Exhibit 99.1

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE
HAVE  BEEN  REGISTERED  WITH  THE  SECURITIES  AND  EXCHANGE  COMMISSION  OR THE
SECURITIES   COMMISSION  OF  ANY  STATE  IN  RELIANCE  UPON  AN  EXEMPTION  FROM
REGISTRATION  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED  (THE  "SECURITIES
ACT"),  AND,  ACCORDINGLY,  MAY NOT BE OFFERED  OR SOLD  EXCEPT  PURSUANT  TO AN
EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR PURSUANT TO AN
AVAILABLE  EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE  REGISTRATION
REQUIREMENTS  OF THE  SECURITIES  ACT AND IN ACCORDANCE  WITH  APPLICABLE  STATE
SECURITIES  LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH  EFFECT,  THE  SUBSTANCE  OF WHICH SHALL BE  REASONABLY  ACCEPTABLE  TO THE
COMPANY.  THIS  SECURITY AND THE  SECURITIES  ISSUABLE  UPON  CONVERSION OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION  WITH A BONA FIDE MARGIN  ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.

Original Issue Date: June 18, 2007


                                                                        $615,000


                       12% SENIOR SECURED CONVERTIBLE NOTE

            THIS 12% SENIOR SECURED CONVERTIBLE NOTE is authorized and issued by
ENVIRONMENTAL  SERVICE  PROFESSIONALS,  INC.,  a  Nevada  corporation,  having a
principal  place of business at 1111 East Tahquitz  Canyon Way,  Suite 100, Palm
Springs, California 92262 (the "COMPANY"),  designated as its 12% Senior Secured
Convertible Note (this "NOTE").

         FOR VALUE RECEIVED, the Company promises to pay to Boca Funding, LLC or
its registered assigns (the "HOLDER"),  or shall have paid pursuant to the terms
hereunder,  the  principal  sum of Six  Hundred  and  Fifteen  Thousand  Dollars
($615,000)  by the  Maturity  Date,  and to pay  interest  to the  Holder on the
aggregate  unconverted  and then  outstanding  principal  amount of this Note in
accordance  with the  provisions  hereof.  This Note is subject to the following
additional provisions:

         SECTION 1.  DEFINITIONS.  For the purposes  hereof,  in addition to the
terms  defined  elsewhere  in this  Note,  the  following  terms  shall have the
following meanings:

                  "ALTERNATE  CONSIDERATION" shall have the meaning set forth in
         Section 5(d).

                  "BUSINESS DAY" means any day except  Saturday,  Sunday and any
         day which shall be a federal legal holiday in the United States or a

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<PAGE>

         day on  which  banking  institutions  in the  State  of  New  York  are
         authorized or required by law or other government action to close.

                  "CHANGE OF CONTROL TRANSACTION" means the occurrence after the
         date  hereof of any of (i) an  acquisition  after the date hereof by an
         individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
         promulgated  under the  Exchange  Act) of  effective  control  (whether
         through legal or beneficial  ownership of capital stock of the Company,
         by contract or otherwise) of in excess of 33% of the voting  securities
         of the Company,  or (ii) the Company merges into or  consolidates  with
         any other Person,  or any Person merges into or  consolidates  with the
         Company and, after giving effect to such transaction,  the stockholders
         of the Company  immediately prior to such transaction own less than 66%
         of the aggregate voting power of the Company or the successor entity of
         such  transaction,  or (iii) the Company sells or transfers its assets,
         as an entirety or substantially  as an entirety,  to another Person and
         the stockholders of the Company  immediately  prior to such transaction
         own less than 66% of the aggregate voting power of the acquiring entity
         immediately  after the  transaction,  (iv) a replacement at one time or
         within a three year period of more than  one-half of the members of the
         Company's  board of  directors  which is not  approved by a majority of
         those individuals who are members of the board of directors on the date
         hereof (or by those individuals who are serving as members of the board
         of directors on any date whose nomination to the board of directors was
         approved by a majority of the members of the board of directors who are
         members on the date hereof),  or (v) the execution by the Company of an
         agreement  to which  the  Company  is a party or by which it is  bound,
         providing for any of the events set forth above in (i) or (iv).

                  "COMMON  STOCK" means the common  stock,  par value $0.001 per
         share,  of the Company and stock of any other class of securities  into
         which such  securities may hereafter have been  reclassified or changed
         into.

                  "COMMON STOCK EQUIVALENTS" means any securities of the Company
         or the  Subsidiaries  which would entitle the holder thereof to acquire
         at any time Common  Stock,  including,  without  limitation,  any debt,
         preferred stock, rights, options,  warrants or other instrument that is
         at any time  convertible  into or exercisable or  exchangeable  for, or
         otherwise entitles the holder thereof to receive, Common Stock.

                  "CONVERSION  SHARES" means the shares of Common Stock issuable
         upon conversion of this Note.

                  "EXCHANGE ACT" means the  Securities  Exchange Act of 1934, as
         amended, and the rules and regulations promulgated thereunder.

                  "EXEMPT  ISSUANCE"  means the issuance of (a) shares of Common
         Stock or options to  employees,  officers or  directors  of the Company
         pursuant to a stock or option plan, in effect on the date hereof,  duly
         adopted  by a  majority  of the  non-employee  members  of the Board of
         Directors of the Company or a majority of the members of a committee of
         non-employee  directors  established  for such purpose,  (b) securities
         upon  the  exercise  or  exchange  of  any  securities  exercisable  or
         exchangeable for or convertible into shares of Common Stock issued and

                                        2

<PAGE>

         outstanding on the date hereof,  provided that such securities have not
         been amended since the date of this Agreement to increase the number of
         such  securities  or to decrease the  exercise,  exchange or conversion
         price of any such securities, or securities issued upon exercise of the
         Warrants,  (c) securities  issued pursuant to acquisitions or strategic
         transactions  approved by a majority of the disinterested  directors of
         the Company, provided any such issuance shall only be to a Person which
         is,  itself or through  its  subsidiaries,  an  operating  company in a
         business  synergistic with the business of the Company and in which the
         Company  receives  benefits in addition to the investment of funds, but
         shall  not  include  a  transaction  in which the  Company  is  issuing
         securities primarily for the purpose of raising capital or to an entity
         whose primary  business is investing in  securities,  (d) up to 200,000
         shares of Common Stock issued to consultants,  service  providers or in
         connection with capital raising  transactions or (e) any other security
         if  approved  in  writing  by the  Holder  in  its  sole  and  absolute
         discretion.

                  "INDEBTEDNESS"  shall mean (a) any  liabilities  for  borrowed
         money or amounts owed in excess of $10,000  (other than trade  accounts
         payable  incurred  in  the  ordinary  course  of  business),   (b)  all
         guaranties, endorsements and other contingent obligations in respect of
         Indebtedness  of  others,  whether  or not the  same are or  should  be
         reflected in the Company's balance sheet (or the notes thereto), except
         guaranties  by  endorsement  of negotiable  instruments  for deposit or
         collection or similar  transactions in the ordinary course of business;
         and (c) the  present  value of any lease  payments in excess of $10,000
         due under leases required to be capitalized in accordance with GAAP.

                   "MATURITY  DATE" shall mean the earlier of December 18, 2007,
         the  consummation of the Qualified  Transaction or such earlier date as
         this Note is required or permitted to be repaid as provided hereunder.

                   "ORIGINAL  ISSUE  DATE"  shall  mean  the  date of the  first
         issuance of the Note  regardless of the number of transfers of any Note
         and  regardless  of the  number of  instruments  which may be issued to
         evidence such Note.

                  "PERMITTED  INDEBTEDNESS" shall mean the Indebtedness existing
         on the Original Issue Date, as set forth on SCHEDULE A attached hereto.

                  "PERMITTED  LIENS" shall mean the  individual  and  collective
         reference to the following:  (a) Liens for taxes, assessments and other
         governmental  charges  or  levies  not  yet  due or  Liens  for  taxes,
         assessments and other governmental charges or levies being contested in
         good faith and by appropriate  proceedings for which adequate  reserves
         (in the good faith judgment of the management of the Company) have been
         established  in  accordance  with GAAP,  (b) Liens imposed by law which
         were  incurred in the ordinary  course of business,  such as carriers',
         warehousemen's  and mechanics' Liens,  statutory  landlords' Liens, and
         other similar Liens arising in the ordinary course of business, and (x)
         which do not individually or in the aggregate  materially  detract from
         the  value of such  property  or assets or  materially  impair  the use
         thereof  in the  operation  of the  business  of the  Company  and  its
         consolidated  Subsidiaries  or (y) which are  being  contested  in good
         faith by appropriate proceedings, which proceedings have the effect of

                                        3

<PAGE>

         preventing  the  forfeiture or sale of the property or asset subject to
         such  Lien  and  (c)  Liens  incurred  in  connection   with  Permitted
         Indebtedness  under clause (b) thereunder  provided that such Liens are
         not secured by assets of the Company or its Subsidiaries other than the
         assets so acquired or leased.

                   "PERSON" means a corporation,  an association, a partnership,
         organization,  a business,  an  individual,  a government  or political
         subdivision thereof or a governmental agency.

                  "QUALIFIED TRANSACTION" means a financing or series of related
         financings  occurring  after the date hereof in which the Company sells
         shares of Common  Stock or Common Stock  Equivalents  with an aggregate
         gross sale price of not less than $1,000,000 or issues  indebtedness in
         a principal amount of not less than $1,000,000,  or agrees to do any of
         the foregoing.

                  "SECURITIES ACT" means the Securities Act of 1933, as amended,
         and the rules and regulations promulgated thereunder.

                  "SUBSIDIARY" shall mean each of National Professional Services
         Inc., a Delaware corporation,  Pacific Environmental Sampling,  Inc., a
         California  corporation,   Allstate  Home  Inspection  &  Environmental
         Testing, Ltd., a Vermont corporation.

                  "TRANSACTION  DOCUMENTS"  means this Note,  the  Warrant,  the
         Guarantee and the Security Agreement.

                  "TRADING  DAY" means a day on which the Common Stock is traded
         on a Trading Market.

                  "TRADING  MARKET" means the following  markets or exchanges on
         which the Common  Stock is listed or quoted for  trading on the date in
         question:  the Nasdaq Global Select  Market,  the Nasdaq Global Market,
         the Nasdaq Capital Market,  the American Stock  Exchange,  the New York
         Stock Exchange or the OTC Bulletin Board.

                  "VWAP" means,  for any date, the price determined by the first
         of the following clauses that applies:  (a) if the Common Stock is then
         listed or quoted on a Trading Market, the daily volume weighted average
         price of the Common Stock for such date (or the nearest preceding date)
         on the  Trading  Market on which  the  Common  Stock is then  listed or
         quoted as reported by Bloomberg  Financial L.P. (based on a Trading Day
         from 9:30 a.m.  Eastern  Time to 4:02 p.m.  Eastern  Time);  (b) if the
         Common  Stock is not then  listed or quoted on a Trading  Market and if
         prices for the Common Stock are then quoted on the OTC Bulletin  Board,
         the volume weighted average price of the Common Stock for such date (or
         the  nearest  preceding  date) on the OTC  Bulletin  Board;  (c) if the
         Common Stock is not then listed or quoted on the OTC Bulletin Board and
         if prices for the Common Stock are then  reported in the "Pink  Sheets"
         published by the Pink Sheets, LLC (or a similar  organization or agency
         succeeding to its functions of reporting  prices),  the most recent bid
         price per share of the Common Stock so reported; or (d) in all other

                                        4

<PAGE>

         cases,  the fair market value of a share of Common Stock as  determined
         by an  independent  appraiser  selected in good faith by the Holder and
         reasonably acceptable to the Company.


         SECTION 2. CONDITIONS;  RANKING;  INTEREST; USE OF PROCEEDS;  AUTOMATIC
PREPAYMENT; REGISTRATION RIGHTS.

         a) On the Original  Issue Date,  the Holder shall advance the principal
amount of this Note to the Company by wire of immediately  available funds (less
any other amounts that may be deducted  therefrom  pursuant to the terms of this
Note).  Prior to the  Holder  having  the  obligation  of making  the  foregoing
advance,  the following shall have occurred to the satisfaction of the Holder in
its sole  discretion:  (i) this Note shall have been duly executed and delivered
by the Company to the Holder;  (ii) the Guarantee (the  "Guarantee")  shall have
been duly executed and  delivered to the Holder by of each of the  Subsidiaries;
(iii) a Security Agreement (the "SECURITY  AGREEMENT") from the Company and each
of the  Subsidiaries  to the  Holder  with  respect  to all of their  respective
assets,  shall have been duly  executed  and  delivered  by the  Company and the
Subsidiaries;  (iv) a warrant to purchase  275,000  shares of Common Stock shall
have  been duly  executed  and  delivered  by the  Company  to the  Holder  (the
"WARRANT");  (v) 750,000  shares of Common  Stock shall be issued to Holder (the
"CLOSING  SHARES");  (vi) an  opinion of  counsel  to the  Company,  in form and
substance  satisfactory to the Holder,  shall have been delivered to the Holder;
(vii) the Company  shall have paid to the  Holder,  a due  diligence  fee in the
amount of $30,000; (viii) there shall have been delivered to the Holder true and
complete copies of resolutions of the Boards of Directors of the Company and the
Subsidiaries  authorizing the transactions  contemplated  hereby; and (ix) there
shall have been  delivered a  certificate  of a duly  authorized  officer of the
Company certifying as to the validity of the representatives and warranties made
herein and certain related matters.

         b)  RANKING  This note  shall  rank  senior to all  current  and future
indebtedness of the Company,  and shall be secured by the Collateral (as defined
in the Security Agreement).

         c) PAYMENT OF INTEREST. The Company shall pay interest to the Holder on
the  outstanding  principal  amount of this  Note at the rate of 12% per  annum,
payable on July 18, 2007 and on the same day of each month thereafter and on the
Maturity  Date (except  that,  if any such date is not a Business Day, then such
payment  shall be due on the next  succeeding  Business Day) (each such date, an
"INTEREST PAYMENT DATE"), in cash.

         d) INTEREST CALCULATIONS.  Interest shall be calculated on the basis of
a 360-day  year and shall  accrue daily  commencing  on the Original  Issue Date
until payment in full of the principal sum, together with all accrued and unpaid
interest  and other  amounts  which may  become  due  hereunder,  has been made.
Interest  hereunder  will be paid to the  Person  in  whose  name  this  Note is
registered on the records of the Company regarding registration and transfers of
this Note (the "NOTE REGISTER").

                                        5


<PAGE>

         e) LATE  FEE.  All  overdue  accrued  and  unpaid  interest  to be paid
hereunder  shall  entail a late fee at the rate of 18% per annum (or such  lower
maximum amount of interest  permitted to be charged under applicable law) ("LATE
FEES") which will accrue  daily,  from the date such  interest is due  hereunder
through and  including  the date of payment.  Upon and after an Event of Default
hereunder, interest hereunder shall accrue at the rate of 18% per annum (or such
lower maximum amount of interest permitted to be charged under applicable law).

         f) PREPAYMENT.  Except as otherwise set forth in this Note, the Company
may not prepay any  portion of the  principal  amount of this Note  without  the
prior written consent of the Holder.

         g)  MANDATORY  PREPAYMENT.  Notwithstanding  anything  to the  contrary
contained  herein,  upon consummation of, and  simultaneously  with, a Qualified
Transaction,  the Company shall prepay this Note in full  (including any accrued
interest up through the date of such prepayment), PLUS an amount, as an economic
make-whole  premium,  equal to the interest that would have otherwise accrued at
the interest rate hereunder on the principal amount of the Note from the date of
prepayment to the stated  Maturity Date  (December 18, 2007) had such  Qualified
Transaction not occurred and such prepayment not been made.

         h) REGISTRATION  RIGHTS.  If the Company shall determine to prepare and
file  with  the  Securities  and  Exchange   Commission  (the   "Commission")  a
registration statement (a "Registration  Statement") relating to an offering for
its own account or the account of others under the  Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated under
the Securities Act), or their then equivalents, relating to equity securities to
be issued solely in connection with any acquisition of any entity or business or
equity  securities  issuable in connection  with stock option or other  employee
benefit  plans,  then the Company  shall send to the Holder a written  notice of
such  determination  and, if within ten days after the date of such notice,  the
Holder  shall  so  request  in  writing,  the  Company  shall  include  in  such
registration  statement all or any part of the Conversion Shares and the Closing
Shares  (together,  the  "Registrable  Securities") as the Holder requests to be
registered so long as such Registrable Securities are proposed to be disposed in
the same manner as those set forth in the  Registration  Statement.  The Company
shall use its best  efforts to cause any  Registration  Statement to be declared
effective by the Commission as promptly as is possible  following it being filed
with the Commission and to remain effective until all Conversion  Shares subject
thereto have been sold. All fees and expenses  incident to the performance of or
compliance  with this Section 2(h) by the Company  shall be borne by the Company
whether or not any Registrable  Securities are sold pursuant to the Registration
Statement.  The Company shall,  notwithstanding  any full or partial exercise of
this Note or repayment  hereof,  indemnify  and hold  harmless  the Holder,  the
officers, directors, members, partners, agents, brokers, investment advisors and
employees  of each of them,  each  person who  controls  the Holder  (within the
meaning of Section 15 of the  Securities Act or Section 20 of the Exchange Act),
and  the  officers,  directors,  members,  shareholders,  partners,  agents  and
employees of each such controlling person, to the fullest extent permitted by

                                        6


<PAGE>

applicable  law,  from  and  against  any  and  all  losses,  claims,   damages,
liabilities, costs (including,  without limitation,  reasonable attorneys' fees)
and expenses (collectively,  "Losses"), as incurred,  arising out of or relating
to (1) any untrue or alleged  untrue  statement of a material fact  contained in
the  Registration  Statement,  any  prospectus  included  therein or any form of
prospectus  or in any  amendment  or  supplement  thereto or in any  preliminary
prospectus, or arising out of or relating to any omission or alleged omission of
a  material  fact  required  to be  stated  therein  or  necessary  to make  the
statements  therein  (in the case of any  prospectus  or form of  prospectus  or
supplement  thereto,  in light of the circumstances  under which they were made)
not  misleading or (2) any violation or alleged  violation by the Company of the
Securities  Act, the Exchange  Act or any state  securities  law, or any rule or
regulation  thereunder,  in connection  with the  performance of its obligations
under this Section 2(h), except to the extent, but only to the extent, that such
untrue  statements  or omissions  referred to in (1) above are based solely upon
information  regarding  the Holder  furnished  in writing to the  Company by the
Holder  expressly  for use therein.  The rights of the Holder under this Section
2(h) shall  survive any full or partial  conversion  or  prepayment of this Note
until  all  Registrable   Securities  have  been  either   registered   under  a
Registration Statement or been sold pursuant to an exemption to the registration
requirements of the Securities Act.  Notwithstanding anything else herein to the
contrary,  if the representative of the underwriter in any underwritten offering
advises the Company in writing that  marketing  factors  require a limitation on
the number of shares  included  in the  registration  statement  related to such
offering,  the number of shares included in such registration statement shall be
allocated,  first,  to the shares to be sold on a primary  basis by the Company,
second,  to the  Registrable  Securities,  and third,  to the shares held by all
other security holders.

         SECTION 3. REGISTRATION OF TRANSFERS AND EXCHANGES.

         a)  DIFFERENT  DENOMINATIONS.  This Note is  exchangeable  for an equal
aggregate principal amount of Notes of different  authorized  denominations,  as
requested by the Holder  surrendering  the same. No service  charge will be made
for such registration of transfer or exchange.

         b)  SECURITIES  LAWS  COMPLIANCE.  This  Note  may  be  transferred  or
exchanged only in compliance with applicable  federal and state  securities laws
and regulations.

         c) RELIANCE ON NOTE REGISTER.  Prior to due  presentment to the Company
for  transfer  of this Note,  the Company and any agent of the Company may treat
the Person in whose name this Note is duly  registered  on the Note  Register as
the owner hereof for the purpose of receiving payment as herein provided and for
all other purposes, whether or not this Note is overdue, and neither the Company
nor any such agent shall be affected by notice to the contrary.

         SECTION 4. CONVERSION.

         a)  VOLUNTARY  CONVERSION.  At any time after the  Original  Issue Date
until this Note is no longer  outstanding,  this Note shall be convertible  into

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<PAGE>

shares of Common  Stock at the option of the Holder,  in whole or in part at any
time and from time to time (subject to the  limitations  on conversion set forth
in Section 4(c) hereof).  The Holder shall effect  conversions  by delivering to
the  Company  the form of Notice  of  Conversion  attached  hereto as Annex A (a
"NOTICE OF CONVERSION"), specifying therein the principal amount of this Note to
be  converted  and the  date on  which  such  conversion  is to be  effected  (a
"CONVERSION  DATE").  If  no  Conversion  Date  is  specified  in  a  Notice  of
Conversion, the Conversion Date shall be the date that such Notice of Conversion
is provided hereunder. To effect conversions hereunder,  the Holder shall not be
required to  physically  surrender  this Note to the  Company  unless the entire
principal  amount of this Note plus all accrued and unpaid interest  thereon has
been so converted.  Conversions  hereunder shall have the effect of lowering the
outstanding  principal  amount of this Note in an amount equal to the applicable
conversion.  The Holder and the  Company  shall  maintain  records  showing  the
principal amount converted and the date of such  conversions.  The Company shall
deliver  any  objection  to any Notice of  Conversion  within 1 Business  Day of
receipt of such notice. In the event of any dispute or discrepancy,  the records
of the Holder shall be controlling and  determinative in the absence of manifest
error. The Holder and any assignee, by acceptance of this Note,  acknowledge and
agree that, by reason of the provisions of this paragraph,  following conversion
of a portion of this Note, the unpaid and unconverted  principal  amount of this
Note may be less than the amount stated on the face hereof.

         b) CONVERSION  PRICE.  The conversion price in effect on any Conversion
Date shall be equal to $0.58,  subject to  adjustment  herein  (the  "CONVERSION
PRICE").

         c) CONVERSION LIMITATIONS.  The Company shall not effect any conversion
of this Note,  and the Holder shall not have the right to convert any portion of
this Note,  pursuant  to Section  4(a) or  otherwise,  to the extent  that after
giving  effect  to such  conversion,  the  Holder  (together  with the  Holder's
affiliates),  would  beneficially own in excess of 4.99% of the number of shares
of the  Common  Stock  outstanding  immediately  after  giving  effect  to  such
conversion.  For  purposes of the  foregoing  sentence,  the 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 with
respect to 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 the 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 4(c),  beneficial
ownership  shall be calculated in accordance  with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder. To the extent that the
limitation  contained in this section applies, the determination of whether this
Note is convertible (in relation to other securities owned by the Holder) and of
which a portion of this Note is convertible  shall be in the sole  discretion of
such Holder. To ensure compliance with this restriction, the Holder will be

                                        8



<PAGE>

deemed to  represent to the Company  upon  delivery of the Notice of  Conversion
that such Notice of Conversion  has not violated the  restrictions  set forth in
this paragraph and the Company shall have no obligation to verify or confirm the
accuracy of such  determination.  In addition,  a determination  as to any group
status as  contemplated  above shall be determined  in  accordance  with Section
13(d) of the Exchange Act and the rules and regulations  promulgated thereunder.
For purposes of this Section  4(c),  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-Q,  Form
10-QSB,  Form 10-K or Form 10-KSB,  as the case may be, (y) a more recent public
announcement  by the  Company  or (z) any  other  notice by the  Company  or the
Company's  Transfer  Agent  setting  forth the number of shares of Common  Stock
outstanding.  Upon the written or oral request of the Holder,  the Company shall
within two Trading 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.  The provisions of this Section
4(c) may be waived by the Holder,  at the election of the Holder,  upon not less
than 61 days' prior notice to the Company,  and the  provisions  of this Section
4(c)  shall  continue  to apply  until  such 61st day (or such  later  date,  as
determined  by the Holder,  as may be specified  in such notice of waiver).  The
provisions of this paragraph shall be implemented in a manner  otherwise than in
strict  conformity with the terms of this Section 4(c) to correct this paragraph
(or any portion hereof) which may be defective or inconsistent with the intended
4.99%  beneficial  ownership  limitation  herein contained or to make changes or
supplements  necessary  or  desirable  to  properly  give  effect to such  4.99%
limitation.  The  limitations  contained  in this  paragraph  shall  apply  to a
successor  holder of this Note. The holders of Common Stock of the Company shall
be third party  beneficiaries of this Section 4(c) and the Company may not waive
this  Section  4(c)  without  the consent of holders of a majority of its Common
Stock.

         d) MECHANICS OF CONVERSION

                  i.  CONVERSION  SHARES  ISSUABLE UPON  CONVERSION OF PRINCIPAL
         AMOUNT. The number of shares of Common Stock issuable upon a conversion
         hereunder shall be determined by the quotient  obtained by dividing (x)
         the outstanding  principal  amount of this Note and accrued interest to
         be converted by (y) the Conversion Price.

                  ii. DELIVERY OF CERTIFICATE  UPON  CONVERSION.  Not later than
         five Trading Days after the  Conversion  Date, the Company will deliver
         or cause to be delivered to the Holder a  certificate  or  certificates
         representing  the Conversion  Shares which shall be free of restrictive
         legends and  trading  restrictions  (other than those  required by law)
         representing  the number of shares of Common Stock being  acquired upon
         the  conversion  of such portion of this Note.  The Company  shall,  if
         available and if allowed under applicable securities laws, use its best
         efforts to deliver any certificate or certificates required to be

                                        9


<PAGE>

         delivered by the Company under this Section  electronically through the
         Depository   Trust   Corporation   or  another   established   clearing
         corporation performing similar functions.

                  iii.  FAILURE TO DELIVER  CERTIFICATES.  If in the case of any
         Notice of Conversion such certificate or certificates are not delivered
         to or as  directed  by the  Holder by the third  Trading  Day after the
         Conversion  Date, the Holder shall be entitled by written notice to the
         Company at any time on or before its  receipt  of such  certificate  or
         certificates thereafter, to rescind such conversion, in which event the
         Company shall  immediately  return the  certificates  representing  the
         principal amount of this Note tendered for conversion.

                  iv. OBLIGATION  ABSOLUTE;  PARTIAL LIQUIDATED  DAMAGES. If the
         Company fails for any reason to deliver to the Holder such  certificate
         or certificates  pursuant to Section  4(d)(ii) by the fifth Trading Day
         after the  Conversion  Date,  the Company shall pay to such Holder,  in
         cash,  as liquidated  damages and not as a penalty,  for each $1,000 of
         principal amount being converted,  $10 per Trading Day for each Trading
         Day after such fifth Trading Day until such certificates are delivered.
         The Company's  obligations to issue and deliver the  Conversion  Shares
         upon  conversion of this Note in  accordance  with the terms hereof are
         absolute and  unconditional,  irrespective of any action or inaction by
         the Holder to enforce the same,  any waiver or consent  with respect to
         any provision  hereof,  the recovery of any judgment against any Person
         or any  action  to  enforce  the  same,  or any  setoff,  counterclaim,
         recoupment,  limitation or termination, or any breach or alleged breach
         by the Holder or any other Person of any  obligation  to the Company or
         any  violation  or alleged  violation of law by the Holder or any other
         person,   and  irrespective  of  any  other  circumstance  which  might
         otherwise  limit  such  obligation  of the  Company  to the  Holder  in
         connection  with the  issuance  of such  Conversion  Shares;  PROVIDED,
         HOWEVER,  such delivery shall not operate as a waiver by the Company of
         any such action the Company may have  against the Holder.  In the event
         the Holder of this Note  shall  elect to  convert  any  portion of this
         note, the Company may not refuse conversion based on any claim that the
         Holder or any one  associated  or  affiliated  with the Holder has been
         engaged in any  violation of law,  agreement  or for any other  reason,
         unless,  an  injunction  from a court,  on notice,  restraining  and or
         enjoining conversion of all or part of this Note shall have been sought
         and obtained and the Company posts a surety bond for the benefit of the
         Holder  in the  amount  of 150% of the  principal  amount  of this Note
         outstanding,  which bond shall remain in effect until the completion of
         arbitration/litigation  of the dispute and the  proceeds of which shall
         be payable to such  Holder to the  extent it obtains  judgment.  In the
         absence of an injunction  precluding  the same, the Company shall issue
         Conversion  Shares or, if  applicable,  cash,  upon a properly  noticed
         conversion.  Nothing  herein  shall  limit a  Holder's  right to pursue
         actual  damages or declare  an Event of Default  pursuant  to Section 7
         herein for the Company's  failure to deliver  Conversion  Shares within
         the period specified herein and such Holder shall have the right to

                                       10


<PAGE>

         pursue  all  remedies  available  to it at law or in equity  including,
         without limitation,  a decree of specific performance and/or injunctive
         relief.  The  exercise of any such rights shall not prohibit the Holder
         from seeking to enforce damages pursuant to any other Section hereof or
         under applicable law.

                  v.  COMPENSATION  FOR  BUY-IN ON  FAILURE  TO  TIMELY  DELIVER
         CERTIFICATES UPON CONVERSION. In addition to any other rights available
         to the Holder,  if the  Company  fails for any reason to deliver to the
         Holder such certificate or certificates pursuant to Section 4(d)(ii) on
         dates set forth therein, and if the Holder is required by its brokerage
         firm to purchase (in an open market  transaction  or otherwise)  Common
         Stock  to  deliver  in  satisfaction  of a sale by such  Holder  of the
         Conversion  Shares  which the Holder  anticipated  receiving  upon such
         conversion (a "BUY-IN"),  then the Company shall (A) pay in cash to the
         Holder (in  addition  to any  remedies  available  to or elected by the
         Holder)  the  amount by which (x) the  Holder's  total  purchase  price
         (including  brokerage  commissions,  if any)  for the  Common  Stock so
         purchased exceeds (y) the product of (1) the aggregate number of shares
         of  Common  Stock  that  such  Holder  anticipated  receiving  from the
         conversion  on  multiplied  by (2) the actual  sale price of the Common
         Stock at the time of the sale (including brokerage commissions, if any)
         giving rise to such  purchase  obligation  and (B) at the option of the
         Holder, either reissue (if surrendered) this Note in a principal amount
         equal to the principal amount of the attempted conversion or deliver to
         the Holder  the  number of shares of Common  Stock that would have been
         issued had the Company timely  complied with its delivery  requirements
         under Section  4(d)(ii).  For example,  if the Holder  purchases Common
         Stock having a total  purchase  price of $11,000 to cover a Buy-In with
         respect to an attempted  conversion  of this Note with respect to which
         the actual sale price of the Conversion  Shares at the time of the sale
         (including brokerage commissions,  if any) giving rise to such purchase
         obligation  was a total of $10,000 under clause (A) of the  immediately
         preceding  sentence,  the  Company  shall be required to pay the Holder
         $1,000.  The Holder shall provide the Company written notice indicating
         the   amounts   payable  to  the  Holder  in  respect  of  the  Buy-In.
         Notwithstanding  anything contained herein to the contrary, if a Holder
         requires  the  Company  to make  payment in respect of a Buy-In for the
         failure to timely deliver certificates hereunder and the Company timely
         pays in full such  payment,  the  Company  shall not be required to pay
         such Holder liquidated damages under Section 4(d)(iv) in respect of the
         certificates resulting in such Buy-In.

                  vi.  RESERVATION  OF  SHARES  ISSUABLE  UPON  CONVERSION.  The
         Company  covenants that it will at all times reserve and keep available
         out of its  authorized  and unissued  shares of Common Stock solely for
         the purpose of  issuance  upon  conversion  of this Note and payment of
         interest on this Note,  each as herein  provided,  free from preemptive
         rights or any other actual contingent  purchase rights of persons other
         than the Holder  (and the other  holders of the  Notes),  not less than
         such number of shares of the Common Stock as shall be issuable (taking

                                       11


<PAGE>

         into account the  adjustments  and  restrictions of Section 5) upon the
         conversion of the outstanding principal amount of this Note and accrued
         interest  hereunder.  The Company  covenants  that all shares of Common
         Stock that shall be so issuable shall,  upon issue, be duly and validly
         authorized, issued and fully paid, nonassessable.

                  vii.  FRACTIONAL  SHARES.  Upon  a  conversion  hereunder  the
         Company shall not be required to issue stock certificates  representing
         fractions  of  shares  of  the  Common  Stock,  but  may  if  otherwise
         permitted,  make a cash  payment in respect of any final  fraction of a
         share based on the VWAP at such time. If the Company  elects not, or is
         unable,  to make such a cash  payment,  the Holder shall be entitled to
         receive,  in lieu of the final fraction of a share,  one whole share of
         Common Stock.

                  viii.  TRANSFER TAXES. The issuance of certificates for shares
         of the Common  Stock on  conversion  of this Note shall be made without
         charge to the Holder hereof for any documentary  stamp or similar taxes
         that  may be  payable  in  respect  of the  issue or  delivery  of such
         certificate, provided that the Company shall not be required to pay any
         tax that may be  payable in respect  of any  transfer  involved  in the
         issuance and delivery of any such certificate upon conversion in a name
         other than that of the Holder of this Note so converted and the Company
         shall not be required to issue or deliver such  certificates  unless or
         until the person or persons  requesting the issuance thereof shall have
         paid to the Company the amount of such tax or shall have established to
         the satisfaction of the Company that such tax has been paid.

         SECTION 5. CERTAIN ADJUSTMENTS.

         a) STOCK DIVIDENDS AND STOCK SPLITS. If the Company,  at any time while
this  Note is  outstanding:  (A)  pays a stock  dividend  or  otherwise  makes a
distribution or  distributions on shares of its Common Stock or any other equity
or equity equivalent  securities  payable in shares of Common Stock (which,  for
avoidance  of doubt,  shall not include any shares of Common Stock issued by the
Company pursuant to this Note,  including as interest  thereon),  (B) subdivides
outstanding  shares of Common Stock into a larger number of shares, (C) combines
(including  by way of reverse  stock split)  outstanding  shares of Common Stock
into a smaller number of shares, or (D) issues by  reclassification of shares of
the Common Stock any shares of capital stock of the Company, then the Conversion
Price  shall be  multiplied  by a fraction of which the  numerator  shall be the
number of shares of Common Stock (excluding treasury shares, if any) outstanding
immediately  before such event and of which the denominator  shall be the number
of shares  of  Common  Stock  outstanding  immediately  after  such  event.  Any
adjustment  made  pursuant to this Section  shall become  effective  immediately
after the record date for the determination of stockholders  entitled to receive
such dividend or distribution and shall become effective  immediately  after the
effective date in the case of a subdivision, combination or re-classification.

                                       12



<PAGE>

         b) SUBSEQUENT  EQUITY SALES. If the Company or any Subsidiary  thereof,
as applicable,  at any time while this Note is outstanding,  shall offer,  sell,
grant any option to  purchase  or offer,  sell or grant any right to reprice its
securities, or otherwise dispose of or issue (or announce any offer, sale, grant
or any option to purchase or other disposition) any Common Stock or Common Stock
Equivalents  entitling  any  Person to  acquire  shares of Common  Stock,  at an
effective price per share less than the then Conversion Price (such lower price,
the  "BASE  CONVERSION  PRICE"  and such  issuances  collectively,  a  "DILUTIVE
ISSUANCE"),  as adjusted  hereunder (if the holder of the Common Stock or Common
Stock Equivalents so issued shall at any time,  whether by operation of purchase
price adjustments, reset provisions,  floating conversion,  exercise or exchange
prices or  otherwise,  or due to warrants,  options or rights per share which is
issued in connection with such issuance, be entitled to receive shares of Common
Stock at an effective  price per share which is less than the Conversion  Price,
such  issuance  shall be deemed to have  occurred  for less than the  Conversion
Price on such date of the Dilutive Issuance), then the Conversion Price shall be
reduced  to equal  the Base  Conversion  Price.  Such  adjustment  shall be made
whenever   such  Common   Stock  or  Common   Stock   Equivalents   are  issued.
Notwithstanding  the  foregoing,  no adjustment  will be made under this Section
5(b) in respect of an Exempt  Issuance.  The Company  shall notify the Holder in
writing,  no later than the  Business Day  following  the issuance of any Common
Stock or Common Stock Equivalents  subject to this section,  indicating  therein
the applicable  issuance  price, or of applicable  reset price,  exchange price,
conversion  price and other pricing  terms (such notice the  "DILUTIVE  ISSUANCE
NOTICE").  For purposes of clarification,  whether or not the Company provides a
Dilutive  Issuance  Notice pursuant to this Section 5(b), upon the occurrence of
any Dilutive  Issuance,  after the date of such Dilutive  Issuance the Holder is
entitled to receive a number of Conversion Shares based upon the Base Conversion
Price regardless of whether the Holder  accurately refers to the Base Conversion
Price in the Notice of Conversion.

         c) PRO RATA DISTRIBUTIONS.  If the Company, at any time while this Note
is outstanding,  shall distribute to all holders of Common Stock (and not to the
holders of the Note) evidences of its indebtedness or assets (including cash and
cash dividends) or rights or warrants to subscribe for or purchase any security,
then in each such case the  Conversion  Price shall be  adjusted by  multiplying
such Conversion Price in effect  immediately  prior to the record date fixed for
determination  of  stockholders  entitled  to  receive  such  distribution  by a
fraction of which the denominator  shall be the VWAP determined as of the record
date  mentioned  above,  and of which the  numerator  shall be such VWAP on such
record date less the then fair  market  value at such record date of the portion
of such assets or evidence of  indebtedness  so  distributed  applicable  to one
outstanding share of the Common Stock as determined by the Board of Directors in
good faith.  In either case the  adjustments  shall be  described in a statement
provided to the Holder of the portion of assets or evidences of  indebtedness so
distributed or such subscription rights applicable to one share of Common Stock.
Such adjustment  shall be made whenever any such  distribution is made and shall
become effective immediately after the record date mentioned above.

                                       13


<PAGE>

         d)  FUNDAMENTAL  TRANSACTION.  If,  at any  time  while  this  Note  is
outstanding,  (A) the Company effects any merger or consolidation of the Company
with  or into  another  Person,  (B)  the  Company  effects  any  sale of all or
substantially all of its assets in one or a series of related transactions,  (C)
any tender offer or exchange offer (whether by the Company or another Person) is
completed  pursuant to which  holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property, or (D) the Company
effects  any  reclassification  of the  Common  Stock  or any  compulsory  share
exchange  pursuant to which the Common Stock is  effectively  converted  into or
exchanged  for  other  securities,  cash  or  property  (in  any  such  case,  a
"FUNDAMENTAL  TRANSACTION"),  then upon any subsequent  conversion of this Note,
the Holder shall have the right to receive, for each Conversion Share that would
have been issuable upon such conversion  immediately  prior to the occurrence of
such Fundamental  Transaction,  the same kind and amount of securities,  cash or
property as it would have been  entitled to receive upon the  occurrence of such
Fundamental  Transaction if it had been,  immediately  prior to such Fundamental
Transaction,   the  holder  of  one  share  of  Common  Stock  (the   "ALTERNATE
CONSIDERATION").  For purposes of any such conversion,  the determination of the
Conversion  Price shall be  appropriately  adjusted  to apply to such  Alternate
Consideration based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such  Fundamental  Transaction,  and the Company
shall  apportion the  Conversion  Price among the Alternate  Consideration  in a
reasonable manner  reflecting the relative value of any different  components of
the Alternate Consideration.  If holders of Common Stock are given any choice as
to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it  receives  upon  any  conversion  of this  Note  following  such  Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any
successor to the Company or  surviving  entity in such  Fundamental  Transaction
shall issue to the Holder a new Note  consistent  with the foregoing  provisions
and   evidencing  the  Holder's  right  to  convert  such  Note  into  Alternate
Consideration.  The  terms of any  agreement  pursuant  to  which a  Fundamental
Transaction  is effected  shall  include terms  requiring any such  successor or
surviving  entity  to  comply  with the  provisions  of this  paragraph  (d) and
insuring  that this Note (or any such  replacement  security)  will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

         e) CALCULATIONS. All calculations under this Section 5 shall be made to
the  nearest  cent or the  nearest  1/100th of a share,  as the case may be. For
purposes of this  Section 5, the number of shares of Common  Stock  deemed to be
issued  and  outstanding  as of a given  date  shall be the sum of the number of
shares  of  Common  Stock  (excluding   treasury  shares,  if  any)  issued  and
outstanding.

         f) NOTICE TO THE HOLDER.

                  i.  ADJUSTMENT TO CONVERSION  PRICE.  Whenever the  Conversion
         Price is adjusted  pursuant to any of this Section 5, the Company shall

                                       14

<PAGE>

         promptly  mail to each  Holder a notice  setting  forth the  Conversion
         Price after such  adjustment and setting forth a brief statement of the
         facts requiring such adjustment.

                  ii.  NOTICES TO HOLDER.  If (A) the  Company  shall  declare a
         dividend  (or any other  distribution)  on the  Common  Stock;  (B) the
         Company  shall  declare a special  nonrecurring  cash  dividend on or a
         redemption  of the Common Stock;  (C) the Company  shall  authorize the
         granting  to all  holders of the Common  Stock  rights or  warrants  to
         subscribe  for or purchase any shares of capital  stock of any class or
         of any  rights;  (D) the  approval of any  stockholders  of the Company
         shall be required in connection with any reclassification of the Common
         Stock, any consolidation or merger to which the Company is a party, any
         sale or  transfer  of all or  substantially  all of the  assets  of the
         Company,  of any compulsory  share exchange whereby the Common Stock is
         converted  into other  securities,  cash or  property;  (E) the Company
         shall authorize the voluntary or involuntary  dissolution,  liquidation
         or winding up of the affairs of the Company;  then,  in each case,  the
         Company shall cause to be filed at each office or agency maintained for
         the purpose of conversion of this Note, and shall cause to be mailed to
         the  Holder at its last  addresses  as it shall  appear  upon the stock
         books of the Company, at least 20 calendar days prior to the applicable
         record or effective date  hereinafter  specified,  a notice stating (x)
         the date on  which a record  is to be  taken  for the  purpose  of such
         dividend, distribution,  redemption, rights or warrants, or if a record
         is not to be taken,  the date as of which  the  holders  of the  Common
         Stock  of  record  to be  entitled  to  such  dividend,  distributions,
         redemption,  rights or warrants are to be determined or (y) the date on
         which such reclassification,  consolidation,  merger, sale, transfer or
         share exchange is expected to become  effective or close,  and the date
         as of which it is expected  that  holders of the Common Stock of record
         shall be  entitled  to exchange  their  shares of the Common  Stock for
         securities,    cash   or   other   property   deliverable   upon   such
         reclassification,   consolidation,  merger,  sale,  transfer  or  share
         exchange;  PROVIDED, that the failure to mail such notice or any defect
         therein or in the mailing  thereof shall not affect the validity of the
         corporate action required to be specified in such notice. The Holder is
         entitled to convert this Note during the 20-day period  commencing  the
         date of such notice to the effective date of the event  triggering such
         notice.

         SECTION  6.  COVENANTS.  As long as any  portion  of this Note  remains
outstanding, the Company agrees as follows:

         a) other than  Permitted  Liens and liens in favor of the  Holder,  the
Company and its  subsidiaries  shall not enter into,  create,  incur,  assume or
suffer  to  exist  any  liens,  security  interests,  charges,  claims  or other
encumbrances of any kind (collectively,  "Liens"),  on or with respect to any of
its or its Subsidiaries'  property or assets now owned or hereafter  acquired or
any interest therein or any income or profits therefrom;

                                       15


<PAGE>

         b) the Company shall not amend its charter documents, including without
limitation,  its  certificate of  incorporation  and bylaws,  in any manner that
adversely affects any rights of the Holder;

         c) the Company shall not, and shall not permit any Subsidiary to, enter
into,  create,  incur,  assume or suffer to exist any Indebtedness,  unless such
Indebtedness is expressly subordinate to this Note as to payment and security;

         d) the Company shall comply with its obligations  under the Warrant and
the other Transaction Documents;

         e) the Company  shall  comply with law and duly  observe and conform in
all material  respects to all valid  requirements  of  governmental  authorities
relating to the conduct of its business or to its properties or assets;

         f) the  Company  shall not,  and shall not permit  any  Subsidiary  to,
engage in any transactions with any officer, director, employee or any affiliate
of the Company, including any contract, agreement or other arrangement providing
for the  furnishing  of  services  to or by,  providing  for  rental  of real or
personal  property to or from,  or otherwise  requiring  payments to or from any
officer,  director or such  employee or, to the  knowledge  of the Company,  any
entity in which any officer,  director,  or any such  employee has a substantial
interest or is an officer,  director, trustee or partner, in each case in excess
of $50,000 other than (i) for payment of salary or consulting  fees for services
rendered and (ii) reimbursement for expenses incurred on behalf of the Company;

         g) the Company shall not, and shall not permit any  Subsidiary  to, (i)
declare or pay any  dividends  or make any  distributions  to any  holder(s)  of
Common Stock or other equity securities of the Company (other than distributions
to the Company from the  Subsidiaries),  (ii) purchase or otherwise  acquire for
value, directly or indirectly,  any Common Stock or other equity security of the
Company, (iii) form any subsidiary, or (iii) transfer,  assign, pledge, issue or
otherwise permit any equity or other ownership  interests in the Subsidiaries to
be  beneficially  owned or held by any person other than the Company (other than
the pledge evidenced by the Security Agreement);  provided,  however, nothing in
this Section 6(g) shall be deemed to prohibit the formation of any  wholly-owned
subsidiary in connection with the merger of that subsidiary with and into either
of Advance Roofing  Solutions,  Inc.,  International  Association of Management,
Inc. or the Entities (as defined in the  Company's  Annual Report on Form 10-KSB
for the year ended December 31, 2006) (collectively, the "Anticipated Mergers"),
to the extent any such subsidiary becomes a Guarantor;

         h) the Company shall not, and shall not permit any  Subsidiary  to, (i)
merge or  consolidate  or sell or dispose  of all its assets or any  substantial
portion thereof or (ii) in any way or manner alter its organizational structure

                                       16

<PAGE>

or change of entity;  provided,  however,  nothing in this Section 6(h) shall be
deemed to prohibit the consummation of the Anticipated  Mergers if the survivors
of such mergers become Guarantors;

         i) the Company shall,  and shall cause each Subsidiary to, promptly pay
and discharge,  or cause to be paid and  discharged,  when due and payable,  all
lawful taxes,  assessments and  governmental  charges or levies imposed upon the
income, profits,  property or business of the Company;  provided,  however, that
any such  tax,  assessment,  charge  or levy  need  not be paid if the  validity
thereof shall  currently be contested in good faith by  appropriate  proceedings
and if the  Company  shall have set aside on its books  adequate  reserves  with
respect  thereto,  and  provided,  further,  that the Company  will pay all such
taxes,  assessments,  charges  or  levies  forthwith  upon the  commencement  of
proceedings to foreclose any lien which may have attached as security therefore;

         j) the Company  shall  maintain in full force and effect its  corporate
existence,  rights  and  franchises  and all  licenses  and other  rights to use
property owned or possessed by it and  reasonably  deemed to be necessary to the
conduct of its business;

         k) the Company shall advise the Holder,  within twenty-four hours after
it  receives  notice  of  issuance  by  the  Commission,  any  state  securities
commission or any other  regulatory  authority of any stop order or of any order
preventing or suspending  any offering of any  securities of the Company,  or of
the suspension of the  qualification of the Common Stock for offering or sale in
any jurisdiction, or the initiation of any proceeding for any such purpose;

         l) the Company shall conduct its businesses in a manner so that it will
not become subject to the Investment Company Act of 1940, as amended; and

         m) the Company will keep its  properties in good repair,  working order
and condition, reasonable wear and tear excepted, and from time to time make all
necessary and proper repairs, renewals, replacements, additions and improvements
thereto;  and the  Company  will at all  times  comply  with each  provision  of
allleases  to which it is a party or under  which it  occupies  property  if the
breach of such provision could reasonably be expected to have a Material Adverse
Effect.

         SECTION 7 EVENTS OF DEFAULT.

         a) "EVENT  OF  DEFAULT",  wherever  used  herein,  means any one of the
following  events  (whatever  the reason and  whether it shall be  voluntary  or
involuntary or effected by operation of law or pursuant to any judgment,  decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):

                  i. any default in the payment of (A) the  principal  amount of
         any Note,  or (B)  interest  (including  Late  Fees) on, or  liquidated
         damages in respect of, any Note,  as and when the same shall become due
         and payable  (whether on a Conversion  Date or the Maturity  Date or by
         acceleration or otherwise);

                                       17

<PAGE>

                  ii. the  Company  shall  fail to observe or perform  any other
         covenant or  agreement  contained  in this Note (other than a breach by
         the Company of its obligations to deliver shares of Common Stock to the
         Holder upon conversion  which breach is addressed in clause (ix) below)
         which failure is not cured, if possible to cure, within 5 Business Days
         after notice of such default sent by the Holder or by any other Holder;

                  iii. a default or event of  default  (subject  to any grace or
         cure  period  provided  for in the  applicable  agreement,  document or
         instrument) shall occur under (A) any of the Transaction Documents,  or
         (B) any other  material  agreement,  lease,  document or  instrument to
         which the  Company or any  Subsidiary  is bound,  which  failure is not
         cured, if possible to cure, within 5 Business Days after notice of such
         default sent by the Holder or by any other Holder;

                  iv. any  representation  or warranty made herein, in any other
         Transaction  Documents,  in any written  statement  pursuant  hereto or
         thereto,  or in any other report,  financial  statement or  certificate
         made or  delivered  to the Holder or any other holder of Notes shall be
         untrue or incorrect in any material respect as of the date when made or
         deemed made;

                  v. (i) the Company or any of its Subsidiaries shall commence a
         case, as debtor, under any applicable  bankruptcy or insolvency laws as
         now or hereafter in effect or any successor thereto,  or the Company or
         any Subsidiary commences any other proceeding under any reorganization,
         arrangement,  adjustment  of  debt,  relief  of  debtors,  dissolution,
         insolvency or  liquidation or similar law of any  jurisdiction  whether
         now or  hereafter in effect  relating to the Company or any  Subsidiary
         thereof or (ii) there is  commenced  a case  against the Company or any
         Subsidiary thereof, under any applicable bankruptcy or insolvency laws,
         as now or hereafter in effect or any  successor  thereto  which remains
         undismissed  for a period  of 60  days;  or (iii)  the  Company  or any
         Subsidiary thereof is adjudicated by a court of competent  jurisdiction
         insolvent or bankrupt;  or any order of relief or other order approving
         any such case or  proceeding  is  entered;  or (iv) the  Company or any
         Subsidiary thereof suffers any appointment of any custodian or the like
         for  it or  any  substantial  part  of  its  property  which  continues
         undischarged or unstayed for a period of 60 days; or (v) the Company or
         any  Subsidiary  thereof makes a general  assignment for the benefit of
         creditors;  or (vi) the Company  shall fail to pay, or shall state that
         it is unable to pay, or shall be unable to pay, its debts  generally as
         they become due; or (vii) the Company or any  Subsidiary  thereof shall
         call a meeting of its creditors with a view to arranging a composition,
         adjustment or  restructuring of its debts; or (viii) the Company or any
         Subsidiary  thereof  shall  by any  act  or  failure  to act  expressly
         indicate  its consent to,  approval  of or  acquiescence  in any of the
         foregoing; or (ix) any corporate or other action is taken by the

                                       18
<PAGE>

         Company or any  Subsidiary  thereof for the purpose of effecting any of
         the foregoing;

                  vi. the Company or any Subsidiary  shall default in any of its
         obligations  under any mortgage,  credit  agreement or other  facility,
         indenture  agreement,  factoring  agreement or other  instrument  under
         which  there  may be  issued,  or by  which  there  may be  secured  or
         evidenced any  indebtedness  for borrowed  money or money due under any
         long term leasing or factoring  arrangement of the Company in an amount
         exceeding  $100,000,  whether  such  indebtedness  now  exists or shall
         hereafter be created and such default shall result in such indebtedness
         becoming or being  declared due and payable  prior to the date on which
         it would otherwise become due and payable;

                  vii.  The  Company  shall  not  comply  with  the  listing  or
         quotation  requirements of the Trading  Market,  the Company shall have
         received  notification  from the Trading Market that it does not comply
         with the listing or quotation requirements of the Trading Market or the
         Common Stock shall not be eligible for quotation on or, for any reason,
         including by order of the Commission or the Trading Market,  quoted for
         trading  on a Trading  Market and shall not again be  eligible  for and
         quoted or listed for trading thereon within three Trading Days;

                  viii.  The  Company  shall be a party to any Change of Control
         Transaction or Fundamental Transaction,  shall agree to sell or dispose
         of all or in  excess of 33% of its  assets in one or more  transactions
         (whether  or not  such  sale  would  constitute  a  Change  of  Control
         Transaction)  or shall  redeem or  repurchase  more  than a de  minimis
         number  of its  outstanding  shares  of  Common  Stock or other  equity
         securities of the Company (other than redemptions of Conversion  Shares
         and repurchases of shares of Common Stock or other equity securities of
         departing  officers  and  directors  of  the  Company;   provided  such
         repurchases  shall  not  exceed  $50,000,  in the  aggregate,  for  all
         officers and directors during the term of this Note);

                  ix.  the  Company   shall  fail  for  any  reason  to  deliver
         certificates  to a  Holder  prior  to the  fifth  Trading  Day  after a
         Conversion  Date pursuant to and in accordance with Section 4(d) or the
         Company shall provide notice to the Holder,  including by way of public
         announcement, at any time, of its intention not to comply with requests
         for conversions of any Notes in accordance with the terms hereof; or

                  x. any monetary judgment,  writ or similar final process shall
         be entered or filed against the Company or any of its property or other
         assets for than  $100,000,  and shall  remain  unvacated,  unbonded  or
         unstayed for a period of 45 calendar days; or


                                       19

<PAGE>
         b) REMEDIES UPON EVENT OF DEFAULT.  If any Event of Default occurs, the
full  principal  amount of this Note,  together  with interest and other amounts
owing in respect  thereof,  to the date of  acceleration  shall  become,  at the
Holder's  election,  immediately  due and  payable in cash.  The Holder need not
provide and the Company hereby waives any presentment,  demand, protest or other
notice of any kind, and the Holder may immediately and without expiration of any
grace period  enforce any and all of its rights and remedies  hereunder  and all
other remedies  available to it under  applicable  law. Such  declaration may be
rescinded and annulled by Holder at any time prior to payment  hereunder and the
Holder  shall have all rights as a Note holder  until such time,  if any, as the
full  payment  under  this  Section  shall  have  been  received  by it. No such
rescission or annulment  shall affect any subsequent  Event of Default or impair
any right consequent thereon.




























                                       20



<PAGE>

         SECTION  8.   REPRESENTATIONS   AND  WARRANTIES.   The  Company  hereby
represents and warrants to the Holder as follows:

                  a) Each of the Company and each of the  Subsidiaries  has been
         duly  organized  and  is  validly   existing  under  the  laws  of  its
         jurisdiction of organization  and has all requisite power and authority
         to execute, deliver and perform its obligations under this Note and all
         other  Transaction  Documents to which it is a party.  The Company does
         not directly or  indirectly  own or have any  investment in the capital
         stock of or any  proprietary  interest  in any  Person  other  than the
         Subsidiaries.  Each of this  Note and all other  Transaction  Documents
         have been duly  authorized,  executed and  delivered by the Company and
         each of the  Subsidiaries  that is a party thereto and  constitutes its
         legal,  valid  and  binding  obligation,   enforceable  against  it  in
         accordance with the terms hereof and thereof.  The execution,  delivery
         and  performance  by the Company and each of the  Subsidiaries  of this
         Note and all other Transaction  Documents to which each is a party, and
         the incurrence by them of their  respective  obligations  hereunder and
         thereunder,  do not  contravene or conflict with any law  applicable to
         the Company or any of the Subsidiaries or other  instrument  binding on
         or otherwise  affecting the Company or any of the  Subsidiaries or give
         rise to any lien,  security  interest  or other  charge or  encumbrance
         (other than in favor of the Holder)  upon any of the  Company's  or the
         Subsidiary's  properties.  No  consent or  approval  of or notice to or
         filing with any governmental  authority or other third party is or will
         be required as a condition  to the validity or  enforceability  of this
         Note or the other Transaction Documents, other than such consents which
         have been obtained and are in full force and effect.

                  b) The Company and the  Subsidiaries  have good and marketable
         title to their  assets  disclosed  in its most  recent SEC  Reports (as
         defined  below).  The  Company  and  each  of the  Subsidiaries  are in
         compliance  in all  material  respects  with all  laws  and  regulatory
         requirements  to which it or its properties are subject.  Except as set
         forth in the SEC Reports,  there is no litigation  pending,  or, to the
         knowledge of the Company,  threatened against the Company or any of the
         Subsidiaries  that  could  reasonably  be  expected  to have a material
         adverse  effect on the  financial  condition,  business,  properties or
         prospects  of the  Company  and its  subsidiaries,  taken as a whole (a
         "MATERIAL ADVERSE Effect").  The Company's  principal place of business
         is the address set forth at the beginning of this Note. The Company has
         paid all federal, foreign, state and local taxes required to be paid by
         it on or prior to the date they were due.  All  documents,  instruments
         and other written  material  heretofore  or hereafter  furnished to the
         Holder  pursuant to the terms of any  Transaction  Document  contain no
         misstatements  of a  material  fact  and do not  fail to  disclose  any
         material fact and the Company has not failed to disclose to the Holders
         any information that could result in a Material Adverse Effect.

                                       21

<PAGE>

                  c) The  Company  has  filed  all  reports,  schedules,  forms,
         statements  and other  documents  required  to be filed by it under the
         Securities  Act of 1933,  as amended (the  "SECURITIES  ACT"),  and the
         Securities  Exchange  Act of 1934,  as amended  (the  "EXCHANGE  ACT"),
         including pursuant to Section 13(a) or 15(d) thereof, for the two years
         preceding  the date hereof (or such  shorter  period as the Company was
         required by law or regulation  to file such  material)  (the  foregoing
         materials, including the exhibits thereto and documents incorporated by
         reference therein,  being  collectively  referred to herein as the "SEC
         Reports") on a timely  basis or has received a valid  extension of such
         time of  filing  and has  filed  any  such  SEC  Reports  prior  to the
         expiration of any such extension. As of their respective dates, the SEC
         Reports complied in all material  respects with the requirements of the
         Securities  Act and the Exchange Act and the rules and  regulations  of
         the Commission promulgated thereunder,  as applicable,  and none of the
         SEC Reports,  when filed,  contained any untrue statement of a material
         fact or omitted to state a material fact required to be stated  therein
         or necessary in order to make the statements  therein,  in the light of
         the  circumstances  under  which they were made,  not  misleading.  The
         financial  statements of the Company included in the SEC Reports comply
         in all material  respects with applicable  accounting  requirements and
         the rules and  regulations of the Commission with respect thereto as in
         effect  at the time of  filing.  Such  financial  statements  have been
         prepared in accordance with United States generally accepted accounting
         principles  applied on a consistent  basis during the periods  involved
         ("GAAP"),  except  as may be  otherwise  specified  in  such  financial
         statements  or the notes  thereto and except that  unaudited  financial
         statements  may not contain all footnotes  required by GAAP, and fairly
         present in all material respects the financial  position of the Company
         and its  consolidated  subsidiaries as of and for the dates thereof and
         the results of  operations  and cash flows for the periods  then ended,
         subject, in the case of unaudited  statements,  to normal,  immaterial,
         year-end audit adjustments.

                  d) Since the date of the latest audited  financial  statements
         included  within  the  SEC  Reports,  (i)  there  has  been  no  event,
         occurrence  or  development  that has had or that could  reasonably  be
         expected to result in a Material  Adverse Effect,  (ii) the Company has
         not incurred any liabilities  (contingent or otherwise)  other than (A)
         trade payables and accrued expenses  incurred in the ordinary course of
         business consistent with past practice and (B) liabilities not required
         to be reflected in the Company's financial  statements pursuant to GAAP
         or disclosed in filings made with the Commission, (iii) the Company has
         not altered its method of accounting, (iv) the Company has not declared
         or made any dividend or  distribution  of cash or other property to its
         stockholders or purchased,  redeemed or made any agreements to purchase
         or redeem any shares of its  capital  stock and (v) the Company has not
         issued any equity  securities  to any officer,  director or  affiliate,
         except pursuant to existing Company stock option plans.

                                       22

<PAGE>

                  e) The Company is in material  compliance  with all provisions
         of the  Sarbanes-Oxley Act of 2002 which are applicable to it as of the
         Closing  Date.  The Company and its  subsidiaries  maintain a system of
         internal accounting controls sufficient to provide reasonable assurance
         that (i)  transactions  are executed in  accordance  with  management's
         general or specific  authorizations,  (ii) transactions are recorded as
         necessary to permit  preparation of financial  statements in conformity
         with GAAP and to maintain asset accountability,  (iii) access to assets
         is permitted only in accordance with  management's  general or specific
         authorization,  and (iv) the  recorded  accountability  for  assets  is
         compared  with  the  existing   assets  at  reasonable   intervals  and
         appropriate  action  is taken  with  respect  to any  differences.  The
         Company has established  disclosure controls and procedures (as defined
         in Exchange  Act Rules  13a-15(e)  and  15d-15(e))  for the Company and
         designed  such  disclosure  controls  and  procedures  to  ensure  that
         information  required to be  disclosed by the Company in the reports it
         files  or  submits  under  the  Exchange  Act is  recorded,  processed,
         summarized  and  reported,  within the time  periods  specified  in the
         Commission's  rules and forms. The Company's  certifying  officers have
         evaluated the  effectiveness of the Company's  disclosure  controls and
         procedures as of the end of the period  covered by the  Company's  most
         recently  filed SEC Report  (such date,  the  "EVALUATION  DATE").  The
         Company presented in its most recently filed SEC Report the conclusions
         of the certifying  officers about the  effectiveness  of the disclosure
         controls and procedures based on their evaluations as of the Evaluation
         Date.  Since the  Evaluation  Date,  there  have been no changes in the
         Company's  internal  control over financial  reporting (as such term is
         defined  in the  Exchange  Act)  that has  materially  affected,  or is
         reasonably likely to materially  affect, the Company's internal control
         over financial reporting.

                  f) The  Company  is  not,  and is not  an  affiliate  of,  and
         immediately after the transactions  contemplated hereby, will not be or
         be an affiliate of, an "investment  company"  within the meaning of the
         Investment Company Act of 1940, as amended.

                  g) The Common Stock is registered pursuant to Section 12(g) of
         the Exchange  Act, and the Company has taken no action  designed to, or
         which to its knowledge is likely to have the effect of, terminating the
         registration  of the Common  Stock under the  Exchange  Act nor has the
         Company received any notification  that the Commission is contemplating
         terminating such registration.

                  h) The Company has not received notice of a default and is not
         in default under, or with respect to, any contractual  obligation,  nor
         does any  condition  exist  that  with  notice or lapse of time or both
         would constitute a default thereunder.

                  i)  There  are no  brokerage  commissions,  finder's  fees  or
         similar fees or commissions  payable by the Company in connection  with
         the  transactions   contemplated  hereby  based  on  any  agreement  or
         understanding with the Company or any action taken by any such Person.

                                       23

<PAGE>

                  j) The Closing  Shares are duly  authorized,  validly  issued,
         fully paid and  non-assessable  and were issued in compliance  with the
         registration  requirements of applicable  federal and state  securities
         laws, and are free and clear of all liens and encumbrances.


         SECTION 9. MISCELLANEOUS.

                  a)  NOTICES.  Any and all notices or other  communications  or
         deliveries to be provided by the Holder hereunder,  including,  without
         limitation, any Notice of Conversion, shall be in writing and delivered
         personally,  by facsimile,  sent by a nationally  recognized  overnight
         courier  service,  addressed to the  Company,  at the address set forth
         above,  facsimile  number (310)  393-2004,  ATTN: MARK J. RICHARDSON or
         such other  address or facsimile  number as the Company may specify for
         such purposes by notice to the Holder delivered in accordance with this
         Section.  Any and all notices or other  communications or deliveries to
         be provided by the Company  hereunder shall be in writing and delivered
         personally,  by facsimile,  sent by a nationally  recognized  overnight
         courier  service  addressed to each Holder at the  facsimile  telephone
         number or address of such Holder appearing on the books of the Company,
         or if no such facsimile  telephone  number or address  appears,  at the
         principal  place  of  business  of the  Holder.  Any  notice  or  other
         communication  or  deliveries  hereunder  shall  be  deemed  given  and
         effective  on the  earliest  of (i) the date of  transmission,  if such
         notice or  communication  is delivered  via  facsimile at the facsimile
         telephone number specified in this Section prior to 5:30 p.m. (New York
         City  time),  (ii) the date  after  the date of  transmission,  if such
         notice or  communication  is delivered  via  facsimile at the facsimile
         telephone  number  specified in this Section  later than 5:30 p.m. (New
         York City time) on any date and earlier than 11:59 p.m.  (New York City
         time) on such date, (iii) the second Business Day following the date of
         mailing, if sent by nationally recognized overnight courier service, or
         (iv) upon  actual  receipt by the party to whom such notice is required
         to be given.

                  b) ABSOLUTE  OBLIGATION.  Except as expressly provided herein,
         no provision of this Note shall alter or impair the  obligation  of the
         Company, which is absolute and unconditional,  to pay the principal of,
         interest  and  liquidated  damages  (if any) on, this Note at the time,
         place, and rate, and in the coin or currency,  herein prescribed.  This
         Note is a direct debt obligation of the Company.

                  c) LOST OR MUTILATED  NOTE.  If this Note shall be  mutilated,
         lost,  stolen or destroyed,  the Company shall execute and deliver,  in
         exchange  and  substitution  for and upon  cancellation  of a mutilated
         Note, or in lieu of or in substitution for a lost,  stolen or destroyed
         Note, a new Note for the  principal  amount of this Note so  mutilated,
         lost,  stolen or  destroyed  but only upon  receipt of evidence of such
         loss,  theft or destruction of such Note, and of the ownership  hereof,
         and  indemnity,  if  requested,  all  reasonably  satisfactory  to  the
         Company.

                  d) GOVERNING LAW. All questions  concerning the  construction,
         validity, enforcement and interpretation of this Note shall be governed
         by and construed  and enforced in accordance  with the internal laws of

                                       24

<PAGE>

         the State of New York, without regard to the principles of conflicts of
         law thereof.  Each party agrees that all legal  proceedings  concerning
         the  interpretations,  enforcement  and  defense  of  the  transactions
         contemplated  by any  of the  Transaction  Documents  (whether  brought
         against  a  party  hereto  or  its  respective  affiliates,  directors,
         officers, shareholders,  employees or agents) shall be commenced in the
         state and federal  courts  sitting in the City of New York,  Borough of
         Manhattan (the "NEW YORK COURTS"). Each party hereto hereby irrevocably
         submits to the  exclusive  jurisdiction  of the New York Courts for the
         adjudication of any dispute hereunder or in connection herewith or with
         any transaction contemplated hereby or discussed herein (including with
         respect to the  enforcement of any of the Transaction  Documents),  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, or such New York Courts are improper or
         inconvenient  venue for such proceeding.  Each party hereby irrevocably
         waives personal service of process and consents to process being served
         in any such suit,  action or  proceeding  by mailing a copy thereof via
         registered or certified  mail or overnight  delivery  (with evidence of
         delivery)  to such party at the  address  in effect  for  notices to it
         under this Note and agrees that such service shall  constitute good and
         sufficient  service of process and notice  thereof.  Nothing  contained
         herein  shall be deemed to limit in any way any right to serve  process
         in any manner  permitted by law. Each party hereto  hereby  irrevocably
         waives,  to the fullest extent permitted by applicable law, any and all
         right  to  trial  by jury in any  legal  proceeding  arising  out of or
         relating  to this  Note or the  transactions  contemplated  hereby.  If
         either  party  shall  commence an action or  proceeding  to enforce any
         provisions of this Note,  then the  prevailing  party in such action or
         proceeding  shall be  reimbursed  by the other party for its  attorneys
         fees and other  costs and  expenses  incurred  with the  investigation,
         preparation  and   prosecution  of  such  action  or  proceeding.   Any
         enforcement  action  relating to this Note may be brought by motion for
         summary judgment in lieu of a complaint pursuant to Section 3213 of the
         New York Civil Practice Law and Rules.

                  e) WAIVER. Any waiver by the Company or the Holder of a breach
         of any  provision  of this Note shall not operate as or be construed to
         be a waiver of any other  breach of such  provision or of any breach of
         any other  provision  of this Note.  The  failure of the Company or the
         Holder to insist upon strict  adherence to any term of this Note on one
         or more  occasions  shall not be  considered  a waiver or deprive  that
         party of the right  thereafter to insist upon strict  adherence to that
         term or any other term of this Note. Any waiver must be in writing.

                  f)  SEVERABILITY.  If any  provision  of this Note is invalid,
         illegal or  unenforceable,  the  balance  of this Note shall  remain in
         effect,  and  if  any  provision  is  inapplicable  to  any  person  or
         circumstance,  it shall  nevertheless  remain  applicable  to all other
         persons and  circumstances.  If it shall be found that any  interest or
         other amount deemed  interest due hereunder  violates  applicable  laws
         governing  usury,  the applicable  rate of interest due hereunder shall
         automatically  be  lowered  to  equal  the  maximum  permitted  rate of
         interest.  The Company covenants (to the extent that it may lawfully do
         so) that it shall not at any time insist upon, plead, or in any manner

                                       25
<PAGE>

         whatsoever  claim  or take the  benefit  or  advantage  of,  any  stay,
         extension or usury law or other law which would prohibit or forgive the
         Company from paying all or any portion of the  principal of or interest
         on this Note as contemplated  herein,  wherever enacted,  now or at any
         time  hereafter  in force,  or which may  affect the  covenants  or the
         performance  of this  indenture,  and the Company (to the extent it may
         lawfully do so) hereby  expressly  waives all  benefits or advantage of
         any such law,  and  covenants  that it will not,  by resort to any such
         law, hinder, delay or impeded the execution of any power herein granted
         to the Holder,  but will suffer and permit the  execution of every such
         as though no such law has been enacted.

                  g) NEXT BUSINESS DAY. Whenever any payment or other obligation
         hereunder shall be due on a day other than a Business Day, such payment
         shall be made on the next succeeding Business Day.

                  h) HEADINGS. The headings contained herein are for convenience
         only, do not  constitute a part of this Note and shall not be deemed to
         limit or affect any of the provisions hereof.

                  i)  ASSUMPTION.  Any  successor  to the  Company or  surviving
         entity in a Fundamental  Transaction shall (i) assume in writing all of
         the   obligations  of  the  Company  under  this  Note  and  the  other
         Transaction  Documents  pursuant  to  written  agreements  in form  and
         substance   satisfactory  to  the  Holder  (such  approval  not  to  be
         unreasonably withheld or delayed) prior to such Fundamental Transaction
         and  (ii) to issue to the  Holder a new Note of such  successor  entity
         evidenced  by a written  instrument  substantially  similar in form and
         substance  to  this  Note,  including,  without  limitation,  having  a
         principal  amount and interest rate equal to the principal  amounts and
         the interest  rates of the Notes held by the Holder and having  similar
         ranking  to this  Note,  and  satisfactory  to the  Holder  in its sole
         discretion.  The provisions of this Section 8(i) shall apply  similarly
         and equally to successive Fundamental Transactions and shall be applied
         without regard to any limitations of this Note.

                              *********************






                                       26

<PAGE>


         IN  WITNESS  WHEREOF,  the  Company  has  caused  this  Note to be duly
executed by a duly authorized officer as of the date first above indicated.


                              ENVIRONMENTAL SERVICE PROFESSIONALS, INC.

                              By: /s/ Edward Torres
                              -----------------------------------------
                               Name: Edward Torres
                              Title: CEO

































                                       27



<PAGE>


                                     ANNEX A

                              NOTICE OF CONVERSION


         The undersigned hereby elects to convert principal under the 12% Senior
Secured Convertible Note of Environmental Service Professionals,  Inc., a Nevada
corporation (the  "Company"),  into shares of common stock, par value $0.001 per
share (the "Common Stock"),  of the Company according to the conditions  hereof,
as of the date written below. If shares are to be issued in the name of a person
other than the undersigned,  the undersigned will pay all transfer taxes payable
with respect thereto and is delivering  herewith such  certificates and opinions
as reasonably requested by the Company in accordance  therewith.  No fee will be
charged to the holder for any  conversion,  except for such transfer  taxes,  if
any.

         By the delivery of this Notice of Conversion the undersigned represents
and  warrants to the Company  that its  ownership  of the Common  Stock does not
exceed the amounts  determined in accordance  with Section 13(d) of the Exchange
Act, specified under Section 4 of said Note.

         The  undersigned   agrees  to  comply  with  the  prospectus   delivery
requirements  under  the  applicable  securities  laws in  connection  with  any
transfer of the aforesaid shares of Common Stock.

Conversion calculations:
Date to Effect Conversion:

Principal Amount of Note to be Converted:

Payment of  Interest  in Common  Stock __ yes __ no
If yes,  $_____ of  Interest Accrued on Account of Conversion at Issue.

Number of shares of Common Stock to be issued:


Signature:

Name:

Address:
