Document:

EX-4.16

          FORM OF AMENDED AND RESTATED SENIOR SECURED CONVERTIBLE NOTE

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES  REPRESENTED BY THIS CERTIFICATE
NOR THE  SECURITIES  INTO  WHICH  THESE  SECURITIES  ARE  CONVERTIBLE  HAVE BEEN
REGISTERED  UNDER THE  SECURITIES ACT OF 1933, AS AMENDED,  OR APPLICABLE  STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,  SOLD,  TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE  REGISTRATION  STATEMENT  FOR
THE SECURITIES  UNDER THE SECURITIES ACT OF 1933, AS AMENDED,  OR (B) AN OPINION
OF COUNSEL,  IN A GENERALLY  ACCEPTABLE FORM, THAT  REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD  PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING  THE  FOREGOING,  SUBJECT TO  COMPLIANCE  WITH  APPLICABLE
SECURITIES  LAWS, THE  SECURITIES MAY BE PLEDGED IN CONNECTION  WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
ANY  TRANSFEREE  OF THIS NOTE  SHOULD  CAREFULLY  REVIEW THE TERMS OF THIS NOTE,
INCLUDING  SECTIONS 3(C)(III) AND 18(A) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED
BY THIS NOTE AND,  ACCORDINGLY,  THE SECURITIES  ISSUABLE UPON CONVERSION HEREOF
MAY BE LESS THAN THE AMOUNTS  SET FORTH ON THE FACE  HEREOF  PURSUANT TO SECTION
3(C)(III)  OF  THIS  NOTE.  THIS  INSTRUMENT  IS  SUBJECT  TO  THE  TERMS  OF  A
INTERCREDITOR  AGREEMENT BY AND BETWEEN  FORTRESS CREDIT CORP., AS AGENT (OR ANY
SUCCESSOR OR REPLACEMENT  AGENT) FOR CERTAIN OTHER FINANCIAL  INSTITUTIONS UNDER
THE SENIOR LOAN AGREEMENT (HEREINAFTER DEFINED), AND LAW DEBENTURE TRUST COMPANY
OF NEW YORK (OR ANY SUCCESSOR OR REPLACEMENT  COLLATERAL AGENT), IN ITS CAPACITY
AS  COLLATERAL  AGENT,  FOR THE HOLDER OF THIS NOTE AND THE HOLDERS OF THE OTHER
NOTES,  DATED AS OF NOVEMBER 8, 2006 AS AMENDED  PURSUANT TO AMENDMENT  NO. 1 TO
INTERCREDITOR AND SUBORDINATION AGREEMENT DATED MAY __, 2007 (AS THE SAME MAY BE
AMENDED  SUPPLEMENTED,  RESTATED,  NOVATED OR REPLACED  (INCLUDING IN CONNECTION
WITH  REPLACEMENT  SENIOR  FINANCING)  FROM  TIME TO  TIME,  THE  "INTERCREDITOR
AGREEMENT").  THIS  INSTRUMENT IS SUBJECT TO THE TERMS OF A SECURITIES  PURCHASE
AGREEMENT  (NOTES AND  WARRANTS),  DATED AS OF  NOVEMBER  8, 2006,  BY AND AMONG
MARITIME  LOGISTICS US HOLDINGS INC., THE BUYERS LISTED  THEREIN,  LAW DEBENTURE
TRUST COMPANY OF NEW YORK, AS COLLATERAL AGENT FOR SUCH BUYERS AND SUMMIT GLOBAL
LOGISTICS, INC. PURSUANT TO THAT CERTAIN JOINDER AGREEMENT, DATED AS OF NOVEMBER
8, 2006, AS SUCH  SECURITIES  PURCHASE  AGREEMENT  HAS BEEN  AMENDED,  RESTATED,
SUPPLEMENTED AND/OR MODIFIED TO DATE AND/OR FROM TIME TO TIME.

                          SUMMIT GLOBAL LOGISTICS, INC.
<PAGE>

              AMENDED AND RESTATED SENIOR SECURED CONVERTIBLE NOTE

Original Issuance Date:           Original Principal Amount: U.S. $_____________
November 8, 2006

Reissue Date:                     Reissue Principal Amount:  U.S. $_____________
May __, 2007

        FOR  VALUE  RECEIVED,   Summit  Global   Logistics,   Inc.,  a  Delaware
corporation (formerly known as Aerobic Creations,  Inc., the "COMPANY"),  hereby
promises  to pay to the  order of  [_________]or  registered  permitted  assigns
("HOLDER") the amount set out above as the Reissue  Principal Amount (as reduced
pursuant to the terms hereof pursuant to redemption (or prepayment),  conversion
or  otherwise,  the  "PRINCIPAL")  when due,  whether upon the Maturity Date (as
defined below),  acceleration,  redemption (or prepayment) or otherwise (in each
case in accordance  with the terms hereof) and to pay interest  ("INTEREST")  on
any outstanding Principal at the applicable Interest Rate, from November 6, 2006
(the  "INTEREST  COMMENCEMENT  DATE")  until the same  becomes due and  payable,
whether  upon  an  Interest  Date  (as  defined   below),   the  Maturity  Date,
acceleration,  conversion, redemption (or prepayment) or otherwise (in each case
in accordance  with the terms hereof).  This Amended and Restated Senior Secured
Convertible  Note  (including  all Senior  Secured  Convertible  Notes issued in
exchange,  transfer or replacement  hereof, as amended,  restated,  supplemented
and/or modified from time to time in accordance with the provisions hereof, this
"NOTE") is one of an issue of Senior Secured  Convertible  Notes and Amended and
Restated  Senior  Secured  Convertible  Notes issued  pursuant to the Securities
Purchase  Agreement  (as defined  below) on the Reissue  Date (such other Senior
Secured  Convertible  Notes and Amended and Restated Senior Secured  Convertible
Notes, as amended, restated,  supplemented and/or modified to date and from time
to time,  the "OTHER  NOTES").  This Note amends,  restates  and  replaces  that
certain  Senior  Secured  Convertible  Note  issued by  Company to Holder on the
Original  Issuance Date ("ORIGINAL  NOTE").  This Note evidences and the Reissue
Principal  Amount  includes  (i) the Original  Principal  Amount of the Original
Note,  (ii)  $________  of  additional  loans  made by Holder to  Company on the
Reissue  Date,  (iii)  $________  of Default  Interest (as defined in the Second
Amendment  to  Securities  Purchase  Agreement  (Notes and  Warrants)  and First
Amendment to Joinder  Agreement  dated as of May __, 2007) and (iv) a fee in the
amount of $_______ as  consideration  for the Holder  agreeing to waive  certain
rights under the Registration  Rights Agreement.  Certain capitalized terms used
herein are defined in Section 28.  Capitalized terms used but not defined herein
shall have the meanings ascribed to them in the Securities Purchase Agreement.

        (1)     MATURITY.  On the Maturity  Date,  the Company  shall pay to the
Holder an amount in cash  representing  all outstanding  Principal,  accrued and
unpaid  Interest  and  accrued  and unpaid Late  Charges on such  Principal  and
Interest.  The "MATURITY  DATE" shall be November 8, 2011, as may be extended at
the option of the Holder (i) in the event that,  and for so long as, an Event of
Default (as defined in Section  4(a)) shall have  occurred and be  continuing on
the Maturity  Date (as may be extended  pursuant to this Section 1) or any event
that shall have occurred and be continuing that with the passage of time and the
failure to cure would  result in an Event of Default  and (ii)  through the date
that is ten (10) Business Days after the  consummation of a Change of Control in
the event that a Change of Control is publicly  announced or a Change of Control
Notice (as defined in Section  5(b)) is delivered  prior to the

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Maturity Date.  Except as specifically set forth in Section 8 hereof,  this Note
is not voluntarily prepayable.

        (2)     INTEREST;   INTEREST   RATE.   (a)  Interest  on  the  Principal
then-outstanding under this Note (i) shall accrue interest at the Interest Rate,
commencing  on the  Interest  COMMENCEMENT  Date,  (ii) shall be computed on the
basis of a 360-day  year  comprised  of twelve  (12)  thirty (30) day months and
(iii) shall be payable in arrears for each Calendar  Quarter on the first day of
the  succeeding  Calendar  Quarter  during the period  beginning on the Interest
Commencement  Date and ending on, and  including,  the Maturity  Date (each,  an
"INTEREST  DATE") with the first  Interest  Date being  January 1, 2007 provided
that,  all Interest  accruing  for the five (5)  consecutive  Calendar  Quarters
ending after the Reissue Date,  commencing  with the Calendar  Quarter ending on
June 30, 2007, shall, at the option of the Company,  after giving written notice
to the Holder on or prior to the first day of each such  Calendar  Quarter other
than with respect to Calendar Quarter ending on June 30, 2007 (in which case, no
such notice is required),  accrue in arrears on the first day of the  succeeding
Calendar  Quarter and shall not be payable  until the Maturity Date (or earlier,
in the event that all  Principal  hereunder  is being  converted to Common Stock
(prior  to the  Maturity  Date)  in  accordance  with  this  Section  2,  on the
Conversion Date with respect  thereto).  Interest on this Note shall accrue from
the  Interest  Commencement  Date until the earlier to occur of the date (i) the
Principal  Amount  is paid or,  if a paying  agent is  engaged  by the  Company,
transferred to such paying agent with  instructions to pay the same and (ii) all
amounts  outstanding under this Note are converted to Common Stock in accordance
with the provisions  hereof.  Interest shall be payable or accrue, as applicable
in accordance with this Section 2(a), on each Interest Date to the record holder
of this  Note on the  applicable  Interest  Date,  and to the  extent  that  any
principal amount of this Note is converted prior to such Interest Date,  accrued
and unpaid  Interest in respect of such converted  principal  amount and accrued
and  unpaid  Late  Charges in respect  of such  converted  principal  amount and
Interest shall be paid on the  Conversion  Date (as defined below) to the record
holder of this Note on the applicable Conversion Date, in cash.

                (b)     Interest on this Note that is payable, and is punctually
paid or duly  provided  for, on any Interest Date shall be paid to the Person in
whose name this Note is  registered  at the close of business on the Record Date
for such  interest  at the office or agency of the Company  maintained  for such
purpose  or at the  office of a payment  agent  located in the state of New York
engaged by the Company for the  purpose of making  payments  under this Note and
the Other  Notes.  Each  payment of interest on this Note shall be made by check
mailed  to the  address  of the  Holder  specified  in the  register  of  Notes;
PROVIDED, HOWEVER, that, at the request of the Holder in writing to the Company,
interest on the Holder's  Note(s) shall be paid by wire transfer in  immediately
available  funds  in  accordance  with the  written  wire  transfer  instruction
supplied  by the  Holder  from  time to time to the  Company  at least  ten (10)
Business Days prior to the applicable Interest Date or Conversion Date.

                (c)     From and after the occurrence and during the continuance
of an Event of Default,  the  Interest  Rate shall be  increased  to two percent
(2.0%) in excess of the Interest  Rate  otherwise  payable at such time.  In the
event that such Event of Default is subsequently cured or waived, the adjustment
referred to in the preceding sentence shall cease to be effective as of the date
of such cure or waiver;  PROVIDED that, the Interest as calculated and unpaid at
such  increased  rate  during the  continuance  of such  Event of Default  shall
continue  to apply to the

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<PAGE>

extent relating to the days after the occurrence of such Event of Default to but
excluding  the date of cure or waiver of such Event of Default.  For purposes of
this  Section  2(c),  the  period of the Event of  Default in respect of Section
4(a)(i) only,  shall  commence the first day after the grace  periods  specified
therein expire and shall end on the day upon which the  applicable  Registration
Statement becomes effective or again becomes available, as applicable.

        (3)     CONVERSION OF NOTES.  This Note shall be convertible into shares
of the Company's  common stock, par value $0.001 per share (the "COMMON STOCK"),
on the terms and conditions set forth in this Section 3.

                (a)     CONVERSION  RIGHT.  Subject to the provisions of Section
3(d), at any time or times on or after the Original  Issuance  Date,  the Holder
shall  be   entitled   to  convert   all  or  any   portion  of  the   Principal
then-outstanding  into fully paid and  nonassessable  shares of Common  Stock in
accordance  with Section 3(c), at the Conversion  Rate (as defined  below).  The
Company  shall not  issue  any  fraction  of a share of  Common  Stock  upon any
conversion.  If the  issuance  would  result in the  issuance of a fraction of a
share of Common  Stock,  the  Company  shall  round such  fraction of a share of
Common Stock up or down, as applicable,  to the nearest whole share. The Company
shall pay any and all taxes that may be payable in respect of the  issuance  and
delivery of shares of Common Stock upon conversion of any Principal.

                (b)     CONVERSION  RATE.  The number of shares of Common  Stock
issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall
be determined by dividing (x) such Conversion Amount by (y) the Conversion Price
(the "CONVERSION RATE").

                        (i)     "CONVERSION  AMOUNT"  means the  portion  of the
Principal  to be  converted,  redeemed  or  otherwise  in  respect  of which the
applicable determination is being made.

                        (ii)    "CONVERSION  PRICE" means,  as of any Conversion
Date (as  defined  below)  or other  date of  determination,  $5.50 per share of
Common Stock subject to adjustment as provided for herein.

                (c)     MECHANICS OF CONVERSION.

                        (i)     OPTIONAL  CONVERSION.  To convert any Conversion
Amount into shares of Common Stock on any date (a "CONVERSION DATE"), the Holder
shall (A) transmit by facsimile (or otherwise deliver),  for receipt on or prior
to 11:59 p.m.,  New York Time,  on such date,  a copy of an  executed  notice of
conversion in the form attached hereto as EXHIBIT I (the "CONVERSION NOTICE") to
the Company and (B) if required by Section  3(c)(iii),  surrender this Note to a
common  carrier  for  delivery  to the  Company  as  soon as  practicable  on or
following such date (or an  indemnification  undertaking in respect of this Note
in the case of its loss,  theft or  destruction).  On or before the second (2nd)
Trading Day  following the date of receipt of a Conversion  Notice,  the Company
shall transmit by facsimile a confirmation of receipt of such Conversion  Notice
to the Holder and the Company's  transfer  agent (the "TRANSFER  AGENT"),  which
confirmation  shall  constitute an  instruction to the Transfer Agent to process
such Conversion  Notice in accordance with the terms herein (the "SHARE DELIVERY
DATE"),  and (X)  provided  that  the  Transfer  Agent is  participating  in the
Depository Trust Company ("DTC") Fast

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<PAGE>

Automated Securities Transfer Program, the applicable  registration statement is
effective under the 1933 Act and provided that the Holder is eligible to receive
shares of Common Stock through DTC,  credit such  aggregate  number of shares of
Common  Stock to which the  Holder  shall be  entitled  to the  Holder's  or its
designee's  balance  account  with DTC  through  its  Deposit  Withdrawal  Agent
Commission  system, or (Y) if the Transfer Agent is not participating in the DTC
Fast  Automated  Securities  Transfer  Program or the Holder is not  eligible to
receive  shares of Common Stock through DTC, issue and deliver to the address as
specified in the Conversion Notice, a certificate, registered in the name of the
Holder or its  designee,  for the number of shares of Common  Stock to which the
Holder  shall be  entitled,  pay to the  Holder in cash an  amount  equal to the
accrued and unpaid Interest and Late Charges (as defined in Section  24(b)),  if
any, on the  Conversion  Amount up to and including  the  Conversion  Date.  The
Holder  undertakes that whenever the Company credits  securities as set forth in
clause  (1)(X) of the  preceding  sentence,  (A) upon receipt of notice from the
Company  that the  applicable  registration  statement  is not, or no longer is,
effective  in  respect  of the resale of such  securities,  the Holder  will not
transfer such securities (other than (I) in connection with a transfer,  wherein
the  Holder  provides  the  Company  with  an  opinion  of  counsel   reasonably
satisfactory to the Company, in a generally  acceptable form, to the effect that
such transfer may be made without registration under the applicable requirements
of the 1933  Act,  or (II) the  Holder  provides  the  Company  with  assurances
reasonably  acceptable to the Company that the transfer may be effected pursuant
to Rule  144 or Rule  144)  until  the  Company  notifies  the  Holder  that the
applicable  registration statement becomes effective (again), and (B) the Holder
shall  indemnify and hold the Company  harmless  against any claim of securities
laws  violations  in respect  of the  transfer  (after the  receipt of the first
notice from the Company provided for in clause (A) of this sentence but prior to
the receipt of the second notice from the Company  provided for in clause (A) of
this  sentence) by the Holder of any security as to which such credit at DTC has
been effected. If this Note is physically surrendered for conversion as required
by Section 3(c)(iii) and the outstanding  Principal of this Note is greater than
the Principal  being  converted,  then the Company shall, as soon as practicable
and in no event later than three (3)  Business  Days after  receipt of this Note
(the "NOTE  DELIVERY  DATE") and at its own  expense,  issue and  deliver to the
holder  a  new  Note  (in  accordance  with  Section  18(d))   representing  the
outstanding  Principal not converted.  The Person or Persons entitled to receive
the shares of Common  Stock  issuable  upon a  conversion  of this Note shall be
treated  for all  purposes  as the record  holder or  holders of such  shares of
Common Stock on the Conversion Date.

                        (ii)    COMPANY'S FAILURE TO TIMELY CONVERT.

                        (A)     CONVERSION  FAILURE.  Subject  to the  terms and
        conditions  of  this  Note,  if  the  Company  shall  fail  to  issue  a
        certificate  to the Holder or credit the Holder's  balance  account with
        DTC for the  number of shares  of  Common  Stock to which the  Holder is
        entitled  upon  conversion of any  Conversion  Amount on or prior to the
        date  which is three  (3)  Trading  Days  after the  Conversion  Date (a
        "CONVERSION  FAILURE"),  and if on or after such  Trading Day the Holder
        purchases (in an open market  transaction or otherwise)  Common Stock to
        deliver in satisfaction of a sale by the Holder of Common Stock issuable
        upon such  conversion  that the Holder  anticipated  receiving  from the
        Company (a "BUY-IN"),  then, in addition to all other remedies available
        to the Holder,  the Company shall,  within three (3) Business Days after
        the Holder's request and in the Holder's discretion, either (i) pay cash
        to the Holder in an amount equal to the Holder's

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<PAGE>

        total  purchase  price  (including  reasonable  out of pocket  brokerage
        commissions,  and other reasonable  out-of-pocket  expenses, if any) for
        the shares of Common Stock so purchased (the "BUY-IN  PRICE"),  at which
        point the Company's obligation to deliver such certificate (and to issue
        such  Common  Stock)  shall  terminate,   or  (ii)  promptly  honor  its
        obligation  to  deliver  to the  Holder a  certificate  or  certificates
        representing  such Common  Stock and pay cash to the Holder in an amount
        equal to the excess (if any) of the Buy-In Price over the product of (A)
        such number of shares of Common  Stock,  times (B) the Closing Bid Price
        on the Conversion Date.

                        (B)     NOTICE  OF  VOID   CONVERSION;   ADJUSTMENT   TO
        CONVERSION  PRICE.  If for any reason the Holder has not received all of
        the shares of Common Stock prior to the tenth (10th)  Business Day after
        the Share  Delivery Date in respect of a conversion of this Note,  other
        than due to the pendency of a dispute being resolved in accordance  with
        Section 23 (a  "CONVERSION  FAILURE"),  then the  Holder,  upon  written
        notice to the Company, may void its Conversion Notice in respect of, and
        retain or have  returned,  as the case may be, any  portion of this Note
        that has not been converted pursuant to the Holder's Conversion Notice.

                        (iii)   BOOK-ENTRY.   Notwithstanding  anything  to  the
contrary  set forth  herein,  upon  conversion  of any  portion  of this Note in
accordance with the terms hereof, the Holder shall not be required to physically
surrender  this Note to the  Company  unless (A) all of the  Principal  is being
converted or (B) the Holder has provided the Company with prior  written  notice
(which notice may be included in a Conversion Notice)  requesting  reissuance of
this Note upon physical surrender of this Note. The Holder and the Company shall
maintain  records  showing the  Principal  converted  (and the Interest and Late
Charges paid in respect  thereof) and the dates of such conversions or shall use
such other method,  reasonably satisfactory to the Holder and the Company, so as
not to require physical surrender of this Note upon conversion.  Notwithstanding
the  foregoing,  if this Note is converted or redeemed as aforesaid,  the Holder
may not transfer this Note unless the Holder first  physically  surrenders  this
Note to the Company, whereupon the Company will forthwith issue and deliver upon
the order of the Holder a new Note of like tenor,  registered  as the Holder may
request,  representing in the aggregate the remaining  Principal  represented by
this Note. The Holder and any assignee, by acceptance of this Note,  acknowledge
and agree  that,  by  reason  of the  provisions  of this  paragraph,  following
conversion or redemption of any portion of this Note, the Principal of this Note
may be less than the principal amount stated on the face hereof.

                        (iv)    PRO RATA CONVERSION; DISPUTES. In the event that
the Company receives a Conversion  Notice from more than one holder of Notes for
the same  Conversion Date and the Company can convert some, but not all, of such
portions of the Notes submitted for conversion,  the Company, subject to Section
3(d),  shall convert from each holder of Notes electing to have Notes  converted
on such date a pro rata amount of such holder's  portion of its Notes  submitted
for conversion  based on the principal  amount of Notes submitted for conversion
on such date by such holder  relative to the aggregate  principal  amount of all
Notes submitted for conversion on such date. In the event of a dispute as to the
number of shares of Common  Stock  issuable to the Holder in  connection  with a
conversion  of this Note,  the  Company  shall issue to the Holder the number of
shares of Common  Stock not in dispute and resolve  such  dispute in  accordance
with Section 23.

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<PAGE>

                (d)     LIMITATIONS ON CONVERSIONS.

                        (i)     BENEFICIAL  OWNERSHIP.  The  Company  shall  not
effect any  conversion of this Note,  and the Holder of this Note shall not have
the right to convert any portion of this Note  pursuant to Section  3(a), to the
extent that after giving effect to such  conversion,  the Holder  (together with
the Holder's affiliates) would beneficially own in excess of 9.99% (the "MAXIMUM
PERCENTAGE")  of the number of shares of Common  Stock  outstanding  immediately
after giving effect to such conversion;  PROVIDED,  HOWEVER,  that following the
Optional  Redemption  Notice  Date (as  defined  in  Section  8(a)) the  Maximum
Percentage  shall be of no further  force and effect on the Optional  Redemption
Date, solely for purposes of effecting a Optional Redemption pursuant to Section
8. For purposes of the foregoing  sentence,  the  aggregate  number of shares of
Common Stock  beneficially  owned by the Holder and its affiliates shall include
the number of shares of Common Stock  issuable  upon  conversion of this Note in
respect of which the  determination  of such  sentence is being made,  but shall
exclude the number of shares of Common  Stock  which would be issuable  upon (A)
conversion  of the  remaining,  nonconverted  portion of this Note  beneficially
owned by the Holder or any of its  affiliates  and (B) exercise or conversion of
the unexercised or nonconverted  portion of any other  securities of the Company
(including,  without  limitation,  any Other  Notes or  warrants)  subject  to a
limitation  on  conversion  or exercise  analogous to the  limitation  contained
herein beneficially owned by the Holder or any of its affiliates.  Except as set
forth  in  the  preceding  sentence,  for  purposes  of  this  Section  3(d)(i),
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Securities  Exchange Act of 1934, as amended (the "EXCHANGE  ACT"). For purposes
of this Section  3(d)(i),  in determining  the number of  outstanding  shares of
Common Stock, the Holder may rely on the number of outstanding  shares of Common
Stock as reflected in (x) the Company's most recent Form 10-K, Form 10-KSB, Form
10-Q,  Form  10-QSB or Form 8-K,  as the case may be, (y) a more  recent  public
announcement  by the  Company  or (z) any  other  notice by the  Company  or the
Transfer  Agent setting forth the number of shares of Common Stock  outstanding.
For any reason at any time, upon the written or oral request of the Holder,  the
Company  shall  promptly,  but in no event no later than two (2) Business  Days,
confirm orally and in writing to the Holder the number of shares of Common Stock
then outstanding.  In any case, the number of outstanding shares of Common Stock
shall be  determined  after  giving  effect to the  conversion  or  exercise  of
securities of the Company,  including this Note, by the Holder or its affiliates
since the date as of which such number of outstanding shares of Common Stock was
reported.  By written notice to the Company, the Holder may increase or decrease
the Maximum  Percentage to any other percentage not in excess of 9.99% specified
in such notice;  provided that (i) any such increase will not be effective until
the  sixty-first  (61st) day after such notice is delivered to the Company,  and
(ii) any such  increase or decrease will apply only to the Holder and not to any
other holder of Notes.

                        (ii)    PRINCIPAL MARKET  REGULATION.  The Company shall
not be  obligated to issue any shares of Common  Stock upon  conversion  of this
Note,  and the  Holder of this Note  shall  not have the right to  receive  upon
conversion  of this Note any shares of Common  Stock,  if the  issuance  of such
shares of Common  Stock would  exceed the  aggregate  number of shares of Common
Stock which the Company may issue upon conversion or exercise, as applicable, of
the  Notes,  the  PIPE  Notes  and  Warrants  without  breaching  the  Company's
obligations  under the rules or regulations of the  applicable  Eligible  Market
(the  number of shares  which may be issued  without  violating  such  rules and
regulations, the "EXCHANGE CAP"), except

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that such  limitation  shall not apply in the event that the Company (A) obtains
the approval of its  stockholders  as required by the  applicable  rules of such
Eligible Market for issuances of shares of Common Stock in excess of such amount
(the  "STOCKHOLDER  APPROVAL")  or (B) obtains a written  opinion  from  outside
counsel to the Company that such approval is not  required,  which opinion shall
be  reasonably  satisfactory  to the  Required  Holders.  Unless  and until such
Stockholder  Approval or written opinion is obtained,  no purchaser of the Notes
pursuant to the Securities  Purchase  Agreement  (each, a "PURCHASER")  shall be
issued  in  the  aggregate,   upon  conversion  or  exercise  or  otherwise,  as
applicable,  of Notes or Warrants,  shares of Common Stock in an amount  greater
than the product of the Exchange Cap multiplied by a fraction,  the numerator of
which is the principal amount of Notes issued to such Purchaser  pursuant to the
Securities  Purchase  Agreement on the Reissue Date and the denominator of which
is the aggregate principal amount of all Notes issued to the Purchasers pursuant
to the  Securities  Purchase  Agreement  on the Reissue  Date and the  aggregate
principal  amount of the PIPE Notes  issued on the  Reissue  Date (in respect of
each Purchaser, the "EXCHANGE CAP ALLOCATION").  In the event that any Purchaser
shall sell or otherwise  transfer any of such Purchaser's  Notes, the transferee
shall  be  allocated  a pro  rata  portion  of  such  Purchaser's  Exchange  Cap
Allocation,  and the  restrictions  of the prior  sentence  shall  apply to such
transferee in respect of the portion of the Exchange Cap Allocation allocated to
such transferee. In the event that any holder of Notes shall convert all of such
holder's Notes into a number of shares of Common Stock which,  in the aggregate,
is less than such holder's Exchange Cap Allocation,  then the difference between
such holder's  Exchange Cap  Allocation and the number of shares of Common Stock
actually issued to such holder shall be allocated to the respective Exchange Cap
Allocations of the remaining  holders of Notes on a pro rata basis in proportion
to the aggregate principal amount of the Notes then held by each such holder.

        (4)     RIGHTS UPON EVENT OF DEFAULT.

                (a)     EVENT OF DEFAULT.  Each of the  following  events  shall
constitute an "EVENT OF DEFAULT":

                        (i)     the  failure  of  the  applicable   Registration
Statement required to be filed pursuant to the Registration  Rights Agreement to
be declared effective by the SEC on or prior to the date that is sixty (60) days
after the  applicable  Effectiveness  Deadline  (as defined in the  Registration
Rights Agreement),  or, while the applicable  Registration Statement is required
to be  maintained  effective  pursuant to the terms of the  Registration  Rights
Agreement, the effectiveness of the applicable Registration Statement lapses for
any reason (including,  without limitation,  the issuance of a stop order) or is
unavailable  to any  holder  of the  Notes  for  sale  of all of  such  holder's
Registrable  Securities  (as defined in the  Registration  Rights  Agreement) in
accordance with the terms of the Registration  Rights Agreement,  and such lapse
or  unavailability  continues for a period of ten (10)  consecutive  days or for
more than three  times in any 365-day  period  that does not exceed  thirty (30)
days in the aggregate  (other, in each case, than days during an Allowable Grace
Period or a  Maintenance  Grace  Period (as defined in the  Registration  Rights
Agreement));

                        (ii)    the  suspension  from  trading or failure of the
Common  Stock to be quoted or listed on an Eligible  Market for a period of five
(5)  consecutive  Trading Days or for more than an aggregate of ten (10) Trading
Days in any 365-day period;

                                       8
<PAGE>

                        (iii)   the  Company's  (A) failure to cure a Conversion
Failure by delivery,  subject to the Conversion Limitations set forth in Section
3(d),  of the  required  number of shares of Common  Stock  within  fifteen (15)
Business Days after the applicable  Conversion Date or (B) written notice to any
holder of the Notes,  including by way of public  announcement or through any of
its  agents,  at any time,  of its  intention  not to comply  with a request for
conversion  of any Notes  into  shares  of  Common  Stock  that is  tendered  in
accordance  with the  provisions  of the Notes,  other than  pursuant to Section
3(d);

                        (iv)    at  any  time  following  the  twentieth  (20th)
consecutive  Business Day that the Holder's  Authorized Share Allocation is less
than the number of shares of Common  Stock that the Holder  would be entitled to
receive upon a conversion  of the full  Conversion  Amount of this Note (without
regard to any limitations on conversion set forth in Section 3(d) or otherwise);

                        (v)     the  Company's  failure to pay to the Holder any
amount of Principal  (including,  without limitation,  any redemption payments),
Interest,  Late Charges or other  amounts when and as due under this Note or any
other Transaction  Document (as defined in the Securities Purchase Agreement) or
any other  agreement,  document,  certificate or other  instrument  delivered in
connection with the  transactions  contemplated  hereby and thereby to which the
Holder is a party,  except, (A) in the case of a failure to pay Interest or Late
Charges  when and as due,  in which case only if such  failure  continues  for a
period of at least five (5) Business  Days and (B) if such payment is prohibited
by the  Intercreditor  Agreement  due  solely  to the  existence  of an Event of
Default occurring under any of the Senior Loan Documents  triggered  pursuant to
the Intercreditor  Agreement or the Senior Loan Agreement by the Holder's breach
of this Note or any Transaction Document to which such Holder is a party;

                        (vi)    the Company's or any Subsidiary's failure to pay
any  principal of or interest or premium on any of its  Indebtedness  (excluding
Indebtedness  under the Senior  Loan and  Indebtedness  evidenced  by any of the
Notes),  to  the  extent  that  the  aggregate  principal  amount  of  all  such
Indebtedness  exceeds  $2,000,000,  when due  (whether  by  scheduled  maturity,
required prepayment,  acceleration,  demand or otherwise) and such failure shall
continue after the applicable grace period,  if any,  specified in the agreement
or  instrument  relating to such  Indebtedness,  or any other  default under any
agreement or instrument  relating to any such Indebtedness,  or any other event,
shall  occur and shall  continue  after the  applicable  grace  period,  if any,
specified  in such  agreement  or  instrument,  if the effect of such default or
event is to accelerate,  or to permit the  acceleration of, the maturity of such
Indebtedness;  or any such Indebtedness shall be declared to be due and payable,
or  required  to be  prepaid  (other  than  by a  regularly  scheduled  required
prepayment),  redeemed,  purchased  or defeased  or an offer to prepay,  redeem,
purchase or defease  such  Indebtedness  shall be  required to be made,  in each
case, prior to the stated maturity thereof, except, if such failure is caused by
the Holder's  breach of this Note or any of the  Transaction  Documents to which
such Holder is a party;

                        (vii)   the Company or any of its Subsidiaries (A) shall
institute any  proceeding or voluntary case seeking to adjudicate it bankrupt or
insolvent,  or seeking  dissolution,  liquidation,  winding up,  reorganization,
arrangement,  adjustment,  protection,  relief or composition of it or its debts
under any law relating to bankruptcy,  insolvency,  reorganization  or relief of
debtors,  or seeking  the entry of an order for relief or the  appointment  of a
receiver,

                                       9
<PAGE>

administrative receiver, administrator,  trustee, custodian, liquidator or other
similar  official  for  any  such  Person  or for  any  substantial  part of its
property, or any other Insolvency Proceeding,  (B) shall be generally not paying
its debts as such debts  become due or shall admit in writing its  inability  to
pay its debts  generally  or shall be unable to pay its debts,  (C) shall make a
general assignment for the benefit of creditors, or (D) shall take any action to
authorize or effect any of the actions set forth above in this subsection (vii);

                        (viii)  any proceeding  shall be instituted  against the
Company  or any  of its  Subsidiaries  seeking  to  adjudicate  it  bankrupt  or
insolvent,  or seeking  dissolution,  liquidation,  winding up,  reorganization,
arrangement,  adjustment, protection, relief of debtors, or seeking the entry of
an order for relief or the appointment of a receiver,  administrative  receiver,
administrator,  trustee, custodian, liquidator or other similar official for any
such Person or for any substantial part of its property, or any other Insolvency
Proceeding  shall be instituted  against the Company or any Subsidiary,  and any
such proceeding shall remain undismissed or unstayed for a period of thirty (30)
days  or any of the  actions  sought  in  such  proceeding  (including,  without
limitation,  the entry of an order for  relief  against  any such  Person or the
appointment  of a receiver,  administrative  receiver,  administrator,  trustee,
custodian,  liquidator or other similar  official for it or for any  substantial
part of its  property)  shall occur;

                        (ix)    any provision of any Note,  Security Document or
the Intercreditor  Agreement or any other security document entered into for the
benefit  of  the  Collateral  Agent  (as  defined  in  the  Securities  Purchase
Agreement)  or any  Holder,  after  delivery  thereof  pursuant  the  Securities
Purchase  Agreement  or any Note  shall at any time for any reason  (other  than
pursuant  to the  express  terms  thereof)  cease to be valid and  binding on or
enforceable  against  the  Company or any  Guarantor  under the  Guaranties  (as
defined  in  the  Securities   Purchase  Agreement)  (each,  a  "GUARANTOR"  and
collectively,  the "GUARANTORS") intended to be a party thereto, or the validity
or  enforceability  thereof  shall  be  contested  by any  party  thereto,  or a
proceeding   shall  be  commenced  by  the  Company  or  any  Guarantor  or  any
Governmental  Authority  having  jurisdiction  over  any  of  them,  seeking  to
establish the invalidity or unenforceability  thereof, or any the Company or any
Guarantor  shall  deny  in  writing  that  it has any  liability  or  obligation
purported to be created under any Note or Security Document;

                        (x)     the  Security   Agreement,   the   Intercreditor
Agreement,  any Pledge Agreement,  Guaranty (as each such term is defined in the
Securities  Purchase  Agreement) or any other security document entered into for
the  benefit of the  Collateral  Agent (as  defined in the  Securities  Purchase
Agreement)  or any  Holder,  after  delivery  thereof  pursuant  the  Securities
Purchase  Agreement or any Note,  shall for any reason fail or cease to create a
valid and perfected and,  except to the extent  permitted by the terms hereof or
thereof,  second  priority  Lien  (subject to  Permitted  Liens) in favor of the
Collateral  Agent for the benefit of Holders on any  Collateral  purported to be
covered thereby;

                        (xi)    the  loss,   suspension  or  revocation  of,  or
failure to renew,  any license or permit now held or  hereafter  acquired by the
Company  or any  Guarantor,  if such  license or permit is not  replaced  with a
similar license or permit and, after giving effect to such  replacement  license
or permit,  such loss,  suspension,  revocation or failure to renew has or could
reasonably be expected to have a Material Adverse Effect;

                                       10
<PAGE>

                        (xii)   the  indictment  of the Company or any Guarantor
under any criminal  statute,  or commencement  of criminal or civil  proceedings
against the Company or any  Guarantor,  pursuant to which statute or proceedings
the  penalties  or  remedies  sought  or  available  include  forfeiture  to any
Governmental Authority of any material portion of the property of such Person;

                        (xiii)  a Change of Control shall have occurred;

                        (xiv)   a  breach,   default,   event  of   default   or
termination shall occur under any Acquisition Document (as defined in the Senior
Loan  Agreement) or other  Material  Contract  after giving effect to applicable
grace  periods,  if any,  contained  in any such  Acquisition  Document or other
Material  Contract  that gives any third party the right to  terminate  any such
Acquisition  Document  or  other  Material  Contract  or  that  otherwise  could
reasonably be expected to have a Material Adverse Effect;

                        (xv)    one or more  final  judgments  or orders for the
payment of money is rendered against any the Company or any Subsidiary in excess
of $2,000,000 in the aggregate (provided that, any judgment covered by insurance
where the insurer has assumed  responsibility  in writing for such  judgment and
acknowledged  that the Company or Subsidiary,  as  applicable,  will receive the
proceeds of such  insurance  within thirty (30) days of the issuance of a final,
non-appealable judgment and execution thereon is effectively stayed shall not be
included in calculating such amount) and shall remain  undischarged or unvacated
for a period in excess of sixty (60) days or execution  shall at any time not be
effectively  stayed,  or any final judgment other than for the payment of money,
or  injunction,  attachment,  garnishment  or execution is rendered  against the
Company or any Subsidiary or any of the  Collateral  having a value in excess of
$2,000,000 and shall remain  undischarged or unvacated for a period in excess of
sixty (60) days or execution shall at any time not be effectively stayed;

                        (xvi)   (A) Any  representation  or warranty made by the
Company or any  Subsidiary  herein (a)  containing a materiality  threshold,  is
incorrect or misleading  when made or (b) in respect of any such  representation
or  warranty  which  does  not  contain  a  materiality  threshold,  the same is
materially  misleading  or  materially  incorrect  when made or (B) the  Company
breaches any covenant  (other than the covenants set forth in Section 14 of this
Note) or other term or condition of any  Transaction  Document,  except,  in the
case of a breach of a covenant, term or condition which is curable, only if such
breach continues for a period of at least twenty (20) consecutive  Business Days
after notice thereof;

                        (xvii)  any breach or  failure in any  respect to comply
with  Section  14 of  this  Note,  Sections  6(e),  (g),  or (h)  of the  Pledge
Agreement,  or Sections 5(e)(i),  (g), or the first sentence of Section 5 (i) of
the Security Agreement;

                        (xviii) any Event of  Default  (as  defined in the Other
Notes) occurs in respect of any Other Note;

                        (xix)   the  occurrence  of any  acceleration  under the
Senior Loan Documents in respect of Indebtedness outstanding thereunder;

                                       11
<PAGE>

                        (xx)    the  Company  and/or  any  Guarantor(s)   is/are
enjoined,  restrained  or in any way  prevented by the order of any court or any
Governmental  Authority from conducting all or any material part of its or their
business  for more  than ten (10) days  provided  that  such  curtailment  could
reasonably be expected to have a Material Adverse Effect;

                        (xxi)   any  material  damage  to,  or  loss,  theft  or
destruction of, any Collateral,  whether or not insured, or any strike, lockout,
labor  dispute,  embargo,  condemnation,  act of God or public  enemy,  or other
casualty which causes, for more than ten (10) days, the cessation or substantial
curtailment of revenue producing  activities at any facility of any Obligor,  if
any such event or  circumstance  has or could  reasonably  be expected to have a
Material Adverse Effect;

                        (xxii)  at any time  after  the  initial  employment  by
ShellCo  of  the  Consultant,  (i)  ShellCo  terminates  the  employment  of the
Consultant,  or limits or attempts to limit the scope of the  engagement  of the
Consultant,  without the consent of Required  Holders  provided that ShellCo may
terminate the  Consultant  (without  being  required to replace the same) at any
time after  December 31, 2007 if no Event of Default is then  continuing or (ii)
ShellCo, or any member of senior management of ShellCo,  shall fail to cooperate
with the Consultant in connection with the Consultant providing the services for
which it was engaged; or

                        (xxiii) any  cessation  of a  substantial  part  of  the
business  of the  Company  and/or  any  Guarantor(s)  for a period  which  could
reasonably be expected to have a Material Adverse Effect.

                (b)     REDEMPTION RIGHT. Upon the Company's obtaining knowledge
of the  occurrence  of an Event of  Default in respect of this Note or any Other
Note, the Company shall, as soon as possible,  but in any event, within four (4)
Business  Days,  deliver  written  notice  thereof via  facsimile  and overnight
courier (an "EVENT OF DEFAULT NOTICE") to the Holder.  Subject to the provisions
of the  Intercreditor  Agreement,  at any time after the earlier of the Holder's
receipt of such Event of Default Notice and the Holder's  becoming aware of such
an Event of Default in  respect of this Note or any Other  Note,  the Holder may
require  the  Company  to redeem all or any  portion of this Note by  delivering
written  notice  thereof  (the  "EVENT OF  DEFAULT  REDEMPTION  NOTICE")  to the
Company,  which Event of Default Redemption Notice shall indicate the portion of
this Note the Holder is electing to redeem. Each portion of this Note subject to
redemption  by the Company  pursuant to this  Section  4(b) shall be redeemed as
provided in Section  12(a),  (provided  that the Event of Default giving rise to
such redemption right has not been cured or waived on or before the second (2nd)
Business Day after the expiration of the payments standstill period set forth in
the Intercreditor  Agreement  (notwithstanding any shorter cure period set forth
in Section 4(a) or any other provision  hereof)) by the Company at a price equal
to the  greater of (x) the product of (i) the  Conversion  Amount to be redeemed
together with accrued and unpaid  Interest and Late Charges,  if any incurred up
to and including the Conversion  Date, in respect of such Conversion  Amount and
(ii) the Redemption  Premium or (y) the product of (A) the Closing Sale Price of
the  Common  Stock on the  date  immediately  preceding  such  Event of  Default
multiplied by (B) the number of shares of Common Stock into which the amount set
forth in clause (x) would have  converted  into in accordance  with Section 3(a)
(the "EVENT OF DEFAULT REDEMPTION PRICE"). For purposes of this Section 4(b) and
Section 12(a), an Event of Default  occurring under Section 4(a)(i) hereof shall

                                       12
<PAGE>

be  deemed  to be  cured  on the day  upon  which  the  applicable  Registration
Statement becomes effective or again becomes  available,  as applicable.  To the
extent  redemptions  required by this Section 4(b) are deemed or determined by a
court of competent  jurisdiction  to be  prepayments of the Note by the Company,
such redemptions shall be deemed to be voluntary prepayments. The parties hereto
agree that in the event of the  Company's  redemption of any portion of the Note
under this Section 4(b),  the Holder's  damages would be uncertain and difficult
to estimate  because of the parties'  inability to predict future interest rates
and the  uncertainty of the  availability  of a suitable  substitute  investment
opportunity for the Holder.  Accordingly,  any Redemption Premium due under this
Section 4(b) is intended by the parties to be, and shall be deemed, a reasonable
estimate of the Holder's actual loss of its investment  opportunity and not as a
penalty.

        (5)     RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.

                (a)     ASSUMPTION. The Company shall not enter into or be party
to a Fundamental Transaction unless, in the case of a Fundamental Transaction of
the type described in clause (ii), (iii), (iv), or (v) of the definition thereof
if the Successor Entity in such  Fundamental  Transaction is a person other than
the Company, (i) such Successor Entity assumes in writing all of the obligations
of the Company under this Note and the other Transaction Documents in accordance
with the provisions of this Section 5(a) pursuant to written  agreements in form
and  substance  reasonably   satisfactory  to  the  Required  Holders  including
agreements  to  deliver  to each  holder of Notes in  exchange  for such Notes a
security of the Successor Entity evidenced by a written instrument substantially
similar in form and  substance  to the  Notes,  including,  without  limitation,
having a principal amount and interest rate equal to the principal  amounts then
outstanding  and the  interest  rates of the Notes held by such  holder,  having
similar  conversion rights as the Notes and having similar ranking to the Notes,
and  reasonably  satisfactory  to the Required  Holders and (ii) such  Successor
Entity (or its Parent  Entity) is a publicly  traded  corporation  whose  common
stock is quoted on or listed for trading on an Eligible  Market  (other than the
Initial Principal Market).  Upon the occurrence of any Fundamental  Transaction,
such Successor Entity shall succeed to, and be substituted for (so that from and
after the date of such  Fundamental  Transaction,  the  provisions  of this Note
referring to the "Company"  shall refer instead to such Successor  Entity),  and
may  exercise  every right and power of the Company and shall  assume all of the
obligations  of the  Company  under  this Note  with the same  effect as if such
Successor Entity had been named as the Company herein.  Upon consummation of the
Fundamental  Transaction,  such  Successor  Entity  shall  deliver to the Holder
confirmation  that there shall be issued upon  conversion  or redemption of this
Note at any time after the consummation of the Fundamental Transaction,  in lieu
of the shares of the Company's Common Stock (or other  securities,  cash, assets
or other property) issuable upon the conversion or redemption of the Notes prior
to such Fundamental Transaction, such shares of the publicly traded common stock
(or their equivalent) of the Successor Entity (including its Parent Entity),  as
adjusted in accordance  with the provisions of this Note. The provisions of this
Section shall apply similarly and equally to successive Fundamental Transactions
and shall be applied  without  regard to any  limitations  on the  conversion or
redemption of this Note.

                (b)     REDEMPTION  RIGHT.  No sooner than fifteen (15) days nor
later than ten (10) days prior to the  consummation of a Change of Control,  but
not prior to the public

                                       13
<PAGE>

announcement of such Change of Control, the Company shall deliver written notice
thereof via facsimile and overnight  courier to the Holder (a "CHANGE OF CONTROL
NOTICE").  At any time during the period beginning after the Holder's receipt of
a Change of  Control  Notice  and  ending  twenty  (20)  Trading  Days after the
consummation  of such Change of  Control,  the Holder may require the Company to
redeem all or any  portion of this Note by  delivering  written  notice  thereof
("CHANGE OF CONTROL REDEMPTION NOTICE") to the Company,  which Change of Control
Redemption Notice shall indicate the Conversion Amount the Holder is electing to
redeem. The portion of this Note subject to redemption  pursuant to this Section
5 shall be  redeemed  by the Company in cash at a price equal the product of (i)
the sum of the Conversion Amount being redeemed plus accrued and unpaid Interest
and Late  Charges,  if any,  in  respect  of such  Conversion  Amount  up to and
including  the  date of  redemption  and (ii) the  greater  of (x) the  quotient
determined  by dividing (A) the greatest of the Closing Sale Price of the Common
Stock  immediately  prior to the  consummation  of the  Change of  Control,  the
Closing  Sale  Price  of the  Common  Stock  immediately  following  the  public
announcement  of such  proposed  Change of Control and the Closing Sale Price of
the Common Stock immediately  prior to the public  announcement of such proposed
Change of Control  by (B) the  Conversion  Price,  and (y) the Change of Control
Premium (such product,  the "CHANGE OF CONTROL REDEMPTION  PRICE").  Redemptions
required by this Section 5 shall be made in  accordance  with the  provisions of
Section 12 and shall have priority over payments to  stockholders  in connection
with a Change of Control.  To the extent  redemptions  required by this  Section
5(b) are  deemed  or  determined  by a court  of  competent  jurisdiction  to be
prepayments of the Note by the Company,  such redemptions  shall be deemed to be
voluntary prepayments.  Notwithstanding anything to the contrary in this Section
5, but subject to Section 3(d), until the Change of Control  Redemption Price is
paid in full, the Conversion  Amount submitted for redemption under this Section
5(c) may be  converted,  in whole or in part,  by the Holder into  Common  Stock
pursuant  to  Section  3. The  parties  hereto  agree  that in the  event of the
Company's  redemption  of any portion of the Note under this Section  5(b),  the
Holder's  damages would be uncertain  and  difficult to estimate  because of the
parties'  inability to predict future  interest rates and the uncertainty of the
availability  of a suitable  substitute  investment  opportunity for the Holder.
Accordingly,  any redemption  premium due under this Section 5(b) is intended by
the parties to be, and shall be deemed,  a  reasonable  estimate of the Holder's
actual loss of its investment  opportunity and not as a penalty, and the receipt
by the Holder of the Change of Control  Redemption  Price shall  constitute full
satisfaction of the amount requested to be redeemed pursuant to this Section 5.

        (6)     RIGHTS  UPON  ISSUANCE OF  PURCHASE  RIGHTS AND OTHER  CORPORATE
EVENTS.

                (a)     PURCHASE RIGHTS.  If at any time after the Reissue Date,
the Company  grants,  issues or sells any  Options,  Convertible  Securities  or
rights to purchase stock, warrants, securities or other property pro rata to the
record  holders  of any  class of  Common  Stock  (collectively,  the  "PURCHASE
RIGHTS"), then the Holder will be entitled to acquire, upon the terms applicable
to such Purchase  Rights,  the aggregate  Purchase Rights which the Holder could
have  acquired  if the  Holder  had held the  number of  shares of Common  Stock
acquirable  upon complete  conversion of this Note (without  taking into account
any limitations or restrictions on the  convertibility of this Note) immediately
before  the date on which a record is taken for the grant,  issuance  or sale of
such Purchase  Rights,  or, if no such record is taken, the date as of

                                       14
<PAGE>

which the record  holders of Common  Stock are to be  determined  for the grant,
issue or sale of such Purchase Rights.

                (b)     OTHER  CORPORATE  EVENTS.  In  addition  to  and  not in
substitution  for any other rights  hereunder,  but without  duplication  of the
consideration  issuable  pursuant to Section 5(a),  prior to the consummation of
any Fundamental  Transaction pursuant to which holders of shares of Common Stock
are entitled to receive  securities or other assets in respect of or in exchange
for  shares of Common  Stock (a  "CORPORATE  EVENT"),  the  Company  shall  make
appropriate  provision to insure that the Holder will  thereafter have the right
to receive  upon a  conversion  of this Note,  (i) in  addition to the shares of
Common Stock receivable upon such conversion, such securities or other assets to
which the Holder  would have been  entitled  in respect of such shares of Common
Stock  had  such  shares  of  Common  Stock  been  held by the  Holder  upon the
consummation   of  such  Corporate   Event  (without  taking  into  account  any
limitations or restrictions on the  convertibility of this Note) or (ii) in lieu
of the shares of Common Stock otherwise  receivable upon such  conversion,  such
securities or other assets  received by the holders of shares of Common Stock in
connection with the  consummation of such Corporate Event in such amounts as the
Holder would have been entitled to receive had this Note  initially  been issued
with conversion rights for the form of such  consideration (as opposed to shares
of Common Stock) at a conversion rate for such  consideration  commensurate with
the Conversion Rate.  Provision made pursuant to the preceding sentence shall be
in a form and substance  satisfactory to the Required Holders. The provisions of
this Section shall apply  similarly and equally to successive  Corporate  Events
and shall be applied  without  regard to any  limitations  on the  conversion or
redemption of this Note.

        (7)     RIGHTS UPON ISSUANCE OF OTHER SECURITIES.

                (a)     ADJUSTMENT OF  CONVERSION  PRICE UPON ISSUANCE OF COMMON
STOCK.  If and whenever on or after the Reissue Date,  the Company (i) issues or
sells, or in accordance with this Section 7(a) is deemed to have issued or sold,
any shares of Common Stock  (including  the issuance or sale of shares of Common
Stock owned or held by or for the account of the Company,  but excluding  shares
of Excluded  Securities  and Common  Stock deemed to have been issued or sold by
the Company in connection with any Excluded Security), Convertible Securities or
Options  entitling the recipient  thereof to subscribe for or purchase shares of
Common  Stock for a  consideration  per share of Common  Stock or (ii)  amend or
otherwise  modify the terms of any Convertible  Securities or Options to a price
per share of Common  Stock (such  issuance,  subscription  or purchase  price or
amended or modified  price being  referred to as the "NEW ISSUANCE  PRICE") less
than a price (the  "APPLICABLE  PRICE") equal to the Conversion  Price in effect
immediately  prior  to such  issue  or  sale or  deemed  issuance  or sale  (the
foregoing a "DILUTIVE ISSUANCE"), then immediately after such Dilutive Issuance,
the Conversion Price then in effect shall be:

                        (i)     if  such  issuance  occurs  prior  to the  first
anniversary of the Reissue Date, adjusted to equal the New Issuance Price, and

                        (ii)    if such  issuance  occurs  on or after the first
anniversary  of the Reissue  Date,  reduced to an amount equal to the product of
(x) the Conversion Price in effect  immediately  prior to such Dilutive Issuance
and (y) the  quotient  determined  by  dividing  (1) the

                                       15
<PAGE>

sum of (I) the product  derived by multiplying  the  Conversion  Price in effect
immediately  prior to such Dilutive  Issuance and the number of shares of Common
Stock Deemed  Outstanding  immediately prior to such Dilutive Issuance plus (II)
the consideration,  if any, received by the Company upon such Dilutive Issuance,
by (2) the product  derived by multiplying  (I) the  Conversion  Price in effect
immediately  prior to such  Dilutive  Issuance  by (II) the  number of shares of
Common Stock Deemed Outstanding immediately after such Dilutive Issuance.

                (b)     CERTAIN  DISTRIBUTIONS  TO HOLDERS OF COMMON  STOCK.  In
case the Company shall at any time or from time to time, on or after the Reissue
Date and prior to conversion  of this Note,  distribute to all holders of shares
of Common Stock  (including  any such  distribution  made in  connection  with a
merger or  consolidation  in which the  Company is the  resulting  or  surviving
Person and the Common  Stock is not changed or  exchanged)  cash,  evidences  of
indebtedness of the Company, any Subsidiary or another issuer, securities of the
Company (including Convertible Securities),  any Subsidiary or another issuer or
other assets  (excluding  dividends  payable in shares of Common Stock for which
adjustment  is  made  under  another   paragraph  of  this  Section  7  and  any
distribution  in  connection  with the issuance of any Excluded  Securities)  or
Options to subscribe for or purchase of any of the foregoing,  then, and in each
such case, the Conversion  Price then in effect shall be adjusted (and any other
appropriate actions shall be taken by the Company) by multiplying the Conversion
Price in effect immediately prior to the date of such distribution by a fraction
(x) the  numerator  of which shall be the Weighted  Average  Price of the Common
Stock for the five (5) consecutive Trading Days immediately prior to the date of
distribution  less the then fair market value (as  determined  by the  Company's
Board  of  Directors  in  the  exercise  of  their  fiduciary  duties  with  the
concurrence  of the Required  Holders) of the portion of the cash,  evidences of
indebtedness,  securities or other assets so  distributed  or of such Options to
subscribe  applicable  to one share of Common Stock and (y) the  denominator  of
which shall be the Weighted  Average  Price of the Common Stock for the five (5)
consecutive Trading Days immediately prior to the date of distribution (but such
fraction shall not be greater than one). Such adjustment  shall be made whenever
any such distribution is made and shall become effective retroactively to a date
immediately  following  the  close  of  business  on the  record  date  for  the
determination of stockholders entitled to receive such distribution.

                (c)     DIVIDENDS  AND  CERTAIN  OTHER  EVENTS IN RESPECT OF THE
COMMON  STOCK.  In the event that the Company  shall at any time or from time to
time, on or after the Reissue Date and prior to the conversion of this Note, (A)
pay a dividend or make a  distribution  payable in shares of Common Stock on any
class of shares of capital stock of the Company,  (B) subdivide its  outstanding
shares of  Common  Stock  into a  greater  number of  shares,  (C)  combine  its
outstanding  shares of Common Stock into a smaller number of shares or (D) issue
any shares of capital stock by  reclassification  of its shares of Common Stock,
the  Conversion  Price in effect at the opening of business on the day following
the date fixed for the  determination  of stockholders  entitled to receive such
dividend or  distribution or at the opening of business on the day following the
day  on  which  such  subdivision,

                                       16
<PAGE>

combination or reclassification  becomes effective, as the case may be, shall be
adjusted so that the holder of any Notes  thereafter  surrendered for conversion
shall be  entitled  to receive  the  number of shares of Common  Stock that such
holder would have owned or have been  entitled to receive after the happening of
any of the events  described  above had such Notes  been  converted  immediately
prior  to the  record  date in the case of a  dividend  or  distribution  or the
effective date in the case of a subdivision, combination or reclassification. An
adjustment made pursuant to this Section 7(c) shall become effective immediately
upon the opening of business on the day next  following the record date (subject
to Section  7(e)  below) in the case of a  dividend  or  distribution  and shall
become  effective  immediately  upon the  opening  of  business  on the day next
following  the  effective  date in the  case of a  subdivision,  combination  or
reclassification.

                (d)     TENDER  OFFERS.  In the event that the Company  shall at
any time or from  time to time,  on or after the  Reissue  Date and prior to the
conversion of this Note,  make a payment of cash or other  consideration  to the
holders  of shares of Common  Stock in  respect  of a tender  offer or  exchange
offer,  other  than  an  odd-lot  offer,  and  the  value  of the sum of (i) the
aggregate cash and other consideration paid for such shares of Common Stock, and
(ii) any other  consent or other fees paid to holders of shares of Common  Stock
in respect of such tender  offer or exchange  offer  expressed  as an amount per
share of Common  Stock  validly  tendered or  exchanged  pursuant to such tender
offer or exchange offer,  exceeds the Weighted Average Price of the Common Stock
on the  Trading  Day  immediately  prior to the date  any such  tender  offer or
exchange offer is first publicly announced (the "ANNOUNCEMENT  DATE"),  then the
Conversion Price shall be adjusted in accordance with the formula:

        R' = R x     O' x P

        F + (P x O)

        For purposes of the foregoing formula:

        R = the Conversion  Price in effect at the expiration time of the tender
offer  or  exchange  offer  that  is the  subject  of  this  Section  7(d)  (the
"EXPIRATION TIME");

        R' = the  Conversion  Price in effect  immediately  after the Expiration
Time;

        F = the fair  market  value (as  determined  by the  Company's  Board of
Directors in the exercise of their fiduciary  duties with the concurrence of the
Required Holders) of the aggregate value of all cash and any other consideration
paid or  payable  for  shares of Common  Stock  validly  tendered  or  exchanged
(including any consent or other fees) and not withdrawn  prior to the Expiration
Time (the "PURCHASED SHARES OF COMMON STOCK");

        O = the number of shares of Common Stock  outstanding  immediately after
the Expiration Time less any Purchased Shares of Common Stock;

        O' = the number of shares of Common Stock outstanding  immediately after
the Expiration Time, plus any Purchased Shares of Common Stock; and

        P = the  Weighted  Average  Price  of the  Common  Stock on the five (5)
consecutive  Trading Days beginning two (2) Trading Days after the  Announcement
Date.

Such decrease,  if any, shall become  effective  immediately upon the opening of
business on the day next  following the  Expiration  Time. In the event that the
Company is obligated to purchase  shares  pursuant to any tender offer,  but the
Company is prevented by applicable  law from effecting any such purchases or all
such  purchases are rescinded,  the Conversion  Price shall

                                       17
<PAGE>

again be adjusted to the  Conversion  Price that would then be in effect if such
tender or exchange  offer had not been made. If the  application of this Section
7(d) to any  tender  or  exchange  offer  would  result  in an  increase  in the
Conversion  Price, no adjustment shall be made for such tender or exchange offer
under this Section 7(d).

                (e)     OTHER   EVENTS.   If  any  event   occurs  of  the  type
contemplated by the provisions of this Section 7 but not expressly  provided for
by such  provisions  (including,  without  limitation,  the  granting  of  stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company's Board of Directors will make an appropriate adjustment in the
Conversion  Price so as to protect  the  rights of the  Holder  under this Note;
provided that no such adjustment will increase the Conversion Price as otherwise
determined pursuant to this Section 7.

        (8)     COMPANY'S RIGHT OF OPTIONAL REDEMPTION.

                (a)     OPTIONAL  REDEMPTION.  If on any Trading Day on or after
the third  anniversary  of the Reissue Date and prior to the Maturity  Date, the
Weighted  Average  Price of the shares of Common  Stock has  equaled or exceeded
180% of the Conversion  Price then in effect for each of 20 consecutive  Trading
Days ending on the  Redemption  Period End Day and provided that the  applicable
Eligible  Market is not the Initial  Principal  Market and no Equity  Conditions
Failure  then  exists,  the  Company  shall  have the right to redeem all or any
portion of the Conversion  Amount then  remaining  under this Note (an "OPTIONAL
REDEMPTION").  The portion of this Note subject to  redemption  pursuant to this
Section 8 shall be  redeemed  by the Company in cash at a price equal to the sum
of (i) the  Principal  being  redeemed  and (ii) the amount of any  accrued  and
unpaid  Late  Charges on such  Principal  and any  accrued  and unpaid  Interest
through the date of redemption (the "OPTIONAL  REDEMPTION  PRICE").  The Company
may exercise its  redemption  right under this Section 8 by delivering a written
notice thereof by confirmed facsimile and overnight courier to all, but not less
than  all,  of the  holders  of Notes  and the  Transfer  Agent  (the  "OPTIONAL
REDEMPTION  NOTICE" and the date such notice is  delivered to all the holders is
referred to as the "OPTIONAL  REDEMPTION NOTICE DATE"). The Optional  Redemption
Notice shall be irrevocable.  The Optional Redemption Notice shall state (A) the
date on which the  Optional  Redemption  shall occur (the  "OPTIONAL  REDEMPTION
DATE") which date shall be not less than 30 days nor more than 60 days after the
Optional  Redemption  Notice Date, and (B) the aggregate  principal  amount (the
"OPTIONAL  REDEMPTION  AMOUNT") of the Notes which the Company has elected to be
subject to Optional  Redemption from all of the holders of the Notes pursuant to
this Section 8 (and analogous  provisions under the Other Notes) on the Optional
Redemption  Date.  The Company will make a public  announcement  containing  the
information  set  forth in the  Optional  Redemption  Notice  on or  before  the
Optional  Redemption  Notice  Date.  The  Company  may not effect  more than one
Optional Redemption. Notwithstanding anything to the contrary in this Section 8,
until the Optional  Redemption  Price is paid, in full, the Optional  Redemption
Amount may be  converted,  in whole or in part,  by the  Holders  into shares of
Common  Stock  pursuant to Section 3. All  Conversion  Amounts  converted by the
Holder after the  Optional  Redemption  Notice Date shall reduce the  Conversion
Amount of this Note  required to be redeemed on the  Optional  Redemption  Date.
Redemptions  made  pursuant to this Section 8 shall be made in  accordance  with
Section 12 to the extent applicable.

                                       18
<PAGE>

                (b)     PRO RATA REDEMPTION  REQUIREMENT.  If the Company elects
to  cause  an  Optional  Redemption  pursuant  to  Section  8(a),  then  it must
simultaneously  take the same  action  in  respect  of the Other  Notes.  If the
Company  elects to cause an Optional  Redemption  pursuant  to Section  8(a) (or
similar  provisions  under the Other  Notes) in  respect of less than all of the
principal amount of the Notes then  outstanding,  then the Company shall require
redemption  of a  principal  amount from the Holder and each holder of the Other
Notes equal to the product of (i) the aggregate  principal amount of Notes which
the  Company  has  elected to cause to be  redeemed  pursuant  to Section  8(a),
multiplied  by (ii)  the  fraction,  the  numerator  of  which is the sum of the
initial  principal  amount of Notes purchased by such holder and the denominator
of which is the  initial  principal  amounts of Notes  purchased  by all holders
holding  outstanding  Notes (such fraction in respect of each holder is referred
to as its "REDEMPTION ALLOCATION PERCENTAGE", and such amount in respect of each
holder is referred to as its "PRO RATA REDEMPTION AMOUNT"); provided that in the
event that the initial holder of any Notes has sold or otherwise transferred any
of such holder's Notes,  the transferee shall be allocated a pro rata portion of
such holder's Redemption Allocation Percentage and Pro Rata Redemption Amount.

        (9)     SECURITY.  This Note and the  Other  Notes  are  secured  to the
extent and in the manner set forth in the Security  Documents (as defined in the
Securities Purchase Agreement).

        (10)    NONCIRCUMVENTION.  The Company hereby  covenants and agrees that
the Company will not, by amendment of its Certificate of  Incorporation,  Bylaws
or through any reorganization, transfer of assets, consolidation, merger, scheme
of arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of  this  Note,  and  will  at all  times  in good  faith  carry  out all of the
provisions  of this Note and take all action as may be  required  to protect the
rights of the Holder of this Note subject to the Intercreditor Agreement.

        (11)    RESERVATION OF AUTHORIZED SHARES.

                (a)     RESERVATION.  The Company shall initially reserve out of
its authorized and unissued  Common Stock a number of shares of Common Stock for
each of the  Notes  equal  to  130% of the  Conversion  Rate in  respect  of the
Conversion  Amount of each such Note as of the Reissue Date.  For so long as any
of the Notes are  outstanding,  the Company  shall take all action  necessary to
reserve and keep  available  out of its  authorized  and unissued  Common Stock,
solely for the purpose of effecting  the  conversion  of the Notes,  130% of the
number  of shares of Common  Stock as shall  from time to time be  necessary  to
effect the conversion of all of the Notes then outstanding;  provided that at no
time shall the  number of shares of Common  Stock so  reserved  be less than the
number of shares  required  to be  reserved by the  previous  sentence  (without
regard to any limitations on conversions) (the "REQUIRED  RESERVE AMOUNT").  The
initial number of shares of Common Stock  reserved for  conversions of the Notes
and each  increase in the number of shares so reserved  shall be  allocated  pro
rata among the holders of the Notes based on the  principal  amount of the Notes
held by each  holder on the  Reissue  Date or increase in the number of reserved
shares,  as the case may be (the "AUTHORIZED  SHARE  ALLOCATION").  In the event
that a holder shall sell or otherwise  transfer any of such holder's Notes, each
transferee  shall be  allocated a pro rata portion of such  holder's

                                       19
<PAGE>

Authorized Share  Allocation.  Any shares of Common Stock reserved and allocated
to any Person which ceases to hold any Notes shall be allocated to the remaining
holders of Notes,  pro rata based on the principal amount of the Notes then held
by such holders.

                (b)     INSUFFICIENT AUTHORIZED SHARES. If at any time while any
of the Notes remain  outstanding,  the Company does not have a sufficient number
of authorized and unreserved shares of Common Stock to satisfy its obligation to
reserve for issuance upon conversion of the Notes at least a number of shares of
Common  Stock  equal  to the  Required  Reserve  Amount  (an  "AUTHORIZED  SHARE
FAILURE"),  then the Company  shall  immediately  take all action  necessary  to
increase the Company's authorized shares of Common Stock to an amount sufficient
to allow the Company to reserve the Required  Reserve  Amount for the Notes then
outstanding.  Without limiting the generality of the foregoing sentence, as soon
as practicable  after the date of the occurrence of an Authorized Share Failure,
but in no event  later  than  sixty  (60)  days  after  the  occurrence  of such
Authorized  Share Failure,  the Company shall hold a meeting of its stockholders
for the  approval of an increase  in the number of  authorized  shares of Common
Stock.  In  connection  with  such  meeting,  the  Company  shall  provide  each
stockholder with a proxy statement and shall use its best efforts to solicit its
stockholders' approval of such increase in authorized shares of Common Stock and
to cause its board of  directors  to  recommend  to the  stockholders  that they
approve such proposal.

        (12)    HOLDER'S REDEMPTIONS.

                (a)     MECHANICS.  The Company  shall  deliver  the  applicable
Event of Default  Redemption  Price to the Holder  within five (5) Business Days
after the Company's receipt of the Holder's Event of Default  Redemption Notice,
if the  Intercreditor  Agreement does not prohibit the payment by the Company of
the  Default  Redemption  Price at such  time,  and if such  payment  is then so
prohibited,  on the third  (3rd)  Business  Day after such  prohibition  lapses;
provided  that if the Event(s) of Default  giving rise to the  redemption  right
shall have been cured or waived on or before the second (2nd) Business Day after
such prohibition's lapsing, such redemption right shall terminate. If the Holder
has submitted a Change of Control  Redemption  Notice in accordance with Section
5(b),  the Company shall  deliver the  applicable  Change of Control  Redemption
Price to the Holder concurrently with the consummation of such Change of Control
if such notice is received prior to the  consummation  of such Change of Control
and within five (5)  Business  Days after the  Company's  receipt of such notice
otherwise.  In the  event of a  redemption  of less  than all of the  Conversion
Amount of this Note, the Company shall promptly cause to be issued and delivered
to the Holder a new Note (in  accordance  with Section 18(d))  representing  the
outstanding Principal which has not been redeemed. In the event that the Company
does not pay the  applicable  Redemption  Price to the  Holder  within  the time
period  required,  at any time thereafter and until the Company pays such unpaid
Redemption  Price  in  full,  the  Holder  shall  have  the  option,  in lieu of
redemption,  to require the Company to promptly  return to the Holder all or any
portion of this Note  representing the Conversion  Amount that was submitted for
redemption and for which the applicable Redemption Price (together with any Late
Charges  thereon) has not been paid. Upon the Company's  receipt of such notice,
(x) the Redemption  Notice shall be null and void in respect of such  Conversion
Amount,  (y) the Company shall immediately return this Note, or issue a new Note
(in accordance  with Section 18(d)) to the Holder  representing  such Conversion
Amount  and (z) the  Conversion  Price of this Note or such new  Notes  shall be
adjusted to the lesser of (A) the  Conversion  Price as in effect on

                                       20
<PAGE>

the date on which the Redemption Notice is voided and (B) the lowest Closing Bid
Price of the Common Stock during the period  beginning on and including the date
on which the  Redemption  Notice is  delivered  to the Company and ending on and
including  the date on which the  Redemption  Notice  is  voided.  The  Holder's
delivery  of a notice  voiding a  Redemption  Notice and  exercise of its rights
following  such notice shall not affect the  Company's  obligations  to make any
payments of Late Charges  which have accrued prior to the date of such notice in
respect of the Conversion Amount subject to such notice.

                (b)     REDEMPTION BY OTHER HOLDERS.  Upon the Company's receipt
of notice from any of the holders of the Other Notes for redemption or repayment
as a result of an event or  occurrence  substantially  similar  to the events or
occurrences described in Section 4(b) (each, an "OTHER REDEMPTION NOTICE"),  the
Company  shall  immediately,  but no later than one (1)  Business  Day after its
receipt  thereof,  forward to the Holder by facsimile a copy of such notice.  If
the  Company  receives a  Redemption  Notice  and one or more  Other  Redemption
Notices, during the seven (7) Business Day period beginning on and including the
date  which is three (3)  Business  Days prior to the  Company's  receipt of the
Holder's  Redemption  Notice and ending on and including the date which is three
(3) Business Days after the Company's receipt of the Holder's  Redemption Notice
and the Company is unable to redeem all  principal,  interest and other  amounts
designated in such Redemption Notice and such Other Redemption  Notices received
during such seven (7) Business Day period,  then the Company  shall redeem a pro
rata amount from each holder of the Notes  (including  the Holder)  based on the
principal  amount  of the  Notes  submitted  for  redemption  pursuant  to  such
Redemption  Notice and such Other  Redemption  Notices  received  by the Company
during such seven Business Day period.

        (13)    VOTING  RIGHTS.  The Holder  shall have no voting  rights as the
holder of this Note, except as required by law,  including,  but not limited to,
the General  Corporation Law of the State of Delaware and as expressly  provided
in this Note.

        (14)    COVENANTS.

                (a)     RANK.  All  payments  due under this Note (i) shall rank
(A) PARI  PASSU  with all  Other  Notes,  (B)  junior  to the  Permitted  Senior
Indebtedness,  (C) senior to the Subordinated Indebtedness, all Indebtedness not
constituting  Permitted  Indebtedness and all Permitted  Indebtedness  expressly
designated  as ranking  junior to the  Notes,  and (D) PARI PASSU with all other
Permitted  Indebtedness  and (ii) shall be secured  by a  security  interest  in
substantially all of the assets of the Company and the Subsidiaries,  other than
the Foreign Subsidiaries (as defined in the Securities Purchase Agreement),  the
escrowed  funds  referenced in SCHEDULE  14(A) and as otherwise  provided in the
Security Agreement (junior only to the security interests securing the Permitted
Senior  Indebtedness) and such security interests shall rank PARI PASSU with the
security   interests   securing   the   Indebtedness   under  the  Other  Notes.
Notwithstanding  the  foregoing,  if Company shall have  received  notice of the
existence of any Lien, the existence or priority of which is in violation of the
first sentence of this Section 14(a), Company shall have ten (10) days after the
receipt  of such  notice to remove  such Lien (or obtain  the  agreement  of the
holder of such Lien that such Lien  ranks in  priority  in  accordance  with the
first sentence of this Section 14(a)).

                                       21
<PAGE>

                (b)     INCURRENCE  OF  INDEBTEDNESS.  Until  this Note has been
converted,  redeemed or otherwise  satisfied in accordance with its terms (other
than in respect of contingent indemnification obligations in respect of which no
claim has been  asserted),  the Company  shall not,  and the  Company  shall not
permit any of its Subsidiaries  to, directly or indirectly,  incur or guarantee,
assume  or suffer to exist any  Indebtedness,  other  than (i) the  Indebtedness
evidenced by this Note and the Other Notes and (ii) Permitted Indebtedness.

                (c)     EXISTENCE OF LIENS.  Until this Note has been converted,
redeemed or  otherwise  satisfied  in  accordance  with its terms (other than in
respect of contingent  indemnification  obligations in respect of which no claim
has been asserted),  the Company shall not, and the Company shall not permit any
of its Subsidiaries to, create,  incur,  assume or suffer to exist any Lien upon
or in respect of any of its properties, whether now owned or hereafter acquired;
file or suffer to exist under the Uniform  Commercial Code or any similar law or
statute of any jurisdiction,  a financing  statement (or the equivalent thereof)
that names it or any of its Subsidiaries as debtor;  sign or suffer to exist any
security  agreement  authorizing  any  secured  party  thereunder  to file  such
financing  statement (or the  equivalent  thereof);  sell any of its property or
assets subject to an  understanding  or agreement,  contingent or otherwise,  to
repurchase such property or assets  (including  sales of accounts) with recourse
to it or any of its Subsidiaries or assign or otherwise transfer,  or permit any
of its Subsidiaries to assign or otherwise transfer,  any account or other right
to  receive  income;  other  than,  as to  all of the  above,  Permitted  Liens.
Notwithstanding  the  foregoing,  if Company shall have  received  notice of the
existence  of any Lien,  the  existence  of which is in  violation  of the first
sentence  of this  Section  14(c),  Company  shall  have ten (10) days after the
receipt of such notice to effect the removal of such Lien.

                (d)     RESTRICTED  PAYMENTS.  The  Company  shall not,  and the
Company shall not permit any of its  Subsidiaries  to,  directly or  indirectly,
redeem,  defease,  repurchase,  repay or make any payments in respect of, by the
payment of cash or cash equivalents (in whole or in part, whether by way of open
market purchases,  tender offers, private transactions or otherwise), all or any
portion  of  any  Indebtedness   (other  than  Permitted  Senior   Indebtedness,
Indebtedness  evidenced by the Other Notes or Permitted Indebtedness (other than
the Permitted  Indebtedness  referenced in clauses (vi) and (xii) hereof and any
other Subordinated  Indebtedness),  the payment of which shall not be restricted
by the  provisions  of this Note,  the  Security  Documents,  the  Warrant,  the
Securities Purchase Agreement or the Registration Rights Agreement),  whether by
way of payment in respect of principal  of (or  premium,  if any) or interest on
such Indebtedness,  if at the time such payment is due or is otherwise made, or,
after giving effect to such  payment,  an event  constituting,  or that with the
passage of time and without  being cured would  constitute,  an Event of Default
has  occurred  or would  occur and is, or would be,  continuing;  provided  that
notwithstanding  the  foregoing,  no principal  (or any portion  thereof) of any
Subordinated  Indebtedness  may be  paid  (whether  upon  maturity,  redemption,
acceleration  or otherwise) so long as this Note is outstanding and for at least
91 days thereafter.

                (e)     RESTRICTION ON REDEMPTION AND CASH DIVIDENDS. Until this
Note has been converted,  redeemed or otherwise satisfied in accordance with its
terms  (other  than in  respect of  contingent  indemnification  obligations  in
respect of which no claim has been asserted),  the Company shall not, nor permit
any of its Subsidiaries to, directly or indirectly,

                                       22
<PAGE>

                        (i)     Declare   or   pay   any   dividend   or   other
distribution,  or permit any  Subsidiary to declare or pay any dividend or other
distribution,  in each case directly or indirectly,  on account of any equity of
the Company or any Subsidiary, except:

                                (A)     any  Subsidiary  of the  Company may pay
        dividends or make other distributions to the Company or any Subsidiary;

                                (B)     the  Company  may pay  dividends  in the
        form of common stock or preferred stock otherwise permitted to be issued
        hereunder  (but in no event in the form of redeemable  preferred  equity
        requiring any payment prior to the Maturity Date); or

                        (ii)    Make  any  repurchase,  redemption  (other  than
redemption  of the  Notes in  accordance  with the  terms  hereof),  retirement,
defeasance,  sinking fund or similar payment,  purchase or other acquisition for
value, direct or indirect,  of any equity of the Company or any Guarantor or any
direct or indirect  parent of the  Company or any  Guarantor,  now or  hereafter
outstanding  or make any payment to retire,  or to obtain the  surrender of, any
outstanding warrants, options or other rights for the purchase or acquisition of
shares of any class of equity of the Company or any Guarantor,  now or hereafter
outstanding,  except,  (x) from and after the second  (2nd)  anniversary  of the
Reissue Date, the Company and the Guarantors may repurchase common stock held by
employees,  officers,  and/or directors pursuant to any Approved Stock Plan upon
the  termination,  retirement  or death of any such  employee,  officer,  and/or
director  in  accordance  with the  provisions  of such plan or  pursuant to any
special  incentive bonus plans pursuant to the terms thereof,  provided that, as
to any such repurchase, each of the following conditions is satisfied: (A) as of
the date of the payment for such repurchase and after giving effect thereto on a
pro  forma  basis,  no Event of  Default  shall  exist or have  occurred  and be
continuing,  (B) such  repurchase  shall be paid with  funds  legally  available
therefor,  (C) such  repurchase  shall not violate any law or  regulation or the
terms of any  indenture,  agreement or  undertaking  to which the Company or any
Guarantor  is a party or by which the Company or such  Guarantor or its or their
property  are  bound,  and (D) the  aggregate  amount of all  payments  for such
repurchases  in any calendar year shall not exceed  $2,000,000  and (y) prior to
such second (2nd)  anniversary  of the Reissue Date,  Company and the Guarantors
may  repurchase  common  stock held by  employees,  officers,  and/or  directors
pursuant to any Approved Stock Plan upon the termination, retirement or death of
any such employee, officer, and/or director in accordance with the provisions of
such plan or pursuant to any special incentive bonus plans pursuant to the terms
thereof,  provided  that,  as to any  such  repurchase,  each  of the  following
conditions is satisfied:  (A) as of the date of the payment for such  repurchase
and after giving effect thereto on a pro forma basis,  no Event of Default shall
exist or have occurred and be continuing, (B) such repurchase shall be paid with
funds legally available therefor,  (C) such repurchase shall not violate any law
or regulation or the terms of any  indenture,  agreement or undertaking to which
the  Company  or any  Guarantor  is a party  or by  which  the  Company  or such
Guarantor or its or their  property are bound,  and (D) the aggregate  amount of
all payments for such repurchases in any calendar year shall not exceed $50,000;

                                       23
<PAGE>

                        (iii)   Return any equity to any  shareholders  or other
        equity  holders of the Company or any of its  Subsidiaries,  or make any
        other  distribution  of  property,  assets,  equity,  warrants,  rights,
        options,  obligations  or  securities  thereto  as such  (other  than as
        permitted  hereunder or, in the case of such distribution of property or
        assets, to the extent not otherwise prohibited hereunder);

                        (iv)    Pay any  management  fees or any  other  fees or
        expenses  (including  the  reimbursement  thereof by the  Company or any
        Guarantor)  pursuant to any  management,  consulting  or other  services
        agreement  to any of the  shareholders  or other  equity  holders of the
        Company or any Guarantor or other Affiliates  except any such management
        fees or any  other  fees or  expenses  (x)  paid to the  Company  or any
        Guarantor  (whether  paid by the  Company,  any  Guarantor  or any other
        Subsidiary or Affiliate of the Company),  (y) paid by SeaMaster China to
        Sea Master  Hong Kong (each as  defined in the Senior  Loan  Agreement);
        and/or (z) paid by a  Subsidiary  that is not the Company or a Guarantor
        to a Subsidiary that is not the Company or a Guarantor or

                        (v)     Directly  or  indirectly  make or commit to make
        any optional  prepayment of, or otherwise  repurchase  any  Indebtedness
        that is subordinated in right of payment to the Notes, including without
        limitation, any Subordinated Indebtedness.

                (f)     MERGER AND ACQUISITION  ACTIVITIES.  Until this Note has
been  converted,  redeemed or otherwise  satisfied in accordance  with its terms
(other than with respect to contingent indemnification obligations in respect of
which no claim has been asserted),  the Company shall not and shall not cause or
permit any of its  Subsidiaries  to merge into or with or  consolidate  with any
other  Person or permit any other  Person to merge  into or with or  consolidate
with it or wind up, liquidate or dissolve, or permit any Subsidiary to do any of
the foregoing, except that, subject to compliance with Section 5 hereof, (w) the
Company or any  Subsidiary  organized  under the laws of a  jurisdiction  in the
United  States may merge with and into or  consolidate  with the  Company or any
Subsidiary  organized under the laws of a jurisdiction in the United States, and
any Foreign  Subsidiary  may merge with or  consolidate  with the Company or any
Subsidiary  organized  under the laws of a  jurisdiction  outside  of the United
States that is acceptable  to the  Collateral  Agent,  provided that each of the
following conditions is satisfied:  (A) the Collateral Agent shall have received
not less than ten (10) Business  Days' prior written  notice of the intention of
the Company or such  Subsidiary to so merge or  consolidate,  which notice shall
set forth in reasonable detail satisfactory to the Collateral Agent, the Persons
that are merging or  consolidating,  which person will be the surviving  entity,
the  locations of the assets of the Persons  that are merging or  consolidating,
and  the  material   agreements  and  documents   relating  to  such  merger  or
consolidation,   (B)  the  Collateral  Agent  shall  have  received  such  other
information with respect to such merger or consolidation as the Collateral Agent
may reasonably request, (C) the rights of the Collateral Agent and any Holder in
any  Collateral,  including,  but not limited to, the existence,  perfection and
priority  of any Lien  thereon,  are not  adversely  affected  by such merger or
consolidation,  (D) as of the effective date of the merger or consolidation  and
after giving effect thereto,  no Default or Event of Default shall exist or have
occurred  and be  continuing,  (E)  upon the  Collateral  Agent's  request,  the
surviving  entity shall  expressly  confirm,  ratify and assume the  obligations
under this Note, the Other Notes and the Security Documents in writing,  in form
and substance satisfactory to the Collateral Agent, and (F) the Collateral Agent
shall have  received,  true,  correct  and  complete

                                       24
<PAGE>

copies of all agreements,  documents and instruments  relating to such merger or
consolidation, including, but not limited to, the certificate or certificates of
merger  to be filed  with  each  appropriate  Secretary  of State or  equivalent
Governmental  Authority  in the  applicable  jurisdiction  (with a copy as filed
promptly  after such filing),  (x) the Company or any  Subsidiary may merge with
and into or consolidate with another Person pursuant to a Permitted Acquisition;
provided  that (A) the  other  party to such  merger or  consolidation  shall be
organized  under the laws of a jurisdiction,  and the surviving  entity shall be
organized under the laws of a  jurisdiction,  in each case that is acceptable to
the  Collateral  Agent,  or if the Company or any such  Subsidiary  is organized
under the laws of a jurisdiction in the United States, such other party shall be
organized  under  the  laws of a  jurisdiction  in the  United  States,  (B) the
surviving  entity shall  expressly  confirm,  ratify and assume the  obligations
under this Note, the Other Notes and the Security Documents in writing,  in form
and substance  satisfactory to the Collateral Agent, and (C) the Company or such
Subsidiary shall expressly confirm, ratify and assume the obligations under this
Note, the Other Notes and the Security  Documents,  the Intercreditor  Agreement
and each  other  security  document  for the  benefit  of the  Collateral  Agent
delivered pursuant to the Securities  Purchase Agreement to which the Company or
such Guarantor was a party in writing, in form and substance satisfactory to the
Collateral Agent, (y) MLI Acquisition Corp. may merge with and into MLI pursuant
to the Merger and (z) the sale,  merger or  dissolution  involving  FMI  Blocker
permitted under Section 14(h).

                (g)     REPORTING REQUIREMENTS.  Unless the same is available on
EDGAR prior to or on the applicable  due date set forth herein,  until this Note
has been converted, redeemed or otherwise satisfied in accordance with its terms
(other than in respect of contingent  indemnification  obligations in respect of
which no claim has been asserted), the Company shall furnish to the Holder:

                        (i)     within  45  days  after  the  end of each of the
        first three  fiscal  quarters of each fiscal year of the Company and its
        Subsidiaries  (unless the 45th day is not a Business  Day, in which case
        the  period  shall  extend  to  the  next  Business  Day  or  unless  an
        appropriate  extension  is filed with the SEC,  in which case the period
        shall be extended as provided by the applicable  securities  laws for up
        to  five  days)  (A)  consolidated  and  consolidating  balance  sheets,
        consolidated  and  consolidating  statements of operations  and retained
        earnings and consolidated and consolidating  statements of cash flows of
        the Company and its Subsidiaries as at the end of such quarter,  and (B)
        on and after the end of the first  twelve (12) months of the Company and
        its Subsidiaries ending after the Original Issuance Date, for the period
        commencing  at the end of the  immediately  preceding  Fiscal  Year  and
        ending  with the end of such  quarter,  setting  forth  in each  case in
        comparative form the figures for the corresponding date or period of the
        immediately  preceding Fiscal Year setting forth in comparative form any
        projections with respect thereto,  in each case all in reasonable detail
        and  certified  by an  authorized  officer  of  the  Company  as  fairly
        presenting,  in all material  respects,  the  financial  position of the
        Company and its  Subsidiaries  on a consolidated  basis as of the end of
        such quarter and the results of operations and cash flows of the Company
        and its  Subsidiaries  on a  consolidated  basis  for such  quarter,  in
        accordance  with GAAP  applied in a manner  consistent  with that of the
        most  recent  audited  financial  statements  of  the  Company  and  its
        Subsidiaries  furnished  to  the  Holder,  subject  to  the  absence  of
        footnotes and normal year-end adjustments;

                                       25
<PAGE>

                        (ii)    within 90 days after the end of each Fiscal Year
        of the  Company  and its  Subsidiaries  (unless  the  90th  day is not a
        Business Day, in which case the period shall extend to the next Business
        Day or unless an  appropriate  extension is filed with the SEC, in which
        case  the  period  shall  be  extended  as  provided  by the  applicable
        securities  laws  for up to 15  days),  consolidated  and  consolidating
        balance sheets,  consolidated and consolidating statements of operations
        and retained earnings and consolidated and  consolidating  statements of
        cash flows of the  Company  and its  Subsidiaries  as at the end of such
        Fiscal  Year,  and on and after the end of the first  Fiscal Year of the
        Company and its  Subsidiaries  ending after the Original  Issuance Date,
        setting forth in each case in comparative form the corresponding figures
        for the immediately  preceding  Fiscal Year and for any projections with
        respect  thereto  previously  provided to the Holder,  all in reasonable
        detail and prepared in accordance with GAAP, and accompanied by a report
        and an  unqualified  opinion,  prepared  in  accordance  with  generally
        accepted auditing standards, of independent certified public accountants
        of nationally recognized standing selected by the Company (which opinion
        shall  be  without  (A) a  "going  concern"  or  like  qualification  or
        exception,  (B) any  qualification  or exception as to the scope of such
        audit,  or (C) any  qualification  which  relates  to the  treatment  or
        classification  of any item and which,  as a condition to the removal of
        such qualification, would require an adjustment to such item, the effect
        of which  would be to cause any  noncompliance  with the  provisions  of
        Section 14(l);

                        (iii)   simultaneously   with   the   delivery   of  the
        financial  statements  of the Company and its  Subsidiaries  required by
        clauses  (i)  and  (ii) of  this  Section  14(g),  a  certificate  of an
        authorized  officer of the  Company  (A)  stating  that such  authorized
        officer has reviewed the  provisions of the Notes and has made or caused
        to be made under his or her  supervision  a review of the  condition and
        operations of the Company and its Subsidiaries during the period covered
        by such  financial  statements  with a view to  determining  whether the
        Company  and  its  Subsidiaries  were  in  compliance  with  all  of the
        provisions of the Notes at the times such  compliance is required hereby
        and thereby, and that such review has not disclosed, and such authorized
        officer  has no  knowledge  of, the  existence  during such period of an
        Event of Default  or, if an Event of  Default  existed,  describing  the
        nature and period of existence  thereof and the action which the Company
        and its Subsidiaries  propose to take or have taken with respect thereto
        and (B) attaching a schedule  showing the  calculations of the financial
        covenants set forth in Section 14(l);

                        (iv)    Intentionally Omitted;

                        (v)     within four (4) Business  Days after  submission
        to any Governmental  Authority,  all material  documents and information
        furnished to such Governmental Authority in connection with any material
        investigation  of  the  Company  or any  Guarantor  other  than  routine
        inquiries by such Governmental Authority;

                        (vi)    within  four (4)  Business  Days  after  Company
        and/or Guarantor(s)  obtain knowledge of any Default,  the occurrence of
        any Event of Default or the occurrence of any event or development  that
        could  reasonably  be expected to have a Material  Adverse  Effect,  the
        written statement of an authorized  officer of the Company setting forth
        the  details  of such  Default,  Event  of  Default  or  other  event or
        development

                                       26
<PAGE>

        that could  reasonably be expected to have a Material Adverse Effect and
        the action which the Company or any of its Subsidiaries proposes to take
        in respect thereof;

                        (vii)   within  four (4)  Business  Days of  receipt  by
        Company,  notice of each action,  suit or proceeding before any court or
        other Governmental  Authority or other regulatory body or any arbitrator
        which, if adversely  determined,  could reasonably be expected to have a
        Material Adverse Effect;

                        (viii)  within  four (4)  Business  Days of  receipt  or
        delivery  thereof by Company or any of its  Subsidiaries,  all  material
        notices,  certificates  and financial  statements  delivered to or to be
        delivered by the Company or any of its  Subsidiaries  under the terms of
        the Acquisition Documents;

                        (ix)    within four (4)  Business  Days after so sending
        or  filing,  copies  of  all  statements,  reports  and  other  material
        information  the  Company or any  Subsidiary  sends to or files with any
        national (domestic or foreign) securities exchange;

                        (x)     within four (4) Business  Days after  receipt by
        Company or any Guarantor,  copies of all material financial reports,  if
        any,  submitted  to the  Company or any  Guarantor  by its  auditors  in
        connection with any annual or interim audit of the books thereof; and

                        (xi)    within  four (4)  Business  Days of  delivery of
        such  information,  such other  information  concerning the condition or
        operations,  financial or otherwise,  of the Company or any Guarantor as
        the Holder may from time to time reasonably request;  provided,  that if
        such  information  is  reasonably   determined  by  the  Company  to  be
        competitively sensitive and to be material, non-public information, then
        the Company  need not  disclose  such  information  unless  Holder first
        enters  into a  reasonable  confidentiality  agreement  relating to such
        information.

                (h)     PRESERVATION OF EXISTENCE, ETC. Until this Note has been
converted,  redeemed or otherwise  satisfied in accordance with its terms (other
than in respect of contingent indemnification obligations in respect of which no
claim has been  asserted),  the Company shall  maintain and preserve,  and cause
each of its  Subsidiaries  to maintain and preserve,  its existence,  rights and
privileges,  and become or remain,  and cause each of its Subsidiaries to become
or remain, duly qualified and in good standing in each jurisdiction in which the
character of the properties owned or leased by it or in which the transaction of
its business makes such qualification necessary, where the failure to qualify or
be in good  standing  could  reasonably  be expected to have a Material  Adverse
Effect. Notwithstanding anything to the contrary set forth in this Note, without
the  consent of any  Holder,  a  Subsidiary  may be  dissolved  by merger into a
Guarantor or the Company,  or, if not a Guarantor,  dissolved,  and FMI Blocker,
Inc. may be dissolved, by merger or otherwise, or sold; provided that all assets
thereof shall  theretofore  have been  transferred  to the Company and/or one or
more other Guarantors.

                (i)     KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Until this Note
has been converted, redeemed or otherwise satisfied in accordance with its terms
(other than in respect of contingent  indemnification  obligations in respect of
which no claim has been

                                       27
<PAGE>

asserted),  the Company shall keep, and cause each of its  Subsidiaries to keep,
adequate records and books of account,  with complete entries made to permit the
preparation of financial statements in accordance with GAAP.

                (j)     FISCAL  YEAR.   Until  this  Note  has  been  converted,
redeemed or  otherwise  satisfied  in  accordance  with its terms (other than in
respect of contingent  indemnification  obligations in respect of which no claim
has been  asserted),  the Company shall cause the Fiscal Year of the Company and
its Subsidiaries to end on or about December 31 of each calendar year unless the
agent under the Senior Loan  Agreement  consents to a change in such Fiscal Year
(and appropriate related changes to the Senior Loan Agreement), which change, if
so approved, shall automatically become applicable to the Notes.

                (k)     INTENTIONALLY OMITTED.

                (l)     FINANCIAL COVENANTS. Until this Note has been converted,
redeemed or  otherwise  satisfied  in  accordance  with its terms (other than in
respect of contingent  indemnification  obligations in respect of which no claim
has been asserted),  neither the Company nor any of the Guarantors shall, unless
the Required Holders shall otherwise consent in writing:

                        (i)     TOTAL  LEVERAGE  RATIO.  Permit the ratio of Net
        Senior  Indebtedness  to  Consolidated  EBITDA  of the  Company  and its
        Subsidiaries for the twelve (12)  consecutive  months ending on the last
        day of the month set forth on  SCHEDULE  14(l)(i)  hereto to be  greater
        than the  applicable  ratio for such  date set  forth on such  Schedule;
        provided  that for the purposes of  calculating  the ratio of Net Senior
        Indebtedness to Consolidated  EBITDA under this Section 14(l)(i) for the
        three (3)  consecutive  months  ending on June 30, 2006,  September  30,
        2006,  December  31, 2006 and March 31,  2007,  EBITDA shall be equal to
        $2,915,000,  $5,217,000,  $4,084,225 and ($565,000),  respectively. With
        respect to all  measurement  periods ending after December 31, 2007, the
        Holder and the  Company  acknowledge  and agree that the Total  Leverage
        Ratio  levels  set forth in  Schedule  14(l)(i)  hereto  shall be set at
        levels  identical  to the  levels  set  forth in  Section  6.03(a)  (and
        Schedule 6.03(a)) of the Senior Loan Agreement for the same time periods
        (after taking into account the manner in which such ratio is calculated)
        minus or plus (as  applicable) a ten percent (10%) variance to allow for
        a cushion (to Company's benefit) with respect thereto provided that such
        financial covenant shall only be tested quarterly;

                        (ii)    CONSOLIDATED EBITDA.  Permit Consolidated EBITDA
        of the Company and its  Subsidiaries  for the periods ending on the last
        day of the month set forth on SCHEDULE  14(l)(ii) hereto to be less than
        the applicable  amount for such period set forth on such Schedule.  With
        respect to all  measurement  periods ending after December 31, 2007, the
        Holder and the Company  acknowledge and agree that the EBITDA levels set
        forth in Schedule  14(l)(ii)  hereto shall be set at levels identical to
        the levels set forth in Section  6.03(b) (and  Schedule  6.03(b)) of the
        Senior  Loan  Agreement  for the same time  periods  (after  taking into
        account  the  manner in which  EBITDA is  calculated)  minus or plus (as
        applicable)  a ten  percent  (10%)  variance  to allow for a cushion (to
        Company's

                                       28
<PAGE>

        benefit)  with respect  thereto  provided that such  financial  covenant
        shall only be tested quarterly; and

                        (iii)   FIXED CHARGE  COVERAGE  RATIO.  Permit the Fixed
        Charge Coverage Ratio of the Company and its Subsidiaries for the period
        ending on the last day of the month  set  forth on  SCHEDULE  14(l)(iii)
        hereto to be less than the applicable ratio for such period set forth on
        such  Schedule.  With respect to the periods  ending after  December 31,
        2007,  the Holder and the Company  acknowledge  and agree that the Fixed
        Charge  Coverage  Ratio levels set forth in Schedule  14(l)(iii)  hereto
        shall be set at levels  identical  to the  levels  set forth in  Section
        6.03(c) (and Schedule 6.03(c)) of the Senior Loan Agreement for the same
        time periods  (after  taking into account the manner in which such ratio
        is  calculated)  minus  or plus  (as  applicable)  a ten  percent  (10%)
        variance  to allow for a cushion (to  Company's  benefit)  with  respect
        thereto  provided  that such  financial  covenant  shall  only be tested
        quarterly.

        If the Senior Loans  outstanding  on the date hereof are  refinanced  or
        otherwise  replaced,  the financial  covenants set forth herein shall be
        identical to the  financial  covenants  set forth in the loan  documents
        that evidence the Senior Loans that replace the Senior Loans outstanding
        on the date hereof  minus or plus (as  applicable)  a ten percent  (10%)
        variance  to allow for a cushion (to  Company's  benefit)  with  respect
        thereto   provided  that  such   financial   covenants  are   reasonably
        satisfactory to the Required  Holders.  If such financial  covenants are
        not reasonably  satisfactory to the Required Holders, the Holder and the
        Company  agree to use  good  faith  best  efforts  to set new  financial
        covenants  (identical to the financial  covenants set forth in the Other
        Notes) reasonably acceptable to the Required Holders and the Company. If
        after good faith best efforts,  the Required Holders and the Company are
        unable to agree with respect to setting the level of such new  financial
        covenants,   the   financial   covenants   set  forth  herein  shall  be
        automatically  reset to the  financial  covenants set forth in Schedules
        14(l)(i),  14(l)(ii) and  14(l)(iii) of the Notes in effect prior to the
        date hereof.

                (m)     DISPOSITIONS.   Until  this  Note  has  been  converted,
redeemed or  otherwise  satisfied  in  accordance  with its terms (other than in
respect of contingent  indemnification  obligations in respect of which no claim
has been  asserted),  neither the Company nor any Guarantor  shall,  directly or
indirectly  make  any  Disposition  or  enter  into  any  agreement  to make any
Disposition, except:

                        (i)     the sale by the Company or any Subsidiary of any
        inventory in the ordinary course of business;

                        (ii)    the sale or other  disposition by the Company or
        any Subsidiary of obsolete or  discontinued  inventory,  and the sale or
        other  disposition  by the  Company or any  Subsidiary  of  obsolete  or
        worn-out  equipment,  in each case, in the ordinary  course of business,
        whether now owned or hereafter  acquired,  provided  that the  aggregate
        amount of any such  assets  sold in any  Fiscal  Year  shall not  exceed
        $1,000,000;

                                       29
<PAGE>

                        (iii)   in addition to the other sales  permitted  under
        this Section 14(m),  the sale or other  disposition of equipment or Real
        Property;  provided that, each of the following  conditions is satisfied
        in respect  thereof:  (A) such proceeds as to any individual sale do not
        exceed  $250,000;  (B) as to an asset sale of Real Property or equipment
        of the  Company or any  Subsidiary,  such  proceeds  from all such asset
        sales in respect of assets of the Company and such Subsidiary during any
        year shall not, after giving effect to such asset sale, in the aggregate
        exceed  $1,000,000;  (C) the  proceeds  are used to purchase  other Real
        Property or  equipment  that will be free and clear of any Lien,  except
        for  Permitted  Liens;  (D) such new Real  Property or  equipment is and
        continues  to be subject to the second  priority  perfected  Lien of the
        Collateral  Agent  (subject to  applicable  Permitted  Liens) unless the
        Person  disposing of such Real Property or equipment is not a Guarantor;
        (E) such new Real Property or equipment is purchased  within one hundred
        eighty (180) days after the sale or other  disposition  of the equipment
        or Real Property  that was subject to such asset sale;  and (F) as to an
        asset  sale  of  Real  Property  or  equipment  of the  Company  or such
        Guarantor, until such time as the proceeds are so used and so long as no
        Event of Default exists or has occurred and is continuing, such proceeds
        will be held in a deposit account or investment  account that is subject
        to a control  agreement  for the benefit of  Collateral  Agent and agent
        under Senior Loan  Agreement or are otherwise  subject to the Collateral
        Agent's perfected  security interest and only released from such account
        for the  payment  of the  purchase  price of such new Real  Property  or
        equipment;

                        (iv)    the sale, assignment, lease or sublease, license
        or other disposition of property by the Company or any Subsidiary to the
        Company or any Guarantor;  provided that,  such property is subject to a
        perfected,  second  priority  Lien  in  favor  of the  Collateral  Agent
        (subject to Permitted Liens);

                        (v)     any  disposition  permitted  under Section 14(f)
        hereof;

                        (vi)    the   non-exclusive   license  of   Intellectual
        Property  (as  defined  in the  Securities  Purchase  Agreement)  rights
        (including,  without limitation,  licenses) granted to a customer of the
        Company  or  any   Subsidiary  in  the  ordinary   course  of  business,
        substantially  consistent  with past practice and not interfering in any
        material  respect with the conduct of the business of the Company or any
        Subsidiary;

                        (vii)   any lease or sub-lease  of Real  Property to any
        Person  other than the  Company or a  Guarantor  on terms and subject to
        conditions  consistent  with the  market  in  respect  of such  lease or
        sub-lease at such time;

                        (viii)  an asset sale of equipment or Real Property that
        is part of the consideration for a Permitted Acquisition and each of the
        conditions to such Permitted  Acquisition are satisfied,  provided that,
        the aggregate  value of all such  equipment or Real Property  subject to
        all of such asset sales,  shall not exceed $1,000,000 and as of the date
        thereof and after giving effect  thereto on a pro forma basis,  no Event
        of Default shall exist or have occurred and be continuing;

                                       30
<PAGE>

                        (ix)    issuances  and sales of Equity  Interests to the
        extent  permitted  under Section 6.02(l) of the Senior Loan Agreement as
        in effect on the date hereof;

                        (x)     any Permitted Lien;

                        (xi)    an asset sale or other  disposition of assets as
        a  contribution  to a Subsidiary  or Affiliate as an  investment in such
        Subsidiary or Affiliate to the extent  permitted under Section  14(t)(v)
        hereof;

                        (xii)   the   transfer   of  funds  as  a   payment   on
        Indebtedness or other  obligations owing by or to the Company and/or any
        Subsidiary to the extent not otherwise prohibited hereunder;

                        (xiii)  investments and capital  contributions  in or to
        the Company and/or any of its  Subsidiaries to the extent not prohibited
        hereunder;

                        (xiv)   Subject to the prior  approval  of the  Required
        Holders:

                                (A)     Disposition  of  non-strategic  business
                assets; or

                                (B)     Dispositions  by  the  Company  and  its
                Subsidiaries not otherwise permitted under this Section 14(m).

                (n)     FEDERAL  RESERVE  REGULATIONS.  Until this Note has been
converted,  redeemed or otherwise  satisfied in accordance with its terms (other
than in respect of contingent indemnification obligations in respect of which no
claim has been asserted),  neither the Company nor any of its Subsidiaries shall
permit any of the Indebtedness under or the proceeds of this Note to be used for
any  purpose  that would cause such  Indebtedness  to be a margin loan under the
provisions of Regulation T, U or X of the Federal Reserve Board.

                (o)     INVESTMENT COMPANY ACT OF 1940. Until this Note has been
converted,  redeemed or otherwise  satisfied in accordance with its terms (other
than in respect of contingent indemnification obligations in respect of which no
claim has been asserted),  neither the Company nor any of its Subsidiaries shall
engage in any business,  enter into any transaction,  use any securities or take
any other action,  or permit any of its Subsidiaries to do any of the foregoing,
that would cause it to become subject to the  registration  requirements  of the
Investment  Company Act of 1940, as amended,  by virtue of being an  "investment
company" or a company "controlled" by an "investment company" not entitled to an
exemption within the meaning of such Act.

                (p)     PROPERTIES. Until this Note has been converted, redeemed
or otherwise  satisfied in  accordance  with its terms (other than in respect of
contingent  indemnification  obligations  in  respect of which no claim has been
asserted),  neither  the Company nor any of its  Subsidiaries  shall  permit any
property of the Company or any  Guarantor to become a fixture in respect of real
property  or to become an  accession  in respect of other  personal  property in
respect of which real or personal  property the Collateral Agent does not have a
valid and perfected second priority Lien (subject to the Permitted Liens).

                                       31
<PAGE>

                (q)     AMENDMENT TO ACQUISITION DOCUMENTS.  Until this Note has
been  converted,  redeemed or otherwise  satisfied in accordance  with its terms
(other than in respect of contingent  indemnification  obligations in respect of
which  no  claim  has  been  asserted),  neither  the  Company  nor  any  of its
Subsidiaries shall amend, modify,  change, agree to any amendment,  modification
or other change to (or make any payment  consistent  with any amendment or other
change to) or waive any of its rights under any of the Acquisition Documents.

                (r)     NO VIOLATION OF ANTI-TERRORISM LAWS. Until this Note has
been  converted,  redeemed or otherwise  satisfied in accordance  with its terms
(other than in respect of contingent  indemnification  obligations in respect of
which no claim has been  asserted),  the Company and  Guarantors  shall not, and
shall not permit any  Subsidiary  to: (i)  violate any of the  prohibitions  set
forth in the Anti-Terrorism  Laws applicable to any of them or the business that
they conduct,  (ii) require the  Collateral  Agent or Holders to take any action
that would  cause the  Collateral  Agent or Holders  to be in  violation  of the
prohibitions set forth in the Anti-Terrorism  Laws, it being understood that the
Collateral  Agent or any Holder  can refuse to honor any such  request or demand
otherwise validly made by a the Company under this Note, (iii) knowingly conduct
any business or engage in making or receiving any  contribution of funds,  goods
or services to or for the benefit of any  Designated  Person or any other Person
identified  in any List,  (iv)  knowingly  deal in, or  otherwise  engage in any
transaction  relating to, any property or interests in property blocked pursuant
to any  Anti-Terrorism  Law, (v) repay the Notes with any funds derived from any
unlawful  activity  with the  result  that the  making of the Notes  would be in
violation  of law,  or (vi)  knowingly  engage in or  conspire  to engage in any
transaction that evades or avoids, or has the purpose of evading or avoiding, or
attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law
(and the Company shall deliver to the Holder any certification or other evidence
requested  from  time  to  time  by the  Holder  in its  reasonable  discretion,
confirming compliance with this Section 14(r).

                (s)     TYPE OF  BUSINESS.  Until this Note has been  converted,
redeemed or  otherwise  satisfied  in  accordance  with its terms (other than in
respect of contingent  indemnification  obligations in respect of which no claim
has been  asserted),  the  Company  shall  not,  and shall not permit any of its
Subsidiaries  to,  engage in any  business,  other  than the  businesses  of the
Company,  the  Guarantors  and/or such  Subsidiary  on the Closing  Date and any
business reasonably related, similar, ancillary or complementary to the business
in which the Company,  the Guarantors or the  Subsidiaries of the Company or the
Guarantors were engaged on the Closing Date;

                (t)     LOANS,  ADVANCES  AND  INVESTMENTS.  Until this Note has
been  converted,  redeemed or otherwise  satisfied in accordance  with its terms
(other than in respect of contingent  indemnification  obligations in respect of
which no claim has been  asserted),  the Company shall not, and shall not permit
any of its Subsidiaries to, make,  directly or indirectly,  any loans or advance
money or property to any person, or invest in (by capital contribution, dividend
or otherwise) or purchase or repurchase the Equity  Interest or  Indebtedness or
all or a  substantial  part of the assets or property of any person,  or form or
acquire any  Subsidiaries,  or agree to do any of the  foregoing,  or permit any
Subsidiary to do any of the foregoing, except:

                        (i)     the Acquisitions contemplated by the Acquisition
Documents;

                                       32
<PAGE>

                        (ii)    loans  existing  on the date hereof as set forth
on SCHEDULE 14(T) hereto,  but not any increase in the principal  amount thereof
as set forth in such  Schedule or any other  modification  of the terms  thereof
which is less favorable to any of the Company, the Guarantors,  the Agent or the
Holders than the existing terms;

                        (iii)   any  investment in cash or Cash  Equivalents  so
long as the deposit account,  investment  account or other account in which such
cash or Cash  Equivalents  are held is  subject to a control  agreement  for the
benefit of the  Collateral  Agent and agent under Senior Loan  Agreement (or the
Collateral Agent otherwise has a perfected  security  interest  therein) and the
Collateral  Agent has a Lien in such account and cash or Cash Equivalents to the
extent required under the Security Agreement;

                        (iv)    loans,    capital    contributions    or   other
investments by the Company or a Guarantor to the Company or another Guarantor on
or after the Original  Issuance Date;  provided that, as of the date of any such
loan, capital  contribution or other investment and after giving effect thereto,
the  Company or  Guarantor  making  such  loan,  capital  contribution  or other
investment shall be Solvent;

                        (v)     loans,    capital    contributions    or   other
investments by the Company or a Guarantor to a Subsidiary  that is not organized
under the laws of a jurisdiction in the United States of America or otherwise to
any  Subsidiary or Affiliate  that is not a Guarantor;  provided  that,  (A) the
aggregate amount of all such loans at any time outstanding and all payments made
for such capital contributions or other investments shall not, in the aggregate,
exceed $12,000,000; (B) upon Collateral Agent's request, any obligations arising
in  connection  with loans by the  Company or a  Guarantor  to a  Subsidiary  or
Affiliate that is not a Guarantor or the Company shall be secured by a valid and
enforceable  perfected security interest,  lien and fixed and floating charge on
the assets of such  Subsidiary  or Affiliate  pursuant to agreements in form and
substance  satisfactory to the Collateral  Agent and the Collateral  Agent shall
have  received all of such  agreements  as duly  executed and  delivered by such
parties,  together with such related  agreements and documents as the Collateral
Agent may require; and (C) as of the date of any such loan, capital contribution
or other investment,  and after giving effect thereto,  on a pro forma basis, no
Default or Event of Default shall exist or have occurred and be continuing;

                        (vi)    Permitted   Acquisitions   including,    without
limitation the planned  purchase of the Equity  Interests of SeaMaster  China by
Sea Master Hong Kong or another  Affiliate of the Company and the formation of a
Subsidiary in connection therewith;

                        (vii)   dividends,  redemptions,  repurchases  and other
distributions permitted hereunder;

                        (viii)  Company and its Subsidiaries  shall be permitted
to form  Subsidiaries  provided  that Company and its  Subsidiaries  comply with
Section 14(w) in connection therewith.

                (u)     TRANSACTIONS  WITH AFFILIATES.  Until this Note has been
converted,  redeemed or otherwise  satisfied in accordance with its terms (other
than in respect of contingent indemnification obligations in respect of which no
claim has been asserted), the Company shall

                                       33
<PAGE>

not, and shall not permit any of its Subsidiaries to, enter into, renew,  extend
or be a party to, any transaction or series of related transactions  (including,
without limitation,  the purchase, sale, lease, transfer or exchange of property
or  assets  of any kind or the  rendering  of  services  of any  kind)  with any
Affiliate, except:

                        (i)     to the extent  necessary  or  desirable  for the
prudent  operation of its business  and for fair  consideration  and on terms no
less  favorable  to it than would be  obtainable  in a  comparable  arm's length
transaction with a Person that is not an Affiliate  thereof;  provided that, (A)
if each  party to such  transaction  is the  Company  or a  Guarantor,  then the
consideration and terms may be less favorable to one of them to the extent it is
more  favorable  to the other,  provided  that such other  entity is Solvent (as
defined in the Securities  Purchase Agreement) at the time of the transaction or
(B) if a party to such  transaction  is the Company or a Guarantor and the other
is a  Subsidiary  or  Affiliate  that is not the  Company  or a  Guarantor,  the
consideration and terms may be less favorable to such Subsidiary or Affiliate;

                        (ii)    transactions  expressly  permitted  by  Sections
14(d),  14(e)  (other  than  clause  (i)(B)  thereof  unless,  with  respect  to
transactions among Affiliates,  the conditions set forth in Section 14(u)(i) are
satisfied),  14(f)  (other  than  clause (y)  thereof  unless,  with  respect to
transactions among Affiliates,  the conditions set forth in Section 14(u)(i) are
satisfied), 14(m) and 14(t); or

                        (iii)   loans  existing  on the date hereof set forth on
SCHEDULE 14(u) hereto,  but not any increase in the principal  amount thereof as
set forth in such Schedule or any other modification of the terms thereof.

                (v)     ENVIRONMENTAL.  Until  this  Note  has  been  converted,
redeemed or  otherwise  satisfied  in  accordance  with its terms (other than in
respect of contingent  indemnification  obligations in respect of which no claim
has been  asserted),  the  Company  shall  not,  and shall not permit any of its
Subsidiaries  to,  permit the use,  handling,  generation,  storage,  treatment,
release or  disposal  of  Hazardous  Materials  (as  defined  in the  Securities
Purchase  Agreement)  at  any  property  owned  or  leased  by it or  any of its
Subsidiaries,  except in compliance with  Environmental  Laws (as defined in the
Securities  Purchase  Agreement) and so long as such use, handling,  generation,
storage,  treatment,  release  or  disposal  of  Hazardous  Materials  could not
reasonable be expected to result in a Material Adverse Effect.

                (w)     FURTHER ASSURANCES.  Until this Note has been converted,
redeemed or  otherwise  satisfied  in  accordance  with its terms (other than in
respect of contingent  indemnification  obligations in respect of which no claim
has been asserted),  (i) the Company shall,  and shall cause each Subsidiary not
in  existence  on the  Closing  Date  (other  than  in  respect  of any  Foreign
Subsidiary)  to execute and deliver to the  Collateral  Agent,  each in form and
substance satisfactory to the Collateral Agent, promptly and in any event within
ten (10) days after the formation, acquisition or change in status thereof (A) a
Guaranty guaranteeing the obligations under the Notes, (B) a Security Agreement,
(C) if such Subsidiary has any  Subsidiaries,  a Pledge Agreement  together with
(1) if certificated, certificates evidencing (aa) all of the Equity Interests of
any Person organized under the laws of the United States of America and owned by
such Subsidiary or (bb) sixty-five  (65%) percent of the Equity Interests of any
person  organized under the laws of a jurisdiction  other than the United States
of America and

                                       34
<PAGE>

owned by such  Subsidiary,  provided that such  certificates may be delivered to
the agent under the Senior Loan Documents if the Permitted  Senior  Indebtedness
has not been  Paid in Full (as  defined  in the  Intercreditor  Agreement),  (2)
undated stock powers or other appropriate  instruments of assignment executed in
blank with signature guaranteed executed in blank with signature guaranteed, and
(3) such opinion of counsel as the Collateral Agent may reasonably request,  (D)
to the extent that such  Subsidiary  has any interest in real property  having a
Current  Value in excess of $250,000 in the case of a fee  interest or requiring
the payment of annual rent exceeding in the aggregate  $250,000 in the case of a
leasehold interest, upon the request of the Collateral Agent or at the direction
of Required  Holder,  each in form and substance  satisfactory to the Collateral
Agent: (1) Mortgages in respect of such real property and related assets located
at the real property,  each duly executed by such Person and in recordable form;
(2) evidence of the recording of such Mortgages in such office or offices as may
be necessary or, in the opinion of the Collateral Agent, desirable to create and
perfect a valid and  enforceable  second  priority  Lien  (subject to  Permitted
Liens) on the Real Property and related assets intended to be covered thereby or
to otherwise protect the rights of the Collateral Agent and Holders  thereunder,
(3) a Title Insurance Policy,  (4) a survey of such Real Property,  certified to
the  Collateral  Agent  and to the  issuer of the  Title  Insurance  Policy by a
licensed professional surveyor reasonably  satisfactory to the Collateral Agent,
(5) Phase I  environmental  site  assessments  in respect of such real property,
certified to the Collateral  Agent by a company  satisfactory  to the Collateral
Agent,  and (6) such other  documents or instruments  (including  guarantees and
opinions of counsel) as the  Collateral  Agent may  require,  and (E) such other
agreements, instruments, approvals, legal opinions or other documents reasonably
requested by the  Collateral  Agent in order to create,  perfect,  establish the
second priority  (subject to Permitted  Liens) of or otherwise  protect any Lien
purported  to be covered by any such  Security  Agreement,  Pledge  Agreement or
Mortgage or  otherwise  to effect the intent that such  Subsidiary  shall become
bound by all of the terms, covenants and agreements contained in the Transaction
Documents  and that all  property  and assets of such  Subsidiary  shall  become
Collateral for the obligations  under the Notes,  except as the Collateral Agent
may otherwise agree; and

                        (ii)    The Company shall,  or shall cause each owner of
the Equity Interests of any such Subsidiary to, execute and deliver promptly and
in any event within three (3) days after the  formation or  acquisition  of such
Subsidiary  after the date  hereof,  a Pledge  Agreement,  together  with (A) if
certificated,  certificates  evidencing  (1) all of the Equity  Interests of any
such  Subsidiary's  Subsidiary  organized under the laws of the United States of
America,  or (2)  sixty-five  (65%) percent of the Equity  Interests of any such
Subsidiary's  Subsidiary  organized under the laws of a jurisdiction  other than
the United  States of America,  (B) undated  stock  powers or other  appropriate
instruments of assignment executed in blank with signature guaranteed,  (C) such
opinion of counsel as the Collateral  Agent may reasonably  request and (D) such
other  agreements,  instruments,  approvals,  legal opinions or other  documents
requested by the Collateral Agent.

                (x)     COMPLIANCE   WITH   LAWS.   Until  this  Note  has  been
converted,  redeemed or otherwise  satisfied in accordance with its terms (other
than in respect of contingent indemnification obligations in respect of which no
claim has been  asserted),  the  Company  shall  comply,  and cause  each of its
Subsidiaries to comply, with all applicable laws, rules, regulations,  judgments
and orders (including,  without limitation, all Environmental Laws) in each case

                                       35
<PAGE>

material to the conduct of its business and operations, except where the failure
to so comply could not reasonably be expected to have a Material Adverse Effect.

        (15)    PARTICIPATION.  The Holder, as the holder of this Note, shall be
entitled to receive such dividends paid and distributions made to the holders of
Common  Stock to the same extent as if the Holder had  converted  this Note into
Common  Stock  (without  regard  to any  limitations  on  conversion  herein  or
elsewhere)  and had held such shares of Common Stock on the record date for such
dividends and distributions. Payments under the preceding sentence shall be made
concurrently with the dividend or distribution to the holders of Common Stock.

        (16)    VOTE TO  ISSUE,  OR  CHANGE  THE  TERMS  OF,  NOTES.  Except  as
otherwise provided herein, no amendment, modification or waiver of any provision
of a Note or any of the other Transaction Documents, or consent to any departure
by any Obligor or Holder  therefrom,  shall in any event be effective unless the
same shall be in writing and signed by the  Required  Holders and the  Obligors;
provided that no amendment, modification, termination or waiver shall, unless in
writing and signed by each holder of Notes directly affected thereby, (i) reduce
the Principal and, provided, further, that no amendment,  modification or waiver
shall, unless in writing and signed by all Holders, (x) change the definition of
"Required  Holders"  or the  percentage  of Holders  required to take any action
hereunder;  (y)  modify  this  Section  16 or (z)  consent  to  the  assignment,
delegation  or other  transfer by the Company or any other Obligor of any of its
rights and obligations under any Transaction Document, and provided further that
to  reduce  the  interest  rate or any fees or  extend  the time of  payment  of
Principal, interest or any fees, or waive any default, event of default or Event
of Default, the consent of each holder of the Notes directly affected thereby is
required.

        (17)    TRANSFER.   This  Note  may  be  offered,   sold,   assigned  or
transferred  by the Holder  without the consent of the Company,  subject only to
the provisions of Section 2(f) of the  Securities  Purchase  Agreement  provided
that Holder  and/or  assignee  give Company  written  notice of such  assignment
within ten (10) Business Days after the consummation of such assignment.

        (18)    REISSUANCE OF THIS NOTE.

                (a)     TRANSFER. If this Note is to be transferred,  the Holder
shall  surrender this Note to the Company,  whereupon the Company will forthwith
issue and deliver  upon the order of the Holder a new Note (in  accordance  with
Section  18(d)),  registered  as  the  Holder  may  request,   representing  the
outstanding  Principal  being  transferred  by the Holder  and, if less then the
entire  outstanding  Principal is being  transferred,  a new Note (in accordance
with Section 18(d)) to the Holder  representing  the  outstanding  Principal not
being transferred.  The Holder and any permitted assignee, by acceptance of this
Note,  acknowledge  and  agree  that,  by reason of the  provisions  of  Section
3(c)(iii)  following  conversion or redemption of any portion of this Note,  the
outstanding  Principal  represented  by this Note may be less than the Principal
stated on the face of this Note.

                (b)     LOST,  STOLEN OR  MUTILATED  NOTE.  Upon  receipt by the
Company of evidence  reasonably  satisfactory to the Company of the loss, theft,
destruction  or  mutilation  of

                                       36
<PAGE>

this  Note,  and,  in  the  case  of  loss,   theft  or   destruction,   of  any
indemnification  undertaking by the Holder to the Company in customary form and,
in the case of  mutilation,  upon surrender and  cancellation  of this Note, the
Company shall execute and deliver to the Holder a new Note (in  accordance  with
Section 18(d)) representing the outstanding Principal.

                (c)     NOTE EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Note
is exchangeable, upon the surrender hereof by the Holder at the principal office
of the Company, for a new Note or Notes (in accordance with Section 18(d) and in
principal  amounts  of at  least  $1,000)  representing  in  the  aggregate  the
outstanding  Principal of this Note,  and each such new Note will represent such
portion of such outstanding Principal as is designated by the Holder at the time
of such surrender.

                (d)     ISSUANCE OF NEW NOTES.  Whenever the Company is required
to issue a new Note pursuant to the terms of this Note,  such new Note (i) shall
be of like tenor with this Note, (ii) shall represent,  as indicated on the face
of such new Note, the Principal  remaining  outstanding (or in the case of a new
Note being issued  pursuant to Section  18(a) or Section  18(c),  the  principal
designated by the Holder which,  when added to the principal  represented by the
other new Notes issued in  connection  with such  issuance,  does not exceed the
Principal  remaining  outstanding  under  this  Note  immediately  prior to such
issuance of new Notes), (iii) shall have an original issuance date, as indicated
on the face of such new Note, which is the same as the Original Issuance Date of
this Note,  (iv) shall have the same rights and conditions as this Note, and (v)
shall  represent  accrued and unpaid  Interest and Late Charges on the Principal
and Interest of this Note, if any, from the Interest Commencement Date.

        (19)    REMEDIES,  CHARACTERIZATIONS,  OTHER  OBLIGATIONS,  BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in
addition to all other  remedies  available  under this Note and any of the other
Transaction  Documents  at law or in  equity  (including  a decree  of  specific
performance and/or other injunctive relief),  and nothing herein shall limit the
Holder's right to pursue actual and consequential damages for any failure by the
Company to comply with the terms of this Note. Amounts set forth or provided for
herein in  respect of  payments,  conversion  and the like (and the  computation
thereof) shall be the amounts to be received by the Holder and shall not, except
as expressly  provided herein or in the Intercreditor  Agreement,  be subject to
any other  obligation of the Company (or the performance  thereof).  The Company
acknowledges  that  a  breach  by it of its  obligations  hereunder  will  cause
irreparable  harm to the Holder  and that the remedy at law for any such  breach
may be inadequate.  The Company  therefore agrees that, in the event of any such
breach or threatened  breach,  the Holder shall be entitled,  in addition to all
other available remedies, to an injunction  restraining any breach,  without the
necessity of showing  economic loss and without any bond or other security being
required.

        (20)    PAYMENT OF COLLECTION,  ENFORCEMENT AND OTHER COSTS. If (a) this
Note is placed in the hands of an attorney for  collection or  enforcement or is
collected or enforced through any legal proceeding or the Holder otherwise takes
action to collect  amounts due under this Note or to enforce the  provisions  of
this Note or (b) there occurs any  bankruptcy,  reorganization,  receivership of
the  Company  or other  proceedings  affecting  Company  creditors'  rights  and
involving a claim under this Note,  then the  Company  shall pay the  reasonable
costs  incurred by the Holder for such  collection,  enforcement or action or in

                                       37
<PAGE>

connection  with  such   bankruptcy,   reorganization,   receivership  or  other
proceeding,  including,  but not limited to, reasonable attorneys' and financial
advisory fees and disbursements.

        (21)    CONSTRUCTION;  HEADINGS. This Note shall be deemed to be jointly
drafted by the Company and all the Purchasers and shall not be construed against
any person as the drafter hereof.  The headings of this Note are for convenience
of reference and shall not form part of, or affect the  interpretation  of, this
Note.

        (22)    FAILURE OR  INDULGENCE  NOT  WAIVER.  No failure or delay on the
part of the 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 other or further exercise thereof or
of any other right, power or privilege.

        (23)    DISPUTE  RESOLUTION.  In  the  case  of  a  dispute  as  to  the
determination  of the Closing Bid Price,  the Closing Sale Price or the Weighted
Average  Price  or the  arithmetic  calculation  of the  Conversion  Rate or any
Redemption  Price,  the Company  shall  submit the  disputed  determinations  or
arithmetic  calculations  via facsimile within two (2) Business Days of receipt,
or deemed receipt,  of the Conversion Notice or Redemption Notice or other event
giving rise to such  dispute,  as the case may be, to the Holder.  If the Holder
and the  Company  are unable to agree  upon such  determination  or  calculation
within  one  (1)  Business  Day of such  disputed  determination  or  arithmetic
calculation being submitted to the Holder,  then the Company shall, within three
(3) Business  Days submit via facsimile  (a) the disputed  determination  of the
Closing Bid Price,  the Closing Sale Price or the Weighted  Average  Price to an
independent,  reputable  investment bank selected by the Company and approved by
the Holder or (b) the disputed arithmetic  calculation of the Conversion Rate or
any  Redemption  Price to the Company's  independent,  outside  accountant.  The
Company,  at the  Company's  expense,  shall  cause the  investment  bank or the
accountant,  as the case may be, to perform the  determinations  or calculations
and notify  the  Company  and the  Holder of the  results no later than five (5)
Business  Days from the time such  investment  bank or  accountant  receives the
disputed determinations or calculations.  Such investment bank's or accountant's
determination  or  calculation,  as the case may be,  shall be binding  upon all
parties absent demonstrable error.

        (24)    NOTICES; PAYMENTS.

                (a)     NOTICES.  Whenever  notice is required to be given under
this Note,  unless  otherwise  provided  herein,  such notice  shall be given in
accordance with Section 9(f) of the Securities Purchase  Agreement.  The Company
shall  provide the Holder with prompt  written  notice of each of the  following
actions  taken  pursuant  to  this  Note,   including  in  reasonable  detail  a
description of such action and the reason  therefor:  confirmation of receipt of
Conversion  Notice  (as  required  by  Section  3(c)(i));  notice of the  credit
Conversion  Shares  on  DTC  (if  so  credited  pursuant  to  Section  3(c)(i));
confirmation  of number of shares of Common  Stock  outstanding  (as required by
Section 3(d)(i)); delivery of an Event of Default Notice (as required by Section
4(b));  delivery of a Change of Control  Notice (as  required by Section  5(b));
notice of Purchase Rights (whenever such right arises pursuant to Section 6(a));
notice of other Corporate Events (whenever such events,  as set forth in Section
6(b) occur);  notice of adjustment of Conversion Price (whenever such adjustment
is required to be calculated pursuant to Section 7(a)); delivery of the Optional
Redemption  Notice (as required by Section 8(a));  notice of and/or

                                       38
<PAGE>

delivery of Event of Default  Redemption  Price or Change of Control  Redemption
Price (pursuant to Section 12(a));  delivery of an Other  Redemption  Notice (as
required by Section 12(b));  determinations  and/or calculations (as required by
Section  23);  other  notices  required by this  Section 24, and  disclosure  of
material  nonpublic  information  (as  required by Section 29). The Company will
give written  notice to the Holder (i) promptly  following any adjustment of the
Conversion  Price,  setting  forth in reasonable  detail,  and  certifying,  the
calculation  of such  adjustment and (ii) at least twenty (20) days prior to the
date on which the  Company  closes its books or takes a record (A) in respect of
any dividend or  distribution  upon the Common Stock,  (B) in respect of any pro
rata subscription offer to holders of Common Stock or (C) for determining rights
to vote in respect of any Fundamental  Transaction,  dissolution or liquidation,
provided  in each case that such  information  shall be made known to the public
prior to or in conjunction with such notice being provided to the Holder.

                (b)     PAYMENTS.  Whenever any payment of cash is to be made by
the Company to any Person  pursuant to this Note,  such payment shall be made in
lawful money of the United  States of America by a check drawn on the account of
the Company or any payment agent located in the state of New York engaged by the
Company for purposes of making  payments under this Note and the Other Notes and
sent via overnight  courier service to such Person at such address as previously
provided to the Company in writing  (which  address,  in the case of each of the
Purchasers,  shall  initially be as set forth on the Schedule of Buyers attached
to the Securities Purchase  Agreement);  provided that the Holder of Note(s) may
elect to receive a payment of cash via wire  transfer of  immediately  available
funds by  providing  the  Company  with prior  written  notice  setting out such
request  and the  Holder's  wire  transfer  instructions.  Whenever  any  amount
expressed  to be due by the  terms of this Note is due on any day which is not a
Business Day, the same shall instead be due on the next  succeeding day which is
a Business  Day and, in the case of any  Interest  Date which is not the date on
which this Note is paid in full, the extension of the due date thereof shall not
be taken into account for purposes of determining  the amount of Interest due on
such date.  Any amount of Principal or other  amounts due under the  Transaction
Documents,  other than  Interest,  which is not paid when due shall  result in a
late charge  being  incurred  and  payable by the Company in an amount  equal to
interest  on such amount at the rate of five  percent  (5.0%) per annum from the
date such amount was due until the same is paid in full ("LATE CHARGE").

        (25)    CANCELLATION.  After all Principal,  accrued  Interest and other
amounts  at any time  owed on this  Note  have  been  paid in full  (other  than
contingent  indemnification  obligations  in  respect of which no claim has been
asserted) or all remaining amounts outstanding hereunder are converted to Common
Stock, this Note shall automatically be deemed canceled, shall be surrendered to
the Company for cancellation and shall not be reissued.

        (26)    WAIVER  OF  NOTICE.  Except  as  otherwise  expressly  set forth
herein,  to the extent  permitted  by law,  the Company  hereby  waives  demand,
notice,  protest  and all other  demands  and  notices  in  connection  with the
delivery, acceptance,  performance,  default or enforcement of this Note and the
Securities Purchase Agreement.

        (27)    GOVERNING LAW; JURISDICTION; SEVERABILITY; JURY TRIAL. This Note
shall be construed and enforced in accordance with, and all questions concerning
the construction, validity, interpretation and performance of this Note shall be
governed by, the

                                       39
<PAGE>

internal laws of the State of New York,  without  giving effect to any choice of
law or conflict of law  provision  or rule  (whether of the State of New York or
any other  jurisdictions)  that would cause the  application  of the laws of any
jurisdictions  other than the State of New York. The Company hereby  irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
The City of New York, Borough of Manhattan,  for the adjudication of any dispute
hereunder or in connection herewith or with any transaction  contemplated hereby
or discussed herein, and hereby irrevocably  waives, and agrees not to assert in
any suit, action or proceeding,  any claim that it is not personally  subject to
the  jurisdiction  of any such court,  that such suit,  action or  proceeding is
brought  in an  inconvenient  forum or that the  venue of such  suit,  action or
proceeding is improper. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any manner permitted by law. In the event that
any  provision  of this Note is invalid or  unenforceable  under any  applicable
statute or rule of law, then such provision  shall be deemed  inoperative to the
extent that it may conflict  therewith  and shall be deemed  modified to conform
with such statute or rule of law. Any such provision  which may prove invalid or
unenforceable  under any law shall not affect the validity or  enforceability of
any other provision of this Note.  Nothing  contained  herein shall be deemed or
operate to preclude the Holder from  bringing  suit or taking other legal action
against  the  Company in any other  jurisdiction  to  collect  on the  Company's
obligations  to the Holder,  to realize on any  collateral or any other security
for such obligations, or to enforce a judgment or other court ruling in favor of
the Holder.  THE COMPANY  HEREBY  IRREVOCABLY  WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES  NOT TO  REQUEST,  A JURY  TRIAL  FOR  THE  ADJUDICATION  OF ANY  DISPUTE
HEREUNDER OR IN CONNECTION  WITH OR ARISING OUT OF THIS NOTE OR ANY  TRANSACTION
CONTEMPLATED HEREBY.

        (28)    CERTAIN  DEFINITIONS.  For purposes of this Note,  the following
terms shall have the following meanings:

                (a)     "ACQUISITIONS"  shall have the  meaning set forth in the
Securities Purchase Agreement.

                (b)     "ANTI-TERRORISM   LAWS"   means   the   OFAC   Laws  and
Regulations and the Executive Orders as each of such terms is defined in Section
5.32 of the Senior Loan Agreement and the USA Patriot Act.

                (c)     "APPLICABLE  MARGIN"  means  the  amount  determined  as
follows:

        Ratio of Net Senior
        Indebtedness to Consolidated
        EBITDA                             Applicable Margin

        Greater than 3.0:1.0                            4.50%

        Equal to or less than 3.0:1.0 but               4.25%
        greater than 2.5:1.0

                                       40
<PAGE>

        Ratio of Net Senior
        Indebtedness to Consolidated
        EBITDA                             Applicable Margin

        Equal to or less than 2.5:1.0 but               4.00%
        greater than 2.0:1.0

        Equal to or less than 2.0:1.0 but               3.75%
        greater than 1.5:1.0

        Equal to or less than 1.5:1.0                   3.50%

provided  that, (a) the  Applicable  Margin shall be calculated and  established
once each  Fiscal  Quarter  based on the ratio of Net  Senior  Indebtedness  (as
defined in the Senior Loan Agreement) to Consolidated  EBITDA of the Company and
its Subsidiaries  for the immediately  preceding twelve (12) month period ending
as of the last day of the immediately  preceding fiscal quarter and shall remain
in effect until adjusted  thereafter  after the end of the next fiscal  quarter,
(b) each adjustment to the Applicable Margin shall be effective on the date that
the Holder receives the financial statements of the Company and its Subsidiaries
for the  immediately  preceding  Fiscal Quarter in accordance with Section 14(g)
and shall  remain in effect  until  adjusted  thereafter  during the next Fiscal
Quarter, (c) the failure to deliver the financial statements pursuant to Section
14(g)  hereof on the  required  date shall  automatically  cause the  Applicable
Margin to be the highest  applicable  rate set forth above,  effective as of the
date on which the delivery of the financial  statements  was otherwise  required
until the date on which such financial statements are so delivered to the Holder
at which time the Applicable  Margin shall be adjusted in accordance with clause
(a) above, (d) in the event that any of the information  provided to the Holders
which is used in the  calculation  of the  Applicable  Margin  for any period is
subsequently restated or is otherwise changed thereafter, then if the Applicable
Margin for the  applicable  period  would have  resulted in a higher  rate,  the
Company  shall pay to the Holder any  additional  amount in respect of  interest
that  would have been  required  based on the  higher  Applicable  Margin on the
subsequent  interest  payment  date,  and (e)  notwithstanding  anything  to the
contrary  set forth  herein,  until the  effective  date set forth in clause (b)
above that  follows  the last day of the fourth full  Fiscal  Quarter  after the
Original  Issuance Date, the Applicable  Margin shall be equal to the greater of
(i) the amount  determined  as set forth  above based on the ratio of Net Senior
Indebtedness to Consolidated  EBITDA of the Company and its Subsidiaries for the
immediately preceding twelve (12) month period ending as of the last day of each
Fiscal Quarter prior thereto after giving pro forma effect to the  Acquisitions,
the Senior Loan and the other transactions  contemplated hereunder and (ii) four
and one half percent (4.50%) per annum.

                                       41
<PAGE>

                (d)     "APPROVED  STOCK PLAN" means any  employee  benefit plan
(including,  without limitation,  any equity compensation plan, restricted stock
plan and/or  employee stock ownership plan) or agreement which has been approved
by the Board of  Directors  of the  Company,  pursuant  to which  the  Company's
securities  may be issued to any employee,  consultant,  officer or director for
services provided to the Company or any Subsidiary.

                (e)     "BANKRUPTCY  CODE"  means the United  States  Bankruptcy
Code (11 U.S.C. ss. 101, et seq.), as amended, and any successor statute.

                (f)     "BLOOMBERG" means Bloomberg Financial Markets.

                (g)     "BUSINESS DAY" means any day other than Saturday, Sunday
or other day on which commercial banks in The City of New York are authorized or
required by law to remain closed.

                (h)     "CASH   EQUIVALENTS"  means  (i)  securities  issued  or
directly and fully  guaranteed  or insured by the United States or any agency or
instrumentality  thereof  (provided that the full faith and credit of the United
States is pledged in support  thereof)  having  maturities  of not more than one
year  from the date of  acquisition,  (ii) time  deposits  and  certificates  of
deposit of any commercial bank, or which is the principal banking  subsidiary of
a bank holding company  organized  under the laws of the United States,  and any
State  thereof,  the  District of Columbia or any foreign  jurisdiction,  having
capital,  surplus and undivided  profits  aggregating in excess of $500,000,000,
with  maturities of not more than one year from the date of  acquisition by such
Person,  (iii)  repurchase  obligations with a term of not more than ninety (90)
days for  underlying  securities  of the types  described  in  clause  (i) above
entered into with any bank meeting the  qualifications  specified in clause (ii)
above,  (iv)  commercial  paper issued by any Person  incorporated in the United
States rated at least A-1 or the  equivalent  thereof by Standard & Poors Rating
Services or at least P-1 or the equivalent there of by Moody's Investor Service,
Inc.  and in each  case  maturing  not  more  than one  year  after  the date of
acquisition  by  such  Person,   or  (v)   investments  in  money  market  funds
substantially  all of whose  assets are  comprised  of  securities  of the types
described in clauses (i) through (iv) above.

                (i)     "CALENDAR  QUARTER" means each of: the period  beginning
on and  including  January 1 and  ending on and  including  March 31; the period
beginning  on and  including  April 1 and ending on and  including  June 30; the
period  beginning on and including July 1 and ending on and including  September
30;  and the  period  beginning  on and  including  October 1 and  ending on and
including December 31.

                (j)     "CAPITALIZED LEASE" means, in respect of any Person, any
lease  of real or  personal  property  by such  Person  as  lessee  which is (a)
required under GAAP to be capitalized on the balance sheet of such Person or (b)
a transaction  of a type commonly  known as a "synthetic  lease" (i.e.,  a lease
transaction that is treated as an operating lease for accounting purposes but in
respect of which  payments  of rent are  intended  to be treated as  payments of
principal and interest on a loan for federal income tax purposes).

                (k)     "CAPITALIZED LEASE OBLIGATIONS" means, in respect of any
Person,  obligations  of such  Person  and its  Subsidiaries  under  Capitalized
Leases, and, for purposes

                                       42
<PAGE>

hereof,  the  amount  of any such  obligation  shall be the  capitalized  amount
thereof determined in accordance with GAAP.

                (l)     "CHANGE OF CONTROL"  means any  Fundamental  Transaction
other  than (i) any  reorganization,  recapitalization  or  reclassification  of
Common Stock, in which holders of the Company's voting power  immediately  prior
to such reorganization, recapitalization or reclassification continue after such
reorganization,  recapitalization  or  reclassification  to hold publicly traded
securities and, directly or indirectly, the voting power of the surviving entity
or  entities  necessary  to elect a  majority  of the  members  of the  board of
directors (or their  equivalent if other than a  corporation)  of such entity or
entities; or (ii) pursuant to a migratory merger effected solely for the purpose
of changing the jurisdiction of incorporation of the Company.

                (m)     "CHANGE  OF CONTROL  PREMIUM"  means (i) in the first 18
months  following the Reissue Date,  120%, (ii) in the period starting 18 months
from the  Reissue  Date and ending 42 months from the Reissue  Date,  115%;  and
(iii) thereafter, 110%.

                (n)     "CLOSING BID PRICE" and "CLOSING SALE PRICE" means,  for
any security as of any date,  the last closing bid price and last closing  trade
price,  respectively,  for such security on the Principal Market, as reported by
Bloomberg,  or, if the Principal  Market begins to operate on an extended  hours
basis and does not  designate  the closing bid price or the closing trade price,
as the case may be, then the last bid price or last trade  price,  respectively,
of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg,
or, if the Principal Market is not the principal  securities exchange or trading
market  for such  security,  the last  closing  bid price or last  trade  price,
respectively,  of such security on the principal  securities exchange or trading
market where such security is listed or traded as reported by  Bloomberg,  or if
the  foregoing  do not apply,  the last  closing bid price or last trade  price,
respectively,  of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price or last trade  price,  respectively,  is  reported  for such  security  by
Bloomberg,  the average of the bid prices, or the ask prices,  respectively,  of
any market  makers for such  security as  reported in the "pink  sheets" by Pink
Sheets LLC (formerly the National  Quotation  Bureau,  Inc.). If the Closing Bid
Price or the  Closing  Sale  Price  cannot be  calculated  for a  security  on a
particular  date on any of the  foregoing  bases,  the  Closing Bid Price or the
Closing Sale Price,  as the case may be, of such  security on such date shall be
the fair market value as mutually  determined by the Company and the Holder.  If
the  Company  and the Holder are unable to agree upon the fair  market  value of
such security,  then such dispute shall be resolved  pursuant to Section 23. All
such determinations to be appropriately  adjusted for any stock dividend,  stock
split,  stock  combination  or other similar  transaction  during the applicable
calculation period.

                (o)     "CLOSING  DATE"  shall have the meaning set forth in the
Securities  Purchase  Agreement,  which date is the date the  Company  initially
issued  certain of the Notes  pursuant to the terms of the  Securities  Purchase
Agreement.

                (p)     "COMMON STOCK DEEMED  OUTSTANDING"  means,  at any given
time, the number of shares of Common Stock  outstanding  at such time,  plus the
number of shares of Common  Stock deemed to be  outstanding  pursuant to Section
7(a)(ii) hereof regardless of

                                       43
<PAGE>

whether the Options or Convertible  Securities are actually  exercisable at such
time,  but excluding any Common Stock owned or held by or for the account of the
Company or issuable upon conversion or exercise, as applicable, of the Notes and
the Warrants.

                (q)     "CONSULTANT"  means  Alvarez  &  Marsal,  Inc.  and  any
replacement or successors thereto selected by Company and reasonably  acceptable
to Required Holders.

                (r)     "CONTINGENT OBLIGATION" means, in respect of any Person,
any  obligation  of such  Person  guaranteeing  or  intended  to  guarantee  any
Indebtedness,  leases, dividends or other obligations ("primary obligations") of
any other  Person (the  "primary  obligor") in any manner,  whether  directly or
indirectly,  including, without limitation, (i) the direct or indirect guaranty,
endorsement  (other than for  collection  or deposit in the  ordinary  course of
business),  co-making,  discounting  with recourse or sale with recourse by such
Person of the  obligation  of a primary  obligor,  (ii) the  obligation  to make
take-or-pay or similar  payments,  if required,  regardless of nonperformance by
any other party or parties to an agreement, (iii) any obligation of such Person,
whether or not  contingent,  (w) to purchase any such primary  obligation or any
property  constituting  direct or indirect security therefor,  (x) to advance or
supply funds (A) for the purchase or payment of any such primary  obligation  or
(B) to maintain  working  capital or equity  capital of the  primary  obligor or
otherwise to maintain the net worth or solvency of the primary  obligor,  (y) to
purchase property,  assets,  securities or services primarily for the purpose of
assuring the owner of any such primary  obligation of the ability of the primary
obligor to make payment of such primary obligation or (z) otherwise to assure or
hold  harmless  the holder of such  primary  obligation  against loss in respect
thereof;  provided that, the term "Contingent  Obligation" shall not include any
product  warranties  extended in the ordinary course of business.  The amount of
any Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable  amount  of  the  primary  obligation  in  respect  of  which  such
Contingent  Obligation is made (or, if less,  the maximum amount of such primary
obligation  for which  such  Person may be liable  pursuant  to the terms of the
instrument  evidencing  such  Contingent   Obligation)  or,  if  not  stated  or
determinable,  the maximum reasonably anticipated liability with respect thereto
(assuming such Person is required to perform thereunder),  as determined by such
Person in good faith.

                (s)     "CONVERTIBLE  SECURITIES"  means any stock or securities
(other than Options)  directly or indirectly  convertible into or exercisable or
exchangeable for Common Stock.

                (t)     "DEFAULT"  means any event that with  notice or lapse of
time, or both, would give rise to an Event of Default.

                (u)     "DESIGNATED  PERSON"  means a Person either (i) included
within the term  "designated  national" as defined in the Cuban  Assets  Control
Regulations,  31 C.F.R.  Part 515, or (ii) designated under Sections 1(a), 1(b),
1(c) or 1(d) of  Executive  Order  No.  13224,  66 Fed.  Reg.  49079  (published
September  25,  2001)  or  similarly   designated  under  any  related  enabling
legislation or any other similar executive orders.

                (v)     "DISPOSITION"  means  any  transaction,   or  series  of
related  transactions,  pursuant to which the Company or any of its Subsidiaries
sells, issues, assigns,

                                       44
<PAGE>

transfers,  conveys, leases or subleases,  licenses or otherwise disposes of, or
permits any  Subsidiary  to sell,  issue,  assign,  transfer,  convey,  lease or
sublease,  license  or  otherwise  dispose  of,  in  each  case  whether  in one
transaction  or a  series  of  related  transactions,  all  or any  part  of its
business,  property or assets,  or any  interest  therein,  whether now owned or
hereafter acquired (or agrees to do any of the foregoing), or permits or suffers
any other Person to acquire any interest in its business, assets or property (or
agrees to do any of the foregoing).

                (w)     "ELIGIBLE  MARKET" means the Initial  Principal  Market,
The New York Stock  Exchange,  Inc.,  the American  Stock  Exchange,  The NASDAQ
Global Select Market, The NASDAQ Global Market or The NASDAQ Capital Market.

                (x)     "EQUITY   CONDITIONS"   means  each  of  the   following
conditions:  (i) on each day during the period  beginning three (3) months prior
to the  applicable  date  of  determination  and  ending  on and  including  the
applicable date of determination  (the "EQUITY  CONDITIONS  MEASURING  PERIOD"),
either (x) the Registration  Statement filed pursuant to the Registration Rights
Agreement  shall be  effective  and  available  for the resale of all  remaining
Registrable  Securities in accordance with the terms of the Registration  Rights
Agreement  or (y) all shares of Common Stock  issuable  upon  conversion  of the
Notes  and  exercise  of  the  Warrants  shall  be  eligible  for  sale  without
restriction and without the need for registration  under any applicable  federal
or state securities laws; (ii) during the Equity Conditions Measuring Period the
Common Stock is designated  for  quotation on any Eligible  Market and shall not
have  been  suspended  from  trading  on such  exchange  or market  (other  than
suspensions of not more than two (2) days and occurring  prior to the applicable
date  of  determination  due  to  business  announcements  by  the  Company  and
suspensions  occurring upon the listing of the Common Stock on another  Eligible
Market  (other  than the  Initial  Principal  Market))  nor shall  delisting  or
suspension by such exchange or market been  threatened or pending  either (A) in
writing by such  exchange or market or (B) by falling  below the then  effective
minimum  listing  maintenance  requirements  of such  exchange or market;  (iii)
during the Equity Conditions  Measuring Period, the Company shall have delivered
Conversion  Shares upon conversion of the Notes and Warrant Shares upon exercise
of the  Warrants  to the  holders  on a  timely  basis as set  forth in  Section
2(c)(ii)  hereof (and analogous  provisions  under the Other Notes) and Sections
2(a) of the Warrants; (iv) any applicable shares of Common Stock to be issued in
connection with the event requiring  determination may be issued in full without
violating  Section 3(d) hereof and the rules or  regulations  of any  applicable
Eligible Market; (v) during the Equity Conditions  Measuring Period, the Company
shall not have failed to timely make any payments  within five (5) Business Days
of when such payment is due pursuant to any  Transaction  Document;  (vi) during
the Equity Conditions Measuring Period, there shall not have occurred either (A)
the  public  announcement  of  a  pending,   proposed  or  intended  Fundamental
Transaction  which has not been  abandoned,  terminated or  consummated,  (B) an
Event of  Default  or (C) an event  that with the  passage  of time or giving of
notice would  constitute  an Event of Default;  (vii) the Company  shall have no
knowledge of any fact that would cause (x) the Registration  Statements required
pursuant to the Registration  Rights Agreement not to be effective and available
for the resale of all remaining  Registrable  Securities in accordance  with the
terms of the  Registration  Rights  Agreement  or (y) any shares of Common Stock
issuable upon  conversion of the Notes and shares of Common Stock  issuable upon
exercise  of the  Warrants  not to be  eligible  for  sale  without  restriction
pursuant to Rule 144(k) and any applicable  state  securities  laws;  (viii) the
Stockholder  Approval (as defined in the Securities  Purchase  Agreement)  shall
have been obtained, if required;  and (ix)

                                       45
<PAGE>

the Company otherwise shall have been in material  compliance with and shall not
have materially breached any provision, covenant,  representation or warranty of
any Transaction Document.

                (y)     "EQUITY CONDITIONS FAILURE" means the failure to satisfy
one or more of the Equity Conditions set forth above.

                (z)     "EQUITY  INTERESTS" means, in respect of any Person, all
of the shares of capital  stock of (or other  ownership or profit  interests in)
such Person,  all of the  warrants,  options or other rights for the purchase or
acquisition  from such Person of shares of capital stock of (or other  ownership
or profit interests in) such Person,  all of the securities  convertible into or
exchangeable  for  shares  of  capital  stock of (or other  ownership  or profit
interests  in) such Person or  warrants,  rights or options for the  purchase or
acquisition from such Person of such shares (or such other  interests),  and all
of  the  other  ownership  or  profit   interests  in  such  Person   (including
partnership,  member or trust interests  therein),  whether voting or nonvoting,
and whether or not such shares, warrants, options, rights or other interests are
outstanding on any date of determination.

                (aa)    "ERISA" means the Employee  Retirement  Income  Security
Act of 1974,  as  amended,  and any  successor  statute of similar  import,  and
regulations thereunder, in each case, as in effect from time to time. References
to sections of ERISA shall be construed also to refer to any successor sections.

                (bb)    "ERISA  AFFILIATE" means (a) any Person subject to ERISA
whose employees are treated as employed by the same employer as the employees of
the Company or any of its  Subsidiaries  under  Internal  Revenue  Code  Section
414(b),  (b) any trade or business  subject to ERISA whose employees are treated
as employed by the same  employer as the  employees of the Company or any of its
Subsidiaries under Internal Revenue Code Section 414(c), (c) solely for purposes
of Section  302 of ERISA and  Section  412 of the  Internal  Revenue  Code,  any
organization subject to ERISA that is a member of an affiliated service group of
which the Company or any of its  Subsidiaries is a member under Internal Revenue
Code  Section  414(m),  or (d) solely for  purposes  of Section 302 of ERISA and
Section 412 of the Internal  Revenue Code, any Person subject to ERISA that is a
party to an arrangement  with the Company or any of its  Subsidiaries  and whose
employees  are  aggregated  with  the  employees  of the  Company  or any of its
Subsidiaries under Internal Revenue Code Section 414(o).

                (cc)    "EXCLUDED SECURITIES" means any Common Stock, Options or
Convertible  Securities,  stock appreciation  rights or other rights with equity
features  issued or issuable:  (i) in connection  with any Approved  Stock Plan;
(ii) upon  conversion of the Notes or PIPE Notes or the exercise of the Warrants
or the Common PIPE Warrants (as defined in the Securities  Purchase  Agreement);
(iii)  in  connection  with  any  Permitted  Acquisitions,  whether  through  an
acquisition of shares or a merger of any business,  assets or technologies,  the
primary purpose of which is not to raise equity capital and (iv) upon conversion
of any  Options  or  Convertible  Securities  which are  outstanding  on the day
immediately  preceding the Reissue Date, provided that the terms of such Options
or Convertible  Securities are not amended,  modified or changed on or after the
Reissue Date.

                                       46
<PAGE>

                (dd)    "FISCAL  QUARTER"  means  each  of the  fiscal  quarters
adopted by the Company for financial  reporting  purposes that correspond to the
Company's  "FISCAL YEAR" that ends on December 31, or such other fiscal  quarter
adopted by the Company for financial reporting purposes in accordance with GAAP.

                (ee)    "FUNDAMENTAL  TRANSACTION" means that the Company shall,
directly or  indirectly,  in one or more  related  transactions,  after the date
hereof (i) be dissolved or liquidated or be the subject of a plan of dissolution
or liquidation  adopted by its  stockholders;  (ii) consolidate or merge with or
into (whether or not the Company is the surviving corporation) another Person or
Persons;  (iii) sell,  assign,  transfer,  convey or otherwise dispose of all or
substantially  all of the properties or assets of the Company to another Person;
(iv) allow another  Person to make a purchase,  tender or exchange offer that is
accepted by the holders of more than the 50% of the outstanding shares of Voting
Stock (not  including  any shares of Voting  Stock held by the Person or Persons
making or party to, or associated or affiliated with the Persons making or party
to, such purchase,  tender or exchange  offer),  (v) consummate a stock purchase
agreement  or other  business  combination  (including,  without  limitation,  a
reorganization,  recapitalization,  spin-off  or  scheme  of  arrangement)  with
another  Person  whereby  such  other  Person  acquires  more  than  50%  of the
outstanding  shares of Voting  Stock (not  including  any shares of Voting Stock
held by the other Person or other  Persons  making or party to, or associated or
affiliated  with the  other  Persons  making or party to,  such  stock  purchase
agreement or other business combination); (vi) any "person" or "group" (as these
terms are used for purposes of Sections  13(d) and 14(d) of the Exchange Act) is
or shall  become  the  "beneficial  owner" (as  defined in Rule 13d-3  under the
Exchange Act),  directly or indirectly,  of 50% of the aggregate ordinary voting
power  represented by issued and outstanding  Common Stock;  (vii) cease to have
during any period of two (2) years,  as the  majority of its Board of  Directors
individuals  who at the  beginning  of such  period  constituted  the  Board  of
Directors of the Company  (together with any new directors whose  nomination for
election  was  approved by a vote of at least a majority of the  directors  then
still in office who were either  directors  at the  beginning  of such period or
whose election or nomination for election was previously so approved); or (viii)
fails to own,  directly or indirectly,  one hundred (100%) percent of the voting
power (directly or indirectly) of the total outstanding  voting stock of each of
the Company and the Subsidiaries other than (A) pursuant to a sale of the voting
stock of the Company or any Subsidiary  permitted  hereunder,  (B) pursuant to a
transfer of such voting  stock to a Guarantor  permitted  herein,  or (C) in the
case of a Subsidiary is acquired  after the date hereof  pursuant to a Permitted
Acquisition  where less than one hundred  (100%)  percent of the voting power of
the total outstanding voting stock of such Subsidiary is acquired.

                (ff)    "GAAP" means United States generally accepted accounting
principles, consistently applied.

                (gg)    "GOVERNMENTAL AUTHORITY" means any nation or government,
any foreign,  Federal, State, city, town,  municipality,  county, local or other
political subdivision thereof or thereto and any department,  commission, board,
bureau,   instrumentality,   agency  or  other  entity   exercising   executive,
legislative,  judicial, taxing, regulatory or administrative powers or functions
of or pertaining to government.

                                       47
<PAGE>

                (hh)    "HEDGING  AGREEMENT"  means any interest  rate,  foreign
currency,  commodity  or  equity  swap,  collar,  cap,  floor  or  forward  rate
agreement,  or other  agreement  or  arrangement  designed  to  protect  against
fluctuations  in  interest  rates  or  currency,   commodity  or  equity  values
(including,  without  limitation,  any option in respect of any of the foregoing
and any  combination  of the  foregoing  agreements  or  arrangements),  and any
confirmation executed in connection with any such agreement or arrangement.

                (ii)    "INDEBTEDNESS" means, in respect of any Person,  without
duplication,  (i) all  indebtedness of such Person for borrowed money;  (ii) all
obligations  of such  Person for the  deferred  purchase  price of  property  or
services  (provided  that  neither  trade  payables  or other  accounts  payable
incurred in the ordinary  course of such Person's  business and not  outstanding
for more than  ninety (90) days after such  payable  was due under its  original
terms nor such trade payables , if outstanding  longer, that are being contested
or  disputed  by such  Person in good faith in the  ordinary  course of business
shall be deemed to  constitute  Indebtedness)  and  including  any  earn-outs or
similar  arrangements  in connection  with any acquisition of businesses by such
Person,   whether   contingent  or  otherwise   subject  to  any  conditions  or
limitations;   (iii)  all  obligations  of  such  Person   evidenced  by  bonds,
debentures,  notes or other similar  instruments or upon which interest payments
are customarily made; (iv) all  reimbursement,  payment or other obligations and
liabilities  of such Person  created or arising under any  conditional  sales or
other title  retention  agreement in respect of property used and/or acquired by
such Person,  even though the rights and remedies of the lessor,  seller  and/or
lender  thereunder may be limited to  repossession  or sale of such property and
all   obligations   and   liabilities   arising  in  connection  with  factoring
arrangements or other  arrangements  in respect of the sale of receivables;  (v)
that  portion of  Capitalized  Lease  Obligations  of such Person that is (or is
required to be)  classified  as a liability on its balance  sheet in  conformity
with GAAP;  (vi) all obligations and  liabilities,  contingent or otherwise,  of
such  Person,  in  respect  of  letters  of  credit,   acceptances  and  similar
facilities;  (vii) all net  obligations  and  liabilities,  of such Person under
Hedging Agreements; (viii) all Contingent Obligations; (ix) liabilities incurred
under Title IV of ERISA in respect of any plan (other than a Multiemployer Plan)
covered by Title IV of ERISA and  maintained for employees of such Person or any
of its ERISA Affiliates;  (x) withdrawal  liability incurred under ERISA by such
Person or any of its ERISA Affiliates in respect of any Multiemployer  Plan; and
(xi) all  obligations  referred to in clauses (i) through (x) of this definition
of another Person secured by (or for which the holder of such  Indebtedness  has
an  existing  right,  contingent  or  otherwise,  to be secured  by) a Lien upon
property owned by such Person, even though such Person has not assumed or become
liable for the  payment of such  Indebtedness.  The  Indebtedness  of any Person
shall include the  Indebtedness  of any partnership of or joint venture in which
such Person is a general  partner or a joint  venturer to the extent such Person
is liable  therefor  as a result of such  Person's  ownership  interest  in such
entity,  except to the extent the terms of such  Indebtedness  expressly provide
that such Person is not liable  therefor.  None of (1) any Approved  Stock Plan,
(2) the Summit Global  Logistics,  Inc.  Equity  Incentive  Plan, (3) the Summit
Global  Logistics,  Inc.  Management  Incentive  Plan,  (4)  the  Summit  Global
Logistics,  Inc. Severance Benefit Plan or (5) the Summit Global Logistics, Inc.
Supplemental  Executive  Retirement  Plan or any  obligations  under any of them
shall be "Indebtedness" for purposes hereof.

                (jj)    "INITIAL    PRINCIPAL   MARKET"   means   the   National
Association of Securities Dealers Inc.'s OTC Bulletin Board.

                                       48
<PAGE>

                (kk)    "INSOLVENCY  PROCEEDING"  means (a) any proceeding by or
against any Person seeking to adjudicate it a bankrupt or insolvent,  or seeking
dissolution,   liquidation,   winding   up,   reorganization,    administration,
arrangement,  adjustment,  protection,  relief or composition of it or its debts
under any law relating to bankruptcy,  insolvency,  reorganization  or relief of
debtors  (including,  but not limited to, any case in respect of any such Person
under any provision of the  Bankruptcy  Code),  or seeking the entry of an order
for  relief  or  the  appointment  of  a  receiver,   administrative   receiver,
administrator,  manager, examiner, trustee, custodian, liquidator,  sequestrator
or other similar official for any such Person or for any substantial part of its
property under any provision of the Bankruptcy  Code or under any other Federal,
State or other foreign  bankruptcy,  insolvency,  receivership,  liquidation  or
similar law now or hereafter in effect,  or (b) the  appointment  of a receiver,
administrative receiver, administrator,  manager, examiner, trustee, liquidator,
custodian,  sequestrator  or similar  official for such Person or a  substantial
part of its assets shall occur under any Federal,  State or foreign  bankruptcy,
insolvency, receivership, liquidation or similar law now or hereafter in effect.

                (ll)    "INTEREST  PERIOD"  means  (i)  initially,   the  period
commencing  on the  Interest  Commencement  Date and  ending  on the nine  month
anniversary of the Interest  Commencement  Date and (b) thereafter,  each period
commencing  on the last day of the  immediately  preceding  Interest  Period and
ending nine months thereafter.

                (mm)    "INTEREST  RATE"  means,  in  respect  of  any  Interest
Period,  a rate per annum  equal to LIBOR  plus the  Applicable  Margin  then in
effect  provided  that for purposes of  calculating  the  Interest  Rate for the
Calendar  Quarter ending on June 30, 2007, the Interest Rate shall be calculated
based upon the  definition  of  Applicable  Margin set forth in this Amended and
Restated Senior Secured Convertible Note.

                (nn)    "LIBOR",  in respect of any Interest Period,  shall mean
the nine-month London Interbank  Offered Rate for deposits in U.S.  dollars,  as
quoted from time to time on Bloomberg  as of  approximately  11:00 a.m.,  London
time, on the second Business Day prior to the first day of such Interest Period.

                (oo)    "LIEN" means any mortgage, deed of trust, deed to secure
debt or similar  instrument,  pledge,  lien  (statutory or otherwise),  security
interest,  charge,  attachment,  assignment or other  encumbrance or security or
preferential  arrangement  of any nature,  including,  without  limitation,  any
conditional sale or title retention  arrangement,  any Capitalized Lease and any
assignment,  deposit  arrangement or financing  lease intended as, or having the
effect of, security.

                (pp)    "LIST" means that certain list  maintained by the Office
of Foreign Assets Control  ("OFAC"),  Department of the Treasury,  and/or on any
other similar list maintained by the OFAC pursuant to any  authorizing  statute,
executive order or regulation.

                (qq)    "MATERIAL CONTRACT" means (i) the Acquisition Documents,
(ii)  each  contract  or  agreement  to  which  the  Company  or  any  of  their
Subsidiaries is a party involving aggregate  consideration payable to or by such
Person of  $1,000,000  or more in any  twelve  month  period and (iii) all other
contracts  or  agreements  material  to  the  business,

                                       49
<PAGE>

operations,  condition  (financial  or  otherwise),  performance,  prospects  or
properties of the Company and its Subsidiaries (taken as a whole).

                (rr)    "MULTIEMPLOYER  PLAN"  means a  "multiemployer  plan" as
defined in Section  4001(a)(3) of ERISA to which the Company or any Guarantor or
any ERISA Affiliates has contributed to, or has been obligated to contribute.

                (ss)    "NET SENIOR INDEBTEDNESS" means in respect of any Person
at any  date,  the  amount  equal  to:  (a)  the  sum of  (i)  the  Consolidated
Indebtedness  of  such  Person  plus  (ii)  the  aggregate  amount  of all  then
outstanding and unpaid trade payables and other obligations of such Person which
are outstanding more than ninety (90) days past due under its original terms and
which are not being  contested  or  disputed by such Person in good faith in the
ordinary  course  of  business  minus  (b) in the  case of the  Company  and its
Subsidiaries,  the sum of (i) cash on the  balance  sheet of such  Person as set
forth in such Person's  financial  statements in the form filed with the SEC for
the fiscal  quarter  immediately  prior to such date plus (ii) the  Subordinated
Indebtedness of such Person plus (iii) the Indebtedness evidenced by the Notes.

                (tt)    "NEW  HOLDERS"  means the  holders  of the New Notes (as
defined in the Second  Amendment to  Securities  Purchase  Agreement  (Notes and
Warrants)  and the First  Amendment  to  Joinder  Agreement  dated as of May __,
2007).

                (uu)    "OBLIGORS"   means  the  Company  and  the   Guarantors,
collectively.

                (vv)    "OPTIONS"  means any  rights,  warrants  or  options  to
subscribe for or purchase shares of Common Stock or Convertible Securities.

                (ww)    "ORIGINAL  NOTE" has the  meaning set forth in the first
paragraph hereof.

                (xx)    "PARENT  ENTITY"  of a  Person  means  an  entity  that,
directly or indirectly, controls the applicable Person and whose common stock or
equivalent  equity  security is quoted or listed on an Eligible  Market,  or, if
there is more than one such Person or Parent Entity, the Person or Parent Entity
with the largest public market  capitalization as of the date of consummation of
the Fundamental Transaction.

                (yy)    "PERMITTED   ACQUISITION"  means  the  Acquisitions  (as
defined in the Securities  Purchase  Agreement) and any other acquisition by the
Company  and/or  any  of  its  Subsidiaries,  whether  by  purchase,  merger  or
otherwise,  whether or not involving cash and/or stock  consideration;  provided
that,

                        (i)     immediately  prior to, and after  giving  effect
        thereto,  no  Default or Event of Default  shall  have  occurred  and be
        continuing or would result therefrom;

                        (ii)    all  transactions in connection  therewith shall
        be consummated in accordance with applicable laws;

                                       50
<PAGE>

                        (iii)   in  the  case  of  the   acquisition  of  Equity
        Interests,  (A)  all  of the  Equity  Interests  (except  for  any  such
        securities  in the  nature  of  directors'  qualifying  shares  required
        pursuant to applicable law) acquired or otherwise  issued by such Person
        or any newly formed  Subsidiary of the Company in  connection  with such
        acquisition shall be owned 100% by the Company or a Subsidiary,  and the
        Company  shall have  taken,  or caused to be taken,  as of the date such
        Person  is or  becomes  a  Subsidiary  of  the  Company  or  of  another
        Subsidiary,  each  of the  actions  set  forth  in  Section  5(l) of the
        Security  Agreement unless such Person becomes a Foreign  Subsidiary and
        (B) in the case of a joint venture,  all of the Equity Interests (except
        for any such  securities in the nature of directors'  qualifying  shares
        required   pursuant  to  applicable  law)  acquired  by  Company  and/or
        Subsidiaries in connection with such acquisition  shall be owned 100% by
        the Company or a Subsidiary  as  applicable,  and the Company shall have
        taken, or caused to be taken, as of the date of such  acquisition,  each
        of the  actions  set forth in  Section  5(l) of the  Security  Agreement
        unless such Person is a Foreign Subsidiary;

                        (iv)    the  Company  and its  Subsidiaries  shall be in
        compliance  with the  financial  covenants  set forth in  Section  14(l)
        hereof on a pro forma basis after giving effect to such  acquisition  as
        of the last day of the fiscal quarter most recently ended;

                        (v)     the  Company   shall  have   delivered   to  the
        Collateral  Agent (as defined in the Security  Agreement),  at least ten
        (10)  Business Days prior to such  proposed  acquisition,  a certificate
        certifying  Company's  compliance with Section 14(l),  together with all
        relevant  financial  information  in  respect of such  acquired  assets,
        including,  without  limitation,  the aggregate  consideration  for such
        acquisition and any information necessary to (A) demonstrate  compliance
        with Section 14(l) hereof and (B) enable Collateral Agent to perfect its
        security  interest in the acquired  assets  and/or  Equity  Interests in
        accordance with the Security  Agreement and the Pledge  Agreement (other
        than the  assets of and  Equity  Interests  of and  issued  by  entities
        organized outside of the United States);

                        (vi)    the cash  consideration for any such acquisition
        (excluding therefrom earnouts, deferred purchase price payments, Special
        Incentive  Bonuses and Subordinated  Indebtedness  derived or arising in
        connection  therewith)  shall  not  exceed  the  amount  of  loans  then
        available in respect of the  Permitted  Indebtedness  plus the Company's
        cash and Cash  Equivalents  on hand  provided  that  Company  and/or its
        Subsidiaries shall have at least $2,500,000 of cash and Cash Equivalents
        on hand and/or availability under the Senior Loan Agreement after giving
        effect to the applicable Permitted Acquisition; and

                        (vii)   the  acquired   business   and/or  assets  shall
        comprise assets used in, or be an operating  company or a division of an
        operating  company  that  engages in, a line of  business  substantially
        similar,  complimentary  or related to the  business  that the  Company,
        Guarantors or their Subsidiaries are engaged in on the date hereof.

                (zz)    "PERMITTED INDEBTEDNESS" means:

                                       51
<PAGE>

                        (i)     Permitted Senior Indebtedness;

                        (ii)    Contingent  Obligations of the Company or any of
its Subsidiaries in respect of any Indebtedness  described in this definition of
Permitted  Indebtedness  which  the  Company  or such  Subsidiary  is  otherwise
permitted to incur hereunder;

                        (iii)   (A)  contingent  Indebtedness  of the Company or
any of its Subsidiaries  existing on the Original  Issuance Date pursuant to the
earn-outs and deferred  purchase price payments under the Acquisition  Documents
in accordance with the terms thereof as in effect on the Original  Issuance Date
and  (B)  contingent  Indebtedness  of the  Company  or any of its  Subsidiaries
arising after the Original  Issuance Date pursuant to earn-outs  and/or deferred
purchase price payments under any Permitted Acquisition(s) consummated after the
Original Issuance Date,  provided that such Indebtedness  under clause (B) shall
not exceed $30,000,000 in the aggregate;

                        (iv)    any other  Indebtedness  of the  Company  or any
Subsidiary listed on SCHEDULE 28(yy) hereto;

                        (v)     purchase  money  Indebtedness  of the Company or
any Subsidiary  (including  purchase money Capitalized  Leases and including all
reimbursement,  payment or other  obligations  and liabilities of the Company or
such Subsidiary  created or arising under any  conditional  sales or other title
retention  agreement in respect of property used and/or  acquired by the Company
or such  Subsidiary,  even though the rights and remedies of the lessor,  seller
and/or  lender  thereunder  may be  limited  to  repossession  or  sale  of such
property)  arising  after the Original  Issuance  Date to the extent  secured by
purchase money security interests in equipment  (including  Capitalized  Leases)
and  purchase  money  mortgage,  deed of trust,  deed to secure  debt or similar
instruments  on Real  Property  not to exceed  $5,000,000  in any Fiscal Year or
$15,000,000  in the aggregate at any time  outstanding  (in each case  including
both purchase money Indebtedness secured by equipment and Real Property) so long
as such security  interests and mortgage,  deed of trust, deed to secure debt or
similar  instruments  do  not  apply  to any  property  of  the  Company  or any
Subsidiary  other than the  equipment  or Real  Property so  acquired  and other
equipment  or Real  Property  financed  by such  lender to the extent  that such
financing  constitutes  Permitted  Indebtedness and is evidenced by an agreement
that includes customary  provisions requiring  cross-collateralization  thereof,
and the  Indebtedness  secured thereby does not exceed the cost of the equipment
or Real  Property so acquired and the cost of other  equipment or Real  Property
financed by such lender to the extent that such financing  constitutes Permitted
Indebtedness and is evidenced by an agreement that includes customary provisions
requiring cross-collateralization thereof, as the case may be;

                        (vi)    Indebtedness  of the  Company or any  Subsidiary
arising  pursuant to loans or  advances  by the  Company or a  Guarantor  to the
Company or such Subsidiary permitted under Sections 14(t) and 14(u);

                        (vii)   contingent Indebtedness existing on the Original
Issuance Datein the form of Special  Incentive Bonuses (as defined in the Senior
Loan  Agreement) to employees,  directors  and/or officers of the Company or any
Subsidiary  and/or to sellers of assets and/or Equity  Interests,  in each case,
under the Acquisition  Documents consisting of the TUG

                                       52
<PAGE>

New York Bonus  Agreement,  the TUG Miami and Los Angeles Bonus Agreement and/or
the TUG China Bonus Agreement, each as in effect on the Original Issuance Date;

                        (viii)  contingent  Indebtedness  in the form of Special
Incentive Bonuses to employees,  directors and/or officers of the Company or any
Subsidiary and/or to sellers of assets and/or Equity Interests, in each case, in
connection  with any  Permitted  Acquisitions  consummated  after  the  Original
Issuance Date; provided that (x) the sum of (A) the aggregate amount of payments
in respect of such  Indebtedness to employees,  directors and/or officers of the
Company or any Subsidiary and/or to such sellers,  plus (B) the aggregate amount
of cash consideration paid in respect of all Permitted  Acquisitions  (excluding
earnouts and deferred  purchase price  payments) other than from the proceeds of
the Common  PIPE  Offering  and any other cash on hand,  shall not exceed in the
aggregate for (A) and ( ),  $7,500,000 and (y) the Company and its  Subsidiaries
shall  not make,  or be  required  to make,  any  payments  in  respect  of such
Indebtedness  to  employees,  directors  and/or  officers  of the Company or any
Subsidiary  and/or to such sellers unless as of the date of any such payment and
after  giving  effect  thereto,  no Default or Event of  Default  under  Section
4(a)(v), 4(a)(vii) or 4(a)(viii) shall be continuing;

                        (ix)    Indebtedness  to  employees,   directors  and/or
officers of the Company or any Subsidiary in the form of retention  compensation
not to exceed $1,000,000 in the aggregate outstanding at any time;

                        (x)     Indebtedness  of the  Company  or any  Guarantor
arising  after  the  Original  Issuance  Date  consisting  of the  reimbursement
obligations  to a financial  institution in respect of letters of credit or bank
guarantees  issued by such financial  institution for the account of the Company
or any Guarantor, in the ordinary course of business; provided that (x) upon its
request,  the Collateral  Agent shall have received  true,  correct and complete
copies of all of agreements,  documents and instruments relating to the facility
pursuant to which such  letters of credit are issued,  and (y) in no event shall
the aggregate amount of all such  Indebtedness  (contingent or otherwise) at any
time exceed the amount equal to (A) $10,000,000 minus (B) the outstanding letter
of credit obligations constituting Permitted Senior Indebtedness at such time;

                        (xi)    Indebtedness  of the Company and the  Guarantors
arising after the Original Issuance Date issued in exchange for, or the proceeds
of which are used to refinance,  replace or substitute for all or any portion of
the  Indebtedness  permitted  under clauses (iv) or (v) of this  definition (the
"REFINANCING   INDEBTEDNESS");   provided  that  as  to  any  such   Refinancing
Indebtedness, each of the following conditions is satisfied: (w) the Refinancing
Indebtedness shall have a weighted average life to maturity and a final maturity
equal to or greater  than the  weighted  average  life to maturity and the final
maturity,  respectively,  of the Indebtedness  being  refinanced,  replaced,  or
substituted for, (x) the Refinancing Indebtedness shall rank in right of payment
no more senior than, and be at least as subordinated (if  subordinated)  to, the
obligations under this Note as the Indebtedness  being  refinanced,  replaced or
substituted for, (y) such extension,  refinancing or modification is pursuant to
terms  that  are not  less  favorable  to the  Company,  its  Subsidiaries,  the
Collateral  Agent  and the  Holder  than  the  terms of the  Indebtedness  being
refinanced,  replaced,  or  substituted  for and (z) after giving effect to such
refinancing,   replacement  or  substitution,   the  principal  amount  of  such
Indebtedness is not

                                       53
<PAGE>

greater than the principal amount of Indebtedness  outstanding immediately prior
to  such  refinancing,  replacement  or  substitution  (or  in the  case  of the
refinancing,  replacement or substitution of or for a revolving credit facility,
the aggregate of the commitments of the lender or lenders under such facility);

                        (xii)   In addition to all other Permitted Indebtedness,
Subordinated  Indebtedness of the Company or any Subsidiary  arising on or after
the Original  Issuance Date,  provided that (w) the Collateral  Agent shall have
received not less than ten (10) days prior  written  notice of the  intention of
the Company or such  Subsidiary to incur such  Indebtedness,  which notice shall
set forth in reasonable  detail  satisfactory  to the Holders the amount of such
Indebtedness,  the person or persons to whom such Indebtedness will be owed, the
interest rate, the schedule of repayments and maturity date with respect thereto
and such other information as the Holders may request with respect thereto,  (x)
the  Holders  shall have  received  true,  correct  and  complete  copies of all
agreements,  documents and instruments  evidencing or otherwise  related to such
Indebtedness,  (y) in no event  shall  the  aggregate  principal  amount of such
Indebtedness at any time outstanding  exceed  $40,000,000 and (z) as of the date
of incurring such  Indebtedness  and after giving effect thereto,  no Default or
Event of Default shall exist or have occurred;

                        (xiii)  Indebtedness of the Company and its Subsidiaries
arising after the Original  Issuance Date consisting of obligations on surety or
appeal  bonds;  provided  that,  (x) such  surety or appeal  bonds  arise in the
ordinary  course  of  business  and  do  not  exceed  at  any  time  outstanding
$5,000,000,  and (y) in connection with any performance bonds issued by a surety
or other person, the issuer of such bond shall have waived in writing any rights
in or to, or other  interest in, any of the  Collateral  (other than deposits or
pledges of cash  permitted to secure such  Indebtedness  under clause (x) of the
definition of the term Permitted  Liens) in an agreement,  in form and substance
satisfactory to the Collateral Agent.

                        (xiv)   Indebtedness  of Sea  Master  Hong Kong  arising
after the Original Issuance Date to Protex in an aggregate  principal amount not
to exceed  $2,000,000  at any time,  provided  that, as of the date of incurring
such  Indebtedness  and after  giving  effect  thereto,  no  Default or Event of
Default shall exist or have occurred; and

                        (xv)    Indebtedness  consisting of liabilities incurred
under Title IV of ERISA in respect of any plan (other than a Multiemployer Plan)
covered by Title IV of ERISA and  maintained for employees of such Person or any
of its ERISA  Affiliates and withdrawal  liability  incurred under ERISA by such
Person or any of its ERISA  Affiliates in respect of any  Multiemployer  Plan to
the extent that in each case such Indebtedness does not otherwise  constitute or
give rise to an Event of Default;

                        (xvi)   incentive bonus plans and other employee benefit
plans of the Company  and/or its  Subsidiaries  to the extent  that  obligations
under such plans constitute "Indebtedness"; and

                        (xvii)  trade   payables  or  other   accounts   payable
incurred in the ordinary  course of the Company's or any  Subsidiary's  business
and not  outstanding  for more than one hundred and twenty (120) days after such
amount is due by the Company or such Subsidiary

                                       54
<PAGE>

or, if outstanding  longer,  that are being contested or disputed by the Company
and/or such Subsidiary in good faith in the ordinary course of business.

                (aaa)   "PERMITTED LIENS" means:

                        (i)     Liens securing the obligations under the Notes;

                        (ii)    Liens   on   the    Collateral    securing   the
Indebtedness evidenced by the Senior Loan;

                        (iii)   Liens securing the payment of taxes, assessments
or other  governmental  charges or levies either not yet overdue or the validity
of which are being contested in good faith by appropriate proceedings diligently
pursued and  available to the Company,  or Guarantor or any other  Subsidiary of
the Company,  as the case may be and in respect of which adequate  reserves have
been set aside on its books and for which  payment is not  required by the terms
of Section 14(x);

                        (iv)    Liens   constituting   purchase  money  security
interests  in  equipment  (including  Capitalized  Leases)  and  purchase  money
mortgages,  deeds of trust, deeds to secure debt or similar  instruments on real
property to secure Indebtedness  permitted under clause (v) of the definition of
the term "Permitted Indebtedness";

                        (v)     Liens   imposed  by  law,   such  as  carriers',
warehousemen's, mechanics', materialmen's and other similar Liens arising in the
ordinary course of business and securing  obligations  (other than  Indebtedness
for  borrowed  money)  that are not overdue by more than thirty (30) days or are
being contested in good faith and by appropriate  proceedings promptly initiated
and diligently  conducted;  provided that they are subordinate to the Collateral
Agent's Liens on the  Collateral  except to the extent of customary fees payable
in respect of such obligations),  and a reserve or other appropriate  provision,
if any, as shall be required by GAAP shall have been made therefor;

                        (vi)    Liens described on SCHEDULE 28(zz),  but not the
extension  of  coverage  thereof  to  other  property  or  the  increase  of the
Indebtedness  secured  thereby  (other  than in respect of accrued  interest  in
accordance with the terms thereof);

                        (vii)   Liens and the right of setoff  against  deposits
of cash by the Company,  any Guarantor or any Subsidiary in the ordinary  course
of business with any  financial  institution  at which a deposit  account of the
Company,  such Guarantor or such Subsidiary is maintained to secure  obligations
of the Company,  such Guarantor or such Subsidiary to such financial institution
in  connection  with  such  deposit  account  and the cash  management  services
provided by such financial  institution  for which such deposit  account is used
consistent  with the current  practices of the Company,  such  Guarantor or such
Subsidiary as of the date hereof;  provided that,  such Liens are subordinate to
the Collateral Agent's Liens on the Collateral except to the extent of customary
fees,  items  returned  unpaid  and  overdrafts   payable  in  respect  of  such
obligations;

                        (viii)  Liens arising from (i) operating  leases and the
precautionary  UCC  financing  statement  filings  in respect  thereof  and (ii)
equipment or other

                                       55
<PAGE>

materials  which are not owned by the Company,  any Guarantor or any  Subsidiary
located on the premises of the Company,  such Guarantor or such  Subsidiary (but
not in connection with, or as part of, the financing  thereof) from time to time
in the ordinary course of business and consistent with current  practices of the
Company,  such Guarantor or such Subsidiary of the Company or such Guarantor and
the precautionary UCC financing statement filings in respect thereof;

                        (ix)    Liens   in   favor  of   customs   and   revenue
authorities  arising as a matter of law to secure  payment of customs  duties in
connection with importation of goods in the ordinary course of business;

                        (x)     deposits  and  pledges  of  cash   securing  (i)
obligations incurred in respect of workers' compensation, unemployment insurance
or other forms of  governmental  insurance or benefits,  (ii) the performance of
bids,  tenders,  leases,  contracts  (other  than for the  payment of money) and
statutory  obligations or (iii)  obligations on surety or appeal bonds permitted
under clause (xiii) of the definition of the term Permitted Indebtedness;

                        (xi)    easements,   zoning   restrictions  and  similar
encumbrances  on real property  owned by the Company or any Subsidiary and minor
irregularities  in the title thereto that do not (x) secure  obligations for the
payment of money, or (y) materially impair the value of such property or its use
by the Company or any  Subsidiary in the normal conduct of the Company's or such
Subsidiary business;

                        (xii)   Liens  resulting  from any  judgment or award so
long as (x) such judgment or award does not constitute an Event of Default under
Section  4(a)(xv)  and (y) the  enforcement  of such  judgment or award has been
stayed by reason of a pending appeal or otherwise;

                        (xiii)  licenses in respect of Intellectual  Property to
the  extent  permitted  hereunder  or  under  the  other  Transaction  Documents
(including, without limitation, Licenses);

                        (xiv)   Liens  of the  financial  institution  that  has
issued  letters of credit or bank  guarantees  for the account of the Company or
any Guarantor  giving rise to Indebtedness of such Person permitted under clause
(x) of the definition of Permitted  Indebtedness on cash and Cash Equivalents of
such  Person  to  secure  the   reimbursement   obligations  to  such  financial
institution in respect of such letters of credit and bank  guarantees;  provided
that, in no event shall the aggregate  amount of such cash and Cash  Equivalents
at any time exceed the amount  equal to one hundred  five (105%)  percent of the
undrawn amount of such letters of credit and bank guarantees then outstanding;

                        (xv)    Liens to secure Refinancing  Indebtedness to the
extent such Liens are otherwise permitted hereunder;

                        (xvi)   pledges of any cash earnest money deposits,  not
to exceed $3,000,000 in the aggregate, by the Company or any Subsidiary pursuant
to a letter of interest or  purchase  agreement  executed by the Company or such
Subsidiary in connection with any Permitted Acquisition;

                                       56
<PAGE>

                        (xvii)  Liens  arising  under  Section  14(t)(v)  on the
assets  of a  Subsidiary  that is not  the  Company  or a  Guarantor  to  secure
obligations  arising  under loans or advances by the Company or any Guarantor to
such Subsidiary; and

                        (xviii) the  pledge  of  cash   collateral  to  GMAC  in
connection with that certain  Termination and Release  Agreement dated as of the
Original Issuance Date in respect of letters of credit issued for the benefit of
the Company and/or Guarantors.

                (bbb)   "PERMITTED  SENIOR  INDEBTEDNESS"  means (i) the  Senior
Loan  and  all  related  obligations;  PROVIDED,  HOWEVER,  that  the  aggregate
principal  amount  of  Permitted  Senior  Indebtedness  outstanding  at any time
thereunder  does not at any time exceed the  Maximum  Senior Debt (as defined in
the  Intercreditor  Agreement),  and (ii)  any  guaranties  of the  Indebtedness
described in clause (i) hereof.

                (ccc)   "PERSON"  means  an  individual,   a  limited  liability
                        company, a partnership,  a joint venture, a corporation,
                        a  trust,  an  unincorporated  organization,  any  other
                        entity  and a  government  or any  department  or agency
                        thereof.

                (ddd)   "PIPE  NOTES"  means  those  certain  convertible  notes
issued by Company  to the  Common  PIPE  Buyers  (as  defined in the  Securities
Purchase  Agreement)  on the date  hereof in the  aggregate  original  principal
amount of $1,000,000.

                (eee)   "PRINCIPAL   MARKET"  means,  from  time  to  time,  the
Eligible  Market  upon  which  the  Common  Stock  is  admitted  or  listed  and
principally trades.

                (fff)   "REAL  PROPERTY"  means  all  now  owned  and  hereafter
acquired real property of the Company and each Subsidiary,  including  leasehold
interests,  together  with all  buildings,  structures,  and other  improvements
located thereon and all licenses,  easements and appurtenances relating thereto,
wherever located.

                (ggg)   "REDEMPTION NOTICES" means,  collectively,  the Event of
Default  Redemption  Notices,  the Change of Control  Redemption Notices and the
Optional  Redemption Notice, each of the foregoing,  individually,  a Redemption
Notice.

                (hhh)   "REDEMPTION PREMIUM" means (i) in the case of the Events
of Default described in Section 4(a)(i) - (vi) and (ix) - (xix), 120% or (ii) in
the case of the Events of Default described in Section 4(a)(vii) - (viii), 100%.

                (iii)   "REDEMPTION  PRICES" means,  collectively,  the Event of
Default  Redemption  Price,  Optional  Redemption  Price and  Change of  Control
Redemption Price and, each of the foregoing, individually, a Redemption Price.

                (jjj)   "REGISTRATION   RIGHTS  AGREEMENT"  means  that  certain
registration  rights  agreement  dated as of the Original  Issuance  Date by and
among the Company and the initial  holders of the Notes relating to, among other
things, the registration for resale of the Common Stock issuable upon conversion
of the Notes and exercise of the  Warrants as amended by Amendment  No. 1 to the
Registration  Rights  Agreement  dated  May  __,  2007 as the  foregoing  may be
amended, restated, supplemented and/or modified from time to time.

                                       57
<PAGE>

                (kkk)   "REISSUE DATE" means May __, 2007.

                (lll)   "REQUIRED   HOLDERS"   means   the   holders   of  Notes
representing at least a majority of the aggregate  principal amount of the Notes
then  outstanding;  provided  that any Note that is held by an  Affiliate of the
Company (other than the New Holders)  shall not be deemed to be outstanding  for
purposes of the determination of "Required Holders".

                (mmm)   Intentionally blank.

                (nnn)   "SEC" means the United  States  Securities  and Exchange
Commission.

                (ooo)   "SECURITIES  PURCHASE  AGREEMENT"   means  that  certain
Securities  Purchase  Agreement  (Notes and  Warrants)  dated as of the Original
Issuance Date by and among Maritime Logistics US Holdings Inc. (and the Company,
pursuant to a Joinder  Agreement dated as of the Original Issuance Date) and the
holders of the Notes, pursuant to which the Company issued the Notes, as amended
by that certain First  Amendment to  Securities  Purchase  Agreement  (Notes and
Warrants)  dated as of January 26, 2007 and that  certain  Second  Amendment  to
Securities  Purchase  Agreement  (Notes and Warrants) and the First Amendment to
Joinder  Agreement  dated as of May __, 2007,  as the  foregoing may be amended,
restated, supplemented and/or modified from time to time.

                (ppp)   "SENIOR  LOAN" the  principal  of,  interest on, and all
fees  and  other  amounts  (including,   without   limitation,   any  reasonable
out-of-pocket costs,  enforcement expenses (including  reasonable  out-of-pocket
legal  fees  and  disbursements),   collateral  protection  expenses  and  other
reimbursement or indemnity  obligations  relating thereto) and all other amounts
payable by the Company  and/or any of its  Subsidiaries,  whether as  principal,
surety,  endorser,  guarantor  or  otherwise,  whether now existing or hereafter
arising, whether arising before or after the commencement of any case in respect
of the Company and/or any of its Subsidiaries under the U.S.  Bankruptcy Code or
any  other  insolvency  proceeding  (and  including,   without  limitation,  any
principal,  interest,  fees, costs,  expenses and other amounts,  whether or not
such  amounts  are  allowable  either  in whole or in part,  in any such case or
similar proceeding),  whether direct or indirect, absolute or contingent,  joint
or several,  due or not due,  primary or secondary,  liquidated or unliquidated,
secured or  unsecured,  arising  under or in  connection  with the  Senior  Loan
Agreement and all  agreements,  documents and  instruments  at any time executed
and/or  delivered by the Company and/or any of its  Subsidiaries  to, with or in
favor of the agent under the Senior Loan  Agreement in  connection  therewith or
related thereto,  as all of the foregoing now exist or may hereafter be amended,
modified,  supplemented,  extended, renewed, restated,  refinanced,  replaced or
restructured  (in whole or in part and including any  agreements  with, to or in
favor  of any  other  agent or  lender  or  group  of  lenders  that at any time
refinances,  replaces or  succeeds  to all or any portion of such  obligations),
provided that the principal amount  outstanding at any time thereunder shall not
exceed the Maximum Senior Debt (as defined in the Intercreditor Agreement).

                (qqq)   "SENIOR   LOAN   AGREEMENT"   means  that  certain  Loan
Agreement  dated as of the Original  Issuance Date by and among Fortress  Credit
Corp.,  in its capacity as  administrative  agent for the lenders party thereto,
the lenders party thereto (such lenders and

                                       58
<PAGE>

their respective successors and assigns, together with Fortress Credit Corp., as
administrative  agent or any successor or replacement agent, being collectively,
"SENIOR  LENDERS"),  the Company and certain of the  Subsidiaries  as amended to
date and as amended, restated, supplemented and/or modified from time to time.

                (rrr)   "SENIOR  LOAN  DOCUMENTS"  has the same meaning as "LOAN
DOCUMENTS" set forth in the Senior Loan Agreement.

                (sss)   "SUBORDINATED  INDEBTEDNESS" means Indebtedness (secured
or  unsecured)  incurred by the  Company  and/or its  Subsidiaries  that is made
expressly subordinate in right of payment to the Indebtedness  evidenced by this
Note, as reflected in a written agreement  acceptable to the Holder and approved
by the Holder in writing and expressly  includes the  Indebtedness  evidenced by
the PIPE Notes; provided that no such Indebtedness shall provide at any time for
(1) the payment, prepayment,  repayment,  repurchase or defeasance,  directly or
indirectly,  of any principal or premium,  if any, thereon until ninety-one (91)
days after the  Maturity  Date or later and (2) other  than with  respect to the
PIPE Notes,  total cash interest at a rate in excess of eleven  percent  (11.0%)
per annum.

                (ttt)   Intentionally blank.

                (uuu)   "SUBSIDIARY"  means,  from time to time,  any  entity in
which the Company directly or indirectly, owns any of the capital stock or holds
an equity or similar interest.

                (vvv)   "SUCCESSOR  ENTITY"  means the Person,  which may be the
Company,  formed by, resulting from or surviving any Fundamental  Transaction or
the  Person  with  which  such  Fundamental  Transaction  shall  have been made,
provided that if such Person is not a publicly  traded entity whose common stock
or  equivalent  equity  security  is quoted or listed for trading on an Eligible
Market, Successor Entity shall mean such Person's Parent Entity.

                (www)   "TRADING DAY" means any day on which the Common Stock is
traded on the Principal Market, or, if the Principal Market is not the principal
trading  market for the Common Stock,  then on the Eligible  Market which is the
principal  securities exchange or securities market on which the Common Stock is
then traded;  provided that "Trading Day" shall not include any day on which the
Common Stock is scheduled to trade on such  exchange or market for less than 4.5
hours or any day that the Common  Stock is  suspended  from  trading  during the
final hour of trading on such  exchange or market (or if such exchange or market
does not  designate in advance the closing  time of trading on such  exchange or
market, then during the hour ending at 4:00:00 p.m., New York Time).

                (xxx)   "VOTING  STOCK" of a Person means  capital stock of such
Person of the class or classes  pursuant to which the holders  thereof  have the
general  voting  power to elect,  or the general  power to  appoint,  at least a
majority  of the  board  of  directors,  managers  or  trustees  of such  Person
(irrespective  of whether or not at the time capital stock of any other class or
classes  shall have or might have voting power by reason of the happening of any
contingency).

                                       59
<PAGE>

                (yyy)   "WARRANTS" has the meaning  ascribed to such term in the
Securities Purchase Agreement, and shall include all warrants issued in exchange
therefor or replacement thereof.

                (zzz)   "WEIGHTED  AVERAGE PRICE" means,  for any security as of
any date,  the dollar  volume-weighted  average  price for such  security on the
Principal  Market during the period beginning at 9:30:01 a.m., New York Time (or
such other time as the Principal Market publicly  announces is the official open
of trading),  and ending at 4:00:00  p.m.,  New York Time (or such other time as
the Principal  Market  publicly  announces is the official  close of trading) as
reported  by  Bloomberg  through  its  "Volume at Price"  functions,  or, if the
foregoing  does not apply,  the  dollar  volume-weighted  average  price of such
security in the  over-the-counter  market on the  electronic  bulletin board for
such security  during the period  beginning at 9:30:01  a.m.,  New York Time (or
such  other time as such  market  publicly  announces  is the  official  open of
trading),  and ending at 4:00:00 p.m., New York Time (or such other time as such
market  publicly  announces  is the  official  close of  trading) as reported by
Bloomberg,  or, if no dollar volume-weighted  average price is reported for such
security by  Bloomberg  for such hours,  the average of the highest  closing bid
price and the  lowest  closing  ask price of any of the  market  makers for such
security  as  reported in the "pink  sheets" by Pink  Sheets LLC  (formerly  the
National  Quotation  Bureau,  Inc.).  If the  Weighted  Average  Price cannot be
calculated  for a security on a particular  date on any of the foregoing  bases,
the  Weighted  Average  Price of such  security  on such date  shall be the fair
market  value as mutually  determined  by the  Company  and the  Holder.  If the
Company  and the Holder are unable to agree upon the fair  market  value of such
security,  then such dispute shall be resolved  pursuant to Section 23. All such
determinations to be appropriately adjusted for any stock dividend, stock split,
stock combination or other similar transaction during the applicable calculation
period.

        (29)    DISCLOSURE.  Notwithstanding  any  other  provisions  set  forth
herein  or in  any  of  the  other  Transaction  Documents  (including,  without
limitation,  any reporting and/or notice  requirements),  the Company shall not,
and  shall  cause  its  Subsidiaries  and  each of  their  respective  officers,
directors,  employees and agents,  not to, provide the Holder with any material,
nonpublic information regarding, the Company or any if its Subsidiaries from and
after the filing of the 8-K Filing  with the SEC  without  the  express  written
consent of the Holder.  If the Holder has, or believes it has, received from the
Company any such material, nonpublic information regarding the Company or any of
the Subsidiaries,  it shall provide the Company with written notice thereof. The
Company  shall,  within four (4) Trading  Days of receipt of such  notice,  make
public disclosure of such material, nonpublic information unless (i) the Company
has in good faith  determined  that the  matters  relating to such notice do not
constitute material non-public  information about the Company or (ii) the notice
is received from a Holder that is an Affiliate,  shareholder,  officer, director
or employee of the Company or any of its Subsidiaries.  In the event of a breach
of the foregoing  covenant by the Company,  any of its  Subsidiaries,  or any of
their respective officers,  directors,  employees and agents, in addition to any
other remedy provided herein or in the Transaction  Documents,  the Holder shall
have  the  right to make a public  disclosure,  in the form of a press  release,
public advertisement or otherwise, of such material,  nonpublic information with
the prior  approval by the Company.  Holder shall not have any  liability to the
Company,  any  of  its  Subsidiaries,  or  any  of  their  respective  officers,
directors, employees, stockholders or agents for any such disclosure. Subject to
the foregoing,  none of the Company, any of its Subsidiaries or the Holder shall
issue any press  releases  or any other  public

                                       60
<PAGE>

statements  in  respect  of  the  transactions  contemplated  hereby;  PROVIDED,
HOWEVER,  that the Company shall be entitled,  without the prior approval of the
Holder,  to make any press release or other public disclosure in respect of such
transactions   (i)  in   substantial   conformity   with  the  8-K   Filing  and
contemporaneously  therewith and (ii) as is required by applicable  Requirements
of Law.

        (30)    INTERCREDITOR  AGREEMENT.  This Note and each of the  provisions
hereof shall be subject to the Intercreditor Agreement.

                            [Signature Page Follows]

                                       61
<PAGE>

               IN WITNESS  WHEREOF,  the Company has caused this Note to be duly
executed as of the Reissue Date set out above.

                              SUMMIT GLOBAL LOGISTICS, INC., formerly known as
                              Aerobic Creations, Inc.

                              By:_________________________________________
                                   Name:
                                   Title:

<PAGE>

                                    EXHIBIT I

                                     COMPANY

                                CONVERSION NOTICE

Reference is made to the Amended and Restated  Senior Secured  Convertible  Note
(the  "NOTE")  issued to the  undersigned  by Company.  In  accordance  with and
pursuant to the Note,  the  undersigned  hereby elects to convert the Conversion
Amount (as  defined  in the Note) of the Note  indicated  below  into  shares of
Common Stock par value $0.001 per share (the "COMMON STOCK") of the Company,  as
of the date specified below.

        Date of Conversion:_____________________________________________________

        Aggregate Conversion Amount to be converted:____________________________

Please confirm the following information:_______________________________________

        Conversion Price:_______________________________________________________

        Number of shares of Common Stock to
        be issued:______________________________________________________________

        Installment Amounts to be reduced and
        amount of reduction:____________________________________________________

Please  issue the Common  Stock into  which the Note is being  converted  in the
following name and to the following address:

        Issue to:_______________________________________________________________

                 _______________________________________________________________

                 _______________________________________________________________

        Facsimile Number:_______________________________________________________

        Authorization:__________________________________________________________

               By:______________________________________________________________

                   Title:_______________________________________________________

Dated:__________________________________________________________________________

        Account Number:_________________________________________________________
          (if electronic book entry transfer)

        Transaction Code Number:________________________________________________
          (if electronic book entry transfer)

<PAGE>

                                 ACKNOWLEDGMENT

                The  Company  hereby  acknowledges  this  Conversion  Notice and
hereby directs the Transfer Agent to issue the above indicated  number of shares
of Common Stock in accordance with the Transfer Agent Instructions dated _______
__, 200_ from the Company and acknowledged and agreed to by [Continental]

                          SUMMIT GLOBAL LOGISTICS, INC.

                          By:_________________________________________
                             Name:
                             Title:EX-4.17

                     FORM OF SENIOR SECURED CONVERTIBLE NOTE

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES  REPRESENTED BY THIS CERTIFICATE
NOR THE  SECURITIES  INTO  WHICH  THESE  SECURITIES  ARE  CONVERTIBLE  HAVE BEEN
REGISTERED  UNDER THE  SECURITIES ACT OF 1933, AS AMENDED,  OR APPLICABLE  STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,  SOLD,  TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE  REGISTRATION  STATEMENT  FOR
THE SECURITIES  UNDER THE SECURITIES ACT OF 1933, AS AMENDED,  OR (B) AN OPINION
OF COUNSEL,  IN A GENERALLY  ACCEPTABLE FORM, THAT  REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD  PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING  THE  FOREGOING,  SUBJECT TO  COMPLIANCE  WITH  APPLICABLE
SECURITIES  LAWS, THE  SECURITIES MAY BE PLEDGED IN CONNECTION  WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
ANY  TRANSFEREE  OF THIS NOTE  SHOULD  CAREFULLY  REVIEW THE TERMS OF THIS NOTE,
INCLUDING  SECTIONS 3(C)(III) AND 18(A) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED
BY THIS NOTE AND,  ACCORDINGLY,  THE SECURITIES  ISSUABLE UPON CONVERSION HEREOF
MAY BE LESS THAN THE AMOUNTS  SET FORTH ON THE FACE  HEREOF  PURSUANT TO SECTION
3(C)(III)  OF  THIS  NOTE.  THIS  INSTRUMENT  IS  SUBJECT  TO  THE  TERMS  OF  A
INTERCREDITOR  AGREEMENT BY AND BETWEEN  FORTRESS CREDIT CORP., AS AGENT (OR ANY
SUCCESSOR OR REPLACEMENT  AGENT) FOR CERTAIN OTHER FINANCIAL  INSTITUTIONS UNDER
THE SENIOR LOAN AGREEMENT (HEREINAFTER DEFINED), AND LAW DEBENTURE TRUST COMPANY
OF NEW YORK (OR ANY SUCCESSOR OR REPLACEMENT  COLLATERAL AGENT), IN ITS CAPACITY
AS  COLLATERAL  AGENT,  FOR THE HOLDER OF THIS NOTE AND THE HOLDERS OF THE OTHER
NOTES,  DATED AS OF NOVEMBER 8, 2006 AS AMENDED  PURSUANT TO AMENDMENT  NO. 1 TO
INTERCREDITOR AND SUBORDINATION AGREEMENT DATED MAY __, 2007 (AS THE SAME MAY BE
AMENDED  SUPPLEMENTED,  RESTATED,  NOVATED OR REPLACED  (INCLUDING IN CONNECTION
WITH  REPLACEMENT  SENIOR  FINANCING)  FROM  TIME TO  TIME,  THE  "INTERCREDITOR
AGREEMENT").  THIS  INSTRUMENT IS SUBJECT TO THE TERMS OF A SECURITIES  PURCHASE
AGREEMENT  (NOTES AND  WARRANTS),  DATED AS OF  NOVEMBER  8, 2006,  BY AND AMONG
MARITIME  LOGISTICS US HOLDINGS INC., THE BUYERS LISTED  THEREIN,  LAW DEBENTURE
TRUST COMPANY OF NEW YORK, AS COLLATERAL AGENT FOR SUCH BUYERS AND SUMMIT GLOBAL
LOGISTICS, INC. PURSUANT TO THAT CERTAIN JOINDER AGREEMENT, DATED AS OF NOVEMBER
8, 2006, AS SUCH  SECURITIES  PURCHASE  AGREEMENT  HAS BEEN  AMENDED,  RESTATED,
SUPPLEMENTED AND/OR MODIFIED TO DATE AND/OR FROM TIME TO TIME.

                          SUMMIT GLOBAL LOGISTICS, INC.

<PAGE>

                         SENIOR SECURED CONVERTIBLE NOTE

Original Issuance Date: May __, 2007    Original Principal Amount: U.S. $_______

               FOR VALUE  RECEIVED,  Summit Global  Logistics,  Inc., a Delaware
corporation (formerly known as Aerobic Creations,  Inc., the "COMPANY"),  hereby
promises  to pay to the  order of  [_________]or  registered  permitted  assigns
("HOLDER") the amount set out above as the Original Principal Amount (as reduced
pursuant to the terms hereof pursuant to redemption (or prepayment),  conversion
or  otherwise,  the  "PRINCIPAL")  when due,  whether upon the Maturity Date (as
defined below),  acceleration,  redemption (or prepayment) or otherwise (in each
case in accordance  with the terms hereof) and to pay interest  ("INTEREST")  on
any  outstanding  Principal at the applicable  Interest Rate,  from May __, 2007
(the  "INTEREST  COMMENCEMENT  DATE")  until the same  becomes due and  payable,
whether  upon  an  Interest  Date  (as  defined   below),   the  Maturity  Date,
acceleration,  conversion, redemption (or prepayment) or otherwise (in each case
in accordance  with the terms  hereof).  This Senior  Secured  Convertible  Note
(including all Senior Secured Convertible Notes issued in exchange,  transfer or
replacement hereof, as amended, restated, supplemented and/or modified from time
to time in  accordance  with the  provisions  hereof,  this "NOTE") is one of an
issue of Senior  Secured  Convertible  Notes and  Amended  and  Restated  Senior
Secured  Convertible Notes issued pursuant to the Securities  Purchase Agreement
(as defined  below) on the Original  Issuance  Date (such other  Senior  Secured
Convertible Notes and Amended and Restated Senior Secured  Convertible Notes, as
amended,  restated,  supplemented and/or modified to date and from time to time,
the "OTHER NOTES"). Certain capitalized terms used herein are defined in Section
28.  Capitalized  terms used but not  defined  herein  shall  have the  meanings
ascribed to them in the Securities Purchase Agreement.

               (1) MATURITY.  On the Maturity Date, the Company shall pay to the
Holder an amount in cash  representing  all outstanding  Principal,  accrued and
unpaid  Interest  and  accrued  and unpaid Late  Charges on such  Principal  and
Interest.  The "MATURITY  DATE" shall be November 8, 2011, as may be extended at
the option of the Holder (i) in the event that,  and for so long as, an Event of
Default (as defined in Section  4(a)) shall have  occurred and be  continuing on
the Maturity  Date (as may be extended  pursuant to this Section 1) or any event
that shall have occurred and be continuing that with the passage of time and the
failure to cure would  result in an Event of Default  and (ii)  through the date
that is ten (10) Business Days after the  consummation of a Change of Control in
the event that a Change of Control is publicly  announced or a Change of Control
Notice (as defined in Section  5(b)) is delivered  prior to the  Maturity  Date.
Except  as  specifically  set  forth  in  Section  8  hereof,  this  Note is not
voluntarily prepayable.

               (2)  INTEREST;  INTEREST  RATE.  (a)  Interest  on the  Principal
then-outstanding under this Note (i) shall accrue interest at the Interest Rate,
commencing  on the  Interest  Commencement  Date,  (ii) shall be computed on the
basis of a 360-day  year  comprised  of twelve  (12)  thirty (30) day months and
(iii) shall be payable in arrears for each Calendar  Quarter on the first day of
the  succeeding  Calendar  Quarter  during the period  beginning on the Interest
Commencement  Date and ending on, and  including,  the Maturity  Date (each,  an

                                       2

<PAGE>

"INTEREST  DATE") with the first Interest Date being July 1, 2007 provided that,
all Interest  accruing for the five (5)  consecutive  Calendar  Quarters  ending
after the Original Issuance Date, commencing with the Calendar Quarter ending on
June 30, 2007, shall, at the option of the Company,  after giving written notice
to the Holder on or prior to the first day of each such  Calendar  Quarter other
than with respect to Calendar Quarter ending on June 30, 2007 (in which case, no
such notice is required),  accrue in arrears on the first day of the  succeeding
Calendar  Quarter and shall not be payable  until the Maturity Date (or earlier,
in the event that all  Principal  hereunder  is being  converted to Common Stock
(prior  to the  Maturity  Date)  in  accordance  with  this  Section  2,  on the
Conversion Date with respect  thereto).  Interest on this Note shall accrue from
the  Interest  Commencement  Date until the earlier to occur of the date (i) the
Principal  Amount  is paid or,  if a paying  agent is  engaged  by the  Company,
transferred to such paying agent with  instructions to pay the same and (ii) all
amounts  outstanding under this Note are converted to Common Stock in accordance
with the provisions  hereof.  Interest shall be payable or accrue, as applicable
in accordance with this Section 2(a), on each Interest Date to the record holder
of this  Note on the  applicable  Interest  Date,  and to the  extent  that  any
principal amount of this Note is converted prior to such Interest Date,  accrued
and unpaid  Interest in respect of such converted  principal  amount and accrued
and  unpaid  Late  Charges in respect  of such  converted  principal  amount and
Interest shall be paid on the  Conversion  Date (as defined below) to the record
holder of this Note on the applicable Conversion Date, in cash.

                    (b) Interest on this Note that is payable, and is punctually
paid or duly  provided  for, on any Interest Date shall be paid to the Person in
whose name this Note is  registered  at the close of business on the Record Date
for such  interest  at the office or agency of the Company  maintained  for such
purpose  or at the  office of a payment  agent  located in the state of New York
engaged by the Company for the  purpose of making  payments  under this Note and
the Other  Notes.  Each  payment of interest on this Note shall be made by check
mailed  to the  address  of the  Holder  specified  in the  register  of  Notes;
PROVIDED, HOWEVER, that, at the request of the Holder in writing to the Company,
interest on the Holder's  Note(s) shall be paid by wire transfer in  immediately
available  funds  in  accordance  with the  written  wire  transfer  instruction
supplied  by the  Holder  from  time to time to the  Company  at least  ten (10)
Business Days prior to the applicable Interest Date or Conversion Date.

                    (c) From and after the occurrence and during the continuance
of an Event of Default,  the  Interest  Rate shall be  increased  to two percent
(2.0%) in excess of the Interest  Rate  otherwise  payable at such time.  In the
event that such Event of Default is subsequently cured or waived, the adjustment
referred to in the preceding sentence shall cease to be effective as of the date
of such cure or waiver;  PROVIDED that, the Interest as calculated and unpaid at
such  increased  rate  during the  continuance  of such  Event of Default  shall
continue  to apply to the extent  relating to the days after the  occurrence  of
such Event of Default to but  excluding the date of cure or waiver of such Event
of  Default.  For  purposes  of this  Section  2(c),  the period of the Event of
Default in respect of Section  4(a)(i) only,  shall commence the first day after
the grace periods  specified  therein expire and shall end on the day upon which
the  applicable  Registration  Statement  becomes  effective  or  again  becomes
available, as applicable.

               (3)  CONVERSION  OF NOTES.  This Note shall be  convertible  into
shares of the Company's  common  stock,  par value $0.001 per share (the "COMMON
STOCK"), on the terms and conditions set forth in this Section 3.

                                       3

<PAGE>

                    (a) CONVERSION  RIGHT.  Subject to the provisions of Section
3(d), at any time or times on or after the Original  Issuance  Date,  the Holder
shall  be   entitled   to  convert   all  or  any   portion  of  the   Principal
then-outstanding  into fully paid and  nonassessable  shares of Common  Stock in
accordance  with Section 3(c), at the Conversion  Rate (as defined  below).  The
Company  shall not  issue  any  fraction  of a share of  Common  Stock  upon any
conversion.  If the  issuance  would  result in the  issuance of a fraction of a
share of Common  Stock,  the  Company  shall  round such  fraction of a share of
Common Stock up or down, as applicable,  to the nearest whole share. The Company
shall pay any and all taxes that may be payable in respect of the  issuance  and
delivery of shares of Common Stock upon conversion of any Principal.

                    (b)  CONVERSION  RATE.  The number of shares of Common Stock
issuable upon conversion of any Conversion Amount pursuant to Section 3(a) shall
be determined by dividing (x) such Conversion Amount by (y) the Conversion Price
(the "CONVERSION RATE").

                         (i)  "CONVERSION  AMOUNT"  means  the  portion  of  the
Principal  to be  converted,  redeemed  or  otherwise  in  respect  of which the
applicable determination is being made.

                         (ii)  "CONVERSION  PRICE" means,  as of any  Conversion
Date (as  defined  below)  or other  date of  determination,  $5.50 per share of
Common Stock.

                    (c) MECHANICS OF CONVERSION.

                         (i)  OPTIONAL  CONVERSION.  To convert  any  Conversion
Amount into shares of Common Stock on any date (a "CONVERSION DATE"), the Holder
shall (A) transmit by facsimile (or otherwise deliver),  for receipt on or prior
to 11:59 p.m.,  New York Time,  on such date,  a copy of an  executed  notice of
conversion in the form attached hereto as EXHIBIT I (the "CONVERSION NOTICE") to
the Company and (B) if required by Section  3(c)(iii),  surrender this Note to a
common  carrier  for  delivery  to the  Company  as  soon as  practicable  on or
following such date (or an  indemnification  undertaking in respect of this Note
in the case of its loss,  theft or  destruction).  On or before the second (2nd)
Trading Day  following the date of receipt of a Conversion  Notice,  the Company
shall transmit by facsimile a confirmation of receipt of such Conversion  Notice
to the Holder and the Company's  transfer  agent (the "TRANSFER  AGENT"),  which
confirmation  shall  constitute an  instruction to the Transfer Agent to process
such Conversion  Notice in accordance with the terms herein (the "SHARE DELIVERY
DATE"),  and (X)  provided  that  the  Transfer  Agent is  participating  in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer Program, the
applicable  registration  statement is effective under the 1933 Act and provided
that the Holder is  eligible  to receive  shares of Common  Stock  through  DTC,
credit such aggregate number of shares of Common Stock to which the Holder shall
be entitled to the Holder's or its designee's  balance  account with DTC through
its Deposit  Withdrawal Agent Commission system, or (Y) if the Transfer Agent is
not participating in the DTC Fast Automated  Securities  Transfer Program or the
Holder is not eligible to receive  shares of Common Stock through DTC, issue and
deliver to the address as specified in the  Conversion  Notice,  a  certificate,
registered in the name of the Holder or its  designee,  for the number of shares
of Common Stock to which the Holder shall be entitled, pay to the Holder in cash
an amount equal to the accrued and unpaid  Interest and Late Charges (as defined
in Section  24(b)),  if any, on the  Conversion  Amount up to and  including the
Conversion  Date.  The Holder

                                       4

<PAGE>

undertakes that whenever the Company  credits  securities as set forth in clause
(1)(X) of the  preceding  sentence,  (A) upon receipt of notice from the Company
that the applicable registration statement is not, or no longer is, effective in
respect of the resale of such  securities,  the Holder  will not  transfer  such
securities  (other than (I) in  connection  with a transfer,  wherein the Holder
provides the Company with an opinion of counsel  reasonably  satisfactory to the
Company, in a generally acceptable form, to the effect that such transfer may be
made without registration under the applicable  requirements of the 1933 Act, or
(II) the Holder  provides the Company with assurances  reasonably  acceptable to
the Company that the transfer may be effected  pursuant to Rule 144 or Rule 144)
until the Company notifies the Holder that the applicable registration statement
becomes  effective  (again),  and (B) the Holder  shall  indemnify  and hold the
Company  harmless  against any claim of securities laws violations in respect of
the transfer  (after the receipt of the first  notice from the Company  provided
for in clause (A) of this sentence but prior to the receipt of the second notice
from the Company  provided for in clause (A) of this  sentence) by the Holder of
any security as to which such credit at DTC has been  effected.  If this Note is
physically  surrendered for conversion as required by Section  3(c)(iii) and the
outstanding  Principal  of  this  Note  is  greater  than  the  Principal  being
converted,  then the Company shall, as soon as practicable and in no event later
than  three (3)  Business  Days after  receipt of this Note (the "NOTE  DELIVERY
DATE") and at its own  expense,  issue and  deliver to the holder a new Note (in
accordance  with Section  18(d))  representing  the  outstanding  Principal  not
converted.  The Person or Persons entitled to receive the shares of Common Stock
issuable upon a conversion of this Note shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on the Conversion Date.

                         (ii) COMPANY'S FAILURE TO TIMELY CONVERT.

                         (A)  CONVERSION  FAILURE.  Subject  to  the  terms  and
conditions of this Note, if the Company shall fail to issue a certificate to the
Holder or credit the Holder's  balance account with DTC for the number of shares
of  Common  Stock to  which  the  Holder  is  entitled  upon  conversion  of any
Conversion  Amount on or prior to the date which is three (3) Trading Days after
the Conversion  Date (a "CONVERSION  FAILURE"),  and if on or after such Trading
Day the Holder  purchases (in an open market  transaction  or otherwise)  Common
Stock to  deliver  in  satisfaction  of a sale by the  Holder  of  Common  Stock
issuable upon such  conversion  that the Holder  anticipated  receiving from the
Company (a "BUY-IN"),  then, in addition to all other remedies  available to the
Holder,  the Company  shall,  within three (3) Business  Days after the Holder's
request and in the Holder's discretion,  either (i) pay cash to the Holder in an
amount equal to the Holder's total purchase price  (including  reasonable out of
pocket brokerage commissions,  and other reasonable  out-of-pocket  expenses, if
any) for the shares of Common Stock so purchased (the "BUY-IN PRICE"),  at which
point the Company's  obligation to deliver such  certificate  (and to issue such
Common Stock) shall terminate,  or (ii) promptly honor its obligation to deliver
to the Holder a certificate or certificates  representing  such Common Stock and
pay cash to the  Holder in an amount  equal to the excess (if any) of the Buy-In
Price over the product of (A) such number of shares of Common  Stock,  times (B)
the Closing Bid Price on the Conversion Date.

                         (B) NOTICE OF VOID CONVERSION; ADJUSTMENT TO CONVERSION
PRICE. If for any reason the Holder has not received all of the shares of Common
Stock

                                       5

<PAGE>

prior to the tenth (10th)  Business Day after the Share  Delivery  Date in
respect of a  conversion  of this  Note,  other  than due to the  pendency  of a
dispute being resolved in accordance  with Section 23 (a "CONVERSION  FAILURE"),
then the Holder,  upon written  notice to the Company,  may void its  Conversion
Notice in  respect  of,  and  retain or have  returned,  as the case may be, any
portion  of this  Note  that has not been  converted  pursuant  to the  Holder's
Conversion Notice.

                         (iii)  BOOK-ENTRY.   Notwithstanding  anything  to  the
contrary  set forth  herein,  upon  conversion  of any  portion  of this Note in
accordance with the terms hereof, the Holder shall not be required to physically
surrender  this Note to the  Company  unless (A) all of the  Principal  is being
converted or (B) the Holder has provided the Company with prior  written  notice
(which notice may be included in a Conversion Notice)  requesting  reissuance of
this Note upon physical surrender of this Note. The Holder and the Company shall
maintain  records  showing the  Principal  converted  (and the Interest and Late
Charges paid in respect  thereof) and the dates of such conversions or shall use
such other method,  reasonably satisfactory to the Holder and the Company, so as
not to require physical surrender of this Note upon conversion.  Notwithstanding
the  foregoing,  if this Note is converted or redeemed as aforesaid,  the Holder
may not transfer this Note unless the Holder first  physically  surrenders  this
Note to the Company, whereupon the Company will forthwith issue and deliver upon
the order of the Holder a new Note of like tenor,  registered  as the Holder may
request,  representing in the aggregate the remaining  Principal  represented by
this Note. The Holder and any assignee, by acceptance of this Note,  acknowledge
and agree  that,  by  reason  of the  provisions  of this  paragraph,  following
conversion or redemption of any portion of this Note, the Principal of this Note
may be less than the principal amount stated on the face hereof.

                         (iv) PRO RATA CONVERSION;  DISPUTES.  In the event that
the Company receives a Conversion  Notice from more than one holder of Notes for
the same  Conversion Date and the Company can convert some, but not all, of such
portions of the Notes submitted for conversion,  the Company, subject to Section
3(d),  shall convert from each holder of Notes electing to have Notes  converted
on such date a pro rata amount of such holder's  portion of its Notes  submitted
for conversion  based on the principal  amount of Notes submitted for conversion
on such date by such holder  relative to the aggregate  principal  amount of all
Notes submitted for conversion on such date. In the event of a dispute as to the
number of shares of Common  Stock  issuable to the Holder in  connection  with a
conversion  of this Note,  the  Company  shall issue to the Holder the number of
shares of Common  Stock not in dispute and resolve  such  dispute in  accordance
with Section 23.

                    (d) LIMITATIONS ON CONVERSIONS.

                         (i) BENEFICIAL OWNERSHIP.  The Company shall not effect
any  conversion  of this  Note,  and the  Holder of this Note shall not have the
right to convert  any  portion of this Note  pursuant  to Section  3(a),  to the
extent that after giving effect to such  conversion,  the Holder  (together with
the Holder's affiliates) would beneficially own in excess of 9.99% (the "MAXIMUM
PERCENTAGE")  of the number of shares of Common  Stock  outstanding  immediately
after giving effect to such conversion;  PROVIDED,  HOWEVER,  that following the
Optional  Redemption  Notice  Date (as  defined  in  Section  8(a)) the  Maximum
Percentage  shall be of no further  force and effect on the Optional  Redemption
Date, solely for purposes of effecting

                                       6

<PAGE>

a Optional  Redemption  pursuant  to Section 8. For  purposes  of the  foregoing
sentence,  the aggregate number of shares of Common Stock  beneficially owned by
the Holder and its affiliates shall include the number of shares of Common Stock
issuable upon conversion of this Note in respect of which the  determination  of
such  sentence is being made,  but shall  exclude the number of shares of Common
Stock which would be issuable upon (A) conversion of the remaining, nonconverted
portion of this Note  beneficially  owned by the Holder or any of its affiliates
and (B) exercise or conversion of the unexercised or nonconverted portion of any
other securities of the Company (including,  without limitation, any Other Notes
or warrants) subject to a limitation on conversion or exercise  analogous to the
limitation  contained  herein  beneficially  owned by the  Holder  or any of its
affiliates.  Except as set forth in the preceding sentence, for purposes of this
Section  3(d)(i),  beneficial  ownership  shall be calculated in accordance with
Section 13(d) of the Securities  Exchange Act of 1934, as amended (the "EXCHANGE
ACT").  For  purposes of this  Section  3(d)(i),  in  determining  the number of
outstanding  shares  of  Common  Stock,  the  Holder  may rely on the  number of
outstanding shares of Common Stock as reflected in (x) the Company's most recent
Form 10-K, Form 10-KSB,  Form 10-Q, Form 10-QSB or Form 8-K, as the case may be,
(y) a more recent public  announcement by the Company or (z) any other notice by
the Company or the Transfer  Agent  setting forth the number of shares of Common
Stock outstanding.  For any reason at any time, upon the written or oral request
of the Holder, the Company shall promptly, but in no event no later than two (2)
Business Days,  confirm orally and in writing to the Holder the number of shares
of Common Stock then outstanding.  In any case, the number of outstanding shares
of Common Stock shall be  determined  after giving  effect to the  conversion or
exercise of securities of the Company, including this Note, by the Holder or its
affiliates  since  the date as of which  such  number of  outstanding  shares of
Common Stock was  reported.  By written  notice to the  Company,  the Holder may
increase  or decrease  the Maximum  Percentage  to any other  percentage  not in
excess of 9.99%  specified in such notice;  provided  that (i) any such increase
will not be  effective  until the  sixty-first  (61st) day after such  notice is
delivered to the Company, and (ii) any such increase or decrease will apply only
to the Holder and not to any other holder of Notes.

                         (ii) PRINCIPAL MARKET REGULATION. The Company shall not
be obligated to issue any shares of Common Stock upon  conversion  of this Note,
and the Holder of this Note shall not have the right to receive upon  conversion
of this Note any  shares of Common  Stock,  if the  issuance  of such  shares of
Common Stock would exceed the  aggregate  number of shares of Common Stock which
the Company may issue upon conversion or exercise, as applicable,  of the Notes,
the PIPE Notes and Warrants without  breaching the Company's  obligations  under
the rules or regulations of the applicable Eligible Market (the number of shares
which may be issued without violating such rules and regulations,  the "EXCHANGE
CAP"), except that such limitation shall not apply in the event that the Company
(A) obtains the approval of its stockholders as required by the applicable rules
of such  Eligible  Market for  issuances  of shares of Common Stock in excess of
such amount (the  "STOCKHOLDER  APPROVAL") or (B) obtains a written opinion from
outside counsel to the Company that such approval is not required, which opinion
shall be reasonably  satisfactory to the Required Holders. Unless and until such
Stockholder  Approval or written opinion is obtained,  no purchaser of the Notes
pursuant to the Securities  Purchase  Agreement  (each, a "PURCHASER")  shall be
issued  in  the  aggregate,   upon  conversion  or  exercise  or  otherwise,  as
applicable,  of Notes or Warrants,  shares of Common Stock in an amount  greater
than the product of the Exchange Cap multiplied by a fraction,  the numerator of
which is the principal amount of Notes issued to such Purchaser  pursuant to the

                                       7

<PAGE>

Securities  Purchase Agreement on the Original Issuance Date and the denominator
of which is the aggregate principal amount of all Notes issued to the Purchasers
pursuant to the Securities  Purchase Agreement on the Original Issuance Date and
the aggregate principal amount of the PIPE Notes issued on the Original Issuance
Date (in respect of each Purchaser, the "EXCHANGE CAP ALLOCATION"). In the event
that any  Purchaser  shall sell or otherwise  transfer  any of such  Purchaser's
Notes,  the transferee shall be allocated a pro rata portion of such Purchaser's
Exchange Cap Allocation,  and the restrictions of the prior sentence shall apply
to such  transferee  in respect of the portion of the  Exchange  Cap  Allocation
allocated  to such  transferee.  In the event  that any  holder  of Notes  shall
convert  all of such  holder's  Notes  into a number of  shares of Common  Stock
which,  in the aggregate,  is less than such holder's  Exchange Cap  Allocation,
then the difference between such holder's Exchange Cap Allocation and the number
of shares of Common Stock  actually  issued to such holder shall be allocated to
the respective  Exchange Cap Allocations of the remaining  holders of Notes on a
pro rata basis in proportion to the aggregate principal amount of the Notes then
held by each such holder.

               (4) RIGHTS UPON EVENT OF DEFAULT.

                    (a) EVENT OF DEFAULT.  Each of the  following  events  shall
constitute an "EVENT OF DEFAULT":

                         (i)  the   failure  of  the   applicable   Registration
Statement required to be filed pursuant to the Registration  Rights Agreement to
be declared effective by the SEC on or prior to the date that is sixty (60) days
after the  applicable  Effectiveness  Deadline  (as defined in the  Registration
Rights Agreement),  or, while the applicable  Registration Statement is required
to be  maintained  effective  pursuant to the terms of the  Registration  Rights
Agreement, the effectiveness of the applicable Registration Statement lapses for
any reason (including,  without limitation,  the issuance of a stop order) or is
unavailable  to any  holder  of the  Notes  for  sale  of all of  such  holder's
Registrable  Securities  (as defined in the  Registration  Rights  Agreement) in
accordance with the terms of the Registration  Rights Agreement,  and such lapse
or  unavailability  continues for a period of ten (10)  consecutive  days or for
more than three  times in any 365-day  period  that does not exceed  thirty (30)
days in the aggregate  (other, in each case, than days during an Allowable Grace
Period or a  Maintenance  Grace  Period (as defined in the  Registration  Rights
Agreement));

                         (ii) the  suspension  from  trading  or  failure of the
Common  Stock to be quoted or listed on an Eligible  Market for a period of five
(5)  consecutive  Trading Days or for more than an aggregate of ten (10) Trading
Days in any 365-day period;

                         (iii) the  Company's  (A) failure to cure a  Conversion
Failure by delivery,  subject to the Conversion Limitations set forth in Section
3(d),  of the  required  number of shares of Common  Stock  within  fifteen (15)
Business Days after the applicable  Conversion Date or (B) written notice to any
holder of the Notes,  including by way of public  announcement or through any of
its  agents,  at any time,  of its  intention  not to comply  with a request for
conversion  of any Notes  into  shares  of  Common  Stock  that is  tendered  in
accordance  with the  provisions  of the Notes,  other than  pursuant to Section
3(d);

                                       8

<PAGE>

                         (iv)  at  any  time  following  the  twentieth   (20th)
consecutive  Business Day that the Holder's  Authorized Share Allocation is less
than the number of shares of Common  Stock that the Holder  would be entitled to
receive upon a conversion  of the full  Conversion  Amount of this Note (without
regard to any limitations on conversion set forth in Section 3(d) or otherwise);

                         (v) the  Company's  failure  to pay to the  Holder  any
amount of Principal  (including,  without limitation,  any redemption payments),
Interest,  Late Charges or other  amounts when and as due under this Note or any
other Transaction  Document (as defined in the Securities Purchase Agreement) or
any other  agreement,  document,  certificate or other  instrument  delivered in
connection with the  transactions  contemplated  hereby and thereby to which the
Holder is a party,  except, (A) in the case of a failure to pay Interest or Late
Charges  when and as due,  in which case only if such  failure  continues  for a
period of at least five (5) Business  Days and (B) if such payment is prohibited
by the  Intercreditor  Agreement  due  solely  to the  existence  of an Event of
Default occurring under any of the Senior Loan Documents  triggered  pursuant to
the Intercreditor  Agreement or the Senior Loan Agreement by the Holder's breach
of this Note or any Transaction Document to which such Holder is a party;

                         (vi) the Company's or any  Subsidiary's  failure to pay
any  principal of or interest or premium on any of its  Indebtedness  (excluding
Indebtedness  under the Senior  Loan and  Indebtedness  evidenced  by any of the
Notes),  to  the  extent  that  the  aggregate  principal  amount  of  all  such
Indebtedness  exceeds  $2,000,000,  when due  (whether  by  scheduled  maturity,
required prepayment,  acceleration,  demand or otherwise) and such failure shall
continue after the applicable grace period,  if any,  specified in the agreement
or  instrument  relating to such  Indebtedness,  or any other  default under any
agreement or instrument  relating to any such Indebtedness,  or any other event,
shall  occur and shall  continue  after the  applicable  grace  period,  if any,
specified  in such  agreement  or  instrument,  if the effect of such default or
event is to accelerate,  or to permit the  acceleration of, the maturity of such
Indebtedness;  or any such Indebtedness shall be declared to be due and payable,
or  required  to be  prepaid  (other  than  by a  regularly  scheduled  required
prepayment),  redeemed,  purchased  or defeased  or an offer to prepay,  redeem,
purchase or defease  such  Indebtedness  shall be  required to be made,  in each
case, prior to the stated maturity thereof, except, if such failure is caused by
the Holder's  breach of this Note or any of the  Transaction  Documents to which
such Holder is a party;

                         (vii) the Company or any of its  Subsidiaries (A) shall
institute any  proceeding or voluntary case seeking to adjudicate it bankrupt or
insolvent,  or seeking  dissolution,  liquidation,  winding up,  reorganization,
arrangement,  adjustment,  protection,  relief or composition of it or its debts
under any law relating to bankruptcy,  insolvency,  reorganization  or relief of
debtors,  or seeking  the entry of an order for relief or the  appointment  of a
receiver, administrative receiver, administrator, trustee, custodian, liquidator
or other similar official for any such Person or for any substantial part of its
property, or any other Insolvency Proceeding,  (B) shall be generally not paying
its debts as such debts  become due or shall admit in writing its  inability  to
pay its debts  generally  or shall be unable to pay its debts,  (C) shall make a
general assignment for the benefit of creditors, or (D) shall take any action to
authorize or effect any of the actions set forth above in this subsection (vii);

                                       9

<PAGE>

                         (viii) any proceeding  shall be instituted  against the
Company  or any  of its  Subsidiaries  seeking  to  adjudicate  it  bankrupt  or
insolvent,  or seeking  dissolution,  liquidation,  winding up,  reorganization,
arrangement,  adjustment, protection, relief of debtors, or seeking the entry of
an order for relief or the appointment of a receiver,  administrative  receiver,
administrator,  trustee, custodian, liquidator or other similar official for any
such Person or for any substantial part of its property, or any other Insolvency
Proceeding  shall be instituted  against the Company or any Subsidiary,  and any
such proceeding shall remain undismissed or unstayed for a period of thirty (30)
days  or any of the  actions  sought  in  such  proceeding  (including,  without
limitation,  the entry of an order for  relief  against  any such  Person or the
appointment  of a receiver,  administrative  receiver,  administrator,  trustee,
custodian,  liquidator or other similar  official for it or for any  substantial
part of its property) shall occur;

                         (ix) any  provision of any Note,  Security  Document or
the Intercreditor  Agreement or any other security document entered into for the
benefit  of  the  Collateral  Agent  (as  defined  in  the  Securities  Purchase
Agreement)  or any  Holder,  after  delivery  thereof  pursuant  the  Securities
Purchase  Agreement  or any Note  shall at any time for any reason  (other  than
pursuant  to the  express  terms  thereof)  cease to be valid and  binding on or
enforceable  against  the  Company or any  Guarantor  under the  Guaranties  (as
defined  in  the  Securities   Purchase  Agreement)  (each,  a  "GUARANTOR"  and
collectively,  the "GUARANTORS") intended to be a party thereto, or the validity
or  enforceability  thereof  shall  be  contested  by any  party  thereto,  or a
proceeding   shall  be  commenced  by  the  Company  or  any  Guarantor  or  any
Governmental  Authority  having  jurisdiction  over  any  of  them,  seeking  to
establish the invalidity or unenforceability  thereof, or any the Company or any
Guarantor  shall  deny  in  writing  that  it has any  liability  or  obligation
purported to be created under any Note or Security Document;

                         (x)   the   Security   Agreement,   the   Intercreditor
Agreement,  any Pledge Agreement,  Guaranty (as each such term is defined in the
Securities  Purchase  Agreement) or any other security document entered into for
the  benefit of the  Collateral  Agent (as  defined in the  Securities  Purchase
Agreement)  or any  Holder,  after  delivery  thereof  pursuant  the  Securities
Purchase  Agreement or any Note,  shall for any reason fail or cease to create a
valid and perfected and,  except to the extent  permitted by the terms hereof or
thereof,  second  priority  Lien  (subject to  Permitted  Liens) in favor of the
Collateral  Agent for the benefit of Holders on any  Collateral  purported to be
covered thereby;

                         (xi) the loss,  suspension or revocation of, or failure
to renew, any license or permit now held or hereafter acquired by the Company or
any Guarantor,  if such license or permit is not replaced with a similar license
or permit and, after giving effect to such replacement  license or permit,  such
loss,  suspension,  revocation  or failure to renew has or could  reasonably  be
expected to have a Material Adverse Effect;

                         (xii) the  indictment  of the Company or any  Guarantor
under any criminal  statute,  or commencement  of criminal or civil  proceedings
against the Company or any  Guarantor,  pursuant to which statute or proceedings
the  penalties  or  remedies  sought  or  available  include  forfeiture  to any
Governmental Authority of any material portion of the property of such Person;

                         (xiii) a Change of Control shall have occurred;

                                       10

<PAGE>

                         (xiv)  a  breach,   default,   event  of   default   or
termination shall occur under any Acquisition Document (as defined in the Senior
Loan  Agreement) or other  Material  Contract  after giving effect to applicable
grace  periods,  if any,  contained  in any such  Acquisition  Document or other
Material  Contract  that gives any third party the right to  terminate  any such
Acquisition  Document  or  other  Material  Contract  or  that  otherwise  could
reasonably be expected to have a Material Adverse Effect;

                         (xv) one or more  final  judgments  or  orders  for the
payment of money is rendered against any the Company or any Subsidiary in excess
of $2,000,000 in the aggregate (provided that, any judgment covered by insurance
where the insurer has assumed  responsibility  in writing for such  judgment and
acknowledged  that the Company or Subsidiary,  as  applicable,  will receive the
proceeds of such  insurance  within thirty (30) days of the issuance of a final,
non-appealable judgment and execution thereon is effectively stayed shall not be
included in calculating such amount) and shall remain  undischarged or unvacated
for a period in excess of sixty (60) days or execution  shall at any time not be
effectively  stayed,  or any final judgment other than for the payment of money,
or  injunction,  attachment,  garnishment  or execution is rendered  against the
Company or any Subsidiary or any of the  Collateral  having a value in excess of
$2,000,000 and shall remain  undischarged or unvacated for a period in excess of
sixty (60) days or execution shall at any time not be effectively stayed;

                         (xvi) (A) Any  representation  or warranty  made by the
Company or any  Subsidiary  herein (a)  containing a materiality  threshold,  is
incorrect or misleading  when made or (b) in respect of any such  representation
or  warranty  which  does  not  contain  a  materiality  threshold,  the same is
materially  misleading  or  materially  incorrect  when made or (B) the  Company
breaches any covenant  (other than the covenants set forth in Section 14 of this
Note) or other term or condition of any  Transaction  Document,  except,  in the
case of a breach of a covenant, term or condition which is curable, only if such
breach continues for a period of at least twenty (20) consecutive  Business Days
after notice thereof;

                         (xvii) any  breach or failure in any  respect to comply
with  Section  14 of  this  Note,  Sections  6(e),  (g),  or (h)  of the  Pledge
Agreement,  or Sections 5(e)(i),  (g), or the first sentence of Section 5 (i) of
the Security Agreement;

                         (xviii)  any Event of Default  (as defined in the Other
Notes) occurs in respect of any Other Note;

                         (xix)  the  occurrence  of any  acceleration  under the
Senior Loan Documents in respect of Indebtedness outstanding thereunder;

                         (xx)  the  Company  and/or  any   Guarantor(s)   is/are
enjoined,  restrained  or in any way  prevented by the order of any court or any
Governmental  Authority from conducting all or any material part of its or their
business  for more  than ten (10) days  provided  that  such  curtailment  could
reasonably be expected to have a Material Adverse Effect;

                         (xxi)  any  material  damage  to,  or  loss,  theft  or
destruction of, any Collateral,  whether or not insured, or any strike, lockout,
labor  dispute,  embargo,  condemnation,  act of God or public  enemy,  or other
casualty which causes, for more than ten (10) days, the

                                       11

<PAGE>

cessation or  substantial  curtailment  of revenue  producing  activities at any
facility  of any  Obligor,  if any  such  event  or  circumstance  has or  could
reasonably be expected to have a Material Adverse Effect; or

                         (xxii) at any time  after  the  initial  employment  by
ShellCo  of  the  Consultant,  (i)  ShellCo  terminates  the  employment  of the
Consultant,  or limits or attempts to limit the scope of the  engagement  of the
Consultant,  without the consent of Required  Holders  provided that ShellCo may
terminate the  Consultant  (without  being  required to replace the same) at any
time after  December 31, 2007 if no Event of Default is then  continuing or (ii)
ShellCo, or any member of senior management of ShellCo,  shall fail to cooperate
with the Consultant in connection with the Consultant providing the services for
which it was engaged; or

                         (xxiii)  any  cessation  of a  substantial  part of the
business  of the  Company  and/or  any  Guarantor(s)  for a period  which  could
reasonably be expected to have a Material Adverse Effect.

                    (b) REDEMPTION RIGHT. Upon the Company's obtaining knowledge
of the  occurrence  of an Event of  Default in respect of this Note or any Other
Note, the Company shall, as soon as possible,  but in any event, within four (4)
Business  Days,  deliver  written  notice  thereof via  facsimile  and overnight
courier (an "EVENT OF DEFAULT NOTICE") to the Holder.  Subject to the provisions
of the  Intercreditor  Agreement,  at any time after the earlier of the Holder's
receipt of such Event of Default Notice and the Holder's  becoming aware of such
an Event of Default in  respect of this Note or any Other  Note,  the Holder may
require  the  Company  to redeem all or any  portion of this Note by  delivering
written  notice  thereof  (the  "EVENT OF  DEFAULT  REDEMPTION  NOTICE")  to the
Company,  which Event of Default Redemption Notice shall indicate the portion of
this Note the Holder is electing to redeem. Each portion of this Note subject to
redemption  by the Company  pursuant to this  Section  4(b) shall be redeemed as
provided in Section  12(a),  (provided  that the Event of Default giving rise to
such redemption right has not been cured or waived on or before the second (2nd)
Business Day after the expiration of the payments standstill period set forth in
the Intercreditor  Agreement  (notwithstanding any shorter cure period set forth
in Section 4(a) or any other provision  hereof)) by the Company at a price equal
to the  greater of (x) the product of (i) the  Conversion  Amount to be redeemed
together with accrued and unpaid  Interest and Late Charges,  if any incurred up
to and including the Conversion  Date, in respect of such Conversion  Amount and
(ii) the Redemption  Premium or (y) the product of (A) the Closing Sale Price of
the  Common  Stock on the  date  immediately  preceding  such  Event of  Default
multiplied by (B) the number of shares of Common Stock into which the amount set
forth in clause (x) would have  converted  into in accordance  with Section 3(a)
(the "EVENT OF DEFAULT REDEMPTION PRICE"). For purposes of this Section 4(b) and
Section 12(a), an Event of Default  occurring under Section 4(a)(i) hereof shall
be  deemed  to be  cured  on the day  upon  which  the  applicable  Registration
Statement becomes effective or again becomes  available,  as applicable.  To the
extent  redemptions  required by this Section 4(b) are deemed or determined by a
court of competent  jurisdiction  to be  prepayments of the Note by the Company,
such redemptions shall be deemed to be voluntary prepayments. The parties hereto
agree that in the event of the  Company's  redemption of any portion of the Note
under this Section 4(b),  the Holder's  damages would be uncertain and difficult
to estimate  because of the parties'  inability to predict future interest rates
and the  uncertainty of the  availability  of a suitable  substitute  investment
opportunity for the Holder.  Accordingly, any

                                       12

<PAGE>

Redemption Premium due under this Section 4(b) is intended by the parties to be,
and shall be deemed,  a reasonable  estimate of the Holder's  actual loss of its
investment opportunity and not as a penalty.

               (5) RIGHTS UPON FUNDAMENTAL TRANSACTION AND CHANGE OF CONTROL.

                    (a) ASSUMPTION. The Company shall not enter into or be party
to a Fundamental Transaction unless, in the case of a Fundamental Transaction of
the type described in clause (ii), (iii), (iv), or (v) of the definition thereof
if the Successor Entity in such  Fundamental  Transaction is a person other than
the Company, (i) such Successor Entity assumes in writing all of the obligations
of the Company under this Note and the other Transaction Documents in accordance
with the provisions of this Section 5(a) pursuant to written  agreements in form
and  substance  reasonably   satisfactory  to  the  Required  Holders  including
agreements  to  deliver  to each  holder of Notes in  exchange  for such Notes a
security of the Successor Entity evidenced by a written instrument substantially
similar in form and  substance  to the  Notes,  including,  without  limitation,
having a principal amount and interest rate equal to the principal  amounts then
outstanding  and the  interest  rates of the Notes held by such  holder,  having
similar  conversion rights as the Notes and having similar ranking to the Notes,
and  reasonably  satisfactory  to the Required  Holders and (ii) such  Successor
Entity (or its Parent  Entity) is a publicly  traded  corporation  whose  common
stock is quoted on or listed for trading on an Eligible  Market  (other than the
Initial Principal Market).  Upon the occurrence of any Fundamental  Transaction,
such Successor Entity shall succeed to, and be substituted for (so that from and
after the date of such  Fundamental  Transaction,  the  provisions  of this Note
referring to the "Company"  shall refer instead to such Successor  Entity),  and
may  exercise  every right and power of the Company and shall  assume all of the
obligations  of the  Company  under  this Note  with the same  effect as if such
Successor Entity had been named as the Company herein.  Upon consummation of the
Fundamental  Transaction,  such  Successor  Entity  shall  deliver to the Holder
confirmation  that there shall be issued upon  conversion  or redemption of this
Note at any time after the consummation of the Fundamental Transaction,  in lieu
of the shares of the Company's Common Stock (or other  securities,  cash, assets
or other property) issuable upon the conversion or redemption of the Notes prior
to such Fundamental Transaction, such shares of the publicly traded common stock
(or their equivalent) of the Successor Entity (including its Parent Entity),  as
adjusted in accordance  with the provisions of this Note. The provisions of this
Section shall apply similarly and equally to successive Fundamental Transactions
and shall be applied  without  regard to any  limitations  on the  conversion or
redemption of this Note.

                    (b) REDEMPTION  RIGHT.  No sooner than fifteen (15) days nor
later than ten (10) days prior to the  consummation of a Change of Control,  but
not prior to the public  announcement  of such  Change of  Control,  the Company
shall deliver written notice thereof via facsimile and overnight  courier to the
Holder (a "CHANGE OF CONTROL  NOTICE").  At any time during the period beginning
after the Holder's  receipt of a Change of Control Notice and ending twenty (20)
Trading Days after the  consummation  of such Change of Control,  the Holder may
require  the  Company  to redeem all or any  portion of this Note by  delivering
written notice thereof ("CHANGE OF CONTROL  REDEMPTION  NOTICE") to the Company,
which Change of Control  Redemption  Notice shall indicate the Conversion Amount
the Holder is electing to redeem. The portion of this Note subject to redemption
pursuant  to this  Section 5 shall be redeemed by the

                                       13

<PAGE>

Company in cash at a price  equal the  product of (i) the sum of the  Conversion
Amount being redeemed plus accrued and unpaid Interest and Late Charges, if any,
in respect of such Conversion  Amount up to and including the date of redemption
and (ii) the greater of (x) the quotient determined by dividing (A) the greatest
of the  Closing  Sale  Price  of  the  Common  Stock  immediately  prior  to the
consummation  of the Change of  Control,  the  Closing  Sale Price of the Common
Stock immediately  following the public  announcement of such proposed Change of
Control and the Closing Sale Price of the Common Stock  immediately prior to the
public  announcement  of such proposed  Change of Control by (B) the  Conversion
Price,  and (y) the Change of Control  Premium  (such  product,  the  "CHANGE OF
CONTROL REDEMPTION PRICE"). Redemptions required by this Section 5 shall be made
in  accordance  with the  provisions  of Section 12 and shall have priority over
payments to stockholders  in connection with a Change of Control.  To the extent
redemptions required by this Section 5(b) are deemed or determined by a court of
competent  jurisdiction  to be  prepayments  of the  Note by the  Company,  such
redemptions  shall  be  deemed  to  be  voluntary  prepayments.  Notwithstanding
anything to the contrary in this Section 5, but subject to Section  3(d),  until
the Change of Control  Redemption  Price is paid in full, the Conversion  Amount
submitted for redemption  under this Section 5(c) may be converted,  in whole or
in part,  by the Holder  into  Common  Stock  pursuant to Section 3. The parties
hereto agree that in the event of the Company's redemption of any portion of the
Note under this Section  5(b),  the  Holder's  damages  would be  uncertain  and
difficult  to  estimate  because of the  parties'  inability  to predict  future
interest rates and the uncertainty of the availability of a suitable  substitute
investment opportunity for the Holder.  Accordingly,  any redemption premium due
under this Section 5(b) is intended by the parties to be, and shall be deemed, a
reasonable  estimate of the Holder's  actual loss of its investment  opportunity
and not as a  penalty,  and the  receipt  by the Holder of the Change of Control
Redemption Price shall  constitute full  satisfaction of the amount requested to
be redeemed pursuant to this Section 5.

               (6) RIGHTS UPON ISSUANCE OF PURCHASE  RIGHTS AND OTHER  CORPORATE
EVENTS.

                    (a)  PURCHASE  RIGHTS.  If at any time  after  the  Original
Issuance  Date,  the Company  grants,  issues or sells any Options,  Convertible
Securities or rights to purchase stock,  warrants,  securities or other property
pro rata to the record holders of any class of Common Stock  (collectively,  the
"PURCHASE RIGHTS"),  then the Holder will be entitled to acquire, upon the terms
applicable to such Purchase  Rights,  the  aggregate  Purchase  Rights which the
Holder could have acquired if the Holder had held the number of shares of Common
Stock  acquirable  upon complete  conversion  of this Note (without  taking into
account any  limitations or  restrictions  on the  convertibility  of this Note)
immediately  before the date on which a record is taken for the grant,  issuance
or sale of such Purchase Rights,  or, if no such record is taken, the date as of
which the record  holders of Common  Stock are to be  determined  for the grant,
issue or sale of such Purchase Rights.

                    (b)  OTHER  CORPORATE  EVENTS.  In  addition  to and  not in
substitution  for any other rights  hereunder,  but without  duplication  of the
consideration  issuable  pursuant to Section 5(a),  prior to the consummation of
any Fundamental  Transaction pursuant to which holders of shares of Common Stock
are entitled to receive  securities or other assets in respect of or in exchange
for  shares of Common  Stock (a  "CORPORATE  EVENT"),  the  Company  shall  make
appropriate  provision to insure that the Holder will  thereafter have the right
to receive  upon a

                                       14

<PAGE>

conversion  of  this  Note,  (i) in  addition  to the  shares  of  Common  Stock
receivable  upon such  conversion,  such securities or other assets to which the
Holder  would have been  entitled in respect of such shares of Common  Stock had
such  shares of Common  Stock been held by the Holder upon the  consummation  of
such  Corporate   Event  (without   taking  into  account  any   limitations  or
restrictions on the  convertibility  of this Note) or (ii) in lieu of the shares
of Common Stock otherwise  receivable upon such  conversion,  such securities or
other  assets  received by the holders of shares of Common  Stock in  connection
with the  consummation  of such  Corporate  Event in such  amounts as the Holder
would have been  entitled  to receive had this Note  initially  been issued with
conversion  rights for the form of such  consideration  (as opposed to shares of
Common Stock) at a conversion rate for such consideration  commensurate with the
Conversion Rate. Provision made pursuant to the preceding sentence shall be in a
form and substance  satisfactory to the Required Holders. The provisions of this
Section shall apply  similarly and equally to  successive  Corporate  Events and
shall  be  applied  without  regard  to any  limitations  on the  conversion  or
redemption of this Note.

               (7) RIGHTS UPON ISSUANCE OF OTHER SECURITIES.

                    (a)  ADJUSTMENT OF CONVERSION  PRICE UPON ISSUANCE OF COMMON
STOCK.  If and whenever on or after the Original  Issuance Date, the Company (i)
issues or sells,  or in  accordance  with  this  Section  7(a) is deemed to have
issued or sold,  any shares of Common Stock  (including  the issuance or sale of
shares of Common Stock owned or held by or for the account of the  Company,  but
excluding  shares of Excluded  Securities  and Common  Stock deemed to have been
issued  or sold by the  Company  in  connection  with  any  Excluded  Security),
Convertible  Securities or Options  entitling the recipient thereof to subscribe
for or purchase shares of Common Stock for a  consideration  per share of Common
Stock or (ii) amend or otherwise modify the terms of any Convertible  Securities
or Options to a price per share of Common Stock (such issuance,  subscription or
purchase  price or amended  or  modified  price  being  referred  to as the "NEW
ISSUANCE  PRICE")  less  than a price  (the  "APPLICABLE  PRICE")  equal  to the
Conversion  Price in effect  immediately  prior to such  issue or sale or deemed
issuance or sale (the foregoing a "DILUTIVE  ISSUANCE"),  then immediately after
such Dilutive Issuance, the Conversion Price then in effect shall be:

                         (i)  if  such  issuance   occurs  prior  to  the  first
anniversary of the Original  Issuance  Date,  adjusted to equal the New Issuance
Price, and

                         (ii) if such  issuance  occurs  on or after  the  first
anniversary  of the Original  Issuance  Date,  reduced to an amount equal to the
product of (x) the Conversion Price in effect immediately prior to such Dilutive
Issuance  and (y) the  quotient  determined  by dividing  (1) the sum of (I) the
product derived by multiplying the Conversion Price in effect  immediately prior
to such  Dilutive  Issuance  and the  number of shares  of Common  Stock  Deemed
Outstanding   immediately   prior  to  such  Dilutive  Issuance  plus  (II)  the
consideration,  if any, received by the Company upon such Dilutive Issuance,  by
(2) the  product  derived  by  multiplying  (I) the  Conversion  Price in effect
immediately  prior to such  Dilutive  Issuance  by (II) the  number of shares of
Common Stock Deemed Outstanding immediately after such Dilutive Issuance.

                    (b) CERTAIN  DISTRIBUTIONS  TO HOLDERS OF COMMON  STOCK.  In
case  the  Company  shall  at any time or from  time to  time,  on or after  the
Original  Issuance Date and prior

                                       15

<PAGE>

to conversion of this Note,  distribute to all holders of shares of Common Stock
(including  any  such   distribution   made  in  connection  with  a  merger  or
consolidation  in which the Company is the resulting or surviving Person and the
Common Stock is not changed or exchanged) cash, evidences of indebtedness of the
Company, any Subsidiary or another issuer,  securities of the Company (including
Convertible  Securities),  any  Subsidiary  or  another  issuer or other  assets
(excluding  dividends  payable in shares of Common Stock for which adjustment is
made  under  another  paragraph  of  this  Section  7 and  any  distribution  in
connection with the issuance of any Excluded Securities) or Options to subscribe
for or  purchase  of any of the  foregoing,  then,  and in each such  case,  the
Conversion  Price then in effect  shall be adjusted  (and any other  appropriate
actions shall be taken by the Company) by multiplying  the  Conversion  Price in
effect  immediately prior to the date of such distribution by a fraction (x) the
numerator of which shall be the Weighted  Average  Price of the Common Stock for
the  five  (5)  consecutive  Trading  Days  immediately  prior  to the  date  of
distribution  less the then fair market value (as  determined  by the  Company's
Board  of  Directors  in  the  exercise  of  their  fiduciary  duties  with  the
concurrence  of the Required  Holders) of the portion of the cash,  evidences of
indebtedness,  securities or other assets so  distributed  or of such Options to
subscribe  applicable  to one share of Common Stock and (y) the  denominator  of
which shall be the Weighted  Average  Price of the Common Stock for the five (5)
consecutive Trading Days immediately prior to the date of distribution (but such
fraction shall not be greater than one). Such adjustment  shall be made whenever
any such distribution is made and shall become effective retroactively to a date
immediately  following  the  close  of  business  on the  record  date  for  the
determination of stockholders entitled to receive such distribution.

                    (c)  DIVIDENDS  AND CERTAIN  OTHER  EVENTS IN RESPECT OF THE
COMMON  STOCK.  In the event that the Company  shall at any time or from time to
time, on or after the Original Issuance Date and prior to the conversion of this
Note,  (A) pay a  dividend  or make a  distribution  payable in shares of Common
Stock on any class of shares of capital stock of the Company,  (B) subdivide its
outstanding  shares of Common Stock into a greater number of shares, (C) combine
its  outstanding  shares of Common Stock into a smaller  number of shares or (D)
issue any shares of capital  stock by  reclassification  of its shares of Common
Stock,  the  Conversion  Price in effect at the  opening of  business on the day
following  the date fixed for the  determination  of  stockholders  entitled  to
receive such dividend or  distribution  or at the opening of business on the day
following the day on which such  subdivision,  combination  or  reclassification
becomes  effective,  as the case may be, shall be adjusted so that the holder of
any Notes thereafter surrendered for conversion shall be entitled to receive the
number of shares of Common  Stock that such holder would have owned or have been
entitled to receive after the happening of any of the events described above had
such Notes been converted  immediately prior to the record date in the case of a
dividend or  distribution  or the effective  date in the case of a  subdivision,
combination  or  reclassification.  An adjustment  made pursuant to this Section
7(c) shall become effective  immediately upon the opening of business on the day
next  following the record date (subject to Section 7(e) below) in the case of a
dividend or distribution and shall become effective immediately upon the opening
of  business  on the day  next  following  the  effective  date in the case of a
subdivision, combination or reclassification.

                    (d) TENDER  OFFERS.  In the event that the Company  shall at
any time or from time to time, on or after the Original  Issuance Date and prior
to the conversion of this Note, make a payment of cash or other consideration to
the holders of shares of Common  Stock in

<PAGE>

respect of a tender offer or exchange  offer,  other than an odd-lot offer,  and
the value of the sum of (i) the aggregate cash and other  consideration paid for
such shares of Common  Stock,  and (ii) any other  consent or other fees paid to
holders of shares of Common  Stock in respect of such  tender  offer or exchange
offer  expressed  as an amount per share of Common  Stock  validly  tendered  or
exchanged pursuant to such tender offer or exchange offer,  exceeds the Weighted
Average  Price of the Common Stock on the Trading Day  immediately  prior to the
date any such tender offer or exchange  offer is first  publicly  announced (the
"ANNOUNCEMENT  DATE"), then the Conversion Price shall be adjusted in accordance
with the formula:

               R' = R x O' x P

               F + (P x O)

               For purposes of the foregoing formula:

               R = the Conversion  Price in effect at the expiration time of the
tender  offer or exchange  offer that is the subject of this  Section  7(d) (the
"EXPIRATION TIME");

               R' =  the  Conversion  Price  in  effect  immediately  after  the
Expiration Time;

               F = the fair market value (as  determined by the Company's  Board
of Directors in the exercise of their  fiduciary  duties with the concurrence of
the  Required  Holders)  of the  aggregate  value  of all  cash  and  any  other
consideration  paid or payable for shares of Common  Stock  validly  tendered or
exchanged  (including any consent or other fees) and not withdrawn  prior to the
Expiration Time (the "PURCHASED SHARES OF COMMON STOCK");

               O = the number of shares of Common Stock outstanding  immediately
after the Expiration Time less any Purchased Shares of Common Stock;

               O' = the number of shares of Common Stock outstanding immediately
after the Expiration Time, plus any Purchased Shares of Common Stock; and

               P = the  Weighted  Average  Price of the Common Stock on the five
(5)  consecutive   Trading  Days  beginning  two  (2)  Trading  Days  after  the
Announcement Date.

Such decrease,  if any, shall become  effective  immediately upon the opening of
business on the day next  following the  Expiration  Time. In the event that the
Company is obligated to purchase  shares  pursuant to any tender offer,  but the
Company is prevented by applicable  law from effecting any such purchases or all
such  purchases are rescinded,  the Conversion  Price shall again be adjusted to
the  Conversion  Price that would then be in effect if such  tender or  exchange
offer had not been made. If the  application  of this Section 7(d) to any tender
or exchange  offer  would  result in an increase  in the  Conversion  Price,  no
adjustment  shall be made for such tender or exchange  offer under this  Section
7(d).

                    (e)  OTHER   EVENTS.   If  any  event  occurs  of  the  type
contemplated by the provisions of this Section 7 but not expressly  provided for
by such  provisions  (including,  without  limitation,  the  granting  of  stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company's Board of Directors will make an appropriate adjustment in

                                       17

<PAGE>

the Conversion  Price so as to protect the rights of the Holder under this Note;
provided that no such adjustment will increase the Conversion Price as otherwise
determined pursuant to this Section 7.

               (8) COMPANY'S RIGHT OF OPTIONAL REDEMPTION.

                    (a) OPTIONAL  REDEMPTION.  If on any Trading Day on or after
the third  anniversary  of the Original  Issuance Date and prior to the Maturity
Date,  the Weighted  Average  Price of the shares of Common Stock has equaled or
exceeded 180% of the Conversion  Price then in effect for each of 20 consecutive
Trading  Days  ending on the  Redemption  Period End Day and  provided  that the
applicable  Eligible  Market is not the Initial  Principal  Market and no Equity
Conditions  Failure then exists,  the Company shall have the right to redeem all
or any  portion of the  Conversion  Amount  then  remaining  under this Note (an
"OPTIONAL REDEMPTION").  The portion of this Note subject to redemption pursuant
to this  Section 8 shall be  redeemed by the Company in cash at a price equal to
the sum of (i) the Principal  being  redeemed and (ii) the amount of any accrued
and unpaid Late Charges on such  Principal  and any accrued and unpaid  Interest
through the date of redemption (the "OPTIONAL  REDEMPTION  PRICE").  The Company
may exercise its  redemption  right under this Section 8 by delivering a written
notice thereof by confirmed facsimile and overnight courier to all, but not less
than  all,  of the  holders  of Notes  and the  Transfer  Agent  (the  "OPTIONAL
REDEMPTION  NOTICE" and the date such notice is  delivered to all the holders is
referred to as the "OPTIONAL  REDEMPTION NOTICE DATE"). The Optional  Redemption
Notice shall be irrevocable.  The Optional Redemption Notice shall state (A) the
date on which the  Optional  Redemption  shall occur (the  "OPTIONAL  REDEMPTION
DATE") which date shall be not less than 30 days nor more than 60 days after the
Optional  Redemption  Notice Date, and (B) the aggregate  principal  amount (the
"OPTIONAL  REDEMPTION  AMOUNT") of the Notes which the Company has elected to be
subject to Optional  Redemption from all of the holders of the Notes pursuant to
this Section 8 (and analogous  provisions under the Other Notes) on the Optional
Redemption  Date.  The Company will make a public  announcement  containing  the
information  set  forth in the  Optional  Redemption  Notice  on or  before  the
Optional  Redemption  Notice  Date.  The  Company  may not effect  more than one
Optional Redemption. Notwithstanding anything to the contrary in this Section 8,
until the Optional  Redemption  Price is paid, in full, the Optional  Redemption
Amount may be  converted,  in whole or in part,  by the  Holders  into shares of
Common  Stock  pursuant to Section 3. All  Conversion  Amounts  converted by the
Holder after the  Optional  Redemption  Notice Date shall reduce the  Conversion
Amount of this Note  required to be redeemed on the  Optional  Redemption  Date.
Redemptions  made  pursuant to this Section 8 shall be made in  accordance  with
Section 12 to the extent applicable.

                    (b) PRO RATA REDEMPTION  REQUIREMENT.  If the Company elects
to  cause  an  Optional  Redemption  pursuant  to  Section  8(a),  then  it must
simultaneously  take the same  action  in  respect  of the Other  Notes.  If the
Company  elects to cause an Optional  Redemption  pursuant  to Section  8(a) (or
similar  provisions  under the Other  Notes) in  respect of less than all of the
principal amount of the Notes then  outstanding,  then the Company shall require
redemption  of a  principal  amount from the Holder and each holder of the Other
Notes equal to the product of (i) the aggregate  principal amount of Notes which
the  Company  has  elected to cause to be  redeemed  pursuant  to Section  8(a),
multiplied  by (ii)  the  fraction,  the  numerator  of  which is the sum of the
initial  principal  amount of Notes purchased by such holder

                                       18

<PAGE>

and the denominator of which is the initial principal amounts of Notes purchased
by all  holders  holding  outstanding  Notes  (such  fraction in respect of each
holder is referred to as its "REDEMPTION ALLOCATION PERCENTAGE", and such amount
in respect of each holder is referred to as its "PRO RATA  REDEMPTION  AMOUNT");
provided  that in the  event  that the  initial  holder of any Notes has sold or
otherwise  transferred  any of such  holder's  Notes,  the  transferee  shall be
allocated a pro rata portion of such holder's Redemption  Allocation  Percentage
and Pro Rata Redemption Amount.

               (9)  SECURITY.  This Note and the Other  Notes are secured to the
extent and in the manner set forth in the Security  Documents (as defined in the
Securities Purchase Agreement).

               (10)  NONCIRCUMVENTION.  The Company hereby  covenants and agrees
that the Company  will not, by amendment of its  Certificate  of  Incorporation,
Bylaws or through any reorganization, transfer of assets, consolidation, merger,
scheme of arrangement,  dissolution,  issue or sale of securities,  or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Note, and will at all times in good faith carry out all of the
provisions  of this Note and take all action as may be  required  to protect the
rights of the Holder of this Note subject to the Intercreditor Agreement.

               (11) RESERVATION OF AUTHORIZED SHARES.

                    (a) RESERVATION.  The Company shall initially reserve out of
its authorized and unissued  Common Stock a number of shares of Common Stock for
each of the  Notes  equal  to  130% of the  Conversion  Rate in  respect  of the
Conversion  Amount of each such Note as of the Original  Issuance  Date.  For so
long as any of the Notes are  outstanding,  the  Company  shall  take all action
necessary  to reserve and keep  available  out of its  authorized  and  unissued
Common Stock,  solely for the purpose of effecting the  conversion of the Notes,
130% of the  number  of shares  of  Common  Stock as shall  from time to time be
necessary  to  effect  the  conversion  of all of the  Notes  then  outstanding;
provided  that at no time shall the number of shares of Common Stock so reserved
be less than the  number of  shares  required  to be  reserved  by the  previous
sentence  (without  regard to any  limitations  on  conversions)  (the "REQUIRED
RESERVE  AMOUNT").  The initial  number of shares of Common  Stock  reserved for
conversions  of the Notes and each  increase in the number of shares so reserved
shall  be  allocated  pro rata  among  the  holders  of the  Notes  based on the
principal amount of the Notes held by each holder on the Original  Issuance Date
or  increase  in the  number  of  reserved  shares,  as  the  case  may be  (the
"AUTHORIZED  SHARE  ALLOCATION").  In the  event  that a  holder  shall  sell or
otherwise  transfer  any of  such  holder's  Notes,  each  transferee  shall  be
allocated a pro rata portion of such holder's  Authorized Share Allocation.  Any
shares of Common Stock reserved and allocated to any Person which ceases to hold
any Notes shall be allocated to the remaining  holders of Notes,  pro rata based
on the principal amount of the Notes then held by such holders.

                    (b) INSUFFICIENT AUTHORIZED SHARES. If at any time while any
of the Notes remain  outstanding,  the Company does not have a sufficient number
of authorized and unreserved shares of Common Stock to satisfy its obligation to
reserve for issuance upon conversion of the Notes at least a number of shares of
Common  Stock  equal  to the  Required  Reserve  Amount  (an  "AUTHORIZED  SHARE
FAILURE"),  then the Company  shall  immediately  take

                                       19

<PAGE>

all action necessary to increase the Company's authorized shares of Common Stock
to an amount  sufficient  to allow the Company to reserve the  Required  Reserve
Amount for the Notes then  outstanding.  Without  limiting the generality of the
foregoing  sentence,  as soon as practicable after the date of the occurrence of
an Authorized  Share  Failure,  but in no event later than sixty (60) days after
the  occurrence  of such  Authorized  Share  Failure,  the Company  shall hold a
meeting of its  stockholders  for the  approval  of an increase in the number of
authorized shares of Common Stock. In connection with such meeting,  the Company
shall  provide each  stockholder  with a proxy  statement and shall use its best
efforts to solicit its  stockholders'  approval of such  increase in  authorized
shares of Common  Stock and to cause its board of  directors to recommend to the
stockholders that they approve such proposal.

               (12) HOLDER'S REDEMPTIONS.

                    (a)  MECHANICS.  The Company  shall  deliver the  applicable
Event of Default  Redemption  Price to the Holder  within five (5) Business Days
after the Company's receipt of the Holder's Event of Default  Redemption Notice,
if the  Intercreditor  Agreement does not prohibit the payment by the Company of
the  Default  Redemption  Price at such  time,  and if such  payment  is then so
prohibited,  on the third  (3rd)  Business  Day after such  prohibition  lapses;
provided  that if the Event(s) of Default  giving rise to the  redemption  right
shall have been cured or waived on or before the second (2nd) Business Day after
such prohibition's lapsing, such redemption right shall terminate. If the Holder
has submitted a Change of Control  Redemption  Notice in accordance with Section
5(b),  the Company shall  deliver the  applicable  Change of Control  Redemption
Price to the Holder concurrently with the consummation of such Change of Control
if such notice is received prior to the  consummation  of such Change of Control
and within five (5)  Business  Days after the  Company's  receipt of such notice
otherwise.  In the  event of a  redemption  of less  than all of the  Conversion
Amount of this Note, the Company shall promptly cause to be issued and delivered
to the Holder a new Note (in  accordance  with Section 18(d))  representing  the
outstanding Principal which has not been redeemed. In the event that the Company
does not pay the  applicable  Redemption  Price to the  Holder  within  the time
period  required,  at any time thereafter and until the Company pays such unpaid
Redemption  Price  in  full,  the  Holder  shall  have  the  option,  in lieu of
redemption,  to require the Company to promptly  return to the Holder all or any
portion of this Note  representing the Conversion  Amount that was submitted for
redemption and for which the applicable Redemption Price (together with any Late
Charges  thereon) has not been paid. Upon the Company's  receipt of such notice,
(x) the Redemption  Notice shall be null and void in respect of such  Conversion
Amount,  (y) the Company shall immediately return this Note, or issue a new Note
(in accordance  with Section 18(d)) to the Holder  representing  such Conversion
Amount  and (z) the  Conversion  Price of this Note or such new  Notes  shall be
adjusted to the lesser of (A) the  Conversion  Price as in effect on the date on
which the  Redemption  Notice is voided and (B) the lowest  Closing Bid Price of
the Common Stock during the period  beginning on and including the date on which
the  Redemption  Notice is delivered to the Company and ending on and  including
the date on which the Redemption  Notice is voided.  The Holder's  delivery of a
notice  voiding a Redemption  Notice and exercise of its rights  following  such
notice shall not affect the Company's  obligations  to make any payments of Late
Charges  which have  accrued  prior to the date of such notice in respect of the
Conversion Amount subject to such notice.

                                       20

<PAGE>

                    (b) REDEMPTION BY OTHER HOLDERS.  Upon the Company's receipt
of notice from any of the holders of the Other Notes for redemption or repayment
as a result of an event or  occurrence  substantially  similar  to the events or
occurrences described in Section 4(b) (each, an "OTHER REDEMPTION NOTICE"),  the
Company  shall  immediately,  but no later than one (1)  Business  Day after its
receipt  thereof,  forward to the Holder by facsimile a copy of such notice.  If
the  Company  receives a  Redemption  Notice  and one or more  Other  Redemption
Notices, during the seven (7) Business Day period beginning on and including the
date  which is three (3)  Business  Days prior to the  Company's  receipt of the
Holder's  Redemption  Notice and ending on and including the date which is three
(3) Business Days after the Company's receipt of the Holder's  Redemption Notice
and the Company is unable to redeem all  principal,  interest and other  amounts
designated in such Redemption Notice and such Other Redemption  Notices received
during such seven (7) Business Day period,  then the Company  shall redeem a pro
rata amount from each holder of the Notes  (including  the Holder)  based on the
principal  amount  of the  Notes  submitted  for  redemption  pursuant  to  such
Redemption  Notice and such Other  Redemption  Notices  received  by the Company
during such seven Business Day period.

               (13) VOTING RIGHTS. The Holder shall have no voting rights as the
holder of this Note, except as required by law,  including,  but not limited to,
the General  Corporation Law of the State of Delaware and as expressly  provided
in this Note.

               (14) COVENANTS.

                    (a) RANK.  All  payments  due under this Note (i) shall rank
(A) PARI  PASSU  with all  Other  Notes,  (B)  junior  to the  Permitted  Senior
Indebtedness,  (C) senior to the Subordinated Indebtedness, all Indebtedness not
constituting  Permitted  Indebtedness and all Permitted  Indebtedness  expressly
designated  as ranking  junior to the  Notes,  and (D) PARI PASSU with all other
Permitted  Indebtedness  and (ii) shall be secured  by a  security  interest  in
substantially all of the assets of the Company and the Subsidiaries,  other than
the Foreign Subsidiaries (as defined in the Securities Purchase Agreement),  the
escrowed  funds  referenced in SCHEDULE  14(a) and as otherwise  provided in the
Security Agreement (junior only to the security interests securing the Permitted
Senior  Indebtedness) and such security interests shall rank PARI PASSU with the
security   interests   securing   the   Indebtedness   under  the  Other  Notes.
Notwithstanding  the  foregoing,  if Company shall have  received  notice of the
existence of any Lien, the existence or priority of which is in violation of the
first sentence of this Section 14(a), Company shall have ten (10) days after the
receipt  of such  notice to remove  such Lien (or obtain  the  agreement  of the
holder of such Lien that such Lien  ranks in  priority  in  accordance  with the
first sentence of this Section 14(a)).

                    (b)  INCURRENCE  OF  INDEBTEDNESS.  Until this Note has been
converted,  redeemed or otherwise  satisfied in accordance with its terms (other
than in respect of contingent indemnification obligations in respect of which no
claim has been  asserted),  the Company  shall not,  and the  Company  shall not
permit any of its Subsidiaries  to, directly or indirectly,  incur or guarantee,
assume  or suffer to exist any  Indebtedness,  other  than (i) the  Indebtedness
evidenced by this Note and the Other Notes and (ii) Permitted Indebtedness.

                    (c) EXISTENCE OF LIENS.  Until this Note has been converted,
redeemed or  otherwise  satisfied  in  accordance  with its terms (other than in
respect of contingent

                                       21

<PAGE>

indemnification obligations in respect of which no claim has been asserted), the
Company shall not, and the Company shall not permit any of its  Subsidiaries to,
create,  incur,  assume or suffer to exist any Lien upon or in respect of any of
its properties, whether now owned or hereafter acquired; file or suffer to exist
under  the  Uniform  Commercial  Code  or  any  similar  law or  statute  of any
jurisdiction, a financing statement (or the equivalent thereof) that names it or
any of its  Subsidiaries  as  debtor;  sign or  suffer  to  exist  any  security
agreement  authorizing  any  secured  party  thereunder  to file such  financing
statement  (or the  equivalent  thereof);  sell any of its  property  or  assets
subject to an understanding or agreement, contingent or otherwise, to repurchase
such property or assets (including sales of accounts) with recourse to it or any
of its  Subsidiaries  or  assign or  otherwise  transfer,  or permit  any of its
Subsidiaries  to assign or  otherwise  transfer,  any  account or other right to
receive  income;  other  than,  as  to  all  of  the  above,   Permitted  Liens.
Notwithstanding  the  foregoing,  if Company shall have  received  notice of the
existence  of any Lien,  the  existence  of which is in  violation  of the first
sentence  of this  Section  14(c),  Company  shall  have ten (10) days after the
receipt of such notice to effect the removal of such Lien.

                    (d)  RESTRICTED  PAYMENTS.  The Company  shall not,  and the
Company shall not permit any of its  Subsidiaries  to,  directly or  indirectly,
redeem,  defease,  repurchase,  repay or make any payments in respect of, by the
payment of cash or cash equivalents (in whole or in part, whether by way of open
market purchases,  tender offers, private transactions or otherwise), all or any
portion  of  any  Indebtedness   (other  than  Permitted  Senior   Indebtedness,
Indebtedness  evidenced by the Other Notes or Permitted Indebtedness (other than
the Permitted  Indebtedness  referenced in clauses (vi) and (xii) hereof and any
other Subordinated  Indebtedness),  the payment of which shall not be restricted
by the  provisions  of this Note,  the  Security  Documents,  the  Warrant,  the
Securities Purchase Agreement or the Registration Rights Agreement),  whether by
way of payment in respect of principal  of (or  premium,  if any) or interest on
such Indebtedness,  if at the time such payment is due or is otherwise made, or,
after giving effect to such  payment,  an event  constituting,  or that with the
passage of time and without  being cured would  constitute,  an Event of Default
has  occurred  or would  occur and is, or would be,  continuing;  provided  that
notwithstanding  the  foregoing,  no principal  (or any portion  thereof) of any
Subordinated  Indebtedness  may be  paid  (whether  upon  maturity,  redemption,
acceleration  or otherwise) so long as this Note is outstanding and for at least
91 days thereafter.

                    (e) RESTRICTION ON REDEMPTION AND CASH DIVIDENDS. Until this
Note has been converted,  redeemed or otherwise satisfied in accordance with its
terms  (other  than in  respect of  contingent  indemnification  obligations  in
respect of which no claim has been asserted),  the Company shall not, nor permit
any of its Subsidiaries to, directly or indirectly,

                         (i) Declare or pay any dividend or other  distribution,
or permit any  Subsidiary to declare or pay any dividend or other  distribution,
in each case directly or indirectly,  on account of any equity of the Company or
any Subsidiary, except:

                              (A)  any   Subsidiary   of  the  Company  may  pay
dividends or make other distributions to the Company or any Subsidiary;

                              (B) the Company may pay  dividends  in the form of
common stock or preferred stock otherwise  permitted to be issued hereunder (but

                                       22

<PAGE>

in no event in the form of  redeemable  preferred  equity  requiring any payment
prior to the Maturity Date); or

                         (ii)  Make  any  repurchase,   redemption  (other  than
redemption  of the  Notes in  accordance  with the  terms  hereof),  retirement,
defeasance,  sinking fund or similar payment,  purchase or other acquisition for
value, direct or indirect,  of any equity of the Company or any Guarantor or any
direct or indirect  parent of the  Company or any  Guarantor,  now or  hereafter
outstanding  or make any payment to retire,  or to obtain the  surrender of, any
outstanding warrants, options or other rights for the purchase or acquisition of
shares of any class of equity of the Company or any Guarantor,  now or hereafter
outstanding,  except,  (x) from and after the second  (2nd)  anniversary  of the
Reissue Date, the Company and the Guarantors may repurchase common stock held by
employees,  officers,  and/or directors pursuant to any Approved Stock Plan upon
the  termination,  retirement  or death of any such  employee,  officer,  and/or
director  in  accordance  with the  provisions  of such plan or  pursuant to any
special  incentive bonus plans pursuant to the terms thereof,  provided that, as
to any such repurchase, each of the following conditions is satisfied: (A) as of
the date of the payment for such repurchase and after giving effect thereto on a
pro  forma  basis,  no Event of  Default  shall  exist or have  occurred  and be
continuing,  (B) such  repurchase  shall be paid with  funds  legally  available
therefor,  (C) such  repurchase  shall not violate any law or  regulation or the
terms of any  indenture,  agreement or  undertaking  to which the Company or any
Guarantor  is a party or by which the Company or such  Guarantor or its or their
property  are  bound,  and (D) the  aggregate  amount of all  payments  for such
repurchases  in any calendar year shall not exceed  $2,000,000  and (y) prior to
such second (2nd)  anniversary  of the Reissue Date,  Company and the Guarantors
may  repurchase  common  stock held by  employees,  officers,  and/or  directors
pursuant to any Approved Stock Plan upon the termination, retirement or death of
any such employee, officer, and/or director in accordance with the provisions of
such plan or pursuant to any special incentive bonus plans pursuant to the terms
thereof,  provided  that,  as to any  such  repurchase,  each  of the  following
conditions is satisfied:  (A) as of the date of the payment for such  repurchase
and after giving effect thereto on a pro forma basis,  no Event of Default shall
exist or have occurred and be continuing, (B) such repurchase shall be paid with
funds legally available therefor,  (C) such repurchase shall not violate any law
or regulation or the terms of any  indenture,  agreement or undertaking to which
the  Company  or any  Guarantor  is a party  or by  which  the  Company  or such
Guarantor or its or their  property are bound,  and (D) the aggregate  amount of
all payments for such repurchases in any calendar year shall not exceed $50,000;

                         (iii)  Return any equity to any  shareholders  or other
equity  holders  of the  Company or any of its  Subsidiaries,  or make any other
distribution of property, assets, equity, warrants, rights, options, obligations
or securities thereto as such (other than as permitted hereunder or, in the case
of such  distribution  of  property  or  assets,  to the  extent  not  otherwise
prohibited hereunder);

                         (iv)  Pay  any  management  fees or any  other  fees or
expenses  (including the reimbursement  thereof by the Company or any Guarantor)
pursuant to any management, consulting or other services agreement to any of the
shareholders  or other equity  holders of the Company or any  Guarantor or other
Affiliates  except any such

                                       23

<PAGE>

management  fees or any other fees or  expenses  (x) paid to the  Company or any
Guarantor (whether paid by the Company, any Guarantor or any other Subsidiary or
Affiliate of the Company),  (y) paid by SeaMaster  China to Sea Master Hong Kong
(each as defined in the Senior Loan Agreement);  and/or (z) paid by a Subsidiary
that is not the Company or a Guarantor to a  Subsidiary  that is not the Company
or a Guarantor or

                         (v) Directly or  indirectly  make or commit to make any
optional  prepayment  of,  or  otherwise  repurchase  any  Indebtedness  that is
subordinated in right of payment to the Notes, including without limitation, any
Subordinated Indebtedness.

                    (f) MERGER AND ACQUISITION  ACTIVITIES.  Until this Note has
been  converted,  redeemed or otherwise  satisfied in accordance  with its terms
(other than with respect to contingent indemnification obligations in respect of
which no claim has been asserted),  the Company shall not and shall not cause or
permit any of its  Subsidiaries  to merge into or with or  consolidate  with any
other  Person or permit any other  Person to merge  into or with or  consolidate
with it or wind up, liquidate or dissolve, or permit any Subsidiary to do any of
the foregoing, except that, subject to compliance with Section 5 hereof, (w) the
Company or any  Subsidiary  organized  under the laws of a  jurisdiction  in the
United  States may merge with and into or  consolidate  with the  Company or any
Subsidiary  organized under the laws of a jurisdiction in the United States, and
any Foreign  Subsidiary  may merge with or  consolidate  with the Company or any
Subsidiary  organized  under the laws of a  jurisdiction  outside  of the United
States that is acceptable  to the  Collateral  Agent,  provided that each of the
following conditions is satisfied:  (A) the Collateral Agent shall have received
not less than ten (10) Business  Days' prior written  notice of the intention of
the Company or such  Subsidiary to so merge or  consolidate,  which notice shall
set forth in reasonable detail satisfactory to the Collateral Agent, the Persons
that are merging or  consolidating,  which person will be the surviving  entity,
the  locations of the assets of the Persons  that are merging or  consolidating,
and  the  material   agreements  and  documents   relating  to  such  merger  or
consolidation,   (B)  the  Collateral  Agent  shall  have  received  such  other
information with respect to such merger or consolidation as the Collateral Agent
may reasonably request, (C) the rights of the Collateral Agent and any Holder in
any  Collateral,  including,  but not limited to, the existence,  perfection and
priority  of any Lien  thereon,  are not  adversely  affected  by such merger or
consolidation,  (D) as of the effective date of the merger or consolidation  and
after giving effect thereto,  no Default or Event of Default shall exist or have
occurred  and be  continuing,  (E)  upon the  Collateral  Agent's  request,  the
surviving  entity shall  expressly  confirm,  ratify and assume the  obligations
under this Note, the Other Notes and the Security Documents in writing,  in form
and substance satisfactory to the Collateral Agent, and (F) the Collateral Agent
shall have  received,  true,  correct  and  complete  copies of all  agreements,
documents and instruments  relating to such merger or consolidation,  including,
but not limited to, the  certificate or  certificates of merger to be filed with
each appropriate Secretary of State or equivalent  Governmental Authority in the
applicable  jurisdiction (with a copy as filed promptly after such filing),  (x)
the  Company  or any  Subsidiary  may merge  with and into or  consolidate  with
another Person pursuant to a Permitted Acquisition;  provided that (A) the other
party to such merger or  consolidation  shall be  organized  under the laws of a
jurisdiction,  and the surviving  entity shall be organized  under the laws of a
jurisdiction, in each case that is acceptable to the Collateral Agent, or if the
Company or any such  Subsidiary is organized under the laws of a jurisdiction in
the United  States,  such other  party  shall be  organized  under the laws of a
jurisdiction  in the United  States,  (B) the surviving  entity shall

                                       24

<PAGE>

expressly confirm,  ratify and assume the obligations under this Note, the Other
Notes and the Security Documents in writing, in form and substance  satisfactory
to the Collateral  Agent, and (C) the Company or such Subsidiary shall expressly
confirm,  ratify and assume the obligations under this Note, the Other Notes and
the Security  Documents,  the  Intercreditor  Agreement and each other  security
document  for the  benefit of the  Collateral  Agent  delivered  pursuant to the
Securities Purchase Agreement to which the Company or such Guarantor was a party
in writing, in form and substance  satisfactory to the Collateral Agent, (y) MLI
Acquisition Corp. may merge with and into MLI pursuant to the Merger and (z) the
sale, merger or dissolution involving FMI Blocker permitted under Section 14(h).

                    (g) REPORTING REQUIREMENTS.  Unless the same is available on
EDGAR prior to or on the applicable  due date set forth herein,  until this Note
has been converted, redeemed or otherwise satisfied in accordance with its terms
(other than in respect of contingent  indemnification  obligations in respect of
which no claim has been asserted), the Company shall furnish to the Holder:

                         (i)  within 45 days  after the end of each of the first
three  fiscal  quarters of each fiscal year of the Company and its  Subsidiaries
(unless  the 45th day is not a Business  Day,  in which  case the  period  shall
extend to the next Business Day or unless an appropriate extension is filed with
the SEC,  in  which  case  the  period  shall be  extended  as  provided  by the
applicable   securities  laws  for  up  to  five  days)  (A)   consolidated  and
consolidating  balance  sheets,  consolidated  and  consolidating  statements of
operations and retained earnings and consolidated and  consolidating  statements
of cash flows of the Company and its Subsidiaries as at the end of such quarter,
and (B) on and after the end of the first  twelve (12) months of the Company and
its Subsidiaries ending after the November 8, 2006, for the period commencing at
the end of the immediately preceding Fiscal Year and ending with the end of such
quarter,  setting  forth in each case in  comparative  form the  figures for the
corresponding  date or period of the immediately  preceding  Fiscal Year setting
forth in comparative form any projections with respect thereto, in each case all
in reasonable  detail and  certified by an authorized  officer of the Company as
fairly  presenting,  in all material  respects,  the  financial  position of the
Company  and its  Subsidiaries  on a  consolidated  basis  as of the end of such
quarter  and the  results of  operations  and cash flows of the  Company and its
Subsidiaries on a consolidated  basis for such quarter,  in accordance with GAAP
applied in a manner  consistent  with that of the most recent audited  financial
statements of the Company and its Subsidiaries  furnished to the Holder, subject
to the absence of footnotes and normal year-end adjustments;

                         (ii)  within 90 days after the end of each  Fiscal Year
of the Company and its Subsidiaries  (unless the 90th day is not a Business Day,
in which  case the period  shall  extend to the next  Business  Day or unless an
appropriate  extension  is filed with the SEC, in which case the period shall be
extended  as  provided  by the  applicable  securities  laws for up to 15 days),
consolidated and  consolidating  balance sheets,  consolidated and consolidating
statements   of  operations   and  retained   earnings  and   consolidated   and
consolidating statements of cash flows of the Company and its Subsidiaries as at
the end of such Fiscal  Year,  and on and after the end of the first Fiscal Year
of the Company and its Subsidiaries  ending after the November 8, 2006,  setting

                                       25

<PAGE>

forth  in each  case in  comparative  form  the  corresponding  figures  for the
immediately  preceding  Fiscal Year and for any projections with respect thereto
previously  provided to the Holder,  all in  reasonable  detail and  prepared in
accordance  with GAAP, and  accompanied by a report and an unqualified  opinion,
prepared  in  accordance  with  generally   accepted  auditing   standards,   of
independent  certified  public  accountants  of nationally  recognized  standing
selected by the Company (which opinion shall be without (A) a "going concern" or
like  qualification or exception,  (B) any  qualification or exception as to the
scope of such audit, or (C) any qualification  which relates to the treatment or
classification  of any item and which,  as a  condition  to the  removal of such
qualification,  would require an  adjustment  to such item,  the effect of which
would be to cause any noncompliance with the provisions of Section 14(l);

                         (iii) simultaneously with the delivery of the financial
statements of the Company and its Subsidiaries  required by clauses (i) and (ii)
of this Section 14(g), a certificate of an authorized officer of the Company (A)
stating that such  authorized  officer has reviewed the  provisions of the Notes
and has made or caused to be made under his or her  supervision  a review of the
condition and operations of the Company and its  Subsidiaries  during the period
covered by such  financial  statements  with a view to  determining  whether the
Company and its  Subsidiaries  were in compliance  with all of the provisions of
the Notes at the times such compliance is required hereby and thereby,  and that
such review has not disclosed,  and such authorized officer has no knowledge of,
the  existence  during  such  period of an Event of  Default  or, if an Event of
Default existed,  describing the nature and period of existence  thereof and the
action which the Company and its Subsidiaries propose to take or have taken with
respect  thereto and (B) attaching a schedule  showing the  calculations  of the
financial covenants set forth in Section 14(l);

                         (iv) Intentionally Omitted;

                         (v) within four (4) Business  Days after  submission to
any Governmental Authority,  all material documents and information furnished to
such Governmental Authority in connection with any material investigation of the
Company or any  Guarantor  other than  routine  inquiries  by such  Governmental
Authority;

                         (vi) within four (4) Business Days after Company and/or
Guarantor(s)  obtain  knowledge of any Default,  the  occurrence of any Event of
Default or the occurrence of any event or development  that could  reasonably be
expected  to  have a  Material  Adverse  Effect,  the  written  statement  of an
authorized  officer of the Company  setting  forth the details of such  Default,
Event of Default or other event or development that could reasonably be expected
to have a Material Adverse Effect and the action which the Company or any of its
Subsidiaries proposes to take in respect thereof;

                         (vii)  within  four (4)  Business  Days of  receipt  by
Company,  notice of each action,  suit or  proceeding  before any court or other
Governmental  Authority or other  regulatory  body or any arbitrator  which,  if
adversely  determined,  could  reasonably be expected to have a Material Adverse
Effect;

                                       26

<PAGE>

                         (viii)  within  four (4)  Business  Days of  receipt or
delivery  by  Company  or  any  of  its  Subsidiaries,   all  material  notices,
certificates  and  financial  statements  delivered to or to be delivered by the
Company or any of its Subsidiaries under the terms of the Acquisition Documents;

                         (ix) within four (4) Business  Days after so sending or
filing,  copies of all  statements,  reports and other material  information the
Company or any  Subsidiary  sends to or files  with any  national  (domestic  or
foreign) securities exchange;

                         (x) within  four (4)  Business  Days  after  receipt by
Company or any  Guarantor,  copies of all material  financial  reports,  if any,
submitted to the Company or any Guarantor by its auditors in connection with any
annual or interim audit of the books thereof; and

                         (xi) within four (4) Business  Days of delivery of such
information,  such other  information  concerning  the condition or  operations,
financial or  otherwise,  of the Company or any Guarantor as the Holder may from
time  to  time  reasonably  request;  provided,  that  if  such  information  is
reasonably  determined  by the Company to be  competitively  sensitive and to be
material,  non-public  information,  then the  Company  need not  disclose  such
information  unless  Holder  first  enters  into  a  reasonable  confidentiality
agreement relating to such information.

                    (h) PRESERVATION OF EXISTENCE, ETC. Until this Note has been
converted,  redeemed or otherwise  satisfied in accordance with its terms (other
than in respect of contingent indemnification obligations in respect of which no
claim has been  asserted),  the Company shall  maintain and preserve,  and cause
each of its  Subsidiaries  to maintain and preserve,  its existence,  rights and
privileges,  and become or remain,  and cause each of its Subsidiaries to become
or remain, duly qualified and in good standing in each jurisdiction in which the
character of the properties owned or leased by it or in which the transaction of
its business makes such qualification necessary, where the failure to qualify or
be in good  standing  could  reasonably  be expected to have a Material  Adverse
Effect. Notwithstanding anything to the contrary set forth in this Note, without
the  consent of any  Holder,  a  Subsidiary  may be  dissolved  by merger into a
Guarantor or the Company,  or, if not a Guarantor,  dissolved,  and FMI Blocker,
Inc. may be dissolved, by merger or otherwise, or sold; provided that all assets
thereof shall  theretofore  have been  transferred  to the Company and/or one or
more other Guarantors.

                    (i) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Until this Note
has been converted, redeemed or otherwise satisfied in accordance with its terms
(other than in respect of contingent  indemnification  obligations in respect of
which no claim has been asserted), the Company shall keep, and cause each of its
Subsidiaries  to keep,  adequate  records  and books of account,  with  complete
entries made to permit the  preparation  of financial  statements  in accordance
with GAAP.

                    (j)  FISCAL  YEAR.  Until  this  Note  has  been  converted,
redeemed or  otherwise  satisfied  in  accordance  with its terms (other than in
respect of contingent  indemnification  obligations in respect of which no claim
has been  asserted),  the Company shall cause the Fiscal Year of the Company and
its Subsidiaries to end on or about December 31 of

                                       27

<PAGE>

each calendar year unless the agent under the Senior Loan Agreement  consents to
a change in such Fiscal Year (and appropriate related changes to the Senior Loan
Agreement),  which change, if so approved, shall automatically become applicable
to the Notes.

                    (k) INTENTIONALLY OMITTED.

                    (l) FINANCIAL COVENANTS. Until this Note has been converted,
redeemed or  otherwise  satisfied  in  accordance  with its terms (other than in
respect of contingent  indemnification  obligations in respect of which no claim
has been asserted),  neither the Company nor any of the Guarantors shall, unless
the Required Holders shall otherwise consent in writing:

                         (i)  TOTAL  LEVERAGE  RATIO.  Permit  the  ratio of Net
Senior  Indebtedness to Consolidated  EBITDA of the Company and its Subsidiaries
for the twelve (12)  consecutive  months ending on the last day of the month set
forth on SCHEDULE  14(l)(i)  hereto to be greater than the applicable  ratio for
such  date set  forth  on such  Schedule;  provided  that  for the  purposes  of
calculating the ratio of Net Senior  Indebtedness  to Consolidated  EBITDA under
this Section  14(l)(i) for the three (3)  consecutive  months ending on June 30,
2006,  September 30, 2006, December 31, 2006 and March 31, 2007, EBITDA shall be
equal to $2,915,000,  $5,217,000, $4,084,225 and ($565,000),  respectively. With
respect to all  measurement  periods  ending after December 31, 2007, the Holder
and the Company  acknowledge  and agree that the Total Leverage Ratio levels set
forth in Schedule 14(l)(i) hereto shall be set at levels identical to the levels
set forth in Section 6.03(a) (and Schedule 6.03(a)) of the Senior Loan Agreement
for the same time  periods  (after  taking into account the manner in which such
ratio is calculated)  minus or plus (as applicable) a ten percent (10%) variance
to allow for a cushion (to Company's benefit) with respect thereto provided that
such financial covenant shall only be measured quarterly;

                         (ii) CONSOLIDATED EBITDA. Permit Consolidated EBITDA of
the Company and its  Subsidiaries  for the periods ending on the last day of the
month  set forth on  SCHEDULE  14(l)(ii)  hereto to be less than the  applicable
amount  for  such  period  set  forth  on such  Schedule.  With  respect  to all
measurement  periods  ending after December 31, 2007, the Holder and the Company
acknowledge  and agree that the EBITDA  levels set forth in  Schedule  14(l)(ii)
hereto  shall be set at levels  identical  to the  levels  set forth in  Section
6.03(b) (and  Schedule  6.03(b)) of the Senior Loan  Agreement for the same time
periods  (after  taking into account the manner in which  EBITDA is  calculated)
minus or plus (as  applicable)  a ten  percent  (10%)  variance  to allow  for a
cushion (to Company's benefit) with respect thereto provided that such financial
covenant shall only be measured quarterly; and

                         (iii) FIXED  CHARGE  COVERAGE  RATIO.  Permit the Fixed
Charge Coverage Ratio of the Company and its  Subsidiaries for the period ending
on the last day of the month set forth on SCHEDULE  14(l)(iii) hereto to be less
than the  applicable  ratio for such  period  set forth on such  Schedule.  With
respect to the  periods  ending  after  December  31,  2007,  the Holder and the
Company  acknowledge  and agree that the Fixed Charge  Coverage Ratio levels set
forth in Schedule  14(l)(iii)  hereto  shall be set at levels

                                       28

<PAGE>

identical to the levels set forth in Section  6.03(c) (and Schedule  6.03(c)) of
the Senior Loan  Agreement for the same time periods  (after taking into account
the manner in which such ratio is  calculated)  minus or plus (as  applicable) a
ten percent (10%)  variance to allow for a cushion (to  Company's  benefit) with
respect  thereto  provided that such  financial  covenant shall only be measured
quarterly.

If the Senior Loans  outstanding  on the date hereof are refinanced or otherwise
replaced,  the  financial  covenants  set forth herein shall be identical to the
financial  covenants  set forth in the loan  documents  that evidence the Senior
Loans that replace the Senior Loans outstanding on the date hereof minus or plus
(as  applicable)  a ten  percent  (10%)  variance  to allow  for a  cushion  (to
Company's  benefit) with respect thereto provided that such financial  covenants
are reasonably satisfactory to the Required Holders. If such financial covenants
are not  reasonably  satisfactory  to the Required  Holders,  the Holder and the
Company  agree to use good faith best  efforts  to set new  financial  covenants
(identical to the financial  covenants set forth in the Other Notes)  reasonably
acceptable  to the Required  Holders and the  Company.  If after good faith best
efforts,  the Required  Holders and the Company are unable to agree with respect
to setting the level of such new financial  covenants,  the financial  covenants
set forth herein shall be  automatically  reset to the  financial  covenants set
forth in Schedules  14(l)(i),  14(l)(ii)  and  14(l)(iii) of the Notes in effect
prior to the date hereof.

                    (m)  DISPOSITIONS.  Until  this  Note  has  been  converted,
redeemed or  otherwise  satisfied  in  accordance  with its terms (other than in
respect of contingent  indemnification  obligations in respect of which no claim
has been  asserted),  neither the Company nor any Guarantor  shall,  directly or
indirectly  make  any  Disposition  or  enter  into  any  agreement  to make any
Disposition, except:

                         (i) the sale by the  Company or any  Subsidiary  of any
inventory in the ordinary course of business;

                         (ii) the sale or other  disposition  by the  Company or
any  Subsidiary  of obsolete or  discontinued  inventory,  and the sale or other
disposition by the Company or any Subsidiary of obsolete or worn-out  equipment,
in each case, in the ordinary course of business, whether now owned or hereafter
acquired,  provided  that the  aggregate  amount of any such  assets sold in any
Fiscal Year shall not exceed $1,000,000;

                         (iii) in addition to the other  sales  permitted  under
this Section 14(m), the sale or other disposition of equipment or Real Property;
provided that, each of the following conditions is satisfied in respect thereof:
(A) such proceeds as to any individual sale do not exceed $250,000; (B) as to an
asset sale of Real Property or equipment of the Company or any Subsidiary,  such
proceeds  from all such asset sales in respect of assets of the Company and such
Subsidiary during any year shall not, after giving effect to such asset sale, in
the aggregate  exceed  $1,000,000;  (C) the proceeds are used to purchase  other
Real Property or equipment  that will be free and clear of any Lien,  except for
Permitted  Liens; (D) such new Real Property or equipment is and continues to be
subject to the second

                                       29

<PAGE>

priority perfected Lien of the Collateral Agent (subject to applicable Permitted
Liens)  unless the Person  disposing of such Real Property or equipment is not a
Guarantor;  (E) such new Real  Property or  equipment  is  purchased  within one
hundred  eighty (180) days after the sale or other  disposition of the equipment
or Real  Property  that was subject to such asset  sale;  and (F) as to an asset
sale of Real Property or equipment of the Company or such Guarantor,  until such
time as the  proceeds  are so used and so long as no Event of Default  exists or
has occurred and is continuing,  such proceeds will be held in a deposit account
or investment  account that is subject to a control agreement for the benefit of
Collateral Agent and agent under Senior Loan Agreement or are otherwise  subject
to the Collateral  Agent's  perfected  security  interest and only released from
such account for the payment of the purchase  price of such new Real Property or
equipment;

                         (iv) the sale, assignment,  lease or sublease,  license
or other disposition of property by the Company or any Subsidiary to the Company
or any Guarantor; provided that, such property is subject to a perfected, second
priority Lien in favor of the Collateral Agent (subject to Permitted Liens);

                         (v)  any  disposition  permitted  under  Section  14(f)
hereof;

                         (vi) the non-exclusive license of Intellectual Property
(as defined in the Securities  Purchase  Agreement) rights  (including,  without
limitation,  licenses) granted to a customer of the Company or any Subsidiary in
the ordinary course of business, substantially consistent with past practice and
not interfering in any material  respect with the conduct of the business of the
Company or any Subsidiary;

                         (vii) any lease or  sub-lease  of Real  Property to any
Person other than the Company or a Guarantor on terms and subject to  conditions
consistent with the market in respect of such lease or sub-lease at such time;

                         (viii) an asset sale of equipment or Real Property that
is  part  of the  consideration  for a  Permitted  Acquisition  and  each of the
conditions to such  Permitted  Acquisition  are  satisfied,  provided  that, the
aggregate  value of all such  equipment or Real Property  subject to all of such
asset sales,  shall not exceed  $1,000,000  and as of the date thereof and after
giving effect  thereto on a pro forma basis,  no Event of Default shall exist or
have occurred and be continuing;

                         (ix)  issuances  and sales of Equity  Interests  to the
extent permitted under Section 6.02(l) of the Senior Loan Agreement as in effect
on the date hereof;

                         (x) any Permitted Lien;

                         (xi) an asset sale or other  disposition of assets as a
contribution to a Subsidiary or Affiliate as an investment in such Subsidiary or
Affiliate to the extent permitted under Section 14(t)(v) hereof;

                                       30

<PAGE>

                         (xii)  the   transfer   of  funds  as  a   payment   on
Indebtedness  or  other  obligations  owing  by or to  the  Company  and/or  any
Subsidiary to the extent not otherwise prohibited hereunder;

                         (xiii)  investments and capital  contributions in or to
the  Company  and/or  any  of its  Subsidiaries  to the  extent  not  prohibited
hereunder;

                         (xiv)  Subject to the prior  approval  of the  Required
Holders:

                              (A) Disposition of non-strategic  business assets;
or

                              (B)   Dispositions   by  the   Company   and   its
Subsidiaries not otherwise permitted under this Section 14(m).

                    (n) FEDERAL  RESERVE  REGULATIONS.  Until this Note has been
converted,  redeemed or otherwise  satisfied in accordance with its terms (other
than in respect of contingent indemnification obligations in respect of which no
claim has been asserted),  neither the Company nor any of its Subsidiaries shall
permit any of the Indebtedness under or the proceeds of this Note to be used for
any  purpose  that would cause such  Indebtedness  to be a margin loan under the
provisions of Regulation T, U or X of the Federal Reserve Board.

                    (o) INVESTMENT COMPANY ACT OF 1940. Until this Note has been
converted,  redeemed or otherwise  satisfied in accordance with its terms (other
than in respect of contingent indemnification obligations in respect of which no
claim has been asserted),  neither the Company nor any of its Subsidiaries shall
engage in any business,  enter into any transaction,  use any securities or take
any other action,  or permit any of its Subsidiaries to do any of the foregoing,
that would cause it to become subject to the  registration  requirements  of the
Investment  Company Act of 1940, as amended,  by virtue of being an  "investment
company" or a company "controlled" by an "investment company" not entitled to an
exemption within the meaning of such Act.

                    (p) PROPERTIES. Until this Note has been converted, redeemed
or otherwise  satisfied in  accordance  with its terms (other than in respect of
contingent  indemnification  obligations  in  respect of which no claim has been
asserted),  neither  the Company nor any of its  Subsidiaries  shall  permit any
property of the Company or any  Guarantor to become a fixture in respect of real
property  or to become an  accession  in respect of other  personal  property in
respect of which real or personal  property the Collateral Agent does not have a
valid and perfected second priority Lien (subject to the Permitted Liens).

                    (q) AMENDMENT TO ACQUISITION DOCUMENTS.  Until this Note has
been  converted,  redeemed or otherwise  satisfied in accordance  with its terms
(other than in respect of contingent  indemnification  obligations in respect of
which  no  claim  has  been  asserted),  neither  the  Company  nor  any  of its
Subsidiaries shall amend, modify,  change, agree to any amendment,  modification
or other change to (or make any payment  consistent  with any amendment or other
change to) or waive any of its rights under any of the Acquisition Documents.

                    (r) NO VIOLATION OF ANTI-TERRORISM LAWS. Until this Note has
been  converted,  redeemed or otherwise  satisfied in accordance  with its terms
(other than in respect of

                                       31

<PAGE>

contingent  indemnification  obligations  in  respect of which no claim has been
asserted),  the  Company  and  Guarantors  shall  not,  and shall not permit any
Subsidiary  to:  (i)  violate  any  of  the   prohibitions   set  forth  in  the
Anti-Terrorism Laws applicable to any of them or the business that they conduct,
(ii) require the Collateral Agent or Holders to take any action that would cause
the Collateral Agent or Holders to be in violation of the prohibitions set forth
in the Anti-Terrorism Laws, it being understood that the Collateral Agent or any
Holder can refuse to honor any such request or demand otherwise  validly made by
a the Company under this Note, (iii) knowingly conduct any business or engage in
making or receiving any  contribution of funds,  goods or services to or for the
benefit of any  Designated  Person or any other Person  identified  in any List,
(iv) knowingly deal in, or otherwise engage in any transaction  relating to, any
property or interests in property  blocked pursuant to any  Anti-Terrorism  Law,
(v) repay the Notes with any funds  derived from any unlawful  activity with the
result  that the  making  of the Notes  would be in  violation  of law,  or (vi)
knowingly  engage in or  conspire  to engage in any  transaction  that evades or
avoids, or has the purpose of evading or avoiding,  or attempts to violate,  any
of the prohibitions set forth in any  Anti-Terrorism  Law (and the Company shall
deliver to the Holder any certification or other evidence requested from time to
time by the Holder in its reasonable discretion, confirming compliance with this
Section 14(r).

                    (s) TYPE OF  BUSINESS.  Until this Note has been  converted,
redeemed or  otherwise  satisfied  in  accordance  with its terms (other than in
respect of contingent  indemnification  obligations in respect of which no claim
has been  asserted),  the  Company  shall  not,  and shall not permit any of its
Subsidiaries  to,  engage in any  business,  other  than the  businesses  of the
Company,  the  Guarantors  and/or such  Subsidiary  on the Closing  Date and any
business reasonably related, similar, ancillary or complementary to the business
in which the Company,  the Guarantors or the  Subsidiaries of the Company or the
Guarantors were engaged on the Closing Date;

                    (t) LOANS,  ADVANCES  AND  INVESTMENTS.  Until this Note has
been  converted,  redeemed or otherwise  satisfied in accordance  with its terms
(other than in respect of contingent  indemnification  obligations in respect of
which no claim has been  asserted),  the Company shall not, and shall not permit
any of its Subsidiaries to, make,  directly or indirectly,  any loans or advance
money or property to any person, or invest in (by capital contribution, dividend
or otherwise) or purchase or repurchase the Equity  Interest or  Indebtedness or
all or a  substantial  part of the assets or property of any person,  or form or
acquire any  Subsidiaries,  or agree to do any of the  foregoing,  or permit any
Subsidiary to do any of the foregoing, except:

                         (i) the  Acquisitions  contemplated  by the Acquisition
Documents;

                         (ii) loans  existing on the date hereof as set forth on
SCHEDULE 14(t) hereto,  but not any increase in the principal  amount thereof as
set forth in such Schedule or any other  modification of the terms thereof which
is less  favorable  to any of the  Company,  the  Guarantors,  the  Agent or the
Holders than the existing terms;

                         (iii) any  investment  in cash or Cash  Equivalents  so
long as the deposit account,  investment  account or other account in which such
cash or Cash  Equivalents  are held is  subject to a control  agreement  for the
benefit of the  Collateral  Agent and agent under

                                       32

<PAGE>

Senior  Loan  Agreement  (or the  Collateral  Agent  otherwise  has a  perfected
security  interest  therein) and the Collateral Agent has a Lien in such account
and  cash  or  Cash  Equivalents  to the  extent  required  under  the  Security
Agreement;

                         (iv) loans, capital  contributions or other investments
by the Company or a Guarantor  to the Company or another  Guarantor  on or after
November  8,  2006;  provided  that,  as of the date of any such  loan,  capital
contribution or other investment and after giving effect thereto, the Company or
Guarantor  making such loan,  capital  contribution or other investment shall be
Solvent;

                         (v) loans,  capital  contributions or other investments
by the Company or a Guarantor to a Subsidiary  that is not  organized  under the
laws of a  jurisdiction  in the United  States of America  or  otherwise  to any
Subsidiary  or  Affiliate  that  is not a  Guarantor;  provided  that,  (A)  the
aggregate amount of all such loans at any time outstanding and all payments made
for such capital contributions or other investments shall not, in the aggregate,
exceed $12,000,000; (B) upon Collateral Agent's request, any obligations arising
in  connection  with loans by the  Company or a  Guarantor  to a  Subsidiary  or
Affiliate that is not a Guarantor or the Company shall be secured by a valid and
enforceable  perfected security interest,  lien and fixed and floating charge on
the assets of such  Subsidiary  or Affiliate  pursuant to agreements in form and
substance  satisfactory to the Collateral  Agent and the Collateral  Agent shall
have  received all of such  agreements  as duly  executed and  delivered by such
parties,  together with such related  agreements and documents as the Collateral
Agent may require; and (C) as of the date of any such loan, capital contribution
or other investment,  and after giving effect thereto,  on a pro forma basis, no
Default or Event of Default shall exist or have occurred and be continuing;

                         (vi)   Permitted   Acquisitions   including,    without
limitation the planned  purchase of the Equity  Interests of SeaMaster  China by
Sea Master Hong Kong or another  Affiliate of the Company and the formation of a
Subsidiary in connection therewith;

                         (vii)  dividends,  redemptions,  repurchases  and other
distributions permitted hereunder;

                         (viii) Company and its Subsidiaries  shall be permitted
to form  Subsidiaries  provided  that Company and its  Subsidiaries  comply with
Section 14(w) in connection therewith.

                    (u) TRANSACTIONS  WITH AFFILIATES.  Until this Note has been
converted,  redeemed or otherwise  satisfied in accordance with its terms (other
than in respect of contingent indemnification obligations in respect of which no
claim has been asserted), the Company shall not, and shall not permit any of its
Subsidiaries to, enter into, renew,  extend or be a party to, any transaction or
series of related  transactions  (including,  without limitation,  the purchase,
sale,  lease,  transfer  or  exchange  of  property or assets of any kind or the
rendering of services of any kind) with any Affiliate, except:

                         (i)  to the  extent  necessary  or  desirable  for  the
prudent  operation of its business  and for fair  consideration  and on terms no
less  favorable  to it than would be  obtainable  in a  comparable  arm's length
transaction with a Person that is not an

                                       33

<PAGE>

Affiliate  thereof;  provided that, (A) if each party to such transaction is the
Company or a Guarantor,  then the  consideration and terms may be less favorable
to one of them to the extent it is more  favorable to the other,  provided  that
such other entity is Solvent (as defined in the Securities  Purchase  Agreement)
at the  time of the  transaction  or (B) if a party to such  transaction  is the
Company or a Guarantor  and the other is a Subsidiary  or Affiliate  that is not
the Company or a Guarantor, the consideration and terms may be less favorable to
such Subsidiary or Affiliate;

                         (ii)  transactions   expressly  permitted  by  Sections
14(d),  14(e)  (other  than  clause  (i)(B)  thereof  unless,  with  respect  to
transactions among Affiliates,  the conditions set forth in Section 14(u)(i) are
satisfied),  14(f)  (other  than  clause (y)  thereof  unless,  with  respect to
transactions among Affiliates,  the conditions set forth in Section 14(u)(i) are
satisfied), 14(m) and 14(t); or

                         (iii)  loans  existing  on the date hereof set forth on
SCHEDULE 14(u) hereto,  but not any increase in the principal  amount thereof as
set forth in such Schedule or any other modification of the terms thereof.

                    (v)  ENVIRONMENTAL.  Until  this  Note has  been  converted,
redeemed or  otherwise  satisfied  in  accordance  with its terms (other than in
respect of contingent  indemnification  obligations in respect of which no claim
has been  asserted),  the  Company  shall  not,  and shall not permit any of its
Subsidiaries  to,  permit the use,  handling,  generation,  storage,  treatment,
release or  disposal  of  Hazardous  Materials  (as  defined  in the  Securities
Purchase  Agreement)  at  any  property  owned  or  leased  by it or  any of its
Subsidiaries,  except in compliance with  Environmental  Laws (as defined in the
Securities  Purchase  Agreement) and so long as such use, handling,  generation,
storage,  treatment,  release  or  disposal  of  Hazardous  Materials  could not
reasonable be expected to result in a Material Adverse Effect.

                    (w) FURTHER ASSURANCES.  Until this Note has been converted,
redeemed or  otherwise  satisfied  in  accordance  with its terms (other than in
respect of contingent  indemnification  obligations in respect of which no claim
has been asserted),  (i) the Company shall,  and shall cause each Subsidiary not
in  existence  on the  Closing  Date  (other  than  in  respect  of any  Foreign
Subsidiary)  to execute and deliver to the  Collateral  Agent,  each in form and
substance satisfactory to the Collateral Agent, promptly and in any event within
ten (10) days after the formation, acquisition or change in status thereof (A) a
Guaranty guaranteeing the obligations under the Notes, (B) a Security Agreement,
(C) if such Subsidiary has any  Subsidiaries,  a Pledge Agreement  together with
(1) if certificated, certificates evidencing (aa) all of the Equity Interests of
any Person organized under the laws of the United States of America and owned by
such Subsidiary or (bb) sixty-five  (65%) percent of the Equity Interests of any
person  organized under the laws of a jurisdiction  other than the United States
of America and owned by such Subsidiary,  provided that such certificates may be
delivered to the agent under the Senior Loan  Documents if the Permitted  Senior
Indebtedness  has not  been  Paid  in  Full  (as  defined  in the  Intercreditor
Agreement),  (2)  undated  stock  powers  or other  appropriate  instruments  of
assignment  executed in blank with signature  guaranteed  executed in blank with
signature  guaranteed,  and (3) such opinion of counsel as the Collateral  Agent
may reasonably request,  (D) to the extent that such Subsidiary has any interest
in real  property  having a Current Value in excess of $250,000 in the case of a
fee interest or requiring the payment of annual rent  exceeding in the aggregate
$250,000 in the case of a leasehold interest, upon the request of the

                                       34

<PAGE>

Collateral  Agent  or at the  direction  of  Required  Holder,  each in form and
substance satisfactory to the Collateral Agent: (1) Mortgages in respect of such
real  property  and  related  assets  located  at the real  property,  each duly
executed by such Person and in recordable form; (2) evidence of the recording of
such  Mortgages in such office or offices as may be necessary or, in the opinion
of the Collateral Agent, desirable to create and perfect a valid and enforceable
second  priority  Lien  (subject to  Permitted  Liens) on the Real  Property and
related assets intended to be covered thereby or to otherwise protect the rights
of the Collateral Agent and Holders  thereunder,  (3) a Title Insurance  Policy,
(4) a survey of such Real Property, certified to the Collateral Agent and to the
issuer  of the  Title  Insurance  Policy  by a  licensed  professional  surveyor
reasonably  satisfactory to the Collateral Agent, (5) Phase I environmental site
assessments in respect of such real property,  certified to the Collateral Agent
by a company  satisfactory to the Collateral Agent, and (6) such other documents
or instruments  (including guarantees and opinions of counsel) as the Collateral
Agent may require, and (E) such other agreements,  instruments, approvals, legal
opinions or other  documents  reasonably  requested by the  Collateral  Agent in
order to create,  perfect,  establish the second priority  (subject to Permitted
Liens) of or  otherwise  protect  any Lien  purported  to be covered by any such
Security  Agreement,  Pledge  Agreement  or Mortgage or  otherwise to effect the
intent that such  Subsidiary  shall become bound by all of the terms,  covenants
and agreements contained in the Transaction  Documents and that all property and
assets of such Subsidiary shall become  Collateral for the obligations under the
Notes, except as the Collateral Agent may otherwise agree; and

                         (ii) The  Company  shall,  or shall cause each owner of
the Equity Interests of any such Subsidiary to, execute and deliver promptly and
in any event within three (3) days after the  formation or  acquisition  of such
Subsidiary  after the date  hereof,  a Pledge  Agreement,  together  with (A) if
certificated,  certificates  evidencing  (1) all of the Equity  Interests of any
such  Subsidiary's  Subsidiary  organized under the laws of the United States of
America,  or (2)  sixty-five  (65%) percent of the Equity  Interests of any such
Subsidiary's  Subsidiary  organized under the laws of a jurisdiction  other than
the United  States of America,  (B) undated  stock  powers or other  appropriate
instruments of assignment executed in blank with signature guaranteed,  (C) such
opinion of counsel as the Collateral  Agent may reasonably  request and (D) such
other  agreements,  instruments,  approvals,  legal opinions or other  documents
requested by the Collateral Agent.

                    (x)  COMPLIANCE   WITH  LAWS.   Until  this  Note  has  been
converted,  redeemed or otherwise  satisfied in accordance with its terms (other
than in respect of contingent indemnification obligations in respect of which no
claim has been  asserted),  the  Company  shall  comply,  and cause  each of its
Subsidiaries to comply, with all applicable laws, rules, regulations,  judgments
and orders (including,  without limitation, all Environmental Laws) in each case
material to the conduct of its business and operations, except where the failure
to so comply could not reasonably be expected to have a Material Adverse Effect.

               (15) PARTICIPATION. The Holder, as the holder of this Note, shall
be entitled to receive such dividends paid and distributions made to the holders
of Common Stock to the same extent as if the Holder had converted this Note into
Common  Stock  (without  regard  to any  limitations  on  conversion  herein  or
elsewhere)  and had held such shares of Common Stock on the record date for such
dividends and distributions. Payments under the preceding

                                       35

<PAGE>

sentence shall be made  concurrently  with the dividend or  distribution  to the
holders of Common Stock.

               (16) VOTE TO  ISSUE,  OR CHANGE  THE TERMS OF,  NOTES.  Except as
otherwise provided herein, no amendment, modification or waiver of any provision
of a Note or any of the other Transaction Documents, or consent to any departure
by any Obligor or Holder  therefrom,  shall in any event be effective unless the
same shall be in writing and signed by the  Required  Holders and the  Obligors;
provided that no amendment, modification, termination or waiver shall, unless in
writing and signed by each holder of Notes directly affected thereby, (i) reduce
the Principal and, provided, further, that no amendment,  modification or waiver
shall, unless in writing and signed by all Holders, (x) change the definition of
"Required  Holders"  or the  percentage  of Holders  required to take any action
hereunder;  (y)  modify  this  Section  16 or (z)  consent  to  the  assignment,
delegation  or other  transfer by the Company or any other Obligor of any of its
rights and obligations under any Transaction Document, and provided further that
to  reduce  the  interest  rate or any fees or  extend  the time of  payment  of
Principal, interest or any fees, or waive any default, event of default or Event
of Default, the consent of each holder of the Notes directly affected thereby is
required.

               (17)  TRANSFER.  This  Note may be  offered,  sold,  assigned  or
transferred  by the Holder  without the consent of the Company,  subject only to
the provisions of Section 2(f) of the  Securities  Purchase  Agreement  provided
that Holder  and/or  assignee  give Company  written  notice of such  assignment
within ten (10) Business Days after the consummation of such assignment.

               (18) REISSUANCE OF THIS NOTE.

                    (a) TRANSFER. If this Note is to be transferred,  the Holder
shall  surrender this Note to the Company,  whereupon the Company will forthwith
issue and deliver  upon the order of the Holder a new Note (in  accordance  with
Section  18(d)),  registered  as  the  Holder  may  request,   representing  the
outstanding  Principal  being  transferred  by the Holder  and, if less then the
entire  outstanding  Principal is being  transferred,  a new Note (in accordance
with Section 18(d)) to the Holder  representing  the  outstanding  Principal not
being transferred.  The Holder and any permitted assignee, by acceptance of this
Note,  acknowledge  and  agree  that,  by reason of the  provisions  of  Section
3(c)(iii)  following  conversion or redemption of any portion of this Note,  the
outstanding  Principal  represented  by this Note may be less than the Principal
stated on the face of this Note.

                    (b) LOST,  STOLEN OR  MUTILATED  NOTE.  Upon  receipt by the
Company of evidence  reasonably  satisfactory to the Company of the loss, theft,
destruction  or  mutilation  of this Note,  and,  in the case of loss,  theft or
destruction,  of any indemnification undertaking by the Holder to the Company in
customary form and, in the case of mutilation,  upon surrender and  cancellation
of this Note, the Company shall execute and deliver to the Holder a new Note (in
accordance with Section 18(d)) representing the outstanding Principal.

                    (c) NOTE EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Note
is exchangeable, upon the surrender hereof by the Holder at the principal office
of the Company, for a new Note or Notes (in accordance with Section 18(d) and in
principal  amounts  of at  least

                                       36

<PAGE>

$1,000)  representing in the aggregate the  outstanding  Principal of this Note,
and each such new Note will represent such portion of such outstanding Principal
as is designated by the Holder at the time of such surrender.

                    (d) ISSUANCE OF NEW NOTES.  Whenever the Company is required
to issue a new Note pursuant to the terms of this Note,  such new Note (i) shall
be of like tenor with this Note, (ii) shall represent,  as indicated on the face
of such new Note, the Principal  remaining  outstanding (or in the case of a new
Note being issued  pursuant to Section  18(a) or Section  18(c),  the  principal
designated by the Holder which,  when added to the principal  represented by the
other new Notes issued in  connection  with such  issuance,  does not exceed the
Principal  remaining  outstanding  under  this  Note  immediately  prior to such
issuance of new Notes), (iii) shall have an original issuance date, as indicated
on the face of such new Note, which is the same as the Original Issuance Date of
this Note,  (iv) shall have the same rights and conditions as this Note, and (v)
shall  represent  accrued and unpaid  Interest and Late Charges on the Principal
and Interest of this Note, if any, from the Interest Commencement Date.

               (19) REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in
addition to all other  remedies  available  under this Note and any of the other
Transaction  Documents  at law or in  equity  (including  a decree  of  specific
performance and/or other injunctive relief),  and nothing herein shall limit the
Holder's right to pursue actual and consequential damages for any failure by the
Company to comply with the terms of this Note. Amounts set forth or provided for
herein in  respect of  payments,  conversion  and the like (and the  computation
thereof) shall be the amounts to be received by the Holder and shall not, except
as expressly  provided herein or in the Intercreditor  Agreement,  be subject to
any other  obligation of the Company (or the performance  thereof).  The Company
acknowledges  that  a  breach  by it of its  obligations  hereunder  will  cause
irreparable  harm to the Holder  and that the remedy at law for any such  breach
may be inadequate.  The Company  therefore agrees that, in the event of any such
breach or threatened  breach,  the Holder shall be entitled,  in addition to all
other available remedies, to an injunction  restraining any breach,  without the
necessity of showing  economic loss and without any bond or other security being
required.

               (20) PAYMENT OF COLLECTION,  ENFORCEMENT  AND OTHER COSTS. If (a)
this Note is placed in the hands of an attorney for collection or enforcement or
is collected or enforced  through any legal  proceeding or the Holder  otherwise
takes action to collect amounts due under this Note or to enforce the provisions
of this Note or (b) there occurs any bankruptcy, reorganization, receivership of
the  Company  or other  proceedings  affecting  Company  creditors'  rights  and
involving a claim under this Note,  then the  Company  shall pay the  reasonable
costs  incurred by the Holder for such  collection,  enforcement or action or in
connection  with  such   bankruptcy,   reorganization,   receivership  or  other
proceeding,  including,  but not limited to, reasonable attorneys' and financial
advisory fees and disbursements.

               (21)  CONSTRUCTION;  HEADINGS.  This  Note  shall be deemed to be
jointly drafted by the Company and all the Purchasers and shall not be construed
against  any person as the  drafter  hereof.  The  headings of this Note are for
convenience   of   reference   and  shall  not  form  part  of,  or  affect  the
interpretation of, this Note.

                                       37

<PAGE>

               (22) FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the
part of the 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 other or further exercise thereof or
of any other right, power or privilege.

               (23)  DISPUTE  RESOLUTION.  In the  case of a  dispute  as to the
determination  of the Closing Bid Price,  the Closing Sale Price or the Weighted
Average  Price  or the  arithmetic  calculation  of the  Conversion  Rate or any
Redemption  Price,  the Company  shall  submit the  disputed  determinations  or
arithmetic  calculations  via facsimile within two (2) Business Days of receipt,
or deemed receipt,  of the Conversion Notice or Redemption Notice or other event
giving rise to such  dispute,  as the case may be, to the Holder.  If the Holder
and the  Company  are unable to agree  upon such  determination  or  calculation
within  one  (1)  Business  Day of such  disputed  determination  or  arithmetic
calculation being submitted to the Holder,  then the Company shall, within three
(3) Business  Days submit via facsimile  (a) the disputed  determination  of the
Closing Bid Price,  the Closing Sale Price or the Weighted  Average  Price to an
independent,  reputable  investment bank selected by the Company and approved by
the Holder or (b) the disputed arithmetic  calculation of the Conversion Rate or
any  Redemption  Price to the Company's  independent,  outside  accountant.  The
Company,  at the  Company's  expense,  shall  cause the  investment  bank or the
accountant,  as the case may be, to perform the  determinations  or calculations
and notify  the  Company  and the  Holder of the  results no later than five (5)
Business  Days from the time such  investment  bank or  accountant  receives the
disputed determinations or calculations.  Such investment bank's or accountant's
determination  or  calculation,  as the case may be,  shall be binding  upon all
parties absent demonstrable error.

               (24) NOTICES; PAYMENTS.

                    (a) NOTICES.  Whenever  notice is required to be given under
this Note,  unless  otherwise  provided  herein,  such notice  shall be given in
accordance with Section 9(f) of the Securities Purchase  Agreement.  The Company
shall  provide the Holder with prompt  written  notice of each of the  following
actions  taken  pursuant  to  this  Note,   including  in  reasonable  detail  a
description of such action and the reason  therefor:  confirmation of receipt of
Conversion  Notice  (as  required  by  Section  3(c)(i));  notice of the  credit
Conversion  Shares  on  DTC  (if  so  credited  pursuant  to  Section  3(c)(i));
confirmation  of number of shares of Common  Stock  outstanding  (as required by
Section 3(d)(i)); delivery of an Event of Default Notice (as required by Section
4(b));  delivery of a Change of Control  Notice (as  required by Section  5(b));
notice of Purchase Rights (whenever such right arises pursuant to Section 6(a));
notice of other Corporate Events (whenever such events,  as set forth in Section
6(b) occur);  notice of adjustment of Conversion Price (whenever such adjustment
is required to be calculated pursuant to Section 7(a)); delivery of the Optional
Redemption  Notice (as required by Section 8(a));  notice of and/or  delivery of
Event of  Default  Redemption  Price  or  Change  of  Control  Redemption  Price
(pursuant to Section 12(a)); delivery of an Other Redemption Notice (as required
by Section 12(b));  determinations  and/or  calculations (as required by Section
23);  other  notices  required by this  Section 24, and  disclosure  of material
nonpublic information (as required by Section 29). The Company will give written
notice to the Holder (i) promptly  following any  adjustment  of the  Conversion
Price,  setting forth in reasonable detail,  and certifying,  the calculation of
such  adjustment  and (ii) at least  twenty (20) days prior to the date on which
the Company closes its books or takes a record (A) in respect of any dividend or
distribution  upon the Common Stock,

                                       38

<PAGE>

(B) in respect of any pro rata subscription  offer to holders of Common Stock or
(C) for determining  rights to vote in respect of any  Fundamental  Transaction,
dissolution or liquidation, provided in each case that such information shall be
made known to the  public  prior to or in  conjunction  with such  notice  being
provided to the Holder.

                    (b) PAYMENTS.  Whenever any payment of cash is to be made by
the Company to any Person  pursuant to this Note,  such payment shall be made in
lawful money of the United  States of America by a check drawn on the account of
the Company or any payment agent located in the state of New York engaged by the
Company for purposes of making  payments under this Note and the Other Notes and
sent via overnight  courier service to such Person at such address as previously
provided to the Company in writing  (which  address,  in the case of each of the
Purchasers,  shall  initially be as set forth on the Schedule of Buyers attached
to the Securities Purchase  Agreement);  provided that the Holder of Note(s) may
elect to receive a payment of cash via wire  transfer of  immediately  available
funds by  providing  the  Company  with prior  written  notice  setting out such
request  and the  Holder's  wire  transfer  instructions.  Whenever  any  amount
expressed  to be due by the  terms of this Note is due on any day which is not a
Business Day, the same shall instead be due on the next  succeeding day which is
a Business  Day and, in the case of any  Interest  Date which is not the date on
which this Note is paid in full, the extension of the due date thereof shall not
be taken into account for purposes of determining  the amount of Interest due on
such date.  Any amount of Principal or other  amounts due under the  Transaction
Documents,  other than  Interest,  which is not paid when due shall  result in a
late charge  being  incurred  and  payable by the Company in an amount  equal to
interest  on such amount at the rate of five  percent  (5.0%) per annum from the
date such amount was due until the same is paid in full ("LATE CHARGE").

               (25)  CANCELLATION.  After all  Principal,  accrued  Interest and
other  amounts at any time owed on this Note have been paid in full  (other than
contingent  indemnification  obligations  in  respect of which no claim has been
asserted) or all remaining amounts outstanding hereunder are converted to Common
Stock, this Note shall automatically be deemed canceled, shall be surrendered to
the Company for cancellation and shall not be reissued.

               (26) WAIVER OF NOTICE.  Except as otherwise  expressly  set forth
herein,  to the extent  permitted  by law,  the Company  hereby  waives  demand,
notice,  protest  and all other  demands  and  notices  in  connection  with the
delivery, acceptance,  performance,  default or enforcement of this Note and the
Securities Purchase Agreement.

               (27) GOVERNING LAW; JURISDICTION;  SEVERABILITY; JURY TRIAL. This
Note shall be  construed  and enforced in  accordance  with,  and all  questions
concerning the construction,  validity,  interpretation  and performance of this
Note shall be governed by, the internal  laws of the State of New York,  without
giving effect to any choice of law or conflict of law provision or rule (whether
of the  State of New York or any  other  jurisdictions)  that  would  cause  the
application of the laws of any  jurisdictions  other than the State of New York.
The Company  hereby  irrevocably  submits to the exclusive  jurisdiction  of the
state and federal courts sitting in The City of New York,  Borough of Manhattan,
for the adjudication of any dispute hereunder or in connection  herewith or with
any transaction  contemplated hereby or discussed herein, and hereby irrevocably
waives,  and agrees not to assert in any suit,  action or proceeding,  any claim
that it is not personally  subject to the  jurisdiction of any such court,  that
such suit,

                                       39

<PAGE>

action or  proceeding is brought in an  inconvenient  forum or that the venue of
such suit,  action or proceeding is improper.  Nothing contained herein shall be
deemed to limit in any way any right to serve process in any manner permitted by
law. In the event that any  provision  of this Note is invalid or  unenforceable
under any applicable statute or rule of law, then such provision shall be deemed
inoperative  to the extent that it may  conflict  therewith  and shall be deemed
modified to conform with such statute or rule of law. Any such  provision  which
may prove invalid or  unenforceable  under any law shall not affect the validity
or enforceability of any other provision of this Note.  Nothing contained herein
shall be deemed or operate to preclude the Holder from  bringing  suit or taking
other legal action against the Company in any other  jurisdiction  to collect on
the Company's  obligations  to the Holder,  to realize on any  collateral or any
other  security  for such  obligations,  or to enforce a judgment or other court
ruling in favor of the Holder.  THE COMPANY HEREBY  IRREVOCABLY WAIVES ANY RIGHT
IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE  HEREUNDER  OR IN  CONNECTION  WITH OR  ARISING  OUT OF THIS NOTE OR ANY
TRANSACTION CONTEMPLATED HEREBY.

               (28)  CERTAIN  DEFINITIONS.   For  purposes  of  this  Note,  the
following terms shall have the following meanings:

                    (a)  "ACQUISITIONS"  shall have the meaning set forth in the
Securities Purchase Agreement.

                    (b)   "ANTI-TERRORISM   LAWS"   means   the  OFAC  Laws  and
Regulations and the Executive Orders as each of such terms is defined in Section
5.32 of the Senior Loan Agreement and the USA Patriot Act.

                    (c)  "APPLICABLE  MARGIN"  means the  amount  determined  as
follows:

        Ratio of Net Senior
        Indebtedness to Consolidated
        EBITDA                             Applicable Margin

        Greater than 3.0:1.0                           4.50%

        Equal to or less than 3.0:1.0 but              4.25%
        greater than 2.5:1.0

        Equal to or less than 2.5:1.0 but              4.00%
        greater than 2.0:1.0

                                       40

<PAGE>

        Ratio of Net Senior
        Indebtedness to Consolidated
        EBITA                              Applicable Margin

        Equal to or less than 2.0:1.0 but              3.75%
        greater than 1.5:1.0

        Equal to or less than 1.5:1.0                  3.50%

provided  that, (a) the  Applicable  Margin shall be calculated and  established
once each  Fiscal  Quarter  based on the ratio of Net  Senior  Indebtedness  (as
defined in the Senior Loan Agreement) to Consolidated  EBITDA of the Company and
its Subsidiaries  for the immediately  preceding twelve (12) month period ending
as of the last day of the immediately  preceding fiscal quarter and shall remain
in effect until adjusted  thereafter  after the end of the next fiscal  quarter,
(b) each adjustment to the Applicable Margin shall be effective on the date that
the Holder receives the financial statements of the Company and its Subsidiaries
for the  immediately  preceding  Fiscal Quarter in accordance with Section 14(g)
and shall  remain in effect  until  adjusted  thereafter  during the next Fiscal
Quarter, (c) the failure to deliver the financial statements pursuant to Section
14(g)  hereof on the  required  date shall  automatically  cause the  Applicable
Margin to be the highest  applicable  rate set forth above,  effective as of the
date on which the delivery of the financial  statements  was otherwise  required
until the date on which such financial statements are so delivered to the Holder
at which time the Applicable  Margin shall be adjusted in accordance with clause
(a) above, (d) in the event that any of the information  provided to the Holders
which is used in the  calculation  of the  Applicable  Margin  for any period is
subsequently restated or is otherwise changed thereafter, then if the Applicable
Margin for the  applicable  period  would have  resulted in a higher  rate,  the
Company  shall pay to the Holder any  additional  amount in respect of  interest
that  would have been  required  based on the  higher  Applicable  Margin on the
subsequent  interest  payment  date,  and (e)  notwithstanding  anything  to the
contrary  set forth  herein,  until the  effective  date set forth in clause (b)
above that follows the last day of the fourth full Fiscal Quarter after November
8, 2006, the  Applicable  Margin shall be equal to the greater of (i) the amount
determined as set forth above based on the ratio of Net Senior  Indebtedness  to
Consolidated  EBITDA of the Company  and its  Subsidiaries  for the  immediately
preceding  twelve  (12) month  period  ending as of the last day of each  Fiscal
Quarter  prior thereto  after giving pro forma effect to the  Acquisitions,  the
Senior Loan and the other transactions  contemplated hereunder and (ii) four and
one half percent (4.50%) per annum.

                    (d)  "APPROVED  STOCK PLAN" means any employee  benefit plan
(including,  without limitation,  any equity compensation plan, restricted stock
plan and/or  employee stock ownership plan) or agreement which has been approved
by the Board of  Directors  of the  Company,  pursuant  to which  the  Company's
securities  may be issued to any employee,  consultant,  officer or director for
services provided to the Company or any Subsidiary.

                                       41

<PAGE>

                    (e)  "BANKRUPTCY  CODE" means the United  States  Bankruptcy
Code (11 U.S.C. ss. 101, et seq.), as amended, and any successor statute.

                    (f) "BLOOMBERG" means Bloomberg Financial Markets.

                    (g) "BUSINESS DAY" means any day other than Saturday, Sunday
or other day on which commercial banks in The City of New York are authorized or
required by law to remain closed.

                    (h)  "CASH  EQUIVALENTS"  means  (i)  securities  issued  or
directly and fully  guaranteed  or insured by the United States or any agency or
instrumentality  thereof  (provided that the full faith and credit of the United
States is pledged in support  thereof)  having  maturities  of not more than one
year  from the date of  acquisition,  (ii) time  deposits  and  certificates  of
deposit of any commercial bank, or which is the principal banking  subsidiary of
a bank holding company  organized  under the laws of the United States,  and any
State  thereof,  the  District of Columbia or any foreign  jurisdiction,  having
capital,  surplus and undivided  profits  aggregating in excess of $500,000,000,
with  maturities of not more than one year from the date of  acquisition by such
Person,  (iii)  repurchase  obligations with a term of not more than ninety (90)
days for  underlying  securities  of the types  described  in  clause  (i) above
entered into with any bank meeting the  qualifications  specified in clause (ii)
above,  (iv)  commercial  paper issued by any Person  incorporated in the United
States rated at least A-1 or the  equivalent  thereof by Standard & Poors Rating
Services or at least P-1 or the equivalent there of by Moody's Investor Service,
Inc.  and in each  case  maturing  not  more  than one  year  after  the date of
acquisition  by  such  Person,   or  (v)   investments  in  money  market  funds
substantially  all of whose  assets are  comprised  of  securities  of the types
described in clauses (i) through (iv) above.

                    (i) "CALENDAR  QUARTER" means each of: the period  beginning
on and  including  January 1 and  ending on and  including  March 31; the period
beginning  on and  including  April 1 and ending on and  including  June 30; the
period  beginning on and including July 1 and ending on and including  September
30;  and the  period  beginning  on and  including  October 1 and  ending on and
including December 31.

                    (j) "CAPITALIZED LEASE" means, in respect of any Person, any
lease  of real or  personal  property  by such  Person  as  lessee  which is (a)
required under GAAP to be capitalized on the balance sheet of such Person or (b)
a transaction  of a type commonly  known as a "synthetic  lease" (i.e.,  a lease
transaction that is treated as an operating lease for accounting purposes but in
respect of which  payments  of rent are  intended  to be treated as  payments of
principal and interest on a loan for federal income tax purposes).

                    (k) "CAPITALIZED LEASE OBLIGATIONS" means, in respect of any
Person,  obligations  of such  Person  and its  Subsidiaries  under  Capitalized
Leases, and, for purposes hereof, the amount of any such obligation shall be the
capitalized amount thereof determined in accordance with GAAP.

                    (l) "CHANGE OF CONTROL"  means any  Fundamental  Transaction
other  than (i) any  reorganization,  recapitalization  or  reclassification  of
Common Stock, in which holders of the Company's voting power  immediately  prior
to such reorganization,

                                       42

<PAGE>

recapitalization  or  reclassification   continue  after  such   reorganization,
recapitalization  or  reclassification  to hold publicly traded  securities and,
directly or  indirectly,  the voting power of the  surviving  entity or entities
necessary to elect a majority of the members of the board of directors (or their
equivalent  if other than a  corporation)  of such entity or  entities;  or (ii)
pursuant to a migratory  merger  effected solely for the purpose of changing the
jurisdiction of incorporation of the Company.

                    (m)  "CHANGE OF CONTROL  PREMIUM"  means (i) in the first 18
months  following the Original  Issuance Date, 120%, (ii) in the period starting
18 months from the Original Issuance Date and ending 42 months from the Original
Issuance Date, 115%; and (iii) thereafter, 110%.

                    (n) "CLOSING BID PRICE" and "CLOSING SALE PRICE" means,  for
any security as of any date,  the last closing bid price and last closing  trade
price,  respectively,  for such security on the Principal Market, as reported by
Bloomberg,  or, if the Principal  Market begins to operate on an extended  hours
basis and does not  designate  the closing bid price or the closing trade price,
as the case may be, then the last bid price or last trade  price,  respectively,
of such security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg,
or, if the Principal Market is not the principal  securities exchange or trading
market  for such  security,  the last  closing  bid price or last  trade  price,
respectively,  of such security on the principal  securities exchange or trading
market where such security is listed or traded as reported by  Bloomberg,  or if
the  foregoing  do not apply,  the last  closing bid price or last trade  price,
respectively,  of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price or last trade  price,  respectively,  is  reported  for such  security  by
Bloomberg,  the average of the bid prices, or the ask prices,  respectively,  of
any market  makers for such  security as  reported in the "pink  sheets" by Pink
Sheets LLC (formerly the National  Quotation  Bureau,  Inc.). If the Closing Bid
Price or the  Closing  Sale  Price  cannot be  calculated  for a  security  on a
particular  date on any of the  foregoing  bases,  the  Closing Bid Price or the
Closing Sale Price,  as the case may be, of such  security on such date shall be
the fair market value as mutually  determined by the Company and the Holder.  If
the  Company  and the Holder are unable to agree upon the fair  market  value of
such security,  then such dispute shall be resolved  pursuant to Section 23. All
such determinations to be appropriately  adjusted for any stock dividend,  stock
split,  stock  combination  or other similar  transaction  during the applicable
calculation period.

                    (o)  "CLOSING  DATE" shall have the meaning set forth in the
Securities  Purchase  Agreement,  which date is the date the  Company  initially
issued  certain of the Notes  pursuant to the terms of the  Securities  Purchase
Agreement.

                    (p) "COMMON STOCK DEEMED  OUTSTANDING"  means,  at any given
time, the number of shares of Common Stock  outstanding  at such time,  plus the
number of shares of Common  Stock deemed to be  outstanding  pursuant to Section
7(a)(ii) hereof regardless of whether the Options or Convertible  Securities are
actually  exercisable at such time, but excluding any Common Stock owned or held
by or for the account of the Company or issuable upon conversion or exercise, as
applicable, of the Notes and the Warrants.

                                       43

<PAGE>

                    (q)  "CONSULTANT"  means  Alvarez  &  Marsal,  Inc.  and any
replacement or successors thereto selected by Company and reasonably  acceptable
to Required Holders.

                    (r) "CONTINGENT OBLIGATION" means, in respect of any Person,
any  obligation  of such  Person  guaranteeing  or  intended  to  guarantee  any
Indebtedness,  leases, dividends or other obligations ("primary obligations") of
any other  Person (the  "primary  obligor") in any manner,  whether  directly or
indirectly,  including, without limitation, (i) the direct or indirect guaranty,
endorsement  (other than for  collection  or deposit in the  ordinary  course of
business),  co-making,  discounting  with recourse or sale with recourse by such
Person of the  obligation  of a primary  obligor,  (ii) the  obligation  to make
take-or-pay or similar  payments,  if required,  regardless of nonperformance by
any other party or parties to an agreement, (iii) any obligation of such Person,
whether or not  contingent,  (w) to purchase any such primary  obligation or any
property  constituting  direct or indirect security therefor,  (x) to advance or
supply funds (A) for the purchase or payment of any such primary  obligation  or
(B) to maintain  working  capital or equity  capital of the  primary  obligor or
otherwise to maintain the net worth or solvency of the primary  obligor,  (y) to
purchase property,  assets,  securities or services primarily for the purpose of
assuring the owner of any such primary  obligation of the ability of the primary
obligor to make payment of such primary obligation or (z) otherwise to assure or
hold  harmless  the holder of such  primary  obligation  against loss in respect
thereof;  provided that, the term "Contingent  Obligation" shall not include any
product  warranties  extended in the ordinary course of business.  The amount of
any Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable  amount  of  the  primary  obligation  in  respect  of  which  such
Contingent  Obligation is made (or, if less,  the maximum amount of such primary
obligation  for which  such  Person may be liable  pursuant  to the terms of the
instrument  evidencing  such  Contingent   Obligation)  or,  if  not  stated  or
determinable,  the maximum reasonably anticipated liability with respect thereto
(assuming such Person is required to perform thereunder),  as determined by such
Person in good faith.

                    (s) "CONVERTIBLE  SECURITIES"  means any stock or securities
(other than Options)  directly or indirectly  convertible into or exercisable or
exchangeable for Common Stock.

                    (t)  "DEFAULT"  means any event that with notice or lapse of
time, or both, would give rise to an Event of Default.

                    (u)  "DESIGNATED  PERSON" means a Person either (i) included
within the term  "designated  national" as defined in the Cuban  Assets  Control
Regulations,  31 C.F.R.  Part 515, or (ii) designated under Sections 1(a), 1(b),
1(c) or 1(d) of  Executive  Order  No.  13224,  66 Fed.  Reg.  49079  (published
September  25,  2001)  or  similarly   designated  under  any  related  enabling
legislation or any other similar executive orders.

                    (v)  "DISPOSITION"  means  any  transaction,  or  series  of
related  transactions,  pursuant to which the Company or any of its Subsidiaries
sells, issues, assigns,  transfers,  conveys,  leases or subleases,  licenses or
otherwise  disposes  of, or  permits  any  Subsidiary  to sell,  issue,  assign,
transfer,  convey,  lease or sublease,  license or otherwise dispose of, in each
case whether in one transaction or a series of related transactions,  all or any
part of its business,  property or assets, or any interest therein,  whether now
owned or hereafter  acquired (or

                                       44

<PAGE>

agrees to do any of the  foregoing),  or permits or suffers any other  Person to
acquire any interest in its business, assets or property (or agrees to do any of
the foregoing).

                    (w) "ELIGIBLE  MARKET" means the Initial  Principal  Market,
The New York Stock  Exchange,  Inc.,  the American  Stock  Exchange,  The NASDAQ
Global Select Market, The NASDAQ Global Market or The NASDAQ Capital Market.

                    (x)  "EQUITY   CONDITIONS"   means  each  of  the  following
conditions:  (i) on each day during the period  beginning three (3) months prior
to the  applicable  date  of  determination  and  ending  on and  including  the
applicable date of determination  (the "EQUITY  CONDITIONS  MEASURING  PERIOD"),
either (x) the Registration  Statement filed pursuant to the Registration Rights
Agreement  shall be  effective  and  available  for the resale of all  remaining
Registrable  Securities in accordance with the terms of the Registration  Rights
Agreement  or (y) all shares of Common Stock  issuable  upon  conversion  of the
Notes  and  exercise  of  the  Warrants  shall  be  eligible  for  sale  without
restriction and without the need for registration  under any applicable  federal
or state securities laws; (ii) during the Equity Conditions Measuring Period the
Common Stock is designated  for  quotation on any Eligible  Market and shall not
have  been  suspended  from  trading  on such  exchange  or market  (other  than
suspensions of not more than two (2) days and occurring  prior to the applicable
date  of  determination  due  to  business  announcements  by  the  Company  and
suspensions  occurring upon the listing of the Common Stock on another  Eligible
Market  (other  than the  Initial  Principal  Market))  nor shall  delisting  or
suspension by such exchange or market been  threatened or pending  either (A) in
writing by such  exchange or market or (B) by falling  below the then  effective
minimum  listing  maintenance  requirements  of such  exchange or market;  (iii)
during the Equity Conditions  Measuring Period, the Company shall have delivered
Conversion  Shares upon conversion of the Notes and Warrant Shares upon exercise
of the  Warrants  to the  holders  on a  timely  basis as set  forth in  Section
2(c)(ii)  hereof (and analogous  provisions  under the Other Notes) and Sections
2(a) of the Warrants; (iv) any applicable shares of Common Stock to be issued in
connection with the event requiring  determination may be issued in full without
violating  Section 3(d) hereof and the rules or  regulations  of any  applicable
Eligible Market; (v) during the Equity Conditions  Measuring Period, the Company
shall not have failed to timely make any payments  within five (5) Business Days
of when such payment is due pursuant to any  Transaction  Document;  (vi) during
the Equity Conditions Measuring Period, there shall not have occurred either (A)
the  public  announcement  of  a  pending,   proposed  or  intended  Fundamental
Transaction  which has not been  abandoned,  terminated or  consummated,  (B) an
Event of  Default  or (C) an event  that with the  passage  of time or giving of
notice would  constitute  an Event of Default;  (vii) the Company  shall have no
knowledge of any fact that would cause (x) the Registration  Statements required
pursuant to the Registration  Rights Agreement not to be effective and available
for the resale of all remaining  Registrable  Securities in accordance  with the
terms of the  Registration  Rights  Agreement  or (y) any shares of Common Stock
issuable upon  conversion of the Notes and shares of Common Stock  issuable upon
exercise  of the  Warrants  not to be  eligible  for  sale  without  restriction
pursuant to Rule 144(k) and any applicable  state  securities  laws;  (viii) the
Stockholder  Approval (as defined in the Securities  Purchase  Agreement)  shall
have been obtained, if required;  and (ix) the Company otherwise shall have been
in  material  compliance  with  and  shall  not  have  materially  breached  any
provision, covenant, representation or warranty of any Transaction Document.

                                       45

<PAGE>

                    (y) "EQUITY CONDITIONS FAILURE" means the failure to satisfy
one or more of the Equity Conditions set forth above.

                    (z) "EQUITY  INTERESTS" means, in respect of any Person, all
of the shares of capital  stock of (or other  ownership or profit  interests in)
such Person,  all of the  warrants,  options or other rights for the purchase or
acquisition  from such Person of shares of capital stock of (or other  ownership
or profit interests in) such Person,  all of the securities  convertible into or
exchangeable  for  shares  of  capital  stock of (or other  ownership  or profit
interests  in) such Person or  warrants,  rights or options for the  purchase or
acquisition from such Person of such shares (or such other  interests),  and all
of  the  other  ownership  or  profit   interests  in  such  Person   (including
partnership,  member or trust interests  therein),  whether voting or nonvoting,
and whether or not such shares, warrants, options, rights or other interests are
outstanding on any date of determination.

                    (aa) "ERISA" means the Employee  Retirement  Income Security
Act of 1974,  as  amended,  and any  successor  statute of similar  import,  and
regulations thereunder, in each case, as in effect from time to time. References
to sections of ERISA shall be construed also to refer to any successor sections.

                    (bb) "ERISA AFFILIATE" means (a) any Person subject to ERISA
whose employees are treated as employed by the same employer as the employees of
the Company or any of its  Subsidiaries  under  Internal  Revenue  Code  Section
414(b),  (b) any trade or business  subject to ERISA whose employees are treated
as employed by the same  employer as the  employees of the Company or any of its
Subsidiaries under Internal Revenue Code Section 414(c), (c) solely for purposes
of Section  302 of ERISA and  Section  412 of the  Internal  Revenue  Code,  any
organization subject to ERISA that is a member of an affiliated service group of
which the Company or any of its  Subsidiaries is a member under Internal Revenue
Code  Section  414(m),  or (d) solely for  purposes  of Section 302 of ERISA and
Section 412 of the Internal  Revenue Code, any Person subject to ERISA that is a
party to an arrangement  with the Company or any of its  Subsidiaries  and whose
employees  are  aggregated  with  the  employees  of the  Company  or any of its
Subsidiaries under Internal Revenue Code Section 414(o).

                    (cc) "EXCLUDED  SECURITIES" means any Common Stock,  Options
or Convertible Securities, stock appreciation rights or other rights with equity
features  issued or issuable:  (i) in connection  with any Approved  Stock Plan;
(ii) upon  conversion of the Notes or PIPE Notes or the exercise of the Warrants
or the Common PIPE Warrants (as defined in the Securities  Purchase  Agreement);
(iii)  in  connection  with  any  Permitted  Acquisitions,  whether  through  an
acquisition of shares or a merger of any business,  assets or technologies,  the
primary purpose of which is not to raise equity capital and (iv) upon conversion
of any  Options  or  Convertible  Securities  which are  outstanding  on the day
immediately  preceding the Original  Issuance  Date,  provided that the terms of
such Options or Convertible  Securities are not amended,  modified or changed on
or after the Original Issuance Date.

                    (dd)  "FISCAL  QUARTER"  means each of the  fiscal  quarters
adopted by the Company for financial  reporting  purposes that correspond to the
Company's  "FISCAL YEAR" that ends on December 31, or such other fiscal  quarter
adopted by the Company for financial reporting purposes in accordance with GAAP.

                                       46

<PAGE>

                    (ee) "FUNDAMENTAL TRANSACTION" means that the Company shall,
directly or  indirectly,  in one or more  related  transactions,  after the date
hereof (i) be dissolved or liquidated or be the subject of a plan of dissolution
or liquidation  adopted by its  stockholders;  (ii) consolidate or merge with or
into (whether or not the Company is the surviving corporation) another Person or
Persons;  (iii) sell,  assign,  transfer,  convey or otherwise dispose of all or
substantially  all of the properties or assets of the Company to another Person;
(iv) allow another  Person to make a purchase,  tender or exchange offer that is
accepted by the holders of more than the 50% of the outstanding shares of Voting
Stock (not  including  any shares of Voting  Stock held by the Person or Persons
making or party to, or associated or affiliated with the Persons making or party
to, such purchase,  tender or exchange  offer),  (v) consummate a stock purchase
agreement  or other  business  combination  (including,  without  limitation,  a
reorganization,  recapitalization,  spin-off  or  scheme  of  arrangement)  with
another  Person  whereby  such  other  Person  acquires  more  than  50%  of the
outstanding  shares of Voting  Stock (not  including  any shares of Voting Stock
held by the other Person or other  Persons  making or party to, or associated or
affiliated  with the  other  Persons  making or party to,  such  stock  purchase
agreement or other business combination); (vi) any "person" or "group" (as these
terms are used for purposes of Sections  13(d) and 14(d) of the Exchange Act) is
or shall  become  the  "beneficial  owner" (as  defined in Rule 13d-3  under the
Exchange Act),  directly or indirectly,  of 50% of the aggregate ordinary voting
power  represented by issued and outstanding  Common Stock;  (vii) cease to have
during any period of two (2) years,  as the  majority of its Board of  Directors
individuals  who at the  beginning  of such  period  constituted  the  Board  of
Directors of the Company  (together with any new directors whose  nomination for
election  was  approved by a vote of at least a majority of the  directors  then
still in office who were either  directors  at the  beginning  of such period or
whose election or nomination for election was previously so approved); or (viii)
fails to own,  directly or indirectly,  one hundred (100%) percent of the voting
power (directly or indirectly) of the total outstanding  voting stock of each of
the Company and the Subsidiaries other than (A) pursuant to a sale of the voting
stock of the Company or any Subsidiary  permitted  hereunder,  (B) pursuant to a
transfer of such voting  stock to a Guarantor  permitted  herein,  or (C) in the
case of a Subsidiary is acquired  after the date hereof  pursuant to a Permitted
Acquisition  where less than one hundred  (100%)  percent of the voting power of
the total outstanding voting stock of such Subsidiary is acquired.

                    (ff)  "GAAP"  means   United   States   generally   accepted
accounting principles, consistently applied.

                    (gg)   "GOVERNMENTAL   AUTHORITY"   means   any   nation  or
government, any foreign, Federal, State, city, town, municipality, county, local
or  other  political   subdivision   thereof  or  thereto  and  any  department,
commission,  board, bureau,  instrumentality,  agency or other entity exercising
executive, legislative, judicial, taxing, regulatory or administrative powers or
functions of or pertaining to government.

                    (hh) "HEDGING  AGREEMENT"  means any interest rate,  foreign
currency,  commodity  or  equity  swap,  collar,  cap,  floor  or  forward  rate
agreement,  or other  agreement  or  arrangement  designed  to  protect  against
fluctuations  in  interest  rates  or  currency,   commodity  or  equity  values
(including,  without  limitation,  any option in respect of any of the foregoing
and any  combination  of the  foregoing  agreements  or  arrangements),  and any
confirmation executed in connection with any such agreement or arrangement.

                                       47

<PAGE>

                    (ii) "INDEBTEDNESS" means, in respect of any Person, without
duplication,  (i) all  indebtedness of such Person for borrowed money;  (ii) all
obligations  of such  Person for the  deferred  purchase  price of  property  or
services  (provided  that  neither  trade  payables  or other  accounts  payable
incurred in the ordinary  course of such Person's  business and not  outstanding
for more than  ninety (90) days after such  payable  was due under its  original
terms nor such trade payables , if outstanding  longer, that are being contested
or  disputed  by such  Person in good faith in the  ordinary  course of business
shall be deemed to  constitute  Indebtedness)  and  including  any  earn-outs or
similar  arrangements  in connection  with any acquisition of businesses by such
Person,   whether   contingent  or  otherwise   subject  to  any  conditions  or
limitations;   (iii)  all  obligations  of  such  Person   evidenced  by  bonds,
debentures,  notes or other similar  instruments or upon which interest payments
are customarily made; (iv) all  reimbursement,  payment or other obligations and
liabilities  of such Person  created or arising under any  conditional  sales or
other title  retention  agreement in respect of property used and/or acquired by
such Person,  even though the rights and remedies of the lessor,  seller  and/or
lender  thereunder may be limited to  repossession  or sale of such property and
all   obligations   and   liabilities   arising  in  connection  with  factoring
arrangements or other  arrangements  in respect of the sale of receivables;  (v)
that  portion of  Capitalized  Lease  Obligations  of such Person that is (or is
required to be)  classified  as a liability on its balance  sheet in  conformity
with GAAP;  (vi) all obligations and  liabilities,  contingent or otherwise,  of
such  Person,  in  respect  of  letters  of  credit,   acceptances  and  similar
facilities;  (vii) all net  obligations  and  liabilities,  of such Person under
Hedging Agreements; (viii) all Contingent Obligations; (ix) liabilities incurred
under Title IV of ERISA in respect of any plan (other than a Multiemployer Plan)
covered by Title IV of ERISA and  maintained for employees of such Person or any
of its ERISA Affiliates;  (x) withdrawal  liability incurred under ERISA by such
Person or any of its ERISA Affiliates in respect of any Multiemployer  Plan; and
(xi) all  obligations  referred to in clauses (i) through (x) of this definition
of another Person secured by (or for which the holder of such  Indebtedness  has
an  existing  right,  contingent  or  otherwise,  to be secured  by) a Lien upon
property owned by such Person, even though such Person has not assumed or become
liable for the  payment of such  Indebtedness.  The  Indebtedness  of any Person
shall include the  Indebtedness  of any partnership of or joint venture in which
such Person is a general  partner or a joint  venturer to the extent such Person
is liable  therefor  as a result of such  Person's  ownership  interest  in such
entity,  except to the extent the terms of such  Indebtedness  expressly provide
that such Person is not liable  therefor.  None of (1) any Approved  Stock Plan,
(2) the Summit Global  Logistics,  Inc.  Equity  Incentive  Plan, (3) the Summit
Global  Logistics,  Inc.  Management  Incentive  Plan,  (4)  the  Summit  Global
Logistics,  Inc. Severance Benefit Plan or (5) the Summit Global Logistics, Inc.
Supplemental  Executive  Retirement  Plan or any  obligations  under any of them
shall be "Indebtedness" for purposes hereof.

                    (jj)   "INITIAL   PRINCIPAL   MARKET"   means  the  National
Association of Securities Dealers Inc.'s OTC Bulletin Board.

                    (kk) "INSOLVENCY  PROCEEDING" means (a) any proceeding by or
against any Person seeking to adjudicate it a bankrupt or insolvent,  or seeking
dissolution,   liquidation,   winding   up,   reorganization,    administration,
arrangement,  adjustment,  protection,  relief or composition of it or its debts
under any law relating to bankruptcy,  insolvency,  reorganization  or relief of
debtors  (including,  but not limited to, any case in respect of any such Person
under any provision of the  Bankruptcy  Code),  or seeking the entry of an order
for  relief  or  the  appointment

                                       48

<PAGE>

of  a  receiver,  administrative  receiver,  administrator,  manager,  examiner,
trustee, custodian,  liquidator,  sequestrator or other similar official for any
such Person or for any  substantial  part of its property under any provision of
the  Bankruptcy  Code or  under  any  other  Federal,  State  or  other  foreign
bankruptcy,  insolvency,  receivership,   liquidation  or  similar  law  now  or
hereafter  in  effect,  or (b) the  appointment  of a  receiver,  administrative
receiver,  administrator,  manager, examiner,  trustee,  liquidator,  custodian,
sequestrator  or similar  official for such Person or a substantial  part of its
assets shall occur under any Federal,  State or foreign bankruptcy,  insolvency,
receivership, liquidation or similar law now or hereafter in effect.

                    (ll)  "INTEREST  PERIOD"  means (i)  initially,  the  period
commencing  on the  Interest  Commencement  Date and  ending  on the nine  month
anniversary of the Interest  Commencement  Date and (b) thereafter,  each period
commencing  on the last day of the  immediately  preceding  Interest  Period and
ending nine months thereafter.

                    (mm)  "INTEREST  RATE"  means,  in respect  of any  Interest
Period,  a rate per annum  equal to LIBOR  plus the  Applicable  Margin  then in
effect  provided  that for purposes of  calculating  the  Interest  Rate for the
Calendar  Quarter ending on June 30, 2007, the Interest Rate shall be calculated
based upon the  definition  of  Applicable  Margin set forth in this Amended and
Restated Senior Secured Convertible Note.

                    (nn) "LIBOR", in respect of any Interest Period,  shall mean
the nine-month London Interbank  Offered Rate for deposits in U.S.  dollars,  as
quoted from time to time on Bloomberg  as of  approximately  11:00 a.m.,  London
time, on the second Business Day prior to the first day of such Interest Period.

                    (oo)  "LIEN"  means any  mortgage,  deed of  trust,  deed to
secure  debt or similar  instrument,  pledge,  lien  (statutory  or  otherwise),
security  interest,  charge,  attachment,  assignment  or other  encumbrance  or
security  or  preferential  arrangement  of  any  nature,   including,   without
limitation, any conditional sale or title retention arrangement, any Capitalized
Lease and any assignment, deposit arrangement or financing lease intended as, or
having the effect of, security.

                    (pp) "LIST" means that certain list maintained by the Office
of Foreign Assets Control  ("OFAC"),  Department of the Treasury,  and/or on any
other similar list maintained by the OFAC pursuant to any  authorizing  statute,
executive order or regulation.

                    (qq)   "MATERIAL   CONTRACT"   means  (i)  the   Acquisition
Documents,  (ii) each contract or agreement to which the Company or any of their
Subsidiaries is a party involving aggregate  consideration payable to or by such
Person of  $1,000,000  or more in any  twelve  month  period and (iii) all other
contracts  or  agreements  material  to  the  business,  operations,   condition
(financial or  otherwise),  performance,  prospects or properties of the Company
and its Subsidiaries (taken as a whole).

                    (rr)  "MULTIEMPLOYER  PLAN" means a "multiemployer  plan" as
defined in Section  4001(a)(3) of ERISA to which the Company or any Guarantor or
any ERISA Affiliates has contributed to, or has been obligated to contribute.

                                       49

<PAGE>

                    (ss)  "NET  SENIOR  INDEBTEDNESS"  means in  respect  of any
Person at any date,  the amount  equal to:  (a) the sum of (i) the  Consolidated
Indebtedness  of  such  Person  plus  (ii)  the  aggregate  amount  of all  then
outstanding and unpaid trade payables and other obligations of such Person which
are outstanding more than ninety (90) days past due under its original terms and
which are not being  contested  or  disputed by such Person in good faith in the
ordinary  course  of  business  minus  (b) in the  case of the  Company  and its
Subsidiaries,  the sum of (i) cash on the  balance  sheet of such  Person as set
forth in such Person's  financial  statements in the form filed with the SEC for
the fiscal  quarter  immediately  prior to such date plus (ii) the  Subordinated
Indebtedness of such Person plus (iii) the Indebtedness evidenced by the Notes.

                    (tt) "NEW  HOLDERS"  means the  holders of the New Notes (as
defined in the Second  Amendment to  Securities  Purchase  Agreement  (Notes and
Warrants)  and the First  Amendment  to  Joinder  Agreement  dated as of May __,
2007).

                    (uu)  "OBLIGORS"  means  the  Company  and  the  Guarantors,
collectively.

                    (vv)  "OPTIONS"  means any  rights,  warrants  or options to
subscribe for or purchase shares of Common Stock or Convertible Securities.

                    (ww) Intentionally Omitted.

                    (xx)  "PARENT  ENTITY"  of a Person  means an  entity  that,
directly or indirectly, controls the applicable Person and whose common stock or
equivalent  equity  security is quoted or listed on an Eligible  Market,  or, if
there is more than one such Person or Parent Entity, the Person or Parent Entity
with the largest public market  capitalization as of the date of consummation of
the Fundamental Transaction.

                    (yy)  "PERMITTED  ACQUISITION"  means the  Acquisitions  (as
defined in the Securities  Purchase  Agreement) and any other acquisition by the
Company  and/or  any  of  its  Subsidiaries,  whether  by  purchase,  merger  or
otherwise,  whether or not involving cash and/or stock  consideration;  provided
that,

                         (i)  immediately  prior  to,  and after  giving  effect
thereto, no Default or Event of Default shall have occurred and be continuing or
would result therefrom;

                         (ii) all transactions in connection  therewith shall be
consummated in accordance with applicable laws;

                         (iii)  in  the  case  of  the   acquisition  of  Equity
Interests,  (A) all of the Equity  Interests  (except for any such securities in
the nature of directors'  qualifying shares required pursuant to applicable law)
acquired or otherwise  issued by such Person or any newly formed  Subsidiary  of
the  Company  in  connection  with such  acquisition  shall be owned 100% by the
Company or a  Subsidiary,  and the  Company  shall have  taken,  or caused to be
taken,  as of the date such Person is or becomes a Subsidiary  of the Company or
of another  Subsidiary,  each of the  actions  set forth in Section  5(l) of the
Security  Agreement  unless such Person becomes a Foreign  Subsidiary and (B) in
the case of a joint venture,  all of the Equity  Interests  (except for any such
securities in the nature

                                       50

<PAGE>

of directors' qualifying shares required pursuant to applicable law) acquired by
Company and/or  Subsidiaries in connection with such acquisition  shall be owned
100% by the Company or a Subsidiary  as  applicable,  and the Company shall have
taken,  or caused to be taken, as of the date of such  acquisition,  each of the
actions set forth in Section 5(l) of the Security  Agreement  unless such Person
is a Foreign Subsidiary;

                         (iv)  the  Company  and its  Subsidiaries  shall  be in
compliance  with the financial  covenants set forth in Section 14(l) hereof on a
pro forma basis after giving  effect to such  acquisition  as of the last day of
the fiscal quarter most recently ended;

                         (v) the Company shall have  delivered to the Collateral
Agent (as defined in the Security  Agreement),  at least ten (10)  Business Days
prior  to  such  proposed  acquisition,   a  certificate   certifying  Company's
compliance with Section 14(l),  together with all relevant financial information
in respect of such acquired assets, including, without limitation, the aggregate
consideration  for  such  acquisition  and  any  information  necessary  to  (A)
demonstrate compliance with Section 14(l) hereof and (B) enable Collateral Agent
to perfect its security  interest in the acquired assets and/or Equity Interests
in accordance with the Security  Agreement and the Pledge  Agreement (other than
the assets of and Equity Interests of and issued by entities  organized  outside
of the United States);

                         (vi) the cash  consideration  for any such  acquisition
(excluding  therefrom  earnouts,   deferred  purchase  price  payments,  Special
Incentive Bonuses and Subordinated Indebtedness derived or arising in connection
therewith) shall not exceed the amount of loans then available in respect of the
Permitted  Indebtedness  plus the Company's  cash and Cash  Equivalents  on hand
provided that Company and/or its Subsidiaries  shall have at least $2,500,000 of
cash and Cash  Equivalents  on hand  and/or  availability  under the Senior Loan
Agreement after giving effect to the applicable Permitted Acquisition; and

                         (vii)  the  acquired   business   and/or  assets  shall
comprise  assets  used  in,  or be an  operating  company  or a  division  of an
operating  company  that engages in, a line of business  substantially  similar,
complimentary  or related to the business that the Company,  Guarantors or their
Subsidiaries are engaged in on the date hereof.

                    (zz) "PERMITTED INDEBTEDNESS" means:

                         (i) Permitted Senior Indebtedness;

                         (ii)  Contingent  Obligations  of the Company or any of
its Subsidiaries in respect of any Indebtedness  described in this definition of
Permitted  Indebtedness  which  the  Company  or such  Subsidiary  is  otherwise
permitted to incur hereunder;

                         (iii) (A) contingent Indebtedness of the Company or any
of its  Subsidiaries  existing on November 8, 2006 pursuant to the earn-outs and
deferred  purchase price payments under the Acquisition  Documents in accordance
with the  terms  thereof  as in effect on  November  8, 2006 and (B)  contingent
Indebtedness of the Company or any of its Subsidiaries

                                       51

<PAGE>

arising after November 8,  2006pursuant to earn-outs  and/or  deferred  purchase
price payments under any Permitted Acquisition(s)  consummated after November 8,
2006,  provided  that such  Indebtedness  under  clause  (B)  shall  not  exceed
$30,000,000 in the aggregate;

                         (iv)  any  other  Indebtedness  of the  Company  or any
Subsidiary listed on SCHEDULE 28(yy) hereto;

                         (v) purchase money  Indebtedness  of the Company or any
Subsidiary  (including  purchase  money  Capitalized  Leases and  including  all
reimbursement,  payment or other  obligations  and liabilities of the Company or
such Subsidiary  created or arising under any  conditional  sales or other title
retention  agreement in respect of property used and/or  acquired by the Company
or such  Subsidiary,  even though the rights and remedies of the lessor,  seller
and/or  lender  thereunder  may be  limited  to  repossession  or  sale  of such
property)  arising after November 8, 2006to the extent secured by purchase money
security  interests in  equipment  (including  Capitalized  Leases) and purchase
money  mortgage,  deed of trust,  deed to secure debt or similar  instruments on
Real Property not to exceed  $5,000,000 in any Fiscal Year or $15,000,000 in the
aggregate at any time  outstanding  (in each case  including both purchase money
Indebtedness  secured by equipment  and Real  Property) so long as such security
interests  and  mortgage,  deed  of  trust,  deed  to  secure  debt  or  similar
instruments do not apply to any property of the Company or any Subsidiary  other
than the  equipment  or Real  Property so acquired  and other  equipment or Real
Property  financed by such lender to the extent that such financing  constitutes
Permitted  Indebtedness and is evidenced by an agreement that includes customary
provisions  requiring  cross-collateralization  thereof,  and  the  Indebtedness
secured  thereby does not exceed the cost of the  equipment or Real  Property so
acquired  and the cost of other  equipment  or Real  Property  financed  by such
lender to the extent that such financing constitutes Permitted  Indebtedness and
is  evidenced by an  agreement  that  includes  customary  provisions  requiring
cross-collateralization thereof, as the case may be;

                         (vi)  Indebtedness  of the  Company  or any  Subsidiary
arising  pursuant to loans or  advances  by the  Company or a  Guarantor  to the
Company or such Subsidiary permitted under Sections 14(t) and 14(u);

                         (vii) contingent  Indebtedness  existing on November 8,
2006in the form of Special  Incentive  Bonuses  (as  defined in the Senior  Loan
Agreement)  to  employees,  directors  and/or  officers  of the  Company  or any
Subsidiary  and/or to sellers of assets and/or Equity  Interests,  in each case,
under the Acquisition  Documents consisting of the TUG New York Bonus Agreement,
the TUG  Miami and Los  Angeles  Bonus  Agreement  and/or  the TUG  China  Bonus
Agreement, each as in effect on November 8, 2006;

                         (viii)  contingent  Indebtedness in the form of Special
Incentive Bonuses to employees,  directors and/or officers of the Company or any
Subsidiary and/or to sellers of assets and/or Equity Interests, in each case, in
connection with any Permitted  Acquisitions  consummated after November 8, 2006;
provided that (x) the sum of (A) the aggregate  amount of payments in respect of
such Indebtedness to employees,  directors and/or officers of the Company or any
Subsidiary  and/or  to such  sellers,  plus  (B) the  aggregate  amount  of cash
consideration paid in respect of all Permitted Acquisitions  (excluding earnouts
and deferred purchase price payments) other than from the proceeds of the Common
PIPE Offering

                                       52

<PAGE>

and any other cash on hand,  shall not exceed in the  aggregate for (A) and (B),
$7,500,000  and (y) the  Company  and its  Subsidiaries  shall not  make,  or be
required to make,  any payments in respect of such  Indebtedness  to  employees,
directors  and/or  officers  of the  Company  or any  Subsidiary  and/or to such
sellers  unless  as of the date of any such  payment  and  after  giving  effect
thereto,  no Default or Event of Default  under  Section  4(a)(v),  4(a)(vii) or
4(a)(viii) shall be continuing;

                         (ix)   Indebtedness  to  employees,   directors  and/or
officers of the Company or any Subsidiary in the form of retention  compensation
not to exceed $1,000,000 in the aggregate outstanding at any time;

                         (x)  Indebtedness  of  the  Company  or  any  Guarantor
arising after November 8,  2006consisting of the reimbursement  obligations to a
financial  institution in respect of letters of credit or bank guarantees issued
by such financial  institution  for the account of the Company or any Guarantor,
in the ordinary  course of  business;  provided  that (x) upon its request,  the
Collateral Agent shall have received true, correct and complete copies of all of
agreements, documents and instruments relating to the facility pursuant to which
such  letters  of credit are  issued,  and (y) in no event  shall the  aggregate
amount of all such Indebtedness (contingent or otherwise) at any time exceed the
amount  equal to (A)  $10,000,000  minus  (B) the  outstanding  letter of credit
obligations constituting Permitted Senior Indebtedness at such time;

                         (xi)  Indebtedness  of the Company  and the  Guarantors
arising after  November 8,  2006issued in exchange for, or the proceeds of which
are used to  refinance,  replace  or  substitute  for all or any  portion of the
Indebtedness  permitted  under  clauses  (iv)  or (v) of  this  definition  (the
"REFINANCING   INDEBTEDNESS");   provided  that  as  to  any  such   Refinancing
Indebtedness, each of the following conditions is satisfied: (w) the Refinancing
Indebtedness shall have a weighted average life to maturity and a final maturity
equal to or greater  than the  weighted  average  life to maturity and the final
maturity,  respectively,  of the Indebtedness  being  refinanced,  replaced,  or
substituted for, (x) the Refinancing Indebtedness shall rank in right of payment
no more senior than, and be at least as subordinated (if  subordinated)  to, the
obligations under this Note as the Indebtedness  being  refinanced,  replaced or
substituted for, (y) such extension,  refinancing or modification is pursuant to
terms  that  are not  less  favorable  to the  Company,  its  Subsidiaries,  the
Collateral  Agent  and the  Holder  than  the  terms of the  Indebtedness  being
refinanced,  replaced,  or  substituted  for and (z) after giving effect to such
refinancing,   replacement  or  substitution,   the  principal  amount  of  such
Indebtedness   is  not  greater  than  the  principal   amount  of  Indebtedness
outstanding  immediately prior to such refinancing,  replacement or substitution
(or in the case of the  refinancing,  replacement  or  substitution  of or for a
revolving  credit  facility,  the aggregate of the  commitments of the lender or
lenders under such facility);

                         (xii) In addition to all other Permitted  Indebtedness,
Subordinated  Indebtedness of the Company or any Subsidiary  arising on or after
November 8, 2006, provided that (w) the Collateral Agent shall have received not
less than ten (10) days prior written  notice of the intention of the Company or
such  Subsidiary  to incur such  Indebtedness,  which  notice shall set forth in
reasonable detail  satisfactory to the Holders the amount of such  Indebtedness,
the person or persons to whom such Indebtedness will be owed, the interest rate,
the schedule of repayments and maturity date with respect thereto and such other
information  as

                                       53

<PAGE>

the  Holders may  request  with  respect  thereto,  (x) the  Holders  shall have
received  true,  correct and complete  copies of all  agreements,  documents and
instruments  evidencing  or otherwise  related to such  Indebtedness,  (y) in no
event shall the  aggregate  principal  amount of such  Indebtedness  at any time
outstanding  exceed  $40,000,000  and  (z)  as of the  date  of  incurring  such
Indebtedness  and after giving  effect  thereto,  no Default or Event of Default
shall exist or have occurred;

                         (xiii) Indebtedness of the Company and its Subsidiaries
arising after  November 8,  2006consisting  of  obligations  on surety or appeal
bonds;  provided  that,  (x) such surety or appeal  bonds arise in the  ordinary
course of business and do not exceed at any time outstanding $5,000,000, and (y)
in connection with any performance bonds issued by a surety or other person, the
issuer of such bond shall have  waived in writing  any rights in or to, or other
interest  in, any of the  Collateral  (other  than  deposits  or pledges of cash
permitted to secure such Indebtedness  under clause (x) of the definition of the
term Permitted Liens) in an agreement, in form and substance satisfactory to the
Collateral Agent.

                         (xiv)  Indebtedness  of Sea  Master  Hong Kong  arising
after November 8, 2006 to Protex in an aggregate  principal amount not to exceed
$2,000,000  at any  time,  provided  that,  as of the  date  of  incurring  such
Indebtedness  and after giving  effect  thereto,  no Default or Event of Default
shall exist or have occurred; and

                         (xv)  Indebtedness  consisting of liabilities  incurred
under Title IV of ERISA in respect of any plan (other than a Multiemployer Plan)
covered by Title IV of ERISA and  maintained for employees of such Person or any
of its ERISA  Affiliates and withdrawal  liability  incurred under ERISA by such
Person or any of its ERISA  Affiliates in respect of any  Multiemployer  Plan to
the extent that in each case such Indebtedness does not otherwise  constitute or
give rise to an Event of Default;

                         (xvi) incentive bonus plans and other employee  benefit
plans of the Company  and/or its  Subsidiaries  to the extent  that  obligations
under such plans constitute "Indebtedness"; and

                         (xvii)  trade  payables  or  other   accounts   payable
incurred in the ordinary  course of the Company's or any  Subsidiary's  business
and not  outstanding  for more than one hundred and twenty (120) days after such
amount is due by the Company or such Subsidiary or, if outstanding  longer, that
are being  contested or disputed by the Company  and/or such  Subsidiary in good
faith in the ordinary course of business.

                    (aaa) "PERMITTED LIENS" means:

                         (i) Liens securing the obligations under the Notes;

                         (ii) Liens on the Collateral  securing the Indebtedness
evidenced by the Senior Loan;

                         (iii) Liens securing the payment of taxes,  assessments
or other  governmental  charges or levies either not yet overdue or the validity
of which are being contested in good faith by appropriate proceedings diligently
pursued and  available to the

                                       54

<PAGE>

Company, or Guarantor or any other Subsidiary of the Company, as the case may be
and in respect of which  adequate  reserves have been set aside on its books and
for which payment is not required by the terms of Section 14(x);

                         (iv)  Liens   constituting   purchase   money  security
interests  in  equipment  (including  Capitalized  Leases)  and  purchase  money
mortgages,  deeds of trust, deeds to secure debt or similar  instruments on real
property to secure Indebtedness  permitted under clause (v) of the definition of
the term "Permitted Indebtedness";

                         (v)  Liens   imposed   by  law,   such  as   carriers',
warehousemen's, mechanics', materialmen's and other similar Liens arising in the
ordinary course of business and securing  obligations  (other than  Indebtedness
for  borrowed  money)  that are not overdue by more than thirty (30) days or are
being contested in good faith and by appropriate  proceedings promptly initiated
and diligently  conducted;  provided that they are subordinate to the Collateral
Agent's Liens on the  Collateral  except to the extent of customary fees payable
in respect of such obligations),  and a reserve or other appropriate  provision,
if any, as shall be required by GAAP shall have been made therefor;

                         (vi) Liens  described on SCHEDULE  28(zz),  but not the
extension  of  coverage  thereof  to  other  property  or  the  increase  of the
Indebtedness  secured  thereby  (other  than in respect of accrued  interest  in
accordance with the terms thereof);

                         (vii) Liens and the right of setoff against deposits of
cash by the Company,  any Guarantor or any Subsidiary in the ordinary  course of
business  with any  financial  institution  at which a  deposit  account  of the
Company,  such Guarantor or such Subsidiary is maintained to secure  obligations
of the Company,  such Guarantor or such Subsidiary to such financial institution
in  connection  with  such  deposit  account  and the cash  management  services
provided by such financial  institution  for which such deposit  account is used
consistent  with the current  practices of the Company,  such  Guarantor or such
Subsidiary as of the date hereof;  provided that,  such Liens are subordinate to
the Collateral Agent's Liens on the Collateral except to the extent of customary
fees,  items  returned  unpaid  and  overdrafts   payable  in  respect  of  such
obligations;

                         (viii) Liens arising from (i) operating  leases and the
precautionary  UCC  financing  statement  filings  in respect  thereof  and (ii)
equipment or other materials  which are not owned by the Company,  any Guarantor
or any Subsidiary located on the premises of the Company, such Guarantor or such
Subsidiary  (but not in connection  with, or as part of, the financing  thereof)
from time to time in the ordinary course of business and consistent with current
practices of the Company,  such  Guarantor or such  Subsidiary of the Company or
such Guarantor and the precautionary UCC financing  statement filings in respect
thereof;

                         (ix) Liens in favor of customs and revenue  authorities
arising as a matter of law to secure  payment of  customs  duties in  connection
with importation of goods in the ordinary course of business;

                         (x)   deposits   and  pledges  of  cash   securing  (i)
obligations incurred in respect of workers' compensation, unemployment insurance
or other forms of

                                       55

<PAGE>

governmental  insurance  or benefits,  (ii) the  performance  of bids,  tenders,
leases,   contracts  (other  than  for  the  payment  of  money)  and  statutory
obligations  or (iii)  obligations  on surety or appeal  bonds  permitted  under
clause (xiii) of the definition of the term Permitted Indebtedness;

                         (xi)  easements,   zoning   restrictions   and  similar
encumbrances  on real property  owned by the Company or any Subsidiary and minor
irregularities  in the title thereto that do not (x) secure  obligations for the
payment of money, or (y) materially impair the value of such property or its use
by the Company or any  Subsidiary in the normal conduct of the Company's or such
Subsidiary business;

                         (xii)  Liens  resulting  from any  judgment or award so
long as (x) such judgment or award does not constitute an Event of Default under
Section  4(a)(xv)  and (y) the  enforcement  of such  judgment or award has been
stayed by reason of a pending appeal or otherwise;

                         (xiii) licenses in respect of Intellectual  Property to
the  extent  permitted  hereunder  or  under  the  other  Transaction  Documents
(including, without limitation, Licenses);

                         (xiv)  Liens  of the  financial  institution  that  has
issued  letters of credit or bank  guarantees  for the account of the Company or
any Guarantor  giving rise to Indebtedness of such Person permitted under clause
(x) of the definition of Permitted  Indebtedness on cash and Cash Equivalents of
such  Person  to  secure  the   reimbursement   obligations  to  such  financial
institution in respect of such letters of credit and bank  guarantees;  provided
that, in no event shall the aggregate  amount of such cash and Cash  Equivalents
at any time exceed the amount  equal to one hundred  five (105%)  percent of the
undrawn amount of such letters of credit and bank guarantees then outstanding;

                         (xv) Liens to secure  Refinancing  Indebtedness  to the
extent such Liens are otherwise permitted hereunder;

                         (xvi) pledges of any cash earnest money  deposits,  not
to exceed $3,000,000 in the aggregate, by the Company or any Subsidiary pursuant
to a letter of interest or  purchase  agreement  executed by the Company or such
Subsidiary in connection with any Permitted Acquisition;

                         (xvii)  Liens  arising  under  Section  14(t)(v) on the
assets  of a  Subsidiary  that is not  the  Company  or a  Guarantor  to  secure
obligations  arising  under loans or advances by the Company or any Guarantor to
such Subsidiary; and

                         (xviii)  the  pledge  of  cash  collateral  to  GMAC in
connection  with that  certain  Termination  and Release  Agreement  dated as of
November  8, 2006in  respect of letters of credit  issued for the benefit of the
Company and/or Guarantors.

                    (bbb) "PERMITTED SENIOR  INDEBTEDNESS"  means (i) the Senior
Loan  and  all  related  obligations;  PROVIDED,  HOWEVER,  that  the  aggregate
principal  amount  of  Permitted  Senior  Indebtedness  outstanding  at any time
thereunder  does not at any time exceed the

                                       56

<PAGE>

Maximum Senior Debt (as defined in the  Intercreditor  Agreement),  and (ii) any
guaranties of the Indebtedness described in clause (i) hereof.

                    (ccc)  "PERSON"  means an  individual,  a limited  liability
company,  a  partnership,   a  joint  venture,   a  corporation,   a  trust,  an
unincorporated organization, any other entity and a government or any department
or agency thereof.

                    (ddd) "PIPE NOTES"  means those  certain  convertible  notes
issued by Company  to the  Common  PIPE  Buyers  (as  defined in the  Securities
Purchase  Agreement)  on the date  hereof in the  aggregate  original  principal
amount of $1,000,000.

                    (eee)  "PRINCIPAL  MARKET"  means,  from  time to time,  the
Eligible  Market  upon  which  the  Common  Stock  is  admitted  or  listed  and
principally trades.

                    (fff)  "REAL  PROPERTY"  means all now  owned and  hereafter
acquired real property of the Company and each Subsidiary,  including  leasehold
interests,  together  with all  buildings,  structures,  and other  improvements
located thereon and all licenses,  easements and appurtenances relating thereto,
wherever located.

                    (ggg) "REDEMPTION NOTICES" means, collectively, the Event of
Default  Redemption  Notices,  the Change of Control  Redemption Notices and the
Optional  Redemption Notice, each of the foregoing,  individually,  a Redemption
Notice.

                    (hhh)  "REDEMPTION  PREMIUM"  means  (i) in the  case of the
Events of Default  described in Section 4(a)(i) - (vi) and (ix) - (xix), 120% or
(ii) in the case of the  Events of Default  described  in  Section  4(a)(vii)  -
(viii), 100%.

                    (iii) "REDEMPTION PRICES" means, collectively,  the Event of
Default  Redemption  Price,  Optional  Redemption  Price and  Change of  Control
Redemption Price and, each of the foregoing, individually, a Redemption Price.

                    (jjj)  "REGISTRATION  RIGHTS  AGREEMENT"  means that certain
registration  rights  agreement  dated as of  November  8,  2006by and among the
Company and the initial  holders of the Notes  relating to, among other  things,
the  registration for resale of the Common Stock issuable upon conversion of the
Notes  and  exercise  of the  Warrants  as  amended  by  Amendment  No. 1 to the
Registration  Rights  Agreement  dated  May  __,  2007 as the  foregoing  may be
amended, restated, supplemented and/or modified from time to time.

                    (kkk)  Intentionally Omitted.

                    (lll)   "REQUIRED   HOLDERS"  means  the  holders  of  Notes
representing at least a majority of the aggregate  principal amount of the Notes
then  outstanding;  provided  that any Note that is held by an  Affiliate of the
Company (other than the New Holders)  shall not be deemed to be outstanding  for
purposes of the determination of "Required Holders".

                    (mmm) Intentionally blank.

                                       57

<PAGE>

                    (nnn) "SEC" means the United States  Securities and Exchange
Commission.

                    (ooo)  "SECURITIES  PURCHASE  AGREEMENT"  means that certain
Securities  Purchase  Agreement  (Notes and  Warrants)  dated as of  November 8,
2006by and among Maritime Logistics US Holdings Inc. (and the Company,  pursuant
to a Joinder  Agreement dated as of the November 8, 2006) and the holders of the
Notes,  pursuant  to which the  Company  issued  the  Notes,  as amended by that
certain First Amendment to Securities  Purchase  Agreement  (Notes and Warrants)
dated as of January 26, 2007 and that certain  Second  Amendment  to  Securities
Purchase  Agreement  (Notes and  Warrants)  and the First  Amendment  to Joinder
Agreement  dated as of May __, 2007, as the foregoing may be amended,  restated,
supplemented and/or modified from time to time.

                    (ppp) "SENIOR  LOAN" the principal of,  interest on, and all
fees  and  other  amounts  (including,   without   limitation,   any  reasonable
out-of-pocket costs,  enforcement expenses (including  reasonable  out-of-pocket
legal  fees  and  disbursements),   collateral  protection  expenses  and  other
reimbursement or indemnity  obligations  relating thereto) and all other amounts
payable by the Company  and/or any of its  Subsidiaries,  whether as  principal,
surety,  endorser,  guarantor  or  otherwise,  whether now existing or hereafter
arising, whether arising before or after the commencement of any case in respect
of the Company and/or any of its Subsidiaries under the U.S.  Bankruptcy Code or
any  other  insolvency  proceeding  (and  including,   without  limitation,  any
principal,  interest,  fees, costs,  expenses and other amounts,  whether or not
such  amounts  are  allowable  either  in whole or in part,  in any such case or
similar proceeding),  whether direct or indirect, absolute or contingent,  joint
or several,  due or not due,  primary or secondary,  liquidated or unliquidated,
secured or  unsecured,  arising  under or in  connection  with the  Senior  Loan
Agreement and all  agreements,  documents and  instruments  at any time executed
and/or  delivered by the Company and/or any of its  Subsidiaries  to, with or in
favor of the agent under the Senior Loan  Agreement in  connection  therewith or
related thereto,  as all of the foregoing now exist or may hereafter be amended,
modified,  supplemented,  extended, renewed, restated,  refinanced,  replaced or
restructured  (in whole or in part and including any  agreements  with, to or in
favor  of any  other  agent or  lender  or  group  of  lenders  that at any time
refinances,  replaces or  succeeds  to all or any portion of such  obligations),
provided that the principal amount  outstanding at any time thereunder shall not
exceed the Maximum Senior Debt (as defined in the Intercreditor Agreement).

                    (qqq)  "SENIOR  LOAN  AGREEMENT"  means  that  certain  Loan
Agreement dated as of November 8, 2006by and among Fortress Credit Corp., in its
capacity as  administrative  agent for the lenders  party  thereto,  the lenders
party  thereto  (such  lenders  and their  respective  successors  and  assigns,
together with Fortress Credit Corp., as administrative agent or any successor or
replacement  agent,  being  collectively,  "SENIOR  LENDERS"),  the  Company and
certain  of the  Subsidiaries  as  amended  to date  and as  amended,  restated,
supplemented and/or modified from time to time.

                    (rrr) "SENIOR LOAN  DOCUMENTS" has the same meaning as "LOAN
DOCUMENTS" set forth in the Senior Loan Agreement.

                                       58

<PAGE>

                    (sss)   "SUBORDINATED   INDEBTEDNESS"   means   Indebtedness
(secured or unsecured)  incurred by the Company and/or its Subsidiaries  that is
made expressly subordinate in right of payment to the Indebtedness  evidenced by
this Note,  as reflected  in a written  agreement  acceptable  to the Holder and
approved  by the Holder in  writing  and  expressly  includes  the  Indebtedness
evidenced by the PIPE Notes; provided that no such Indebtedness shall provide at
any time for (1) the payment, prepayment,  repayment,  repurchase or defeasance,
directly or  indirectly,  of any  principal or premium,  if any,  thereon  until
ninety-one  (91) days after the  Maturity  Date or later and (2) other than with
respect to the PIPE  Notes,  total cash  interest  at a rate in excess of eleven
percent (11.0%) per annum.

                    (ttt) Intentionally blank.

                    (uuu)  "SUBSIDIARY"  means, from time to time, any entity in
which the Company directly or indirectly, owns any of the capital stock or holds
an equity or similar interest.

                    (vvv) "SUCCESSOR ENTITY" means the Person,  which may be the
Company,  formed by, resulting from or surviving any Fundamental  Transaction or
the  Person  with  which  such  Fundamental  Transaction  shall  have been made,
provided that if such Person is not a publicly  traded entity whose common stock
or  equivalent  equity  security  is quoted or listed for trading on an Eligible
Market, Successor Entity shall mean such Person's Parent Entity.

                    (www)  "TRADING DAY" means any day on which the Common Stock
is traded  on the  Principal  Market,  or,  if the  Principal  Market is not the
principal trading market for the Common Stock, then on the Eligible Market which
is the principal  securities  exchange or securities  market on which the Common
Stock is then traded;  provided  that "Trading Day" shall not include any day on
which the Common Stock is scheduled to trade on such exchange or market for less
than 4.5 hours or any day that the Common Stock is suspended from trading during
the final hour of trading on such  exchange  or market (or if such  exchange  or
market  does not  designate  in  advance  the  closing  time of  trading on such
exchange or market, then during the hour ending at 4:00:00 p.m., New York Time).

                    (xxx) "VOTING STOCK" of a Person means capital stock of such
Person of the class or classes  pursuant to which the holders  thereof  have the
general  voting  power to elect,  or the general  power to  appoint,  at least a
majority  of the  board  of  directors,  managers  or  trustees  of such  Person
(irrespective  of whether or not at the time capital stock of any other class or
classes  shall have or might have voting power by reason of the happening of any
contingency).

                    (yyy)  "WARRANTS"  has the meaning  ascribed to such term in
the  Securities  Purchase  Agreement,  and shall include all warrants  issued in
exchange therefor or replacement thereof.

                    (zzz) "WEIGHTED AVERAGE PRICE" means, for any security as of
any date,  the dollar  volume-weighted  average  price for such  security on the
Principal  Market during the period beginning at 9:30:01 a.m., New York Time (or
such other time as the Principal Market publicly  announces is the official open
of trading),  and ending at 4:00:00  p.m.,  New York Time (or such other time as
the Principal  Market  publicly  announces is the official  close of trading) as

                                       59

<PAGE>

reported  by  Bloomberg  through  its  "Volume at Price"  functions,  or, if the
foregoing  does not apply,  the  dollar  volume-weighted  average  price of such
security in the  over-the-counter  market on the  electronic  bulletin board for
such security  during the period  beginning at 9:30:01  a.m.,  New York Time (or
such  other time as such  market  publicly  announces  is the  official  open of
trading),  and ending at 4:00:00 p.m., New York Time (or such other time as such
market  publicly  announces  is the  official  close of  trading) as reported by
Bloomberg,  or, if no dollar volume-weighted  average price is reported for such
security by  Bloomberg  for such hours,  the average of the highest  closing bid
price and the  lowest  closing  ask price of any of the  market  makers for such
security  as  reported in the "pink  sheets" by Pink  Sheets LLC  (formerly  the
National  Quotation  Bureau,  Inc.).  If the  Weighted  Average  Price cannot be
calculated  for a security on a particular  date on any of the foregoing  bases,
the  Weighted  Average  Price of such  security  on such date  shall be the fair
market  value as mutually  determined  by the  Company  and the  Holder.  If the
Company  and the Holder are unable to agree upon the fair  market  value of such
security,  then such dispute shall be resolved  pursuant to Section 23. All such
determinations to be appropriately adjusted for any stock dividend, stock split,
stock combination or other similar transaction during the applicable calculation
period.

               (29) DISCLOSURE.  Notwithstanding  any other provisions set forth
herein  or in  any  of  the  other  Transaction  Documents  (including,  without
limitation,  any reporting and/or notice  requirements),  the Company shall not,
and  shall  cause  its  Subsidiaries  and  each of  their  respective  officers,
directors,  employees and agents,  not to, provide the Holder with any material,
nonpublic information regarding, the Company or any if its Subsidiaries from and
after the filing of the 8-K Filing  with the SEC  without  the  express  written
consent of the Holder.  If the Holder has, or believes it has, received from the
Company any such material, nonpublic information regarding the Company or any of
the Subsidiaries,  it shall provide the Company with written notice thereof. The
Company  shall,  within four (4) Trading  Days of receipt of such  notice,  make
public disclosure of such material, nonpublic information unless (i) the Company
has in good faith  determined  that the  matters  relating to such notice do not
constitute material non-public  information about the Company or (ii) the notice
is received from a Holder that is an Affiliate,  shareholder,  officer, director
or employee of the Company or any of its Subsidiaries.  In the event of a breach
of the foregoing  covenant by the Company,  any of its  Subsidiaries,  or any of
their respective officers,  directors,  employees and agents, in addition to any
other remedy provided herein or in the Transaction  Documents,  the Holder shall
have  the  right to make a public  disclosure,  in the form of a press  release,
public advertisement or otherwise, of such material,  nonpublic information with
the prior  approval by the Company.  Holder shall not have any  liability to the
Company,  any  of  its  Subsidiaries,  or  any  of  their  respective  officers,
directors, employees, stockholders or agents for any such disclosure. Subject to
the foregoing,  none of the Company, any of its Subsidiaries or the Holder shall
issue any press  releases  or any other  public  statements  in  respect  of the
transactions  contemplated hereby; PROVIDED,  HOWEVER, that the Company shall be
entitled, without the prior approval of the Holder, to make any press release or
other  public  disclosure  in respect of such  transactions  (i) in  substantial
conformity  with the 8-K Filing and  contemporaneously  therewith and (ii) as is
required by applicable Requirements of Law.

               (30)  INTERCREDITOR   AGREEMENT.   This  Note  and  each  of  the
provisions hereof shall be subject to the Intercreditor Agreement.

                                       60

<PAGE>

                            [Signature Page Follows]

                                       61

<PAGE>

               IN WITNESS  WHEREOF,  the Company has caused this Note to be duly
executed as of the Original Issuance Date set out above.

                              SUMMIT GLOBAL LOGISTICS, INC., formerly known as
                              Aerobic Creations, Inc.

                              By:_________________________________________
                                 Name:
                                 Title:

<PAGE>

                                    EXHIBIT I

                                     COMPANY

                                CONVERSION NOTICE

Reference is made to the Senior Secured  Convertible Note (the "NOTE") issued to
the  undersigned  by Company.  In accordance  with and pursuant to the Note, the
undersigned  hereby elects to convert the  Conversion  Amount (as defined in the
Note) of the Note  indicated  below into shares of Common Stock par value $0.001
per share (the "COMMON STOCK") of the Company, as of the date specified below.

        Date of Conversion:
                           -----------------------------------------------------

        Aggregate Conversion Amount to be converted:
                                                    ----------------------------

Please confirm the following information:

        Conversion Price:
                         -------------------------------------------------------

        Number of shares of Common Stock to
        be issued:
                  --------------------------------------------------------------

        Installment Amounts to be reduced and
        amount of reduction:
                            ----------------------------------------------------

Please  issue the Common  Stock into  which the Note is being  converted  in the
following name and to the following address:

        Issue to:
                 ---------------------------------------------------------------

                 ---------------------------------------------------------------

                 ---------------------------------------------------------------

        Facsimile Number:
                         -------------------------------------------------------

        Authorization:
                      ----------------------------------------------------------

               By:
                  --------------------------------------------------------------

                   Title:
                         -------------------------------------------------------

Dated:
      --------------------------------------------------------------------------

        Account Number:
                       ---------------------------------------------------------
        (if electronic book entry transfer)

        Transaction Code Number:
                                ------------------------------------------------
        (if electronic book entry transfer)

<PAGE>

                                 ACKNOWLEDGMENT

               The Company hereby acknowledges this Conversion Notice and hereby
directs  the  Transfer  Agent to issue the above  indicated  number of shares of
Common Stock in accordance  with the Transfer Agent  Instructions  dated _______
__, 200_ from the Company and acknowledged and agreed to by [Continental]

                                   SUMMIT GLOBAL LOGISTICS, INC.

                                   By:__________________________________________
                                      Name:
                                      Title:

<PAGE>

                                 Schedule 14(a)

                                      Rank

<PAGE>

                                Schedule 14(l)(i)

                              Total Leverage Ratio

<PAGE>

                               Schedule 14(l)(ii)

                               Consolidated EBITDA

<PAGE>

                               Schedule 14(l)(iii)

                           Fixed Charge Coverage Ratio

<PAGE>

                                 Schedule 14(t)

                         Loans, Advances and Investments

<PAGE>

                                 Schedule 14(u)

                          Transactions with Affiliates

<PAGE>

                                 Schedule 28(yy)

                         Existing Permitted Indebtedness

<PAGE>

                                 Schedule 28(zz)

                            Existing Permitted Liens

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