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<CONFORMED-NAME>ENVIRONMENTAL SERVICE PROFESSIONALS, INC.
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<STREET1>1111 EAST TAHQUITZ CANYON WAY
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<STATE>CA
<ZIP>92262
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<CITY>PALM SPRINGS
<STATE>CA
<ZIP>92262
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<FORMER-CONFORMED-NAME>GLAS-AIRE INDUSTRIES GROUP LTD
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<FILENAME>exp8kjune202007.txt
<TEXT>
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



                                    FORM 8-K


     Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


         Date of Report (Date of earliest event reported): June 18, 2007


                    ENVIRONMENTAL SERVICE PROFESSIONALS, INC.
               --------------------------------------------------
             (Exact name of registrant as specified in its charter)



                                     NEVADA
               --------------------------------------------------
                 (State or other jurisdiction of incorporation)



          1-14244                                     84-1214736
--------------------------------------------------------------------------------
   (Commission File Number)                 (I.R.S. Employer Identification No.)

    1111 EAST TAHQUITZ CANYON WAY, SUITE 110, PALM SPRINGS, CALIFORNIA 92262
--------------------------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (760) 327-5284
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

                        GLAS-AIRE INDUSTRIES GROUP LTD.
                              145 TYEE DRIVE, #1641
                         POINT ROBERTS, WASHINGTON 98281
--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)


Check  the  appropriate  box  below  if the  Form  8-K  filing  is  intended  to
simultaneously  satisfy the filing obligation of the registrant under any of the
following provisions.

[_]      Written  communications  pursuant to Rule 425 under the  Securities Act
         (17 CFR240.14d-2(b))

[_]      Soliciting  material  pursuant to Rule 14a-12  under  Exchange  Act (17
         CFR240.14a-12)

[_]      Pre-commencement  communications  pursuant to Rule  14d-2(b)  under the
         Exchange Act (17 CFR240.14d-2(b))

[_]      Pre-commencement  communications  pursuant to Rule  13e-4(c)  under the
         Exchange Act (17 CFR240.13e-4(c))



<PAGE>



                                TABLE OF CONTENTS


SECTION 1.   REGISTRANT'S BUSINESS AND OPERATIONS..............................1

                 Item 1.01  Entry into a Material Definitive Agreement.........1

SECTION 2.   FINANCIAL INFORMATION.............................................2

SECTION 3.   SECURITIES AND TRADING MARKETS....................................2

                 Item 3.02  Unregistered Sales of Equity Securities............2

SECTION 4.   MATTERS RELATING TO ACCOUNTANTS AND FINANCIAL
                 STATEMENTS....................................................2
SECTION 5.   CORPORATE GOVERNANCE AND MANAGEMENT...............................2

SECTION 6.   ASSET BACKED SECURITIES...........................................2

SECTION 7.   REGULATION FD.....................................................3

SECTION 8.   OTHER EVENTS......................................................3

SECTION 9.   FINANCIAL STATEMENTS AND EXHIBITS.................................3

SIGNATURES.....................................................................3


<PAGE>

SECTION 1.  REGISTRANT'S BUSINESS AND OPERATIONS

ITEM 1.01     ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

         On or about  June  18,  2007  (the  "Closing"),  Environmental  Service
Professionals,  Inc. (the  "Company"),  entered into a $615,000  senior  secured
convertible  note with Boca Funding,  LLC (the "Holder") in accordance  with the
12% Senior Secured Convertible Note (the "Note"), a copy of which is attached to
this Report as Exhibit 99.1, the Security Agreement, a copy of which is attached
to this Report as Exhibit 99.2 (the  "Security  Agreement"),  and the Subsidiary
Guaranty, a copy of which is attached to this Report as Exhibit 99.3.

         Pursuant to the terms of the Note, the Company will pay interest to the
Holder  on the  outstanding  principal  amount  of the Note at a rate of 12% per
annum,  payable on July 18,  2007 and on the same day of each month  thereafter.
The  outstanding  principal  amount of the Note is  payable  on the  earlier  of
December  18, 2007 or the date on which the Company  sells  shares of its 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 (a  "Qualified  Transaction").
The  Company  may not prepay any  portion  of the  principal  amount of the Note
without  the prior  written  consent  of the  Holder;  provided,  however,  upon
consummation of, and simultaneously with, a Qualified  Transaction,  the Company
must prepay the 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  through  December
18, 2007 had such  Qualified  Transaction  not occurred and such  prepayment not
been made.

         At  any  time  after  June  18,  2007  until  the  Note  is  no  longer
outstanding,  the Note is convertible  into shares of the Company's common stock
("Conversion  Shares") at the option of the  Holder,  in whole or in part at any
time and from time to time.  The  conversion  price is equal to $0.58 per share,
subject to adjustment for stock dividends,  stock splits, and certain subsequent
equity sales.

         In  consideration  of, and as an  inducement  for,  the  funding of the
$615,000 of capital to the Company pursuant to the Note and Security  Agreement,
the  Company  issued to the Holder a warrant to purchase  275,000  shares of the
Company's common stock at a purchase price of $0.01 per share  exercisable for a
period of five years, a copy of which is attached to this Report as Exhibit 99.4
(the  "Warrant"),  and 750,000 shares of the Company's common stock. The Closing
Shares,  shares of common stock underlying the Warrants,  and Conversion  Shares
all have piggyback registration rights.

         On or about June 18, 2007, as additional  inducement  for the Holder to
make the loan to the Company,  each of the Company's wholly owned  subsidiaries,
National Professional Services Inc., Pacific Environmental  Sampling,  Inc., and
Allstate  Home  Inspection &  Environmental  Testing,  Ltd.  (collectively,  the
"Subsidiaries"),   entered  into  the  Subsidiary  Guaranty.   Pursuant  to  the
Subsidiary  Guaranty,  the  Subsidiaries  agreed,  jointly  and  severally,   to
guarantee  to the Holder the full and  punctual  payment  when due  (whether  at
maturity,   by  acceleration  or  otherwise),   and  the  performance,   of  all
liabilities,  agreements  and other  obligations  of the  Company to the Holder,
whether  direct or  indirect,  absolute  or  contingent,  due or to become  due,
secured or unsecured,  now existing or hereafter arising or acquired (whether by
way of  discount,  letter of  credit,  lease,  loan,  overdraft  or  otherwise),
including without limitation all obligations under the Note.

         On or about June 1, 2007, the Company entered into a Limited Consulting
Contract,  a copy of which is  attached  to this  Report  as  Exhibit  99.5 (the
"Contract"),  with  Clearvision,  Inc.  ("CVI")  pursuant to which CVI agreed to
provide media consulting services to the Company.  The following is a summary of
the media placement  guarantees CVI agreed to provide for the Company during the
six to twelve month term of the Contract: (1) air the Company's TV News

                                        1



<PAGE>

Spotlight  and/or VNR (as those terms are defined in the  Contract),  as regular
(non-paid)  programming  and as sponsored  (paid)  programming,  on national and
local cable,  satellite,  and broadcast affiliates  throughout the United States
and Canada;  (2) ensure at least  10,000  total  airings of VNR and 15,000 total
airings  of  ad  clusters   generated  from  a  combination  of  cablecasts  and
broadcasts;  (3) provide nationwide  distribution of the TV Spotlight and/or VNR
on one or more national  networks such as CNN,  MSNBC,  FOX News Channel,  CNBC,
Dish Network and AMC; (4) ensure at least twelve  interviews on national  and/or
local market  television and radio talk shows during the first six month term of
the campaign;  (5) provide a minimum of 100 Newspaper  Feature  placements;  (6)
provide 200 Radio News Release  ("RNR")  placements;  and (7) provide updates of
the Company's headlining events in major financial/business E-newsletter sent to
over  650,000  opt-in   subscribers   including:   250,000+  financial  services
professionals, 50,000+ key corporate decision makers and 350,000+ investors.

         CVI also agreed to provide the following  productions  for the Company:
one (1) B-Roll footage for May 18, 2007 Symposium in Palm Springs, California, a
TV News Spotlight (as that term is defined in the Contract), a VNR (as that term
is defined in the Contract),  a corporate video (up to ten minutes), a tradeshow
loop  presentation,  Internet streaming video, a Newspaper feature, a RNR, and a
commercial advertisement.

         In  consideration  for providing the media  consulting  services to the
Company, CVI will receive the following media consulting fee: (a) $100,000.00 in
cash  payable  on the  later  of 60 days  after  the  commencement  date of this
Agreement or on the date the  Blackwater  Capital  funding occurs but in no case
later than  September 30, 2007,  (b) 1,500,000  shares of restricted  stock (the
"Shares") to be released 500,000 Shares on each of June 30, 2007,  September 30,
2007, and December 31, 2007, and (c) a warrant to be issued on December 31, 2007
to purchase one million  (1,000,000)  shares of the Company's common stock at an
exercise price of seventy-five  cents ($0.75) per share exercisable for a period
of three years from the date of issuance (the "Warrant").  The shares underlying
the Warrant and the Shares will have piggyback  registration rights on the first
available registration filing on Form SB-2, S-1 or S-3.

SECTION 2.  FINANCIAL INFORMATION

         Not Applicable.


SECTION 3.  SECURITIES AND TRADING MARKETS

ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES

         See Item 1.01.


SECTION 4.  MATTERS RELATED TO ACCOUNTANTS AND FINANCIAL STATEMENTS

         Not Applicable.


SECTION 5.  CORPORATE GOVERNANCE AND MANAGEMENT

         Not Applicable.


SECTION 6.  ASSET BACKED SECURITIES

         Not Applicable.

                                        2


<PAGE>


SECTION 7.  REGULATION FD DISCLOSURE

         Not Applicable.


SECTION 8.  OTHER EVENTS

         Not Applicable.


SECTION 9.  FINANCIAL STATEMENTS, PRO FORMA FINANCIALS & EXHIBITS

         (a)      Financial Statements of Business Acquired

                  Not Applicable.

         (b)      Pro Forma Financial Information

                  Not Applicable.

         (c)      Exhibits

                  99.1     Senior  Secured  Convertible  Note with Boca Funding,
                           LLC, dated as of June 18, 2007.

                  99.2     Security Agreement between Boca Funding,  LLC and the
                           Company, dated as of June 18, 2007.

                  99.3     Guaranty Agreement by National  Professional Services
                           Inc., a Delaware  corporation,  Pacific Environmental
                           Sampling,  Inc., a California  corporation,  Allstate
                           Home  Inspection  &  Environmental  Testing,  Ltd., a
                           Delaware corporation,  in favor of Boca Funding, LLC,
                           dated as of June 18, 2007.

                  99.4     Warrant Agreement  between Boca Funding,  LLC and the
                           Company, dated as of June 18, 2007.

                  99.5     Limited Consulting Contract between Clearvision, Inc.
                           and the Company, dated as of June 1, 2007.


                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended,  the  registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.



                           ENVIRONMENTAL SERVICE PROFESSIONALS, INC.
                           -------------------------------------------
                           (Registrant)

Date:  June 20, 2007


                           /s/ Edward Torres
                           -------------------------------------------
                           Edward Torres, Chief Executive Officer


                                        3

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>2
<FILENAME>ex991.txt
<TEXT>
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

                                        1



<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

                                        7



<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:
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>3
<FILENAME>ex992.txt
<TEXT>
Exhibit 99.2

                               SECURITY AGREEMENT

         This SECURITY AGREEMENT,  dated as of June 18, 2007 (this "AGREEMENT"),
is among Environmental  Service  Professionals,  Inc., a Nevada corporation (the
"COMPANY"),  all of the  Subsidiaries  of the Company  (such  subsidiaries,  the
"GUARANTORS" and together with the Company, the "DEBTORS") and BOCA FUNDING, LLC
(the  "SECURED  PARTY"),   the  holder  of  the  Company's  12%  Senior  Secured
Convertible  Note,  issued on June 18, 2007 in the original  principal amount of
$615,000 (the "NOTE"), and its endorsees, transferees and assigns.

                              W I T N E S S E T H:

         WHEREAS,  pursuant to the Note,  the Secured Party has agreed to extend
the loans to the Company evidenced by the Note;

         WHEREAS,  pursuant to a certain Guarantee,  dated as of the date hereof
(the "GUARANTEE"), the Guarantors have jointly and severally agreed to guarantee
and act as surety for payment of such Note; and

         WHEREAS,  in order to induce  the  Secured  Party to  extend  the loans
evidenced  by the Note,  each  Debtor has agreed to execute  and  deliver to the
Secured Party this Agreement and to grant the Secured Party a security  interest
in certain property of such Debtor to secure the prompt payment, performance and
discharge  in full of all of the  Company's  obligations  under the Note and the
Guarantors' obligations under the Guarantee.

         NOW, THEREFORE, in consideration of the agreements herein contained and
for other good and valuable consideration,  the receipt and sufficiency of which
is hereby acknowledged, the parties hereto hereby agree as follows:

         1. CERTAIN DEFINITIONS.  As used in this Agreement, the following terms
shall  have  the  meanings  set  forth in this  Section  1.  Terms  used but not
otherwise  defined in this  Agreement  that are  defined in Article 9 of the UCC
(including  the terms  "account",  "chattel  paper",  "commercial  tort  claim",
"deposit account", "document",  "equipment",  "fixtures", "general intangibles",
"goods", "instruments",  "inventory",  "investment property",  "letter-of-credit
rights",  "proceeds",  "securities" and "supporting obligations") shall have the
respective meanings given such terms in Article 9 of the UCC.

                  (a)  "COLLATERAL"  means the  collateral  in which the Secured
         Party is granted a security  interest by this Agreement and which shall
         include  the  following  personal  property  of  the  Debtors,  whether
         presently  owned or  existing  or  hereafter  acquired  or coming  into
         existence,  wherever situated, and all additions and accessions thereto
         and all  substitutions  and  replacements  thereof,  and all  proceeds,
         products and  accounts  thereof,  including,  without  limitation,  all
         proceeds from the sale or transfer of the  Collateral  and of insurance
         covering the same and of any tort claims in connection  therewith,  and
         all dividends,  interest, cash, notes,  securities,  equity interest or
         other property at any time and from time to time  acquired,  receivable
         or otherwise  distributed in respect of, or in exchange for, any or all
         of the Pledged Securities (as defined below):

                                        1


<PAGE>

                           (i) All goods, including, without limitation, (A) all
                  machinery,   equipment,  computers,  motor  vehicles,  trucks,
                  tanks,  boats,  ships,  appliances,   furniture,  special  and
                  general tools, fixtures,  test and quality control devices and
                  other   equipment  of  every  kind  and  nature  and  wherever
                  situated,  together  with all documents of title and documents
                  representing  the same, all additions and accessions  thereto,
                  replacements therefor, all parts therefor, and all substitutes
                  for any of the  foregoing  and all other items used and useful
                  in   connection   with  any   Debtor's   businesses   and  all
                  improvements  thereto;  and (B) all  inventory,  including all
                  materials, work in process and finished goods;

                           (ii)  All   contract   rights   and   other   general
                  intangibles,  including,  without limitation,  all partnership
                  interests,  membership  interests,  stock or other securities,
                  rights under any of the Organizational  Documents,  agreements
                  related to the Pledged Securities,  licenses, distribution and
                  other agreements,  computer software (whether "off-the-shelf",
                  licensed  from any third party or  developed  by any  Debtor),
                  computer  software  development  rights,  leases,  franchises,
                  customer lists, quality control procedures, grants and rights,
                  goodwill,  trademarks,  service  marks,  trade  styles,  trade
                  names, patents,  patent applications,  copyrights,  and income
                  tax refunds;

                           (iii) All accounts,  together  with all  instruments,
                  all documents of title representing any of the foregoing,  all
                  rights in any merchandising,  goods, equipment, motor vehicles
                  and trucks which any of the same may represent, and all right,
                  title,  security and guaranties  with respect to each account,
                  including any right of stoppage in transit;

                           (iv)   All   documents,    letter-of-credit   rights,
                  instruments and chattel paper;

                           (v) All commercial tort claims;

                           (vi) All deposit  accounts  and all cash  (whether or
                  not deposited in such deposit accounts);

                           (vii) All investment property;

                           (viii) All supporting obligations;

                           (ix) All files, records,  books of account,  business
                  papers, and computer programs; and

                           (x) the products and proceeds of all of the foregoing
                  Collateral set forth in clauses (i)-(ix) above.

                           Without limiting the generality of the foregoing, the
                  "COLLATERAL" shall include all investment property and general
                  intangibles respecting ownership and/or other equity interests


                                        2


<PAGE>

                  in each Guarantor,  including,  without limitation, the shares
                  of  capital  stock and the other  equity  interests  listed on
                  SCHEDULE  H hereto (as the same may be  modified  from time to
                  time  pursuant to the terms  hereof),  and any other shares of
                  capital  stock  and/or  other  equity  interests  of any other
                  direct or indirect  subsidiary  of any Debtor  obtained in the
                  future, and, in each case, all certificates  representing such
                  shares and/or equity  interests and, in each case, all rights,
                  options,  warrants,  stock,  other  securities  and/or  equity
                  interests  that  may  hereafter  be  received,  receivable  or
                  distributed  in  respect  of,  or  exchanged  for,  any of the
                  foregoing and all rights  arising under or in connection  with
                  the  Pledged  Securities,  including,  but not limited to, all
                  dividends, interest and cash.

                           Notwithstanding  the foregoing,  nothing herein shall
                  be deemed to constitute  an assignment of any asset which,  in
                  the  event of an  assignment,  becomes  void by  operation  of
                  applicable  law  or  the  assignment  of  which  is  otherwise
                  prohibited by applicable  law (in each case to the extent that
                  such applicable law is not overridden by Sections 9-406, 9-407
                  and/or  9-408 of the UCC or  other  similar  applicable  law);
                  provided,  however, that to the extent permitted by applicable
                  law, this Agreement shall create a valid security  interest in
                  such asset and, to the extent  permitted  by  applicable  law,
                  this Agreement  shall create a valid security  interest in the
                  proceeds of such asset.

                  (b) "INTELLECTUAL  PROPERTY" means the collective reference to
         all  rights,   priorities  and  privileges   relating  to  intellectual
         property, whether arising under United States, multinational or foreign
         laws or otherwise,  including,  without limitation,  (i) all copyrights
         arising under the laws of the United  States,  any other country or any
         political  subdivision thereof,  whether registered or unregistered and
         whether  published or  unpublished,  all  registrations  and recordings
         thereof,  and all  applications  in  connection  therewith,  including,
         without limitation,  all registrations,  recordings and applications in
         the United  States  Copyright  Office,  (ii) all letters  patent of the
         United States, any other country or any political  subdivision thereof,
         all reissues and extensions  thereof,  and all applications for letters
         patent of the United  States or any other  country  and all  divisions,
         continuations and continuations-in-part  thereof, (iii) all trademarks,
         trade names, corporate names, company names, business names, fictitious
         business names,  trade dress,  service marks,  logos,  domain names and
         other  source or  business  identifiers,  and all  goodwill  associated
         therewith,   now  existing  or  hereafter  adopted  or  acquired,   all
         registrations   and  recordings   thereof,   and  all  applications  in
         connection therewith, whether in the United States Patent and Trademark
         Office or in any  similar  office or agency of the United  States,  any
         State  thereof  or  any  other  country  or any  political  subdivision
         thereof, or otherwise,  and all common law rights related thereto, (iv)
         all trade  secrets  arising  under the laws of the United  States,  any
         other country or any political  subdivision  thereof, (v) all rights to
         obtain any reissues,  renewals or extensions of the foregoing, (vi) all
         licenses for any of the  foregoing,  and (vii) all causes of action for
         infringement of the foregoing.

                  (c)  "NECESSARY   ENDORSEMENT"   means  undated  stock  powers
         endorsed  in blank or  other  proper  instruments  of  assignment  duly
         executed and such other  instruments  or documents as the Secured Party
         may reasonably request.

                                        3


<PAGE>

                  (d) "OBLIGATIONS" means all of the liabilities and obligations
         (primary, secondary, direct, contingent, sole, joint or several) due or
         to  become  due,  or that  are now or may be  hereafter  contracted  or
         acquired,  or owing to, of any Debtor to the Secured Party,  including,
         without limitation, all obligations under this Agreement, the Note, the
         Guarantee,  the Warrant  issued by the Company to the Secured  Party on
         the date hereof (the "Warrant") and any other  instruments,  agreements
         or other documents executed and/or delivered in connection  herewith or
         therewith,  in each case, whether now or hereafter existing,  voluntary
         or involuntary, direct or indirect, absolute or contingent,  liquidated
         or unliquidated,  whether or not jointly owed with others,  and whether
         or not from time to time decreased or extinguished and later increased,
         created or  incurred,  and all or any  portion of such  obligations  or
         liabilities  that  are  paid,  to the  extent  all or any  part of such
         payment is avoided or recovered  directly or indirectly from any of the
         Secured Party as a preference, fraudulent transfer or otherwise as such
         obligations  may  be  amended,  supplemented,  converted,  extended  or
         modified  from time to time.  Without  limiting the  generality  of the
         foregoing,  the term "Obligations"  shall include,  without limitation:
         (i)  principal  of,  and  interest  on the Note and the loans  extended
         pursuant  thereto;  (ii) any and all other  fees,  indemnities,  costs,
         obligations  and  liabilities of the Debtors from time to time under or
         in connection with this Agreement, the Note, the Guarantee, the Warrant
         and any  other  instruments,  agreements  or other  documents  executed
         and/or  delivered in connection  herewith or  therewith;  and (iii) all
         amounts  (including  but not  limited  to  post-petition  interest)  in
         respect of the  foregoing  that would be payable  but for the fact that
         the obligations to pay such amounts are  unenforceable or not allowable
         due  to  the  existence  of a  bankruptcy,  reorganization  or  similar
         proceeding involving any Debtor.

                  (e)  "ORGANIZATIONAL  DOCUMENTS"  means  with  respect  to any
         Debtor,  the  documents by which such Debtor was  organized  (such as a
         certificate of  incorporation,  certificate  of limited  partnership or
         articles  of  organization,  and  including,  without  limitation,  any
         certificates  of  designation  for  preferred  stock or other  forms of
         preferred  equity) and which relate to the internal  governance of such
         Debtor  (such as  bylaws,  a  partnership  agreement  or an  operating,
         limited liability or members agreement).

                  (f) "PLEDGED  SECURITIES"  shall have the meaning  ascribed to
         such term in Section 4(i).

                  (g) "UCC"  means the Uniform  Commercial  Code of the State of
         New York and or any other  applicable  law of any state or states which
         has jurisdiction with respect to all, or any portion of, the Collateral
         or this  Agreement,  from time to time. It is the intent of the parties
         that defined  terms in the UCC should be  construed  in their  broadest
         sense so that the term  "Collateral"  will be construed in its broadest
         sense.  Accordingly if there are, from time to time, changes to defined
         terms in the UCC that broaden the  definitions,  they are  incorporated
         herein and if  existing  definitions  in the UCC are  broader  than the
         amended definitions, the existing ones shall be controlling.

                                        4
<PAGE>

         2. GRANT OF SECURITY  INTEREST IN COLLATERAL.  As an inducement for the
Secured  Party to extend  the loans as  evidenced  by the Note and to secure the
complete and timely payment,  performance and discharge in full, as the case may
be,  of  all  of  the  Obligations,   each  Debtor  hereby  unconditionally  and
irrevocably  pledges,  grants and  hypothecates  to the Secured Party a security
interest  in and to, a lien  upon and a right of  set-off  against  all of their
respective  right,  title and interest of whatsoever  kind and nature in and to,
the  Collateral  (a  "SECURITY   INTEREST"  and   collectively,   the  "SECURITY
INTERESTS").

         3. DELIVERY OF CERTAIN  COLLATERAL.  Contemporaneously  or prior to the
execution of this Agreement,  each Debtor shall deliver or cause to be delivered
to the  Secured  Party  (a) any  and  all  certificates  and  other  instruments
representing  or  evidencing  the  Pledged  Securities,  and  (b)  any  and  all
certificates  and other  instruments or documents  representing any of the other
Collateral, in each case, together with all Necessary Endorsements.  The Debtors
are,  contemporaneously  with the  execution  hereof,  delivering to the Secured
Party,  or have  previously  delivered to the Secured  Party, a true and correct
copy of each Organizational Document governing any of the Pledged Securities.

         4.  REPRESENTATIONS,   WARRANTIES,  COVENANTS  AND  AGREEMENTS  OF  THE
DEBTORS.  Except as set forth under the corresponding  section of the disclosure
schedules delivered to the Secured Party concurrently  herewith (the "DISCLOSURE
SCHEDULES"),  which  Disclosure  Schedules  shall be deemed a part hereof,  each
Debtor  represents  and warrants to, and covenants and agrees with,  the Secured
Party as follows:

                  (a) Each  Debtor  has the  requisite  corporate,  partnership,
         limited  liability  company or other power and  authority to enter into
         this  Agreement and otherwise to carry out its  obligations  hereunder.
         The  execution,  delivery  and  performance  by  each  Debtor  of  this
         Agreement  and  the  filings   contemplated   therein  have  been  duly
         authorized  by all  necessary  action on the part of such Debtor and no
         further action is required by such Debtor. This Agreement has been duly
         executed by each Debtor.  This Agreement  constitutes the legal,  valid
         and binding obligation of each Debtor,  enforceable against each Debtor
         in  accordance  with its  terms  except as such  enforceability  may be
         limited  by  applicable  bankruptcy,  insolvency,   reorganization  and
         similar laws of general application relating to or affecting the rights
         and remedies of creditors and by general principles of equity.

                   (b) The Debtors  have no place of  business or offices  where
         their  respective  books of account  and  records  are kept (other than
         temporarily at the offices of its attorneys or  accountants)  or places
         where Collateral is stored or located,  except as set forth on SCHEDULE
         A attached  hereto.  Except as  disclosed  on  SCHEDULE A, none of such
         Collateral is in the possession of any consignee, bailee, warehouseman,
         agent or processor.

                  (c) Except for  Permitted  Liens (as  defined in the Note) and
         except as set forth on SCHEDULE B attached hereto,  the Debtors are the
         sole owner of the  Collateral,  free and clear of any  liens,  security
         interests,  encumbrances, rights or claims, and are fully authorized to
         grant the Security Interests. Except as set forth on SCHEDULE B


                                        5
<PAGE>

         attached hereto, there is not on file in any governmental or regulatory
         authority, agency or recording office an effective financing statement,
         security  agreement,  license or  transfer  or any notice of any of the
         foregoing  (other than those that will be filed in favor of the Secured
         Party  pursuant to this  Agreement)  covering or  affecting  any of the
         Collateral.  Except as set forth on  Schedule  B  attached  hereto  and
         except pursuant to this  Agreement,  as long as this Agreement shall be
         in effect, the Debtors shall not execute and shall not knowingly permit
         to be on  file  in any  such  office  or  agency  any  other  financing
         statement or other  document or instrument  (except to the extent filed
         or recorded in favor of the Secured Party pursuant to the terms of this
         Agreement).

                  (d) No written claim has been received that any  Collateral or
         Debtor's use of any Collateral  violates the rights of any third party.
         There has been no adverse  decision to any Debtor's  claim of ownership
         rights in or exclusive rights to use the Collateral in any jurisdiction
         or to any Debtor's  right to keep and maintain such  Collateral in full
         force and  effect,  and there is no  proceeding  involving  said rights
         pending or, to the best knowledge of any Debtor,  threatened before any
         court, judicial body,  administrative or regulatory agency,  arbitrator
         or other governmental authority.

                  (e) Each  Debtor  shall at all  times  maintain  its  books of
         account and records  relating to the Collateral at its principal  place
         of business and its Collateral at the locations set forth on SCHEDULE A
         attached  hereto and may not relocate such books of account and records
         or tangible Collateral unless it delivers to the Secured Party at least
         30 days prior to such  relocation (i) written notice of such relocation
         and the new location  thereof  (which must be within the United States)
         and (ii) evidence that appropriate  financing  statements under the UCC
         and other  necessary  documents  have been filed and recorded and other
         steps have been taken to perfect the  Security  Interests  to create in
         favor of the Secured Party a valid,  perfected and continuing perfected
         first priority lien in the Collateral.

                  (f) This  Agreement  creates in favor of the  Secured  Party a
         valid,  security interest in the Collateral,  subject only to Permitted
         Liens (as defined in the Note) securing the payment and  performance of
         the Obligations.  Upon making the filings  described in the immediately
         following  paragraph,  all security  interests created hereunder in any
         Collateral  which may be perfected by filing  Uniform  Commercial  Code
         financing  statements  shall have been duly  perfected.  Except for the
         filing of the Uniform Commercial Code financing  statements referred to
         in  the  immediately  following  paragraph,   the  recordation  of  the
         Intellectual  Property  Security  Agreement (as defined below) (if any)
         with respect to  copyrights  and copyright  applications  in the United
         States  Copyright Office referred to in paragraph (p), and the delivery
         of the  certificates  and other  instruments  provided in Section 3, no
         action  is  necessary  to  create,  perfect  or  protect  the  security
         interests  created  hereunder.  Without  limiting the generality of the
         foregoing,  except for the  filing of said  financing  statements,  the
         recordation  of  said  Intellectual  Property  Security  Agreement,  no
         consent of any third  parties and no  authorization,  approval or other
         action by, and no notice to or filing with, any governmental  authority
         or  regulatory  body is required  for (i) the  execution,  delivery and
         performance of this Agreement, (ii) the creation or perfection of the


                                        6
<PAGE>

         Security  Interests  created  hereunder in the  Collateral or (iii) the
         enforcement of the rights of the Secured Party hereunder.

                   (g) Each Debtor hereby  authorizes  the Secured Party to file
         one or more  financing  statements  under the UCC,  with respect to the
         Security Interests with the proper filing and recording agencies in any
         jurisdiction  deemed  proper by it, which UCC  financing  statement may
         describe the collateral as "All assets".

                   (h) The execution, delivery and performance of this Agreement
         by the  Debtors  does  not (i)  violate  any of the  provisions  of any
         Organizational  Documents of any Debtor or any judgment,  decree, order
         or  award  of  any  court,  governmental  body  or  arbitrator  or  any
         applicable  law,  rule or  regulation  applicable to any Debtor or (ii)
         conflict with, or constitute a default (or an event that with notice or
         lapse of time or both would become a default)  under, or give to others
         any rights of  termination,  amendment,  acceleration  or  cancellation
         (with or  without  notice,  lapse of time or both) of,  any  agreement,
         credit facility, debt or other instrument (evidencing any Debtor's debt
         or otherwise) or other  understanding to which any Debtor is a party or
         by which any property or asset of any Debtor is bound or  affected.  If
         any,  all  required  consents  (including,   without  limitation,  from
         stockholders  or creditors of any Debtor)  necessary  for any Debtor to
         enter into and perform its obligations hereunder have been obtained.

                   (i) The capital  stock and other equity  interests  listed on
         SCHEDULE  H hereto  (the  "PLEDGED  SECURITIES")  represent  all of the
         capital stock and other equity interests in and to the Guarantors,  and
         represent all capital stock and other equity interests owned,  directly
         or  indirectly,  by the  Company.  All of the  Pledged  Securities  are
         validly issued,  fully paid and  nonassessable,  and the Company is the
         legal and beneficial owner of the Pledged Securities, free and clear of
         any  lien,  security  interest  or  other  encumbrance  except  for the
         security  interests created by this Agreement and other Permitted Liens
         (as  defined  in the  Note).  Each  Debtor  shall  cause the pledge and
         security  interest  of  the  Secured  Party  to be  duly  noted  in its
         corporate books and records.

                  (j) The ownership and other equity  interests in  partnerships
         and limited  liability  companies (if any)  included in the  Collateral
         (the  "PLEDGED  INTERESTS")  by their express terms do not provide that
         they are  securities  governed by Article 8 of the UCC and are not held
         in a securities account or by any financial intermediary.

                  (k) Except for Permitted Liens (as defined in the Note),  each
         Debtor shall at all times  maintain  the liens and  Security  Interests
         provided for hereunder as valid and perfected  first priority liens and
         security  interests  in the  Collateral  in favor of the Secured  Party
         until this  Agreement  and the  Security  Interest  hereunder  shall be
         terminated  pursuant to Section 11 hereof. Each Debtor hereby agrees to
         defend the same against the claims of any and all persons and entities.
         Each Debtor shall  safeguard and protect all Collateral for the account
         of the Secured Party. At the request of the Secured Party,  each Debtor
         will sign and deliver to the Secured  Party at any time or from time to
         time  one or  more  financing  statements  pursuant  to the UCC in form
         reasonably  satisfactory  to the Secured Party and will pay the cost of
         filing the same in all public offices  wherever filing is, or is deemed
         by the Secured Party to be, necessary or desirable to effect the rights


                                        7

<PAGE>

         and obligations provided for herein. Without limiting the generality of
         the foregoing,  each Debtor shall pay all fees, taxes and other amounts
         necessary  to  maintain  the  Collateral  and  the  Security  Interests
         hereunder,  and each  Debtor  shall  obtain and  furnish to the Secured
         Party  from  time  to  time,   upon  demand,   such   releases   and/or
         subordinations  of claims and liens  which may be  required to maintain
         the priority of the Security Interests hereunder.

                  (l) Except for  Permitted  Liens (as defined in the Note),  no
         Debtor will transfer, pledge,  hypothecate,  encumber, license, sell or
         otherwise  dispose of any of the Collateral  (except for  non-exclusive
         licenses  granted by a Debtor in its  ordinary  course of business  and
         sales of  inventory  by a Debtor in its  ordinary  course of  business)
         without the prior written consent of the Secured Party.

                  (m)  Each  Debtor  shall  keep  and  preserve  its  equipment,
         inventory and other tangible  Collateral in good condition,  repair and
         order and shall not operate or locate any such  Collateral (or cause to
         be operated or located) in any area excluded from insurance coverage.

                  (n) Each Debtor  shall  maintain  with  financially  sound and
         reputable insurers, insurance with respect to the Collateral, including
         Collateral hereafter acquired,  against loss or damage of the kinds and
         in the amounts  customarily  insured against by entities of established
         reputation  having similar  properties  similarly  situated and in such
         amounts as are customarily carried under similar circumstances by other
         such  entities  and  otherwise  as is prudent for  entities  engaged in
         similar  businesses  but in any  event  sufficient  to  cover  the full
         replacement cost thereof. Each Debtor shall cause each insurance policy
         issued in connection herewith to provide,  and the insurer issuing such
         policy to certify to the Secured  Party that (a) the Secured Party will
         be named as lender loss payee and  additional  insured  under each such
         insurance policy;  (b) if such insurance be proposed to be cancelled or
         materially  changed  for  any  reason  whatsoever,  such  insurer  will
         promptly notify the Secured Party and such cancellation or change shall
         not be effective as to the Secured  Party for at least thirty (30) days
         after receipt by the Secured Party of such notice, unless the effect of
         such change is to extend or increase coverage under the policy; and (c)
         the  Secured  Party  will have the  right  (but no  obligation)  at its
         election to remedy any default in the payment of premiums within thirty
         (30) days of notice  from the insurer of such  default.  If no Event of
         Default (as defined in the Note) exists and if the proceeds arising out
         of any claim or series of related claims do not exceed  $100,000,  loss
         payments in each instance will be applied by the  applicable  Debtor to
         the repair  and/or  replacement  of property  with respect to which the
         loss was  incurred  to the  extent  reasonably  feasible,  and any loss
         payments  or  the  balance  thereof  remaining,  to the  extent  not so
         applied, shall be payable to the applicable Debtor, provided,  however,
         that payments  received by any Debtor after an Event of Default  occurs
         and is continuing or in excess of $100,000 for any occurrence or series
         of related  occurrences  shall be paid to the  Secured  Party  and,  if
         received by such Debtor,  shall be held in trust for the Secured  Party
         and  immediately  paid  over  to the  Secured  Party  unless  otherwise
         directed in writing by the Secured Party. Copies of such policies or


                                        8

<PAGE>

         the related  certificates,  in each case,  naming the Secured  Party as
         lender loss payee and  additional  insured  shall be  delivered  to the
         Secured  Party at least  annually  and at the  time any new  policy  of
         insurance is issued.

                  (o) Each  Debtor  shall,  within  ten (10)  days of  obtaining
         knowledge  thereof,  advise the Secured Party  promptly,  in sufficient
         detail,  of any material  adverse change in the Collateral,  and of the
         occurrence of any event which would have a material  adverse  effect on
         the value of the Collateral or on the Secured Party's security interest
         therein.

                   (p) Each  Debtor  shall  promptly  execute and deliver to the
         Secured  Party such further  deeds,  mortgages,  assignments,  security
         agreements,  financing  statements  or  other  instruments,  documents,
         certificates and assurances and take such further action as the Secured
         Party may from time to time request and may in its sole discretion deem
         necessary to perfect,  protect or enforce the Secured Party's  security
         interest in the Collateral including, without limitation, if applicable
         and  requested  in writing by the  Secured  Party,  the  execution  and
         delivery of a separate security agreement with respect to each Debtor's
         Intellectual Property  ("INTELLECTUAL  PROPERTY SECURITY AGREEMENT") in
         which  the  Secured  Party  have  been  granted  a  security   interest
         hereunder, substantially in a form reasonably acceptable to the Secured
         Party, which Intellectual  Property Security  Agreement,  other than as
         stated  therein,  shall be subject  to all of the terms and  conditions
         hereof.

                  (q)  Each  Debtor  shall  permit  the  Secured  Party  and its
         representatives  and agents to inspect  the  Collateral  during  normal
         business hours and upon reasonable prior notice,  and to make copies of
         records pertaining to the Collateral as may be reasonably  requested by
         the Secured Party from time to time.

                  (r) Each Debtor shall take all steps  reasonably  necessary to
         diligently pursue and seek to preserve, enforce and collect any rights,
         claims,  causes of action  and  accounts  receivable  in respect of the
         Collateral.

                  (s) Each Debtor  shall  promptly  notify the Secured  Party in
         sufficient  detail upon becoming aware of any attachment,  garnishment,
         execution or other legal process  levied  against any Collateral and of
         any other  information  received  by such  Debtor  that may  materially
         affect the value of the Collateral, the Security Interest or the rights
         and remedies of the Secured Party hereunder.

                  (t) All information  heretofore,  herein or hereafter supplied
         to the Secured  Party by or on behalf of any Debtor with respect to the
         Collateral is accurate and complete in all material  respects as of the
         date furnished.

                  (u) The Debtors  shall at all times  preserve and keep in full
         force and effect their respective valid existence and good standing and
         any rights and franchises material to its business.

                  (v) No Debtor  will  change  its name,  type of  organization,
         jurisdiction of organization,  organizational identification number (if
         it has one), legal or corporate structure, or identity, or add any new


                                        9
<PAGE>

         fictitious  name  unless it  provides  at least 30 days  prior  written
         notice to the  Secured  Party of such  change  and, at the time of such
         written notification,  such Debtor provides any financing statements or
         fixture filings necessary to perfect and continue the perfection of the
         Security Interests granted and evidenced by this Agreement.

                  (w) Except in the  ordinary  course of business and except for
         Permitted  Liens (as defined in the Note), no Debtor may consign any of
         its  Inventory or sell any of its  Inventory on bill and hold,  sale or
         return,  sale on approval,  or other  conditional terms of sale without
         the  consent of the  Secured  Party,  which  shall not be  unreasonably
         withheld.

                  (x) No Debtor may relocate its chief executive office to a new
         location without providing 30 days prior written  notification  thereof
         to the  Secured  Party  and so long  as,  at the  time of such  written
         notification,  such Debtor provides any financing statements or fixture
         filings  necessary  to  perfect  and  continue  the  perfection  of the
         Security Interests granted and evidenced by this Agreement.

                   (y) Each Debtor was  organized and remains  organized  solely
         under the laws of the state set  forth  next to such  Debtor's  name in
         SCHEDULE D attached  hereto,  which SCHEDULE D sets forth each Debtor's
         organizational  identification  number or, if any Debtor  does not have
         one, states that one does not exist.

                  (z) (i) The actual  name of each  Debtor is the name set forth
         in  SCHEDULE D  attached  hereto;  (ii) no Debtor  has any trade  names
         except as set forth on SCHEDULE E attached hereto;  (iii) no Debtor has
         used any name other than that stated in the  preamble  hereto or as set
         forth on SCHEDULE E for the  preceding  five years;  and (iv) no entity
         has merged into any Debtor or been  acquired  by any Debtor  within the
         past five years except as set forth on SCHEDULE E.

                  (aa) At any  time and from  time to time  that any  Collateral
         consists of  instruments,  certificated  securities or other items that
         require  or permit  possession  by the  secured  party to  perfect  the
         security  interest created hereby,  the applicable Debtor shall deliver
         such Collateral to the Secured Party.

                  (bb) Each Debtor, in its capacity as issuer,  hereby agrees to
         comply  with any and all  orders  and  instructions  of  Secured  Party
         regarding  the  Pledged  Interests  consistent  with the  terms of this
         Agreement  without the further consent of any Debtor as contemplated by
         Section  8-106 (or any  successor  section) of the UCC.  Further,  each
         Debtor agrees that it shall not enter into a similar  agreement (or one
         that would confer "control" within the meaning of Article 8 of the UCC)
         with any other person or entity.

                  (cc) Each  Debtor  shall  cause  all  tangible  chattel  paper
         constituting  Collateral to be delivered to the Secured  Party,  or, if
         such  delivery is not  possible,  then to cause such  tangible  chattel
         paper to contain a legend  noting  that it is  subject to the  security
         interest  created by this Agreement.  To the extent that any Collateral
         consists of electronic chattel paper, the applicable Debtor shall cause
         the  underlying  chattel  paper to be  "marked"  within the  meaning of
         Section 9-105 of the UCC (or successor section thereto).

                                       10

<PAGE>

                  (dd)  [Reserved].

                  (ee)  To  the  extent   that  any   Collateral   consists   of
         letter-of-credit  rights,  the applicable Debtor shall cause the issuer
         of each underlying  letter of credit to consent to an assignment of the
         proceeds thereof to the Secured Party.

                  (ff) To the extent that any Collateral is in the possession of
         any third  party,  the  applicable  Debtor  shall join with the Secured
         Party in  notifying  such third party of the Secured  Party's  security
         interest in such  Collateral  and shall obtain an  acknowledgement  and
         agreement from such third party with respect to the Collateral, in form
         and substance reasonably satisfactory to the Secured Party.

                  (gg)  If any  Debtor  shall  at any  time  hold or  acquire  a
         commercial  tort claim,  such Debtor shall promptly  notify the Secured
         Party in a writing signed by such Debtor of the particulars thereof and
         grant to the Secured Party in such writing a security  interest therein
         and in the proceeds thereof, all upon the terms of this Agreement, with
         such writing to be in form and  substance  satisfactory  to the Secured
         Party.

                  (hh) Each Debtor shall  immediately  provide written notice to
         the Secured Party of any and all accounts  which arise out of contracts
         with any governmental authority and, to the extent necessary to perfect
         or continue  the  perfected  status of the  Security  Interests in such
         accounts and proceeds thereof, shall execute and deliver to the Secured
         Party an assignment of claims for such accounts and cooperate  with the
         Secured  Party in taking any other  steps  required,  in its  judgment,
         under the  Federal  Assignment  of Claims Act or any  similar  federal,
         state or local  statute or rule to perfect or  continue  the  perfected
         status of the Security Interests in such accounts and proceeds thereof.

                   (ii) Each Debtor shall cause each  subsidiary  of such Debtor
         with operations or material operations (which, if in doubt, shall be in
         the sole  determination  of the Secured Party) to immediately  become a
         party hereto (an "ADDITIONAL  Debtor"),  by executing and delivering an
         Additional Debtor Joinder in substantially the form of ANNEX A attached
         hereto and comply with the provisions hereof applicable to the Debtors.
         As of the date hereof, the Company represents and warrants that none of
         its  subsidiaries  have any operations or material  assets.  Concurrent
         therewith,  the Additional Debtor shall deliver  replacement  schedules
         for, or supplements to all other  Schedules to (or referred to in) this
         Agreement, as applicable,  which replacement schedules shall supersede,
         or  supplements  shall  modify,  the  Schedules  then  in  effect.  The
         Additional   Debtor  shall  also  deliver  such  opinions  of  counsel,
         authorizing   resolutions,   good  standing  certificates,   incumbency
         certificates,  organizational documents, financing statements and other
         information  and  documentation  as the  Secured  Party may  reasonably
         request.  Upon  delivery of the  foregoing  to the Secured  Party,  the
         Additional  Debtor shall be and become a party to this  Agreement  with
         the same rights and obligations as the Debtors, for all purposes hereof
         as fully  and to the same  extent as if it were an  original  signatory
         hereto and shall be deemed to have made the representations, warranties
         and covenants set forth herein as of the date of execution and delivery


                                       11
<PAGE>

         of such  Additional  Debtor Joinder,  and all references  herein to the
         "Debtors" shall be deemed to include each Additional Debtor.

                  (jj) Each Debtor shall vote the Pledged  Securities  to comply
         with the covenants and agreements set forth herein and in the Note.

                  (kk) Each Debtor shall  register the pledge of the  applicable
         Pledged  Securities  on the books of such  Debtor.  Each  Debtor  shall
         notify each issuer of Pledged  Securities to register the pledge of the
         applicable  Pledged  Securities in the name of the Secured Party on the
         books of such  issuer.  Further,  except with  respect to  certificated
         securities  delivered to the Secured Party, the applicable Debtor shall
         deliver to Secured Party an  acknowledgement  of pledge  (which,  where
         appropriate,  shall  comply with the  requirements  of the relevant UCC
         with respect to perfection by registration) signed by the issuer of the
         applicable  Pledged  Securities,  which  acknowledgement  shall confirm
         that: (a) it has  registered  the pledge on its books and records;  and
         (b) at any time directed by Secured Party during the continuation of an
         Event of Default,  such issuer will  transfer  the record  ownership of
         such Pledged Securities into the name of any designee of Secured Party,
         will take such steps as may be  necessary to effect the  transfer,  and
         will comply with all other instructions of Secured Party regarding such
         Pledged  Securities  without  the  further  consent  of the  applicable
         Debtor.

                  (ll) In the  event  that,  upon an  occurrence  of an Event of
         Default,  Secured Party shall sell all or any of the Pledged Securities
         to another party or parties (herein called the  "TRANSFEREE")  or shall
         purchase  or retain all or any of the Pledged  Securities,  each Debtor
         shall,  to the extent  applicable:  (i) deliver to Secured Party or the
         Transferee, as the case may be, the articles of incorporation,  bylaws,
         minute books, stock certificate books,  corporate seals, deeds, leases,
         indentures,  agreements,  evidences of indebtedness,  books of account,
         financial records and all other Organizational Documents and records of
         the Debtors and their  direct and indirect  subsidiaries;  (ii) use its
         best  efforts to obtain  resignations  of the persons  then  serving as
         officers  and  directors  of the Debtors and their  direct and indirect
         subsidiaries, if so requested; and (iii) use its best efforts to obtain
         any approvals that are required by any  governmental or regulatory body
         in order to permit the sale of the Pledged Securities to the Transferee
         or the purchase or retention of the Pledged Securities by Secured Party
         and allow the  Transferee  or Secured Party to continue the business of
         the Debtors and their direct and indirect subsidiaries.

                  (mm) Without limiting the generality of the other  obligations
         of the Debtors  hereunder,  each Debtor shall  promptly (i) cause to be
         registered  at the United States  Copyright  Office all of its material
         copyrights,  (ii) cause the security interest  contemplated hereby with
         respect to all  Intellectual  Property  registered at the United States
         Copyright  Office or United States  Patent and  Trademark  Office to be
         duly  recorded  at the  applicable  office,  and (iii) give the Secured
         Party notice whenever it acquires (whether absolutely or by license) or
         creates any additional material Intellectual Property.

                   (nn) Each  Debtor  will  from time to time,  at the joint and
         several expense of the Debtors,  promptly  execute and deliver all such
         further instruments and documents, and take all such further action as


                                       12


<PAGE>

         may be necessary or desirable,  or as the Secured Party may  reasonably
         request,  in order to perfect and protect any security interest granted
         or  purported  to be granted  hereby or to enable the Secured  Party to
         exercise  and enforce  their  rights and  remedies  hereunder  and with
         respect to any  Collateral  or to  otherwise  carry out the purposes of
         this Agreement.

                  (oo)  SCHEDULE F  attached  hereto  lists all of the  patents,
         patent applications,  trademarks,  trademark  applications,  registered
         copyrights, and domain names owned by any of the Debtors as of the date
         hereof.  SCHEDULE F lists all material  licenses in favor of any Debtor
         for the use of any patents, trademarks,  copyrights and domain names as
         of the date hereof.  All material patents and trademarks of the Debtors
         have been duly  recorded  at the United  States  Patent  and  Trademark
         Office  and all  material  copyrights  of the  Debtors  have  been duly
         recorded at the United States Copyright Office.

                  (pp) Except as set forth on SCHEDULE G attached  hereto,  none
         of the account debtors or other persons or entities obligated on any of
         the  Collateral  is a  governmental  authority  covered by the  Federal
         Assignment of Claims Act or any similar federal, state or local statute
         or rule in respect of such Collateral.

         5. EFFECT OF PLEDGE ON CERTAIN RIGHTS. If any of the Collateral subject
to  this  Agreement   consists  of  nonvoting  equity  or  ownership   interests
(regardless of class,  designation,  preference or rights) that may be converted
into voting equity or ownership  interests upon the occurrence of certain events
(including,  without  limitation,  upon the  transfer of all or any of the other
stock or assets of the  issuer),  it is agreed that the pledge of such equity or
ownership  interests  pursuant to this  Agreement or the  enforcement  of any of
Secured  Party's  rights  hereunder  shall not be deemed to be the type of event
which would trigger such conversion rights notwithstanding any provisions in the
Organizational  Documents  or  agreements  to which any  Debtor is subject or to
which any Debtor is party.

         6. DEFAULTS. The following events shall be "EVENTS OF DEFAULT":

                  (a) The  occurrence  of an Event of Default (as defined in the
         Note) under the Note;

                  (b) Any  representation  or  warranty  of any  Debtor  in this
         Agreement  shall prove to have been  incorrect in any material  respect
         when made;

                  (c) The failure by any Debtor to observe or perform any of its
         obligations  hereunder for three (3) days after delivery to such Debtor
         of notice of such  failure  by or on behalf of a Secured  Party  unless
         such  default is capable of cure but cannot be cured  within  such time
         frame and such  Debtor is using  best  efforts to cure same in a timely
         fashion; or

                  (d) If any provision of this  Agreement  shall at any time for
         any  reason  be  declared  to be null  and  void,  or the  validity  or
         enforceability   thereof  shall  be  contested  by  any  Debtor,  or  a
         proceeding shall be commenced by any Debtor, or by any governmental


                                       13

<PAGE>

         authority having jurisdiction over any Debtor, seeking to establish the
         invalidity or  unenforceability  thereof, or any Debtor shall deny that
         any Debtor has any  liability  or  obligation  purported  to be created
         under this Agreement.

         7. DUTY TO HOLD IN TRUST.

                  (a) Upon the  occurrence  of any Event of  Default  and at any
         time  thereafter,  each  Debtor  shall,  upon  receipt of any  revenue,
         income,  dividend,  interest  or other  sums  subject  to the  Security
         Interests, whether payable pursuant to the Note or otherwise, or of any
         check, draft, note, trade acceptance or other instrument  evidencing an
         obligation  to pay any such sum, hold the same in trust for the Secured
         Party  and  shall  forthwith  endorse  and  transfer  any such  sums or
         instruments,  or both, to the Secured Party,  pro-rata in proportion to
         their respective  then-currently  outstanding  principal amount of Note
         for  application to the  satisfaction  of the  Obligations  (and if any
         Debenture is not  outstanding,  pro-rata in  proportion  to the initial
         purchases of the remaining Note).

                  (b) If any Debtor  shall  become  entitled to receive or shall
         receive  any   securities  or  other   property   (including,   without
         limitation,  shares of Pledged  Securities or instruments  representing
         Pledged  Securities  acquired  after the date  hereof,  or any options,
         warrants, rights or other similar property or certificates representing
         a   dividend,    or   any   distribution   in   connection   with   any
         recapitalization, reclassification or increase or reduction of capital,
         or issued in connection with any  reorganization  of such Debtor or any
         of its direct or  indirect  subsidiaries)  in  respect  of the  Pledged
         Securities  (whether  as an  addition  to,  in  substitution  of, or in
         exchange for, such Pledged Securities or otherwise), such Debtor agrees
         to (i) accept the same as the agent of the Secured Party; (ii) hold the
         same in trust on behalf of and for the  benefit of the  Secured  Party;
         and (iii) to deliver any and all certificates or instruments evidencing
         the same to  Secured  Party on or before the close of  business  on the
         fifth business day following the receipt thereof by such Debtor, in the
         exact form received  together with the  Necessary  Endorsements,  to be
         held by  Secured  Party  subject  to the  terms  of this  Agreement  as
         Collateral.

         8. RIGHTS AND REMEDIES UPON DEFAULT.

                  (a) Upon the  occurrence  of any Event of  Default  and at any
         time thereafter, the Secured Party shall have the right to exercise all
         of the remedies conferred hereunder and under the Note, and the Secured
         Party shall have all the rights and  remedies of a secured  party under
         the UCC. Without limitation, the Secured Party shall have the following
         rights and powers:

                           (i) The  Secured  Party  shall have the right to take
                  possession of the  Collateral  and, for that  purpose,  enter,
                  with the aid and assistance of any person,  any premises where
                  the Collateral,  or any part thereof,  is or may be placed and
                  remove the same, and each Debtor shall assemble the Collateral
                  and make it available to the Secured Party at places which the
                  Secured  Party  shall  reasonably  select,   whether  at  such
                  Debtor's  premises or  elsewhere,  and make  available  to the
                  Secured Party, without rent, all of such Debtor's respective


                                       14


<PAGE>

                  premises and  facilities  for the purpose of the Secured Party
                  taking  possession  of,  removing or putting the Collateral in
                  saleable or disposable form.

                           (ii) Upon notice to the Debtors by Secured Party, all
                  rights  of each  Debtor  to  exercise  the  voting  and  other
                  consensual  rights  which it would  otherwise  be  entitled to
                  exercise  and  all  rights  of  each  Debtor  to  receive  the
                  dividends and interest which it would  otherwise be authorized
                  to receive and retain, shall cease. Upon such notice,  Secured
                  Party  shall  have the right to  receive  any  interest,  cash
                  dividends  or other  payments  on the  Collateral  and, at the
                  option of Secured  Party,  to exercise in the Secured  Party's
                  discretion  all  voting  rights  pertaining  thereto.  Without
                  limiting the generality of the foregoing,  Secured Party shall
                  have the right (but not the obligation) to exercise all rights
                  with  respect  to the  Collateral  as it  were  the  sole  and
                  absolute owner thereof, including, without limitation, to vote
                  and/or to exchange, at its sole discretion,  any or all of the
                  Collateral  in  connection  with  a  merger,   reorganization,
                  consolidation,    recapitalization   or   other   readjustment
                  concerning or involving the Collateral or any Debtor or any of
                  its direct or indirect subsidiaries.

                           (iii)  The  Secured  Party  shall  have the  right to
                  operate the business of each Debtor using the  Collateral  and
                  shall  have the  right to  assign,  sell,  lease or  otherwise
                  dispose of and deliver all or any part of the  Collateral,  at
                  public or private  sale or  otherwise,  either with or without
                  special  conditions or stipulations,  for cash or on credit or
                  for future  delivery,  in such  parcel or parcels  and at such
                  time or times and at such place or places, and upon such terms
                  and  conditions  as the  Secured  Party may deem  commercially
                  reasonable,  all  without  (except  as  shall be  required  by
                  applicable  statute  and  cannot be waived)  advertisement  or
                  demand upon or notice to any Debtor or right of  redemption of
                  a Debtor,  which are hereby expressly  waived.  Upon each such
                  sale, lease,  assignment or other transfer of Collateral,  the
                  Secured Party,  may, unless prohibited by applicable law which
                  cannot be waived,  purchase all or any part of the  Collateral
                  being sold,  free from and  discharged of all trusts,  claims,
                  right of  redemption  and  equities of any  Debtor,  which are
                  hereby waived and released.

                           (iv) The Secured  Party shall have the right (but not
                  the obligation) to notify any account debtors and any obligors
                  under instruments or accounts to make payments directly to the
                  Secured Party, and to enforce the Debtors' rights against such
                  account debtors and obligors.

                           (v) The Secured Party,  may (but is not obligated to)
                  direct  any  financial  intermediary  or any  other  person or
                  entity holding any investment property to transfer the same to
                  the Secured Party, or its designee.

                           (vi) The Secured  Party may (but is not obligated to)
                  transfer any or all  Intellectual  Property  registered in the
                  name of any Debtor at the United  States  Patent and Trademark
                  Office  and/or  Copyright  Office into the name of the Secured
                  Party or any designee or any purchaser of any Collateral.

                                       15


<PAGE>

                  (b) The Secured Party shall comply with any  applicable law in
         connection  with a disposition of Collateral and such  compliance  will
         not be considered adversely to affect the commercial  reasonableness of
         any sale of the  Collateral.  The Secured Party may sell the Collateral
         without  giving  any  warranties  and may  specifically  disclaim  such
         warranties. If the Secured Party sells any of the Collateral on credit,
         the Debtors will only be credited  with  payments  actually made by the
         purchaser.  In addition,  each Debtor waives any and all rights that it
         may have to a judicial  hearing in advance of the enforcement of any of
         the Secured Party's rights and remedies hereunder,  including,  without
         limitation,  its right  following an Event of Default to take immediate
         possession  of the  Collateral  and to exercise its rights and remedies
         with respect thereto.

                  (c) For the purpose of enabling  the Secured  Party to further
         exercise rights and remedies under this Section 8 or elsewhere provided
         by  agreement  or  applicable  law,  each Debtor  hereby  grants to the
         Secured  Party,  an  irrevocable,   nonexclusive  license  (exercisable
         without  payment of royalty or other  compensation  to such  Debtor) to
         use,  license  or  sublicense   following  an  Event  of  Default,  any
         Intellectual  Property now owned or hereafter  acquired by such Debtor,
         and  wherever  the same may be located,  and  including in such license
         access to all media in which any of the licensed  items may be recorded
         or  stored  and to all  computer  software  and  programs  used for the
         compilation or printout thereof.

         9.  APPLICATIONS OF PROCEEDS.  The proceeds of any such sale,  lease or
other  disposition of the Collateral  hereunder or from payments made on account
of any insurance  policy insuring any portion of the Collateral shall be applied
first, to the expenses of retaking,  holding, storing,  processing and preparing
for sale, selling, and the like (including,  without limitation, any taxes, fees
and other costs  incurred in  connection  therewith) of the  Collateral,  to the
reasonable  attorneys'  fees  and  expenses  incurred  by the  Secured  Party in
enforcing  the  Secured   Party's  rights   hereunder  and  in  connection  with
collecting, storing and disposing of the Collateral, and then to satisfaction of
the Obligations,  and to the payment of any other amounts required by applicable
law,  after  which the  Secured  Party  shall pay to the  applicable  Debtor any
surplus  proceeds.  If,  upon the  sale,  license  or other  disposition  of the
Collateral,  the proceeds  thereof are  insufficient to pay all amounts to which
the  Secured  Party is  legally  entitled,  the  Debtors  will be liable for the
deficiency,  together with interest thereon, at the rate of 20% per annum or the
lesser  amount  permitted  by  applicable  law  (the  "DEFAULT  RATE"),  and the
reasonable  fees of any attorneys  employed by the Secured Party to collect such
deficiency.  To the extent  permitted by applicable  law, each Debtor waives all
claims,  damages  and  demands  against  the  Secured  Party  arising out of the
repossession, removal, retention or sale of the Collateral, unless due solely to
the gross negligence or willful misconduct of the Secured Party as determined by
a final  judgment  (not  subject  to  further  appeal)  of a court of  competent
jurisdiction.

         10. SECURITIES LAW PROVISION. Each Debtor recognizes that Secured Party
may be limited  in its  ability to effect a sale to the public of all or part of
the Pledged  Securities by reason of certain  prohibitions in the Securities Act
of 1933, as amended,  or other federal or state  securities laws  (collectively,
the "SECURITIES LAWS"), and may be compelled to resort to one or more sales to a
restricted  group of  purchasers  who may be  required  to agree to acquire  the
Pledged Securities for their own account, for investment and not with a view to


                                       16

<PAGE>

the distribution or resale thereof. Each Debtor agrees that sales so made may be
at prices and on terms less favorable than if the Pledged  Securities  were sold
to the public, and that Secured Party has no obligation to delay the sale of any
Pledged  Securities  for the period of time  necessary  to register  the Pledged
Securities for sale to the public under the Securities  Laws.  Each Debtor shall
cooperate  with Secured Party in its attempt to satisfy any  requirements  under
the Securities Laws (including,  without limitation,  registration thereunder if
requested by Secured Party) applicable to the sale of the Pledged  Securities by
Secured Party.

         11.  COSTS AND  EXPENSES.  Each  Debtor  agrees  to pay all  reasonable
out-of-pocket  fees,  costs and expenses  incurred in connection with any filing
required  hereunder,  including  without  limitation,  any financing  statements
pursuant  to  the  UCC,   continuation   statements,   partial  releases  and/or
termination   statements  related  thereto  or  any  expenses  of  any  searches
reasonably  required by the Secured Party.  The Debtors shall also pay all other
claims and  charges  which in the  reasonable  opinion of the  Secured  Party is
reasonably  likely to prejudice,  imperil or otherwise  affect the Collateral or
the Security Interests  therein.  The Debtors will also, upon demand, pay to the
Secured  Party the  amount of any and all  reasonable  expenses,  including  the
reasonable fees and expenses of its counsel and of any experts and agents, which
the Secured  Party,  may incur in connection  with (i) the  enforcement  of this
Agreement, (ii) the custody or preservation of, or the sale of, collection from,
or other  realization  upon,  any of the  Collateral,  or (iii) the  exercise or
enforcement  of any of the rights of the Secured Party under the Note.  Until so
paid, any fees payable  hereunder shall be added to the principal  amount of the
Note and shall bear interest at the Default Rate.

         12.  RESPONSIBILITY FOR COLLATERAL.  The Debtors assume all liabilities
and responsibility in connection with all Collateral,  and the Obligations shall
in no way be affected or diminished by reason of the loss,  destruction,  damage
or theft of any of the Collateral or its unavailability for any reason.  Without
limiting  the  generality  of the  foregoing,  (a) in no event shall the Secured
Party (i) have any duty (either  before or after an Event of Default) to collect
any amounts in respect of the  Collateral or to preserve any rights  relating to
the Collateral, or (ii) have any obligation to clean-up or otherwise prepare the
Collateral for sale, and (b) each Debtor shall remain obligated and liable under
each  contract  or  agreement  included  in the  Collateral  to be  observed  or
performed  by such  Debtor  thereunder.  The  Secured  Party  shall not have any
obligation  or  liability  under any such  contract or agreement by reason of or
arising out of this Agreement or the receipt by the Secured Party of any payment
relating to any of the  Collateral,  nor shall the Secured Party be obligated in
any manner to perform any of the  obligations of any Debtor under or pursuant to
any such contract or agreement,  to make inquiry as to the nature or sufficiency
of any payment  received by the Secured Party in respect of the Collateral or as
to the  sufficiency  of any  performance by any party under any such contract or
agreement,  to  present or file any  claim,  to take any  action to enforce  any
performance  or to  collect  the  payment  of any  amounts  which  may have been
assigned to the Secured  Party or to which the Secured  Party may be entitled at
any time or times.

         13. SECURITY  INTERESTS  ABSOLUTE.  All rights of the Secured Party and
all obligations of the Debtors  hereunder,  shall be absolute and unconditional,
irrespective of: (a) any lack of validity or  enforceability  of this Agreement,
the Note or any agreement entered into in connection with the foregoing,  or any
portion  hereof or  thereof;  (b) any  change  in the  time,  manner or place of
payment  or  performance  of,  or in  any  other  term  of,  all  or  any of the


                                       17

<PAGE>

Obligations, or any other amendment or waiver of or any consent to any departure
from  the  Note or any  other  agreement  entered  into in  connection  with the
foregoing; (c) any exchange,  release or nonperfection of any of the Collateral,
or any release or amendment or waiver of or consent to departure  from any other
collateral for, or any guarantee,  or any other security,  for all or any of the
Obligations;  (d) any action by the Secured Party to obtain,  adjust, settle and
cancel in its sole discretion any insurance claims or matters made or arising in
connection  with the  Collateral;  or (e) any  other  circumstance  which  might
otherwise  constitute any legal or equitable defense available to a Debtor, or a
discharge of all or any part of the Security Interests granted hereby. Until the
Obligations  shall  have  been paid and  performed  in full,  the  rights of the
Secured Party shall continue even if the  Obligations are barred for any reason,
including,  without  limitation,  the running of the statute of  limitations  or
bankruptcy.  Each  Debtor  expressly  waives  presentment,  protest,  notice  of
protest,  demand, notice of nonpayment and demand for performance.  In the event
that at any time any transfer of any  Collateral or any payment  received by the
Secured Party  hereunder  shall be deemed by final order of a court of competent
jurisdiction to have been a voidable  preference or fraudulent  conveyance under
the bankruptcy or insolvency laws of the United States, or shall be deemed to be
otherwise  due to any party  other than the  Secured  Party,  then,  in any such
event, each Debtor's  obligations  hereunder shall survive  cancellation of this
Agreement, and shall not be discharged or satisfied by any prior payment thereof
and/or  cancellation  of this  Agreement,  but shall  remain a valid and binding
obligation  enforceable in accordance with the terms and provisions hereof. Each
Debtor  waives all right to require  the  Secured  Party to proceed  against any
other person or entity or to apply any  Collateral  which the Secured  Party may
hold at any time,  or to marshal  assets,  or to pursue any other  remedy.  Each
Debtor waives any defense arising by reason of the application of the statute of
limitations to any obligation secured hereby.

         14. TERM OF AGREEMENT.  This Agreement and the Security Interests shall
terminate  on  the  date  on  which  all  payments  under  the  Note  have  been
indefeasibly  paid  in  full  and  all  other  Obligations  have  been  paid  or
discharged;  provided, however, that all indemnities of the Debtors contained in
this Agreement (including, without limitation, Annex B hereto) shall survive and
remain  operative and in full force and effect  regardless of the termination of
this Agreement.

         15. POWER OF ATTORNEY; FURTHER ASSURANCES.

                   (a) Each Debtor authorizes the Secured Party, and does hereby
         make,  constitute  and  appoint  the  Secured  Party and its  officers,
         agents, successors or assigns with full power of substitution,  as such
         Debtor's true and lawful  attorney-in-fact,  with power, in the name of
         the Secured Party or such Debtor,  to, after the  occurrence and during
         the continuance of an Event of Default,  (i) endorse any note,  checks,
         drafts,  money  orders  or  other  instruments  of  payment  (including
         payments  payable  under or in respect of any policy of  insurance)  in
         respect of the Collateral  that may come into possession of the Secured
         Party; (ii) to sign and endorse any financing statement pursuant to the
         UCC or any invoice, freight or express bill, bill of lading, storage or
         warehouse receipts, drafts against debtors, assignments,  verifications
         and notices in connection with accounts,  and other documents  relating
         to the Collateral;  (iii) to pay or discharge  taxes,  liens,  security
         interests or other encumbrances at any time levied or placed on or


                                       18
<PAGE>

         threatened  against the Collateral;  (iv) to demand,  collect,  receipt
         for,  compromise,  settle  and sue for  monies  due in  respect  of the
         Collateral;  (v) to  transfer  any  Intellectual  Property  or  provide
         licenses respecting any Intellectual Property;  and (vi) generally,  at
         the option of the Secured Party, and at the expense of the Debtors,  at
         any time,  or from time to time,  to execute  and  deliver  any and all
         documents  and  instruments  and to do all acts and  things  which  the
         Secured Party deems necessary to protect, preserve and realize upon the
         Collateral  and the  Security  Interests  granted  therein  in order to
         effect  the  intent  of this  Agreement  and the Note all as fully  and
         effectually  as the Debtors  might or could do; and each Debtor  hereby
         ratifies all that said attorney  shall  lawfully do or cause to be done
         by virtue  hereof.  This power of attorney is coupled  with an interest
         and shall be irrevocable  for the term of this Agreement and thereafter
         as long as any of the Obligations shall be outstanding. The designation
         set  forth  herein  shall  be  deemed  to  amend  and   supersede   any
         inconsistent  provision  in  the  Organizational   Documents  or  other
         documents or  agreements to which any Debtor is subject or to which any
         Debtor is a party.  Without  limiting the  generality of the foregoing,
         after the occurrence and during the continuance of an Event of Default,
         each Secured Party is  specifically  authorized to execute and file any
         applications  for or  instruments  of transfer  and  assignment  of any
         patents, trademarks, copyrights or other Intellectual Property with the
         United  States  Patent  and  Trademark  Office  and the  United  States
         Copyright Office.

                   (b) On a continuing  basis,  each Debtor will make,  execute,
         acknowledge,  deliver,  file and  record,  as the case may be, with the
         proper filing and recording  agencies in any  jurisdiction,  including,
         without limitation,  the jurisdictions indicated on SCHEDULE C attached
         hereto,  all  such  instruments,  and  take  all  such  action  as  may
         reasonably be deemed necessary or advisable, or as reasonably requested
         by the  Secured  Party,  to  perfect  the  Security  Interests  granted
         hereunder  and  otherwise  to carry out the intent and purposes of this
         Agreement,  or for assuring  and  confirming  to the Secured  Party the
         grant  or  perfection  of a  perfected  security  interest  in all  the
         Collateral under the UCC.

                  (c) Each Debtor hereby irrevocably  appoints the Secured Party
         as such Debtor's attorney-in-fact, with full authority in the place and
         instead  of such  Debtor and in the name of such  Debtor,  from time to
         time in the  Secured  Party's  discretion,  to take any  action  and to
         execute any  instrument  which the Secured Party may deem  necessary or
         advisable to accomplish the purposes of this  Agreement,  including the
         filing,   in  its  sole  discretion,   of  one  or  more  financing  or
         continuation statements and amendments thereto,  relative to any of the
         Collateral without the signature of such Debtor where permitted by law,
         which  financing  statements may (but need not) describe the Collateral
         as "all assets" or "all personal property" or words of like import, and
         ratifies all such  actions  taken by the Secured  Party.  This power of
         attorney is coupled with an interest and shall be  irrevocable  for the
         term of this Agreement and thereafter as long as any of the Obligations
         shall be outstanding.

         16. NOTICES.  Any demand upon or notice to the Debtors  hereunder shall
be  effective  when  delivered by hand or when  properly  deposited in the mails
postage prepaid, or sent by telex,  answerback received, or electronic facsimile
transmission,  receipt  acknowledged,  or  delivered  to a telegraph  company or
overnight courier, in each case addressed to the Debtor at the address shown


                                       19

<PAGE>

below.  Any  notice  by the  Debtors  to the  Secured  Party  shall  be given as
aforesaid,  addressed  to the Secured  Party at the address  shown below or such
other address as the Secured Party may advise the Debtors in writing.

            Secured Party:
                               Boca Funding, LLC
                               Carnegie Hall Tower
                               152 W. 57th Street
                               54th Floor
                               New York, NY 10019
                               Fax: (212) 582-2222

            Debtors:
                               c/o Environmental Service Professionals, Inc
                               1111 Tahquitz Canyon Way, Suite 110
                               Palm Springs, CA 92262
                               Fax: (760) 327-5630



         17.  OTHER  SECURITY.  To the extent  that the  Obligations  are now or
hereafter  secured by property  other than the  Collateral or by the  guarantee,
endorsement or property of any other person, firm,  corporation or other entity,
then the Secured Party shall have the right, in its sole discretion,  to pursue,
relinquish,  subordinate,  modify or take any other action with respect thereto,
without in any way modifying or affecting any of the Secured  Party's rights and
remedies hereunder.

         18. MISCELLANEOUS.

                  (a) No course of dealing  between  the Debtors and the Secured
         Party, nor any failure to exercise, nor any delay in exercising, on the
         part of the Secured Party, any right,  power or privilege  hereunder or
         under the Note shall operate as a waiver thereof;  nor shall any single
         or partial  exercise  of any right,  power or  privilege  hereunder  or
         thereunder  preclude  any  other or  further  exercise  thereof  or the
         exercise of any other right, power or privilege.

                  (b) All of the rights and  remedies of the Secured  Party with
         respect to the Collateral, whether established hereby or by the Note or
         by any other  agreements,  instruments  or documents or by law shall be
         cumulative and may be exercised singly or concurrently.

                  (c) This  Agreement,  together with the exhibits and schedules
         hereto, contain the entire understanding of the parties with respect to
         the  subject  matter  hereof and  supersede  all prior  agreements  and
         understandings,  oral or written,  with respect to such matters,  which
         the parties  acknowledge  have been merged into this  Agreement and the
         exhibits and schedules hereto. No provision of this Agreement may be


                                       20

<PAGE>

         waived,   modified,   supplemented  or  amended  except  in  a  written
         instrument signed, in the case of an amendment,  by the Debtors and the
         Secured  Party or, in the case of a waiver,  by the party  against whom
         enforcement of any such waived provision is sought.

                  (d) If any term,  provision,  covenant or  restriction of this
         Agreement is held by a court of competent  jurisdiction  to be invalid,
         illegal, void or unenforceable, the remainder of the terms, provisions,
         covenants and  restrictions set forth herein shall remain in full force
         and effect and shall in no way be  affected,  impaired or  invalidated,
         and the parties hereto shall use their commercially  reasonable efforts
         to find  and  employ  an  alternative  means  to  achieve  the  same or
         substantially  the  same  result  as that  contemplated  by such  term,
         provision,  covenant  or  restriction.  It  is  hereby  stipulated  and
         declared  to be the  intention  of the  parties  that they  would  have
         executed the remaining  terms,  provisions,  covenants and restrictions
         without  including any of such that may be hereafter  declared invalid,
         illegal, void or unenforceable.

                  (e) No waiver of any default  with  respect to any  provision,
         condition  or  requirement  of this  Agreement  shall be deemed to be a
         continuing  waiver in the future or a waiver of any subsequent  default
         or a waiver of any other  provision,  condition or requirement  hereof,
         nor shall  any delay or  omission  of any party to  exercise  any right
         hereunder in any manner impair the exercise of any such right.

                  (f) This  Agreement  shall be  binding  upon and  inure to the
         benefit of the parties and their successors and permitted assigns.  The
         Company and the  Guarantors may not assign this Agreement or any rights
         or  obligations  hereunder  without the prior  written  consent of each
         Secured Party (other than by merger).  The Secured Party may assign any
         or all of its rights  under this  Agreement  to any Person to whom such
         Secured  Party  assigns or  transfers  any  Securities,  provided  such
         transferee  agrees  in  writing  to  be  bound,  with  respect  to  the
         transferred Securities,  by the provisions of this Agreement that apply
         to the "Secured Party."

                  (g) Each party shall take such further  action and execute and
         deliver such further  documents as may be necessary or  appropriate  in
         order to carry out the provisions and purposes of this Agreement.

                  (h)  All  questions  concerning  the  construction,  validity,
         enforcement and  interpretation  of this Agreement shall be governed by
         and construed and enforced in accordance  with the internal laws of the
         State of New York, without regard to the principles of conflicts of law
         thereof.  Each  Debtor  agrees  that  all  proceedings  concerning  the
         interpretations,   enforcement   and   defense   of  the   transactions
         contemplated by this Agreement and the Note (whether  brought against a
         party  hereto  or  its  respective  affiliates,   directors,  officers,
         shareholders,   partners,   members,  employees  or  agents)  shall  be
         commenced  exclusively  in the state and federal  courts sitting in the
         City of New York, Borough of Manhattan.  Each Debtor hereby irrevocably
         submits to the exclusive  jurisdiction  of the state and federal courts
         sitting  in  the  City  of New  York,  Borough  of  Manhattan  for  the
         adjudication of any dispute hereunder or in connection herewith or with
         any transaction contemplated hereby or discussed herein, and hereby


                                       21

<PAGE>

         irrevocably  waives,  and agrees not to assert in any  proceeding,  any
         claim that it is not personally subject to the jurisdiction of any such
         court,  that such  proceeding  is improper.  Each party  hereto  hereby
         irrevocably  waives personal service of process and consents to process
         being  served in any such  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 Agreement 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 Agreement or the transactions  contemplated hereby. If
         any party shall commence a proceeding to enforce any provisions of this
         Agreement,  then  the  prevailing  party  in such  proceeding  shall be
         reimbursed by the other party for its  reasonable  attorney's  fees and
         other costs and expenses incurred with the  investigation,  preparation
         and prosecution of such proceeding.

                  (i)  This   Agreement   may  be  executed  in  any  number  of
         counterparts,  each of which when so executed  shall be deemed to be an
         original and, all of which taken together shall  constitute one and the
         same  Agreement.  In the  event  that any  signature  is  delivered  by
         facsimile  transmission,  such  signature  shall create a valid binding
         obligation of the party executing (or on whose behalf such signature is
         executed) the same with the same force and effect as if such  facsimile
         signature were the original thereof.

                  (j) All Debtors  shall jointly and severally be liable for the
         obligations of each Debtor to the Secured Party hereunder.

                  (k) Each Debtor shall  indemnify,  reimburse and hold harmless
         the Secured Party and its partners,  members,  shareholders,  officers,
         directors,  employees  and  agents  (and any other  persons  with other
         titles that have similar functions) (collectively,  "INDEMNITEES") from
         and  against  any  and  all  losses,  claims,   liabilities,   damages,
         penalties, suits, costs and expenses, of any kind or nature, (including
         fees  relating to the cost of  investigating  and  defending any of the
         foregoing)  imposed on, incurred by or asserted against such Indemnitee
         in any way  related  to or  arising  from or alleged to arise from this
         Agreement  or  the   Collateral,   except  any  such  losses,   claims,
         liabilities, damages, penalties, suits, costs and expenses which result
         from the gross  negligence or willful  misconduct of the  Indemnitee as
         determined by a final,  nonappealable  decision of a court of competent
         jurisdiction. This indemnification provision is in addition to, and not
         in limitation of, any other indemnification  provision in the Note, the
         Purchase  Agreement  (as such term is defined in the Note) or any other
         agreement,  instrument  or other  document  executed  or  delivered  in
         connection herewith or therewith.

                  (l) Nothing in this  Agreement  shall be  construed to subject
         the Secured Party to liability as a partner in any Debtor or any if its
         direct or indirect subsidiaries that is a partnership or as a member in
         any  Debtor or any of its  direct or  indirect  subsidiaries  that is a
         limited  liability  company,  nor shall the Secured  Party be deemed to
         have assumed any obligations under any partnership agreement or limited
         liability company agreement, as applicable, of any such Debtor or any


                                       22

<PAGE>

         if its direct or indirect  subsidiaries or otherwise,  unless and until
         the Secured Party exercises its right to be substituted for such Debtor
         as a partner or member, as applicable, pursuant hereto.

                  (m) To the extent that the grant of the  security  interest in
         the  Collateral  and the  enforcement  of the terms hereof  require the
         consent, approval or action of any partner or member, as applicable, of
         any  Debtor  or any  direct or  indirect  subsidiary  of any  Debtor or
         compliance with any provisions of any of the Organizational  Documents,
         the Debtors  hereby  grant such consent and approval and waive any such
         noncompliance with the terms of said documents.

                            [SIGNATURE PAGES FOLLOW]

























                                       23

<PAGE>


         IN WITNESS  WHEREOF,  the parties  hereto  have  caused  this  Security
Agreement to be duly executed on the day and year first above written.


ENVIRONMENTAL SERVICE PROFESSIONALS, INC.

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



NATIONAL PROFESSIONAL SERVICES INC.

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


PACIFIC ENVIRONMENTAL SAMPLING, INC.

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


ALLSTATE HOME INSPECTION & ENVIRONMENTAL TESTING, LTD.

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


BOCA FUNDING, LLC


By: /s/ Gil Kaulter
    ---------------
     Name:
     Title:












                                       24

<PAGE>




                                   SCHEDULE A


Principal Place of Business of Debtors:

1111 East Tahquitz Canyon Way
Suite 110
Palm Springs, CA 92262

Locations Where Collateral is Located or Stored:

1111 East Tahquitz Canyon Way
Suite 110
Palm Springs, CA 92262

91 Summer Road
Barre, Vermont 05641



<PAGE>



                                   SCHEDULE B

None.



<PAGE>



                                   SCHEDULE C

Nevada
California
Delaware






<PAGE>


                                   SCHEDULE D
              Legal Names and Organizational Identification Numbers
<TABLE>
<CAPTION>
<S>    <C>                                     <C>                         <C>
------ --------------------------------------- --------------------------- ----------------------- ---
       NAME                                    STAE OF ORGANIZATION        TAX ID #
------ --------------------------------------- --------------------------- ----------------------- ---
------ --------------------------------------- --------------------------- ----------------------- ---
       Environmental Service Professionals,    Nevada                      84-1214736
       Inc.
------ --------------------------------------- --------------------------- ----------------------- ---
       National Professional Services Inc.     Delaware                    20-3498643
------ --------------------------------------- --------------------------- ----------------------- ---
       Pacific Environmental Sampling, Inc.    California                  03-0442621
------ --------------------------------------- --------------------------- ----------------------- ---
       Allstate Home Inspection &              Delaware                    92-0000340
       Environmental Testing, Ltd.
------ --------------------------------------- --------------------------- ----------------------- ---
</TABLE>






<PAGE>


                                   SCHEDULE E
                         Names; Mergers and Acquisitions

                        Glass-Aire Industries Group Ltd.



<PAGE>


                                   SCHEDULE F
                              Intellectual Property

All  Intellectual  Property as disclosed in the Company's  Annual Report on Form
10-KSB for the fiscal year ended December 31, 2006.




<PAGE>


                                   SCHEDULE G
                                 Account Debtors

None.







<PAGE>


                                   SCHEDULE H
                               Pledged Securities

<TABLE>
<CAPTION>
<S>                                     <C>                      <C>                   <C>             <C>
--------------------------------------- ------------------------ --------------------- --------------- ---------------
NAME OF ISSUER/GUARANTOR                  TYPE OF SECURITIES        NO. OF SHARES      PERCENTAGE OF       STOCK
                                                                        OWNED           ISSUER OWNED    CERTIFICATE
                                                                                                            NO.
--------------------------------------- ------------------------ --------------------- --------------- ---------------
--------------------------------------- ------------------------ --------------------- --------------- ---------------
National Professional Services Inc.     Common                   1,000                 100%            7

--------------------------------------- ------------------------ --------------------- --------------- ---------------
Pacific Environmental Sampling, Inc.    Common                   1,000                 100%            21
--------------------------------------- ------------------------ --------------------- --------------- ---------------
Allstate Home Inspection &              Common                   1,000                 100%            2
Environmental Testing, Ltd.
--------------------------------------- ------------------------ --------------------- --------------- ---------------
</TABLE>






<PAGE>




                                     ANNEX A
                                       TO
                                    SECURITY
                                    AGREEMENT

                        FORM OF ADDITIONAL DEBTOR JOINDER

         Security  Agreement  dated as of June ___,  2007 made by  ENVIRONMENTAL
SERVICE  PROFESSIONALS,  INC. and its  subsidiaries  party  thereto from time to
time,  as Debtors to and in favor of the Secured Party  identified  therein (the
"SECURITY AGREEMENT")

         Reference  is  made  to  the  Security   Agreement  as  defined  above;
capitalized  terms used herein and not otherwise  defined  herein shall have the
meanings given to such terms in, or by reference in, the Security Agreement.

         The  undersigned  hereby agrees that upon  delivery of this  Additional
Debtor Joinder to the Secured Party referred to above, the undersigned shall (a)
be an Additional  Debtor under the Security  Agreement,  (b) have all the rights
and obligations of the Debtors under the Security  Agreement as fully and to the
same extent as if the undersigned was an original  signatory  thereto and (c) be
deemed to have made the  representations  and warranties set forth therein as of
the date of execution and delivery of this Additional  Debtor  Joinder.  WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, THE UNDERSIGNED SPECIFICALLY GRANTS TO
THE SECURED PARTY A SECURITY  INTEREST IN THE COLLATERAL AS MORE FULLY SET FORTH
IN THE  SECURITY  AGREEMENT  AND  ACKNOWLEDGES  AND AGREES TO THE WAIVER OF JURY
TRIAL PROVISIONS SET FORTH THEREIN.

         Attached hereto are supplemental  and/or  replacement  Schedules to the
Security Agreement, as applicable.

         An executed  copy of this  Joinder  shall be  delivered  to the Secured
Party,  and the Secured  Party may rely on the  matters  set forth  herein on or
after the date hereof. This Joinder shall not be modified, amended or terminated
without the prior written consent of the Secured Party.




<PAGE>


         IN WITNESS  WHEREOF,  the  undersigned  has caused  this  Joinder to be
executed in the name and on behalf of the undersigned.

                           [Name of Additional Debtor]

                           By:
                           Name:
                           Title:

                           Address:





Dated:






</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.3
<SEQUENCE>4
<FILENAME>ex993.txt
<TEXT>
Exhibit 99.3

                                    GUARANTY

         GUARANTY  (the  "Guaranty"),  dated as of June 18,  2007,  by  National
Professional  Services  Inc.,  a  Delaware  corporation,  Pacific  Environmental
Sampling,   Inc.,  a  California   corporation,   Allstate  Home   Inspection  &
Environmental  Testing,  Ltd., a Delaware  corporation,  each with an address of
c/oEnvironmental  Service  Professionals,  Inc.,  1111 East Tahquitz Canyon Way,
Suite 110, Palm Springs, California 92262 (each a "Guarantor", collectively, the
"Guarantors"),  in favor of BOCA  FUNDING,  LLC with an  office at 152 West 57th
Street, 54th Floor, New York, NY (the "Secured Party").

         WHEREAS, the Guarantors are subsidiaries or affiliates of ENVIRONMENTAL
SERVICE PROFESSIONALS, INC. (the "Borrower"); and

         WHEREAS,  in accordance with a certain senior secured convertible note,
dated as of the date hereof (the "Note"),  executed by the Borrower, and certain
related agreements between the Borrower and the Secured Party (collectively, as
amended,  restated,  or  extended  from  time to time,  the  "Loan  Documents"),
theSecured  Party  has  agreed to loan to the  Borrower  up to SIX  HUNDRED  AND
FIFTEEN THOUSAND Dollars ($615,000) (the "Loan"); and

         WHEREAS,  the  Secured  Party's  willingness  to  extend  the  loan  is
conditioned upon the Guarantors executing and delivering this Guaranty; and

         WHEREAS,  the  aforesaid  Loan  will be  beneficial  to the  Guarantors
inasmuch as the proceeds of the Loan to the Borrower will indirectly benefit the
Guarantors;

         NOW,  THEREFORE,  in order to induce the Secured Party to make the Loan
to the Borrower pursuant to the Loan Documents,  and for other good and valuable
consideration,  the receipt and  sufficiency of which is hereby  acknowledged by
each of the Guarantors, the Guarantors hereby agree as follows:

         1. GUARANTY OF PAYMENT AND PERFORMANCE.  The Guarantors  hereby jointly
and severally  guarantee to the Secured Party the full and punctual payment when
due (whether at maturity, by acceleration or otherwise), and the performance, of
all liabilities, agreements and other obligations of the Borrower to the Secured
Party, whether direct or indirect, absolute or contingent, due or to become due,
secured or unsecured,  now existing or hereafter arising or acquired (whether by
way of  discount,  letter of  credit,  lease,  loan,  overdraft  or  otherwise),
including without limitation all obligations under the Note  (collectively,  the
"Obligations").  This  Guaranty is an  absolute,  unconditional  and  continuing
guaranty of the full and punctual payment and performance of the Obligations and
not  of  their  collectibility  only  and  is in no  way  conditioned  upon  any
requirement  that  the  Secured  Party  first  attempt  to  collect  any  of the
Obligations  from the  Borrower  or resort  to any  security  or other  means of
obtaining  their  payment.  Should  the  Borrower  default  in  the  payment  or
performance  of  any of the  Obligations,  the  obligations  of  each  Guarantor
hereunder shall become immediately due and payable to the Secured Party, without
demand or  notice  of any  nature,  all of which  are  expressly  waived by each
Guarantor.  Payments by each Guarantor  hereunder may be required by the Secured
Party on any number of occasions.

                                        1

<PAGE>

         2. GUARANTORS'  AGREEMENT TO PAY. Each Guarantor further agrees, as the
principal  obligor and not as a guarantor  only, to pay to the Secured Party, on
demand, all reasonable costs and expenses  (including court costs and reasonable
legal  expenses)  incurred or expended by the Secured Party in  connection  with
enforcement  of this  Guaranty,  together with  interest on amounts  recoverable
under this  Guaranty  from the time such amounts  become due under this Guaranty
until payment,  at the rate per annum equal to the default rate set forth in the
Note;  provided that if such interest exceeds the maximum amount permitted to be
paid under  applicable  law, then such interest shall be reduced to such maximum
permitted amount.

         3. UNLIMITED GUARANTY.  The liability of each Guarantor hereunder shall
be unlimited to the extent of the Obligations and the other  obligations of each
Guarantor hereunder (including, without limitation, under Section 2 above).

         4.  WAIVERS  BY  GUARANTORS;  SECURED  PARTY'S  FREEDOM  TO  ACT.  Each
Guarantor  agrees that the  Obligations  will be paid and performed  strictly in
accordance  with their  respective  terms  regardless of any law,  regulation or
order now or hereafter in effect in any jurisdiction affecting any of such terms
or the rights of the Secured Party with respect  thereto.  Each Guarantor waives
presentment,  demand,  protest,  notice of  acceptance,  notice  of  Obligations
incurred and all other notices of any kind,  all defenses which may be available
to Borrower by virtue of any  valuation,  stay,  moratorium law or other similar
law now or hereafter in effect,  any right to require the  marshalling of assets
of the Borrower,  and all suretyship  defenses  generally.  Without limiting the
generality of the  foregoing,  each  Guarantor  agrees to the  provisions of any
instrument  evidencing,  securing or otherwise  executed in connection  with any
Obligation and agrees that the obligations of each Guarantor hereunder shall not
be released or discharged, in whole or in part, or otherwise affected by (i) the
failure of the  Secured  Party to assert  any claim or demand or to enforce  any
right or remedy  against the  Borrower;  (ii) any  extensions or renewals of any
Obligation;  (iii) any rescissions,  waivers, amendments or modifications of any
of the terms or provisions of any  agreement  evidencing,  securing or otherwise
executed in connection with any Obligation  (provided,  that, the obligations of
each  Guarantor  hereunder  shall  be  appropriately  modified  to  reflect  any
amendment or modification of the Obligations);  (iv) the substitution or release
of any  entity  primarily  or  secondarily  liable for any  Obligation;  (v) the
adequacy of any rights the Secured  Party may have  against  any  collateral  or
other means of obtaining  repayment of the  Obligations;  (vi) the impairment of
any  collateral  securing the  Obligations,  including  without  limitation  the
failure to perfect or preserve  any rights the Secured  Party might have in such
collateral  or  the  substitution,   exchange,   surrender,   release,  loss  or
destruction  of any such  collateral;  or (vii) any other act or omission  which
might in any manner or to any extent vary the risk of any Guarantor or otherwise
operate as a release or  discharge of any other  Guarantor,  all of which may be
done without notice to any Guarantor.

         5.  UNENFORCEABILITY OF OBLIGATIONS AGAINST BORROWER. If for any reason
the Borrower has no legal existence or is under no legal obligation to discharge
any of the Obligations,  or if any of the Obligations have become  irrecoverable
from the  Borrower by operation of law or for any other  reason,  this  Guaranty
shall  nevertheless  be binding on each  Guarantor to the same extent as if each
Guarantor at all times had been the principal  obligor on all such  Obligations.
In the event that  acceleration  of the time for payment of the  Obligations  is
stayed upon the insolvency, bankruptcy or reorganization of the Borrower, or for

                                        2


<PAGE>

any other reason,  all such amounts otherwise subject to acceleration  under the
terms of any agreement evidencing,  securing or otherwise executed in connection
with any Obligation shall be immediately due and payable by each Guarantor.

         6.  SUBROGATION;  SUBORDINATION.  Until the payment and  performance in
full of all  Obligations  and any and all  obligations  of the  Borrower  to any
affiliate of the Secured Party,  no Guarantor  shall exercise any rights against
the Borrower arising as a result of payment by any Guarantor  hereunder,  by way
of  subrogation or otherwise,  and will not prove any claim in competition  with
the  Secured  Party or its  affiliates  in respect of any payment  hereunder  in
bankruptcy or insolvency  proceedings of any nature; no Guarantor will claim any
set-off or counterclaim  against the Borrower in respect of any liability of any
Guarantor  to the  Borrower;  and each  Guarantor  waives any benefit of and any
right to participate in any collateral which may be held by the Secured Party or
any  such  affiliate.  The  payment  of any  amounts  due  with  respect  to any
indebtedness  of the Borrower now or hereafter  held by any  Guarantor is hereby
subordinated  to the prior payment in full of the  Obligations.  Each  Guarantor
agrees that after the occurrence of any default in the payment or performance of
the Obligations, after the expiration of any applicable cure period, it will not
demand,  sue for or  otherwise  attempt  to  collect  after  such  time any such
indebtedness of the Borrower to such Guarantor until the Obligations  shall have
been paid in full. If,  notwithstanding  the foregoing  sentence,  any Guarantor
shall collect,  enforce or receive any amounts in respect of such  indebtedness,
such amounts  shall be  collected,  enforced  and received by such  Guarantor as
trustee for the Secured  Party and be paid over to the Secured  Party on account
of  the  Obligations  without  affecting  in any  manner  the  liability  of any
Guarantor under the other provisions of this Guaranty.

         7. FURTHER ASSURANCES.  Each Guarantor agrees to do all such things and
execute  all such  documents,  as the  Secured  Party  may  consider  reasonably
necessary or  desirable to give full effect to this  Guaranty and to perfect and
preserve the rights and powers of the Secured Party hereunder.

         8. TERMINATION; REINSTATEMENT. This Guaranty shall remain in full force
and effect  until the  earlier of: (i) the  Obligations  are paid in full (other
than  contingent  indemnity  obligations),  and not subject to any  recapture or
preference in bankruptcy  or similar  proceedings,  and the Secured Party has no
further commitment to extent credit to the Borrower or (ii) the Secured Party is
given written notice of each Guarantor's intention to discontinue this Guaranty,
notwithstanding any intermediate or temporary payment or settlement of the whole
or any  part of the  Obligations.  No such  notice  under  (ii)  above  shall be
effective unless received and acknowledged by an officer of the Secured Party at
its head  office.  No notice  under  (ii) above  shall  affect any rights of the
Secured  Party or of any  affiliate  hereunder  with respect to any  Obligations
incurred  prior to such notice.  This Guaranty shall continue to be effective or
be reinstated,  notwithstanding  any notice or  termination,  if at any time any
payment made or value  received  with respect to an  Obligation  is rescinded or
must otherwise be returned by the Secured Party upon the insolvency,  bankruptcy
or reorganization of the Borrower, or otherwise,  all as though such payment had
not been made or value received.

                                        3

<PAGE>

         9. SUCCESSORS AND ASSIGNS. This Guaranty shall be jointly and severally
binding upon each Guarantor,  its successors and assigns, and shall inure to the
benefit  of  and be  enforceable  by  the  Secured  Party  and  its  successors,
transferees  and assigns.  Without  limiting  the  generality  of the  foregoing
sentence,  the Secured  Party may assign or otherwise  transfer any agreement or
any note held by it  evidencing,  securing or otherwise  executed in  connection
with the Obligations,  or sell  participations in any interest  therein,  to any
other person or entity,  and such other person or entity shall thereupon  become
vested,  to the extent set forth in the agreement  evidencing  such  assignment,
transfer or participation, with all the rights in respect thereof granted to the
Secured Party herein.

         10. AMENDMENTS AND WAIVERS.  No amendment or waiver of any provision of
this Guaranty nor consent to any departure by any Guarantor  therefrom  shall be
effective  unless the same shall be in writing and signed by the Secured  Party.
No  failure  on the  part of the  Secured  Party  to  exercise,  and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder  preclude any other or further
exercise thereof or the exercise of any other right.

         11. NOTICES. All notices and other communications  called for hereunder
shall be made in writing and, unless  otherwise  specifically  provided  herein,
shall be deemed to have been duly made or given when delivered by hand or mailed
first  class mail  postage  prepaid  or, in the case of  telegraphic  or telexed
notice, when transmitted,  answer back received, addressed as follows: if to the
Guarantors,  at the address set forth above, and if to the Secured Party, at the
address set forth above,  or at such  address as either  party may  designate in
writing.

         12.  GOVERNING  LAW;  CONSENT TO  JURISDICTION.  This Guaranty shall be
governed by, and construed in accordance with, the laws of the State of New York
without  reference to its conflicts of laws  provisions.  Each Guarantor  agrees
that any suit for the  enforcement of this Guaranty may be brought in the courts
of the State of New York or any federal  court  sitting  therein and consents to
the  non-exclusive  jurisdiction  of such court and to service of process in any
such suit being made upon the  Guarantors  by mail at the address  specified  in
Section 11 hereof. Each Guarantor hereby waives any objection that it may now or
hereafter have to the venue of any such suit or any such court or that such suit
was brought in an inconvenient  court.  Any enforcement  action relating to this
Guarantee  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.

         13. WAIVER OF JURY TRIAL. EACH GUARANTOR AND, BY ITS ACCEPTANCE OF THIS
GUARANTY,  THE SECURED  PARTY,  HEREBY WAIVES TRIAL BY JURY IN ANY LITIGATION IN
ANY COURT WITH  RESPECT  TO, IN  CONNECTION  WITH,  OR ARISING  OUT OF: (A) THIS
GUARANTY OR ANY OTHER  INSTRUMENT OR DOCUMENT  DELIVERED IN CONNECTION  WITH THE
OBLIGATIONS;  (B)  THE  VALIDITY,  INTERPRETATION,   COLLECTION  OR  ENFORCEMENT
THEREOF; OR (C) ANY OTHER CLAIM OR DISPUTE HOWEVER ARISING BETWEEN ANY GUARANTOR
AND THE SECURED PARTY.

                                        4


<PAGE>

         14. CERTAIN  REFERENCES.  All pronouns and any variations thereof shall
be deemed to refer to the masculine,  feminine,  neuter,  singular or plural, as
the identity of the person,  persons,  entity or entities may require. The terms
"herein",  "hereof" or  "hereunder" or similar terms used in this Guaranty refer
to this entire  Guaranty and not only to the  particular  provision in which the
term is used.

         15. MISCELLANEOUS. This Guaranty, together with the Security Agreement,
delivered  by the  Guarantors  as of the  date  hereof  to  the  Secured  Party,
constitutes  the entire  agreement of the Guarantors with respect to the matters
set forth herein. The rights and remedies herein provided are cumulative and not
exclusive  of any  remedies  provided  by law or any other  agreement,  and this
Guaranty  shall be in addition to any other  guaranty  of the  Obligations.  The
invalidity  or  unenforceability  of any one or more  sections of this  Guaranty
shall not affect the validity or  enforceability  of its  remaining  provisions.
Captions are for the ease of reference  only and shall not affect the meaning of
the relevant provisions. The meanings of all defined terms used in this Guaranty
shall be equally applicable to the singular and plural, masculine,  feminine and
generic forms of the terms defined.  The  obligations of each Guarantor shall be
joint and several.






















                                        5



<PAGE>


IN WITNESS  WHEREOF,  each Guarantor has caused this Guaranty to be executed and
delivered  as of the  date  appearing  in the  introductory  paragraph  of  this
Guaranty.


NATIONAL PROFESSIONAL SERVICES INC.

By: /s/ Edward L. Torres
----------------------------------------------------------
     Name: Edward L. Torres
     Title: President

PACIFIC ENVIRONMENTAL SAMPLING, INC.
By: /s/ Edward L. Torres
----------------------------------------------------------
     Name: Edward L. Torres
     Title: President

ALLSTATE HOME INSPECTION & ENVIRONMENTAL TESTING, LTD.
By: /s/ Edward L. Torres
----------------------------------------------------------
     Name: Edward L. Torres
     Title: President
























                                        6

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.4
<SEQUENCE>5
<FILENAME>ex994.txt
<TEXT>
Exhibit 99.4

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
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  EXERCISE  OF THIS
SECURITY MAY BE PLEDGED IN CONNECTION  WITH A BONA FIDE MARGIN  ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.

                          COMMON STOCK PURCHASE WARRANT

                  To Purchase 275,000 Shares of Common Stock of

                    ENVIRONMENTAL SERVICE PROFESSIONALS, INC.

THIS COMMON STOCK PURCHASE  WARRANT (the  "WARRANT")  certifies  that, for value
received,  BOCA  FUNDING,  LLC, or its  registered  assigns (the  "HOLDER"),  is
entitled, upon the terms and subject to the conditions hereinafter set forth, at
any time on or after the date hereof  (the  "INITIAL  EXERCISE  DATE") and on or
prior to the close of  business on the FIFTH  (5TH)  anniversary  of the Initial
Exercise  Date (the  "TERMINATION  DATE") to purchase up to 275,000  shares (the
"WARRANT  SHARES")  of Common  Stock,  par value  $0.01 per share  (the  "COMMON
STOCK"), of ENVIRONMENTAL SERVICE PROFESSIONALS, INC., a Nevada corporation (the
"COMPANY").  The purchase  price of one share of Common Stock under this Warrant
shall be equal to the Exercise Price, as defined in Section 2(b).

         SECTION  1.  DEFINITIONS.  Capitalized  terms  used  and not  otherwise
defined  herein shall have the  meanings  (i) set forth in that  certain  Senior
Secured  Note,  dated the date  hereof  (the  "NOTE"),  from the  Company to the
initial  Holder and in the  principal  amount of $615,000  and (ii) set forth in
Exhibit A hereto.

         SECTION 2. EXERCISE.

                  a)  EXERCISE  OF  WARRANT.  Exercise  of the  purchase  rights
         represented  by this Warrant may be made,  in whole or in part,  at any
         time or times on or after the  Initial  Exercise  Date and on or before
         the  Termination  Date by delivery  to the  Company of a duly  executed
         facsimile  copy of the Notice of Exercise Form annexed  hereto (or such
         other office or agency of the Company as it may  designate by notice in
         writing  to  the  registered  Holder  at the  address  of  such  Holder
         appearing on the books of the Company); and, within five Trading Days

                                        1


<PAGE>

         of the date said Notice of Exercise is delivered  to the  Company,  the
         Company shall have received payment of the aggregate  Exercise Price of
         the shares thereby  purchased by wire transfer or cashier's check drawn
         on a  United  States  bank.  Notwithstanding  anything  herein  to  the
         contrary, the Holder shall not be required to physically surrender this
         Warrant  to the  Company  until the  Holder  has  purchased  all of the
         Warrant Shares  available  hereunder and the Warrant has been exercised
         in full, in which case, the Holder shall  surrender this Warrant to the
         Company for  cancellation  within  three  Trading  Days of the date the
         final Notice of Exercise is delivered to the Company. Partial exercises
         of this Warrant resulting in purchases of a portion of the total number
         of Warrant Shares available hereunder shall have the effect of lowering
         the outstanding  number of Warrant Shares  purchasable  hereunder in an
         amount equal to the applicable number of Warrant Shares purchased.  The
         Holder and the Company  shall  maintain  records  showing the number of
         Warrant Shares  purchased and the date of such  purchases.  The Company
         shall  deliver any  objection to any Notice of Exercise Form within one
         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,  negligence or willful
         misconduct. The Holder, by acceptance of this Warrant, acknowledges and
         agrees that, by reason of the provisions of this  paragraph,  following
         the purchase of a portion of the Warrant Shares  hereunder,  the number
         of Warrant  Shares  available for purchase  hereunder at any given time
         may be less than the amount stated on the face hereof.

                  If at any time  after  one year from the date of  issuance  of
         this  Warrant  there  is  no  then-effective   Registration   Statement
         registering  the resale of the Warrant Shares by the Holder,  then this
         Warrant  may also be  exercised  at such  time by means of a  "cashless
         exercise"   in  which  the  Holder  shall  be  entitled  to  receive  a
         certificate  for the number of  Warrant  Shares  equal to the  quotient
         obtained by dividing [(A-B) (X)] by (A), where:

                  (A)=     the VWAP on the Trading Day  immediately  preceding
                           the date of such election;

                  (B)=     the Exercise  Price of this  Warrant,  as adjusted;
                           and

                  (X)=     the number of Warrant  Shares  issuable upon exercise
                           of this Warrant in accordance  with the terms of this
                           Warrant  by means of a cash  exercise  rather  than a
                           cashless exercise.

         The Conversion  Right may be exercised by surrendering  this Warrant to
         the Company,  with an executed  Notice of Exercise with the  conversion
         section  completed,  exercising the Conversion Right and specifying the
         total  number of shares of Common  Stock that the Holder will be issued
         pursuant to such conversion.

                  b) EXERCISE PRICE.  The exercise price per share of the Common
         Stock under this Warrant shall be $0.01,  subject to adjustment  herein
         (the "EXERCISE PRICE").

                                        2

<PAGE>

                  c) MECHANICS OF EXERCISE.

                           i.  AUTHORIZATION  OF  WARRANT  SHARES.  The  Company
                  covenants that all Warrant Shares which may be issued upon the
                  exercise of the purchase  rights  represented  by this Warrant
                  will, upon exercise of the purchase rights represented by this
                  Warrant,  be duly authorized,  validly issued,  fully paid and
                  nonassessable  and free  from all  taxes,  liens  and  charges
                  created by the Company in respect of the issue thereof  (other
                  than   taxes   in   respect   of   any   transfer    occurring
                  contemporaneously with such issue).

                           ii.   DELIVERY   OF   CERTIFICATES   UPON   EXERCISE.
                  Certificates   for  shares   purchased   hereunder   shall  be
                  transmitted by the transfer agent of the Company to the Holder
                  by crediting the account of the Holder's prime broker with the
                  Depository Trust Company through its Deposit  Withdrawal Agent
                  Commission  ("DWAC") system if the Company is a participant in
                  such system, and otherwise by physical delivery to the address
                  specified by the Holder in the Notice of Exercise  within five
                  Trading  Days of  receipt  by the  Company  of the  Notice  of
                  Exercise  Form,  surrender of this Warrant (if  required)  and
                  payment of the  aggregate  Exercise  Price as set forth  above
                  ("WARRANT SHARE DELIVERY DATE").  This Warrant shall be deemed
                  to have  been  exercised  on the  date the  Exercise  Price is
                  received by the Company. The Warrant Shares shall be deemed to
                  have  been  issued,  and the  Holder  or any  other  Person so
                  designated  to be named therein shall be deemed to have become
                  a holder of record of such shares for all purposes,  as of the
                  date the Warrant has been  exercised by payment to the Company
                  of the Exercise Price and all taxes required to be paid by the
                  Holder,  if any,  pursuant  to Section  2(c)(vi)  prior to the
                  issuance of such shares, have been paid.

                           iii. DELIVERY OF NEW WARRANTS UPON EXERCISE.  If this
                  Warrant shall have been  exercised in part, the Company shall,
                  at the request of a Holder and upon  surrender of this Warrant
                  certificate,  at the time of  delivery of the  certificate  or
                  certificates  representing Warrant Shares, deliver to Holder a
                  new Warrant  evidencing  the rights of Holder to purchase  the
                  unpurchased  Warrant Shares called for by this Warrant,  which
                  new Warrant shall in all other respects be identical with this
                  Warrant.

                           iv. RESCISSION  RIGHTS. If the Company fails to cause
                  its transfer  agent to transmit to the Holder a certificate or
                  certificates  representing  the  Warrant  Shares  pursuant  to
                  Section  2(c)(ii) by the Warrant Share Delivery Date, then the
                  Holder will have the right to rescind such exercise.

                           v. NO  FRACTIONAL  SHARES  OR  SCRIP.  No  fractional
                  shares or scrip representing fractional shares shall be issued
                  upon the  exercise of this  Warrant.  As to any  fraction of a
                  share which  Holder  would  otherwise  be entitled to purchase

                                        3
<PAGE>

                  upon such exercise, the Company shall at its election,  either
                  pay a cash  adjustment in respect of such final fraction in an
                  amount equal to such fraction multiplied by the Exercise Price
                  or round up to the next whole share.

                           vi.   CHARGES,   TAXES  AND  EXPENSES.   Issuance  of
                  certificates  for Warrant  Shares shall be made without charge
                  to  the  Holder  for  any  issue  or  transfer  tax  or  other
                  incidental   expense  in  respect  of  the  issuance  of  such
                  certificate,  all of which taxes and expenses shall be paid by
                  the Company, and such certificates shall be issued in the name
                  of the Holder or in such name or names as may be  directed  by
                  the Holder; PROVIDED,  HOWEVER, that in the event certificates
                  for  Warrant  Shares are to be issued in a name other than the
                  name of the Holder, this Warrant when surrendered for exercise
                  shall be accompanied by the  Assignment  Form attached  hereto
                  duly executed by the Holder; and the Company may require, as a
                  condition  thereto,   the  payment  of  a  sum  sufficient  to
                  reimburse it for any transfer tax incidental thereto.

                           vii. CLOSING OF BOOKS. The Company will not close its
                  stockholder  books or records in any manner that  prevents the
                  timely exercise of this Warrant, pursuant to the terms hereof.

                           viii.  COMPENSATION  FOR  BUY-IN ON FAILURE TO TIMELY
                  DELIVER  CERTIFICATES UPON EXERCISE.  In addition to any other
                  rights available to the Holder,  if the Company fails to cause
                  its transfer  agent to transmit to the Holder a certificate or
                  certificates  representing  the Warrant Shares  pursuant to an
                  exercise on or before the Warrant Share  Delivery Date, and if
                  after  such  date the  Holder  is  required  by its  broker to
                  purchase (in an open market  transaction or otherwise)  shares
                  of Common  Stock to deliver in  satisfaction  of a sale by the
                  Holder of the  Warrant  Shares  which the  Holder  anticipated
                  receiving  upon such exercise (a  "Buy-In"),  then the Company
                  shall (1) pay in cash to the  Holder  the  amount by which (x)
                  the  Holder's  total  purchase  price   (including   brokerage
                  commissions,  if any)  for  the  shares  of  Common  Stock  so
                  purchased  exceeds (y) the amount  obtained by multiplying (A)
                  the number of Warrant  Shares that the Company was required to
                  deliver to the Holder in connection with the exercise at issue
                  times  (B) the price at which the sell  order  giving  rise to
                  such purchase  obligation was executed,  and (2) at the option
                  of the Holder, either reinstate the portion of the Warrant and
                  equivalent  number of Warrant  Shares for which such  exercise
                  was not  honored or deliver to the Holder the number of shares
                  of Common  Stock that would have been  issued had the  Company
                  timely  complied  with its exercise  and delivery  obligations
                  hereunder.  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  exercise  of shares of Common
                  Stock  with  an  aggregate  sale  price  giving  rise  to such
                  purchase obligation of $10,000, under clause (1) of the

                                        4


<PAGE>

                  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, together with applicable  confirmations
                  and  other  evidence  reasonably  requested  by  the  Company.
                  Nothing  herein  shall  limit a  Holder's  right to pursue any
                  other remedies available to it hereunder,  at law or in equity
                  including,   without   limitation,   a  decree   of   specific
                  performance  and/or  injunctive  relief  with  respect  to the
                  Company's failure to timely deliver certificates  representing
                  shares  of  Common  Stock  upon  exercise  of the  Warrant  as
                  required pursuant to the terms hereof.

                  d)  EXERCISE  LIMITATIONS.  The  Company  shall not effect any
         exercise  of this  Warrant  and a Holder  shall  not have the  right to
         exercise  any  portion of this  Warrant,  pursuant  to Section  2(a) or
         otherwise,  to the extent  that after  giving  effect to such  issuance
         after exercise,  such Holder  (together with such Holder's  Affiliates,
         and any other  person or entity  acting as a group  together  with such
         Holder  or any of  such  Holder's  Affiliates),  as  set  forth  on the
         applicable  Notice of  Exercise,  would  beneficially  own in excess of
         4.99%  of  the  number  of  shares  of  the  Common  Stock  outstanding
         immediately  after giving effect to such issuance.  For purposes of the
         foregoing  sentence,  the number of shares of Common Stock beneficially
         owned by such  Holder and its  Affiliates  shall  include the number of
         shares of Common  Stock  issuable  upon  exercise of this  Warrant 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) exercise of the  remaining,  nonexercised  portion of
         this Warrant beneficially owned by such 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  Warrants)  subject to a limitation  on  conversion or
         exercise  analogous to the  limitation  contained  herein  beneficially
         owned by such Holder or any of its  Affiliates.  Except as set forth in
         the preceding sentence,  for purposes of this Section 2(d),  beneficial
         ownership  shall be calculated in accordance  with Section 13(d) of the
         Exchange Act and the rules and regulations promulgated  thereunder,  it
         being  acknowledged by the Holder that the Holder is solely responsible
         for any schedules required to be filed in accordance with Section 13(d)
         of the  Exchange  Act. To the extent that the  limitation  contained in
         this Section 2(d) applies, the determination of whether this Warrant is
         exercisable (in relation to other  securities owned by such Holder) and
         of which a portion of this Warrant is exercisable  shall be in the sole
         discretion  of the Holder,  and the  submission of a Notice of Exercise
         shall be  deemed  to be the  Holder's  determination  of  whether  this
         Warrant is exercisable  (in relation to other  securities  owned by the
         Holder) and of which  portion of this Warrant is  exercisable,  in each
         case subject to such aggregate percentage  limitation,  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  2(d),  in  determining  the
         number of outstanding shares of Common Stock, a Holder may rely on the

                                        5

<PAGE>

         number of  outstanding  shares of Common  Stock as reflected in (x) the
         Company's  most recent Form 10-QSB 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
         Warrant,  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  2(d) 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  2(d) shall  continue to
         apply until such 61st day (or such later date,  as  determined  by such
         Holder, as may be specified in such notice of waiver).

         SECTION 3. CERTAIN ADJUSTMENTS.

                  a) STOCK  DIVIDENDS  AND SPLITS.  If the Company,  at any time
         while  this  Warrant  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 upon  exercise
         of this  Warrant),  (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 in each
         case, the Exercise 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  3(a) 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.

                  b) SUBSEQUENT  EQUITY SALES.  If the Company at any time while
         this  Warrant is  outstanding,  except for  issuances  contemplated  by
         Section  2(b),  shall sell or grant any option to  purchase  or 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  Exercise  Price (such lower  price,
         the "BASE SHARE  PRICE" and such  issuances  collectively,  a "DILUTIVE
         ISSUANCE")  (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

                                        6

<PAGE>

         or rights per share which are 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 Exercise  Price,  such  issuance  shall be
         deemed to have  occurred for less than the Exercise  Price on such date
         of the Dilutive Issuance),  then the Exercise Price shall be reduced to
         equal the Base Share Price. Such adjustment shall be made whenever such
         Common Stock or Common Stock  Equivalents  are issued.  Notwithstanding
         the foregoing,  no adjustments shall be made, paid or issued under this
         Section 3(b) in respect of an Exempt Issuance. The Company shall notify
         the Holder in writing,  no later than two Trading  Days  following  the
         issuance of any Common  Stock or Common  Stock  Equivalents  subject to
         this section,  indicating  therein the applicable  issuance  price,  or
         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  3(b),  upon the
         occurrence  of any Dilutive  Issuance,  after the date of such Dilutive
         Issuance  the Holder is entitled to receive a number of Warrant  Shares
         based  upon the Base  Share  Price  regardless  of  whether  the Holder
         accurately refers to the Base Share Price in the Notice of Exercise.

                  c) SUBSEQUENT  RIGHTS OFFERINGS.  If the Company,  at any time
         while the  Warrant  is  outstanding,  shall  issue  rights,  options or
         warrants to all  holders of Common  Stock (and not to the Holder of the
         Warrant on an  as-exercised  basis)  entitling them to subscribe for or
         purchase shares of Common Stock at a price per share less than the VWAP
         at the record date  mentioned  below,  then the Exercise Price shall be
         multiplied by a fraction,  of which the denominator shall be the number
         of shares of the Common  Stock  outstanding  on the date of issuance of
         such rights or warrants plus the number of additional  shares of Common
         Stock offered for subscription or purchase,  and of which the numerator
         shall be the number of shares of the Common  Stock  outstanding  on the
         date of issuance  of such rights or warrants  plus the number of shares
         which the  aggregate  offering  price of the total  number of shares so
         offered  (assuming  receipt by the Company in full of all consideration
         payable  upon  exercise  of such  rights,  options or  warrants)  would
         purchase at such VWAP.  Such  adjustment  shall be made  whenever  such
         rights or warrants are issued,  and shall become effective  immediately
         after the record date for the determination of stockholders entitled to
         receive such rights, options or warrants.

                  d) PRO RATA  DISTRIBUTIONS.  If the Company, at any time prior
         to the  Termination  Date,  shall  distribute  to all holders of Common
         Stock (and not to the Holder of the Warrant on an  as-exercised  basis)
         evidences  of its  indebtedness  or  assets  (including  cash  and cash
         dividends)  or rights or warrants  to  subscribe  for or  purchase  any
         security other than the Common Stock (which shall be subject to Section
         3(b) or  3(c)),  then in each  such case the  Exercise  Price  shall be
         adjusted by multiplying the Exercise 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 per share 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 of the Company in good faith.  In either case the adjustments
         shall be described in a statement provided to the Holder of the portion

                                        7

<PAGE>

         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.

                  e) FUNDAMENTAL TRANSACTION. If, at any time while this Warrant
         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
         exercise of this  Warrant,  the Holder shall have the right to receive,
         for each Warrant Share that would have been issuable upon such exercise
         immediately prior to the occurrence of such Fundamental Transaction, at
         the option of the Holder, (a) upon exercise of this Warrant, the number
         of shares of Common Stock of the successor or acquiring  corporation or
         of the Company, if it is the surviving corporation,  and any additional
         consideration (the "ALTERNATE  CONSIDERATION")  receivable upon or as a
         result of such reorganization,  reclassification, merger, consolidation
         or  disposition of assets by a Holder of the number of shares of Common
         Stock for which this Warrant is exercisable  immediately  prior to such
         event or (b) if the  Company is  acquired  in an all cash  transaction,
         cash equal to the value of this  Warrant as  determined  in  accordance
         with the Black-Scholes option pricing formula. For purposes of any such
         exercise,   the   determination   of  the   Exercise   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 Exercise 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
         exercise of this Warrant 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 warrant  consistent  with the foregoing
         provisions  and  evidencing the Holder's right to exercise such warrant
         into Alternate  Consideration.  The terms of any agreement  pursuant to
         which  a  Fundamental  Transaction  is  affected  shall  include  terms
         requiring  any such  successor or  surviving  entity to comply with the
         provisions  of this Section 3(e) and insuring that this Warrant (or any
         such  replacement   security)  will  be  similarly  adjusted  upon  any
         subsequent transaction analogous to a Fundamental Transaction.

                  f) CALCULATIONS.  All calculations  under this Section 3 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 3, the number of shares of
         Common Stock deemed to be issued and outstanding as of a given date

                                        8

<PAGE>

         shall be the sum of the  number of shares  of Common  Stock  (excluding
         treasury shares, if any) issued and outstanding.

                  g)  VOLUNTARY  ADJUSTMENT  BY COMPANY.  The Company may at any
         time during the term of this Warrant  reduce the then current  Exercise
         Price to any amount and for any period of time  deemed  appropriate  by
         the Board of Directors of the Company.

                  h) NOTICE TO HOLDERS.

                           i.  ADJUSTMENT  TO  EXERCISE   PRICE.   Whenever  the
                  Exercise  Price is adjusted  pursuant to any provision of this
                  Section 3, the Company  shall  promptly  mail to each Holder a
                  notice setting forth the Exercise Price after such  adjustment
                  and setting  forth a brief  statement  of the facts  requiring
                  such adjustment.

                           ii.  NOTICE TO ALLOW  EXERCISE BY HOLDER.  If (A) the
                  Company shall declare a dividend (or any other distribution in
                  whatever  form) 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 mailed to the  Holder  at its last  address  as it
                  shall  appear upon the Warrant  Register  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 exercise this Warrant during the 20-day period

                                        9

<PAGE>

                  commencing on the date of such notice to the effective date of
                  the event triggering such notice.

                           iii.  NOTICE OF SUBSEQUENT  ISSUANCE.  The first time
                  after the Initial Exercise Date that the Company issues shares
                  of  Common  Stock or  Common  Stock  Equivalents,  other  than
                  pursuant  to an  Exempt  Issuance  or to an  Affiliate  of the
                  Company,  and the aggregate amount of net proceeds received by
                  the Company therefrom is not less than the principal amount of
                  the  Note,  the  Company  shall  mail to each  Holder a notice
                  within two Trading  Days  thereof and shall  provide  evidence
                  therewith  of the price per share at which such  issuance  was
                  made.

                           iv. EFFECT OF FAILURE TO GIVE NOTICE.  The failure of
                  the Company to give any notice  required under this section or
                  any  inaccuracy  or other defect  therein shall not affect the
                  determination of the Exercise Price that shall be in effect as
                  provided herein.

         SECTION 4. TRANSFER OF WARRANT; REGISTRATION RIGHTS.

                  a) TRANSFERABILITY.  Subject to compliance with any applicable
         securities  laws,  this  Warrant and all rights  hereunder  (including,
         without limitation, any registration rights) are transferable, in whole
         or in part,  upon surrender of this Warrant at the principal  office of
         the Company or its designated agent, together with a written assignment
         of this Warrant substantially in the form attached hereto duly executed
         by the Holder or its agent or attorney and funds  sufficient to pay any
         transfer  taxes  payable  upon the making of such  transfer.  Upon such
         surrender and, if required, such payment, the Company shall execute and
         deliver  a new  Warrant  or  Warrants  in the name of the  assignee  or
         assignees and in the  denomination or  denominations  specified in such
         instrument of assignment, and shall issue to the assignor a new Warrant
         evidencing  the  portion  of this  Warrant  not so  assigned,  and this
         Warrant shall promptly be cancelled.  A Warrant,  if properly assigned,
         may be  exercised  by a new holder for the  purchase of Warrant  Shares
         without having a new Warrant issued.

                  b) NEW WARRANTS.  This Warrant may be divided or combined with
         other Warrants upon presentation  hereof at the aforesaid office of the
         Company,  together  with a  written  notice  specifying  the  names and
         denominations  in which new  Warrants  are to be issued,  signed by the
         Holder or its agent or  attorney.  Subject to  compliance  with Section
         4(a),  as to any  transfer  which may be involved  in such  division or
         combination,  the  Company  shall  execute and deliver a new Warrant or
         Warrants  in  exchange  for the  Warrant or  Warrants  to be divided or
         combined in accordance with such notice.

                  c) WARRANT REGISTER.  The Company shall register this Warrant,
         upon  records to be  maintained  by the Company for that  purpose  (the
         "WARRANT REGISTER"),  in the name of the record Holder hereof from time
         to time. The Company may deem and treat the  registered  Holder of this
         Warrant as the  absolute  owner  hereof for the purpose of any exercise
         hereof or any  distribution to the Holder,  and for all other purposes,
         absent actual notice to the contrary.

                                       10

<PAGE>

                  d) TRANSFER RESTRICTIONS.  If, at the time of the surrender of
         this  Warrant in  connection  with any  transfer of this  Warrant,  the
         transfer  of  this  Warrant  shall  not be  registered  pursuant  to an
         effective  registration  statement  under the  Securities Act and under
         applicable  state securities or blue sky laws, the Company may require,
         as a condition of allowing such transfer (i) that there be furnished to
         the Company a written  opinion of counsel  (which  opinion  shall be in
         form,  substance  and  scope  customary  for  opinions  of  counsel  in
         comparable  transactions)  to the effect that such transfer may be made
         without  registration  under the  Securities  Act and under  applicable
         state  securities or blue sky laws,  (ii) that the holder or transferee
         execute  and deliver to the  Company an  investment  letter in form and
         substance acceptable to the Company and (iii) that the transferee be an
         "accredited  investor" as defined in Rule 501(a)  promulgated under the
         Securities Act or a "qualified  institutional buyer" as defined in Rule
         144A(a)  under the  Securities  Act. The Company will  provide,  at the
         Company's expense,  such legal opinions in the future as are reasonably
         necessary for the issuance and resale of the Common Stock issuable upon
         exercise  of  the  Warrants  pursuant  to  an  effective   registration
         statement,  Rule 144  under the  Securities  Act or an  exemption  from
         registration.  In the event that Common  Stock is sold in a manner that
         complies with an exemption from registration, the Company will promptly
         instruct its counsel (at its  expense) to issue to the  transfer  agent
         and opinion permitting removal of the legend (indefinitely, if pursuant
         to Rule  144(k) of the 1933 Act,  or to  permit  sale of the  shares if
         pursuant to the other provisions of Rule 144 of the 1933 Act).

                  e)  REGISTRATION  RIGHTS.  If the Company  shall  determine to
         prepare  and file  with 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 Warrant Shares as the Holder  requests
         to be  registered  so long as such  Warrant  Shares 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 Warrant Shares subject thereto have
         been sold.  All fees and  expenses  incident to the  performance  of or
         compliance  with this Section 4(e) by the Company shall be borne by the
         Company  whether or not any  Warrant  Shares are sold  pursuant  to the
         Registration Statement. The Company shall,  notwithstanding any full or
         partial  exercise of this  Warrant,  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 applicable law,
         from and  against  any and all losses,  claims,  damages,  liabilities,
         costs (including, without limitation, reasonable attorneys' fees) and

                                       11
<PAGE>

         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 4(e), 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 4(e) shall  survive any full or
         partial  exercise of this  Warrant  until all Warrant  Shares 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 Warrant Shares, and THIRD,
         to the shares held by all other security holders.


         SECTION 5. MISCELLANEOUS.

                  a) NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE.  This Warrant does
         not  entitle  the  Holder to any  voting  rights  or other  rights as a
         shareholder  of the Company  prior to the exercise  hereof as set forth
         herein.

                  b) LOSS,  THEFT,  DESTRUCTION  OR MUTILATION  OF WARRANT.  The
         Company  covenants  that  upon  receipt  by  the  Company  of  evidence
         reasonably  satisfactory  to it of  the  loss,  theft,  destruction  or
         mutilation  of this  Warrant or any stock  certificate  relating to the
         Warrant Shares, and in case of loss, theft or destruction, of indemnity
         or security  reasonably  satisfactory to it (which,  in the case of the
         Warrant, shall not include the posting of any bond), and upon surrender
         and  cancellation of such Warrant or stock  certificate,  if mutilated,
         the Company will make and deliver a new Warrant or stock certificate of
         like tenor and dated as of such  cancellation,  in lieu of such Warrant
         or stock certificate.

                  c) SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed
         day for  the  taking  of any  action  or the  expiration  of any  right
         required  or  granted  herein  shall not be a Business  Day,  then such
         action  may be  taken  or  such  right  may be  exercised  on the  next
         succeeding Business Day.

                                       12

<PAGE>

                  d) AUTHORIZED SHARES.

         The   Company   covenants   that  during  the  period  the  Warrant  is
         outstanding,  it will reserve from its authorized  and unissued  Common
         Stock a sufficient  number of shares to provide for the issuance of the
         Warrant  Shares upon the  exercise of any  purchase  rights  under this
         Warrant.  The  Company  further  covenants  that its  issuance  of this
         Warrant shall constitute full authority to its officers who are charged
         with the duty of executing stock  certificates to execute and issue the
         necessary  certificates for the Warrant Shares upon the exercise of the
         purchase  rights  under this  Warrant.  The Company  will take all such
         reasonable  action  as may be  necessary  to assure  that such  Warrant
         Shares  may be issued  as  provided  herein  without  violation  of any
         applicable  law or  regulation,  or of any  requirements  of any  stock
         exchange or Trading Market upon which the Common Stock may be listed.

         Except and to the extent as waived or consented  to by the Holder,  the
         Company  shall  not  by  any  action,  including,  without  limitation,
         amending   its   certificate   of    incorporation   or   through   any
         reorganization, transfer of assets, consolidation, merger, dissolution,
         issue or sale of securities  or any other  voluntary  action,  avoid or
         seek to avoid the observance or performance of any of the terms of this
         Warrant, but will at all times in good faith assist in the carrying out
         of all such  terms  and in the  taking  of all such  actions  as may be
         necessary or  appropriate  to protect the rights of Holder as set forth
         in this Warrant against impairment.  Without limiting the generality of
         the  foregoing,  the Company will (a) not increase the par value of any
         Warrant  Shares above the amount  payable  therefor  upon such exercise
         immediately  prior to such  increase  in par  value,  (b) take all such
         action as may be necessary or appropriate in order that the Company may
         validly and legally issue fully paid and  nonassessable  Warrant Shares
         upon the exercise of this Warrant, and (c) use commercially  reasonable
         efforts to obtain all such authorizations,  exemptions or consents from
         any  public  regulatory  body  having  jurisdiction  thereof  as may be
         necessary to enable the Company to perform its  obligations  under this
         Warrant.

         Before  taking any action  which would result in an  adjustment  in the
         number of Warrant  Shares for which this Warrant is  exercisable  or in
         the Exercise Price, the Company shall obtain all such authorizations or
         exemptions  thereof,  or consents thereto, as may be necessary from any
         public regulatory body or bodies having jurisdiction thereof.

                  e) JURISDICTION.  All questions  concerning the  construction,
         validity,  enforcement  and  interpretation  of this  Warrant  shall be
         determined in accordance with the provisions of the Note.

                  f)  RESTRICTIONS.  The Holder  acknowledges  that the  Warrant
         Shares  acquired upon the exercise of this Warrant,  if not registered,
         will  have  restrictions  upon  resale  imposed  by state  and  federal
         securities laws.

                                       13

<PAGE>

                  g) NONWAIVER AND  EXPENSES.  No course of dealing or any delay
         or failure to exercise any right  hereunder on the part of Holder shall
         operate  as a waiver  of such  right or  otherwise  prejudice  Holder's
         rights,  powers or remedies,  notwithstanding  the fact that all rights
         hereunder  terminate on the Termination  Date. If the Company willfully
         and knowingly fails to comply with any provision of this Warrant, which
         results in any material damages to the Holder, the Company shall pay to
         Holder  such  amounts as shall be  sufficient  to cover any  reasonable
         costs and expenses including, but not limited to, reasonable attorneys'
         fees, including those of appellate  proceedings,  incurred by Holder in
         collecting  any amounts due pursuant  hereto or in otherwise  enforcing
         any of its rights, powers or remedies hereunder.

                  h) NOTICES. Any notice,  request or other document required or
         permitted to be given or  delivered to the Holder by the Company  shall
         be delivered in accordance with the notice provisions of the Note.

                  i)  LIMITATION  OF  LIABILITY.  No  provision  hereof,  in the
         absence of any affirmative action by Holder to exercise this Warrant to
         purchase  Warrant  Shares,  and no enumeration  herein of the rights or
         privileges  of Holder,  shall give rise to any  liability of Holder for
         the  purchase  price of any  Common  Stock or as a  stockholder  of the
         Company,  whether  such  liability  is  asserted  by the  Company or by
         creditors of the Company.

                  j) REMEDIES. Holder, in addition to being entitled to exercise
         all rights  granted by law,  including  recovery  of  damages,  will be
         entitled to specific  performance of its rights under this Warrant. The
         Company agrees that monetary damages would not be adequate compensation
         for any loss incurred by reason of a breach by it of the  provisions of
         this  Warrant and hereby  agrees to waive and not to assert the defense
         in any action for  specific  performance  that a remedy at law would be
         adequate.

                  k) SUCCESSORS  AND ASSIGNS.  Subject to applicable  securities
         laws,  this  Warrant and the rights and  obligations  evidenced  hereby
         shall inure to the benefit of and be binding upon the successors of the
         Company  and the  successors  and  permitted  assigns  of  Holder.  The
         provisions  of this  Warrant are  intended to be for the benefit of all
         Holders from time to time of this Warrant and shall be  enforceable  by
         any such Holder or holder of Warrant Shares.

                  l)  AMENDMENT.  This Warrant may be modified or amended or the
         provisions  hereof  waived with the written  consent of the Company and
         the Holder.

                  m)  SEVERABILITY.  Wherever  possible,  each provision of this
         Warrant  shall be  interpreted  in such manner as to be  effective  and
         valid under  applicable law, but if any provision of this Warrant shall
         be prohibited by or invalid under  applicable law, such provision shall
         be ineffective to the extent of such prohibition or invalidity, without
         invalidating   the  remainder  of  such  provisions  or  the  remaining
         provisions of this Warrant.

                  n)  HEADINGS.  The  headings  used in this Warrant are for the
         convenience of reference only and shall not, for any purpose, be deemed
         a part of this Warrant.


                              ********************
                                       14

<PAGE>


         IN WITNESS WHEREOF,  the Company has caused this Warrant to be executed
by its officer thereunto duly authorized.


Dated:  June 18, 2007

                                ENVIRONMENTAL SERVICE PROFESSIONALS, INC.


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



























                                       15


<PAGE>





                               NOTICE OF EXERCISE

TO:  ENVIRONMENTAL SERVICE PROFESSIONALS, INC.


(1)The  undersigned  hereby elects to purchase  ________  Warrant  Shares of the
Company  pursuant to the terms of the  attached  Warrant  (only if  exercised in
full), and tenders herewith payment of the exercise price in full, together with
all applicable transfer taxes, if any.

(2)Payment shall take the form of (check applicable box):

                           [  ] in lawful money of the United States; or

                           [ ] the issuance of ______  shares of Common Stock in
                           accordance with the formula set forth in Section 2(a)
                           pursuant to the Conversion  Right procedure set forth
                           in Section 2(a).

(3)Please issue a certificate or certificates  representing  said Warrant Shares
in the name of the undersigned or in such other name as is specified below:


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


The Warrant Shares shall be delivered to the following DWAC Account Number or by
physical delivery of a certificate to:


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

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

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

(4) ACCREDITED INVESTOR.  The undersigned is an "accredited investor" as defined
in Regulation D promulgated under the Securities Act of 1933, as amended.

[SIGNATURE OF HOLDER]


Name of Investing Entity: ______________________________________________________
SIGNATURE OF AUTHORIZED SIGNATORY OF INVESTING ENTITY: _________________________
Name of Authorized Signatory: __________________________________________________
Title of Authorized Signatory: _________________________________________________
Date: __________________________________________________________________________







<PAGE>




                                 ASSIGNMENT FORM

             (To assign the foregoing warrant, execute this form and
                          supply required information.
                 Do not use this form to exercise the warrant.)



         FOR VALUE RECEIVED,  [____] all of or [_______] shares of the foregoing
Warrant and all rights evidenced thereby are hereby assigned to


_______________________________________________ whose address is


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


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

                 Dated:  ______________, _______

                 Holder's Signature:    _____________________________

                 Holder's Address:      _____________________________

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


Signature Guaranteed:  ______________________________________________


NOTE: The signature to this  Assignment Form must correspond with the name as it
appears on the face of the Warrant,  without  alteration or  enlargement  or any
change whatsoever,  and must be guaranteed by a bank or trust company.  Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.



<PAGE>


                                    Exhibit A
                              (Certain Definitions)


                  "AFFILIATE"  means any Person  that,  directly  or  indirectly
         through one or more intermediaries,  controls or is controlled by or is
         under  common  control  with a  Person,  as such  terms are used in and
         construed under Rule 144 under the Securities Act.

                  "BUSINESS DAY" means any day except Saturday,  Sunday, any day
         which shall be a federal  legal holiday in the United States or any day
         on which banking institutions in the State of New Jersey are authorized
         or required by law or other governmental action to close.

                  "COMMON STOCK EQUIVALENTS" means any securities of the Company
         or its  subsidiaries  which would entitle the holder thereof to acquire
         at any time Common  Stock,  including,  without  limitation,  any debt,
         preferred stock, rights,  options,  warrant 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.

                  "EXEMPT  ISSUANCE"  means the issuance of (a) shares of Common
         Stock or options to employees, officers or directors of, or consultants
         or advisors to, the Company or any  subsidiary 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  outstanding on
         the Initial Exercise Date,  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,  (c) securities issued pursuant to acquisitions or
         strategic  transactions  approved by a majority of the directors of the
         Company,  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,  (e) any
         securities issued to landlords,  equipment lessors, services providers,
         banks or other  financial  institutions  in  exchange  for a bona  fide
         lease,  loan or  other  debt  financing  or in  strategic  transactions
         (including  joint  ventures,  manufacturing,  marketing or distribution
         arrangements or technology transfer or development  arrangements),  (f)
         any shares of Common Stock issued in  connection  with any stock split,
         stock dividend or recapitalization  by the Company,  (g) any securities
         that are issued by the  Company  pursuant to a  registration  statement
         filed under the Securities  Act, or (h) any securities  issued pursuant
         to any rights or agreements outstanding as of the date of this Warrant.

                  "PERSON"  means an  individual  or  corporation,  partnership,
         trust,  incorporated  or  unincorporated  association,  joint  venture,
         limited  liability  company,  joint stock  company,  government  (or an
         agency or subdivision thereof) or other entity of any kind.

                  "TRADING  DAY" means a day on which the  Trading  Markets  are
         open for business.

                  "TRADING MARKET" means the following markets or exchanges: the
         Nasdaq Capital Market, the American Stock Exchange,  the New York Stock
         Exchange,  the Nasdaq National Market or the Over-the-Counter  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)



<PAGE>

         on the  Trading  Market on which  the  Common  Stock is then  listed or
         quoted as reported by Bloomberg L.P.  (based on a Trading Day from 9:30
         a.m.  New York City time to 4:02 p.m.  New York City time);  (b) if the
         OTC Bulletin Board is not a Trading Market, 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 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 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.



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.5
<SEQUENCE>6
<FILENAME>ex995.txt
<TEXT>
Exhibit 99.5

                                CLEARVISION INC.
 1041 N. Formosa Ave., Los Angeles, CA 90046 * t: 323-850-2988 * f: 323-850-2989



                           LIMITED CONSULTING CONTRACT

<TABLE>
<CAPTION>
<S>                                    <C>                                          <C>
This Agreement is made between         ENVIRONMENTAL SERVICE PROFESSIONALS INC      (hereinafter "CLIENT")
                                       ---------------------------------------------


And                                    CLEARVISION INC.                             (hereinafter "CVI").
                                       ---------------------------------------------
</TABLE>

         In consideration  for the promises  contained herein and other good and
valuable considerations, it is agreed as follows:

                          INDEPENDENT CONTRACTOR STATUS

         Parties to this  contract  intend that the  relationship  between  them
created by the contract is that of CLIENT and independent contractor.  No agent,
employee or servant of the independent  contractor  shall be, or shall be deemed
to be, an employee, agent, or servant of the employer. CLIENT is interested only
in the results obtained under this contract;  the manner and means of conduct of
the work are under the sole control of the independent  contractor.  None of the
benefits provided by the CLIENT to its employees, including, but not limited to,
compensation,  insurance  and  unemployment  insurance  will be available to the
contractor, or its employees. Independent contractor will be solely and entirely
responsible  for its acts and for the acts of its agents,  employees,  servants,
and  subcontractors  during  the  performance  of  this  contract.  Within  this
Agreement,  the use of the name CLIENT shall mean CLIENT  itself,  or employees,
agents or other CVI's employed by CLIENT.

                          STATEMENT OF CONTRACT INTENT

         Throughout this Agreement and the term of this  Agreement,  CVI will be
engaged in consulting and corporate  development  on an  independent  contractor
basis. CVI will derive its revenues and any other  compensation  from consulting
fees charged CLIENT.

         CLIENT and CVI agree to enter into a Limited Consulting Contract.

         It is the intent of CLIENT and the CVI,  evidenced by their  signatures
hereto, to employ and provide the services described herein.

                             DUTIES TO BE PERFORMED

1.   Develop and identify  relationships  for the CLIENT through  networking and
     pre-existing  relations of CVI to further CLIENT'S image and recognition as
     a leader in the mold and moisture management industry.

2.   CVI may  use its  best  professional  judgment  in  hiring  or  contracting
     personnel to perform the duties specified in this Agreement.


======================================== =======================================
LIMITED CONSULTING CONTRACT                                          PAGE 1 OF 5



<PAGE>

3.   Specify a plan to enhance  CLIENT'S  image in the public  market place with
     research reports.

4.   CVI will  gather and amass such data and  information  (due  diligence)  as
     necessary to implement CLIENT'S strategies and monitor results.

5.   CVI shall develop  strategic  alliances with business and industry partners
     on behalf of CLIENT that enhance or further  advance the business of CLIENT
     in conjunction with CLIENT'S milestones.

6.   CVI shall develop marketing strategies, techniques, methods, procedures and
     materials as needed for continued advancement of CLIENT's corporate mission
     statement.

7.   Other such duties and  responsibilities  as may be mutually  agreed upon by
     the  parties  and made  part of this  Agreement  by  signed  amendments  or
     addenda, including but not limited to the following Media campaign package:

8.   PROVIDE A CELEBRITY  ENDORSEMENT FOR THE CLIENT,  (MOST LIKELY ED MCMAHON),
     SUBJECT  TO THE  CLIENT'S  APPROVAL  OF  CELEBRITY  AND  COST  FOR  SUCH IN
     ADDITIONAL 144 SHARES OF RESTRICTED STOCK AND CASH.

9.   CLIENT WILL PAY ANY AND ALL FEES, AIRFARE, HOTEL, GROUND TRANSPORTATION AND
     PER  DIEM   ASSOCIATED   WITH  OUT  OF  STATE  TRAVEL  FOR  ANY   CELEBRITY
     SPOKESPERSON.

     Definitions:

     o    TV NEWS  SPOTLIGHT:  A 2-8  minute  segment  featured  on 1/2  hr.  TV
          newsmagazines airing nationwide.

     o    VNR: a  broadcast-quality  30-90 second  narrated  Video News Release,
          followed  by up to 13 minutes of B-Roll and Sound  Bites,  distributed
          via Satellite and Beta Broadcast Masters for inclusion on national and
          local news programs and talk shows.

     o    NEWSPAPER FEATURE: 1-3 column news article with photo and contact info
          distributed to over 10,000 newspapers (mainly major market dailies and
          weeklies), reaching over 20 million readers (est.).

     o    RNR:  60  second  Radio  News  Release  professionally   recorded  and
          distributed  in script form and on CD to 6,600 radio  stations for use
          on regular news and talk shows.

Whereas CVI have offered their services to the CLIENT, and the CLIENT has chosen
to hire CVI to perform these services;

For  mutual  consideration,  the  receipt  and  sufficiency  of which are hereby
acknowledged, the parties hereto agree to as follows:

1. PRODUCTION GUARANTEES
CVI will provide the following  productions  for CLIENT:  B-Roll footage for May
18th, 2007 Symposium in Palm Springs,  California, TV News Spotlight, Video News
Release (VNR),  Corporate  Video (UP TO 10-MIN),  Tradeshow  Loop  Presentation,
Internet Streaming Video,  Newspaper Feature, RNR and Commercial Ad. Productions
include  complete  Scripting  (two drafts and a polish per  Feature) to CLIENT's
approval;  up to four days of Shooting - including  locations approved by CLIENT
and on a  state-of-the-art  sound  stage  and news set in  Hollywood,  CA;  Emmy
winning news anchors; accredited on-camera news reporter;  Voice-over narration;
unlimited  Stock  Footage  from  in-house  library  (17 YEARS  WORTH OF ARCHIVED
PRODUCTION FOOTAGE);  Complete Post Production / Editing with Graphics,  Digital
Editing;  Production Insurance, CVI's local Location and Travel expenses and Per
Diem, Director and Producer Fees; printing, postage and mailing, news clippings,
and readership reports. Also includes all overhead and administrative expenses.

======================================== =======================================
LIMITED CONSULTING CONTRACT                                          PAGE 2 OF 5

<PAGE>

2. MEDIA PLACEMENT GUARANTEES
CVI represents, warrants and agrees that:

a) CLIENT's TV News  Spotlight  and/or VNR will air on national and local cable,
satellite and broadcast affiliates throughout the U.S. and Canada. Programs will
air as regular (non-paid) programming and as sponsored (paid) programming.

b) CVI  guarantees at least 10,000 TOTAL AIRINGS of VNR and 15,000 TOTAL AIRINGS
of ad clusters  generated  from a  combination  of  cablecasts  and  broadcasts.
Counted  airings will take place  between 6 AM and 10:30 PM daily,  EST and each
city counts as one airing.  A 30-60 second VNR will air on seven networks (CNBC,
CNN Headline News, Fox News, MSNBC, The Weather Channel and Bloomberg TV) in 208
markets,  with 350 of those  airings in the Top 50 markets.  Airings will hit 15
million  subscribers  with a median household income of $65,000 and guarantees a
Nielsen reported reach of more than 482,000 adult viewers.

c) CVI guarantees nationwide  distribution of the TV Spotlight and/or VNR on one
or more national  networks such as CNN,  MSNBC,  FOX News  Channel,  CNBC,  Dish
Network and AMC.

d) CLIENT is  guaranteed  at least twelve  interviews  on national  and/or local
market TV and Radio talk shows during the six month term of this campaign.

e) CLIENT is also  guaranteed  to  receive a minimum  of 100  Newspaper  Feature
placements;

f) 200 Radio News Release (RNR) placements.

g) Monthly updates of CLIENT's  headlining  events in major financial / business
E-newsletter  sent  to  over  650,000  opt-in  subscribers  including:  250,000+
financial  services  professionals,  50,000+ key corporate  decision  makers and
350,000+ investors.

CLIENT  will  receive  usage  reports  with  maps,  bar  charts,  pie charts and
circulation    data   plus    physical    clippings    from    newspapers    and
magazines---verifying   the   guaranteed   number  of  placements  and  audience
impressions.  TV,  Print and Radio  elements  are  subject  to  editing by media
outlets.

3. PROMOTIONAL ELEMENTS

a)   CLIENT will  receive ONE HUNDRED  (100) fully  packaged VHS or CD copies of
     the Corporate Video or TV News Spotlight  (CLIENT's choice) with the option
     to purchase more at guaranteed competitive prices. CLIENT is free to choose
     five additional TV airings instead of the copies.

b)   CLIENT's complete Spotlight  transcript,  CLIENT logo, capsule  description
     and links to CLIENT's  site will be featured as a TOP STORY  during the six
     month term of this campaign on one or more news portals.

c)   CLIENT will receive Video Streaming of CLIENT's  Spotlight for at least six
     months.

4. GRANT OF RIGHTS

a)   CVI  hereby  grants to CLIENT the  complete,  unconditional  and  exclusive
     worldwide  ownership in perpetuity of the Corporate  Video,  Tradeshow Loop
     Presentation,  and Internet Streaming versions.  CLIENT shall, accordingly,
     have the sole and exclusive  right to copyright  any such  materials in its
     name, as the sole owner and author  thereof (it being  understood  that for
     such  purposes CVI shall be CLIENT's  "employees  for hire" as such term is
     defined in the United States  Copyright  Act).  However,  any  re-editing /
     re-purposing  of footage  containing  TV news  anchors  and  reporters  for
     commercial  broadcast  use (e.g.  infomercial  usage)  will  require  their
     written  approval.  CVI grants to CLIENT the rights to: a) approve  Scripts
     prior to Shooting;  b) approve final edited corporate  version;  c) receive
     additional  VHS, DVD, or CD copies of all  materials at  guaranteed  rates.
     CLIENT IS FREE TO USE ANY VENDOR IF CVI CANNOT MATCH THEIR WRITTEN QUOTE.
======================================== =======================================
LIMITED CONSULTING CONTRACT                                          PAGE 3 OF 5

<PAGE>

b)   CLIENT grants to CVI all rights to edit, distribute, exhibit, syndicate and
     market worldwide the approved VNR (via cable, network TV, satellite, cruise
     lines,  airlines,  video,  internet,  CD,  DVD,  etc.)  in  perpetuity  all
     programming  created for broadcast  purposes under this Agreement.  CVI and
     its partners  retain  complete  ownership and editorial  content of its TV,
     Radio, and Internet shows, and websites.

                                    ARTICLE I

         CLIENT hereby  contracts CVI commencing on the date specified below and
continuing  for a period of up to six (6) to twelve (12) months or until CVI has
performed the above mentioned services, whichever shall come first, to act as an
independent agent to or though its agents,  servants, and employees perform such
services for CLIENT as are consistent with the intent of this Agreement.

         In  consideration  for providing the media  consulting  services to the
Company, CVI will receive the following media consulting fee: (a) $100,000.00 in
cash  payable  on the  later  of 60 days  after  the  commencement  date of this
Agreement or on the date the  Blackwater  Capital  funding occurs but in no case
later than  September 30, 2007,  (b) 1,500,000  shares of restricted  stock (the
"Shares") to be released 500,000 Shares on each of June 30, 2007,  September 30,
2007, and December 31, 2007, and (c) a warrant to be issued on December 31, 2007
to purchase one million  (1,000,000)  shares of the Company's common stock at an
exercise price of seventy-five  cents ($0.75) per share exercisable for a period
of three years from the date of issuance (the "Warrant").  The shares underlying
the Warrant and the Shares will have piggyback  registration rights on the first
available registration filing on Form SB-2, S-1 or S-3.

                                   ARTICLE II

         CLIENT  agrees that CVI will have the right to use  CLIENT's  personnel
and CVIs when  necessary,  and CVI will provide and pay all costs  pertaining to
this Agreement  relating to legal and other necessary  services required for CVI
to perform its duties.

                                   ARTICLE III

         If any portion of this  Agreement is  determined  to be void as against
the law or public policy,  such provision shall not render the entire  Agreement
void, but only the invalid portion shall be so construed,  and those  provisions
of this  Agreement  as  evidenced  by this  Agreement  shall be entered into and
carried out.

         The parties agree that in the event any party to this  Agreement  shall
fail or refuse to perform any of the  provisions  of this  Agreement,  the other
party hereto shall be entitled to injunctive  relief  enjoining and  restraining
the  violations  of any of the  provisions  of  this  Agreement  and  compelling
specific performance of this Agreement as set forth herein.

         The  waiver by either  party of breach or  violation  of, or failure to
comply with,  any term  condition  or  provision of this  Agreement by the other
party shall not effect this Agreement and shall not operate or be construed as a
waiver of any subsequent breach, rights, or remedies of the parties hereto.

     No departure from this Agreement will  constitute a waiver or  modification
of any of the provisions or conditions,  or the rights, or remedies of either of
the parties hereto.
======================================== =======================================
LIMITED CONSULTING CONTRACT                                          PAGE 4 OF 5


<PAGE>

         This  Agreement  is made  with  reference  to the laws of the  State of
California,  unless  another  state may have  jurisdiction  in this  transaction
requiring the application of that state's laws to this particular transaction.

         It  is  expressly   understood  that  this  Agreement  shall  bind  any
successors, assigns, subsidiaries, or extensions to the parties hereto.

         It  is  expressly  understood  and  agreed  that  CLIENT  and  CVI  are
completely  separate entities and are not partners,  joint ventures,  nor agents
for each other in any sense  whatsoever and neither party has the power or right
to obligate or bind the other. It is also expressly  understood that CVI has not
represented  itself as a  brokerage  firm,  venture  capital  firm,  or by other
definition, a capital raising entity in this transaction.

         This  Agreement  is complete and it is mutually  agreed and  understood
that no other agreements, statements,  inducements, or representations,  written
or verbal,  have been made or relied upon by either party. In addition,  because
CVI has agreed to accept CLIENT'S stock as compensation for its services; CLIENT
understands  and  agrees  that CVI  does not  recommend  or give any  advice  to
investors regarding CLIENT'S stock,  including  evaluations or performance.  CVI
makes no  representations  or warranties that its services  contemplated  herein
will have any bearing  whatsoever on CLIENT'S present or future share price. The
modifications  hereto or  amendments  hereto shall be binding when  presented in
writing and signed by both parties.

         This Agreement may be signed in counterpart.

         Signed by a person or persons duly authorized by CLIENT and CVI.




FOR CVI                                  FOR CLIENT


/s/ David Alvarado                       /s/ Edward Torres
------------------------------------     ---------------------------------------
CLEARVISION INC.                         ENVIRONMENTAL SERVICE PROFESSIONALS INC
By:                                      By: CEO



6/1/07                                   6/1/07
------------------------------------     ---------------------------------------
DATE:                                    DATE:



======================================== =======================================
LIMITED CONSULTING CONTRACT                                          PAGE 5 OF 5



</TEXT>
</DOCUMENT>
</SUBMISSION>
