

               a.   GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
agreements made and to be performed in the State of Delaware (without regard to
principles of conflict of laws). Both parties irrevocably consent to the
exclusive jurisdiction of the United States federal courts and the state courts
located in Delaware with respect to any suit or proceeding based on or arising
under this Agreement, the agreements entered into in connection herewith or the
transactions contemplated hereby or thereby and irrevocably agree that all
claims in respect of such suit or proceeding may be determined in such courts.
Both parties irrevocably waive the defense of an inconvenient forum to the
maintenance of such suit or proceeding. Both parties further agree that service
of process upon a party mailed by first class mail shall be deemed in every
respect effective service of process upon the party in any such suit or
proceeding. Nothing herein shall affect either party's right to serve process in
any other manner permitted by law. Both parties agree that a final
non-appealable judgment in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.

               b.   COUNTERPARTS; SIGNATURES BY FACSIMILE. This Agreement may be
executed in one or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party. This Agreement, once executed by
a party, may be delivered to the other party hereto by facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.

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

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

               e.   ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Note
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor the Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.

               f.   NOTICES. Any notices required or permitted to be given
under the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular United States
mail, or upon receipt, if delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile, in each case addressed
to a party. The addresses for such communications shall be:
<PAGE>   9

                    If to the Company:

                         SmartSources.com, Inc.
                         2030 Marine Drive
                         Suite 100
                         North Vancouver, B.C.  V7P 1V7
                         Attention: Chief Executive Officer
                         Facsimile: (604) 986-0869

                    With copy to:

                         Kirkpatrick & Lockhart LLP
                         3100 Bank One Center
                         1717 Main Street
                         Dallas, Texas 75201-4681
                         Attention: Norman R. Miller
                         Facsimile: (214) 939-4949

                    If to a Buyer:

                         Rose Glen Capital Management, L.P.
                         3 Bala Plaza East, Suite 501
                         251 St. Asaphs Road
                         Bala Cynwyd, PA 19004
                         Attention: Steven B. Katznelson
                         Facsimile: (610) 617-0570

                    With copy to:

                         Akerman, Senterfitt & Edison, P.A.
                         SunTrust International Center
                         One S.E. Third Avenue, 28th Floor
                         Miami, Florida  33131-1704
                         Attention:  Bradley D. Houser
                         Facsimile:  (305) 374-5095

          Each party shall provide notice to the other party of any change in
address.

               g.   SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns;
provided that any assignment of the Note shall be in a minimal denomination of
$1,000,000 in aggregate principal amount . The Company shall not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Buyer; provided, however, that the Agreement may be assigned by
the Company without the prior written consent of the Buyer in the event of a
merger or consolidation of the Company or the sale of all or substantially all
of its assets (each a "CHANGE OF CONTROL"), where (i) the successor or acquiring
entity and, if such entity is owned or controlled by another
<PAGE>   10
entity or entities, the entity or entities owning or controlling the successor
or acquiring entity, in such transaction assumes the Company's obligations
hereunder and under the agreements and instruments entered into in connection
herewith (including the Note) and (ii) the successor or acquiring entity has
combined financial strength after the Change of Control, which is greater than
or equal to the Company's financial condition prior to the Change of Control and
the Company's ability to satisfy its obligations under this Agreement is not
impaired, as certified without qualification to the Buyer by an independent
public accounting firm or independent investment banking firm, in either case,
reasonably acceptable to the Buyer.

               h.   THIRD PARTY BENEFICIARIES. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.

               i.   SURVIVAL. The representations and warranties of the Company
and the Buyer and the agreements and covenants set forth in Sections 1(c), 2, 3,
4 and 7 shall survive the closing hereunder notwithstanding any due diligence
investigation conducted by or on behalf of the Buyer or the Company. The Company
agrees to indemnify and hold harmless the Buyer and all their officers,
directors, employees and agents from any and all costs, expenses, losses,
liabilities and damages whatsoever that may be incurred as the result of any
claims, rights, obligations or rights of action against the Buyer and all their
officers, directors, employees and agents related to any breach or alleged
breach by the Company of any of its representations, warranties, agreements and
covenants set forth in Sections 1(c), 3, 4 and 7 hereof or in any other of its
covenants and obligations under this Agreement.

               j.   PUBLICITY. The Company shall not issue any press releases or
any other public statements with respect to the transactions contemplated hereby
(including any disclosure in any documents filed with the SEC), unless expressly
reasonably agreed to in writing by the Buyer or unless and until such disclosure
is, in the reasonable opinion of counsel to the Company, required by law or
applicable regulation, and then only to the extent of such requirement. In
addition, the Company agrees that it will not disclose, and will not include in
any public statement or other announcement (including any disclosure in any
document filed with the SEC), the name of the Buyer, unless expressly reasonably
agreed to in writing by the Buyer or unless and until such disclosure is, in the
reasonable opinion of counsel to the Company, required by law or applicable
regulation, and then only to the extent of such requirement; provided, however,
that, if either the Note, the Guarantees or this Agreement are filed as an
exhibit to any filing made by the Company with the SEC, the disclosure of the
Buyer's name in such exhibit shall not be a breach of this Section 7(j).

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

               l.   NO STRICT CONSTRUCTION. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
<PAGE>   11

               m.   REMEDIES. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Buyer, by vitiating
the intent and purpose of the transactions contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Agreement will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement, that the
Buyer shall be entitled, in addition to all other available remedies in law or
in equity, to an injunction or injunctions to prevent or cure any breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions of this Agreement, without the necessity of showing economic loss and
without any bond or other security being required.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>   12

        IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused
this Agreement to be duly executed as of the date first above written.

SMARTSOURCES.COM, INC.

By:
        --------------------------------------------
        Nathan Nifco
        Chief Executive Officer

RGC INTERNATIONAL INVESTORS, LDC

By:     Rose Glen Capital Management, L.P.,
        Investment Manager

By:     RGC General Partner Corp.,
        as General Partner

By:
        --------------------------------------------
        Steven B. Katznelson
        Managing Director<PAGE>   1

                                                                    EXHIBIT 4.06

THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE SECURITIES MAY
NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT, OR AN OPINION OF COUNSEL,
IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE
TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR UNLESS SOLD
PURSUANT TO RULE 144 UNDER THE SECURITIES ACT.

                                 PROMISSORY NOTE

January 12, 2001                                                   $2,860,000.00

         FOR VALUE RECEIVED, SMARTSOURCES.COM, INC., a corporation organized
under the laws of the State of Colorado (the "BORROWER"), hereby promises to pay
to RGC INTERNATIONAL INVESTORS, LDC (the "HOLDER") the sum of Two Million, Eight
Hundred Sixty Thousand and No/100 ($2,860,000.00) Dollars and to pay interest on
the unpaid principal balance hereof at a daily rate expressed as a fraction, the
denominator of which is three hundred and sixty (360) and the numerator of which
is Eleven (11%) Percent per annum compounded annually from the date hereof (the
"Issue Date") until the same becomes due and payable. Any amount of principal of
or interest on this Note which is not paid when due shall bear interest at the
lesser of the highest rate permitted by the Governing Law (as defined herein) or
the rate of seventeen percent (17%) per annum from the due date thereof until
the same is paid. Interest shall be calculated based on a 360-day year and shall
commence accruing on the date hereof. Borrower shall pay to Holder, monthly,
commencing on January 12, 2002 and on the first day of each and every month
thereafter until the Maturity Date, installments of $20,000.00, which shall be
applied to accrued and unpaid interest, it being understood that such
installments may not be sufficient to pay all accrued interest. Any accrued
interest not paid by any regularly scheduled $20,000.00 installment shall be
compounded annually. Notwithstanding anything herein to the contrary, the entire
unpaid principal balance of this Note, together with all accrued and unpaid
interest thereon, shall be due and payable on January 12, 2005 (the "MATURITY
DATE"). All payments of principal and interest shall be made in, and all
references herein to monetary denominations shall refer to, lawful money of the
United States of America. All payments shall be made c/o Rose Glen Capital
Management, L.P., 3 Bala Plaza East, Suite 501, 251 Asaphs Road, Bala Cynwyd,
Pennsylvania 19004, or such other address as the Holder shall hereafter give to
the Borrower by written notice.

         Holder makes no representation, either in this instrument or elsewhere,
that the rate of interest offered herein is the lowest or best rate of interest
offered by Holder for loans of the kind evidenced by this instrument, or loans
of any other kind.

         Borrower may at its sole election at any time and from time to time
prepay all or any part of this Note. All prepayments shall first be applied to
any amounts due hereunder not constituting accrued interest or principal, then
to all accrued and unpaid interest that is not due and payable monthly as
provided herein, then to all other accrued and unpaid interest, then for
principal. Any

<PAGE>   2

prepayment of principal shall reduce the outstanding principal balance of this
Note by the amount of principal so repaid plus the "Discount Amount". The
"Discount Amount" shall be the product of: (i) the amount of the principal paid,
multiplied by (ii) a fraction the denominator of which is 360 and the numerator
of which is four (4%) percent per annum, multiplied by (iii) the number of days
from the date of the prepayment through the Maturity Date. In the event that as
a result of one or more prepayments of principal, the $20,000 installment per
month payments shall exceed the amount of interest accruing monthly on the
balance of principal then owing, Borrower shall continue to make the $20,000
monthly payments to Holder and those payments shall be applied first to interest
and then to the prepayment of principal as provided above.

1.       Events of Default. Each of the following occurrences shall constitute
an "EVENT OF DEFAULT" under this Note:

         (a)   Failure to Pay Principal or Interest. Borrower shall default in
the full payment of any installment of principal or interest as and when due
under this Note; or

         (b)   Breach of Agreements. If Borrower or any subsidiary of Borrower
violates any of the terms or breaches any of the representations, warranties or
covenants contained in this Note, in that certain Redemption and Exchange
Agreement dated as of January 12, 2001 by and between Borrower and Holder (the
"Redemption Agreement"), or in any guaranty delivered to Holder by any
subsidiary of Borrower, if any such default is not cured within ten (10) days of
written notice from Holder;

         (c)   Default as to Other Indebtedness; Operating Leases. Borrower or
any subsidiary of Borrower shall fail to make any payment when due (whether by
scheduled maturity, prior to the stated maturity, required prepayment,
acceleration, demand or otherwise) with respect to any Indebtedness (defined
below) (other than hereunder), singly or in the aggregate equal to or exceeding
$50,000; or any breach, default or event of default on the part of Borrower or
any subsidiary of Borrower shall occur under any operating lease to which
Borrower or a subsidiary of Borrower is a party which breach, default or event
of default shall materially adversely affect the rights of Borrower or such
subsidiary with respect to the property subject to any operating lease on which
the remaining payments exceed $100,000.

         (d)   Involuntary Bankruptcy; Appointment of Receiver, Etc.

                    (i)    An involuntary case shall be commenced against
               Borrower or any subsidiary of Borrower and the petition shall not
               be dismissed, stayed, bonded or discharged within sixty (60) days
               after commencement of the case; or a court having jurisdiction in
               the premises shall enter a decree or order for relief in respect
               of Borrower or any subsidiary of Borrower in an involuntary case,
               under any applicable bankruptcy, insolvency or other similar law
               now or hereinafter in effect; or any other similar relief shall
               be granted under any applicable federal, state, local or foreign
               law;

                    (ii)   A decree or order of a court having jurisdiction in
               the premises for the appointment of a receiver, liquidator,
               sequestrator, trustee, custodian or other officer

                                       2
<PAGE>   3

               having similar powers over Borrower or any subsidiary of Borrower
               or over all or a substantial part of the property of Borrower or
               any subsidiary of Borrower shall be entered; or an interim
               receiver, trustee or other custodian of Borrower or any
               subsidiary of Borrower or of all or a substantial part of the
               property of Borrower or any subsidiary of Borrower shall be
               appointed or a warrant of attachment, execution or similar
               process against any substantial part of the property of Borrower
               or any subsidiary of Borrower shall be issued and any such event
               shall not be stayed, dismissed, bonded or discharged within sixty
               (60) days after entry, appointment or issuance.

         (e)   Voluntary Bankruptcy; Appointment of Receiver, Etc. Borrower or
any subsidiary of Borrower shall have an order for relief entered with respect
to it or commence a voluntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or shall consent to the entry
of an order for relief in an involuntary case, or to the conversion of an
involuntary case to a voluntary case, under any such law, or shall consent to
the appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its property or assets; or Borrower
or any subsidiary of Borrower shall make any assignment for the benefit of
creditors or shall be unable or fail, or admit in writing its inability, to pay
its debts as such debts become due; or the shareholders or board of directors
(or equivalent) of Borrower or any subsidiary of Borrower (or any committee
thereof) adopts any resolution or otherwise authorizes any action to approve any
of the foregoing.

         (f)   Dissolution. Any order, judgment or decree shall be entered
against Borrower or any subsidiary of Borrower which accounts for 10% or more of
Borrower's business, decreeing its involuntary dissolution or split up and such
order shall remain undischarged and unstayed for a period in excess of thirty
(30) days; or Borrower or any subsidiary of Borrower shall otherwise dissolve,
be dissolved, or cease to exist except as specifically permitted by this Note.

         (g)   Loan Documents. At any time, for any reason, (i) this Note, the
Redemption Agreement or any document evidencing or guaranteeing the Obligations
(defined below) (collectively, "LOAN DOCUMENTS") ceases to be in full force and
effect, (ii) Borrower or any subsidiary of Borrower expressly repudiates its
obligations under the Loan Documents either in writing or through a public
announcement, or (iii) Borrower or any subsidiary of Borrower grant a Lien
(except as permitted hereunder) in favor of parties other than Holder.

         (h)   Judgments and Attachments.

                    (i)     Any money judgment (other than a money judgment
               covered by insurance as to which the insurance company has
               acknowledged coverage), writ or warrant of attachment, or similar
               process against Borrower or any subsidiary of Borrower or any of
               their respective assets involving in any case an amount in the
               aggregate in excess of $100,000 is entered and shall remain
               undischarged, unvacated, unbonded or unstayed for a period of
               forty-five (45) days or in any event later than five (5) days
               prior to the date of any proposed sale thereunder; provided,
               however, if any such judgment, writ or warrant of attachment or
               similar process is in excess of

                                       3
<PAGE>   4

               $100,000, the entry thereof shall immediately constitute an Event
               of Default hereunder unless fully bonded in a manner satisfactory
               to Holder.

                    (ii)   A federal or foreign tax Lien is filed against
               Borrower or any subsidiary of Borrower or against any of the
               property of Borrower or any subsidiary of Borrower which is not
               discharged of record, bonded over or otherwise secured to the
               reasonable satisfaction of Holder within sixty (60) days after
               the filing thereof or the date upon which Holder receives actual
               knowledge of the filing thereof for an amount which equals or
               exceeds, when combined with such amounts claimed to be owing by
               Borrower and its subsidiaries, $50,000.

                    (iii)  An environmental Lien is filed against any of the
               Property with respect to claims in an amount which equals or
               exceeds $50,000 and such Lien is not discharged, vacated, bonded
               or stayed within thirty (30) days of the imposition of the Lien.

         (i)   [INTENTIONALLY OMITTED]

         (j)   [INTENTIONALLY OMITTED]

         (k)   Material Adverse Effect. An event shall occur which results in a
Material Adverse Effect (defined below).

         An Event of Default shall be deemed "continuing" until cured or waived
in writing by Holder in its sole and absolute discretion.

2.       Rights and Remedies.

         (a)   Acceleration. Upon the occurrence of any Event of Default
described in 1(d), (e) or 1(f), the unpaid principal amount of, and any and all
accrued interest on, the Obligations and all accrued fees shall automatically
become immediately due and payable, without presentment, demand, or protest or
other requirements of any kind (including, without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
and of acceleration), all of which are hereby expressly waived by Borrower; and
upon the occurrence and during the continuance of any other Event of Default,
Holder may declare the unpaid principal amount of and any and all accrued and
unpaid interest on the Obligations to be, and the same shall thereupon be,
immediately due and payable, without presentment, demand, or protest or other
requirements of any kind (including, without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
and of acceleration), all of which are hereby expressly waived by Borrower.

         (b)   Enforcement. Borrower acknowledges that in the event Borrower or
any Guarantor (as defined herein) fails to perform, observe or discharge any of
their respective obligations or liabilities under this Note, the Redemption
Agreement or any other Loan Document, any remedy of law may prove to be
inadequate relief to Holder; therefore, Borrower agrees that Holder shall be

                                       4
<PAGE>   5

entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving actual damages.

         (c)   Other. The remedies provided in this Note shall be cumulative and
concurrent and in addition to all other remedies available at law or in equity
(including a decree of specific performance and/or other injunctive relief), and
may be pursued singly, successively or together, at the sole discretion of
Holder, and may be exercised as often as occasion therefor shall arise. No
remedy contained herein shall be deemed a waiver of compliance giving rise to
such remedy and nothing herein shall limit Holder's right to pursue actual
damages for any failure by the Borrower to comply with the terms of this Note.
No act of omission or commission of Holder, including specifically any failure
to exercise any right, remedy or recourse, shall be effective unless it is set
forth in a written document executed by Holder and then only to the extent
specifically recited therein. A waiver or release with reference to one event
shall not be construed as continuing, as a bar to, or as a waiver or release of,
any subsequent right, remedy or recourse as to any subsequent event.

         (d)   [INTENTIONALLY OMITTED]

3.       Reporting Covenants. Borrower covenants and agrees that so long as any
principal or interest is outstanding and thereafter until payment in full of all
amounts due and payable hereunder and under the Loan Documents (collectively,
"Obligations") (other than indemnities not yet due), unless Holder shall
otherwise give its prior written consent thereto:

         (a)   Financial Statements. Borrower shall maintain, and cause each of
its subsidiaries to maintain, a system of accounting established and
administered in accordance with sound business practices to permit preparation
of consolidated and consolidating financial statements in conformity with
generally accepted accounting principles set forth in the opinions and
pronouncements of the American Institute of Certified Public Accountants
Accounting Principles Board and Financial Accounting Standards Board ("GAAP")
and each of the financial statements described below ("Financial Statements")
shall be prepared from such system and records. Borrower shall deliver or cause
to be delivered to Holder:

                    (i)    Quarterly Reports. As soon as practicable, and in
               any event within fifty (50) days after the end of each fiscal
               quarter of Borrower ("FISCAL QUARTER") in each fiscal year of
               Borrower ("FISCAL YEAR"), the consolidated and consolidating
               balance sheets of Borrower and its subsidiaries as at the end of
               such period and the related consolidated and consolidating
               statement of income of Borrower and its subsidiaries and
               consolidated statements of shareholders' equity and cash flow of
               Borrower and its subsidiaries, in each instance, for such Fiscal
               Quarter, certified by the chief financial officer of Borrower as
               fairly presenting the respective consolidated and consolidating
               financial positions of Borrower and its subsidiaries as at the
               dates indicated and the results of their operations and cash flow
               for the periods indicated in accordance with GAAP, subject to
               normal year end adjustments and excluding footnotes. Delivery to
               Holder of Borrower's SEC Form 10-Q for any Fiscal Quarter

                                       5

<PAGE>   6

               within the time period required hereby shall be deemed to satisfy
               the requirements of this Section 3(a)(i).

                    (ii)   Annual Reports. As soon as practicable, and in any
               event within one hundred and five (105) days after the end of
               each Fiscal Year, (x) the consolidated and consolidating balance
               sheets of (A) Borrower and its subsidiaries as at the end of such
               Fiscal Year and (B) to the extent the same are routinely and
               regularly prepared, each of Borrower's subsidiaries as at the end
               of such Fiscal Year and (y) the related consolidated and
               consolidating statements of income, shareholders' equity and cash
               flow of (A) Borrower and its subsidiaries and (B) to the extent
               the same are routinely and regularly prepared, each of Borrower's
               subsidiaries for such Fiscal Year, setting forth in each case in
               comparative form the corresponding figures for the previous
               Fiscal Year, and (z) a report on such consolidated Financial
               Statements of Borrower and its subsidiaries of Moss Adams LLP or
               other independent certified public accountants acceptable to
               Holder; which report: shall be unqualified as to the scope of the
               audit performed and shall state that such Financial Statements
               fairly present the consolidated financial position of Borrower
               and its subsidiaries as at the dates indicated and the results of
               their operations and cash flow for the periods indicated in
               conformity with GAAP applied on a basis consistent with prior
               years (except for changes with which Moss Adams LLP or any such
               other independent certified public accountants, if applicable,
               shall concur and which shall have been disclosed in the notes to
               the Financial Statements) and that the examination by such
               accountants in connection with such Financial Statements has been
               made in accordance with generally accepted auditing standards.
               Delivery to Holder of Borrower's SEC Form 10-K within the time
               period required hereby shall be deemed to satisfy the
               requirements of Section 3(a) (ii) (x) and (y).

         (b)   Events of Default. Promptly upon any of the chairman of the board
of directors, president, chief executive officer, chief operating officer, chief
financial officer, treasurer or controller of Borrower obtaining knowledge (i)
of any condition or event which constitutes an Event of Default under this Note,
(ii) that any person (other than Holder) has given any notice to Borrower or any
of Borrower's subsidiaries or taken any other action with respect to a claimed
default or event or condition of the type referred to in Section 1(c), or (iii)
of any condition or event which has resulted in a Material Adverse Effect
(defined below), Borrower shall deliver to Holder a certificate from the chief
financial officer, president or treasurer of Borrower ("OFFICER'S CERTIFICATE")
specifying (x) the nature and period of existence of any such claimed default or
Event of Default, (y) the notice given or action taken by such person in
connection therewith, and (z) what action Borrower or the applicable subsidiary
has taken, is taking and proposes to take with respect thereto. For the purposes
of this Note, "MATERIAL ADVERSE EFFECT" shall mean a material adverse effect
upon (i) the business, operations, assets, financial condition, results of
operation, or properties of Borrower and its subsidiaries taken as a whole, (ii)
the authority or ability of Borrower or any of its subsidiaries to perform their
respective obligations under this Note or the Redemption Agreement or the other
Loan Documents, or (iii) the ability of Holder to enforce this Note, the
Redemption Agreement or the other Loan Documents.

                                        6
<PAGE>   7

         (c)   Lawsuits.

                    (i)    Institution of Proceedings. Promptly upon Borrower or
               any subsidiary of Borrower obtaining knowledge of the institution
               of, or written threat of, any action, suit, proceeding,
               governmental investigation or arbitration against or affecting
               Borrower or any subsidiary of Borrower (other than an action,
               suit or proceeding brought by Holder), which action, suit,
               proceeding, governmental investigation or arbitration exposes, or
               in the case of multiple actions, suits, proceedings, governmental
               investigations or arbitrations arising out of the same general
               allegations or circumstances which expose, in Borrower's
               reasonable judgment, Borrower or any subsidiary of Borrower to
               liability in an amount aggregating $50,000 or more (exclusive of
               claims covered by insurance policies of Borrower or its
               subsidiaries unless the insurers of such claims have disclaimed
               coverage or reserved the right to disclaim coverage on such
               claims), Borrower shall give written notice thereof to Holder and
               provide such other information (other than information protected
               by attorney-client privilege) as may be reasonably available to
               enable Holder and its counsel to evaluate such matters.

                    (ii)   Additional Reports Upon Request. In addition to the
               requirements set forth in clause (i) of this Section 3(c),
               Borrower, upon the request of Holder, shall promptly give written
               notice of the status of any action, suit, proceeding,
               governmental investigation or arbitration covered by a report
               delivered pursuant to clause (i) and provide such other
               information as may be reasonably available to it to enable Holder
               and its counsel to evaluate such matters.

         (d)   Insurance. As soon as practicable and in any event by the last
business day of October in each calendar year, Borrower shall deliver to Holder
(i) a report in form and substance reasonably satisfactory to Holder outlining
(A) all material insurance coverage maintained as of the date of such report by
Borrower and its subsidiaries and the duration of such coverage and (B) the
claims and awards, if any, made under such insurance for the twelve (12)
calendar month period then ending and (ii) evidence that all premiums with
respect to such coverage have been paid.

         (e)   SEC Reports. Simultaneous with the filing of any report or
document with the United States Securities and Exchange Commission ("SEC
Filing"), Borrower shall deliver a copy of such SEC Filing to Holder.

         (f)   Other Reports. Simultaneous with the delivery thereof to the
primary intended recipient, Borrower shall deliver or cause to be delivered to
Holder (i) copies of all press releases made available generally by Borrower or
any of its subsidiaries to the public concerning material developments in the
business of such person(s), (ii) reports, if any, submitted to Borrower or any
of its subsidiaries or their respective boards of directors by such person's
independent public accountants, including, without limitation, any management
report prepared in connection with the annual audit; and (iii) copies of all
documents and reports delivered to any creditor of Borrower or its subsidiaries
who provides loans or credit facilities to Borrower or its subsidiaries.

                                       7
<PAGE>   8

         (g)   Other Information. Promptly upon receiving a request therefor
from Holder, Borrower shall prepare and deliver to Holder such other information
with respect to Borrowers and its subsidiaries, as from time to time may be
reasonably requested by Holder.

4.       Affirmative Covenants. Borrower covenants and agrees that until payment
in full of all of the Obligations (other than indemnities not yet due), unless
Holder shall otherwise give its prior written consent:

         (a)   Existence, Etc. Borrower shall at all times maintain, and cause
each of its subsidiaries to maintain, its corporate existence and preserve and
keep, or cause to be preserved and kept, in full force and effect their
respective rights and franchises material to their respective businesses.

         (b)   Corporate Powers; Conduct of Business. Borrower shall, and shall
cause each of its subsidiaries to, qualify and remain qualified to do business
and maintain its good standing in each jurisdiction in which the nature of its
business and the ownership of its property requires it to be so qualified and in
good standing, except to the extent that failure to be so qualified does not
have a Material Adverse Effect.

         (c)   Compliance with Laws, Etc. Borrower shall, and shall cause each
of its subsidiaries to, (i) comply with all requirements of law affecting it or
its business, property, assets or operations, and (ii) obtain as needed all
permits necessary for its operations and maintain such permits in good standing,
except in the case where noncompliance with either clause (i) or (ii) above is
not reasonably likely to result in a Material Adverse Effect.

         (d)   Payment of Taxes and Claims. Borrower shall, and shall cause each
of its subsidiaries to, file all tax returns and reports as and when required by
the related governmental authority and pay (i) all taxes, assessments and other
governmental charges imposed upon it or on any of its property or assets or in
respect of any of its franchises, business, income or property before any
penalty or interest accrues thereon and (ii) all claims (including, without
limitation, claims for labor, services, materials and supplies) for sums which
have become due and payable and which by law have or may become a Lien (defined
below) (other than a Permitted Lien (defined in Section 5(c))) upon any of the
property of Borrower or any other subsidiary of Borrower, prior to the time when
any penalty or fine shall be incurred with respect thereto; provided, however,
that no such taxes, assessments and governmental charges referred to in clause
(i) above or claims referred to in clause (ii) above need be paid if being
contested in good faith by appropriate proceedings diligently instituted and
conducted and if such reserve or other appropriate provision, if any, as shall
be required in conformity with GAAP shall have been made therefor. For purposes
of this Note, the term "LIEN" means any mortgage, deed of trust, pledge,
hypothecation, assignment, conditional sale or other title retention agreement,
deposit arrangement, security interest, encumbrance (including, without
limitation, easements, rights-of-way, zoning restrictions and the like), lien
(statutory or other and including, without limitation, any environmental lien),
option, preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever in respect of any property of a
person, whether granted voluntarily or imposed by law, and includes the interest
of a lessor under a capital lease or under any financing lease having
substantially the same economic

                                       8
<PAGE>   9

effect as any of the foregoing and the filing of any financing statement or
similar notice (other than a financing statement filed by a "true" lessor
pursuant to s. 9-408 of the Uniform Commercial Code), naming the owner of such
property as debtor, under the Uniform Commercial Code or other comparable law of
any jurisdiction.

         (e)   Insurance. Borrower shall maintain in full force and effect the
insurance policies and programs as are reasonably acceptable to Holder. All such
policies and programs shall be maintained with insurers reasonably acceptable to
Holder.

         (f)   Inspection of Property; Books and Records; Discussions. Borrower
shall permit, and shall cause each of its subsidiaries to permit, any authorized
representative(s) designated by Holder to visit and inspect, whether by access
to Borrower's or its respective subsidiaries' MIS or otherwise, any of their
respective property, to examine, audit, check and make copies of Borrower's and
its respective subsidiaries' financial and accounting records, books, journals,
orders, receipts and any correspondence (other than privileged correspondence
with legal counsel) and other data relating to their respective businesses or
the transactions contemplated hereby or referenced herein (including, without
limitation, in connection with environmental compliance, hazard or liability, by
such representatives designated by Holder), and to discuss their affairs,
finances and accounts with their management personnel and independent certified
public accountants, all upon reasonable written notice and at such reasonable
times during normal business hours, as often as may be reasonably requested.
After the occurrence of a default or an Event of Default hereunder, each such
visitation and inspection shall be at Borrower's expense. Borrower shall keep
and maintain, and cause each of its subsidiaries to keep and maintain, in all
material respects on its MIS and otherwise proper books of record and account in
which entries in conformity with GAAP shall be made of all dealings and
transactions in relation to its respective businesses and activities. If an
Event of Default has occurred and is continuing and the Obligations have been
accelerated pursuant to Section 1, Borrower, upon Holder's request in connection
with efforts to enforce the rights and remedies of Holder hereunder, shall turn
over, and cause each of their respective subsidiaries to turn over, any such
records requested by Holder to Holder or its representatives; provided, however,
that Borrower may, in its discretion, retain copies of such records. Without
limiting the foregoing, Borrower acknowledges and agrees that Holder may engage
an independent consultant to act as its representative to undertake certain of
the aforesaid actions on behalf of Holder and covenants that Borrower will, and
will cause its subsidiaries to, cooperate fully with such consultant in the
conduct of its activities and make available such personnel, information, data
and documents as are requested by such consultant in the conduct of such
activities. After the occurrence of a default or an Event of Default hereunder,
all such activities of consultants shall be at the expense of Borrower. Holder
will use reasonable efforts consistent with prudent practices, to keep all
non-public and proprietary information of Borrower and any subsidiary of
Borrower confidential provided that Holder may disclose such information (a)
subject to appropriate confidentiality agreements, (b) in accordance with
applicable law, or (c) when such information becomes public through no fault of
Holder.

         (g)   [INTENTIONALLY OMITTED].

         (h)   Maintenance of Property. Borrower shall, and shall cause each of
its subsidiaries to, maintain in all material respects all of its owned and
leased property in good, safe and insurable

                                       9
<PAGE>   10

condition and not permit, commit or suffer any waste of any such property and
shall maintain all such property in good working order, reasonable wear and tear
excepted; provided, however, that such property may be altered or renovated in
the ordinary course of Borrower's or any of its subsidiaries' business.

         (i)   Condemnation. Immediately upon Borrower learning of the
institution of any proceeding for the condemnation or other taking of any of the
owned or leased real property of Borrower or any of its subsidiaries, Borrower
shall notify Holder of the pendency of such proceeding.

         (j)   Future Guarantees. Borrower shall cause all subsidiaries of
Borrower to execute and deliver to Holder a guaranty of the Obligations
concurrently with such entity becoming a subsidiary of Borrower, in form and
substance satisfactory to Holder in its sole discretion.

5.       Negative Covenants. Borrower covenants and agrees that it shall comply
with the following covenants until payment in full of all of the Obligations
(other than indemnities not yet due), unless Holder shall otherwise give its
prior written consent:

         (a)   Indebtedness. Borrower may incur Indebtedness on an unsecured
basis where the creditor is merely a general unsecured creditor of Borrower or
its subsidiaries and is not entitled to payments on a preferential basis.
Borrower shall not, nor shall Borrower permit any of its subsidiaries to,
directly or indirectly create, incur, assume or otherwise become or remain
directly or indirectly (as an Accommodation Obligation (as defined below) or
otherwise) liable with respect to any Indebtedness (defined below) that is
secured or senior to the Obligations unless Holder is separately granted by
Borrower, a pari passu senior position in right of payment with such creditor,
and if such creditor is secured, a pari passu security interest with such
creditor (the "Permitted Senior Indebtedness"). Holder and Borrower will execute
such documents reasonably required to evidence such secured or senior pari passu
position contemporaneously with the issuance of such senior or secured loan or
extension of credit. The Permitted Senior Indebtedness may be paid in accordance
with the terms of such Senior Permitted Indebtedness provided that no default or
Event of Default exists or would occur upon making such payment and provided
further that neither Borrower nor any subsidiary shall pre-pay or accelerate any
payments payable under the Permitted Senior Indebtedness. Notwithstanding the
foregoing, Borrower may incur Indebtedness which constitutes Customary Permitted
Liens and Permitted Liens (as defined below).

                    (i)    For purposes of this Note "Indebtedness" as applied
               to any person, means without limitation all indebtedness,
               obligations or other liabilities of such person for borrowed
               money or evidenced by debt securities, debentures, acceptances,
               notes or other similar instruments, and any accrued interest,
               fees and charges relating thereto, or which are Accommodation
               Obligations.

                    (ii)   For purposes of this Note "Accommodation Obligation"
               means any contractual obligation, contingent or otherwise, of one
               person with respect to any Indebtedness, obligation or liability
               of another, if the primary purpose or intent thereof by the
               person incurring the Accommodation Obligation is to provide

                                       10
<PAGE>   11

               assurance to the obligee of such Indebtedness, obligation or
               liability of another that such Indebtedness, obligation or
               liability will be paid or discharged, or that any agreements
               relating thereto will be complied with. The amount of any
               Accommodation Obligation shall be equal to the amount of the
               Indebtedness, obligation or liability so guaranteed or otherwise
               supported; provided, that if the liability of the person
               extending such guaranty or support is limited with respect
               thereto to an amount less than the Indebtedness, obligation or
               liability guaranteed or supported, or is limited to recourse
               against a particular asset or assets of such person, the amount
               of the corresponding Accommodation Obligation shall be so
               limited.

         (b)   Sales of Assets. Borrower shall not, and shall not allow any of
its subsidiaries to sell, assign, transfer, lease, convey or otherwise dispose
of any of its property, whether now owned or hereafter acquired, or any income
or profits therefrom, or enter into any agreement to do so other than in the
ordinary course of business, unless:

                    (i)    the sale of any tangible or intangible property
               outside of the ordinary course of such person's business is for
               consideration not less than the fair market value thereof and the
               fair market value thereof in the aggregate with all other sales
               outside the ordinary course of business on an annual basis does
               not exceed $100,000, provided that when the proceeds or other
               consideration exceed $100,000 for sales outside the ordinary
               course of business, fifty percent (50%) of the proceeds and any
               other consideration received in excess of $100,000 from such
               sales, shall be paid to Holder and if required by the terms of
               the Permitted Senior Indebtedness any other senior creditor, pro
               rata, and payments to Holder shall be applied against the
               Obligations; and

                    (ii)   the disposition of equipment if (A) such equipment is
               obsolete or no longer useful in the ordinary course of business
               of Borrower or any of its subsidiaries, provided that the
               aggregate fair market value of all such equipment disposed of in
               any Fiscal Year by Borrower or any of its subsidiaries and its
               subsidiaries shall not exceed $50,000, or (B) within six (6)
               months after such disposition, an amount equal to the proceeds
               therefrom is either (x) used to finance the purchase of
               replacement equipment and the seller thereof delivers to Holder
               evidence of such use and that the replacement equipment is free
               and clear of all Liens except Permitted Liens or (y) the proceeds
               are delivered to Holder for application to the repayment of the
               Obligations, and if required by the terms of the Permitted Senior
               Indebtedness, to such senior creditor, pro rata.

         (c)   Liens. Borrower shall not, and shall not permit any of its
subsidiaries to directly or indirectly create, incur, assume or permit to exist
any Lien on or with respect to any of their respective property or assets except
(i) Permitted Senior Indebtedness, (ii) Customary Permitted liens, and (iii)
liens securing Indebtedness which is incurred to refinance Indebtedness which is
secured by Permitted Liens (as defined below); provided that such liens do not
extend to or cover any property or assets of the Borrower or any of its
subsidiaries other than the property or assets securing the indebtedness being
refinanced.

                                       11
<PAGE>   12

                    (i)    For purposes hereof "PERMITTED LIENS" means (i) liens
               (including extensions and renewals thereto) upon real or personal
               (whether tangible or intangible) property acquired after the
               Issue Date provided that (a) such lien is created solely for the
               purpose of securing indebtedness incurred, (1) to finance the
               cost (including the cost of improvement or construction) of the
               item of property or assets acquired and such lien is created
               prior to, at the time of or within 12 months after the later of
               the acquisition, the completion of construction or the
               commencement of full operation of such property or (2) to
               refinance any indebtedness previously so secured, (b) the
               principal amount of the indebtedness secured by such lien does
               not exceed 100% of such cost and (c) any such lien shall not
               extend to or cover any property or assets other than such item of
               property or assets and any improvements on such item; (ii) any
               interest or title of a lessor in the property subject to any
               capitalized lease obligation or operating lease; (iii) liens on
               property of, or on shares of capital stock or indebtedness of,
               any person existing at the time such person becomes, or becomes a
               part of, the Borrower or any subsidiary of the Borrower; provided
               that such liens do not extend to or cover any property or assets
               of the Borrower or any subsidiary of the Borrower, other than the
               property or assets acquired; (iv) liens in favor of the Borrower
               or any subsidiary; (v) liens securing reimbursement obligations
               with respect to letters of credit that encumber documents or
               other property relating to such letters of credit and the
               products and proceeds thereof; (vi) liens arising out of
               conditional sale, title retention, consignment or similar
               arrangements for the sale of products entered into by the
               Borrower or any of its subsidiaries in the ordinary course of
               business of the Borrower and its subsidiaries; (vii) liens
               securing the Borrower's obligations in respect of bankers'
               acceptances issued or created to facilitate the purchase,
               shipment or storage of inventory or other products which are
               limited to the inventory or products related thereto; and (viii)
               licenses, escrows or any security interests arising in the
               ordinary course of business, granted by the Borrower with respect
               to any intellectual property owned by the Borrower.

                    (ii)   For purposes of this Note, "Customary Permitted
               Liens" means (i) Liens (other than environmental liens and Liens
               in favor of the Pension Benefit Guaranty Corporation ("PBGC")
               with respect to the payment of taxes, assessments or governmental
               charges in all cases which are not yet due or which are being
               contested in good faith by appropriate proceedings and with
               respect to which adequate reserves or other appropriate
               provisions are being maintained in accordance with GAAP; (ii)
               statutory Liens of landlords and Liens of suppliers, mechanics,
               carriers, materialmen, warehousemen or workmen and other Liens
               imposed by law created in the ordinary course of business for
               amounts not yet due or which are being contested in good faith by
               appropriate proceedings and with respect to which adequate
               reserves or other appropriate provisions are being maintained in
               accordance with GAAP; (iii) Liens (other than any Lien in favor
               of the PBGC) incurred or deposits made in the ordinary course of
               business in connection with worker's compensation, unemployment
               insurance or other types of social security benefits or

                                       12
<PAGE>   13

               to secure the performance of bids, tenders, sales, contracts
               (other than for the repayment of borrowed money), surety, appeal
               and performance bonds; provided that (A) all such Liens do not in
               the aggregate materially detract from the value of Borrower's or
               any of its subsidiaries' assets or property or materially impair
               the use thereof in the operation of their respective businesses,
               and (B) all Liens of attachment or judgment and Liens securing
               bonds to stay judgments or in connection with appeals do not
               secure at any time an aggregate amount exceeding $50,000; and
               (iv) Liens arising with respect to zoning restrictions,
               easements, licenses, reservations, covenants, rights-of-way,
               utility easements, building restrictions and other similar
               charges or encumbrances on the use of real property which do not
               interfere with the ordinary conduct of the business of a Borrower
               or any of its subsidiaries.

         (d)   [INTENTIONALLY OMITTED]

         (e)   [INTENTIONALLY OMITTED]

         (f)   Restricted Junior Payments. Borrower shall not, nor shall
Borrower permit any of its subsidiaries to, declare or make any Restricted
Junior Payment (defined below), except dividends or other distributions
(directly or indirectly) from subsidiaries of Borrower to Borrower in such
amounts and at such times as are required to enable Borrower to meet its
Obligations hereunder or under any Indebtedness permitted by Section 5(a)
hereof. Notwithstanding the foregoing, payments by Borrower to a Guarantor or a
Guarantor to Borrower in accordance with the terms of the specific Indebtedness
are permitted provided that no default or Event of Default exists or will occur
as a result of such payment. For purposes of this Note, the term "RESTRICTED
JUNIOR PAYMENT" shall mean (i) any dividend or other distribution, direct or
indirect, on account of any equity securities of Borrower or any subsidiary of
Borrower now or hereafter outstanding other than shares issued pursuant to a
shareholders rights plan, (ii) any redemption, retirement, sinking fund or
similar payment, purchase or other acquisition for value, direct or indirect, of
any securities of Borrower or any subsidiary of Borrower now or hereafter
outstanding, (iii) any payment or prepayment of principal of, premium, if any,
or interest, fees or other charges on or with respect to, and any redemption,
purchase, retirement, defeasance, sinking fund or similar payment and any claim
for rescission with respect to, any Indebtedness owing at any time to any
affiliate of a Borrower, (iv) any payment made to redeem, purchase, repurchase
or retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire equity securities of Borrower or any subsidiary of
Borrower now or hereafter outstanding, and (v) any fees or other remuneration
paid to Borrower or any subsidiary of Borrower. [INTENTIONALLY OMITTED]

         (g)   Transactions with Affiliates. Borrower shall not, and shall not
permit any of its subsidiaries to directly or indirectly enter into or permit to
exist any transaction (including, without limitation, the purchase, sale, lease
or exchange of any property or the rendering of any service) with any affiliate
of Borrower, on terms that are less favorable to Borrower or its subsidiary than
those that might be obtained in an arm's length transaction at the time from
persons who are not such an affiliate, provided that Borrower may enter into a
business transaction with a Guarantor if Borrower's board of directors deem such
transaction to be prudent in the exercise of their reasonable business judgment.

                                       13
<PAGE>   14

         (h)   Restriction on Fundamental Changes. Borrower shall not, and shall
not permit any of its subsidiaries to enter into any merger or consolidation
with an unaffiliated third party. Notwithstanding the foregoing if the combined
financial strength after the merger is greater than or equal to the Borrower's
financial condition prior to the merger and Borrower's ability to satisfy the
Obligations is not impaired, as certified without qualification to Holder by an
independent public accounting firm or independent investment banking firm, in
either case, reasonably acceptable to Holder, then Borrower may pursue the
merger without Holder's consent. Borrower shall not, and shall not permit any of
its subsidiaries (which account for 10% or more of Borrower's business) to
liquidate, wind-up or dissolve (or suffer any liquidation or dissolution), or
convey, lease, sell, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or substantially all of its business or property,
whether now or hereafter acquired.

         (i)   [INTENTIONALLY OMITTED]

         (j)   [INTENTIONALLY OMITTED]

         (k)   Organizational Documents. Borrower shall not, nor shall Borrower
permit any of its subsidiaries to, amend, modify or otherwise change any of the
terms or provisions in any of its organizational documents (charter, articles of
incorporation, bylaws, partnership agreements, membership agreements, operating
agreements or other similar documents) as in effect on the date hereof, which
change in any material respect the nature of Borrower's or any of its
subsidiaries' business or obligations with respect to the payment of its
Indebtedness or which would otherwise have a Material Adverse Effect.

         (l)   [INTENTIONALLY OMITTED]

         Borrower and each endorser, surety, guarantor or other accommodation
party of this Note (hereinafter referred to collectively as the "Obligors" and
individually an "Obligor") hereby: (a) waive demand, presentment for payment,
notice of nonpayment, protest, notice of protest and all other notice, filing of
suit and diligence in collecting this Note, in enforcing any of the security
rights or in proceeding against any security that may hereafter be granted to
secure this Note; (b) agree to any substitution, exchange, addition or release
of any security that may hereafter be granted to secure this Note or the
addition or release of any party or person primarily or secondarily liable
hereon; (c) agree that Holder shall not be required first to institute any suit,
or to exhaust his, their or its remedies against Borrower, any Obligors, or any
other person or party to become liable hereunder or against any security that
may hereafter be granted to secure this Note in order to enforce payment of this
Note; (d) consent to any extension, rearrangement, renewal or postponement of
time of payment of this Note and to any other indulgency with respect hereto
without notice, consent or consideration to any of the foregoing; and (e) agree
that, notwithstanding the occurrence of any of the foregoing (except the express
written release by Holder of any such person), they shall be and remain jointly
and severally, directly and primarily, liable for all sums due under this Note.

         Borrower and each subsidiary of Borrower that becomes a guarantor of
this Note (each, a "GUARANTOR"), jointly and severally, further agrees (a) to
indemnify and hold harmless Holder and each of their respective officers,
directors, employees, attorneys and agents (collectively, the

                                       14
<PAGE>   15

"Indemnitees") from and against any and all liabilities, obligations, losses
(other than loss of profits), damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever,
including, without limitation, the fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding, whether or not such Indemnitees shall be designated a party
thereto), imposed on, incurred by, or asserted against such Indemnitees in any
manner relating to or arising out of (i) this Note, the Redemption Agreement or
the other Loan Documents, or any act, event or transaction related or attendant
thereto, the management of such loan evidenced hereby, the use or intended use
of the proceeds of the loans evidenced hereby, or any of the other transactions
contemplated in or by this Note, the Redemption Agreement or any of the other
Loan Documents, or (ii) any liabilities and costs relating to (x) any violation
by Borrower or any subsidiary of Borrower, or their respective
predecessors-in-interest, of any environmental, health or safety requirements of
law, or (y) the past, present or future operations of Borrower or subsidiary of
Borrower, or any of their respective predecessors-in-interest (collectively, the
"INDEMNIFIED MATTERS"); provided, however, Borrower shall have no obligation to
an Indemnitee hereunder with respect to Indemnified Matters caused by or
resulting from the willful misconduct or gross negligence of such Indemnitee, as
determined by a final, non-appealable order of a court of competent jurisdiction
and (b) not to assert any claim against any of the Indemnified Parties on any
theory of liability for special, indirect, consequential or punitive damages
arising out of, or in any way in connection with, the Obligations or any other
matters governed by this Note, the Redemption Agreement and/or the other Loan
Documents. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in the preceding sentence may be unenforceable because it is
violative of any law or public policy, Borrower and its subsidiaries shall
contribute the maximum portion which it is permitted to pay and satisfy under
applicable law, to the payment and satisfaction of all Indemnified Matters
incurred by the Indemnitees.

         Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, sent by facsimile transmission or courier service or
United States certified mail and shall be deemed to have been given when
delivered in person or by courier service, upon receipt of a facsimile
transmission, or three (3) business days after deposit in the United States mail
with postage prepaid and properly addressed. For the purposes hereof, the
addresses of the parties shall be as set forth in its Redemption Agreement, or,
as to each party, at such other address as may be designated by such party in a
written notice to the other party.

         All obligations of Borrower and any Guarantor in respect of taxes,
indemnification and expense reimbursement shall survive the execution and
delivery of this Note, the Redemption Agreement and the other Loan Documents,
the making and repayment of the loan evidenced thereby, and the termination of
this Note and shall not be limited in any way by the passage of time or
occurrence of any event.

         In case any provision in or obligation under this Note or the other
Loan Documents shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.

                                       15
<PAGE>   16

         The Holder does not intend to violate any applicable usury laws.
Nothing herein contained shall be construed or so operate as to require the
Borrower to pay interest at a greater rate than is lawful in such case to
contract for, or to make any payment, or to do any act contrary to law. Should
any interest or other charges paid by the Borrower, or parties liable for the
payment of this Note, in connection with the loan evidenced by this Note, or any
document delivered in connection with said loan, result in the computation or
earning of interest in excess of the maximum rate of interest which is legally
permitted by law, then any and all such interest in excess of the maximum legal
rate of interest shall automatically be and the same is hereby waived by the
Holder hereof, and any and all such interest in excess of the maximum legal rate
which has been paid shall be automatically credited against and in reduction of
the balance due under this Note, and the portion of said excess which exceeds
the balance due under this Note shall be paid by the Holder to the Borrower.

         No failure or delay on the part of Holder 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 any
other or further exercise thereof or of any other right, power or privilege.

         The Note may be amended or modified only by an instrument in writing
signed by the Borrower and the Holder.

         This Note shall be binding upon the Borrower and its successors and
assigns and shall inure to the benefit of Holder and its successors and assigns.

         All parties liable for the payment of this Note agree to pay the Holder
hereof reasonable attorneys' fees and paralegal fees for the services and
expenses of counsel employed after default or maturity to collect this Note
(including any bankruptcy proceedings or appeals relating to such enforcement
proceedings), whether or not suit be brought.

         This Note shall be governed by and construed in accordance with the
laws of the State of Delaware applicable to contracts made and to be performed
in the State of Delaware (without regard to principles of conflict of laws)
("GOVERNING LAW").

         Whenever used in this Note, the singular number shall include the
plural, the plural the singular, and the masculine shall include the feminine
and the neuter, the words "Borrower" and "Holder" shall be deemed to include
Borrower and Holder as defined herein and their respective successors and
assigns, and the word "person" shall be deemed to mean natural persons,
corporations, partnerships and all other legal entities. It is expressly
understood and agreed that Holder shall never be construed for any purpose as a
partner, joint venturer, co-principal or associate of Borrower or any Obligors
or of any person or party claiming by, through or under Borrower or any Obligors
in the conduct of their respective businesses.

         The Borrower and Holder irrevocably consent to the jurisdiction of the
United States federal courts and state courts located in Delaware in any suit or
proceeding based on or arising under this Note, the agreements entered into in
connection herewith or the transactions contemplated hereby or thereby and
irrevocably agree that all claims in respect of such suit or proceeding may be

                                       16
<PAGE>   17

determined in such courts. Borrower and Holder irrevocably waive the defense of
an inconvenient forum to the maintenance of such suit or proceeding.

         THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY
RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREIN, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE, AND ANY
AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION THEREWITH, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
EITHER PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR HOLDER ENTERING INTO
THIS LOAN.

         IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its
name by its duly authorized officer as of the date first above written.

                                       SMARTSOURCES.COM, INC.

                                       By:
                                           -------------------------------------
                                           Nathan Nifco
                                           Chairman, President and CEO

                                       17

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