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C O N F I D E N T I A L P R I V A T E P L A C E M E N T M E M O R A N D U M

PURSUANT TO RULE 506


OF THE SECURITIES ACT OF 1933

ENVIRONMENTAL SERVICE PROFESSIONALS, INC.

$10,000,000
1,000,000 Units
Each Unit Consisting of
One Share of Series A Preferred Stock and
One Membership Interest in the ESP LIBACSM Fund, LLC

Offering Price per Unit: $10.00

Minimum Investment: 1,000 Units ($10,000)

CAPITAL GROWTH RESOURCES


Placement Agent

FOR ACCREDITED INVESTORS ONLY

Environmental Service Professionals, Inc.


1111 Tahquitz Canyon Way, Suite 110
Palm Springs, California 92262
Telephone: (760) 327-5284
Environmental Service Professionals, Inc.
$10,000,000
1,000,000 Units
Each Unit Consisting of
One Share of Series A Preferred Stock and
One Membership Interest in the ESP LIBACSM Fund, LLC

Offering Price per Unit: $10.00

Minimum Investment: 1,000 Units ($10,000)

Environmental Service Professionals, Inc. (“we,” “us,” “our,” “ESP,” or the “Company”) is a
Nevada corporation headquartered in Southern California. Through our wholly owned subsidiary
Environmental Safeguard Professionals, Inc. (“Safeguard”), we offer various inspection services to address
mandated energy certification, construction defects, moisture and other environmental issues in commercial
and residential buildings. Our services include the Certified Environmental Home Inspector™ (“CEHI”)
program, Healthy Living Maintenance Program™ (“HLMP”), and EcoCheck Inspection™ program. Through
our wholly owned subsidiary National Professional Services, Inc. (“NPS”), we offer annual trade
memberships and management services for industry related associations. Porter Valley Software, Inc.
(“PVS”), the nation’s number one inspection software company, will provide the core of our on-line
inspection protocols. See “BUSINESS SUMMARY.”

Our principal investment objectives are to:


1. Locate and acquire companies that provide other types of services that would support the
corporate focus of the Company as well as enhance the Company’s product services to its
client base while simultaneously strengthening the Company’s national market share.
2. Earn profits from our CEHI™ program, HLMP™, and EcoCheck Inspection™ program,
thereby increasing the value of the Company.
The Company has engaged Capital Growth Resources, a Financial Industry Regulatory Authority
(“FINRA”) member firm, as the exclusive placement agent for this offering (the “Placement Agent” or
“CGR”). Each share of Series A Preferred Stock is convertible into 17.24 shares of our common stock
(“Common Stock”). Each share of Series A Preferred Stock will automatically convert into 17.24 shares of
Common Stock once our Common Stock has traded at a closing bid price of $1.50 per share or more, for a
period of 20 consecutive trading days at any time six months after this offering terminates (the “Investment
Threshold”). The Company has also engaged Capital Growth Planning, Inc. (“CGP”), the parent company of
the Placement Agent, to use their proprietary “Life Insurance Backed Collateral (“LIBACSM”) process, as a
means of mitigating the risk of investment loss for investors in this Offering . See “DESCRIPTION OF
SECURITIES.” For more detailed information regarding CGP’s LIBACSM business process, see “ESP
LIBACSM Fund, LLC Investment Objectives and Strategy.“ Also, Exhibit A contains a flow chart of the
LIBACSM business process. Our stock currently is quoted on the OTC Bulletin Board and trades under the
ticker symbol “EVSP.”

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

Price to Investors (1) Selling Commissions (2) Proceeds to LLC Proceeds to Company (3)
Per Unit $10.00 $1.00 $4.00 $5.00
Total (4) $10,000,000 $1,000,000 $4,000,000 $5,000,000
*See footnotes on following page.

The Date of this Memorandum is November 1, 2008


(1) This offering will terminate on March 31, 2009, unless we and CGR mutually agree to extend the offering
period for up to an additional 90 days (the “Sales Termination Date”). Subscription funds will be deposited
into an escrow account with US BANK N.A. (the “Securities Escrow”) a qualified FDIC insured financial
institution selected by CGR, until at least $500,000 of subscription funds are received and accepted by the
Company (the “Minimum Offering”). Once the Minimum Offering amount has been raised, subscription
funds may thereafter be transferred by the Company from the Escrow Account as follows: (i) 50% into our
operating account for use as described in this Confidential Private Placement Offering Memorandum (the
“Memorandum”), (ii) 10% to the Placement Agent, and (iii) 40% to a separate escrow to be established by
the ESP LIBACSM Fund, LLC (a “Life Settlement Escrow”) for the purpose of acquiring LIBACSM Assets
(to be described) with a total combined face value in life insurance policies approximately equal to, or more
than, the gross offering proceeds (the portfolio of “LIBACSM Assets”). See “TERMS OF THE
OFFERING.”

(2) The Units will be offered on a “best-efforts, all or none” basis up to the minimum offering and a “best
efforts basis thereafter by CGR and possibly through other broker-dealers who sign a Selling Agreement
with CGR and who are registered members of FINRA. Selling commissions may be paid to registered
broker-dealers in the form of cash, shares, and options to purchase shares of our Common Stock, for sales
of Units made through or by them. The Company will indemnify participating broker-dealers, including
CGR, with respect to disclosures made in this Memorandum. In consideration for services to be rendered
by CGR in connection with this offering of Units, CGR will receive, subject to the completion of the
Minimum Offering, a cash commission of 8% and a cash non-accountable expense allowance of 2% (the
“Placement Agent Cash Fee”), and a three year warrant to purchase two shares of the Company’s common
stock at an exercise price of $0.75 per share for every Unit sold (the “Placement Agent Warrants”). See
“PLAN OF DISTRIBUTION.”

(3) The amounts shown reflect the deduction of the Placement Agent Cash Fees and the acquisition of the
LIBACSM Assets. The amounts shown are before deducting other organization and offering costs to the
Company, which include legal, accounting, printing, due diligence, marketing, selling and other costs
incurred in the offering of the Units.

(4) The Units are being offered pursuant to Rule 506 of Regulation D of Section 4(2) of the Securities Act of
1933, as amended. The Units will only be sold to investors who are Accredited Investors as that term is
defined in Regulation D promulgated under the Securities Act of 1933, as amended. We have the option
in our sole discretion to accept less than the minimum investment from a limited number of subscribers.

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THIS OFFERING OF SECURITIES IS BEING MADE PURSUANT TO THE PRIVATE PLACEMENT
EXEMPTION AVAILABLE IN RULE 506 OF REGULATION D PROMULGATED UNDER SECTION 4(2) OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND PURSUANT TO THE NATIONAL SECURITIES MARKET
IMPROVEMENT ACT OF 1996.
_____________________________________

THESE SECURITIES ARE OFFERED PURSUANT TO EXEMPTIONS PROVIDED BY THE SECURITIES ACT
OF 1933, AS AMENDED (THE “ACT”) AND BY CERTAIN STATE SECURITIES LAWS, AND PURSUANT TO CERTAIN
RULES AND REGULATIONS PROMULGATED PURSUANT THERETO. THE SECURITIES MAY NOT BE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION UNDER THE ACT OR AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
THERE ARE, AND WILL CONTINUE TO BE, RESTRICTIONS ON THE TRANSFER OF THE SECURITIES AND ALL
OTHER UNREGISTERED SECURITIES OF THE COMPANY. THERE IS NO MARKET FOR THE SECURITIES AND
NONE IS EXPECTED TO DEVELOP IN THE NEAR FUTURE. A PURCHASE OF THE SECURITIES SHOULD BE
REGARDED AS AN ILLIQUID, LONG-TERM INVESTMENT.
_____________________________________

DURING THE COURSE OF THE OFFERING AND PRIOR TO SALE, EACH OFFEREE OF THE SECURITIES,
AND HIS OR HER ADVISOR(S), ARE INVITED TO ASK QUESTIONS OF, AND OBTAIN ADDITIONAL
INFORMATION FROM, THE COMPANY CONCERNING THE TERMS AND CONDITIONS OF THE OFFERING, AND
ANY OTHER RELEVANT MATTERS (INCLUDING, WITHOUT LIMITATION, INFORMATION TO VERIFY THE
ACCURACY OF THE INFORMATION SET FORTH HEREIN), TO THE EXTENT THE COMPANY POSSESSES SUCH
INFORMATION OR CAN ACQUIRE IT WITHOUT UNREASONABLE EFFORT OR EXPENSE. OFFEREES OR
ADVISORS HAVING QUESTIONS OR DESIRING ADDITIONAL INFORMATION SHOULD CONTACT EDWARD
TORRES, CHIEF EXECUTIVE OFFICER OF THE COMPANY, AT (760) 327-5284. EXCEPT FOR THE INFORMATION
SET FORTH HEREIN AND SUCH FURTHER INFORMATION AS MAY BE PROVIDED BY THE COMPANY, NO
PERSON ACTING IN ANY CAPACITY WHATSOEVER WITH RESPECT TO THIS OFFERING HAS ANY AUTHORITY
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OR WARRANTIES, EITHER EXPRESS OR
IMPLIED. IF GIVEN OR MADE, SUCH OTHER INFORMATION, REPRESENTATIONS, OR WARRANTIES MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THE COMPANY FILES PUBLIC REPORTS
WITH THE SECURITIES AND EXCHANGE COMMISSION WHICH ARE AVAILABLE FOR REVIEW BY ALL
PROSPECTIVE INVESTORS AT WWW.SEC.GOV.
_____________________________________

THE INVESTOR MUST RELY ON HIS OR HER OWN EXAMINATION OF THE COMPANY AND THE TERMS
OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED IN MAKING AN INVESTMENT IN THE
SECURITIES OFFERED HEREBY. PRIOR TO MAKING AN INVESTMENT IN THE SECURITIES, A PROSPECTIVE
INVESTOR SHOULD CONSULT HIS OR HER OWN COUNSEL, ACCOUNTANT AND OTHER ADVISORS, AND
CAREFULLY REVIEW AND CONSIDER THE ENTIRE CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM,
AND IN PARTICULAR, THE SECTION ENTITLED “RISK FACTORS.” PROSPECTIVE INVESTORS SHOULD NOT
CONSTRUE THE CONTENTS OF THIS MEMORANDUM, OR ANY PRIOR OR SUBSEQUENT COMMUNICATIONS
FROM THE COMPANY OR ANY OF ITS AGENTS, OFFICERS, OR REPRESENTATIVES, AS LEGAL OR TAX ADVICE.
EACH OFFEREE SHOULD CONSULT HIS OR HER OWN ADVISORS AS TO LEGAL, TAX AND RELATED MATTERS
CONCERNING AN INVESTMENT IN THE COMPANY.
_____________________________________

THIS MEMORANDUM IS NOT KNOWN TO CONTAIN AN UNTRUE STATEMENT OF A MATERIAL FACT


OR TO OMIT MATERIAL FACTS WHICH, IF OMITTED, WOULD MAKE THE STATEMENTS HEREIN MISLEADING.
IT CONTAINS A FAIR SUMMARY OF THE MATERIAL TERMS OF DOCUMENTS PURPORTED TO BE
SUMMARIZED HEREIN. HOWEVER, THIS IS A SUMMARY ONLY AND DOES NOT PURPORT TO BE COMPLETE.
ACCORDINGLY, REFERENCE SHOULD BE MADE TO THE DOCUMENTS REFERRED TO HEREIN, COPIES OF
WHICH ARE ATTACHED HERETO OR WILL BE SUPPLIED UPON REQUEST, FOR THE EXACT TERMS OF SUCH
AGREEMENTS AND DOCUMENTS.
_____________________________________

THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY JURISDICTION IN


WHICH SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NO PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS CONCERNING THE COMPANY OTHER THAN
THOSE CONTAINED IN THIS MEMORANDUM, AND IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON.
_____________________________________

EXCEPT WHERE OTHERWISE INDICATED, THIS MEMORANDUM IS CURRENT AS OF THE DATE


HEREOF. NEITHER THE DELIVERY OF THIS MEMORANDUM NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY AFTER THE DATE HEREOF.

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STATE NOTICE REQUIREMENTS

NOTICE REQUIREMENTS IN STATES WHERE UNITS MAY BE SOLD ARE AS FOLLOWS:

1. FOR CALIFORNIA RESIDENTS: THE SALE OF THE SECURITIES WHICH ARE


THE SUBJECT OF THIS OFFERING HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND IS BEING MADE PURSUANT TO
THE EXEMPTION FROM QUALIFICATION UNDER THE NATIONAL SECURITIES MARKET
IMPROVEMENT ACT OF 1996 OR, IN THE ALTERNATIVE PURSUANT TO THE EXEMPTION
AVAILABLE IN SECTION 25102(f) OF THE CALIFORNIA CORPORATIONS CODE FOR
PRIVATE PLACEMENTS.

2. FOR FLORIDA RESIDENTS: THESE SECURITIES HAVE NOT BEEN


REGISTERED WITH THE FLORIDA DIVISION OF SECURITIES. EACH FLORIDA RESIDENT
WHO SUBSCRIBES FOR THE PURCHASE OF SECURITIES HEREIN HAS THE RIGHT,
PURSUANT TO SECTION 517.061(11)(a)(5) OF THE FLORIDA SECURITIES ACT, TO
WITHDRAW HIS SUBSCRIPTION FOR SUCH PURCHASE AND RECEIVE A FULL REFUND OF
ALL MONIES PAID WITHIN THREE BUSINESS DAYS AFTER THE EXECUTION OF THE
SUBSCRIPTION AGREEMENT OR PAYMENT FOR THE PURCHASE HAS BEEN MADE,
WHICHEVER IS LATER. WITHDRAWAL WILL BE WITHOUT ANY FURTHER LIABILITY TO
ANY PERSON. TO ACCOMPLISH THIS WITHDRAWAL, A SUBSCRIBER NEED ONLY SEND A
LETTER OR TELEGRAM TO THE COMPANY AT ITS ADDRESS SET FORTH IN THE TEXT OF
THIS MEMORANDUM INDICATING HIS INTENTION TO WITHDRAW. SUCH LETTER OR
TELEGRAM SHOULD BE SENT AND POSTMARKED PRIOR TO THE END OF THE
AFOREMENTIONED THIRD BUSINESS DAY. IT IS ADVISABLE TO SEND SUCH LETTER BY
CERTIFIED MAIL, RETURN RECEIPT REQUESTED TO ENSURE THAT IT IS RECEIVED AND
ALSO TO EVIDENCE THE TIME IT WAS MAILED. IF THE REQUEST IS MADE ORALLY (IN
PERSON OR BY TELEPHONE TO THE COMPANY AT THE NUMBER LISTED IN THE TEXT OF
THIS MEMORANDUM), A WRITTEN CONFIRMATION THAT THE REQUEST HAS BEEN
RECEIVED SHOULD BE REQUESTED.

SEE THE SUBSCRIPTION AGREEMENT FOR OTHER STATE NOTICES, IF


APPLICABLE.

THIS SPACE INTENTIONALLY LEFT BLANK

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TABLE OF CONTENTS
Page

INVESTMENT SUMMARY ....................................................................................................................... 1


USE OF PROCEEDS ................................................................................................................................... 4
CAPITAL STRUCTURE (PRE & POST OFFERING) ............................................................................... 5
TERMS OF THE OFFERING...................................................................................................................... 6
PLAN OF DISTRIBUTION ......................................................................................................................... 7
ESP LIBACSM FUND, LLC INVESTMENT OBJECTIVES AND STRATEGY ....................................... 8
BUSINESS SUMMARY ............................................................................................................................ 14
MANAGEMENT........................................................................................................................................ 20
RISK FACTORS ........................................................................................................................................ 27
DESCRIPTION OF SECURITIES............................................................................................................. 56
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS................................................................... 65
ERISA CONSIDERATIONS ..................................................................................................................... 73
CAPITALIZATION ................................................................................................................................... 74
DILUTION ................................................................................................................................................. 76
DIVIDEND POLICY.................................................................................................................................. 77
PRINCIPAL STOCKHOLDERS ............................................................................................................... 77
ENVIRONMENTAL SERVICE PROFESSIONALS, INC.
PRO FORMA FINANCIAL PROJECTIONS ............................................................................................ 79
ADDITIONAL INFORMATION............................................................................................................... 85

EXHIBITS

LIBACSM BUSINESS PROCESS FLOW CHART .....................................................................................A


CERTIFICATE OF DESIGNATION FOR SERIES A PREFERRED STOCK .........................................B
REGISTRATION RIGHTS AGREEMENT ...............................................................................................C
ESP LIBACSM FUND, LLC LIMITED LIABILITY COMPANY AGREEMENT ....................................D
FINANCIAL STATEMENTS .....................................................................................................................E*
SUBSCRIPTION DOCUMENTS ...............................................................................................................F

*Available in public reports filed with the Securities and Exchange Commission at
www.sec.gov/edgar.shtml.

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INVESTMENT SUMMARY

The following summary is qualified in its entirety by the more detailed information appearing
elsewhere or incorporated by reference in this Memorandum and its Exhibits. Each prospective investor
is urged to carefully read this Memorandum and its Exhibits in their entirety including but not limited to
the risk factors.

The Company

Environmental Service Professionals, Inc. (“we,” “us,” “our,” “ESP,” or the “Company”) is a
Nevada corporation headquartered in Southern California. Through our wholly owned subsidiary
Environmental Safeguard Professionals, Inc. (“Safeguard”), we offer various inspection services to
address mandated energy certification, construction defects, moisture and other environmental issues in
commercial and residential buildings. Our services include the Certified Environmental Home
Inspector™ (“CEHI”) program, Healthy Living Maintenance Program™ (“HLMP”), and EcoCheck
Inspection™ program. Through our wholly owned subsidiary National Professional Services, Inc.
(“NPS”), we offer annual trade memberships and management services for industry related associations.
Porter Valley Software, Inc. (“PVS”), the nation’s number one inspection software company, will provide
the core of our on-line inspection protocols

Safeguard has developed an all inclusive multi-disciplined inspection program focused on


reducing liabilities and mitigating risks. The program is designed to protect homeowners, businesses and
retail properties, builders, lenders, mortgage brokers/agents, and all other real estate oriented properties
relating to state mandated energy certification, construction defects, moisture or other environmental
issues. It is known as the EcoCheck Inspection™. The EcoCheck Inspection™ has developed, based on
standardized training, certification, inspection, and results, reporting analysis programs which form the
foundation of a suite of services that together are provided by ESP’s Certified Environmental Home
Inspector™ (“CEHI”). One of the programs we provide by the CEHI program is the Healthy Home
Assurance Certification™ (“HAC”). After a EcoCheck Inspection™ has been conducted by one of our
CEHIs, a subject property that passes inspection receives a HAC. The HAC is placed in the window
closest to the main entrance of the building in order to alert visitors that the subject property promotes a
healthy living environment through management of potentially harmful indoor air quality issues and is
valid for 12 months.

Through the EcoCheck Inspection™, ESP also offers a pro-active comprehensive subscription
based 10 year annual maintenance process called the Healthy Living Maintenance Program™ (“HLMP”)
to all residential properties that have received a HAC. Once a subject property receives an initial HAC, it
is eligible to subscribe to the HLMP. Every 12 months a new EcoCheck Inspection™ is conducted and
after any issues, if required, are corrected a new HAC is issued. We believe that the HLMP adds value to
a property and mitigates risk for the insurance, mortgage banking, building, real estate, and property
management industries by reducing claims, instilling confidence in property safety, and promoting a
positive green image to both residential and commercial clients.

NPS is currently a conglomerate of seven individual associations and maintains annual paying
members. The focus of this business unit is to establish cross-training on CEHI programs and to provide
information concerning residential environmental issues, to establish training for underwriters, loan
officers and appraisers, and to educate these groups about CEHI inspection protocols. Training programs
for insurance companies, underwriters, loss control, and risk management personnel educate and
emphasize the benefits of using a CEHI on the initial inspection and then establishing annual inspections.

PVS has developed various software programs which have been designed specifically for

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detailed data searching and data retention under the name “InspectVue™. InspectVue™ is the core
component of ESP’s automated on-line EcoCheck Inspection™ protocols that include the new energy
inspection requirements that are being developed in concert with other industry leading participants.

Our executive offices are located at 1111 East Tahquitz Canyon Way, Suite 110, Palm Springs,
California 92262 and our telephone number is (760) 327-5284. Our Internet address is www.evsp.com.
We have not incorporated by reference into this Memorandum the information included on or linked from
our website and you should not consider it to be part of this Memorandum.

The Unit Investment

The Company is offering up to 1,000,000 Units for a purchase price of $10.00 per Unit. Each
Unit consists of one share of Series A Preferred Stock in the Company (the “Shares”) and one
membership interest (a “Membership Interest” and, collectively, the “Membership Interests”) in the ESP
LIBACSM Fund, LLC, a recently formed Delaware limited liability company (the “LLC”). The minimum
investment is 1,000 Units ($10,000), although we have the right in our sole discretion to accept less than
the minimum from a limited number of subscribers.

The Series A Preferred Stock

Issue .................................................................. 1,000,000 shares of Series A Convertible Preferred


Stock (the “Series A Preferred Stock” or “Shares”), par
value $0.01 per share.

Dividend Rate ................................................... The Series A Preferred Stock will participate with the
Common Stock on an as-converted basis with respect to
any dividends which may be declared by the Board of
Directors. See “RISK FACTORS – Risks Relating to
Business – No Assurance That Dividends Will Be Paid.”

Liquidation Preference...................................... $10.00 per share of Series A Preferred Stock.

Automatic Conversion ...................................... Each share of Series A Preferred Stock will


automatically convert into 17.24 shares of Common
Stock (i.e., the equivalent of $0.58 per share using
$10.00 per share for the Series A Preferred Stock as the
baseline) once our Common Stock has thereafter traded
at a closing bid price of $1.50 per share for a period of
20 consecutive trading days at any time six months after
the final closing of this Offering (the “Investment
Threshold”). Capital Growth Planning, Inc., pursuant to
its Patent Licensing Agreement with ESP by which ESP
has licensed the right to use the LIBACSM business
process, has the option to purchase the Company’s
Membership Interests for a period of 180 days after ESP
becomes the sole member.

Shareholder Conversion Right .......................... The Series A Preferred Stockholders may convert each
share of Series A Preferred Stock into 17.24 shares of
Common Stock at any time after the shares of Series A
Preferred Stock are issued.

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Voting Rights .................................................... The Series A Preferred Stock has no voting rights.
Shares of Series A Preferred Stock converted into shares
of Common Stock will have the same voting rights as
other Common Stock.

Registration Rights............................................ With respect to shares of Common Stock obtained by


Series A Preferred Stockholders through the conversion
of the Series A Preferred Stock (“Registrable
Securities”), if we determine to register any of our
securities for our own account, other than a registration
relating solely to employee benefit plans or a registration
relating solely to a transaction pursuant to Rule 145
promulgated under the Securities Act or a registration on
any registration form which does not permit secondary
sales, we will promptly give to each holder of
Registrable Securities written notice thereof and include
in such registration the number of shares of Registrable
Securities specified in a written request made by such
holders within ten (10) days after receipt of such written
notice from us (the “Piggyback Registration Right”).
Notwithstanding anything else herein to the contrary, if
the representative of the underwriters in any
underwritten registration advises us in writing that
marketing factors require a limitation of the number of
Registrable Securities to be underwritten, the
representative may exclude all Registrable Securities
from, or limit the number of Registrable Securities to be
included in, the registration and underwriting. We will
so advise all holders requesting registration, and the
number of Registrable Securities that shall be included
in the registration and underwriting shall be allocated
pro rata based on the total number of Registrable
Securities held by such holders. A copy of the
Registration Rights Agreement is included with this
Memorandum as Exhibit C.

The Membership Interests

Issue .................................................................. 1,000,000 membership interests (the “Membership


Interests”) in ESP LIBACSM Fund, LLC, a Delaware
limited liability company formed to own “Fully Funded”
Life Insurance Backed Collateral (the “LIBACSM
Assets”) for the benefit of the Members.

The LIBACSM Assets......................................... Through a series of revocable trusts, senior life


settlement insurance policies would be acquired with
total combined life insurance policy face values
approximately equal to, or more than, the gross proceeds
of this offering. The assets within each trust are “Fully
Funded.” Fully Funded means that in addition to each

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senior life settlement insurance policy (a “Policy”), the
LLC (though each trust) will acquire a Single Premium
Immediate Annuity (a “SPIA”) issued and backed by a
U.S. life insurance carrier with a Standard and Poor’s
Rating of “AA” or better at the time of purchase, to
provide each trust an annual income stream sufficient to
pay all future premiums, all administrative fees, and all
required taxes on income, for the life of each insured
underlying each policy (the combination of the Policy
and SPIA within the revocable trust, with each measured
by the life of the insured, is referred to as a “LIBACSM
Asset”, and the collection of the LIBACSM Assets to be
acquired are referred to as the “Portfolio of LIBACSM
Assets”). This is all accomplished with forty percent
(40%) of the funds invested in the Units. See “THE ESP
LIBACSM Fund, LLC INVESTMENT OBJECTIVES
AND STRATEGIES” and Exhibit A for a flow chart of
the LIBACSM business process.

Automatic Reversion ........................................ Membership Interests will automatically revert to ESP


(economic interest only), pro tanto (meaning for each
Share converted, one Membership Interest will revert to
ESP), to the extent an investor converts his Shares to
ESP’s Common Stock. Also, any time after six months
following the final closing of the offering and when and
if ESP’s Common Stock has traded at a closing bid price
of $1.50 per share or more for a period of 20 consecutive
trading days (the “Investment Threshold”), all the Shares
will automatically be converted to Common Stock and
all Membership Interests will automatically revert to
ESP such that ESP will then be the sole member (i.e.
ESP will own all the Membership Interests) of the ESP
LIBACSM Fund, LLC. This conversion represents
approximately a 258% return on investment, if the
Investment Threshold is achieved and an investor is able
to sell his Common Stock for at least $1.50 per share.
CGP will have the option to repurchase from ESP the
remaining LIBACSM Assets at cost for a period of 180
days after ESP becomes the sole member.

USE OF PROCEEDS

The maximum gross proceeds from the sale of the Units are $10,000,000. This offering has a
minimum capitalization of $500,000. We cannot assure that we will raise sufficient capital from this
offering to execute our business plan. The net proceeds from the offering available to the Company for
investment in its business are expected to be approximately $5,000,000, if the maximum offering is
achieved, and $250,000 if the minimum is achieved (see chart below). The above net proceeds to ESP are
after distributions to the ESP LIBACSM Fund, LLC and payment of offering costs, including the
Placement Agent Cash Fee, printing, mailing, legal, and accounting costs, but not including other
potential selling commissions and referral fees that may be incurred. The estimate of the budget for
offering costs is an estimate only and the actual offering costs may differ from those expected by

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management. The following table is an estimate of the intended use of proceeds from this offering,
assuming that the retirement of a substantial amount of the Company’s short-term indebtedness is
accomplished from other expected funding sources.

Disbursement Minimum Maximum


Safeguard Division $50,000 $500,000
Software Development $50,000 $750,000
Target Acquisitions $1,500,000
Retirement of Indebtedness $50,000 $500,000
Working Capital $100,000 $1,250,000
Capital Expenditures $500,000
Commissions $50,000 $1,000,000
The ESP LIBACSM Fund, LLC $200,000 $4,000,000

Total $500,000 $10,000,000

The intended allocation of net proceeds described above is an estimate only and the proceeds of
this offering may be allocated differently in management’s discretion. The amounts and timing of any
expenditure will vary depending on the costs we incur in raising capital, the amount of cash generated by
our operations, competitive and technological developments and the rate of growth, if any, of our
business. Accordingly, management will have broad discretion in applying the net proceeds from this
offering.

CAPITAL STRUCTURE
(PRE & POST OFFERING)

Series A Preferred Stock offered by ESP............................................................................. 1,000,000 shares

Series A Preferred Stock issued & outstanding ................................................................................. 0 shares

Common Stock authorized (1) ......................................................................................... 100,000,000 shares

Common Stock issued & outstanding (2) ........................................................................... 56,239,250 shares

The ESP LIBACSM Fund, LLC Membership Interests authorized............................. 1,000,000 Membership
Interests

The ESP LIBACSM Fund, LLC Membership Interests issued & outstanding............0 Membership Interests

Preferred and Common Stock issued & outstanding after the offering (3)......................... 57,239,259 shares

(1) We intend to amend our Articles of Incorporation in the future to increase the number of our authorized
common stock (“Common Stock”) and preferred stock (“Preferred Stock”).

(2) Includes 22,507,000 shares owned by our Chief Executive Officer and 9,034,483 shares owned by our
Chief Operating Officer. See “PRINCIPAL STOCKHOLDERS.” Also includes 112,069 shares of
Common Stock sold by us in a prior private placement of units in August 2008 for a purchase price of
$0.58 per unit, each unit consisting of one share of Common Stock and one Common Stock purchase
warrant exercisable for a period of three years at an exercise price of $0.75 per share. Includes 5,172,414
shares of Common Stock sold by us in a prior private placement of units ending in August 2008 for a

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purchase price of $2.32 per unit, pursuant to which we raised approximately $3,000,000 of total capital and
$2,775,000 of net capital from the sale of approximately 1,293,104 units. Each unit consisted of four shares
of Common Stock (i.e. $0.58 per share), two Common Stock purchase warrants exercisable for a period of
three years at an exercise price of $0.75 per share, and one Common Stock purchase warrant exercisable for
a period of three years at an exercise price of $0.25 per share. The prior private placements were made
pursuant to Rule 506 of Regulation D of the Securities Act of 1933, as amended. Also includes 416,896
shares issued by us from July 2008 to August 2008 as late fees pursuant to certain bridge loans, and 20,000
shares of Common Stock issued by us in July 2008 for services rendered.

(3) The total number of shares of our Preferred Stock and Common Stock outstanding assumes that the
maximum number of Units is sold in this offering, but does not assume the conversion of the Series A
Preferred Stock into Common Stock (17,240,000 shares of our Common Stock are issuable upon the
conversion of all of the Series A Preferred Stock). Also does not include 16,394,018 shares of Common
Stock issuable upon the exercise of outstanding warrants or up to 2,000,000 shares of Common Stock
issuable upon the exercise of up to 2,000,000 Placement Agent Warrants issuable pursuant to this offering.
See “DESCRIPTION OF SECURITIES.”

TERMS OF THE OFFERING

Securities Offered

We are offering up to 1,000,000 Units for a purchase price of $10.00 per Unit. Each Unit
consists of one share of Series A Preferred Stock in the Company (the “Shares”) and one membership
interest (a “Membership Interest” and, collectively, the “Membership Interests”) in the ESP LIBACSM
Fund, LLC, a recently formed Delaware limited liability company (the “LLC”). Each Unit includes a pro
rata Membership Interest in the LLC. We will have the unrestricted right to reject tendered subscriptions
for any reason. In the event the Units available for sale are oversubscribed, they will be sold to those
investors subscribing first, provided they satisfy the applicable investor suitability standards. The
minimum investment is 1,000 Units ($10,000), although we have the right in its sole discretion to accept
less than the minimum from a limited number of subscribers.

Determination of Offering Price

The offering price of the Units was arbitrarily determined by us and does not bear any
relationship to the assets, results of operations or book value of ESP, or to any other historically based
criteria of value.

Subscription Period

The offering of Units will terminate on March 31, 2009, unless we and CGR mutually agree to
extend the offering period for up to an additional 90 days (the “Sales Termination Date’’). The Sales
Termination Date may occur prior to March 31, 2009, if subscriptions for the maximum number of Units
have been received and accepted by us before such date. Subscriptions for Units must be received and
accepted by us on or before such date to qualify the subscriber for participation in the offering.

Subscription Procedures

Subscription funds will be deposited into a subscription escrow account with US Bank National
Association (the “Escrow Agent”), an independent FDIC insured financial institution in Los Angeles,
California, until a minimum of $500,000 is raised in this Offering. Once the minimum offering amount is
raised, the subscription escrow will close but the Securities Escrow Account will remain open with the
escrow agent acting as the receiving agent for the Company such that all subscription funds will thereafter
be deposited into the Securities Escrow Account and released to the Company’s operating account and the

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LLC’s life settlement escrow account immediately after acceptance of your subscription by the Company.
The life settlement escrow will be with an independent FDIC insured financial institution, such as Well
Fargo N.A., of Minnesota or Christina Bank and Trust of Delaware (the “Life Settlement Escrow”).
Completed and signed subscription documents and subscription checks should be sent to Capital Growth
Resources at the following address: 405 East Lexington Avenue, Suite 201, El Cajon, California 92020,
Attention: Lorie Cook. Subscription checks should be made payable to the ESPI Escrow Account. By
executing the Subscription Agreement, the subscriber will be deemed to have executed the ESP LIBACSM
Fund, LLC, Limited Liability Company Agreement, a copy of which is attached to this Memorandum as
Exhibit D. If a subscription is rejected, all funds will be returned to a subscriber within ten days after
such rejection without deduction or interest. Upon acceptance by the Company of a subscription, a
confirmation of such acceptance will be sent to the subscriber.

Investor Suitability Standards

Units will be sold only to a person who (i) has a net worth (or joint net worth with the purchaser’s
spouse) of at least $1,000,000, or (ii) has an annual gross income during the past two years and a
reasonable expectation of annual gross income in the current year of at least $200,000 or $300,000 jointly
with spouse, or (iii) otherwise meets the requirements for an Accredited Investor as defined in Rule 501
of Regulation D promulgated under Section 4(2) of the Securities Act of 1933, as amended. See the
Purchaser Qualification Questionnaire in the Subscription Documents in Exhibit F to this Memorandum.
In the case of sales to fiduciary accounts (Keogh Plans, Individual Retirement Accounts (IRAs) and
Qualified Pension/Profit Sharing Plans or Trusts), the above suitability standards must be met by the
fiduciary account, the beneficiary of the fiduciary account, or by the donor who directly or indirectly
supplies the funds for the purchase of Units. Investor suitability standards in certain states may be higher
than those described in this Memorandum. These standards represent minimum suitability requirements
for prospective investors, and the satisfaction of such standards does not necessarily mean that an
investment in ESP is suitable for such persons.

Each investor must represent in writing that he meets the applicable requirements set forth above
and in the Subscription Agreement, including, among other things, that (i) he is purchasing the Units for
his own account, for investment and not with a view toward distribution, and (ii) he has such knowledge
and experience in financial and business matters that he is capable of evaluating without outside
assistance the merits and risks of investing in the Units, or he and his purchaser representative together
have such knowledge and experience that they are capable of evaluating the merits and risks of investing
in the Units. Broker-dealers and other persons participating in the offering must make a reasonable
inquiry in order to verify an investor’s suitability for an investment in ESP. Transferees of Units will be
required to meet the above suitability standards.

Interim Investments

Company funds not needed on an immediate basis to fund Company operations may be invested
in government securities, money market accounts, deposits or certificates of deposit in commercial banks
or savings and loan associations, bank repurchase agreements, funds backed by government securities,
short-term commercial paper, or in other similar interim investments.

PLAN OF DISTRIBUTION

The Units are being offered on a “best-efforts, all or none” basis up to the Minimum Offering and
a “best efforts” basis thereafter through registered broker-dealers who are members of the FINRA.
Selling commissions may be paid to registered broker-dealers in the form of cash, shares or options to
purchase shares of our Common Stock with respect to Units sold by or through them. The amount of

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selling commissions payable, if any, will be determined by us in negotiations with prospective broker-
dealers. The Company has entered into an exclusive Placement Agent Agreement with Capital Growth
Resources (“CGR”), a member of FINRA, pursuant to which CGR will be paid a selling commission of
8% and a placement agent non-accountable expense fee of 2% of the total capital raised in this offering.
The Company, on or about August 23, 2008, signed a Patent Licensing Agreement with CGR’s parent
corporation, Capital Growth Planning, Inc., to use its LIBACSM business process in this Offering. The
LIBACSM process is protected by, among other things, a Provisional Business Process Patent Application,
filed on February 2, 2008. Insured Capital Management, Inc. an affiliate of CGR and also a wholly
owned subsidiary of CGP, will be the manager of the ESP LIBACSM Fund, LLC. Additional affiliates of
CGR and wholly owned subsidiaries of CGP, Capital Life Assets, Inc. (“CLA”), Capital Growth
Insurance Services, Inc. (“CGIS”), and Capital Administrative Services, Inc. (“CAS”) will be involved in
the transaction. Respectively, CLA will source Policies for the LIBACSM Assets to be acquired by ESP
LIBACSM Fund, LLC, which will be a form of security for this investment and will receive a fee of no
more than twp percent (2%) of the face value of Policies acquired CGIS will act as the sole agent in
acquiring SPIA contracts on behalf of the revocable trusts making up the Portfolio of LIBACSM Assets
and will receive a commission for the insurance company which issues the annuity, and CAS will act as
an agent of the insured to process the SPIA application and receive funds from the life settlement escrow
on behalf of the insured and his revocable trust to pay the SPIA premium, for which service it will receive
a fee of approximately One Hundred Dollars ($100). The Company will indemnify CGR and other
participating broker-dealer firms and others, if any, with respect to the disclosures made in this
Memorandum.

ESP LIBACSM FUND, LLC INVESTMENT OBJECTIVES AND STRATEGY

General

We are offering up to 1,000,000 Units for a purchase price of $10.00 per Unit (the “Offering”).
Each Unit consists of one share of Series A Preferred Stock (the “Shares”) and one membership interest
(a “Membership Interest” and, collectively, the “Membership Interests”) in the ESP LIBACSM Fund,
LLC, a Delaware limited liability company (the “LLC”). Each Unit includes a pro rata Membership
Interest in the LLC. For each closing, forty percent (40%) of the gross proceeds (the “LLC Funds”) will
be transferred from the Securities Escrow to the Life Settlement escrow to be used by the LLC to acquire,
through an Irrevocable Life Insurance Trust (the “Master Trust”) of which the LLC is the grantor and sole
beneficiary, the control of a series of revocable trusts each of which will own a senior non-variable, non-
contestable universal or whole life insurance policy (each a “Policy” and collectively the “Polices”) and a
single premium immediate annuity (each a “SPIA” and collectively the “SPIAs”). The revocable trusts
containing the Policies and SPIAs are referred to collectively as the “Portfolio of LIBACSM Assets”. The
structure of the LLC controlling the Master Trust, which in turn will control the revocable trusts, was
designed, among other things, to protect the LIBACsm Assets and investors’ Membership Interests from
the Company’s creditors and any possible Company insolvency, including bankruptcy.

The LIBACSM Assets

Each trust, owning a Policy will also own a SPIA contract that will be designed to generate a cash
flow to the Trust equal to the costs of paying all the life insurance premiums, trustee fees, LLC
management fees, policy servicing and tracking fees, and taxes on the taxable portion of the SPIA
income, for as long as the insured underlying the Policy and SPIA lives, no matter how long that the
insured may live. Each Policy will have been issued by an U.S. insurance carrier who at the time of the
LLC’s acquisition will have a Standard and Poor’s rating of “A” or better. Each SPIA will have been
issued by a U.S. insurance carrier who at the time of the LLC’s acquisition will have a Standard and
Poor’s rating of “AA” or better and who will be different than the carrier who issued the Policy. See
“RISK FACTORS” for Risk applicable to the LIBACSM Assets. For more tax information also see

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“CERTAIN FEDERAL INCOME TAX CONSIDERATIONS - Membership Interests.”

The Portfolio of LIBACSM Assets

The Portfolio of LIBACSM Assets will consist of life insurance Policies with a combined life
insurance policy face values approximately equal to, or more than, the gross proceeds of this offering,
with the revocable trusts being the sole beneficiary of said Policies, the Master Trust being the sole
beneficiary of the revocable trusts and the LLC being the sole beneficiary of the Master Trust. Thus, all
net death benefits under the Policies will flow through to the LLC to its Members. Each Policy will be
indirectly purchased through the purchase of Trust Powers from the individuals who own and control the
revocable trusts and are residents of a state of the United States (the “Insureds”). The Portfolio of
LIBACSM Assets will be acquired with the LLC’s 40% allocation of gross offering proceeds. Policies
targeted will be insured’s with a life expectancy (an “LE”) of 12 to 18 years. Policies with this range of
LEs are designed to meet the requirements in cost and availability for the LIBACSM process to
economically achieve its objectives. See “RISK FACTORS” for risks applicable to the Portfolio of
LIBACSM Assets.

Principle Protection Features

The Portfolio of LIBACSM Assets is designed to protect the investors from investment loss in the
event ESP fails to meet its business plan and/or its investment milestone of having its Common Stock
trade at a closing bid price of at least $1.50 per share for 20 consecutive trading days at any time after six
months from the final closing of the offering (the “Investment Threshold”). The LLC managing member
(the “Manager”) believes it will be able to aggregate LIBACSM Assets with death benefits slightly in
excess of the total amount invested in this Offering to provide the Investors with approximately the return
of their investment (over time) if ESP fails to meet its business goals. Though the LIBACSM process is
not meant to cover the time value of money in lost opportunities from capital locked in an illiquid
investment, providing more LIBACSM Asset coverage helps. See “RISK FACTORS - Risks Related to
ESP LIBACSM Fund, LLC, the Master Trust and the Portfolio of LIBACSM Assets” for risks applicable to
the intended principal protection feature of the LIBACSM process.

The ESP LIBACSM Fund, LLC Management

Insured Capital Management, Inc.

Insured Capital Management (“ICM”) will be the non-member manager of the LLC and will
contract with other parties for certain duties and responsibilities in managing the LLC and the Portfolio of
LIBACSM Assets owned by the LLC for the benefit of the investors in this offering. The following
provides a summary of the day-to-day management activities of the LLC, the Master Trust and the
revocable trusts related to the LIBACSM Assets, which activities will be paid for from the cash flows
created from the SPIAs.

Trustee(s)

ICM will retain an independent corporate trustee which is either an FDIC insured financial
institution or a subsidiary of such institution, like Well Fargo N.A., of Minnesota or Christina Bank and
Trust of Delaware, to act as trustee for the Master Trust and each revocable trust (the “Trustee”). The
Trustee will manage all Trust proceeds, cash, distributions to the LLC, and/or bank accounts for the
revocable trusts and the Master Trust. ICM will assist the Trustee(s) by providing, through a third party,
Policy servicing and death benefit tracking information.

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Policy Servicing

ICM will hire an independent Policy Servicing Company, such as Life Settlement Solutions, Inc.,
headquartered in San Diego (see: www.lss-corp.com) or Mosaic Management Group, Inc., headquartered
in Boca Raton, Florida (see: www.mosaic-grp.com) to manage the LLC Policy assets. ICM will assist the
Policy servicing firm with death benefit tracking administrative oversight, but will not manage any of the
day to day activities involved in managing the Policy assets. Policy Servicing will include, but may not
be limited to: 1) maintaining a database of Policy information; 2) instructing the Trustee as to the timing
and amount of premiums to be paid for each Policy; 3) monitoring insurance premium notices and
confirming premiums paid on a monthly Premiums Paid Report; 4) obtaining annual in-force Policy
illustrations; 5) monitoring the life status and contact information of Insured’s to notify the trustee of a
Policy maturity; and, 6) assisting the trustee in the collection of death benefits payable under the Policies
upon an insured’s death (a “policy maturity”).

In general, the LLC’s management anticipates that the typical life expectancy of an Insured will
average approximately fifteen years, although the LLC reserves the right to select underlying Policies of
shorter or longer life expectancies. Upon purchasing a Policy and the SPIA, the LLC, indirectly through
the Master Trust, will obtain all legal rights and responsibilities contained in the Policy and SPIA, and
will assume all legal ownership rights to the Policy and the SPIA, the death benefit payable thereunder,
the right to receive SPIA payments, the responsibility for future premium payments due under the Policy,
and the right to monitor the life and health of the Insured; provided, however, that with respect to any
Policy providing for double indemnity or additional accidental death benefits, the original policy owner of
such Policy may, in jurisdictions where mandated by applicable law, retain a statutory right to designate
the beneficiary entitled to receive such double or additional accidental death benefits to the extent the
same are in excess of the net death benefit payable under such Policy.

Investment Threshold

The ESP LIBACSM Fund, LLC will hold the Portfolio of LIBACSM Assets for the benefit of
investors until one of the following occurs: 1) investor(s) exercise their conversion rights and covert their
Preferred Shares into the Common Stock of the Company, in which a pro-rata interest in the LLC will
revert to the Company; and/or, 2) beginning six (6) months from the final closing date of the offering, the
Common Stock trades at a closing bid price of at least $1.50 per share for twenty (20) consecutive trading
days (the “Investment Threshold”), upon which date the investors’ Series A Preferred Stock will
automatically convert to the Company’s Common Stock and the investors’ Membership Interests in the
LLC will automatically revert to the Company.

Services to be Rendered by Manager’s Affiliates

The Company has executed a Patent Licensing Agreement (the “PLA”) with the Manager’s
parent corporation, Capital Growth Planning, Inc., which calls for CGP’s wholly-owned subsidiary and
the Manager’s affiliate, Capital Life Assets, Inc. (“CLA”), to serve as the LLC’s sole and exclusive agent
in sourcing, identifying, and negotiating the acquisition of the Polices. For this service, CLA will charge
a fee not to exceed two percent (2%) of the face value of Polices that are acquired. The PLA also calls for
Capital Growth Insurance Services, Inc. (“CGIS”), also a CGP wholly-owned subsidiary and Manager
affiliate, to be the sole and exclusive agent for placing the SPIA contracts for which CGIS will be paid a
commission for the placement by the insurance companies which issue the SPIAs. If the LLC acquires
Policies in a state that regulates life settlements, the LLC will pay a duly licensed provider a standard fee.
The Manager will also use the services of its affiliate, Capital Administrative Services, Inc. (“CAS”), to
act as the agent for the Insured to process the SPIA application and receive funds from the life settlement
escrow on behalf of the Insured and his revocable trust to pay the SPIA premium, for which service it will
receive a fee of approximately One Hundred Dollars ($100). The Company believes that the 40% of the

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gross offering proceeds allocated to the build the Portfolio of LIBACSM Assets (which 40% includes all
Portfolio acquisition fees and closing costs and the costs of acquiring the Policies and SPIAs) will be
sufficient for the LLC to acquire and aggregate total combined Policies with death benefits equal to or
greater than 100% of the gross proceeds raised in the offering and SPIA contracts sufficient to pay all life
insurance premiums and the administrative costs to service the Portfolio of LIBACSM Assets.

Reversion Feature

When and if an investor voluntarily converts his Series A Preferred Stock to the Company’s
Common Stock, his Membership Interest automatically reverts to the Company (although the Company
will enjoy only economic and not voting rights in that situation). Investors’ Preferred Stock automatically
converts to Common Stock at any time beginning six (6) months after the final closing date of the
Offering when the Company’s Common Stock has traded at a closing bid price of $1.50 per share or more
for a period of twenty (20) consecutive trading days (the “Investment Threshold”). When and if the
Company achieves its Investment Threshold, Investors’ Membership Interests will revert to the Company,
and on the date of the Investment Threshold, the Company will become the sole member of the LLC.
Upon such occurrence, CGP will have the option to purchase, for a period of one hundred eighty (180)
days, the Company’s sole Membership Interest in the LLC for the price the LLC paid to acquire the
LIBACSM Assets (excluding any early Policy maturities) that then makeup the Portfolio of LIBACSM
Assets.

100% of the net death benefit proceeds from the Policies will be distributed among the then
holders of the Membership Interests on a pro rata basis. Members are entitled to receive cash
distributions from the LLC (i.e., when Policies pay death benefits or quarterly distributions intended to
cover the nominal amount of taxes generated by SPIA revenue) which are made to them by the LLC prior
to the termination of their Membership Interests, if that ever occurs, even if their Membership Interests
are subsequently terminated because of a conversion or achievement of the Investment Threshold. The
SPIA payments to be received by the LLC are priced with the objective to provide the LLC with funds to
distribute to Members, on a quarterly basis, amounts approximately equal to federal income tax due
(based upon the current highest federal individual income tax rate) on the taxable portion of SPIA
payments. See “CERTAIN FEDERAL INCOME TAX CONSIDERATIONS - Membership Interests.”

The Portfolio of LIBACSM Assets also has risks associated with it. Though the timing and
certainty of cash flow from the SPIA are intended to be provided through contracts with U.S. life
insurance companies, certain insurance industry issues could arise, causing an interruption in payments.
Though the Manager will, when Policy structures are available, select a premium payment that is
illustrated as guaranteed, certain Policies that do not have guaranteed illustrations to estimate premiums
may be subject to interest rate fluctuations. The LEs of Insureds under the Policies are estimates only,
and, in addition, payment of Policy death benefits may be impaired for technical reasons. For these
reasons, there is no assurance that the Portfolio of LIBACSM Assets will completely or adequately protect
Unit holders from loss of a portion of their investment in the Units. See “RISK FACTORS – Risks
Related to Offering – Risks Relating to Life Insurance Policies as Security for This Investment.”

Life Settlement Investments

In general, the LLC will acquire, through the LIBACSM business process, in-force non-
contestable, non-variable Policies insuring the lives of individuals of seventy (70) years of age or older
who have an LE of between 12 years and 18 years, with an aggregated average of approximately fifteen
(15) years, at a price greater than the “surrender cash value” offered by life insurance companies but less
than the face amount of, or the death benefit payable under, such life insurance Policies. The Policies
must have been in-force for more than two (2) years and thus beyond their contestability periods. The
LLC will indirectly acquire Policies from the Insured’s who elect to sell the Policies for a variety of

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reasons. While the LLC will attempt to control risk through the diversification of investments, any risk
management techniques utilized by the LLC’s management cannot provide any assurances that the LLC
will not be exposed to the risk of selecting Policies that present unforeseen risks. There can be no
assurance that the LLC will achieve its objectives, and Policy investment results may vary substantially
over time and from period to period.

Policies will be acquired through what is termed to be the secondary life settlement market, which
is subject to certain state by state laws and by supply and demand. Currently the market appears strong.
This trend may continue, or demand may weaken and supply may increase, which would affect prices of
underlying Policies in the life settlement secondary market

In selecting the LIBACSM Assets to be held in the portfolio, the Policies must meet a number of
criteria established by the LLC, including, but not limited to, the following:

¾ Policies must be issued by life insurance carriers rated “A” or better by Standard & Poor’s, a
division of the McGraw-Hill Companies, Inc., or an equivalent rating by a similar nationally
recognized rating agency.

¾ SPIAs must be issued by annuity life insurance carriers rated “AA” or better by Standard &
Poor’s, a division of the McGraw-Hill Companies, Inc., or an equivalent rating by a similar
nationally recognized rating agency.

¾ Insureds must have a life expectancy of between twelve (12) and eighteen (18) years at the time
of Policy issuance with the expectation that the average life expectancy of insured’s underlying
the Policies, to be held in the portfolio will be approximately fifteen (15) years.

¾ Insureds must be age seventy (70) or older at the time of Policy issuance.

¾ Insureds must be a resident of the United States at the time of Policy issuance.

¾ Policies must have a death benefit of at least US$200,000.

¾ Policies must comply with other life insurance and financing underwriting criteria established by
the LLC.

¾ Each SPIA must generate payments equal to or greater than the current annual costs of its
respective policy premiums, and projected costs for trustee and management fees, tracking
services and taxes (based upon the current top individual tax rate).

¾ The LLC will pay forty percent (40%) of gross offering proceeds to acquire Policies with a
cumulative face value of 100%, or more of the gross offering proceeds.

A viatical or life settlement is the sale to a third party of an existing life insurance policy, or the
beneficial interest in a trust holding a life insurance policy, for more than the policy’s cash surrender
value but less than its net death benefit. Regulatory usage of the terms “viatical settlement” and “life
settlement” varies by state. However, the industry generally uses the term “viatical settlement” to refer to
instances where the insured is terminally ill with a life expectancy of less than two years. A “life
settlement”, on the other hand, focuses on underlying policies insuring older individuals (typically 65 or
over) with life expectancies of at least two years. The LLC will engage in life settlements, rather than
viatical settlements, as its principal focus.

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Supply Side: The supply side of the life settlement after-market (those selling their policies) is
typically made up of elderly individuals, or businesses, that own policies no longer wanted
because, for example, the children that the policy may have been designed to protect have grown,
the nest egg it was designed to assure has been built, the business with an established buy-sell
agreement in place has been sold, the key man has retired, premium payments are no longer
affordable, the insured needs cash to cover rising medical costs and living expenses, or the
insured just wants to sell the policy and use the life settlement proceeds and premium savings to
enhance his or her quality of life.

Demand Side: The demand side of the life settlement after-market (those buying the policies) is
typically made up of financial institutions (banks, insurance companies, pension plans, etc.) that
recognize the potentially high yield investments in life insurance policies offer, and, more
recently, high net worth investors buying individual policies or investing in pools of policies.

Historically, if an owner of a life insurance policy found that the policy was no longer needed due
to changed needs or circumstances, the owner could elect to cancel the policy and receive the policy’s
cash surrender value as a lump sum. Sometimes, an owner simply lets the policy lapse. In the past
several years, a number of companies have raised pools of capital and created a more liquid secondary
market for life insurance policies. Simply put, these companies will competitively bid on the purchase of
an existing policy, taking into account the insured’s current age, state of health, and the overall economic
environment. In other words, if they qualify, those wishing to cash in their policies may obtain a
competitive market quote based on several bids. Accordingly, a life settlement transaction can be
mutually beneficial for both the seller and the buyer. The seller is able to sell the policy for more than the
cash surrender value offered by his or her life insurance company, and the buyer is able to purchase an
investment vehicle with a high potential rate of return.

Once the transaction is complete, the purchaser of the life settlement policy becomes the legal and
registered owner of the life insurance policy and is assigned all legal rights and responsibilities under the
insurance policy contract, including the right to designate the beneficiary of the death benefit payable
under the policy.

While estimates vary, the life settlement industry has grown from approximately US$200 million
in face value in 1998 to approximately US$4 billion in face value in 2002 and over US$10 billion in
2004. Industry volume is expected to reach approximately US$45 billion in face value by 2008-2010.
Major financial services firms such as AIG, Dresdner Bank, Deutsche Bank, DZ Bank, Lehman Brothers
and Merrill Lynch have been market participants.

Traditionally, the life settlement buyer purchases a policy insuring a senior’s life (giving the
selling owner immediate cash) and then keeps it in force by paying the premiums on the policy until the
insured under such policy dies. Alternatively, the life settlement buyer may decide to resell the policy on
the life settlement secondary market. When the policy ultimately pays out at the insured’s death, the
buyer receives the policy’s face value. Life settlement pricing is based mainly on the insured’s estimated
life expectancy, derived primarily from individual medical life expectancy assessments performed by
independent, third party firms. The leaders in the field of life expectancy estimates are 21st Services,
LLC, American Viatical Services, Inc., Examination Management Services, Inc. and Fasano Associates,
Inc.

With respect to life settlements, when actual mortality accurately reflects life expectancy
estimates at the time a policy is purchased in the secondary market, actual financial returns meet predicted
returns. Returns are calculated based on a policy’s face value amount less the sum of the life settlement
amount paid to the policy owner and any premiums paid to maintain the policy in good standing over the
insured’s remaining life. Theoretically, a portfolio of a statistically relevant number of soundly

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underwritten life settlements would be expected to mature close to average mean life expectancy
predictions, creating relatively predicable financial returns. The LLC’s investment objective is not to
provide to investors in the Units a return on their total investment, but, rather, to create a portfolio of
Policies and SPIAs (“the Portfolio of LIBACSM Assets”) with the objective to protect against investment
loss such that in the event the Company does not meet its business objectives the Portfolio of LIBACSM
Assets will eventually return to the Members, upon maturity of all or most of the Policies, and on a pre-
tax basis, the gross amounts the Members invested in the offering. That investment objective does not
include providing any additional returns to such investors based upon the time value of their investments,
unless an amount in Portfolio of LIBACSM Assets are created in excess of the gross offering proceeds.

BUSINESS SUMMARY

General

Environmental Service Professionals, Inc. (“we,” “us,” “our,” “ESP,” or the “Company”) is a
Nevada corporation headquartered in Southern California. Through our wholly-owned subsidiary
Environmental Safeguard Professionals, Inc. (“Safeguard”), we offer various inspection services to
address mandated energy certification, construction defects, moisture and other environmental issues in
commercial and residential buildings. Our services include the Certified Environmental Home
Inspector™ (“CEHI”) program, Healthy Living Maintenance Program™ (“HLMP”), and EcoCheck
Inspection™ program. Through our wholly owned subsidiary National Professional Services, Inc.
(“NPS”), we offer annual trade memberships and management services for industry related associations.
Porter Valley Software, Inc. (“PVS”), the nation’s number one inspection software company, will provide
the core of our on-line inspection protocols.

Safeguard has developed an all inclusive multi-disciplined inspection program focused on


reducing liabilities and mitigating risks. The program is designed to protect homeowners, businesses and
retail properties, builders, lenders, mortgage brokers/agents, and all other real estate oriented properties
relating to state mandated energy certification, construction defects, moisture or other environmental
issues. It is known as the EcoCheck Inspection™. The EcoCheck Inspection™ has developed, based on
standardized training, certification, inspection, and results, reporting analysis programs which form the
foundation of a suite of services that together are provided by ESP’s Certified Environmental Home
Inspector™ (“CEHI”). One of the programs we provide by the CEHI program is the Healthy Home
Assurance Certification™ (“HAC”). After a EcoCheck Inspection™ has been conducted by one of our
CEHIs, a subject property that passes inspection receives a HAC. The HAC is placed in the window
closest to the main entrance of the building in order to alert visitors that the subject property promotes a
healthy living environment through management of potentially harmful indoor air quality issues and is
valid for 12 months.

Through the EcoCheck Inspection™, ESP also offers a pro-active comprehensive subscription
based 10 year annual maintenance process called the Healthy Living Maintenance Program™ (“HLMP”)
to all residential properties that have received a HAC. Once a subject property receives an initial HAC, it
is eligible to subscribe to the HLMP™. Every 12 months a new EcoCheck Inspection™ is conducted and
after any issues, if required, are corrected, a new HAC is issued. We believe that the HLMP™ adds value
to a property and mitigates risk for the insurance, mortgage banking, building, real estate, and property
management industries by reducing claims, instilling confidence in property safety, and promoting a
positive green image to both residential and commercial clients.

NPS is currently a conglomerate of seven individual associations and maintains annual paying
members. The focus of this business unit is to establish cross-training on CEHI™ programs and to
provide information concerning residential environmental issues, to establish training for underwriters,

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loan officers and appraisers, and to educate these groups about CEHI™ inspection protocols. Training
programs for insurance companies, underwriters, loss control, and risk management personnel educate
and emphasize the benefits of using a CEHI™ on the initial inspection and then establishing annual
inspections.

PVS has developed various software programs which have been designed specifically for detailed
data searching and data retention under the name “InspectVue™. InspectVue™ is the core component of
ESP’s automated on-line EcoCheck Inspection™ protocols that include the new energy inspection
requirements that are being developed in concert with other industry leading participants.

Wholly Owned Subsidiaries

Environmental Safeguard Professionals, Inc.

Overview. Safeguard has developed an all inclusive multi-disciplined inspection process (the
“EcoCheck Inspection™”) that is focused on reducing liabilities and mitigating risks to protect
homeowners, retail properties, builders, lenders, and mortgage brokers/agents relating to state mandated
energy certification, construction defects, moisture and other environmental issues. It strives to be “The
Industry’s Best in Class Inspection.”

The branding of this program is called the Certified Environmental Home Inspector™ program
(“CEHI program”). We believe that the CEHI™ program represents the keystone for environmental
inspection services to address mandated energy certification, construction defects, moisture and other
environmental issues in commercial and residential buildings. The EcoCheck Inspection™ program
services will support the residential real-estate mortgage, banking and insurance industries in their ability
to manage losses through moisture related claims. We also believe that the CEHI™ program will play a
significant role in managing the health and indoor air quality of the environments where people work and
live.

One of the programs we provide as a part of the CEHI™ program is our Healthy Assurance
Certification™ (“HAC”). After an EcoCheck Inspection™ has been conducted by one of our CEHIs, a
subject property that passes inspection receives a HAC. The HAC is placed in the window closest to the
main entrance of the building in order to alert visitors that the subject property promotes a healthy living
environment through management of potentially harmful indoor air quality issues and is valid for 12
months.

We also offer a pro-active comprehensive subscription-based 10 year annual maintenance


program called the Healthy Living Maintenance Program™ (“HLMP”), to all residential properties that
have received a HAC. Once a subject property receives an initial HAC it is eligible to subscribe to the
HLMP™. Every 12 months, a new EcoCheck Inspection™ is conducted and after any issues, if required,
are corrected a new HAC is issued. We believe that the HLMP™ adds value to a property and mitigates
risk for the insurance, mortgage banking, building, real estate, and property management industries by
reducing claims, instilling confidence in property safety, and promoting a positive green image to both
residential and commercial clients.

Safeguard, while developing the CEHI™ program, has engaged in working relationships with
five industry participants: the National Association of Moisture Management (“NAMM”), Porter Valley
Software, Inc., EMLabs P&K, Environmental Data Resources Inc. (“EDR”), CMC Energy Services, Inc.
(“CMC”), and ConSol, the nation’s leading green and energy engineering company.

By accepting (a) ConSol’s inspection protocols for Green Building and Energy Certification, (b)
NAMM’s inspection protocols as the basis for the moisture inspection, (c) EMLabs P&K’s MoldScore™

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as the prime method of sample analysis and (d) by bringing it all together, utilizing the core of the
InspectVue™ application from Porter Valley as the software platform, ESP has constructed a system that
we believe produces a universally accepted standardized report for moisture related issues using the best
science currently available to determine if any mold that may be present poses a hazard.

Safeguard’s CEHI™ program, which includes the Certified Moisture Inspection and
MoldScore™ analysis meets the requirements of the “mold prevention and maintenance plan (“MPMP”)
as defined in the “Mold Steps Toward Clarity - A White Paper by the Mold Working Group Updated:
July 2007” published by the Commercial Real Estate/Multifamily Finance Board of Governors
(“COMBOG”) Underwriting and Closing Committee of the Mortgage Bankers Association.

The CEHI™ program is all about risk management for the individual. Management believes it is
a significant tool to assess the health of one’s environment. Management believes that for the industry, it
provides an easily understood, standardized way of assessing the risks of their policies, regardless of
location.

Service Description. The services included in the CEHI™ program are comprised of what
management believes to be highly advanced and standardized on-line and automated procedural protocols
developed in concert with each of the four industry participants, ESP, NAMM, EMLab P&K, Porter
Valley Software, EDR, CMC, and ConSol. It is a requirement that all CEHIs utilize the on-line system
when delivering any of the CEHI™ program services. By working with nationally recognized industry
leaders, management believes that we have developed state of the art “best in class” procedures providing
the residential real-estate and insurance industries the ability to manage losses through claim reduction.

Management believes that clients utilizing CEHIs, can be assured that every single employee or
approved vendor who provides services through the CEHI™ program has obtained the industries’ best
training, certifications and equipment required to provide the CEHIs program’s services.

Management believes that the CEHI™ program also benefits the individual inspector. Approved
vendors of Safeguard who deliver CEHI™ program services are anticipated to have the ability to deliver
more effective inspections and meaningful reports, as well as the ability to provide additional
environmental services (e.g.: Allergen Screening, Energy/Environmental reports and Radon testing). The
CEHI's ability to provide certain environmental services may be subject state or federal law and/or
additional training requirements.

National Professional Services, Inc.

Overview. NPS is a management company whose services include complete organization,


association and administrative management, advisory council and board of director coordination,
seminars, conferences, graphic design and printing, accounting and reporting and consulting. NPS
currently provides comprehensive management services for seven different membership organizations of
which four are both National and International Organizations and one is non-profit. NPS maintains a
servicing facility in Phoenix, Arizona which includes a fully trained staff, conference room, library,
accounting services and a computer room updated with the latest server technology.

NPS is a full service association management company with the ability to work with trade
associations that have between 250 members to 50,000 members.

Description of Associations. Founded in 1966, the National Association of Real Estate


Appraisers (“NAREA”) is a professional organization of real estate appraisers. NAREA is one of the
largest professional associations in the United States. Management believes that NAREA has earned the
credibility and public trust needed when affiliating with a professional organization. Management

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believes that the Code of Ethics and Uniform Standards of Professional Appraisal Practice (“USPAP”), to
which members must adhere, provides the industry with the assurance it needs when accepting an
appraisal report from a NAREA designated member. Along with the regular nationwide seminars and an
annual Appraisal Expo Conference, members receive bi-monthly newsletters, appraisal guidelines,
updates on regulations, the Annual Membership Directory, legislative monitoring of the issues affecting
the appraisal industry and much more.

The Environmental Assessment Association (“EAA”) is an international organization dedicated


to providing members with information and education in the environmental industry relating to
environmental inspections and testing. EAA represents thousands of environmental professionals who
provide services to a wide variety of clients including lenders, federal & state agencies and private
companies. EAA’s membership consists of environmental inspectors, lenders, remediation firms and
government agencies. The Environmental Assessment Association offers several professional
designations and memberships which management believes makes the association one of the largest in the
world for environmental professionals. EAA has worked closely with Environmental Protection
Agencies and management believes that EAA is at the forefront of the environmental industry
maintaining a well earned reputation of “being involved.”

Management believes that the Association of Construction Inspectors (“ACI”) is the largest
professional organization for those involved in construction inspection and construction project
management. Management also believes that ACI is the leading association providing standards,
guidelines, regulations, education, training, and professional recognition in a field that has quickly
become critical for both residential and commercial construction. Management believes that members of
ACI provide a vital service to the construction industry, providing both construction inspections
(verifying percentage of completion for the purpose of draw requests) and construction project
management (providing full construction monitoring, paying of the contractor and sub-contractors,
verifying each stage of construction and reporting to the client).

The Housing Inspection Foundation (“HIF”) is an organization of professionals dedicated to the


promotion and development of Home Inspection. HIF was created to provide members with information,
education, standards, ethics, and professional recognition. Management believes that the home inspection
industry is the fastest growing profession today. Management believes that this creates new opportunities
for those who are involved in the real estate, construction or environmental fields who are willing to learn
how to perform these vital services-including home inspectors, building inspectors, real estate
professionals, construction inspectors, and remodeling contractors.

The International Real Estate Institute (“IREI”) is a professional organization founded in 1966,
making available real estate professionals to those requiring Professional Realty Reports. Management
believes that IREI is one of the largest professional associations in the world, with more members in more
cities than any other organization. Management believes that IREI has earned the credibility and public
trust one needs when affiliating with a professional organization. Management believes that the Code of
Ethics and Professional Standards of Professional Real Estate Practice, to which members must adhere,
provides the industry the assurance it needs when accepting an appraisal report from an IREI designated
member. Professionally presented education programs enhance the member's knowledge. Along with
weekly seminars and an annual Realtor Expo and Conference, members receive bi-monthly Newsletters,
real estate guidelines, updates on regulations, the Annual Membership Directory, legislative monitoring
of the issues affecting the real estate industry and much more.

The International Society of Meeting Planners (“ISMP”) is a professional organization founded in


1966, making available professional meeting planners. Management believes that ISMP is one of the
largest professional associations in the United States with more members in more cities than any other
organization. Management believes that ISMP has earned the credibility and public trust one needs when

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affiliating with a professional organization. Management believes that the Code of Ethics and Uniform
Standards of Professional Meeting Planners Practice, to which members must adhere, provides the
industry the assurance it needs when accepting a meeting report from an ISMP designated member.
Professionally presented education programs enhance the member's knowledge. In addition to the weekly
seminars and an Annual Planners Expo and Conference, members receive bi-monthly Newsletters,
meeting guidelines, updates on regulations, the Annual Membership Directory and legislative monitoring
of the issues affecting the industry.

Porter Valley Software, Inc.

PVS has developed various software programs which have been designed specifically for
corporate applications that require highly detailed data searching and data retention solutions, including
but not limited to InspectVue™ Report-Writers. InspectVue™ Report-Writers is a software application
used by CEHIs for both residential and commercial structural, moisture, environmental and fireplace
inspections. InspectVue™ Report-Writers uses PVS’ PVS Inspection Platform™ as its underlying
technology to accumulate and record specific and unique data on every building inspected. In January
2005, PVS won the Innovations Award presented by The International Association of Certified Home
Inspectors for its InspectVue™ line of Professional Report-Writers. We believe that PVS will become a
core component of the on-line and automated procedural protocols, including but not limited to new
energy inspection requirements, we are developing in concert with ConSol and other industry
participants.

Intellectual Property

Establishing or acquiring strong brand identity is important to our plans to recruit the required
independent contractors and establish a strong presence in local, regional and national markets. We are
working with our intellectual property counsel to register a number of names for us to use in developing
external brand identity. In addition, management is impressed with the number of small operators who
have developed significant brand acceptance and recognition in their geographic area. We believe that
these brand assets could be leveraged in much larger geographic areas with substantially larger market
share. We are pursuing opportunities to expand our brand identity with such small operators having
significant brand acceptance in three ways: (1) through an affiliate relationship; (2) licensing for
expanded territories; and/or (3) acquisition potential, where appropriate.

Currently, ESP owns the following registered trademarks/service marks:


1. Environmental Sampling Professionals, Inc®, registration number 2721471;
2. ESP and Design®, registration number 2788620;
3. Allstate Home Inspection & Household Environmental Testing®, registration number
2509084; and
4. Advance Look®, registration number 3035162.

Marketing

We plan to implement multiple strategies to market our services and gain national recognition.
We anticipate that our core focus will be on the residential, multi-unit, and commercial markets. The
residential market is our primary the target market because we believe that it is the largest and most
profitable for ESP. It represents homeowners contracting for inspections and demonstrates high same-day
close rates. The multi-unit market includes condominium homeowner associations contracting for
maintenance services. In the commercial market, service calls are used to create a maintenance budget.

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These represent larger contracts and have longer sales cycles. Management expects our diversification
over several market segments to stabilize our service utilization levels during lulls in the target market.

We also plan to acquire small companies in different geographic regions with strong branding and
operational histories within their geographical regions. We believe that we will be able to leverage these
regional distribution companies into a national presence with a larger branded proprietary product line.

Government Regulation

ESP and its affiliates are subject to various federal, state and local laws affecting regulation of the
indoor air quality testing industry. ESP is also subject to government laws and regulations governing
health, safety, working conditions, employee relations, wrongful termination, wages, taxes and other
matters applicable to businesses in general. Labor laws apply to the employment of workers. Furthermore,
ESP and its affiliates will be required to obtain business licenses from state and local governments in
order to operate its facilities. ESP and its affiliates must also obtain certifications for their Certified
Industrial Hygienists from the local or state jurisdictions when ESP and its affiliates decide to operate in
other states.

Facilities

ESP currently leases office space at 1111 E. Tahquitz Canyon Way, Suite 110, Palm Springs,
California 92262. The Palm Springs location is ESP’s main office with approximately 4,433 square feet
of office space at a rental rate of approximately $6,000 per month pursuant to a three year lease which
commenced in August 2006. ESP’s wholly owned subsidiary, NPS, leases additional office space at
21640 North 19th Avenue, Unit C2, Phoenix, Arizona 85027. The Arizona office has approximately
1,500 square feet of office space at a rental rate of $2,883 per month pursuant to a one year lease which
commenced in September 2007.

Employees

As of October 9, 2008, ESP and its affiliates employed 15 people on a full-time basis. In
addition, we utilize the services of several consultants and part-time employees on a regular basis. ESP
projects that during the next 12 months, its workforce is likely to increase to approximately 24 employees.
To support our need for technical staffing, we have established relationships with technical staffing
organizations that continuously offer qualified personnel to meet our needs, both locally and from out of
the area.

Legal Proceedings

John Cooley v. Pacific Environmental Sampling, Inc. etc., et al. On December 6, 2006, John
Cooley filed a civil complaint in Ventura County alleging breach of fiduciary duty and fraud regarding
the restructuring of Pacific Environmental Sampling, Inc. on March 25, 2006. On December 12, 2006, a
hearing before the Court was held on the application for injunctive relief and for appointment of a
receiver. Both of Cooley’s requests were denied by the Court. ESP and its affiliates subsequently filed a
demurrer challenging the legal sufficiency of the fraud claim and the demurrer was sustained. Cooley was
permitted by the Court to file a First Amended Complaint to attempt to correct deficiencies. With an
extension, the First Amended Complaint was filed on March 27, 2007. Subsequently, this First Amended
Compliant was rejected as were the Second Amended Complaint and Third Amended Complaint. On
July 3, 2008, a hearing regarding plaintiff Cooley’s fourth amended complaint was held before the Court
and the Company was granted all submitted demurrers and Motions to Strike. On July 29, 2008, plaintiff
Cooley advised that he does not intend to file a fifth amended complaint. A Case Management

- 19 -
Conference was held on September 4, 2008. As of the date of this report, ESP and its affiliates cannot
predict the outcome of this case. ESP and its affiliates believe they have meritorious defenses and are
vigorously defending the action.

MANAGEMENT

Directors and Executive Officers

The following table sets forth the directors, executive officers, and key consultants of ESP as of
October 31, 2008:

Name Age Position Since


Edward L. Torres 50 Chairman, Chief Executive Officer and President October 11, 2006
Lyle Watkins 48 Director, Chief Operating Officer, and Corporate October 11, 2006
Secretary
Gerry Berg 61 Chief Financial Officer October 9, 2008
Leroy Moyer (1) 65 Director April 1, 2007
S. Robert August 56 Director May 31, 2007
Robert S. Iger 67 Director August 29, 2008
(1) Member of Audit Committee

Edward Torres, age 50, has been the Chairman, Chief Executive Officer, and President of ESP
since October 2006 and of Safeguard since February 2007. Mr. Torres has over 25 years of business
development experience as an entrepreneur in several professional industries. Mr. Torres graduated with a
Bachelor’s Degree in Business Development, and established a national manufacturing service business
with Priority Sales and Service. After several years with that company, Mr. Torres merged the company
with Sandelos USA, a national company known for its kitchen and bath products. He oversaw
international production and distribution of the products for the U.S. market, as well as participated in the
acquisition of Sandelos, USA during the mid 1990’s. In 1996, he participated in the acquisition of
Commercial Labor Management, Inc., a public entity, and arranged its reverse merger with Zeros & Ones,
Inc., a technology company currently traded on Pink Sheets. During 1996 Mr. Torres also participated in
the formation of Joint Employers Group, a California based professional employer organization.
Overseeing the company’s marketing and sales division, he was instrumental in increasing its revenue
from $100,000 in 1995 to $65 million in 2001. In 2003 Mr. Torres arranged the sale of Joint Employers
Group, Inc. to ITEC, a publicly traded company in the human resource industry. In 2003 Mr. Torres,
through Pro-Active Business Services, founded Contempo Homes and was instrumental in obtaining 71
acres for the development of 130 homes. All of the homes built by Contempo Homes, Inc. incorporate
distinct architectural design, modern conveniences, and Green Technology, also known as
ContempoGREEN and EcoModern. The combination of these various elements makes Contempo homes
unique and desirable. In 2005, Pro-Active and Mr. Torres sold their holdings in Contempo Homes and
currently provide land development and entitlement procurement consulting services to clients in the City
of Palm Springs and in the Coachella Valley communities. Mr. Torres serves on several local task forces
and on a variety of building industry organizations which have helped to establish his influence in many
Coachella Valley cities. He sits on the Building Industry Association Board of Directors as Immediate
Past President of the Desert Chapter, Senior Officer of the Southern California Building Industry
Association, President of the Palm Springs Economic Development Corporation (PSEDC), and has
served or serving is a member of the City Task Force for establishing new development standards for the
City of Palm Springs and business retention guidelines.

Lyle Watkins, age 48, has been a Director and Corporate Secretary of ESP since October 2006.
He has been the Chief Operating Officer of ESP since October 2006 and of each of its wholly owned
subsidiaries (Environmental Safeguard Professionals, Inc., Porter Valley Software, Inc. and National

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Professional Services, Inc.) as they were acquired. Mr. Watkins has an Applied Science Degree –
Telecommunications, and received a Masters Degree in Business Administration in 1996. He has served
as Chief Financial Officer of Pacific Image Connect, Inc. in Thousand Oaks, California. He served as
Director of Systems Engineering of Rhythms NetConnections, Inc. in Englewood, Colorado, and a
Manager of Business Development for GTE International. As Manager of Business Development, he
directed the operations of engineering and sales support for a strategic business unit with a sales support
staff including engineers, market development managers, program and project managers, trainers,
database analysts, contract administrators and field operations desk staff. During his tenure, top line
revenue of his strategic business unit increased 275% to $250 million, the department expanded from 22
personnel to 159 personnel, he managed assets and administered an $18 million annual expense budget,
expenses were reduced by 15% and profitability increased by $3 million. Mr. Watkins has also managed
the review of cash flow and value statement analysis, developed and launched a fiber based metropolitan
ATM service, and negotiated technology and exclusive marketing agreements with property developers in
Canada, the United States, Hong Kong and the Philippines. Mr. Watkins has developed joint ventures
between telecommunications companies and property developers including design, implementation and
service delivery of advanced CATV networks. He has performed market development and new business
implementation throughout North America and Southeast Asia.

Gerry Berg, age 61, has been the Chief Financial Officer of ESP since October 9, 2008. Mr.
Berg has over 30 years of senior management experience working with private and public companies. His
overall emphasis has been on finance and operations. Mr. Berg has served a number of public companies
as their President, Chief Financial Officer or as a financial consultant. He has been responsible for
manufacturing, inventory control, product procurement, and quality control departments. He has managed
shareholder relations, financial reviews, budgeting, contract analysis, legal services and banking
relationships, including investment banking. He has also served on the Board of Directors for a number of
public companies. As a financial consultant, Mr. Berg provided services to a wide variety of companies
in a senior management capacity. As the Chief Financial Officer of the Company, Mr. Berg provides
assistance to the President/CEO for developing and implementing the Company’s business plan and
finance strategies with a major emphasis on operations management including cash flow management,
budgeting, inventory and manufacturing control, and overhead monitoring. He also provides assistance in
meeting all compliance requirements for public companies related to the Securities and Exchange
Commission. He also coordinates with the Company’s independent Certified Public Accountants for the
year-end audit and quarterly review of financial statements and assists with corporate operations and
administrative management. Mr. Berg began his career as a Certified Public Accountant with the firm of
Deloitte & Touche (D&T). He served as Audit Manager for the Buick Motor Division of General Motors
Corporation as one of his primary assignments. During this tenure with D&T his specific responsibilities
in addition to audit services included providing client services related to venture capital opportunities,
SEC public offerings, mergers and acquisitions, development of strategic business plans, cash
management, cost and budget controls, and tax planning. Mr. Berg holds a Bachelors of Arts in
Accounting from Walsh College where he graduated Cum Laude. Mr. Berg became a Certified Public
Accountant (CPA) in the State of Michigan in 1979 and in the State of California in 1984.

Leroy Moyer, age 65, has been a Director of ESP since April 2007. Mr. Moyer is a Certified
Public Accountant and currently is the Director of Business Development for Dimensional Insight, a
business intelligence and corporate performance management company that delivers software and
services that help companies drive, monitor and understand corporate performance. Mr. Moyer began his
career with Deloitte, Haskins & Sells (subsequently Deloitte and hereinafter referred to as “Deloitte”)
where he was responsible for multiple clients who ranged from recently funded start-up companies to
multinational Global 1000 corporations. In 1980 he was elected a Partner of Deloitte. His career with
Deloitte included over 22 years serving the unique and complex needs of emerging technology
businesses, international experience in Deloitte’s Paris office and Deloitte’s New York executive office

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where he provided expert technical advice on SEC matters, mergers and acquisitions. In Mr. Moyer’s
SEC department role, he worked extensively with Deloitte clients, underwriters and investment bankers
on significant reporting, filing and disclosure matters. Mr. Moyer has also served as a Vice President of
Finance, as well as Chief Financial Officer of both private and public companies focused on high
technology, telecommunications, software, hardware, and manufacturing. Mr. Moyer has been both an
inside and independent member of various Boards of Directors, and has experience in information
technology systems, contracts, treasury, legal, tax, risk management, pricing and sales and strategic
planning.

S. Robert August, age 56 has been a Director of ESP since May 31, 2007. Mr. August is the
President and founder of S. Robert August & Company, Inc., a national marketing and management firm
specializing in servicing real estate builders, developers, realtors, economic development councils,
suppliers, manufacturers, and related businesses. The company, located in Denver, Colorado, was
founded by Mr. August in 1983. Mr. August is also the founder of RealtyWorks, Inc., a real estate firm
founded in 1995 in Denver, Colorado, specializing in land and new home sales, which operated until
2006. From 1983 to 1995, Mr. August was the founder and President of S. Robert August Realty
Corporation in Denver, Colorado, specializing in land and new home sales. Mr. August was the Vice
President of Marketing and Sales for Stuart R. Scott & Associates, Inc. from 1982 to 1983, where he
trained, supervised and motivated a real estate sales force for six residential communities. Mr. August has
also served as a Director of Marketing for The Ranch in Denver, Colorado, from 1978 to 1982, a Project
Manager for Tollin-Grayboyes from 1976 to 1978, and other positions in real estate sales and consulting.
Mr. August has a Bachelor of Arts Degree in Labor Management Relations from Pennsylvania State
University and a Masters of International Management from the American Graduate School of
International Management (1976). Mr. August is also active in fund raising for Children's Hospital,
Multiple Sclerosis, Hospice of Metro Denver, Colorado Easter Seal Society, Show Home for Hope,
Bridge Project, Colorado AIDS Project, Colorado Pediatric Aids Foundation, Home Builders Foundation,
and National Association of Home Builders’ (“NAHB”) Home Builders Care. Mr. August serves as a
Past Chairman of the NAHB’s National Sales and Marketing Council.

Robert Iger, age 67, has been a Director of ESP since August 29, 2008. Mr. Iger is a founder of
Iger & Associates which, 2003, has represented local and national clients before local, state, and federal
public officials providing political leadership in complex government matters. He works closely with
elected and appointed public officials on public finance, transportation, airport, land use, and healthcare
matters. He advises clients on business development opportunities. He also provides timely information
on any legal, regulatory, and legislative changes impacting clients. He has an extensive business
background in corporate governance, legal support, and corporate financing. From 1989 to 1990, Mr. Iger
was the Chief Executive Officer, of ColorMax, a public company. Also from 1982 to 1994, he was a
Senior Vice President for Oxford First Corporation. From 1994 to 1996, he ran LAR Holdings &
Eventide Capital, a venture capital firm. From 1979 to 1981, he was General Manager of Candle
Corporation, a start-up computer software company. From 1969 to 1977, Mr. Iger was with Xerox
Corporation and when he left he was in charge of strategic planning for the largest division of Xerox. He
is an active member of the California Bar and holds a Juris Doctor Degree from Western State University.
He earned a Bachelor’s Degree in Economics and a Masters Degree in Econometrics from the State
University of New York at Buffalo. He also taught an Economics course at the State University of New
York at Buffalo, Millard Fillmore College, and University of Phoenix. As an officer of the United States
Air Force, Mr. Iger was commissioned at the age of 20 years old.

No officer or director is required to make any specific amount or percentage of his business time
available to us. Each of our officers intends to devote such amount of his or her time to our affairs as is
required or deemed appropriate by us.

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Board of Directors

Our Board of Directors currently consists of five directors. Messrs. Moyer, August, and Iger are
“independent” as defined in Rule 4200 of FINRA’s listing standards. Mr. Torres, who is our President
and Chief Executive Officer, and Mr. Watkins, who is our Chief Operating Officer and Corporate
Secretary, are not independent. We plan to appoint additional independent directors so that a majority of
our directors are independent.

Committees of the Board of Directors

Our Board of Directors currently has a standing Audit Committee. We plan to establish a
Compensation Committee and a Nominating and Governance Committee. Until such committees are
established, matters otherwise addressed by such committees will be acted upon by the majority of
independent directors. The following is a brief description of our committees and contemplated
committees.

Audit Committee

Mr. Moyer is the sole member of our Audit Committee. Mr. Moyer meets the applicable FINRA
listing standards for designation as an “Audit Committee Financial Expert.” The Board of Directors has
adopted a written charter of the Audit Committee. The Audit Committee is authorized by the Board of
Directors to review, with our independent accountants, the annual financial statements of ESP prior to
publication, and to review the work of, and approve non-audit services preformed by, such independent
accountants. The Audit Committee will make annual recommendations to the Board for the appointment
of independent public accountants for the ensuing year. The Audit Committee will also review the
effectiveness of the financial and accounting functions and the organization, operations and management
of ESP. The Audit Committee was formed in April 2007. The Audit Committee held monthly meetings
during the fiscal year ended December 31, 2007.

Pursuant to the Audit Committee charter, the functions of our Audit Committee includes:

• meeting with our management periodically to consider the adequacy of our internal
controls and the objectivity of our financial reporting;
• engaging and pre-approving audit and non-audit services to be rendered by our
independent auditors;
• recommending to our Board of Directors the engagement of our independent auditors and
oversight of the work of our independent auditors;
• reviewing our financial statements and periodic reports and discussing the statements and
reports with our management, including any significant adjustments, management
judgments and estimates, new accounting policies and disagreements with management;
• establishing procedures for the receipt, retention and treatment of complaints received by
us regarding accounting, internal accounting controls and auditing matters;
• administering and discussing with management and our independent auditors our code of
ethics; and
• reviewing and approving all related-party transactions in accordance with applicable
listing exchange rules.

Compensation Committee

We plan to establish a compensation committee. The functions of our compensation committee


will include:

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• reviewing and, as it deems appropriate, recommending to our board of directors, policies,
practices and procedures relating to the compensation of our directors and executive
officers and the establishment and administration of certain of our employee benefit
plans;
• exercising authority under certain of our employee benefit plans; and
• reviewing and approving executive officer and director indemnification and insurance
matters.

Corporate Governance and Nominating Committee

We plan to establish a corporate governance and nominating committee. The functions of our
corporate governance and nominating committee will include:

• developing and recommending to our board of directors our corporate governance


guidelines;
• overseeing the evaluation of our board of directors;
• identifying qualified candidates to become members of our board of directors;
• selecting nominees for election of directors at the next annual meeting of shareholders (or
special meeting of shareholders at which directors are to be elected); and
• selecting candidates to fill vacancies on our board of directors.

Compensation Committee Interlocks and Insider Participation

Once established, no member of our compensation committee will serve as a member of the
board of directors or the compensation committee of any entity that has one or more executive officers
who serve on our board of directors or compensation committee. No interlocking relationship exists
between our board of directors and the board of directors or compensation committee of any other
company, nor has any interlocking relationship existed in the past.

Code of Conduct

ESP has adopted a Code of Conduct that applies to all of our directors, officers and employees.
The text of the Code of Conduct has been posted on ESP’s Internet website and can be viewed at
http://www.evsp.com. Any waiver of the provisions of the Code of Conduct for executive officers and
directors may be made only by the Audit Committee and, in the case of a waiver for members of the
Audit Committee, by the Board of Directors. Any such waivers will be promptly disclosed to ESP’s
shareholders.

Limitation of Liability and Indemnification of Officers and Directors

Under Nevada General Corporation Law and ESP’s Articles of Incorporation, ESP’s directors
will have no personal liability to ESP’s stockholders for monetary damages incurred as the result of the
breach or alleged breach by a director of his “duty of care.” This provision does not apply to the
directors’ (i) acts or omissions that involve intentional misconduct or a knowing and culpable violation of
law, (ii) acts or omissions that a director believes to be contrary to the best interests of the corporation or
its shareholders or that involve the absence of good faith on the part of the director, (iii) approval of any
transaction from which a director derives an improper personal benefit, (iv) acts or omissions that show a
reckless disregard for the director’s duty to the corporation or its shareholders in circumstances in which
the director was aware, or should have been aware, in the ordinary course of performing a director’s
duties, of a risk of serious injury to the corporation or its shareholders, (v) acts or omissions that
constituted an unexcused pattern of inattention that amounts to an abdication of the director’s duty to the
corporation or its shareholders, or (vi) approval of an unlawful dividend, distribution, stock repurchase or

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redemption. This provision would generally absolve directors of personal liability for negligence in the
performance of duties, including gross negligence.

The effect of this provision in ESP’s Articles of Incorporation is to eliminate the rights of ESP’s
stockholders (through stockholder’s derivative suits on behalf of ESP) to recover monetary damages
against a director for breach of his fiduciary duty of care as a director (including breaches resulting from
negligent or grossly negligent behavior) except in the situations described in clauses (i) through (vi)
above. This provision does not limit nor eliminate the rights of ESP or any stockholder to seek non-
monetary relief such as an injunction or rescission in the event of a breach of a director’s duty of care. In
addition, ESP’s Articles of Incorporation provide that if Nevada law is amended to authorize the future
elimination or limitation of the liability of a director, then the liability of the directors will be eliminated
or limited to the fullest extent permitted by the law, as amended. Nevada General Corporation Law
grants corporations the right to indemnify their directors, officers, employees and agents in accordance
with applicable law. ESP’s Bylaws provide for indemnification of such persons to the full extent
allowable under applicable law. These provisions will not alter the liability of the directors under federal
securities laws.

Furthermore, management has entered into agreements to indemnify ESP’s directors and officers,
in addition to the indemnification provided for in ESP’s Bylaws. These agreements, among other things,
indemnify ESP’s directors and officers for certain expenses (including attorneys’ fees), judgments, fines,
and settlement amounts incurred by any such person in any action or proceeding, including any action by
or in the right of ESP, arising out of such person’s services as a director or officer of ESP, any subsidiary
of ESP or any other company or enterprise to which the person provides services at the request of ESP.
We believe that these provisions and agreements are necessary to attract and retain qualified directors and
officers.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to
directors, officers or persons controlling ESP pursuant to the foregoing provisions, ESP has been
informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the
Act and is therefore unenforceable.

Executive Compensation

The following table summarizes compensation paid or accrued by ESP and its subsidiaries for the
year ended December 31, 2007 for services rendered in all capacities, by the chief executive officer and
the other most highly compensated executive officers during the fiscal year ended December 31, 2007.

Name and Principal Year Salary Stock Option All other Total
Position Awards Awards Compensation
Edward L. Torres
Chief Executive 2007 $120,000(1) $915,000(3) -0- -0- $1,135,000
Officer

Lyle Watkins
Chief Operating 2007 -0- -0- -0- $114,680 (2) $114,680
Officer and
Corporate Secretary

(1) Mr. Torres has deferred payment of $13,750 of his $120,000 salary for the fiscal year ended December 31,
2007. Mr. Torres has also deferred payment of $68,750 for the fiscal year 2008.

(2) We contract with Northcom Consulting, Inc. for Mr. Watkins’ services on month to month basis. Of the
$114,680 payable to Northcom Consulting, Inc. for services provided by Mr. Watkins during the fiscal year

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ended December 31, 2007, $14,334.90 is outstanding. Northcom Consulting, Inc. is owed $58,301.40 for
services provided by Mr. Watkins to ESP during the fiscal year 2008.

(3) We assumed a value of $0.61 per share.

Employment Agreements

ESP and its subsidiaries have not entered into any employment agreements with their executive
officers to date, and do not intend to enter into employment agreements with them at the time. ESP and
its subsidiaries may enter into employment agreements with them in the future.

Employee Benefit Plans

On or about April 28, 2008, our Board of Directors approved the 2008 ESP Stock and Incentive
Plan (the “2008 Plan”) for directors, officers, employees, and consultants. We anticipate that our
shareholders will ratify the 2008 Plan on or before April 28, 2009. The 2008 Plan allows any of the
following types of awards, to be granted alone or in tandem with other awards: (1) Stock options which
may be either incentive stock options (“ISOs”), which are intended to satisfy the requirements of Section
422 of the Internal Revenue Code of 1986, as amended, or nonstatutory stock options (“NSOs”), which
are not intended to meet those requirements; (2) restricted stock which is Common Stock that is subject to
restrictions, including a prohibition against transfer and a substantial risk of forfeiture, until the end of a
“restricted period” during which the grantee must satisfy certain vesting conditions; (3) restricted stock
units which entitle the grantee to receive Common Stock, or cash (or other property) based on the value of
Common Stock, after a “restricted period” during which the grantee must satisfy certain vesting
conditions or the restricted stock unit is forfeited; (4) stock appreciation rights which entitle the grantee to
receive, with respect to a specified number of shares of Common Stock, any increase in the value of the
shares from the date the award is granted to the date the right is exercised; and (5) other types of equity-
based compensation which may include shares of Common Stock granted upon the achievement of
performance objectives.

The 2008 Plan will be administered by the Compensation Committee, which will at all times be
composed of two or more members of the Board of Directors who are not our employees or consultants.
Any employee or director of, or consultant for, us or any of our subsidiaries or other affiliates will be
eligible to receive awards under the 2008 Plan. We have reserved 10,000,000 shares of Common Stock
for awards under the 2008 Plan. In addition, on each anniversary of the 2008 Plan’s effective date on or
before the fifth anniversary of the effective date, the aggregate number of shares of our Common Stock
available for issuance under the 2008 Plan will be increased by the lesser of (a) 5% of the total number of
shares of our Common Stock outstanding as of the December 31 immediately preceding the anniversary,
(b) 500,000 shares, or (c) a lesser number of shares of our Common Stock that our board, in its sole
discretion, determines. In general, shares reserved for awards that lapse or are canceled will be added
back to the pool of shares available for awards under the 2008 Plan.

Awards under the 2008 Plan are forfeitable until they become vested. An award will become
vested only if the vesting conditions set forth in the award agreement (as determined by the Compensation
Committee) are satisfied. The vesting conditions may include performance of services for a specified
period, achievement of performance objectives, or a combination of both. The Compensation Committee
also has authority to provide for accelerated vesting upon occurrence of an event such as a change in
control. The 2008 Plan specifically prohibits the Compensation Committee from repricing any stock
options or stock appreciation rights. In general, awards under the 2008 Plan may not be assigned or
transferred except by will or the laws of descent and distribution. However, the Compensation Committee
may allow the transfer of NSOs to members of a 2008 Plan participant’s immediate family or to a trust,

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partnership, or corporation in which the parties in interest are limited to the participant and members of
the participant’s immediate family.

The Board of Directors or the Compensation Committee may amend, alter, suspend, or terminate
the 2008 Plan at any time. If necessary to comply with any applicable law (including stock exchange
rules), we will first obtain stockholder approval. Amendments, alterations, suspensions, and termination
of the 2008 Plan generally may not impair a participant’s (or a beneficiary’s) rights under an outstanding
award. However, rights may be impaired if necessary to comply with an applicable law or accounting
principles (including a change in the law or accounting principles) pursuant to a written agreement with
the participant. Unless it is terminated sooner, the 2008 Plan will terminate upon the earlier of April 28,
2018 or the date all shares available for issuance under the 2008 Plan have been issued and vested.

In April 2008, we issued stock options to purchase 1,000,000 shares of our Common Stock at an
average exercise price of $0.10 per share to our two independent directors.

Director Compensation

None of ESP’s directors received any compensation for their respective services rendered to us
during the year ended December 31, 2007.

As of April 28, 2008, we approved the following non-employee director compensation program:
We will pay our non-employee directors $2,500 each quarter and our two current non-employee directors
will receive $10,000 in consideration for their services to ESP during 2007. In addition, we will grant
options to our non-employee directors as follows: (i) each new non-employee director will receive a one-
time grant of options to purchase 100,000 shares of our Common Stock in accordance with the 2008 Plan,
(ii) each board committee chairperson will receive a one-time grant of options to purchase 50,000 shares
of our Common Stock in accordance with the 2008 Plan, and (iii) each non-employee director will receive
an annual grant of options to purchase 50,000 shares of our Common Stock in accordance with the 2008
Plan.

RISK FACTORS

The purchase of the Units is speculative and involves a high degree of risk and significant
dilution. Prospective investors should carefully consider all of the information contained in this
Memorandum and, in particular, the following factors which could adversely affect our operations and
prospects, before making a decision to purchase the Units.

Cautionary Statements

This Memorandum, including the sections entitled “Investment Summary,” “Risk Factors,” and
“Description of Business,” contains forward-looking statements. These statements relate to future events
or our future financial performance and involve known and unknown risks, uncertainties and other factors
which are, in some cases, beyond our ability to control or predict and that may cause our or our industry’s
actual results, levels of activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by the forward-looking
statements. These risks and other factors include those listed under “Risk Factors” and elsewhere in this
prospectus. In some cases, you can identify forward-looking statements by terminology such as “may,”
“will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,”
“potential,” “continue” or the negative of these terms or other comparable terminology. You should not
place undue reliance on forward-looking statements. Actual events or results may differ materially. In
evaluating these statements, you should understand that various factors, in addition to those discussed in

- 27 -
“Risk Factors” and elsewhere in this document, could affect our future results and could cause results to
differ materially from those expressed in such forward-looking statements, including the following:

• our limited operating history and fluctuating operating results;


• we are currently in default on our short-term indebtedness and need substantial capital or
financing to cure the default;
• the possibility we may be unable to manage our growth;
• extensive competition;
• loss of members of our senior management;
• our limited number of customers and suppliers;
• our need to effectively integrate businesses we acquire;
• regulatory interpretations and changes;
• volatility or decline of our stock price;
• our failure to earn revenues or profits;
• inadequate capital and barriers to raising capital or to obtaining the financing needed to
implement our business plans;
• changes in demand for our products and services;
• non-acceptance by homeowners, other property owners, and the real estate building,
lending, and ownership industries of our CEHI and HAC programs;
• rapid and significant changes in markets;
• litigation with our legal claims and allegations by outside parties; and
• insufficient revenues to cover operating costs.

Although we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of
these forward-looking statements.

You should read these factors and the other cautionary statements made in this prospectus as
being applicable to all related forward-looking statements wherever they appear in this prospectus. If one
or more of these factors materialize, or if any underlying assumptions prove incorrect, our actual results,
performance or achievements may vary materially from any future results, performance or achievements
expressed or implied by these forward-looking statements. We undertake no obligation to publicly update
any forward-looking statements, whether as a result of new information, future events or otherwise,
except as required by law.

Risks Related to Our Business

We have a limited operating history, which could make it difficult to accurately evaluate our business
and prospects.

We began offering our environmental inspection services as Environmental Service


Professionals, Inc. in October 2006 and our association management services in July 2007. Accordingly,
we have a limited operating history and, as a result, we have limited financial data that you can use to
evaluate our business and prospects. Our business model is evolving and it may not be successful. As a
result of these factors, the future revenue and income potential of our business is uncertain. Although we
have experienced significant revenue growth in recent periods, we may not be able to sustain this growth.
Any evaluation of our business and our prospects must be considered in light of these factors and the risks
and uncertainties often encountered by companies in our state of development. Some of these risks and
uncertainties relate to our ability to do the following:

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• Maintain and expand our current relationships, and develop new relationships with state,
federal and environmental regulatory bodies
• Gain the acceptance of the commercial and residential insurance industry to a level where
they will consider offering a discount to their policyholders, if their customers/insured’s
receive an initial inspection services and then participate in an annual inspection program
• Maintain and expand our current relationships, and develop new relationships with the
industry stakeholders including insurance, mortgage, and banking businesses, and
realtors, builders, asset managers and the consumer
• Continue to grow our revenue and meet anticipated growth targets
• Manage our expanding operations and implement and improve our operational, financial,
and management controls
• Respond effectively to competition
• Implement ESP’s national marketing campaign
• Attract and retain qualified management and employees
• Attract the existing top tier home and moisture inspectors nationwide and to become
approved vendors as independent contractors in order to deliver the CEHI Program of
services

If we are unable to address these risks, our business, results of operation, and prospects could suffer.

Financial projections are only estimates by management and actual results may differ substantially.

Financial projections concerning the estimated operating results and financial condition of the
Company are included with the Memorandum. Any projections are based on certain assumptions which
could prove to be inaccurate and which would be subject to future conditions that are beyond the control
of the Company, such as general industry conditions. The Company may experience unanticipated costs,
or anticipated revenues may not materialize, resulting in lower revenues than forecasted. There is no
assurance that the results illustrated in any financial projections will in fact be realized by the Company.
Any financial projections have been prepared by management of the Company and have not been
examined or compiled by independent certified public accountants. Counsel to the Company has had no
participation in the preparation or review of any financial projections prepared by the Company.
Accordingly, neither the independent certified public accountants nor counsel to the Company are able to
provide any level of assurance on them. There can be no assurance that the Company will earn net
profits. There is no assurance that the Company will be able to raise capital in this placement of Units, or
that it will have sufficient capital to fund its business operations. There is no assurance that the Company
could obtain additional financing or capital from any source, or that such financing or capital would be
available to the Company on terms acceptable to it.

Lack of public acceptance of our services would have a negative impact our sales and profitability.

Our business is speculative and dependent upon the acceptance of our services as an effective and
reliable method to perform indoor air quality and energy use inspections. Our business is also dependent
on the effectiveness of our marketing program to convince potential clients and potential independent
contractors to utilize our services so that we will become profitable. We cannot assure that the public or
industry stakeholders will accept our inspection services, or that we will be successful or that our business
will earn any profit. We cannot assure that we will earn any revenues or that investors will not lose their
entire investment. We cannot assure that we will operate our business successfully or that our Common
Stock will have value. A failure of our marketing campaign would have a material adverse impact on its
operating results, financial condition and business performance.

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We may risk exposure from liability claims.

Environmental inspectors face the risk of exposure to liability claims in the event that the use of
analysis reports or reliance on inspection protocols cause property damage, injury or illness as a result of
contamination from environmental hazards that were included in such analysis, inspection protocols, or
otherwise. We expect to maintain sufficient primary or excess umbrella liability insurance. However,
such insurance may not continue to be available at a reasonable cost, or, if available, may not be adequate
to cover all liabilities. Although we intend to seek contractual indemnification and insurance coverage
from parties supplying its services, such indemnification or insurance coverage is limited, as a practical
matter, to the creditworthiness of the indemnifying party and the insured limits of any insurance provided
by suppliers. If we do not have adequate insurance or contractual indemnification available, product
liability relating to defective products could materially reduce our future net earnings and earnings per
share.

We may be harmed by actions taken by our environmental inspectors that are outside our control.

A significant portion of our environmental inspectors are independent contractors and are not our
employees. We provide training and support to the environmental inspectors, but the quality of their
operations may be diminished by any number of factors beyond our control. Consequently, our
environmental inspectors may not successfully operate in a manner consistent with our standards and
requirements, or may not hire and train qualified personnel. Our image and reputation, and the image and
reputation of other environmental inspectors, may suffer materially and system-wide sales could
significantly decline if our environmental inspectors do not operate successfully.

We may become reliant on technology for efficient operations which could increase our operating costs
in the short term and make us vulnerable to disruptions.

The need to synchronize data and the related information which is key to our on-line work flow
system. Global trends are moving toward developing and adopting standardized protocols for data
synchronization. The implementation of these protocols will be an added expense encountered by us in
executing our business strategy. One of the greatest coordination challenges for us is having inspectors
utilize on-line work flow systems effectively to ensure efficient and effective service to our clients and to
capture the mission critical data post inspection. The Internet is playing a growing role in creating an
automated communications network for presenting, tracking, and capturing this mission critical
information. We believe that we will need to develop a network to enable the on-line work flow system
on the Internet in order to operate profitability which could increase our operating costs in the short term.

Our ability to reduce costs in the long term and increase profits, as well as our ability to serve
customers most effectively, may depend on the reliability of our technology network. We expect to use
software and other technology systems to dispatch inspectors in the most efficient manner to optimize the
use of standardized inspection and analysis protocols and minimize the time spent at each stop. Any
disruption to these computer systems in the future could adversely impact our customer service, decrease
the volume of our business, and result in increased costs. While we expect to invest in technology
security initiatives and disaster recovery plans, we recognize that these measures cannot fully insulate us
from technology disruption that could result in adverse effects on operations and profits.

Our business strategy, in part, depends upon our ability to complete and manage acquisitions of other
companies.

A part of our strategy is to achieve growth through acquisitions of businesses. We may not be
able to make acquisitions in the future and any acquisitions we do make may not be successful.
Furthermore, future acquisitions may have a material adverse effect upon our operating results,

- 30 -
particularly in periods immediately following the consummation of those transactions while the
operations of the acquired businesses are being integrated into our operations.

Achieving the benefits of acquisitions depends on the timely, efficient and successful execution of a
number of post-acquisition events, including integrating the business of the acquired company into our
operations, marketing programs, and reporting and information systems. We may not be able to
successfully integrate the acquired company’s operations or personnel, or realize the anticipated benefits
of the acquisition. Our ability to integrate acquisitions may be adversely affected by many factors,
including the relatively large size of a business and the allocation of our limited management resources
among various integration efforts.

In connection with the acquisitions of businesses in the future, we may decide to consolidate the
operations of any acquired business with our existing operations or make other changes with respect to
the acquired business, which could result in special charges or other expenses. Our results of operations
also may be adversely affected by expenses we incur in making acquisitions, by amortization of
acquisition-related intangible assets with definite lives and by additional depreciation attributable to
acquired assets. Any of the businesses we acquire may also have liabilities or adverse operating issues,
including some that we fail to discover before the acquisition, and our indemnity for such liabilities
typically has been limited and may, with respect to future acquisitions, also be limited.

Additionally, our ability to make any future acquisitions may depend upon obtaining additional
financing. We may not be able to obtain additional financing on acceptable terms or at all. To the extent
that we seek to acquire other businesses in exchange for our Common Stock, fluctuations in our stock
price could have a material adverse effect on our ability to complete acquisitions.

We have no assurance that our proposed acquisitions will be completed.

Our business strategy, in part, is to expand our operations through strategic acquisitions. We
have not entered into any agreements, arrangements or understandings to acquire any operating
companies, and we cannot assure that any acquisition will be completed for any number of reasons.
These reasons include, but are not limited to, our ability to obtain funding, complete the necessary due
diligence to our satisfaction, agree on all material terms of definitive purchase agreements, obtain audited
financial statements consistent with the unaudited financial statements, or otherwise consummate the
acquisition of any or all of such entities.

We may not be able to manage proposed acquisitions and achieve profitability.

In the event that we are able to complete any acquisitions, such acquisitions would present
numerous challenges to us. These include, but are not limited to, the integration of the acquired entities
with our operations, technologies and management and the attendant risks associated with such
acquisitions, including, but not limited to, possible unanticipated liabilities, unanticipated costs, and
diversion of management attention or loss of personnel.

We cannot assure you that we will successfully integrate or profitably manage any acquired
businesses, that our continued business will achieve sales levels, profitability, efficiencies or synergies
that justify the acquisitions, or that the acquisitions will result in increased earnings for us in any future
period. Successful integration of our operations will depend on, among other things, our ability to attract,
hire and retain skilled management and other personnel, none of which can be assured. To manage
growth effectively, we will need to invest in development of enhancements to existing services,
implement operational, financial and management information systems, procedures and controls, and
integrate our personnel and operations with those of an acquired company. We cannot assure that we will

- 31 -
be able to manage the combined operations effectively, and failure to do so could have a material adverse
effect on our business, financial condition and/or operating results.

We may become subject to undisclosed liabilities as a result of proposed acquisitions.

While we will conduct whatever due diligence we can with regard to all acquisitions, there may
be significant undisclosed liabilities associated with an entity that might not be known to us prior to an
acquisition. The indemnities and warranties that we will receive in connection with the proposed
acquisitions might not fully cover such liabilities, in which case our operations may be adversely affected.

We may not be able to successfully compete against companies with substantially greater resources.

The indoor air quality testing industry is extremely competitive. Our principal competitors
include other indoor air quality testers, certified industrial hygienists, home inspectors, termite inspectors,
and remediation and abatement companies. These competitors may have longer operating histories,
greater name recognition, larger installed customer bases, and substantially greater financial and
marketing resources than ESP. We believe that the principal factors affecting competition in this
proposed market include name recognition, and the ability to receive referrals based on client confidence
in our services. There are no significant barriers of entry that could keep potential competitors from
opening similar indoor air quality testing facilities. Our ability to compete successfully in the industry
will depend in large part upon our ability to market and sell our indoor air quality testing services and to
respond effectively to changing insurance industry standards and methodology. We cannot assure that
ESP will be able to compete successfully in the indoor air quality testing industry, or that future
competition will not have a material adverse effect on our business, operating results, and financial
condition.

We may from time to time be subject to disputes with customers and vendors relating to amounts
invoiced for services provided which we may not be able to resolve in our favor.

It is not unusual in our industry to occasionally have disagreements with vendors relating to
amounts billed for services provided between the recipient of the services and the vendor. To the extent
we are unable to favorably resolve these disputes, our revenues, profitability or cash may be adversely
affected.

Our ability to protect our intellectual property is uncertain.

We rely on know-how and trade secrets to maintain our competitive position. Confidentiality
agreements or other agreements with our employees, consultants and advisors may not be enforceable or
may not provide meaningful protection for our proprietary technology, know-how, trade secrets, or other
proprietary information in the event of misappropriation, unauthorized use or disclosure or other breaches
of the agreements, or, even if such agreements are legally enforceable, we may not have adequate
remedies for breaches of such agreements. The failure of our agreements to protect our proprietary
technology could result in significantly lower revenues, reduced profit margins or loss of market share.

The market for our services depends to some extent upon the goodwill associated with our
trademarks and service marks. We own, or have licenses to use, the material trademarks, service marks
and trade names used in connection with the marketing and performance of our services in the markets
where those services are sold. Therefore, trademark protection is important to our business. Although
our trademarks and service marks are registered in the United States, we may not be successful in
asserting trademark protection. In addition, the laws of certain foreign countries may not protect our
trademarks or service marks to the same extent as the laws of the United States. The loss or infringement

- 32 -
of our trademarks or service marks could impair the goodwill associated with our brands, harm our
reputation and have a material adverse effect on our financial results.

We expect to continue to incur losses for the near future.

We project that we will continue to incur development and administrative expenses and operate at
a loss for up to the next three years unless we are able to complete several acquisitions or generate
substantial revenues from inspection and membership services. We cannot be certain whether or when
we will be able to achieve profitability because of the significant uncertainties with respect to our
business.

Our current capitalization is inadequate and we may not be able to raise the required capital to cure
our defaults on short-term indebtedness and to conduct our operations.

We have incurred substantial indebtedness through short-term bridge loans and other short term
loans made to us during the past 12 months by investors and lenders. These loans have maturity dates
occurring in the second quarter of 2008. We must raise substantial equity capital in order to refinance
these short-term loans because our businesses do not have sufficient revenue to service the debt. We
cannot assure that we will be able to raise the necessary capital to repay our debt. If we default on the
debt, a significant portion of which is secured by our assets, then we could lose our businesses and related
assets, causing investors to lose their entire investment in us. Furthermore, we cannot assure that we will
not incur debt in the future, that we will have sufficient funds to repay our indebtedness, or that we will
not default on our debt, jeopardizing our business viability. We may not be able to borrow or raise
additional capital in the future to meet our needs or to otherwise provide the capital necessary to conduct
our business.

We will require additional capital resources including, but not limited to, exercise of outstanding
warrants, in order to conduct our operations and raise sufficient working capital, as well as in order to
grow and expand our business. Future events may lead to increased costs that could make it difficult for
us to succeed. To raise additional capital, we may be required to sell additional equity securities, or
accept debt financing or obtain financing through a bank or other entity. If additional funds are raised
through the issuance of additional stock, there may be a significant dilution in the value of our
outstanding Common Stock. We may not have binding arrangements with respect to additional
financings, even though we have signed investment and financing commitments. If we so require, future
financing may not be available to us on commercially reasonable terms, or at all. We cannot assure that
any additional financings will be available to us, that we will be able to obtain additional loans, or that
adequate funds for our operations will otherwise be available when needed or on terms that are acceptable
to us. The inability to secure additional financing would prevent us from achieving profitability and
would have a material adverse effect upon us, which may result in the loss of your investment in ESP.

Our industry is subject to regulation that could adversely impact our business.

Our business is subject to various federal, state and local laws that govern indoor air quality
assessors and hygienists, business licensing, and those governing health, safety, the rights of employees,
employment discrimination, wrongful termination, wages, hours, taxes, quality of service, and other
matters. A failure by us or our independent environmental inspectors to comply with applicable
government regulations or insurance company requirements could have a material adverse effect on our
financial condition and business operations.

- 33 -
Our financial statements have been prepared assuming that we will continue as a going concern.

Our financial statements have been prepared assuming that we will continue as a going concern.
As discussed in Note 15 to the financial statements, we generated net losses of $21,468,106 during the
period from September 29, 1992 (inception) through December 31, 2007. These conditions raise
substantial doubt about our ability to continue as a going concern. Our continuation as a going concern is
dependent on our ability to meet our obligations, to obtain additional financing as may be required, and
ultimately to attain profitability. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty. Management plans to raise additional funds
through debt or equity offerings. We are insolvent unless and until we raise adequate capital to repay our
short-term indebtedness which is in default. There is no guarantee that we will be able to raise any capital
through any type of offerings.

We are currently in default on our bridge loans.

We have failed to repay our bridge loans on a timely basis. Currently, our bridge loan lenders are
exercising forbearance on a voluntary day-to-day basis. We cannot assure that our lenders will continue
to refrain from enforcement and foreclosure on their loans. If we are not able to repay or refinance bridge
loans, we may experience foreclosure on our assets and a cessation of our business. In such
circumstances you may lose your entire investment in ESP.

We have an obligation to repurchase stock issued to certain bridge loan lenders.

We have an obligation to repurchase stock issued to certain bridge loan lenders. We cannot
assure that we will have sufficient funds to repurchase the stock and we may default on this obligation.
Currently, we have an obligation to repurchase 215,321 shares of our Common Stock at a price of $1.00
per share.

Our business may be subject to fluctuations in the economy and geopolitical events.

Our business could be affected by general economic conditions and those specific to the
inspection, real-estate and energy management industries. In addition, our business could be affected by
geopolitical events such as war, threat of war or terrorist actions. Such an economic downturn or
geopolitical event could materially and adversely affect our business and financial condition.

The adverse resolution of current litigation, certain disputes, and contingent liabilities could adversely
affect our business and financial condition.

We are currently involved in litigation and have other pending disputes with our prior
accountants, our prior Chief Financial Officer, a prior director and executive officer of the Company,
prior owners of companies we have acquired, and potentially other parties that may result in expensive
litigation. These disputes primarily involve monetary payments and issuance of shares of our stock that
we strongly believe should not have been made or should not be made to such third parties. There is no
assurance that we will prevail in the current litigation or in any of our pending disputes. The cost of
litigating our claims or defending against claims could be substantial and, along with possible adverse
judgments against us for money or shares, could have a material adverse impact on our business
performance, business prospects, operating results and financial condition. A judgment forcing us to
issue or release shares would dilute existing shareholders, and a judgment forcing us to make monetary
payments would reduce our ability to fund the operation of our business or to retire indebtedness.
Furthermore, bridge lenders could cease their forbearance and launch collection actions against us in
court unless we repay those debts soon. There is no assurance that bridge lenders will not file lawsuits

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against us seeking judgments and damages, which would have a material adverse impact on our business,
financial condition and operating results, as well as our stock price.

We must restate certain of our financial statements, which may adversely affect the trading price of our
Common Stock.

We must restate our financial statements for the fiscal years ended December 31, 2006 and 2007,
as well as for the three months ended March 31, 2007, June 30, 2007, September 30, 2007, and March 31,
2008 to reflect the SEC’s concerns regarding our prior accountant’s treatment of our business
combination which closed in October 2006. We do not anticipate that the changes to our financial
statements will be material or that they will have a material adverse effect on our business, but we cannot
assure that the changes will not adversely affect the trading price of our Common Stock.

We did not timely file with the SEC our Form 10-KSB for the fiscal year ended December 31, 2007. As
a result of this delayed filing, we are currently ineligible to use Form S-3 to register securities with the
SEC in capital-raising transactions, which may adversely affect our cost of future capital.

We did not timely file with the SEC our Form 10-KSB for the fiscal year ended December 31,
2007. As a result of the delayed filing of our Form 10-KSB, we are ineligible to use a “short form”
registration statement on Form S-3 to register securities for sale by us or for resale by other security
holders, in capital raising transactions, until we have timely filed all periodic reports under the Securities
Exchange Act of 1934 for at least 12 calendar months. In the meantime, for capital raising transactions,
we would need to use Form S-1 to register securities with the SEC, or issue such securities in a private
placement, which could increase the time and resources required to raise capital during this period.

If we were to lose the services of our key personnel, we may not be able to execute our business
strategy.

Our success is substantially dependent on the performance of our executive officers and key
employees. Given our early stage of operation, we are dependent on our ability to retain and motivate
high quality personnel. Although we believe we will be able to engage qualified personnel for such
purposes, an inability to do so could materially adversely affect our ability to market and perform our
services. The loss of one or more of our key employees or our inability to hire and retain other qualified
employees could have a material adverse effect on our business

If we are unable to hire, retain or motivate qualified personnel, consultants, independent contractors
and advisors, we may not be able to grow effectively.

Our performance will be largely dependent on the talents and efforts of highly skilled individuals.
Our future success depends on our continuing ability to identify, hire, develop, motivate and retain highly
qualified personnel for all areas of our organization. Competition for such qualified employees is intense.
If we do not succeed in attracting excellent personnel or in retaining or motivating them, we may be
unable to grow effectively. In addition, our future success will depend in large part on our ability to
retain key consultants and advisors. We cannot assure that any skilled individuals will agree to become
an employee, consultant or independent contractor of ESP. Our inability to retain their services could
negatively impact our business and our ability to execute our business strategy.

Directors and officers have limited liability.

As permitted by the Nevada General Corporation Law, our certificate of incorporation and by-
laws limit the personal liability of our directors and stockholders for monetary damages for breach of
fiduciary duty as a director or stockholder, but such provision does not eliminate or limit the liability of a

- 35 -
director in certain circumstances, such as for: (i) any breach of the director’s duty of loyalty to the
corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (iii) under Section 174 of the Nevada General Corporate Law;
or (iv) for any transaction from which the director derived an improper personal benefit. If we were
called upon to perform under our indemnification agreement, then the portion of our assets expended for
such purpose would reduce the amount otherwise available for our business.

Risks Related to Our Securities

Until October 2006, we were a public shell company. There are certain risks associated with
transactions with public shell companies generally, including increased Securities and Exchange
Commission scrutiny and regulation and lack of analyst coverage.

Prior to October 2006, we were effectively a public shell company with no material assets or
operations and our only value was that we maintained current filings with the Securities and Exchange
Commission (“SEC”) and a class of securities that was traded on the OTC Bulletin Board. Substantial
additional risks are associated with a public shell merger transaction such as the absence of accurate or
adequate public information concerning the public shell; undisclosed liabilities; improper accounting;
claims or litigation from former officers, directors, employees or stockholders; contractual obligations;
regulatory requirements, the application of Rule 144(i) of the Securities Act of 1933, as amended, and
other risks. Although management performed due diligence on the public shell company, there can be no
assurance that such risks do not occur. The occurrence of any such risk could materially adversely affect
our results of operations, financial condition and stock price. Security analysts of major brokerage firms
may not provide coverage of us. No assurance can be given that brokerage firms will want to conduct any
secondary public offerings on our behalf or make a market in our stock in the future.

Our Common Stock may be considered a “penny stock” and may be difficult to sell.

The SEC has adopted regulations which generally define “penny stock” to be an equity security
that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share,
subject to specific exemptions. The market price of our Common Stock is less than $5.00 per share and
therefore may be designated as a “penny stock” according to SEC rules. This designation requires any
broker or dealer selling these securities to disclose certain information concerning the transaction, obtain
a written agreement from the purchaser and determine that the purchaser is reasonably suitable to
purchase the securities. These rules may restrict the ability of brokers or dealers to sell our Common
Stock and may affect the ability of investors to sell their shares. In addition, since our Common Stock is
currently traded on the NASD’s OTC Bulletin Board, investors may find it difficult to obtain accurate
quotations of our Common Stock and may experience a lack of buyers to purchase such stock or a lack of
market makers to support the stock price.

Our principal shareholders have significant voting power and may take actions that may not be in the
best interest of other shareholders.

As of October 1, 2008, our executive officers, directors, and principal shareholders who hold 5%
or more of our outstanding Common Stock beneficially owned, in the aggregate, approximately 61% of
our outstanding Common Stock. These shareholders are able to exercise significant control over all
matters requiring shareholder approval, including the election of directors and approval of significant
corporate transactions. This concentration of ownership may have the effect of delaying or preventing a
change in control and might adversely affect the market price of our Common Stock. This concentration
of ownership may not be in the best interests of all our shareholders.

- 36 -
We can provide no assurance that our internal control over our financial reporting will be effective
under Section 404 of the Sarbanes-Oxley Act of 2002.

Given the complexities and inherent risks associated with the operation of internal control over
financial reporting, we can provide no assurance that our internal control over financial reporting will be
effective under Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”). Moreover, we can provide no
assurance as to any matters that might be reported in our management’s assessment of our internal control
over financial reporting or our independent registered public accounting firm’s audit report. If we are not
able to implement the requirements relating to internal controls and all other provisions of Section 404 in
a timely fashion or achieve adequate compliance with these requirements or other requirements of SOX,
we might become subject to sanctions or investigation by regulatory authorities such as the SEC or the
Financial Industry Regulatory Authority, Inc. (“FINRA”). Any such action may materially adversely
affect our reputation, financial condition and the value of our securities, including our Common Stock.
Additionally, ineffective internal control over financial reporting could cause investors to lose confidence
in our reported financial information and could result in a lower trading price for our securities.

The trading price of our Common Stock has been, and is likely to continue to be, volatile with limited
liquidity.

The trading prices of our Common Stock and the securities of service companies generally have
been highly volatile. Trading volume has been extremely light and may not increase, resulting in limited
liquidity for stockholders. The trading price of our Common Stock may decline or fail to appreciate.
Factors affecting the trading price of our Common Stock will include:

• variations in our operating results;


• announcements of technological innovations, new services or service enhancements,
strategic alliances or significant agreements by us or by our competitors;
• recruitment or departure of key personnel;
• changes in the estimates of our operating results or changes in recommendations by any
securities analysts that elect to follow our Common Stock;
• developments or disputes concerning our intellectual property or other proprietary rights;
• the gain or loss of significant customers;
• market conditions in the inspection industry, the industries of our customers, and the
economy as a whole; and
• adoption or modification of regulations, policies, procedures or programs applicable to
our business.

In addition, if the market for service company stocks or the stock market in general experiences
loss of investor confidence, the trading price of our Common Stock could decline for reasons unrelated to
our business, operating results or financial condition. The trading price of our Common Stock might also
decline in reaction to events that affect other companies in our industry even if these events do not
directly affect us.

There is no assurance of an established public trading market, and the failure to establish one would
adversely affect the ability of our investors to sell their securities in the public market.

At present, there is minimal trading of our securities, and there can be no assurance that an active
trading market will develop. Our Common Stock is traded on the OTC Bulletin Board. The OTC Bulletin
Board is an inter-dealer, over-the-counter market that provides significantly less liquidity than FINRA’s
automated quotation system, or NASDAQ Stock Market. Quotes for stocks included on the OTC Bulletin
Board are not listed in the financial sections of newspapers as are those for the NASDAQ Stock Market.
Therefore, prices for securities traded solely on the OTC Bulletin Board may be difficult to obtain and

- 37 -
holders of Common Stock may be unable to resell their securities at or near their original price or at any
price.

Trading on the OTC Bulletin Board may be detrimental to investors.

Securities traded on the OTC Bulletin Board generally have limited trading volume and exhibit a
wide spread between the bid/ask quotations. We cannot predict whether a more active market for our
Common Stock will develop in the future. In the absence of an active trading market, investors may have
difficulty buying and selling our Common Stock or obtaining market quotations, market visibility for our
Common Stock may be limited, and a lack of visibility for our Common Stock may have a depressive
effect on the market price for our Common Stock.

A significant number of our shares are eligible for sale, and their sale could depress the market price
of our Common Stock.

Sales of a significant number of shares of our Common Stock in the public market could harm the
market price of our Common Stock. Some or all of our shares of Common Stock as well as shares of
Common Stock underlying warrants may also be offered from time to time in the open market pursuant to
an effective registration statement or Rule 144, and these sales may have a depressive effect on the market
for our shares of Common Stock. In general, a non affiliate who has held restricted shares for a period of
six months may sell into the market shares of our Common Stock.

If we fail to maintain effective internal controls over financial reporting, the price of our Common
Stock may be adversely affected.

We are required to establish and maintain appropriate internal controls over financial reporting.
Failure to establish those controls, or any failure of those controls once established, could adversely
impact our public disclosures regarding our business, financial condition or results of operations. In
addition, management’s assessment of internal controls over financial reporting may identify weaknesses
and conditions that need to be addressed in our internal controls over financial reporting or other matters
that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be
addressed in our internal control over financial reporting, disclosure of management’s assessment of our
internal controls over financial reporting or disclosure of our public accounting firm’s attestation to or
report on management’s assessment of our internal controls over financial reporting may have an adverse
impact on the price of our Common Stock.

We do not foresee paying cash dividends in the foreseeable future.

We have not paid cash dividends on our stock and do not plan to pay cash dividends on our
Common Stock in the foreseeable future.

We may use our preferred stock as an anti-takeover device.

We are authorized to issue up to 1,000,000 shares of preferred stock, $0.01 par value. The
preferred stock may be issued in series from time to time with such designation, voting and other rights,
preferences and limitations as our Board of Directors may determine by resolution. Unless the nature of a
particular transaction and applicable statutes require such approval, the Board of Directors has the
authority to issue these shares without stockholder approval subject to approval of the holders of our
preferred stock. The issuance of preferred stock may have the effect of delaying or preventing a change
in control of ESP without any further action by our stockholders.

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We are subject to critical accounting policies, and we may interpret or implement required policies
incorrectly.

We will follow generally accepted accounting principles for the U.S. in preparing our financial
statements. As part of this process, we must make many estimates and judgments about future events.
These affect the value of the assets and liabilities, contingent assets and liabilities, and revenue and
expenses that we report in our financial statements. We believe these estimates and judgments are
reasonable, and we make them in accordance with our accounting policies based on information available
at the time. However, actual results could differ from our estimates, and this could require us to record
adjustments to expenses or revenues that could be material to our financial position and results of
operations in future periods.

Risks Related to Offering

Risk relating to life insurance policies as security for this investment.

Each Unit includes a pro rata membership interest in the ESP LIBACSM Fund, LLC, a Delaware
limited liability company (the “LLC”). The LLC will use 40% of the gross proceeds from the sale of the
Units to acquire a portfolio of life insurance policies having an aggregate pay-off amount of
approximately the amount of the offering, or $10,000,000 if the maximum capital of $10,000,000 is
raised. As Members of the LLC, holders of our Series A Preferred Stock, while holders, will also have an
indirect equity ownership interest in the portfolio which is controlled by the Master Trust formed by the
LLC. The manager (the “Manager”) of the LLC is an affiliate of Capital Growth Resources, a registered
member of FINRA and the exclusive placement agent for this offering. The portfolio is designed to
eventually return to investors their original investment amount in the Units if certain conditions are not
satisfied, such as our stock failing to trade at a closing price of at least $1.50 per share for 20 consecutive
trading days at any time after six months from the final closing of the offering (the “Investment
Threshold”). For the purposes of the Series A Preferred Stock, the Investment Threshold will not be
calculated until six months after the Series A Preferred Stock is issued. There are several risks associated
with the portfolio. First, if the Investment Threshold is achieved, investors’ Membership Interests in the
LLC automatically revert to ESP and become subject to the Capital Growth Planning, Inc.’s (“CGP”)
right for 180 days to acquire the Membership Interests from ESP for an amount equal to the Master
Trust’s cost of acquiring the LIBACSM Assets that exist at the time CGP exercises this right, payable in
cash. If CGP exercises this option, the Company would no longer own the Membership Interests in the
LLC, and, in that case, investors would have no ownership interest in the portfolio. Consequently,
investors would lose the potential protection offered by the portfolio once the Investment Threshold
occurs, even if the trading price of our stock declines after the Investment Threshold is achieved. If the
Manager does not elect to purchase the Membership Interests from ESP, then we would hold an illiquid
asset that may be difficult to sell or otherwise monetize, and from which cash flow would be uncertain.
Investors may convert their Series A Preferred Stock into our Common Stock at any time and, subject to
compliance with Rule 144 of the Act, sell their Common Stock in the open market or otherwise. If,
however, the trading price of our Common Stock declines after the occurrence of the Threshold and
investors have not yet sold their Common Stock, investors would not necessarily receive $1.50 per share
for their stock once they were able to (or they decided to) sell it. Generally under Rule 144, investors
must hold the Common Stock for at least six months after being issued the Series A Preferred Stock,
provided that ESP is then current in its reporting obligations with the Securities and Exchange
Commission (“SEC”). If we do not remain current in our reporting obligations to the SEC, investors
would not be able to have the restrictive transfer legend removed from their Common Stock until we were
again reporting for a period of at least 12 months. This problem for investors under Rule 144 will cease
to exist if the Common Stock underlying the Series A Preferred Stock is registered pursuant to the
holder’s piggyback registration rights. See Exhibit C to this Memorandum. Furthermore, the portfolio
consists of Policies with uncertain pay-off dates, since payment depends on the length of the life of the

- 39 -
insureds. Until pay-off, the insurance policies are essentially illiquid. Consequently, the date when cash
flow would be available from the LLC, if any, is uncertain. All net death benefits that are generated by
the LIBACSM Assets prior to the achievement of the Threshold would be distributed among the Members
(i.e., Series A Preferred Stockholders) on a pro rata basis. To the extent that a Series A Preferred
Stockholder converts his Preferred Stock into Common Stock prior to the achievement of the Threshold,
then a proportionate amount of his Membership Interest in the LLC would have reverted to ESP, and ESP
would assume economic ownership of that Membership Interest, subject to the CGP’s repurchase right for
its own account. CGP has the right to purchase all of the Membership Interest in the LLC from ESP for a
period of 180 days after the date that all Membership Interests in the LLC have vested in ESP. Collection
on the portfolio may encounter legal obstacles, such as refusal of insurance companies to pay on them for
a variety of legal or technical reasons. The amount of total proceeds from this offering that is allocated
for the purchase of the portfolio includes purchase of SPIAs designed to pay, among other things, the
estimated premiums on the Policies over the term of those Policies. If the LLC fails to pay the premiums
on the Policies or if its proceeds from the SPIAs are insufficient to pay premiums because the Insureds
live longer than expected or for other reasons, then investors would lose some or all of the protection
intended to be afforded by the portfolio. The Manager will have conflicts of interest with the LLC and
the investors (as Members) because it will earn compensation in connection with the management of the
portfolio, payable from the Master Trust, leaving less money available for the payment of Policy
premiums or to purchase more Policies for greater portfolio coverage. The portfolio is not designed to
cover the time value of the investors’ investment in the Units, since the portfolio is not expected to cash
flow in the near future, and the expected total pay-off amount is approximately equal to the original
purchase price of the Units. Consequently, there is no assurance that the portfolio will adequately protect
the investors from experiencing a loss of all or a portion of their investment in the Units.

Low minimum capitalization from offering.

The minimum capitalization required in this offering is only $500,000. We cannot assure that all
or a significant number of Units will be sold in this offering. Investors’ subscription funds will be used
by us as soon as they are received after the minimum capitalization is achieved, and no refunds will be
given if an inadequate amount of money is raised from this offering to enable us to conduct our business.
If only a small portion of the Units is placed, then we may not have sufficient capital to operate. We
cannot assure that we could obtain additional financing or capital from any source, or that such financing
or capital would be available to us on terms acceptable to it. Under such circumstances, investors in the
Units would likely lose their entire investment in the Company, subject to possible distributions from the
ESP LIBACSM Fund, LLC.

We arbitrarily determined the offering price of the Units.

The offering price of the Units has been determined by management, and bears no relationship to
our assets, book value, potential earnings, net worth or any other recognized criteria of value. We cannot
assure that the price of the Units is the fair market value of the Units or that investors will earn any profit
on them.

The Series A Preferred Stock automatically converts to Common Stock when and if our Common Stock
has traded at a closing bid price of $1.50 per share for a period of 20 consecutive trading days.

Each share of Series A Preferred Stock will automatically convert into 17.24 shares of our
Common Stock when and if our Common Stock has traded at a closing bid price of $1.50 per share or
more for a period of 20 consecutive trading days, provided that an automatic conversion cannot occur
until at least six months after the final closing of the Offering. Accordingly, the daily trading price of our
Common Stock for this purpose will not be calculated until the expiration of the initial six month period
after this offering terminates. On any conversion, fractional shares will be rounded down to the nearest

- 40 -
whole number. Once a conversion occurs, investors will no longer have the liquidation preference and
other protections afforded by the Series A Preferred Stock. See “DESCRIPTION OF CAPITAL STOCK
– Series A Preferred Stock.”

The Series A Preferred Stockholders have the right to convert their shares into shares of our Common
Stock.

The Series A Preferred Stockholders will have the right to voluntarily convert their shares of
Series A Preferred Stock to shares of Common Stock. The Company does not have the right to require a
conversion of the Series A Preferred Stock, except upon an automatic conversion. Series A Preferred
Stockholders who elect to convert their shares into Common Stock will thereafter not have the right to the
liquidation preference. See "DESCRIPTION OF THE CAPITAL STOCK – Series A Preferred Stock."

Risk That Exemptions Are Not Available.

This offering has not been registered under the Securities Act in reliance upon the “private
offering” exemption contained in Section 4(2) of the Securities Act and Rule 506 of Regulation D. It is
currently anticipated that reliance will also be made on similar available exemptions from securities
registration under applicable state securities (“Blue Sky”) laws. There is no assurance that the offering
presently qualifies or will continue to qualify under such exemptive provisions. If suits for rescission are
brought under the Securities Act or state law and successfully concluded for failure to register this
offering or for acts or omissions constituting other offenses under the Securities Act, the Securities
Exchange Act of 1934, as amended, or under state securities laws, both our capital and assets could be
adversely affected, thus jeopardizing our ability to operate successfully. Further, the time and capital of
the Company could be adversely affected by our need to defend any action by investigators of
government agencies, even when we are ultimately exonerated.

Risks Related to ESP LIBACSM Fund, LLC, the Master Trust and the Portfolio of LIBACsm Assets

General

An investment in the Membership Interests of the LLC involves substantial risks, including those
discussed below and elsewhere in this Memorandum. It is a speculative investment. It is designed for
sophisticated investors who are able to bear the economic risk of the loss of their investment in the LLC
and is not intended as a complete investment program. Before purchasing a Membership Interest in the
LLC, a prospective investor should carefully consider the various risk factors and potential conflicts of
interest, as well as suitability requirements, restrictions on transfer, reversion of Membership Interests,
and the various legal, tax, financial, regulatory and other investment related issues associated with an
investment in the LLC. Prospective investors are urged to consult their own legal, tax, financial and
investment advisers regarding the suitability of this investment.

Each Unit includes a pro rata Membership Interest in the ESP LIBACSM Fund, LLC, a Delaware
limited liability company (the “LLC”). The LLC will create and become the sole beneficiary and owner
of all of the beneficial interests of an irrevocable life insurance trust formed to qualify as a Delaware
Statutory Trust (the “Master Trust”). The Master Trust will use the proceeds of the offering allocated to
the LLC and contributed by the LLC to the Master Trust (40% of the gross proceeds of the offering) to
purchase indirectly from multiple insureds in-force, non-variable, non-contestable life insurance policies,
insuring the life of an insured (each a “Policy” and all collectively the “Policies”), and a Single Premium
Immediate Annuity (“SPIA”) using the insured as the measuring life of the annuity. The SPIA and Policy
held within the insured’s revocable trust are referred to as a “LIBACSM Asset”). The Master Trust will,
indirectly, thus have the right to receive payment of the death benefits under the Policies and all SPIA
revenue. The Company and the LLC intend that the Master Trust will own Policies which have a total

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combined life insurance face value at least equal to the total amount of funds raised in the offering. That
portion of the forty percent (40%) of the gross offering proceeds not used to acquire the Policies will be
used by the Master Trust to fund the purchase of SPIAs measured by the lives of the insureds under the
Policies, which, as calculated by the LLC, will provide revenue to the Master Trust for as long as the
insured under the related Policy lives, and be in amounts sufficient to fund the LLC’s and the Master
Trust’s direct and indirect administrative expenses, the premium payments due under the Policies and the
taxes due on the annuity revenue. The manager of the LLC, Insured Capital Management, Inc. (the
“Manager”), is an affiliate of Capital Growth Resources, a registered member of FINRA and the
exclusive placement agent for this offering. The Portfolio of LIBACSM Assets is designed to eventually
return to investors the gross amount of their original investment in the Units, if the Company does not
meet its investment goal of having the Common Stock underlying the Series A Preferred Stock obtain a
closing bid price of $1.50 or more for twenty (20) consecutive trading days any time after six (6) months
from the final closing of this offering. There can be no assurance that this objective will be achieved.

If the Company’s Common Stock trades at a closing bid price of at least $1.50 per share for
twenty (20) consecutive trading days any time after six (6) months from the final closing of this offering
(the “Investment Threshold”), the investors’ Membership Interests in the LLC automatically revert to the
Company and the Company will become the sole equity owner of the LLC. Thereafter, and pursuant to
the terms of a Patent Licensing Agreement between Capital Growth Planning, Inc. (“CGP”) and the
Company through which the Company has obtained its right to use the LIBACSM process, for a period of
one hundred eighty (180) days, CGP has the right to repurchase the Membership Interest in the LLC then
owned by the Company for cash at the LLC’s cost for the LIBACSM Assets then included in the portfolio.
In that case investors would have no ownership interest in the LLC. Consequently, once the Investment
Threshold occurs, and investors own the Company’s Common Stock with a value approximately equal to
about two hundred fifty-eight percent (258%) of their initial investment in this offering, investors would
lose any potential protection for the amount of their original investment in the Units offered by ownership
of the Membership Interests. If the Manager does not elect to repurchase the LLC Membership Interests
owned by the Company, then the Company would hold an illiquid asset that may be difficult to sell or
otherwise monetize, and from which cash flow would be uncertain.

In addition, if at any time a Member converts his Series A Preferred Stock into Common Stock of
the Company, the investor’s Membership Interests in the LLC will automatically revert to the Company
in proportion to the number of shares of Series A Preferred Stock converted by such shareholder. The
Company would then become a non-voting member of the LLC, but would have the same economic
interests in the LLC as the converting former Member. To the extent that a Series A Preferred
Stockholder converts his Preferred Stock into Common Stock prior to the achievement of the Investment
Threshold, then a proportionate amount of his Membership Interest in the LLC would be terminated, and
the Company would, in effect, assume economic ownership of that Membership Interest.

The amount of total proceeds from this offering that is allocated for the purchase of the LIBACSM
Assets includes an amount for the purchase of SPIAs. The SPIAs are designed to pay, among other
things, the estimated premiums on the Policies until those Policies mature. An affiliate of the Manager,
Capital Growth Insurance Services, Inc. (“CGIS”), will receive commissions from the insurance
companies who issue the SPIAs. Another affiliate of the Manager, Capital Life Assets, Inc. (“CLA”),
will earn compensation in connection with the sourcing of Policies to be acquired, which compensation
will be payable to CLA by the LLC as a cost of acquisition. A third affiliate of the Manager, Capital
Administrative Services, Inc. (“CAS”), will be retained by the insured, through the insured’s revocable
trust, to receive the advance from the Master Trust for the SPIA premium and make the SPIA premium
payment to the insurance carrier who will issue the annuity contract. For this service, CAS will charge a
nominal fee of approximately One Hundred Dollars ($100). The Manager will have conflicts of interest
with the LLC and the investors (as Members) because of its affiliation with CGIS, CLA, and CAS. The

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LIBACSM Assets and the LLC are not designed to provide a return to the Members of the time value of
their investment in the Units.

Risk relating to life insurance policies coupled with single premium immediate annuities as security for
this investment.

Each Unit includes a pro rata membership interest in ESP LIBACSM Fund, LLC, a Delaware
limited liability company (the “LLC”). The LLC will use 40% of the gross proceeds from the sale of the
Units to acquire a portfolio (the “LIBACSM Assets”) of life insurance policies, having aggregate death
benefits equal to or more than the gross Offering proceeds, and Single Premium Immediate Annuities
(“SPIAs”), that generate sufficient revenue to pay all the expenses related to the ownership and
maintenance of its assets (each policy coupled with a SPIA using the same measuring life is referred to as
a “LIBACSM Asset”). While the LLC manager, Insured Capital Management, Inc. (“ICM” or the
“Manager”) is confident it will be able to acquire policies with death benefits equal to or more then the
gross Offering proceeds and related SPIAs that generate revenue sufficient to pay all expenses related to
the ownership and maintenance of the LIBACSM Assets, ICM cannot guarantee that current pricing for
senior life settlement policies will not increase or that the premiums to acquire SPIAs will not increase,
which could result in the acquisition of a Portfolio of LIBACSM Assets with less death benefits than the
gross Offering proceeds. As Members of the LLC, holders of ESP’s Series A Preferred Stock will also
have an indirect equity ownership interest in the Portfolio of LIBACSM Assets held by the Master Trust
through their ownership of Membership Interests. ICM is an affiliate of Capital Growth Resources, a
registered member of FINRA and the exclusive placement agent for this offering. The Portfolio of
LIBACSM Assets is designed to eventually return to investors their original investment amount in the
Units if certain conditions are not satisfied, such as ESP’s stock failing to trade at a closing bid price of at
least $1.50 per share for 20 consecutive trading days at any time after six months from the final closing of
the Offering (the “Investment Threshold”). There are several risks associated with the LIBACSM Assets.
First, if the Investment Threshold is achieved, investors’ Membership Interests in the LLC automatically
revert to ESP and become subject to Capital Growth Planning, Inc.’s (“CGP”) right, for 180 days, to
purchase the Membership Interests from ESP for CGP’s own account at the cost incurred by the Master
Trust in acquiring the LIBACSM Assets that exist at the time CGP exercises this right, payable by CGP in
cash. In that case, investors, through their ownership in the Company’s Common Stock, would have no
ownership interest in the LIBACSM Assets. Consequently, investors would lose the potential protection
offered by the LIBACSM Assets once the Investment Threshold occurs, even if the trading price of ESP’s
Common Stock declines after the Investment Threshold is achieved. If CGP does not elect to purchase
the Membership Interests from ESP, then ESP would hold an illiquid asset that may be difficult to sell or
otherwise monetize, and from which cash flow would be uncertain. Investors may convert their Series A
Preferred Stock into ESP’s Common Stock at any time and, subject to compliance with Rule 144 of the
Act, sell their Common Stock in the open market or otherwise. If, however, the trading price of ESP’s
Common Stock declines after the occurrence of the Investment Threshold and investors have not yet sold
it, investors would not necessarily receive $1.50 per share for their stock once they were able to (or they
decided to) sell it. Generally under Rule 144, investors must hold either the Series A Preferred Stock or
underlying Common Stock for at least six months after being issued the Series A Preferred Stock,
provided that ESP is then current in its reporting obligations with the Securities and Exchange
Commission (“SEC”). If we do not remain current in our reporting obligations to the SEC, investors
would not be able to have the restrictive transfer legend removed from their Common Stock until we were
again reporting for a period of at least 12 months. This problem for investors under Rule 144 will cease
to exist if the Common Stock underlying the Series A Preferred Stock is registered pursuant to the
holder’s piggyback registration rights. Attached as Exhibit C to this Memorandum, Registration Rights
Agreement. Furthermore, the Portfolio of LIBACSM Assets consists of Policies with uncertain pay-off
dates, since payment depends on the length of the life of the insureds. Until pay-off, the Policies are
illiquid. Consequently, the date when cash flow would be available from the LLC is uncertain. All net
death benefits upon Policy maturities generated by the LIBACSM Assets prior to the achievement of the

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Investment Threshold would be distributed among the Members (i.e., Series A Preferred Stockholders) on
a pro rata basis. To the extent that a Series A Preferred Stockholder converts his Preferred Stock into
Common Stock prior to the achievement of the Investment Threshold, then a proportionate amount of his
Membership Interest in the LLC would have reverted to ESP, and ESP would assume economic
ownership of that portion of the LIBACSM Assets, subject to CGP’s repurchase right for its own account.
Though unlikely, collection on the LIBACSM Assets from Policy maturities may encounter legal
obstacles, such as refusal of insurance companies to pay death benefits for a variety of legal or technical
reasons. The forty percent (40%) of total proceeds from this offering allocated for the purchase of the
LIBACSM Assets includes funds for the purchase of SPIAs, the revenue from which will pay, among other
things, the estimated premiums on the Policies over the term of those Policies. The LLC will use the
most conservative assumption regarding the amount of insurance premiums needed to maintain Policies
in-force by estimating these premiums based upon an insured living to age 100 or endowment, whichever
is longer, and it will acquire SPIAs that generate revenue intended to be sufficient to pay such future
premiums and anticipated administrative expenses associated with maintaining the LIBACSM Assets. The
LLC will also assume current crediting rates, which are at historic lows, in estimating the costs of future
premium payments to keep Policies in-force. If crediting rates drop, the cost of premiums will increase,
and the SPIA revenue may be insufficient to keep all the of the Policies in the Portfolio of LIBACSM
Assets in-force, in which event the LLC would need to either reduce death benefits for one or more
Policies or liquidate a portion of its Portfolio of LIBACSM Assets to obtain funds with which to keep the
remaining Policies in-force. In such event, investors would lose some of the protection afforded by the
LIBACSM Assets. The Manager believes that it will be able to acquire Policies with death benefits in
excess of the gross offering proceeds such that in the event the LLC had to liquidate some of its Portfolio
of LIBACSM Assets, there would still be Policies with total death benefits at least equal to the gross
offering proceeds. However, there is no guarantee that in such event the value of death benefits would be
equal to or greater than the amount of gross offering proceeds. The Manager will have conflicts of
interest with the LLC and the investors (as members) because it will earn compensation in connection
with the management of the LIBACSM Assets, payable from the SPIA revenue, leaving less money
available for the payment of Policy premiums or to purchase more Policies for greater portfolio coverage.
The Portfolio of LIBACSM Assets is not designed to cover the time value of the investors’ investment in
the Units, since the death benefits from the LIBACSM Assets are not expected to produce cash flow in the
near term, and the expected total pay-off amount is expected to be equal to or slightly more than the
original purchase price of the Units. Consequently, there is no assurance that the LIBACSM Assets will
adequately protect the investors from experiencing a loss of a portion of their investment in the Units.

Lack of Operating History

The Master Trust and the LLC are newly formed entities and have no operating or financial
history upon which prospective investors in the LLC may evaluate the likely performance of the LLC.
There can be no assurance that the LLC or the Trust will achieve its investment objectives. In addition,
there can be no assurance that the LLC or the Master Trust will be able to operate their businesses as
currently expected. Changes in laws and regulations might require the Master Trust and/or the LLC to
alter their respective methods of conducting business.

Limited Experience of the Manager

Insured Capital Management, Inc. (the “Manager”) has never operated an entity or business quite
like the LLC or the Master Trust. The Manager believes that it has the necessary infrastructure in place to
provide the appropriate oversight, compliance and reporting required when managing the LIBACSM
Assets. However, there can be no assurance that the steps taken by the Manager will be adequate.
Moreover, if the Manager has difficulties in providing these services, the Members may not be aware of
any difficulties until a substantial portion of their contribution has been invested by the Master Trust. To
mitigate against this limited experience, the Manager intends to use the services of a National Bank, or a

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subsidiary of a National Bank, licensed as a corporate trustee, to act as the trustee of each revocable trust
and the Master Trust, and it further intends to contract with an experienced policy servicing and tracking
company (a company who has many years of providing policy serving information to owners of settled
policies and many years of tracking the health status and deaths of insureds). Pricing for these services
has been factored into the amount of SPIA revenue estimated to be necessary to pay all related expenses
and costs.

Lack of Member Control Over LLC Policies

The investment, management, and financing policies of the LLC are to be determined by the
Manager. These policies may be changed from time to time at the discretion of the Manager without a
vote of the Members of the LLC. Any policies or policy changes could be detrimental to the Master
Trust, and therefore, to the value of the LLC. Members will have no right to participate in the day to day
operation of the LLC or the Master Trust, including investment and disposition decisions and decisions
regarding Portfolio investments. In addition, the Members will not have the right to remove the Manager
unless the Manager is finally determined to be, in an adjudicated proceeding, grossly negligent or to have
engaged in willful misconduct not in the interest of the LLC. The Members will have no direct influence
over the management of the Master Trust.

Dependence on Key Personnel

Both the Manager and the LLC rely on the management of Capital Growth Planning, Inc. to
successfully manage the affairs of the LLC and the Master Trust. There can be no assurance that some or
all of the individuals who comprise this management team will remain involved in the business, or
otherwise continue to be able to carry on their current duties throughout the term of the LLC and the
Master Trust.

Competition

There is currently very little demand for senior life settlement policies with life expectancies
(“LEs”) in the twelve (12) year to eighteen (18) year range that the Manager plans to pursue. An affiliate
of the Manager, Capital Life Assets, Inc., will earn compensation in connection with sourcing Policies for
acquisition, payable by the LLC as a cost of acquisition. The Manager does not anticipate there will
develop much market demand for these longer LE policies. Should demand increase unexpectedly, there
would likely be unexpected competition with respect to the acquisition of the type of policies the Manager
intends to acquire for the Portfolio of LIBACSM Assets. Thus, there can be no assurance that the Manager
will be able to locate and complete investments which satisfy the Master Trust’s investment objectives.
In such event, the Manager will use its commercially reasonable good faith efforts to use the forty percent
(40%) of gross offering proceeds allocated to the LLC to obtain as much combined insurance policy face
value in the Portfolio of LIBACSM Assets as is reasonably possible in light of such economic conditions.

Liability of the Manager and Indemnification of the Manager

Pursuant to the LLC Agreement, the Manager, its affiliates and their respective officers, directors,
managers, members, shareholders, employees, agents and representatives shall not be liable to the LLC or
to any Member for any act or omission unless the act or omission was one of fraud, willful misfeasance or
gross negligence, as finally determined by a court of competent jurisdiction. In addition, the LLC
Agreement provides that the LLC shall indemnify and hold harmless the Manager and its affiliates and
their respective officers, directors, managers, members, shareholders, employees, agents and
representatives against any loss, liability, damage, cost, expense, judgment reasonably incurred by them,
provided that the conduct of the Manager and its affiliates and their respective officers, directors,
managers, members, shareholders, employees, agents and representatives did not constitute fraud, willful

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misfeasance or gross negligence as finally determined by a court of competent jurisdiction. As a result, a
Member will have only limited rights of action against the Manager and its affiliates and their respective
officers, directors, managers, members, shareholders, employees, agents and representatives.

Manager’s Right to Dissolve the LLC or Expel a Member

The Manager has the right to dissolve the LLC at any time without the written consent of the
Members. Accordingly, there is the risk that the Manager may elect to dissolve the LLC and distribute
the LLC assets. The Manager also has the right to expel or force the withdrawal of a Member at any time,
with or without cause. Such a mandatory withdrawal could result in adverse tax and economic
consequences to such Member. No person will have an obligation to reimburse any portion of a
Member’s loss, whether upon dissolution, forced withdrawal of the Members or otherwise.

Delayed Schedule K-1’s.

The Manager will endeavor to provide a final Schedule K-1 to each Member for any given
calendar year prior to April 15 of the following year. In the event that the final Schedule K-1 is not
available by such date, a Member may have to file an extension and pay taxes based on an estimated
amount and then file his or her return once the final Schedule K-1 is available.

Uncertainty of Life Settlements Market

Policies acquired indirectly by the Master Trust may be over-priced by the Manager and/or may
not be readily saleable in the life settlements or secondary life insurance market if the need should arise
for the liquidation of any of the Policies. The value of a Policy in the life settlements or secondary market
depends significantly on the health and medical condition and life expectancy of the insured, life
expectancy tables then in use by the life settlement industry, and any changes in general economic
conditions, including interest rates, inflation rates, government regulations, overall industry conditions,
competition, political conditions, volatility in the financial markets and legislation at the time the LLC
may seek to sell the Policy. The demand for the purchase, and the liquidity, of in-force Policies are
uncertain, especially with respect to insureds with the longer LEs the Master Trust intends to acquire.
The inability of the Manager to acquire, with the portion of the offering proceeds allocated to it, Policies
with an aggregate face amount equal to or more than the total proceeds raised in the Offering could result
in the inability of the LLC to achieve its objective of providing investors with a return of their principal
invested in the offering in the event that ESP fails to meet its investment objectives and goals.

Insurable Interest Risk

All states require that the initial purchaser of a new life insurance policy insuring the life of an
individual have an insurable interest in such individual’s life at the time of original issuance of the Policy.
Whether an insurable interest exists in the context of the purchase of a life insurance policy is critical
because, in the absence of a valid insurable interest, life insurance policies are unenforceable under most
states’ laws. Where a life insurance policy has been issued to a policy holder without an insurable interest
in the life of the individual who is insured, the insurance company is generally not required to pay the
death benefit under the policy, but must repay to the owner of the policy all premium payments, usually
without interest. Generally, there are two forms of insurable interests in the life of an individual, familial
and financial. Additionally, an individual is deemed to have an insurable interest in his or her own life. It
is the intent of the Master Trust to acquire Policies where the insured has at all times been the sole owner
of that Policy. It is also a common practice for an individual, as a grantor or settlor, to form an
irrevocable life insurance trust (an “ILIT”) to purchase and own a life insurance policy insuring the life of
the grantor or settlor, where the beneficiaries of the ILIT are persons who themselves, by virtue of certain
familial relationships with the grantor or settlor, also have an insurable interest in the life of the insured.

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An insured will generally form the ILIT, which will be the applicant and owner and sole beneficiary of
the Policy, and the sole beneficiary of the ILIT will be an individual with an insurable interest in the life
of the insured. If the Master Trust entertains any transactions with such an ILIT, it will do so only under
circumstances where it has concluded and reasonably believes that the ILIT will have an insurable interest
in the life of the insured of a Policy. Notwithstanding that determination, a state insurance regulatory
authority or a court may determine that the ILIT does not have an insurable interest in the life of the
insured. Any such determination could have a material adverse effect on the ability of the LLC to achieve
its investment objectives.

Premium Increases and Failure to Pay Premiums

For any Policies that may be obtained by the Master Trust, the Master Trust will be responsible
for maintaining the Policies including paying insurance premiums. If a life insurance company is able to
increase the cost of insurance charged for any of the Policies, the amounts required to be paid for
insurance premiums due for these Policies may increase, requiring the Master Trust to incur additional
costs for the Policies, which may adversely affect the secondary market sale value of such Policies.
Failure by the Master Trust to pay premiums on the Policies when due, due to a shortfall in SPIA revenue
or for any other reason, will result in termination or “lapse” of the Policy. If revenue from the SPIAs are
unable to meet increased premium costs, the Manager may cause the death benefits of a Policy or Policies
to be reduced in order to reduce such increased costs or it may attempt to sell some of the Policies in the
secondary market to cover such additional costs. To mitigate against this risk, the LLC will use
conservative assumption regarding the amount of premiums needed to keep Policies in-force by pricing
premiums based upon the insureds living to age 100 or endowment, whichever is longer, and it will
acquire SPIAs that are designed to generate revenue sufficient to pay such future premiums and all
reasonably known administrative expenses associated with maintaining the Portfolio of LIBACSM Assets.
The LLC will also assume current crediting rates, which are at historic lows, in estimating the costs of
future premium payments to keep Policies in-force. If crediting rates drop, the cost of premiums may
increase and the SPIA revenue may be insufficient to keep all the of the Policies in the Portfolio of
LIBACSM Assets in-force, in which event the LLC may need to either reduce death benefits for one or
more Policies or liquidate a portion of its portfolio to obtain funds with which to keep the remaining
Policies in-force. In such an event, investors would lose some of the potential protection intended to be
afforded by the Portfolio of LIBACSM Assets. The Manager currently anticipates that it will be able to
acquire policies with death benefits in excess of the gross offering proceeds such that in the event the
LLC had to liquidate some of its portfolio, there would still be Policies with total death benefits at least
equal to the gross offering proceeds. However, in such event the value of death benefits may be
decreased to an amount below the amount of gross offering proceeds.

Uncertainty of Life Expectancy

The value in the life settlements market of the Policies that may be obtained by the Master Trust
depends upon the life expectancy of the insured under the Policy. Life expectancies are estimates of the
expected longevity or mortality of an insured and are inherently uncertain, especially in small sample
sizes. There can be no assurance that any life expectancy obtained on an insured for a Policy will be
predictive of the future longevity or mortality of the insured. The actual maturity date of the Policies may
therefore be longer than projected, which would negatively impact the time within which investors could
expect to receive a return of their investment from the LLC if the Company is unable to meet its
investment objectives and goals. In addition, improvements in medicine, disease treatment,
pharmaceuticals and other medical and health services may enable insureds to live longer. The business
of rendering life expectancies for individual insureds of Policies in the life settlement market is not
currently regulated by the U.S. federal or state governments except for the State of Florida, which
requires a life expectancy provider to register with the Florida Office of Insurance Regulation. However,
there can be no assurance that this business will not become regulated and, if so, that any such regulation

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would not have a material adverse effect on the ability of a policy servicing company to obtain insureds’
life expectancies (if needed) in connection with the sale of Policies.

Uncertainty as to Mortality Tables and other Actuarial Assumptions

Life expectancies and mortality estimates are inherently uncertain estimates. There can be no
assurance that any mortality table or other actuarial data that could be utilized by the Manager to value a
Policy will be predictive of the future longevity or mortality of an insured of a Policy. To the extent
actuarial assumptions differ from actual results as to the crediting or other assumptions made in
determining the amount of premium payments necessary to maintain a Policy in-force, i.e., crediting rates
drop below there current historical lows for a significant period of time, SPIA revenue may not be
sufficient to pay all of the management fees, premiums due and income taxes due with respect to SPIA
income. To mitigate this risk, the Manager intends to acquire, as available, Policies with a “guaranteed
Rate Illustration.” In addition, to the extent the Master Trust obtains any Policy based on the perceived
life expectancy and such perception is inaccurate, distributions from the maturity of the Policy may be
delayed, and in some cases such delays could be significantly longer than expected. Future mortality
experiences may not resemble the mortality experiences of the past. It is possible for insureds with a
certain life expectancy to experience a different mortality rate in the future than experienced by insureds
with the same traits in the past. Many participants in the life settlement industry use the 2001 Valuation
Basic Table (the “2001 VBT”), a mortality table developed by the American Academy of Actuaries
(“AAA”). There are other proprietary mortality tables which some industry participants use to which the
Fund Manager may not have access. The AAA has updated and revised the 2001 VBT (the “2008
VBT”), which may result in insureds under the Policies having a lower mortality than under the 2001
VBT. Use of the 2008 VBT and or other mortality tables that may be developed may negatively affect
future life expectancies for insureds under Policies. In addition, Fasano Associates, Inc., a life expectancy
provider used by many participants in the life settlement industry, announced in February 2008, its
development of new mortality tables for the over-65 life settlements market. Also, Tillinghast, a major
consulting actuarial services company which is part of Towers Perrin, announced the availability of its
Older Age Mortality Study, which states that it is the largest older age mortality study conducted in the
U.S. for the life insurance industry. In September 2008, 21st Century, another life expectancy provider,
issued its revised mortality tables which generally extended life expectancies.

Concentration and Lack of Diversification of Life Insurance Companies

The LLC intends to diversify the Portfolio of LIBACSM Assets by investing in Policies issued by
a variety of insurance companies with ratings of S&P “A” or better at the time of acquisition and
investing in SPIAs from a variety of insurance carriers with an S&P rating of “AA” or better at the time
of issuance of the SPIA. The ability to achieve diversification with regard to the Portfolio of LIBACSM
Assets depends in part upon the total amount of funds raised in the offering and allocated to the LLC, the
face amount of Policies available for acquisition, the cost of acquiring the Policies and the cost of
acquiring the SPIAs. There can be no assurance that the LLC will be able to achieve sufficient
diversification in its acquisition of the Policies and SPIAs. Accordingly, a significant portion of the
LLC’s capital may be invested in a concentrated pool of Policies issued by a small number of life
insurance companies. The failure to raise sufficient capital or subsequent losses may cause the LLC to
not have sufficient funds to diversify its investments among life insurance companies held in the Portfolio
of LIBACSM Assets. A lack of diversification may affect the timing of the return of the investor’s
invested capital and any additional returns, as well as result in experiencing a loss of a portion of their
investment in the Units in the event of an insurer’s insolvency and a total depletion of the applicable State
Premium Fund by which states attempt to insure against the possibility of an insurer’s insolvency.
Moreover, the LLC may not have adopted fixed guidelines for diversification. Accordingly, the Portfolio
of LIBACSM Assets may be subject to more rapid change in value than would be the case if the LLC were
otherwise to maintain a wide diversification among life insurance companies.

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Credit Risk of Life Insurance Companies

The LLC will assume the credit risk associated with Policies and SPIAs issued by various life
insurance companies. The failure or bankruptcy of any of such life insurance company or annuity
company could have a material adverse impact on the LLC’s ability to achieve its investment objectives.
A life insurance company’s business tends to track general economic and market conditions that are
beyond its control, including extended economic recessions, interest rate changes, the subprime lending
market crisis or changes in investor perceptions regarding the strength of insurers generally and the
Policies or annuities they offer. Adverse economic factors and volatility in the financial markets may
have a material adverse effect on a life insurance or annuity company’s business and credit rating,
financial condition and operating results, and an issuing carrier may default on its obligation to pay death
benefits on Policies or make annuity payments under the SPIAs. In such event, the LLC would look to
the applicable State Premium Fund in place to protect life insurance and annuity owners from such
insolvency. The Manager is unaware of any life insurance death benefit or annuity payment in the United
States not eventually being paid in full to the owner as a result of an insurance carrier’s insolvency.

Life Insurance Company Possibly Failing to Pay or Failing Timely to Pay Death Benefits

A life insurance company may prolong any investigation for processing death claims for Policies
with a large face amount. In such event, the LLC would likely experience a substantial delay in the
payment of the death benefit and the possible denial of the insurance company’s obligation to pay the
death benefit. To mitigate this risk, the LLC intends to acquire only non-contestable Policies for which
the contestability period by the issuing life insurance company has expired.

Some Policies Terminate When the Insured Reaches Age 95 or 100

Investors should also be aware that some insurance policies terminate if the insured lives to the
age of 100, or in some cases at age 95. If the insured outlives the Policy, the LLC would get nothing on
that Policy as the insurer is relieved of its obligation thereunder. Such a Policy termination would result
in a loss of investment return on the Policy and eliminate any potential proceeds realizable by the Master
Trust from the sale or the maturation of the Policy. To mitigate this risk, the Company intends to acquire
Policies where this provision does not exist or the insurer has waived this provision.

Challenges by Former Beneficiaries, Heirs of the Insured and Insurance Companies; Payment of
Policy Proceeds

Persons who would have been the beneficiaries under the Policies in the absence of a sale of the
Policies to the Master Trust, or heirs of the insured, or the life insurance company issuing a Policy may
challenge the validity of the indirect sale of the Policy to the Master Trust and consequently contest, deny
or delay the payment of the proceeds of a Policy following an insured's death, based on a variety of
factors including a lack of insurable interest, mental capacity of the insured, applicable periods of
contestability or suicide provisions. If the death of an insured cannot be verified and no death certificate
can be produced, the issuing life insurance company may not pay the proceeds of a Policy until after the
passage of a statutory period (usually five (5) to seven (7) years) for the presumption of death without
proof. In the event of a lawsuit or claim by heirs or beneficiaries of the insured, the Master Trust would
face the cost of defending such a lawsuit, even if the Master Trust were to prevail on the merits of the
lawsuit. Additional costs and expenses that the Master Trust may incur in connection with such a lawsuit
could adversely affect the LLC.

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Tracking the Insured

Another risk regarding Policies that are obtained by the Master Trust is tracking the location and
health status of the insured. The Manager intends to rely on the ability of an experienced third party
servicing company to collect proceeds from the Policy at the death of the insured. For this reason, such
servicing entity must track and periodically monitor the health and life status of the insured so that when a
Policy reaches maturity (the death of the insured), the servicing entity is aware of the development and
can take action to collect the proceeds due under the relevant Policy. In many states, tracking services
may only be performed by a licensed life settlement provider or licensed settlement broker, or an
authorized representative of such licensee. Any such servicing entity is required periodically to track
insureds to assure that the proceeds collection process is performed in a manner as efficiently as possible.
Also, U.S. federal and state privacy laws may limit the information the servicing entity may receive about
insureds under Policies regarding the insured’s current health status. In addition, other factors, such as an
insured’s or insured’s designated contact’s unwillingness to cooperate with the servicing entity may limit
the information about the insured that the servicing entity may obtain. There can be no assurance that the
whereabouts of an insured may be determined or that there may not be a delay in ascertaining that an
insured has passed away, or in obtaining required documentation needed to claim the death benefits
payable under the Policy.

NAIC Viatical Settlements Model Act

Industry groups, including the National Association of Insurance Commissioners (“NAIC”) and
the North American Securities Administrators Association (“NASAA”), perceived there to be an industry
regulatory void and passed the NAIC Viatical Settlements Model Act and subsequent Guidelines
Regarding Viatical Investments to protect seniors from over-reaching by less than scrupulous life
settlement brokers and providers. In addition to the states which adopt the NASAA guidelines, other
states who license insurance purchases follow many of the provisions of the NAIC Viatical Settlements
Model Act. Most states regulate life settlements through their insurance departments and or securities
administrators.

The NAIC Viatical Settlements Model Act was developed by the NAIC to encourage states to
adopt uniform standards to regulate the life settlements industry. A number of states have adopted the
NAIC Viatical Settlements Model Act and others have implemented certain provisions of the NAIC
Viatical Settlements Model Act in the regulations they have enacted. Accordingly, a generic form of life
settlement contract, which includes much of the NAIC Viatical Settlements Model Act, has been
developed for the industry.

Certain regulated states have enacted statutes or adopted or proposed regulations that establish
minimum purchase prices to be paid for viatical settlements according to the insured’s life expectancy.
Viatical settlements in this context are those generally where the insured has a life expectancy of less than
two years and is terminally ill. The LLC has no intention of buying such viatical settlements.

On June 4, 2007, the NAIC approved amendments to the NAIC Viatical Settlements Model Act
(the “Amended NAIC Viatical Settlements Model Act”) which are principally designed to deter non-
recourse financing of newly issued life insurance policies and life insurance policies which may have a
propensity to be sold in the life settlements market. The approved amendments negatively impact certain
life settlement transactions. Specifically, they (a) expand from two years to five years the prohibition on
the life settlement of a life insurance policy following issuance except under certain narrowly defined
circumstances, (b) expand the definition of a life settlement to encompass some life insurance policies
that are subject to certain types of financing arrangements, (c) impose greater disclosure requirements to
viators and insurers, (d) address conflict of interest situations, and (e) impose additional advertising
constraints. Iowa, Nebraska, North Dakota, Ohio, Oklahoma and West Virginia are among the first states

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to enact the Amended NAIC Viatical Settlements Model Act and other states may follow suit in 2008,
which may impact the market for the Policies and have a material adverse effect on the LLC. The LLC
intends to acquire Policies from insureds that reside in unregulated states. In regulated states, the LLC
intends to acquire Policies only through properly licensed life settlement providers. The LLC will itself
not become a licensed life settlement provider under the laws of any state.

NCOIL Life Settlements Model Act

On November 17, 2007, the National Conference of Insurance Legislators (“NCOIL”) adopted
amendments to its Life Settlements Model Act (the “Amended NCOIL Life Settlements Model Act”).
Among other restrictions and regulations, the Amended NCOIL Life Settlements Model Act includes a
definition of “STOLI” which is defined as a practice or plan to initiate a life insurance policy for a third-
party investor who, at the time of policy origination, has no insurable interest in the person insured under
the policy. Other noteworthy amendments include a two-year moratorium on settlement and a
recommendation that states amend their insurable interest laws, if necessary, to prevent the use of trusts to
benefit investors without insurable interest. Arizona, Connecticut, Hawaii, Indiana, Kansas, Kentucky,
Maine, Nebraska and West Virginia have adopted settlement statutes which are a hybrid of both the
Amended NAIC Viatical Settlements Model Act and the NCOIL Life Settlements Model Act. They are
among the first states to adopt the Amended NCOIL Life Settlements Model Act and further adoption by
other states may impact the life settlement markets. To mitigate risks associates with the so-called STOLI
policies, the LLC does not intend to acquire any Policies, the premiums for which have been financed
under a program not approved by the issuing life insurance company.

Privacy Laws and Other Factors May Limit the Information the Fund Manager May Receive
About an Insured

U.S. federal and state privacy laws may limit the information the Master Trust receives about the
persons insured under the Policies, such as the insured’s current health or medical condition. In addition,
other factors, such as an insured’s unwillingness to cooperate, may limit the information about the insured
that the Fund Manager may obtain after it obtains a Policy.

Certain Litigation Risks

The life settlements industry has been tainted by allegations of fraud and misconduct as illustrated
by several noteworthy litigations which have focused the spotlight on this burgeoning industry. Many of
those cases, some of which have been commenced by regulatory authorities, involve allegations of fraud,
breaches of fiduciary duty, bid-rigging, non-disclosure of material facts and associated misconduct in life
settlement transactions. Many of the cases are also by the life insurance companies that attack the
original issuance of the policies on insurable interest and fraud grounds. To mitigate this risk, the LLC
intends to acquire only non-contestable policies.

Speculative Investments

The Master Trust’s Portfolio may be deemed highly speculative. No assurance can be given that
the Portfolio will successfully achieve the objectives of the Master Trust. There is no assurance that the
Master Trust’s operations will result in net death benefits equal to the Members’ investment in the
offering. In the event that the Master Trust’s plans are unsuccessful, an investor in the LLC may lose all
or a substantial part of his investment. For these and other reasons, the investment in the LLC must be
considered a highly speculative investment.

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Market Conditions

As with many investments, changes in economic conditions, including interest rates, inflation
rates, government regulations, overall industry conditions, competition, political conditions and
legislation can have a substantial adverse affect on the Policies and SPIAs in which the Master Trust
invests.

Limited Liquidity

The Master Trust intends to invest substantially all of its available capital in LIBACSM Assets,
which are relatively illiquid investments. In the event of extreme market activity, the Master Trust may
not be able to liquidate its investments in a prompt manner, which could thereby reduce the Master
Trust’s ability to protect its assets and achieve its goal of providing investors with a means of obtaining a
return of invested principal in the event ESP fails to achieve its goals.

Reliance on Death Benefits and Marketability of Policies for Liquidity

The LLC’s liquidity will be dependent upon, among other things, the unpredictable timing of
payments to the LLC upon the deaths of insureds under Policies indirectly owned by the LLC, and the
secondary market value of any Policies in the event that the Manager determines it is in the best interest
of the LLC to sell one or more of the Policies. The LLC intends to monitor the status of its Policies
continually and to reduce death benefits payable or institute liquidation efforts promptly if there is a
shortfall in SPIA revenue with which to make premium payments on the acquired Policies. Liquidation
of the LLC’s positions in Policies may be affected by market conditions, so there is no assurance that the
LLC will be able successfully to liquidate the desired amount of the Policies in order to meet any
premium shortfall.

An Insured May Misappropriate the Funds Advanced to the Insured and Intended to Pay for the
Purchase of the SPIA and Then the Insured May Not Deliver the Policy or the SPIA to the Master
Trust

The program is designed to provide funds to the insured so that, in addition to the LLC providing
funds to the insured to indirectly acquire the insured’s Policy, the insured will purchase a SPIA and
deliver that SPIA and the Policy, indirectly, to the Master Trust. Although the Manager intends to
implement controls, as described below, an insured may default on his or her contractual obligation to
contribute the SPIA and the Policy or to consummate the transaction pursuant to which he or she has
agreed to transfer, indirectly, the Policy and SPIA to the Master Trust. In that event, the LLC would be
required to institute litigation to either recover the funds advanced to the insured or to require the insured
to comply with his or her obligations. Such litigation would be costly to the LLC, and the expenses of
such litigation might not be collectable from the insured. To mitigate this risk, the Master Trust will
require the insured, through his or her revocable trust, to retain Capital Administrative Services, Inc., an
affiliate of the Manager, to receive and hold the advance for the SPIA premium and process the SPIA
application and premium with the insurance carrier who will issue the SPIA.

No Regular Distributions Anticipated

Other than quarterly distributions to cover the income taxes due on a portion of the SPIA
proceeds (based upon the current maximum individual federal income tax rate), the Manager does not
intend to make distributions to Members on a regularly scheduled basis, and the Manager reserves the
right to make distributions in its sole and absolute discretion. The Master Trust is required to distribute
net death benefits to the LLC as soon as practicable upon receipt of such proceeds. The LLC intends to
then distribute such proceeds to its Members. However, although the Manager intends to price the

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acquisition of Policies such that the SPIA proceeds will cover all management fees, premium costs, and
income taxes due on SPIA income, the Manager may decide not to distribute to the Members all or some
portion of any death benefit in order to meet unexpected LLC expenses.

Illiquid Investments

Because of the limitation on withdrawal rights and the fact that the Membership Interests are not
tradable or freely transferable, an investment in the LLC is an illiquid investment. An investment in the
LLC should be considered only by investors financially able to maintain their investment.

Withdrawal of Capital

A Member may not withdraw any of its investment in the LLC. The Manager does not intend to
liquidate assets of the LLC to fund withdrawals, if any.

Restrictions on Transfer

The Membership Interests have not been registered under the Securities Act or under any state
securities or blue sky laws or the securities laws of any other jurisdiction and are being issued and sold in
reliance upon exemptions from registration provided by such laws. No Membership Interest may be sold
or transferred unless such sale or transfer (i) is exempt from the registration requirements of the Securities
Act and applicable state securities laws, (ii) will not constitute or result in a prohibited transaction under
ERISA or Section 4975 of the Code, and (iii) does not cause the LLC to become subject to the
registration requirements of the Investment Company Act. The LLC will not provide registration rights
to any purchaser of the Membership Interests, and neither the LLC nor any other person may or is
obligated to register the Membership Interests for resale under the Securities Act or any state securities or
blue sky laws.

Reduction of Death Benefits or Sale of Policies by the Master Trust

The Master Trust intends to hold Policies in the Portfolio of LIBACSM Assets until each Policy
matures. However, circumstances may arise with respect to which the Manager determines that it is in
the best interest of the LLC and Master Trust that a death benefit payable under a Policy or Policies be
reduced or that a Policy or Policies be liquidated in the secondary life settlement market. Such a
decision may result in the LLC not achieving its business and other objectives.

Delay in Acquiring Life Settlement Policies.

As proceeds of the offering become available to the Manager for investing in the Master Trust,
the Master Trust will indirectly purchase the Policies in accordance with the Master Trust’s investment
program. The Master Trust will work promptly toward acquiring Policies to satisfy its investment
requirements. However, the Master Trust’s exact timing of acquisition of Policies cannot be predicted
with certainty. Delays in acquiring Policies could, in turn, result in delays, and in turn, negatively impact
the ability of the Master Trust to return the gross investment proceeds to the Members.

Limited Regulatory Oversight

Neither the LLC nor the Master Trust intend to register as an Investment Company under the
Investment Company Act of 1940, as amended (the “Investment Company Act”). The Investment
Company Act, among other things, requires investment companies to have disinterested directors,
requires securities held in custody at all times to be individually segregated from the securities of any
other person and marked to clearly identify such securities as the property of such investment company,

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and regulates the relationship between the investment adviser and the investment company. Therefore,
the Members will not benefit from protections provided by the Investment Company Act. In addition,
neither the Manager nor its principals are registered investment advisors under the Investment Advisors
Act of 1940.

Compliance with Federal and State Securities Laws

The federal securities laws may apply to life settlements. In addition, some states treat the sale of
life settlements as the sale of securities and require registration in such states. Almost all state securities
regulators have begun to regulate the sale of interests in life settlements as the sale of securities. Some
state securities regulators have taken the position that the sale of an interest in a life settlement is an
“investment contract” that falls within the definition of a “security” under state securities acts. Some state
legislatures have amended state securities acts to specifically add viatical and life settlement contracts to
the definition of a “security”. Accordingly, the Master Trust’s failure to comply with applicable federal
or state securities laws may have a material adverse impact on the Master Trust, and ultimately, the LLC.
Securities regulators may impose civil fines or penalties against the Master Trust and, under certain
circumstances, may require it to make a rescission offer to some or all of the investors. As a result, the
Master Trust’s and the LLC’s financial position could be materially adversely affected. The Policies may
be deemed to be securities for purposes of federal and state securities statutes. However, because the
LLC or the Master Trust will be acquiring the Policies, the LLC believes that such laws will have little
impact on the purchase of the Policies by the Master Trust. Nevertheless, security law regulators or the
sellers of the Policies may challenge that assumption. The Manager intends to monitor federal and state
laws and regulations and changes in such federal and state laws and regulations through the appointment
of outside legal advisers.

Change in Applicable Laws

The activities of the Master Trust and the LLC are subject to compliance with various legal
requirements, including requirements imposed by the federal and state tax laws and insurance laws and
regulations. Changes in such statutes, laws and regulations may result in material changes to the legal
requirements to which the LLC and its Members and the Master Trust may be subject and may impede
the Master Trust’s implementation of its investment strategy. See “RISK FACTORS – Risk Related to
ESP LIBACSM Fund, LLC, the Master Trust and the Portfolio of LIBACsm Assets – NAIC Viatical
Settlements Model Act and NCOIL Life Settlements Model Act.”

Risks Relating to Taxes

The LLC will not seek rulings from the Internal Revenue Service (“IRS”) with respect to any of
the federal income tax considerations related to transactions contemplated by the Master Trust or
investments in the LLC. Thus, positions to be taken by the LLC as to tax consequences could differ from
positions taken by the IRS. The tax aspects relating to the operation of the LLC and allocations and
distributions to its Members are complex. Each potential Member should review the tax considerations
with a professional adviser that is familiar with such potential Member’s tax situation and with the
specific tax laws and regulations applicable to the potential Member and the LLC. Any potential investor
that is a tax-exempt organization or entity (including but not limited to an individual retirement account)
may be subject to different laws and regulations than non-exempt taxpayers. All prospective investors
should consult with their own professional adviser as to the advisability and tax consequences of an
investment in the LLC. Some of the income generated by the LLC may be unrelated business taxable
income to Members which are tax-exempt entities, in which case LLC income would be taxable for such
entities, notwithstanding their otherwise tax exempt status. Please see the discussion under the heading
Certain Federal Income Tax Considerations, Membership Interests.

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Risks Relating to ERISA

A fiduciary of a pension, profit-sharing, retirement or employee benefit plan subject to ERISA,


and a collective investment fund, separate account or other account in which such plans invest and which
is deemed to be investing on behalf of such plans (“ERISA Plans”), must comply with the fiduciary
responsibility requirements of ERISA. Accordingly, such investment must satisfy the prudence and
diversification requirements of Section 404(a) (1) (B) and (C) of ERISA and must be in accordance with
the documents and instruments governing the plan as required by Section 404(a) (1) (D) of ERISA. A
failure to comply with such requirements could result in personal liability to the plan fiduciary. If the
assets of the LLC were to be deemed to be “plan assets” (i) the prudence, diversification, exclusive
benefit and other requirements of ERISA, which are generally applicable to investments by ERISA Plans
and impose liability on fiduciaries, would extend to investments made by the LLC; (ii) persons exercising
discretion for the investments of assets of ERISA Plans in the LLC will be liable under ERISA for
investments that do not conform to ERISA standards; and (iii) certain transactions that the LLC might
otherwise enter into might constitute “prohibited transactions” which might have to be rescinded and,
even if not rescinded, could result in the imposition of excise taxes. Moreover, other issues such as
improper delegation of fiduciary responsibility and possible self-dealing might arise in the event the
assets of the LLC were deemed to be “plan assets.”

Activities of the Manager and the Trustee of the Master Trust

The Manager, the Trustee of the Master Trust and their respective affiliates are not required to
manage the LLC or the Master Trust as their sole and exclusive function (collectively, the “Managing
Parties”). The Managing Parties are only required to devote such time as they may deem necessary to
accomplish the purposes of the LLC and the Master Trust, as the case may be. The Managing Parties and
their respective affiliates may engage in other business activities, including the formation of and
participation in other investment vehicles engaged in a business similar to that of the LLC or the Master
Trust. In addition, the Managing Parties may engage in a variety of investments, including engaging in
investments for their personal accounts, as well as other entities and accounts, serving on various boards
and committees or advisory firms. Such other entities or accounts may have investment objectives similar
to or different from those of the LLC or the Master Trust. As a result, conflicts of interest may arise with
respect to allocation of resources, time and investment opportunities between the LLC and the other
entities or accounts.

Transactions with Affiliates of the Manager

The Managing Member of the ESP LIBACSM Fund, LLC, is Insured Capital Management, Inc.
(“ICM” or “Manager”). The Manager will use the services of its affiliate, Capital Growth Insurance
Services, Inc., to place the SPIAs, who will receive commissions for the insurance companies which issue
the SPIAs. Capital Life Assets, Inc., another affiliate of the Manager, will source Polices for acquisition
and will be receive a fee as part of the cost of acquisition, not to exceed two percent (2%) of the face
value of the Policy so acquired. The Placement Agent for the offering, Capital Growth Resources, is an
affiliate of the Manager. It will receive commissions from the proceeds of the offering for its placement
agent services. The Master Trust will require the insured, through his or her revocable trust, to retain
Capital Administrative Services, Inc., also an affiliate of the Manager, to receive the advance for the SPIA
premium and process the SPIA application and premium with the insurance carrier who will issue the
SPIA. In addition, the LLC and the Master Trust may, from time to time, enter into ordinary course
transactions with affiliates of the Manager. The Manager intends that all such transactions will be carried
out on an arms’ length basis on terms no less favorable to the LLC or the Master Trust than those which
would have been obtained from independent third parties.

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Need for Independent Investment Analysis and Due Diligence Review

No independent legal, accounting or business advisors have been appointed by the LLC to
represent the interests of the potential Members in connection with this offering. Neither the Manager nor
any of its officers, directors, members, managers, employees or agents, has made, intends to have made or
makes hereby or otherwise any representation or expresses or intends to express any opinion with respect
to the merits of an investment in the LLC. The potential Members are therefore requested and
encouraged to engage independent accountants, appraisers, attorneys, medical advisers, actuaries and
other advisors to (i) conduct such due diligence investigation, research and review as they may deem
necessary or advisable, and (ii) provide such opinions with respect to the merits of an investment in the
LLC to be offered hereby and applicable risk factors as they may deem necessary or advisable on which
to rely. The Manager will fully cooperate with each potential investor in conducting such an independent
analysis, so long as the Manager can determine, in its reasonable discretion, that such cooperation is not
unduly burdensome. Each potential investor acknowledges that it has been informed and understands that
the Manager’s legal counsel with respect to this arrangement has not “expertized” any portion of this
Memorandum or any other document.

THE FOREGOING LIST OF RISK FACTORS DOES NOT PURPORT TO BE EXHAUSTIVE


OR A COMPLETE EXPLANATION OF THE RISKS INVOLVED IN INVESTING IN THE
MEMBERSHIP INTERESTS.

DESCRIPTION OF SECURITIES

General

Our authorized capital stock consists of 100,000,000 shares of Common Stock, par value $0.001
per share, of which approximately 56,239,259 shares are issued and outstanding as of October 1, 2008.
We also have 1,000,000 shares of Preferred Stock, par value $0.01 per share, authorized as part of our
capital stock, of which a maximum of 1,000,000 may be issued and outstanding upon the issuance of all
shares of Series A Preferred Stock being offered by the Company in this offering.

Common Stock

The holders of our Common Stock are entitled to one vote per share held of record on all matters
submitted to a vote of shareholders. The holders of Common Stock do not have cumulative voting rights
in the election of directors. Accordingly, the holders of a majority of the outstanding shares of Common
Stock entitled to vote in any election of directors may elect all of the directors standing for election.
Subject to preferential rights with respect to any series of preferred stock that may be issued, holders of
the Common Stock are entitled to receive ratably such dividends as may be declared by the board of
directors on the Common Stock out of funds legally available therefore and, in the event of a liquidation,
dissolution or winding-up of our affairs, are entitled to share equally and ratably in all of our remaining
assets and funds.

Series A Preferred Stock

We are authorized to issue 1,000,000 shares of Preferred Stock, par value $0.01 per share, of
which 1,000,000 shares have been designated Series A Preferred Stock. No shares of preferred stock
have been issued as of October 1, 2008.

Voting Rights. The Series A Preferred Stock has no voting rights. Shares of Series A Preferred
Stock converted into shares of Common Stock will have the same voting rights as other Common Stock.

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Dividends. The Series A Preferred Stock will participate with the Common Stock on an as-
converted basis with respect to any dividends which may be declared by the Board of Directors.

Conversion. Each share of Series A Preferred Stock is convertible at the option of the holder at
any time after issuance into 17.24 shares of Common Stock, subject to adjustment from time to time in
the event (i) the Company subdivides or combines its outstanding Common Stock into a greater or
smaller number of shares, including stock splits and stock dividends; or (ii) of a reorganization or
reclassification of the Company’s Common Stock, the consolidation or merger of the Company with or
into another company, the sale, conveyance or other transfer of substantially all of the Company’s assets
to another corporation or other similar event, whereby securities or other assets are issuable or
distributable to the holders of the outstanding Common Stock of the Company upon the occurrence of any
such event; or (iii) of the issuance by the Company to the holders of its Common Stock of securities
convertible into, or exchangeable for, such shares of Common Stock. Fractional shares of Common
Stock on a conversion are rounded down to the nearest whole number. The Company does not have any
right to require a conversion of the Series A Preferred Stock into Common Stock.

Automatic Conversion. Each share of Series A Preferred Stock will automatically convert into
17.24 shares of our Common Stock at any time after six months from the termination date of this offering,
once our Common Stock has, after such six month period, traded at a closing bid price of $1.50 per share
or more for a period of 20 consecutive trading days. The number of shares of our Common Stock
issuable upon an automatic conversion of the Series A Preferred Stock will be adjusted proportionately in
the event of stock splits, stock dividends and similar events. Fractional shares of Common Stock on a
conversion are rounded down to the nearest whole number.

Redemption. The Series A Preferred Stock is not redeemable by either the holder of the stock or
the Company unless mutually agreed in writing by the holder and the Company.

Preemptive Rights. A holder of the Series A Preferred Stock has no preemptive rights to
subscribe for any additional shares of any class of stock of the Company or for any issue of bonds, notes
or other securities convertible into any class of stock of the Company.

Liquidation Preference. In the event of a liquidation, dissolution or winding-up of the Company,


whether voluntary or otherwise, after payment of the debts and other liabilities of the Company, the
holders of the Series A Preferred Stock will be entitled to receive from the remaining net assets of the
Company, before any distribution to the holders of the Common Stock, the amount of $10.00 per share in
cash. Holders of the Series A Preferred Stock will not be entitled to receive any other payments upon
liquidation.

Stock and Incentive Plans

On or about April 28, 2008, the Board of Directors of ESP approved the 2008 ESP Stock and
Incentive Plan (the “2008 Plan”) for directors, officers, employees, and consultants to ESP. We anticipate
that our shareholders will ratify the 2008 on or before April 28, 2009. As of October 1, 2008, we had
outstanding options under the 2008 Plan to purchase approximately 800,000 shares of our Common
Stock, with a weighted average exercise price of $0.10 per share.

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Warrants

Bridge Loan and Short Term Loan Warrants

From June 2007 to April 2008, we issued a total of 642,420 warrants to purchase 642,420 shares
of our Common Stock pursuant to bridge loan agreements, of which 275,000 are exercisable for five years
from the date of issuance at an exercise price of $0.01 per share, and 367,420 are exercisable for three
years from the date of issuance at an exercise price of $1.50 per share. Each warrant contains provisions
for the adjustment of the exercise price and the aggregate number of shares issuable upon the exercise of
the warrant under certain circumstances, including stock dividends, stock splits, reorganizations,
reclassifications, and consolidations.

From October 2007 to May 2008 we issued a total of 1,886,206 warrants to purchase 1,886,206
shares of our Common Stock pursuant to short term loan agreements, of which 850,000 are exercisable
for three years from the date of issuance at an exercise price of $0.17 per share, 500,000 are exercisable
for three years from the date of issuance at an exercise price of $0.25 per share, 436,206 are exercisable
for three years from the date of issuance at an exercise price of $0.58 per share, and 100,000 are
exercisable for three years from the date of issuance at an exercise price of $0.75 per share. Each warrant
contains provisions for the adjustment of the exercise price and the aggregate number of shares issuable
upon the exercise of the warrant under certain circumstances, including stock dividends, stock splits,
reorganizations, reclassifications, and consolidations.

Private Placement Warrants

As part of a private placement of our Common Stock in August 2008, we issued a total of
2,586,208 warrants to purchase 2,586,208 shares of our Common Stock exercisable for a period of three
years at an exercise price of $0.75 per share and 1,293,104 warrants to purchase 1,293,104 shares of our
Common Stock exercisable for a period of three years at an exercise price of $0.25 per share. Each
warrant contains provisions for the adjustment of the exercise price and the aggregate number of shares
issuable upon the exercise of the warrant under certain circumstances, including stock dividends, stock
splits, reorganizations, reclassifications, and consolidations.

As part of a private placement of our Common Stock in August 2008, we issued a total of
112,069 warrants to purchase 112,069 shares of our Common Stock. Each warrant entitles the holder to
purchase shares of our Common Stock with an exercise price of $0.75 per share at any time for a period
of three years from the date of issuance. Each warrant contains provisions for the adjustment of the
exercise price and the aggregate number of shares issuable upon the exercise of the warrant under certain
circumstances, including stock dividends, stock splits, reorganizations, reclassifications, and
consolidations.

As part of the business combination we closed in October 2006, we issued a total of 604,221
warrants to purchase 604,221 shares of our Common Stock in exchange for 604,221 warrants previously
issued by our former wholly owned subsidiary to investors who participated in a private placement by our
former wholly owned subsidiary which commenced on May 1, 2006. Each warrant entitles the holder to
purchase shares of our Common Stock with an exercise price of $0.75 per share at any time for a period
of five years from the date of issuance. Each warrant contains provisions for the adjustment of the
exercise price and the aggregate number of shares issuable upon the exercise of the warrant under certain
circumstances, including stock dividends, stock splits, reorganizations, reclassifications, and
consolidations.

As part of the business combination we closed in October 2006, we issued a total of 560,346
warrants to purchase 560,346 shares of our Common Stock in exchange for 560,346 warrants previously

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issued by our former wholly owned subsidiary to investors who participated in a private placement by our
former wholly owned subsidiary which commenced on May 15, 2006. Each warrant entitles the holder to
purchase shares of our Common Stock with an exercise price of $0.75 per share at any time for a period
of five years from the date of issuance. Each warrant contains provisions for the adjustment of the
exercise price and the aggregate number of shares issuable upon the exercise of the warrant under certain
circumstances, including stock dividends, stock splits, reorganizations, reclassifications, and
consolidations.

As part of the business combination we closed in October 2006, we issued a total of 370,000
warrants to purchase 370,000 shares of our Common Stock in exchange for 370,000 warrants previously
issued by our former wholly owned subsidiary to investors who participated in a private placement by our
former wholly owned subsidiary which commenced on May 15, 2006. Each warrant entitles the holder to
purchase shares of our Common Stock with an exercise price of $1.50 per share at any time for a period
of five years from the date of issuance. Each warrant contains provisions for the adjustment of the
exercise price and the aggregate number of shares issuable upon the exercise of the warrant under certain
circumstances, including stock dividends, stock splits, reorganizations, reclassifications, and
consolidations.

Management and Service Warrants

In November 2006, we issued a total of 4,050,000 warrants to purchase 4,050,000 shares of our
Common Stock to management. Each warrant entitles the holder to purchase shares of our Common
Stock with an exercise price of $0.75 per share at any time for a period of five years from the date of
issuance. Each warrant contains provisions for the adjustment of the exercise price and the aggregate
number of shares issuable upon the exercise of the warrant under certain circumstances, including stock
dividends, stock splits, reorganizations, reclassifications, and consolidations.

From April 2007 to June 2008, we issued a total of 4,539,444 warrants to purchase 4,539,444
shares of our Common Stock to service providers, of which 350,000 are exercisable for five years from
the date of issuance at an exercise price of $0.01 per share, 350,000 are exercisable for five years from the
date of issuance at an exercise price of $0.17 per share, 300,000 are exercisable for three years from the
date of issuance at an exercise price of $0.17 per share, 1,561,244 are exercisable for three years from the
date of issuance at an exercise price of $0.25 per share, 300,000 are exercisable for three years from the
date of issuance at an exercise price of $0.58 per share, 1,553,200 are exercisable for three years from the
date of issuance at an exercise price of $0.75 per share, 125,000 are exercisable for three years from the
date of issuance at an exercise price of $1.25 per share. Each warrant contains provisions for the
adjustment of the exercise price and the aggregate number of shares issuable upon the exercise of the
warrant under certain circumstances, including stock dividends, stock splits, reorganizations,
reclassifications, and consolidations.

Acquisition Warrants

In February 2007, we issued 250,000 warrants to purchase 250,000 shares of our Common Stock
in conjunction with our acquisition of 100% of the outstanding stock of Allstate Home Inspection &
Environmental Testing, Ltd. These warrants are exercisable for five years from the date of issuance at an
exercise price of $0.75 per share.

Effect of the California Corporations Code

The California Corporations Code includes provisions designed to apply certain aspects of
California law to corporations organized outside California where, in general, such corporations are doing
more than 50% of their business in California and have more than 50% of their outstanding voting

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securities held of record by persons residing in California (the “California Test”). These provisions,
which are generally more restrictive than their counterparts under Nevada law, currently apply to ESP.

Among the provisions of the California law which will apply are limitations on corporate
dividends and other distributions and rights of stockholders to cumulate votes in the election of directors.
Numerous other provisions which are listed in Section 2115 of the California General Corporation Law
could also apply. In some cases, these provisions are in conflict with the laws of Nevada. The following
summarizes some of the principal differences which could apply to ESP:

Under both Nevada and California law, cumulative voting for the election of directors is
permitted. However, under Nevada law cumulative voting must be expressly authorized in the Certificate
of Incorporation. Both Nevada and California law allow a classified Board of Directors, however,
Nevada law requires that it be authorized in the Certificate of Incorporation or the Bylaws. California law
does not permit staggered classes for smaller corporations, such as ESP, and directors must be elected at
each annual meeting of stockholders. Under Nevada law, the Certificate of Incorporation or Bylaws may
limit the removal of directors for cause only, while under California law, stockholders may remove
directors without cause. Pursuant to Nevada law, the directors may amend the Bylaws to change the
number of authorized directors. Under California law, subject to limited circumstances, any amendment
to the Bylaws changing the number of authorized directors requires stockholder approval.

Under Nevada law, a director is obligated to discharge his or her duties in good faith and to
inform himself or herself about all material information reasonably available to him or her before making
a business decision. Pursuant to California law, a director is obligated to discharge his or her duties in
good faith, and to exercise such care, including reasonable inquiry, as an ordinarily prudent person in a
similar position would use under similar circumstances. Whereas California law specifically prohibits a
corporation from limiting or eliminating a director’s liability for reckless disregard or abdication of these
duties, Nevada Law contains no such prohibition.

California law also requires stockholder approval for certain sale-of-assets and stock-for-stock
reorganizations, whereas Nevada law does not require such approval. Nevada law permits the payment of
dividends from paid-in and earned surplus or redemption of shares from earned, paid-in or reduction
surplus. Under California law, any such distributions cannot be made unless retained earnings equals or
exceeds the amount of the distributions, if, after giving effect to the distribution, the corporation’s
tangible assets are less than 125% of its liabilities, the corporation’s current liabilities exceed its current
assets, the corporation’s average operating income for the two most recently completed fiscal years is less
than 125% of its current liabilities, or the corporation would be unable to meet its liabilities as they
mature.

At such time as ESP has any class of securities listed on the New York Stock Exchange or the
American Stock Exchange, or approved for inclusion on the Nasdaq National Market System, and ESP
has at least 800 holders of its equity securities, or ESP no longer satisfies each of the elements of the
California Test, we will be exempt from the provisions of Section 2115. No assurance can be given that
ESP will ever satisfy any exemption from Section 2115.

SUMMARY OF THE ESP LIBACSM FUND, LLC LIMITED LIABILITY COMPANY


AGREEMENT

The following sets forth a summary of the terms of the LLC’s Limited Liability Company
Agreement (the “Operating Agreement”), which governs the operations of ESP LIBACSM Fund, LLC (the
“LLC”) and the terms of its membership interests (the “Membership Interests”) which underlie the Units
purchased pursuant to this offering. This summary does not contain all of the information that a
prospective investor may deem important to his, her or its investment in the Membership Interests

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underlying the Units. As each investor purchasing Units pursuant to this offering will be deemed to have
executed the Operating Agreement by executing the Subscription Agreement, a prospective investor
should carefully review the terms of the Operating Agreement, a copy of which has been included as
Exhibit D to this Memorandum.

General

The LLC is organized as a Delaware limited liability company pursuant to the Operating
Agreement, in accordance with the laws of the State of Delaware (the “Delaware Act”).

Membership Status

The sale of Membership Interests to a prospective investor pursuant to this offering will be
deemed to have occurred upon the acceptance of an investor’s subscription by the LLC. Once ESP
accepts an investor’s subscription, such investor will become a Member of the LLC and will have all of
the rights and obligations of a Member in the LLC, as set forth in the Operating Agreement. Members
will not have any authority to act on behalf of the LLC solely in their capacity as Members.

The Company will be admitted into the LLC as a non-economic member (the “Special Member”).
The Special Member will not, until a Member converts his or her Shares to Common Stock or
achievement of the Investment Threshold, as defined below, (i) have a right to participate in or receive
distributions from the LLC; or (ii) enjoy any voting or economic rights of a Member (except that, if the
Company becomes a Member because an investor in the Units converts his or her Shares to Common
Stock, the Company will not enjoy any voting rights).

Restrictions on Transfer

The Membership Interests will not be registered under the Securities Act of 1933, as amended
(the “Securities Act”) or any equivalent state securities law. The Operating Agreement permits the
transfer of the Membership Interests to the Special Member upon the occurrence of the Threshold or upon
a conversion from the voluntary conversion of Shares to Common Stock, and otherwise only when it is
approved by the Manager of the LLC in its sole and absolute discretion.

Withdrawal

Other than upon the conversion of his or her Shares into Common Stock, no Member may
voluntarily withdraw or resign from the Company without the prior written consent of the Manager,
which consent may be withheld or conditioned in the sole and absolute discretion of the Manager. Any
purported transfer of all or any portion of the Membership Interests in violation of the terms of the
Operating Agreement shall be void and have no force or effect.

Investment Threshold

If certain events occur, such as the investor’s voluntary conversion of the Shares into the
Common Stock or if the Common Stock trades at a closing bid price of at least $1.50 per share for twenty
(20) consecutive trading days at any time six months after the final closing date of this offering (the
“Investment Threshold”), resulting in an involuntary conversion, the investors’ Membership Interests in
the LLC will revert to the Company as the Special Member. When the Investment Threshold occurs, all
Membership Interests revert to the Company and the Company will own 100% of the Membership
Interests.

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Management

The LLC will be managed by Insured Capital Management, Inc., a wholly-owned subsidiary of
Capital Growth Planning, Inc., who will be a non-member manager (the “Manager”). The Manager will
serve until resignation or until it is removed and replaced by the affirmative vote of the Members holding
eighty percent (80%) of the Membership Interests (the “Supermajority Vote”), in the event the Manager
(a) commits fraud or dishonesty against the LLC and the LLC suffers a material adverse effect due to
such act, or (b) the Manager acts in a grossly negligent manner or engages in willful misconduct during
the course of performing its duties as Manager and the LLC suffers a material adverse effect due to such
act or acts. The Manager will have full responsibility and exclusive and complete discretion in the
management and control of the business and affairs of the LLC and will make all decisions affecting the
LLC’s affairs and business of managing the Portfolio of LIBACSM Assets. The Manager may be
permitted to delegate certain of its management duties as set forth in the Operating Agreement.

Capital Contributions

The LLC will maintain a capital account for each Member according to the rules applicable to a
partnership. No Member will be entitled to interest on his, her or its capital account or to withdraw or
reduce the Member’s capital account.

Allocations and Distributions

In general, the LLC’s profits and losses will be allocated to Members pro rata in accordance with
each Member’s percentage ownership of Membership Interests. The Manager may make allocations to
handle special tax distributions such as minimum gains, member non-recourse debt, qualified income
offset, etc. The process for any distribution will be in accordance with the Operating Agreement. Any
net proceeds resulting from the sale, transfer, exchange or other disposition or condemnation of all or
substantially all of the LLC’s property will be applied first, to the payment and discharge of all of the
LLC’s debts and liabilities to creditors other than Members; second, to the payment and discharge of all
of the LLC’s debts and liabilities to the Members; and third, to the Members pro rata in accordance with
their positive capital account balances, after giving effect to all capital contributions, distributions and
allocations for all periods.

Limited Voting Rights; No Meetings of Members

The Members of the LLC shall have no voting rights except in very limited circumstances, as set
forth in the Operating Agreement or as otherwise may be required by law. There is no requirement in the
Operating Agreement for any meeting of Members and Members of the LLC are not entitled to call
meetings of the Members. Meetings of the Members may be held, if any, when called by the Manager, at
its sole and absolute discretion, at the principal office of the LLC, unless some other appropriate and
convenient location is designated by the Manager. The Manager shall preside at all meetings of the
Members, if any.

Limited Liability

The Delaware statute under which the LLC has been formed provides that Members are not
personally liable for the obligations of the LLC.

Duration of the LLC’s Existence

The LLC will exist perpetually, unless sooner terminated pursuant to the terms of the Operating
Agreement. The Operating Agreement provides for the dissolution of the LLC upon the occurrence of the

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following events:

(i) with the consent of the Manager, upon the affirmative vote of Members holding eighty percent
(80%) of the Membership Interests;

(ii) the entry of a decree of judicial dissolution of the LLC under Section 18-802 of the Delaware
Act;

(iii) as otherwise required by the Delaware Act.

In the event that the LLC is dissolved, the LLC will continue solely for the purpose of winding up its
affairs and in an orderly manner, liquidating its assets and satisfying claims of its creditors and Members.

Member Meetings

Meetings of the Member may be held, if any, when called by the Manager, at its sole and absolute
discretion, at the principal office of the LLC, unless some other appropriate and convenient location is
designated by the Manager. The Manager shall preside at all meetings of the Members.

Conflicts of Interest

The Manager will devote so much of its time to the business of the LLC as it deems reasonably
necessary and advisable to manage the affairs of the LLC. The Manager may be engaged in other
business affairs. Specifically, the Operating Agreement provides that any Member or the Manager may
engage in, or possess an interest in, other business ventures of any and every nature and description,
independently or with others, whether or not similar to or in competition with the business of the LLC,
and neither the LLC nor its Members shall have any right, by virtue of the Operating Agreement or
otherwise, to participate in such other business ventures or to the income or profits derived from them.

Indemnification of Manager and Members

The Manager will perform its duties in good faith. If the Manager performs its duties in
compliance with this standard, it will not be liable to the LLC or its Members for any action so taken or
any such failure to take action. The Manager, its affiliates, the officers of the Manager and Manager’s
designees (each a “Management Indemnitee”) shall be indemnified and held harmless by the Company
(subject to the final two sentences of this paragraph) from and against any and all losses, claims, damages,
liabilities, expenses (including legal fees and expenses), judgments, fines, settlements and other amounts
arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal,
administrative or investigative, that relate to or arise out of the LLC or its assets, business or affairs, in
which the Management Indemnitee may be involved, or threatened to be involved, as a party or otherwise
by reason of such Management Indemnitee’s status as the Manager, or an owner, manager, director,
officer, partner, agent or employee of any of the foregoing, if (a) the Management Indemnitee acted in
good faith and in a manner such Management Indemnitee believed to be in the best interests of the LLC
and, with respect to any criminal proceeding, had no reasonable cause to believe such Management
Indemnitee’s conduct was unlawful and (b) the Management Indemnitee’s conduct did not constitute
gross negligence or willful or wanton misconduct. The termination of any action, suit or proceeding by
judgment, order, settlement or conviction or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the Management Indemnitee acted in a manner contrary to that specified
above in subsections (a) and (b). Any indemnification shall be made only out of the assets of the LLC,
and no Member shall have any personal liability on account of such indemnification. All calculations of
claims and the amount of indemnification to which any Management Indemnitee is entitled shall be made
after giving effect to the tax consequences of any such claim.

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Amendments to the Operating Agreement

Except as otherwise expressly provided elsewhere in the Operating Agreement, the Operating
Agreement shall not be altered, modified or changed, and no provision of the Operating Agreement shall
be waived, except by an amendment or waiver, as applicable, that is approved by the Manager and
Member(s) owning eighty percent (80%) of the Membership Interests.

Financial Reports

Annual reports consisting of financial statements of the LLC may be delivered by the Manager to
each Member within one hundred eighty (180) days after the end of each fiscal year of the LLC. Any
financial statements for the LLC will be issued at the discretion of the Manager. Information concerning
the LLC that is necessary for the preparation by the Members of federal and state income tax returns will
be provided by the Manager to each Member as soon as practical after receipt of all of the necessary
information by the Manager.

Fiscal Year

The fiscal year of the LLC will end on December 31st of each year.

Management of ESP LIBACSM Fund, LLC

Insured Capital Management, Inc. (“ICM”) was formed in 2007 to serve as the corporate
managing member of several planned “fully collateralized” or “yield” driven securities transactions that
use Capital Growth Planning, Inc.’s LIBACSM products. The following individuals comprise ICM’s
management team:

Mr. Douglas W. Miller is the Chief Executive Officer of ICM, as well as the CEO for its parent
company, Capital Growth Planning, Inc. (“CGP”). Mr. Miller began his association with CGP in August
of 1988, after graduating from Fresno State with an emphasis in Financial Services. In 1991, Mr. Miller
successfully completed Northwestern Mutual’s Career Agent Development Program and has been a
member of the Million Dollar Round Table (“MDRT”) since 2002. As CEO of CGP, Mr. Miller is
directly involved the design, development and marketing of CGP’s insurance, securities, and investment
products and programs for national and international syndication. Mr. Miller is a Registered
Representative with FINRA (Series 7 & 63). Mr. Miller also holds a Real Estate and Life Insurance
license with the State of California and multiple non-residence life insurance licenses in 40 or more other
states.

Mr. Jerry Sexton is the President of ICM, as well as the President for its parent company,
Capital Growth Planning, Inc. (“CGP”). Mr. Sexton began his association with CGP in 1996 and is
responsible for overseeing CGP’s business processes and procedures, including the functional research,
development, and management of CGP’s life settlement brokerage structures and insurance products. Mr.
Sexton has been a member of the MDRT since 2003. Mr. Sexton also works directly with sales
representatives and agents regarding the Company’s life settlement and life insurance product structures.
Mr. Sexton is a Registered Representative with FINRA (Series 7, 63 & 65) and a Registered Investment
Advisor (“RIA”) with the State of California. Mr. Sexton also holds a Real Estate and Life Insurance
license with the State of California, and multiple non-residence life insurance licenses in 20 or more other
states.

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Mr. Mark E. Stutzman, Esq. is the General Counsel and Corporate Secretary for ICM and its
parent company, Capital Growth Planning, Inc. (“CGP”). Mr. Stutzman is licensed to practice law in
California. Mr. Stutzman joined CGP in October of 1997, after twelve years in private practice. Mr.
Stutzman earned his Bachelor of Arts degree in Political Science from U.C. Berkeley and earned his Juris
Doctorate, cum laude, from Northwestern School of Law. Mr. Stutzman coordinates the drafting and
approval of all legal documents used in CGP’s financial structures. Other responsibilities include
maintaining corporate records and managing the legal affairs of CGP and its subsidiaries. Mr. Stutzman
is a Registered Representative with FINRA (Series 7 & 63) and holds a Life Insurance license with the
State of California.

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

Membership Interests

General

The following discussion summarizes certain anticipated federal income tax consequences of
investing in ESP LIBACSM Fund, LLC (the “LLC”) Membership Interests. The discussion is based on the
Internal Revenue Code of 1986, as amended (the “Code”), the Treasury Regulations thereunder, Internal
Revenue Service (“IRS”) positions and court decisions now in effect. All of the above authorities are
subject to change (possibly retroactive) by legislative or administrative action.

THE FOLLOWING SUMMARY DOES NOT DISCUSS ALL TAX CONSIDERATIONS THAT MAY BE
RELEVANT TO PROSPECTIVE INVESTORS AND DOES NOT CONSTITUTE LEGAL OR TAX
ADVICE. FURTHERMORE, THE TAX CONSEQUENCES OF INVESTING IN THE LLC MAY VARY
DEPENDING ON THE PARTICULAR INVESTOR’S STATUS. ACCORDINGLY, EACH PROSPECTIVE
INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE FEDERAL, STATE, LOCAL
AND FOREIGN TAX CONSEQUENCES OF INVESTING IN THE UNITS.

THE FOLLOWING TAX DISCUSSION WAS NOT WRITTEN TO BE USED, AND CANNOT BE USED
BY YOU, TO AVOID ANY PENALTIES THAT MAY BE IMPOSED ON YOU BY THE IRS.

Partnership Status

The LLC expects to be treated as a partnership for federal income tax purposes. This means that
the LLC will not pay any federal income tax, and the Members will pay tax on their share of our limited
liability company’s net income Under Treasury Regulations known as the “check-the-box” regulations,
an unincorporated entity with more than one member, such as a limited liability company, will be taxed as
a partnership for federal income tax purposes unless the entity is considered a publicly traded limited
partnership or the entity affirmatively elects to be taxed as a corporation.

The LLC will not elect to be taxed as a corporation and will endeavor to take steps as are feasible
and advisable to avoid classification as a publicly traded limited partnership.

If the LLC fails to qualify for partnership taxation for whatever reason, it would be treated as a
“C corporation” for federal income tax purposes. As a “C corporation,” the LLC would be taxed on its
taxable income at corporate rates, currently at a maximum rate of 35%. Distributions would generally be
taxed again to holders of the Membership Interests as corporate dividends. In addition, holders of the
Membership Interests would not be required to report their share of the LLC’s income, gains, losses or
deductions on their tax returns until such are distributed. Because a tax would be imposed upon the LLC
as a corporate entity, the cash available for distribution to Members would be reduced by the amount of
tax paid, in which case the value of the Membership Interests would be reduced.

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Tax Treatment of Our Operations; Flow-Through of Taxable Income and Loss; Use of Calendar
Year

The LLC will pay no federal income tax. Instead, as a Member, you will be required to report on
your annual federal and state income tax returns your allocable share of the income, gains, losses and
deductions the LLC has recognized without regard to whether it makes any cash distributions to you.

Because the LLC will be taxed as a partnership, it will have its own taxable year that is separate
from the taxable years of the Members. Unless a business purpose can be established to support a
different taxable year, a partnership must use the “majority interest taxable year” which is the taxable year
that conforms to the taxable year of the holders of more than 50% of its interests. In this case, the
majority interest taxable year is the calendar year.

Tax Consequences to the LLC’s Members

As a Member, you will be required to report on your income tax return for your taxable year with
which or within which our taxable year ends, your distributive share of the LLC’s income, gains, losses
and deductions without regard to whether any cash distributions are received. To illustrate, each calendar
year member will include his share of the LLC’s 2008 taxable income or loss on his 2008 income tax
return. A member with a June 30 fiscal year will report his share of our 2008 taxable income or loss on
his income tax return for the fiscal year ending June 30, 2009. The LLC will provide each Member with
an annual Schedule K-1 indicating such Member’s share of its income, loss and their separately stated
components.

Initial Tax Basis of Membership Interests and Periodic Basis Adjustments

Under Section 722 of the Internal Revenue Code, your initial basis in the Membership Interests
you purchase will be equal to the sum of the amount of money you paid for your Membership Interests.
Your initial basis in each Membership Interest purchased will be 40% of the total purchase price of the
Units purchased in the offering. Your initial basis in the Membership Interests will be increased to reflect
your distributive share of our taxable income, tax-exempt income and gains. If you make additional
capital contributions at any time (although none are anticipated), the adjusted basis of your Membership
Interests will be increased by the amount of any cash contributed or the adjusted basis in any property
contributed if additional Membership Interests are not distributed to you. If additional Membership
Interests are issued, the initial basis of those Membership Interests will equal the amount of any cash
contributed or the adjusted basis in any property contributed. The basis of your Membership Interests
will be decreased, but not below zero, by:

¾ The amount of any cash the LLC distributes to you;

¾ The basis of any other property distributed;

¾ Your distributive share of losses and nondeductible expenditures that are “not properly
chargeable to capital account”; and

¾ Any reduction in your share of the LLC’s debt, if any.

The Membership Interests basis calculations are complex. A Member is only required to
compute Membership Interests basis if the computation is necessary to determine his tax liability, but
accurate records should be maintained. Typically, basis computations are necessary at the following
times:

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¾ The end of a taxable year during which the LLC suffered a loss, for the purpose of determining
the deductibility of the Member’s share of the loss;

¾ Upon the liquidation or disposition of a Membership Interest; and

¾ Upon the non-liquidating distribution of cash or property to a Member, in order to ascertain the
basis of distributed property or the taxability of cash distributed.

Allocations of Income and Losses

Your distributive share of the LLC’s income, gain, loss, or deduction for federal income tax
purposes generally is determined in accordance with the LLC’s Limited Liability Company Agreement
(the “Operating Agreement”). Under Section 704(b) of the Internal Revenue Code, however, an
allocation, or portion thereof, will be respected only if it either has “substantial economic effect” or is in
accordance with the “partner’s interest in the partnership.” If the allocation or portion thereof contained
in our Operating Agreement does not meet either test, the IRS may make a reallocation of such items in
accordance with its determination of each Member’s economic interest in the Company. U.S. Treasury
Regulations contain guidelines as to whether partnership allocations have substantial economic effect.
The allocations contained in the Operating Agreement are intended to comply with the Treasury
Regulations’ test for having substantial economic effect.

Tax Treatment of the LLC with respect to the Portfolio of Policies and SPIAs

The following basic information addresses some of the tax aspects applicable to the Master Trust
with respect to the Policies (particularly the death benefits payable under the Policies) and the SPIAs
which flow through to the LLC and to the Members as described. For advice about your specific
situation, each prospective investor should consult your tax advisor.

SPIAs: Subject to certain exceptions, gross income generally includes amounts that a taxpayer
receives under the contemplated SPIA contract. Code Section 72(a). However, gross income excludes
that portion of any amount received under the contemplated SPIA contract which bears the same ratio to
such amount as the investment in the contract bears to the expected return under the contract; provided,
however, that the amount so excluded cannot exceed the “unrecovered investment in the contract.” Code
Section 72(b)(1) & (2). The unrecovered investment in the contract means the “investment in the
contract” less the aggregate amount received under the contract on or after such contract’s starting date
and before the date as of which the determination is made, to the extent such amount was excludable from
gross income. Code Section 72(b)(4). The investment in the contract is, as of any date, the total amount
of premiums or other consideration paid for the contract less the total amounts received under the contract
before such date, to the extent that such amount was excludable from gross income. Code Section
72(c)(1).

Because the Master Trust will be structured as a grantor trust, and the LLC will be a partnership
for federal income tax purposes, the Members (and not the Insured) will recognize as income the portion
of each SPIA payment received by the Master Trust under the SPIA in excess of the ratable portion of the
investment in the contract assigned to that payment. When reporting such income to the Members, the
LLC will also deduct from such income the amount of the LLC management fees as an expense.

Death Benefits: Generally, under Code Section 101 (a)(1), gross income excludes death benefits
paid under a life insurance contract because of the death of the individual whose life is insured under the
policy. However, under Code Section 101(a)(2), but subject to the exceptions provided in Code Section
101(a)(2)(A) and (B), if the owner of a life insurance policy transfers such policy for value, the amount
excludible under Code Section 101(a)(1) is reduced to the amount of the tax basis of the transferee of the
life insurance contract. The payment by the Master Trust to the Insured will be a transfer for value of the

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Policy by the Insured for purposes of Code Section 101(a)(2). Therefore, the amount of the death benefit
payable under the Policy in excess of the Master Trust’s tax basis in the Policy will be includable as gross
income of the LLC. The Master Trust’s tax basis in the Policy will be the sum of (a) the cost of the
Policy acquisition (other than the portion thereof reflecting the cost of the SPIA), plus (b) the total amount
of all insurance premiums paid by the Master Trust after the date of the consummation of the Policy
purchase transaction.

Accordingly, for the same reason discussed above, the death benefit paid under the Policy by
reason of the Insured’s death will not be property of the Insured’s estate. Because the LLC will be the
owner of the Policy for federal estate and income tax purposes, the Members will realize the income
derived from the death benefits paid under the Policy and such income will be allocated to each
Member’s capital account. Each Member will owe its pro rata share of the federal income taxes with
respect to that death benefit to the extent described in the previous paragraph. The character of the
income that the LLC will so recognize should be ordinary income. Even though the Policy may be a
capital asset, receipt of the death proceeds does not represent receipt of proceeds from a sale or exchange
of property, a requirement for capital gain treatment under Code Section 1222. Rather, receipt of the
death proceeds represent the receipt of contract rights.

Distributions

Distributions made by the LLC to a Member generally will only be taxable to the Member for
federal income tax purposes to the extent that such distribution exceeds, in most instances, the Member’s
then capital account in his Membership Interests immediately before the distribution.

SPIAs: The LLC intends to make cash distributions with respect to the income portion of each
SPIA payment received by the LLC, which income will be attributed ratably to the Members. The LLC
intends, in accordance with the terms of the Operating Agreement, to make periodic distributions to each
Member in amounts equal to the highest individual tax rate or, in other words, thirty-five (35%) of the
taxable portion of the SPIA income (the “SPIA Distributions”).

Policies: The LLC intends to make cash distributions to the Members on a pro rata basis equal
to, in the aggregate, one hundred percent (100%) of the net death benefits paid to the LLC with respect to
any Policy. However the LLC may retain a portion of death benefits to meet unexpected expenses or if
the Manager determines it is in the best interest of the LLC to create a reserve for unexpected expenses.

Deductibility of Losses; At-Risk; Passive Loss Limitations

Generally, a Member may deduct losses allocated to him, subject to a number of restrictions.
Your ability to deduct any losses the LLC allocates to you is determined by applying the following three
limitations dealing with basis, at-risk amounts and passive losses.

Basis

You may not deduct an amount exceeding your adjusted basis in your Membership Interests
pursuant to Internal Revenue Code Section 704(d). If your share of our losses exceeds your basis in your
Membership Interests at the end of any taxable year, such excess losses, to the extent they exceed your
adjusted basis, may be carried over indefinitely and deducted to the extent that at the end of any
succeeding year your adjusted basis in your Membership Interests exceeds zero.

At Risk Rules

Under the “at-risk” provisions of Section 465 of the Internal Revenue Code, if you are an
individual taxpayer (including an individual partner in a partnership) or a closely-held corporation, you

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may deduct losses from a trade or business activity, and thereby reduce your taxable income from other
sources, only to the extent you are considered “at risk” with respect to that particular activity. The
amount you are considered to have “at risk” includes money contributed to the activity and certain
amounts borrowed with respect to the activity for which you may be liable.

Passive Loss Rules

If you are an individual, Section 469 of the Internal Revenue Code may substantially restrict your
ability to deduct losses and tax credits from passive activities. Passive activities generally include
activities conducted by pass-through entities, such as our limited liability company, certain partnerships,
or S corporations, in which the taxpayer does not materially participate. Generally, losses from passive
activities are deductible only to the extent of the taxpayer’s income from other passive activities. Passive
activity losses that are not deductible may be carried forward and deducted against future passive activity
income or may be deducted in full upon disposition of a Member’s entire Membership Interests to an
unrelated party in a fully taxable transaction. It is important to note that “passive activities” do not
include dividends and interest income that normally is considered to be “passive” in nature. Closely held
C corporations also are subject to the passive activity limitations, but generally may deduct passive losses
against a broader base of income.

For Members who borrow money to purchase their Membership Interests, interest expense
attributable to the amount borrowed will be aggregated with other items of income and loss from passive
activities and subjected to the passive activity loss limitation. To illustrate, if a Member’s only passive
activity is our limited liability company, and if we incur a net loss, no interest expense on the related
borrowing would be deductible. If that Member’s share of our taxable income is less than the related
interest expense, the excess would be nondeductible. In both instances, the disallowed interest would be
suspended and would be deductible against future passive activity income or upon disposition of the
Member’s entire Membership Interests to an unrelated party in a fully taxable transaction.

Passive Activity Income

The LLC expects to make the SPIA Distributions, and, to the extent that your share of the LLC’s
net income constitutes income from a passive activity (as described above), such income may generally
be offset by your net losses and credits from investments in other passive activities.

Alternative Minimum Tax

If the LLC adopts accelerated methods of depreciation, it is possible that taxable income for
Alternative Minimum Tax purposes might exceed regular taxable income passed through to the Members.
No decision has been made on this point, but the LLC believes that most Members are unlikely to be
adversely affected by excess alternative minimum taxable income.

Tax Consequences upon Disposition of the Membership Interests

Gain or loss will be recognized on a sale or other disposition of Membership Interests equal to the
difference between the amount realized and the Member’s basis in the Membership Interests sold.
Amount realized includes cash and the fair market value of any property received. Gain or loss
recognized by a Member on the sale, transfer, or exchange (collectively, a “Disposition”) of Membership
Interests held for more than one year generally will be taxed as long-term capital gain or loss. A portion
of this gain or loss, however, will be separately computed and taxed as ordinary income or loss under
Internal Revenue Code Section 751 to the extent attributable to depreciation recapture or other
“unrealized receivables” or “substantially appreciated inventory” owned by us.

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As noted in this Memorandum, if certain events occur, such as the investor’s conversion of the
Shares into Common Stock or if beginning six (6) months after the final closing of the offering the
Common Stock trades at a closing bid price of at least $1.50 per share for twenty (20) consecutive trading
days, the investors’ Membership Interests in the LLC will revert to the Company (in either case a
“Membership Interest Liquidation”). Such Membership Interest Liquidation will be deemed to be, for
income tax purposes, a Disposition, and the tax consequences set forth in the preceding paragraph will
apply. By way of example, assume an investor invested $10,000 in the offering and ten (10) months after
the final close of the offering the Company reaches its Threshold. At such time the investors 1,000 shares
of Series A Preferred Stock is automatically converted into seventeen thousand (17,240) shares of
Common Stock and all of his LLC Membership Interests revert to the Company. Further assume that no
substantive distributions have been made from the LLC such that the investor’s basis in the Membership
Interests is the Four Thousand Dollars ($4,000) paid for such interests. The reversion triggers a taxable
event upon which the investor must report any gain or loss from the disposition of the Membership
Interests. In the example, the IRS will probably consider that forty percent (40%), or Four Thousand
Dollars ($4,000), of the consideration for the Common Stock is from the Membership Interest disposition
and sixty percent, or Six Thousand Dollars ($6,000), is from the conversion of the shares of Preferred
Stock. Also assume that the stock traded at a closing bid price of $1.50 per share on the 20th consecutive
trading day, although the closing bid price upon which any gain will be calculated may be more than
$1.50 per share. Thus forty percent (40%) of the Common Stock acquired is attributable to the reversion
of the Membership Interests to ESP, i.e., Common Stock worth $10,344 (17,240 shares x $1.50 per share
x 0.4) and the taxable gain (most likely characterized as a short term or long term capital gain, depending
on the period of time the investment has been owned by the Member) for this example reportable by the
Member on his tax return for the tax year in which the Membership Liquidation Event occurs would be
$10,344 - $4,000, or $6,344. This gain would increase the investors basis in the Common Stock by the
same amount so the investor’s basis in the Common Stock would be $6,000 (basis from the Series A
Preferred Stock that carries over to the Common Stock in a non-taxable event) plus $6,344 basis from the
taxable gain reported upon the disposition of the Membership Interests.

Allocations and Distributions Following Membership Interest Transfers

If any Membership Interest is transferred during any accounting period in compliance with the
provisions of the Operating Agreement, then, solely for purposes of making allocations and distributions,
the LLC will use either the interim closing of the books method or a daily proration of profit or loss for
the entire period, as determined by the Manager, and the convention that recognizes the transfer as of the
beginning of the month following the month in which there is compliance with the notice, documentation
and information requirements of the governing documents. All distributions on or before the end of the
calendar month in which these requirements have been substantially complied with shall be made to the
transferor, and all distributions thereafter shall be made to the transferee. However, the LLC has the
authority to adopt any other reasonable permitted method or convention.

Effect of Tax Code Section 754 Election on Membership Interest Transfers

The adjusted basis of each Member in his or her Membership Interests (“outside basis”) initially
will equal his or her proportionate share of the LLC’s adjusted basis in the portfolio (“inside basis”).
Over time, however, it is possible that changes in values of the Membership Interests and cost recovery
deductions will cause the value of a Membership Interest to differ from the Member’s proportionate share
of the inside basis.

Section 754 of the Internal Revenue Code permits a limited liability company that is taxed as a
partnership to make an election that allows a transferee who acquires Membership Interests either by
purchase or upon the death of a Member to adjust his or her share of the inside basis to fair market value
as reflected by the Membership Interest price in the case of a purchase or the estate tax value of the

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Membership Interest in the case of an acquisition upon death of a Member. Once the amount of the
transferee’s basis adjustment is determined, it is allocated among the LLC’s various assets pursuant to
Section 755 of the Internal Revenue Code.

A Section 754 election is beneficial to the transferee when his or her outside basis is greater than
his or her proportionate share of the entity’s inside basis. In this case, a special basis calculation is made
solely for the benefit of the transferee that will determine his or her cost recovery deductions and his or
her gain or loss on disposition of property by reference to his or her higher outside basis. The Section 754
election will be detrimental to the transferee if his or her outside basis is less than his proportionate share
of inside basis.

If the LLC makes a Section 754 election, Treasury Regulations require the LLC to make the basis
adjustments. In addition, these regulations place the responsibility for reporting basis adjustments on the
LLC. The LLC must report basis adjustments by attaching statements to its partnership returns. In
addition, the LLC is required to adjust specific partnership items in light of the basis adjustments.
Consequently, amounts reported on the transferee’s Schedule K-1 are adjusted amounts.

Permitted transferees are subject to an affirmative obligation to notify the LLC of their basis in
acquired interests. To accommodate concerns about the reliability of the information provided, the LLC
is entitled to rely on the written representations of transferees concerning either the amount paid for the
Membership Interest or the transferee’s basis in the Membership Interest under Section 1014 of the
Internal Revenue Code, unless clearly erroneous.

The Operating Agreement provides that the Manager will determine whether a Section 754
election will be made. Depending on the circumstances, the value of Membership Interests may be
effected positively or negatively by whether or not we make a Section 754 election. If the LLC decides to
make a Section 754 election, the election will be made on a timely filed partnership income tax return and
is effective for permitted transfers occurring in the taxable year of the return in which the election is
made. Once made, the Section 754 election is irrevocable unless the IRS consents to its revocation.

IRS Reporting Requirement

The IRS requires a taxpayer who sells, redeems or exchanges Membership Interests to notify the
LLC in writing within thirty (30) days or, for transfers occurring on or after December 16 of any year, by
January 15 of the following year. The written notice required by the IRS must include the names and
addresses of both parties to the exchange, the identifying or social security numbers of the transferor and,
if known, of the transferee and the exchange date. The IRS imposes a penalty on the taxpayer for failure
to file the written notice to the LLC unless reasonable cause can be shown.

The LLC’s Dissolution and Liquidation May Be Taxable to You, Unless Its Properties are
Distributed In-kind

The LLC’s dissolution and liquidation will involve the distribution to Members of the portfolio, if
any, remaining after payment of all of its debts and liabilities. Upon dissolution, Membership Interests
may be liquidated by one or more distributions of cash. Gain would be recognized by you to the extent, if
any, that the amount of cash received exceeds your adjusted basis in your Membership Interests.

Life Settlement Interests may be Prohibited Investments for Certain Tax Qualified Retirement
Accounts Such as IRAs and Others

Section 408(a)(3) of the Code provides that “no part of trust funds will be invested in life
insurance contracts” by an “individual retirement account” (“IRA”) within the meaning of Section 408(a)
of the Code. As such, an investment in the Membership Interests by an IRA could lead to the

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disallowance of certain tax benefits applicable to an IRA under the Code and the imposition by the IRS of
associated penalties. Therefore, potential investors should consult a knowledgeable tax advisor before
investing tax qualified investment funds in the Membership Interests.

Series A Preferred Stock

Tax Classification of the Company.

The Company is intended to be treated as a corporation for federal income tax purposes under the
Code. Accordingly, the Company (a) will pay federal income taxes at corporate rates on its taxable
income; (b) distributions made to the stockholders will be taxable to them as dividend income to the
extent of the Company’s current and accumulated earnings and profits, and will not be deductible by the
Company in computing its taxable income; and (c) subject to certain limitations, the Company can use
any of its losses to offset only past or future income of the Company, and the stockholders cannot use the
losses to offset their individual income.

Tax Basis of Investment in the Company

The initial tax basis of each stockholder’s Company shares will generally be equal to the
allocable amount of the subscription payment made by such stockholder to the Company in exchange for
its subscription for the shares.

Sale or Other Disposition of Shares

Gain or loss recognized on the sale or other disposition of an individual’s shares generally will be
taxable as a capital transaction.

Capital Gains and Losses

In general, capital gain from property held for more than 12 months is long term capital gain and
capital gain from property held for 12 months or less is short term capital gain. An individual stockholder
who recognizes long term capital gain will be taxable on such gain at a maximum tax rate of 15%,
assuming he has held his Company shares at least twelve months. An individual stockholder who
recognizes short term capital gain will be taxable on such gain at the same rates as ordinary income. A
corporate stockholder is taxable on both short term capital gain and long term capital gain at the same
rates as its ordinary income.

An individual stockholder may deduct only $3,000 of net capital losses in any year to offset
ordinary income. A corporate stockholder may not deduct net capital losses in any year to offset ordinary
income.

In addition to the rules set forth above, several proposals to change the rules relating to the
taxation of capital gains are currently pending in Congress. Some of the proposals would reduce the
maximum rate of taxation on capital gains recognized by individuals and corporations. The Company
expresses no opinion on the likelihood of any of these proposals being enacted into law.

State, Local and Foreign Taxes

In addition to the federal income tax consequences described above, prospective investors should
consider potential state, local and foreign tax consequences of an investment in the Company and the
LLC. Each prospective investor is advised to consult his tax advisor for advice as to state, local and
foreign taxes that may be payable in connection with an investment in the Company and the LLC.

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ERISA CONSIDERATIONS

General Fiduciary Obligations. Trustees and other fiduciaries of qualified retirement plans or
IRAs that are set up as part of a plan sponsored and maintained by an employer, as well as trustees and
fiduciaries of Keogh Plans under which employees, in addition to self-employed individuals, are
participants (together, “ERISA Plans”), are governed by the fiduciary responsibility provisions of Title 1
of the Employee Retirement Income Security Act of 1974 (“ERISA”). An investment in Units by an
ERISA Plan must be made in accordance with the general obligation of fiduciaries under ERISA to
discharge their duties (i) for the exclusive purpose of providing benefits to participants and their
beneficiaries; (ii) with the same standard of care that would be exercised by a prudent man familiar with
such matters acting under similar circumstances; (iii) in such a manner as to diversify the investments of
the plan, unless it is clearly prudent not to do so; and (iv) in accordance with the documents establishing
the plan. Fiduciaries considering an investment in the Units should accordingly consult their own legal
advisors if they have any concern as to whether the investment would be inconsistent with any of these
criteria.

Fiduciaries of certain ERISA Plans which provide for individual accounts (for example, those
which qualify under Section 401(k) of the Code, Keogh Plans and IRAs) and which permit a beneficiary
to exercise independent control over the assets in his individual account, will not be liable for any
investment loss or for any breach of the prudence or diversification obligations which results from the
exercise of such control by the beneficiary, nor will the beneficiary be deemed to be a fiduciary subject to
the general fiduciary obligations merely by virtue of his exercise of such control. On October 13, 1992,
the Department of Labor issued regulations establishing criteria for determining whether the extent of a
beneficiary’s independent control over the assets in his account is adequate to relieve the ERISA Plan’s
fiduciaries of their obligations with respect to an investment directed by the beneficiary. Under the
regulations, the beneficiary must not only exercise actual, independent control in directing the particular
investment transaction, but also the ERISA Plan must give the participant or beneficiary a reasonable
opportunity to exercise such control, and must permit him to choose among a broad range of investment
alternatives.

Limited Transactions. Trustees and other fiduciaries making the investment decision for any
qualified retirement plan, IRA or Keogh Plan (or beneficiaries exercising control over their individual
accounts) should also consider the application of the prohibited transactions provisions of ERISA and the
Code in making their investment decision. Sales and certain other transactions between a qualified
retirement plan, IRA or Keogh Plan and certain persons related to it (e.g., a plan sponsor, fiduciary, or
service provider) are prohibited transactions. The particular facts concerning the sponsorship, operations
and other investments of a qualified retirement plan, IRA or Keogh Plan may cause a wide range of
persons to be treated as parties in interest or disqualified persons with respect to it. Any fiduciary,
participant or beneficiary considering an investment in Units by a qualified retirement plan IRA or Keogh
Plan should examine the individual circumstances of that plan to determine that the investment will not be
a prohibited transaction. Fiduciaries, participants or beneficiaries considering an investment in the Units
should consult their own legal advisors if they have any concern as to whether the investment would be a
prohibited transaction.

Special Fiduciary Considerations. Regulations issued on November 13, 1986, by the


Department of Labor (the “Final Plan Assets Regulations”) provide that when an ERISA Plan or any
other plan covered by Code Section 4975 (e.g., an IRA or a Keogh Plan which covers only self-employed
persons) makes an investment in an equity interest of an entity that is neither a “publicly offered security”
nor a security issued by an investment company registered under the Investment Company Act of 1940,
the underlying assets of the entity in which the investment is made could be treated as assets of the

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investing plan (referred to in ERISA as “plan assets”). Programs which are deemed to be operating
companies or which do not issue more than 25% of their equity interests to ERISA Plans are exempt from
being designated as holding “plan assets.” Management anticipates that the Company would clearly be
characterized as an “operating company” for the purposes of the regulations, and that it would therefore
not be deemed to be holding “plan assets.” The LLC, however, may not be deemed to be an operating
company. Accordingly, management does not intend that ownership of the Membership Interests owned
by ERISA Plans will exceed twenty-five percent (25%) of all of the Membership Interests owned by non-
affiliates of the Company and the LLC.

Classification of the assets of the Company as “plan assets” could adversely affect both the plan
fiduciary and management. The term “fiduciary” is defined generally to include any person who
exercises any authority or control over the management or disposition of plan assets. Thus, classification
of Company assets as plan assets could make the management a “fiduciary” of an investing plan. If assets
of the Company are deemed to be plan assets of investor plans, transactions which may occur in the
course of its operations may constitute violations by the management of fiduciary duties under ERISA.
Violation of fiduciary duties by management could result in liability not only for management but also for
the trustee or other fiduciary of an investing ERISA Plan. In addition, if assets of the Company are
classified as “plan assets,” certain transactions that the Company might enter into in the ordinary course
of its business might constitute “prohibited transactions” under ERISA and the Code.

Reporting of Fair Market Value. Under Code Section 408(i), as amended by the Tax Reform
Act of 1986, IRA trustees must report the fair market value of investments to IRA holders by January 31
of each year. The Service has not yet promulgated regulations defining appropriate methods for the
determination of fair market value for this purpose. In addition, the assets of an ERISA Plan or Keogh
Plan must be valued at their “current value” as of the close of the plan’s fiscal year in order to comply
with certain reporting obligations under ERISA and the Code. For purposes of such requirements,
“current value” means fair market value where available. Otherwise, current value means the fair value
as determined in good faith under the terms of the plan by a trustee or other named fiduciary, assuming an
orderly liquidation at the time of the determination. The Company does not have an obligation under
ERISA or the Code with respect to such reports or valuation although management will use good faith
efforts to assist fiduciaries with their valuation reports. There can be no assurance, however, that any
value so established (i) could or will actually be realized by the IRA, ERISA Plan or Keogh Plan upon
sale of the Units or upon liquidation of the Company, or (ii) will comply with the ERISA or Code
requirements.

CAPITALIZATION

The following table sets forth the capitalization of the Company as of June 30, 2008 and as
adjusted (a) to reflect capital raised by us in August 2008 pursuant to prior private placements, 416,896
shares issued by us from July 2008 to August 2008 as late fees pursuant to certain bridge loans, and
20,000 shares of Common Stock issued by us in July 2008 to a consultant for services rendered, and (b) to
give effect to the sale by us of 1,000,000 Units at a purchase price of $10.00 per Unit, and the application
of the estimated net proceeds from the sale of those Units.

[Please see table on next page.]

- 74 -
As of June 30, 2008
Pro Forma As Adjusted
(Unaudited)(1)(3)(4) Pro Forma (Unaudited)

Indebtedness:
Long-term indebtedness $1,243,934 $1,243,934
Stockholders’ Equity:

Preferred Stock, par value $0.01 per


share, 1,000,000 shares authorized,
1,000,000 shares of Series A Preferred
Stock authorized, no shares issued or
outstanding, 1,000,000 issued and
outstanding, as adjusted(2) -0- $5,000,000

Common Stock, par value $0.001 per


share, 100,000,000 shares authorized,
56,239,259 issued and outstanding,
73,479,259 issued and outstanding upon
conversion of all Series A Preferred Stock,
as adjusted(3)(4) $2,916,920 $2,916,920

Members’ Equity in ESP LIBACSM Fund, -0- $4,000,000


LLC (5)

Additional Paid in Capital $25,852,570 $25,852,570

Retained Earnings (Deficit) ($30,851,419) ($30,851,419)

Total Shareholders’ and Members’ Equity ($2,081,929) $6,918,071


(Deficit) (5)

Total Capitalization ($837,995) $8,162,005

(1) See “FINANCIAL STATEMENTS.”

(2) The capital to be raised from the placement of the Units is expected to be a potential maximum of $10,000,000.
See “TERMS OF THE OFFERING.” The actual capitalization is adjusted to reflect the assumption that
1,000,000 shares of Series A Preferred Stock and 1,000,000 Membership Interests are issued for approximately
$5,000,000 of capital, with approximately $5,000,000 deducted for payment of the Insurance Premium and
offering costs including the Placement Agent Cash Fee. Does not assume the conversion of the Series A
Preferred Stock into Common Stock (17,240,000 shares of our Common Stock are issuable upon the conversion
of all of the Series A Preferred Stock).

(3) Includes 112,069 shares of Common Stock sold by us in a prior private placement of units in August 2008 for
gross proceeds of $65,000 (net proceeds of approximately $58,500) at a purchase price of $0.58 per unit, each
unit consisting of one share of Common Stock and one Common Stock purchase warrant exercisable for a
period of three years at an exercise price of $0.75 per share. Includes 5,172,414 shares of Common Stock sold
by us in a prior private placement of units ending in August 2008 for a purchase price of $2.32 per unit pursuant
to which we raised gross proceeds approximately $3,000,000 and net proceeds of approximately $2,775,000,
each unit consisting of four shares of Common Stock, two Common Stock purchase warrants exercisable for a
period of three years at an exercise price of $0.75 per share, and one Common Stock purchase warrant

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exercisable for a period of three years at an exercise price of $0.25 per share. The prior private placements were
made pursuant to Rule 506 of Regulation D of the Securities Act of 1933, as amended. Also includes 416,896
shares of Common Stock with a value of $27,383 issued by us from July 2008 to August 2008 as late fees
pursuant to certain bridge loans, and 20,000 shares of Common Stock with a value of $5,400 issued by us in
July 2008 for services rendered.

(4) Does not include 16,394,018 shares of Common Stock issuable upon the exercise of outstanding warrants or up
to 2,000,000 shares of Common Stock issuable upon the exercise of up to 2,000,000 Placement Agent Warrants
issuable pursuant to this offering. See “DESCRIPTION OF SECURITIES.”

(5) As described elsewhere in this Memorandum, 40% of the gross proceeds of this offering will be invested in ESP
LIBACSM Fund, LLC, and investors in the Units will be Members of the LLC as well as holders of our Series A
Preferred Stock. Accordingly, total equity on this table includes the Unit holders’ equity in ESP and ESP
LIBACSM Fund, LLC.

DILUTION

As of June 30, 2008, our net tangible book value was approximately ($2,081,929) or
approximately ($0.037) per share of Common Stock, including private issuances of stock made by us in
July and August 2008. Net tangible book value per share consists of stockholders’ equity adjusted for the
retained earnings (deficit), divided by the total number of shares of Common Stock outstanding. Without
giving effect to any changes in such net tangible book value after June 30, 2008, other than to give effect
to the sale of 1,000,000 shares of Series A Preferred Stock and Membership Interests being offered by us
in this Memorandum, and the conversion of the Series A Preferred Stock into 17,240,000 shares Common
Stock, the pro forma net tangible book value at June 30, 2008, assuming the conversion of each share of
Series A Preferred Stock into one share of Common Stock, and including Members’ equity in ESP
LIBACSM Fund, LLC, would have been $6,918,071 or approximately $0.094 per share. Thus, as of June
30, 2008, the pro forma net tangible book value per share of Common Stock owned by our current
stockholders would have increased by approximately $0.131 (including credit for the Membership
Interests, which may never be owned by us) without any additional investment on their part, and the
purchasers of the Units will incur an immediate dilution of approximately $0.49 per share of Series A
Preferred Stock from the purchase price. “Dilution” means the difference between the offering price and
the pro forma net tangible book value per share after giving effect to the offering. Holders of Series A
Preferred Stock may be subjected to additional dilution if any additional securities or net profits interests
are issued as compensation or to raise additional financing. The following table illustrates the dilution,
which, investors participating in this offering will incur, and the benefit to current stockholders because of
this offering.

Private Placement per Converted Common Share(1)(2) ................ $0.58

Pro Forma Net Tangible Book Value per share of Common


Stock Before Offering ............................................................... ($0.037)

Increase in Pro Forma Net Tangible Book Value per share of


Common Stock Attributable to Units Offered Hereby(2) ............ $0.131

Pro Forma Net Tangible Book Value


Per share of Common Stock after Offering(2) ............................. $0.094

Dilution of Pro Forma Net Tangible Book Value per share of


Common Stock To Purchasers in this Offering(2) .......................... $0.49

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(1) Before deduction of estimated offering expenses, and assuming the conversion of all Series A Preferred Stock
offered into shares of our Common Stock at a conversion price of $0.58 per share.

(2) Assumes the conversion of each share of Series A Preferred Stock into one share of Common Stock at a
conversion price of $0.58 per share.

DIVIDEND POLICY

The Series A Preferred Stockholders will participate with the Common Stockholders on an as-
converted basis with respect to any dividends which may be declared by the Board of Directors. We have
not declared or paid any cash dividends and do not intend to pay cash dividends in the near future on the
shares of Common Stock. We may declare and pay cash dividends after our operations have more fully
matured. We are not currently a party to any agreement restricting the payment of dividends. See
“DESCRIPTION OF SECURITIES.”

PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding beneficial ownership of the Company’s stock
as of October 1, 2008 and as adjusted to reflect the sale of shares of the Company’s Series A Preferred
Stock offered by this Memorandum, by:

• each of the Company’s directors and the named executive officers;


• all of the Company’s directors and executive officers as a group; and
• each person or group of affiliated persons known by the Company to be the beneficial
owner of more than 5% of the Company’s outstanding shares of Common Stock.

Beneficial ownership and percentage ownership are determined in accordance with the rules of
the Securities and Exchange Commission and includes voting or investment power with respect to shares
of stock. This information does not necessarily indicate beneficial ownership for any other purpose.

Unless otherwise indicated and subject to applicable community property laws, to our knowledge,
each stockholder named in the following table possesses sole voting and investment power over their
shares of Common Stock, except for those jointly owned with that person’s spouse. Percentage of
beneficial ownership before the offering is based on 56,239,259 shares of Common Stock outstanding as
of October 1, 2008. Unless otherwise noted below, the address of each person listed on the table is c/o
Environmental Service Professionals, Inc., 1111 East Tahquitz Canyon Way, Suite 110, Palm Springs,
California 92262. Except as indicated, each person listed below has sole voting and investment power
with respect to the shares set forth opposite such person’s name.

Name and Position of Shares Beneficially Owned Prior to Shares Beneficially Owned After
Beneficial Owner Offering(1) Offering(3)
Number(2) Percent Number Percent

Edward Torres, Chief


Executive Officer,
President, Chief Financial 23,324,000 41.5% 23,324,000 31.7%
Officer (4)(9)

Lyle Watkins, Chief


Operating Officer, 9,554,483 17.0% 9,554,483 13.0%

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Corporate Secretary, and
Director (5)(9)

S. Robert August, Director 800,000 1.4% 800,000 1.1%


(6)

Leroy Moyer, Director 470,000 0.8% 470,000 0.6%


(7)*

Robert Iger, Director (8) 10,000 * 10,000 *

All directors and executive


officers as a group (four
persons) (8) 34,148,483 60.7% 34,148,483 46.5%

*Indicates beneficial ownership of less than 0.5%.


(1) Unless otherwise indicated and subject to applicable community property laws, to our knowledge each
stockholder named in the table possesses sole voting and investment power with respect to all shares of
Common Stock, except for those owned jointly with that person’s spouse.

(2) Calculation of beneficial ownership assumes the exercise of all warrants and options exercisable within 60 days
of October 1, 2008, only by the respective named stockholder.

(3) Assumes the issuance of 1,000,000 shares of Series A Preferred Stock pursuant to this offering, and the
conversion of those Shares into 17,240,000 shares of our Common Stock.

(4) Includes 500,000 shares which may be purchased pursuant to warrants that are exercisable within 60 days of
October 1, 2008. Also includes 3,207,000 shares which are owned by Pro-Active Retirement Trust of which
Mr. Torres is the Trustee, and 317,000 shares which may be purchased pursuant to warrants that are exercisable
within 60 days of October 1, 2008 which are owned by Pro-Active Business Services, Inc. of which Mr. Torres
is the President.

(5) Includes 500,000 shares which may be purchased pursuant to warrants and stock options that are exercisable
within 60 days of October 1, 2008. Also includes 54,483 shares and 20,000 shares which may be purchased
pursuant to warrants that are exercisable within 60 days of October 1, 2008 which are owned by Northcom
Consulting, Inc. of which Mr. Watkins is the President.

(6) Includes 350,000 shares which may be purchased pursuant to stock options that are exercisable within 60 days
of October 1, 2008. Also includes 450,000 shares and 250,000 shares which may be purchased pursuant to
warrants that are exercisable within 60 days of October 1, 2008 which are owned by S. Robert August &
Associates of which Mr. August is the President.

(7) Includes 450,000 shares which may be purchased pursuant to stock options that are exercisable within 60 days
of October 1, 2008. Includes 10,000 shares which may be purchased pursuant to warrants that are exercisable
within 60 days of October 1, 2008.

(8) See footnotes (4) through (8). Includes an aggregate of 2,387,000 shares of Common Stock issuable upon the
exercise of warrants and stock options that are exercisable within 60 days of October 1, 2008.

(9) Includes shares subject to lock-up and vesting provisions. On November 1, 2006, ESP entered into a
Redemption, Lock-up and Vesting Agreement (the “Agreement”) with certain shareholders of ESP, including
Edward Torres and Lyle Watkins (collectively, the “Executive”). The purpose of the agreement was to provide
for redemption of a portion of their shares, and to lock-up the balance of their shares in order to facilitate ESP’s
ability to raise capital. According to the Agreement, in consideration for permitting ESP to redeem and lock-up
the shares, ESP conferred piggyback registration rights to the shares for the Executive as the shares are released
from lock-up. ESP has a right of first refusal to purchase the shares covered by the Agreement. This right

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specifies that before there can be any valid sale or transfer of any of the shares by the Executive, the Executive
must first offer his shares to ESP. The Executive has agreed that he will not directly or indirectly sell or
otherwise transfer or dispose of any of the shares during the lock-up period. Furthermore, during the
Executive’s employment with ESP, he has agreed that he will not sell, transfer, or assign more than 8% of the
released shares per month. Similarly, the Executive has also agreed that after the termination of his
employment with ESP for any reason, he will not sell, transfer or assign more than 4% of the released shares per
month. If, however, the Executive is terminated for cause, all unvested shares on the date of such termination
will immediately be cancelled. The following table lists the number of shares subject to lock-up and the
scheduled release dates:

Name of Executive Number of Shares Lock-Up Period and


Subject to Lock-Up Release Schedule
Edward L. Torres 4,007,000 11/1/06 : 801,400
11/1/07 : 801,400
11/1/08 : 801,400
11/1/09 : 801,400
11/1/10 : 801,400

Lyle A. Watkins 1,000,000 11/1/06 : 200,000


11/1/07 : 200,000
11/1/08 : 200,000
11/1/09 : 200,000
11/1/10 : 200,000

ENVIRONMENTAL SERVICE PROFESSIONALS, INC.


PRO FORMA FINANCIAL PROJECTIONS

Financial projections concerning the estimated operating results and financial condition of the
Company are included with the Memorandum. These projections are based on certain assumptions which
could prove to be inaccurate and which are subject to future conditions that may be beyond the control of
the Company, such as general industry conditions and the volume of business conducted. For example,
there is absolutely no assurance that the Company will conduct 250,000 inspections in 2009, or the
number of inspections indicated in subsequent years, although these are management’s best estimates at
this time of future inspection volume. The assumed number of inspections in the pro forma financial
projections determines the Company’s projected revenue, the growth of its trust, and other components of
the forecast. The Company may experience unanticipated costs, or anticipated revenues may not
materialize, resulting in lower revenues than forecasted. There is no assurance that the results illustrated
in the financial projections will in fact be realized by the Company. Any financial projections are
prepared by management of the Company and have not been examined or compiled by independent
certified public accountants. Counsel to the Company has had no participation in the preparation or
review of any financial projections prepared by the Company. Accordingly, neither the independent
certified public accountants nor counsel to the Company are able to provide any level of assurance on
them. There can be no assurance that the Company will earn net profits. There is no assurance that the
Company will be able to raise capital or that it will have sufficient capital to fund its business operations.
There is no assurance that the Company can obtain additional financing or capital from any source, or that
such financing or capital would be available to the Company on terms acceptable to it.

- 79 -
ESP Consolidated Pro-Forma Income Statement - Assumptions

Revenue

Total Revenue is based on the following assumptions:

2009 2010 2011 2012 2013


Safeguard
# of first time
(initial) EcoCheck 250,000 750,000 1,500,000 1,000,000 1,500,000
Inspection™s
Price per
$600 $650 $700 $750 $800
Inspection
# of annual
HLMP™ 0 250,000 1,000,000 2,500,000 3,500,000
inspections
Minimum # of
568 1,333 3,333 3,500 5,000
CEHI™
NPS
Total Trade
Association 10,000 10,000 10,000 10,000 10,000
Memberships
Annual Dues $225 $225 $225 $225 $225
Porter Valley
Software
New Sales of
2,000 2,000 1,000 1,000 1,000
InspectVue™
Unit Price $195 $195 $195 $195 $195
Annual License
5,000 6,000 7,000 7,000 7,000
Renewals
Unit Price $99 $99 $99 $99 $99
3rd Party
$115,000 $516,000 $1,112,000 $1,112,000 $1,112,000
Outsourcing (1)

(1) Includes revenue from 3rd party users of certain scaled down versions of InspectVue™ and inter-subsidiary licensing and
support charges of which are reflected in their respective expenses.

Cost of Goods Sold

Total Cost of Goods sold are calculated as a percentage of total revenue by entity. Safeguard is
calculated at 50% for all years. Both NPS and Porter Valley Software are each calculated at 30% for each
year.

Expenses

Total Expenses are calculated as a percentage of Total Revenue, for 2009 at 8%, for 2010 at 7%
and for 2011, 2012 and 2013 at 5% for each year.

Trust Consolidated Pro-Forma Income Statement - Assumptions

Trust Receipts

The receipts from the HLMP™ (Healthy Living Maintenance Program™) as a pre-paid
subscription based 10 year annual maintenance process. This pre-paid amount is $3,250 for 2009, $3,410
for 2010, $3,580 for 2011, $3,760 for 2012 and $3,950 for 2013.

It is assumed that for every Initial EcoCheck Inspection™ performed, respective HLMP sales are
made.

- 80 -
The interest generated is calculated on Total Receipts as a simple interest annualized at 5% for
each year of 2009 through 2013 inclusive.

Expenditures

The Safeguard expenditures are directly related to the estimated costs incurred by Safeguard to
perform the required number of annual inspections on any given year. These expenditures are assumed to
be $341 per inspection for 2010, $358 per inspection for 2011, $376 per inspection for 2012 and $395 per
inspection for 2013. All other expenditures are broken down and listed on the Pro-Forma.

ESP Consolidated Pro-Forma Balance Sheets - Assumptions

Consolidates all Assets, Liabilities and Equity from all entities including the Trust. Trust Liability
is comprised solely of the reserve to pay Safeguard for the required annual inspections.

Please note that these figures do not include the carry forward of any 2008 Assets, Liabilities or
Equity.

[See charts on following pages.]

- 81 -
ESP Consolidated Pro-Forma Income Statement

2009 2010 2011 2012 2013

Revenue
Safeguard - Initial
EcoCheck $ 150,000,000 $ 487,500,000 $ 1,050,000,000 $ 750,000,000 $ 1,200,000,000
Safeguard - HLMP $ - $ 85,250,000 $ 358,000,000 $ 940,000,000 $ 1,382,638,359
NPS $ 2,250,000 $ 2,250,000 $ 2,250,000 $ 2,250,000 $ 2,250,000

Porter Valley Software $ 1,000,000 $ 1,500,000 $ 2,000,000 $ 2,000,000 $ 2,000,000


Total Revenue $ 153,250,000 $ 576,500,000 $ 1,412,250,000 $ 1,694,250,000 $ 2,586,888,359
COGS
Safeguard - Initial
EcoCheck $ 75,000,000 $ 243,750,000 $ 525,000,000 $ 375,000,000 $ 600,000,000
Safeguard - HLMP $ 42,625,000 $ 179,000,000 $ 470,000,000 $ 691,319,180
NPS $ 675,000 $ 675,000 $ 675,000 $ 675,000 $ 675,000

Porter Valley Software $ 300,000 $ 450,000 $ 600,000 $ 600,000 $ 600,000


Total COGS $ 75,975,000 $ 287,500,000 $ 705,275,000 $ 846,275,000 $ 1,292,594,180
Gross Profit $ 77,275,000 $ 289,000,000 $ 706,975,000 $ 847,975,000 $ 1,294,294,180
Expenses
Safeguard $ 11,250,000 $ 36,562,500 $ 63,000,000 $ 75,000,000 $ 120,000,000
NPS $ 900,000 $ 900,000 $ 900,000 $ 900,000 $ 900,000

Porter Valley Software $ 400,000 $ 600,000 $ 800,000 $ 800,000 $ 800,000


Total Expenses $ 12,550,000 $ 38,062,500 $ 64,700,000 $ 76,700,000 $ 121,700,000
Net Income Before
Taxes $ 64,725,000 $ 250,937,500 $ 642,275,000 $ 771,275,000 $ 1,172,594,180
Taxes @ 50% $ 32,362,500 $ 125,468,750 $ 321,137,500 $ 385,637,500 $ 586,297,090

Net Income After Tax $ 32,362,500 $ 125,468,750 $ 321,137,500 $ 385,637,500 $ 586,297,090


Trust Consolidated Pro-Forma Income Statement

2009 2010 2011 2012 2013

Trust Receipts
HLMP $ 812,500,000 $ 2,557,500,000 $ 5,370,000,000 $ 3,760,000,000 $ 5,925,000,000
Interest $ 30,468,750 $ 137,704,297 $ 372,362,571 $ 577,761,346 $ 823,897,053
Total Receipts $ 842,968,750 $ 2,695,204,297 $ 5,742,362,571 $ 4,337,761,346 $ 6,748,897,053
Expenditures
Safeguard $ - $ 85,250,000 $ 358,000,000 $ 940,000,000 $ 1,382,638,359
Affinity (15%) $ 4,570,313 $ 20,655,645 $ 55,854,386 $ 86,664,202 $ 123,584,558
Re-Investment (5%) $ 1,523,438 $ 4,131,129 $ 9,309,064 $ 8,666,420 $ 12,358,456
Trustee (1%) $ 8,429,688 $ 26,952,043 $ 57,423,626 $ 43,377,613 $ 67,488,971
Total Expenditures $ 14,523,438 $ 136,988,816 $ 480,587,076 $ 1,078,708,235 $ 1,586,070,344
Sub-Total $ 828,445,313 $ 2,558,215,480 $ 5,261,775,495 $ 3,259,053,110 $ 5,162,826,710
Other Expenditures
Management $ 319,922 $ 481,965 $ 1,303,269 $ 1,213,299 $ 1,730,184
Administration $ 594,141 $ 895,078 $ 2,420,357 $ 2,253,269 $ 3,213,199
Total Other
Expenditures $ 914,063 $ 1,377,043 $ 3,723,626 $ 3,466,568 $ 4,943,382
Beginning Balance $ - $ 827,531,250 $ 3,384,369,688 $ 8,642,421,557 $ 11,898,008,099

Total Trust Balance


$ 827,531,250 $ 3,384,369,688 $ 8,642,421,557 $ 11,898,008,099 $ 17,055,891,427
ESP Consolidated Pro-Forma Balance Sheets

2009 2010 2011 2012 2013

Assets:
Cash $ 29,862,500 $ 150,331,250 $ 471,468,750 $ 857,106,250 $ 1,443,403,340
Trust Account $ 827,531,250 $ 3,384,369,688 $ 8,642,421,557 $ 11,898,008,099 $ 17,055,891,427
Building $ 3,500,000 $ 3,500,000 $ 3,500,000 $ 3,500,000 $ 3,500,000
Other Assets $ 1,000,000 $ 6,000,000 $ 6,000,000 $ 6,000,000 $ 6,000,000
Total Assets: $ 861,893,750 $ 3,544,200,938 $ 9,123,390,307 $ 12,764,614,349 $ 18,508,794,766

Liabilities:
Trust Liability $ 812,500,000 $ 3,324,750,000 $ 8,353,750,000 $ 11,235,750,000 $ 15,906,750,000
Total Liabilities: $ 812,500,000 $ 3,324,750,000 $ 8,353,750,000 $ 11,235,750,000 $ 15,906,750,000

Equity:
Equity from Trust $ 15,031,250 $ 59,619,688 $ 288,671,557 $ 662,258,099 $ 1,149,141,427
Paid in Capital $ 2,000,000 $ 2,000,000 $ 2,000,000 $ 2,000,000 $ 2,000,000
Retained Earnings $ 32,362,500 $ 157,831,250 $ 478,968,750 $ 864,606,250 $ 1,450,903,340
Total Equity: $ 49,393,750 $ 219,450,938 $ 769,640,307 $ 1,528,864,349 $ 2,602,044,766
Total Liabilites &
Equity: $ 861,893,750 $ 3,544,200,938 $ 9,123,390,307 $ 12,764,614,349 $ 18,508,794,766
ADDITIONAL INFORMATION

This Memorandum does not purport to restate all of the relevant provisions of the documents
referred to or pertinent to the matters discussed herein, all of which must be read for a complete
description of the terms relating to an investment in ESP. Such documents are available for inspection
during regular business hours at our office by appointment, and upon written request, copies of
documents not attached to this Memorandum will be provided to prospective investors. The Company
also files public reports with the Securities and Exchange Commission (“SEC”). Those reports may be
examined at the SEC’s website at www.sec.gov. Each prospective investor is invited to ask questions of,
and receive answers from, representatives of ESP. Each prospective investor is invited to obtain such
information concerning us and this offering, to the extent we possess the same or can acquire it without
unreasonable effort or expense, as such prospective investor deems necessary to verify the accuracy of the
information referred to in this Memorandum. Arrangements to ask such questions or obtain such
information should be made by communicating with our Chief Executive Officer at our executive offices.
Our telephone number for this purpose is (760) 327-5284. Please be advised that prospective investors
may not rely on any oral or written representations that are inconsistent with this Memorandum.

The offering of the Units is made solely by this Memorandum and the exhibits hereto. The
prospective investors have a right to inquire about, request, and receive any additional information they
may deem appropriate or necessary to further evaluate this offering and to make an investment decision.
Representatives of ESP may prepare written responses to such inquiries or requests if the information
requested is available. The use of any documents other than those prepared and expressly authorized by
us in connection with this offering are not to be relied upon by prospective investors.

ONLY INFORMATION OR REPRESENTATIONS CONTAINED HEREIN MAY BE RELIED


UPON AS HAVING BEEN AUTHORIZED BY ESP. NO PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS MEMORANDUM IN CONNECTION WITH THE OFFER BEING MADE
HEREBY, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. INVESTORS
ARE CAUTIONED NOT TO RELY UPON ANY INFORMATION NOT EXPRESSLY SET FORTH IN
THIS MEMORANDUM. THE INFORMATION PRESENTED IS AS OF THE DATE ON THE
COVER HEREOF UNLESS ANOTHER DATE IS SPECIFIED, AND NEITHER THE DELIVERY OF
THIS MEMORANDUM NOR ANY SALE HEREUNDER SHALL CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION PRESENTED SUBSEQUENT TO
SUCH DATE(S).
EXHIBIT A
LIBACSM BUSINESS PROCESS FLOW CHART
Exhibit A

PRIVATE & CONFIDENTIAL INFORMATION


Not for distribution to the general public

LIBACSM Business Process Flow Chart

Investors Investors Investors Investors

Securities Escrow

Life Settlement
Securities
Escrow

The ESP LIBACSM Fund, LLC


SM will be owned by Investors
ESP LIBAC Fund, LLC Until the Investment Threshold ESP
is Attained by ESP or
Voluntary Conversions occur
Grantor Beneficiary
Preferred Stock

MASTER TRUST (Investment Threshold)


O R
(Holding the Portfolio of LIBACSM Assets) (Voluntary Conversion)

REVOCABLE TRUST Common Stock


SM
(Making up the LIBAC Assets) Preferred Stock
Converts
to 17.24 Shares
Life Settlement Single Premium of Common Stock
Insurance Immediate
(per Preferred
Policies Annuities
Share Issued)
once Investment
Threshold is
Achieved or Voluntary
Conversion is made

For more detailed information regarding LIBACSM structures & strategies, including a full due diligence
overview, a legal & tax opinion letter, and CGP’s pending provisional patent application, filed with the U.S.
Patent Office on February 1, 2008, a non-disclosure agreement (“NDA”) must be executed.
THIS DOCUMENT CONTAINS PRIVATE AND CONFIDENTIAL INFORMATION AND IS NOT TO BE DISTRIBUTED TO THE GENERAL
PUBLIC. THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY.
IT IS FOR INFORMATION AND EVALUATION PURPOSES ONLY. AN OFFER OF SECURITIES CAN ONLY BE MADE TO QUALIFIED AND
SUITABLE INVESTORS BY WAY OF A PRIVATE PLACEMENT MEMORANDUM AND ONLY IN STATES WHERE PERMITTED BY
LAW. ALL MATERIAL STATEMENTS ARE BACKED BY SOURCES DEEMED TO BE RELIABLE, ALTHOUGH NO ACCURACY CAN BE
GUARANTEED. THIS DOCUMENT IS NOT A RESEARCH REPORT.
EXHIBIT B
SERIES A PREFERRED STOCK
CERTIFICATE OF DESIGNATION
ROSS MILLER
Secretary of State
204 North Carson Street, Ste 1
Carson City, Nevada 89701-4299
(775) 684 5708
Website: www.nvsos.gov

Certificate of Designation
(PURSUANT TO NRS 78.1955)

USE BLACK INK ONLY - DO NOT HIGHLIGHT ABOVE SPACE IS FOR OFFICE USE ONLY

Certificate of Designation For


Nevada Profit Corporations
(Pursuant to NRS 78.1955)
1. Name of corporation:
Environmental Services Professionals, Inc.

2. By resolution of the board of directors pursuant to a provision in the articles of incorporation this
certificate establishes the following regarding the voting powers, designations, preferences,
limitations, restrictions and relative rights of the following class or series of stock.
1.Designation

The number of authorized shares of Preferred Stock is 1,000,000, 1,000,000 of which are hereby designated
as “Series A Preferred Stock,” with the rights, preferences, privileges, and restrictions set forth in this
Certificate.

2.Dividends

The holders of the Series A Preferred Stock will participate with the Common Stock on an as-converted
basis with respect to any dividends which may be declared by the Board of Directors. (continued)

3. Effective date of filing: (optional)


(must not be later than 90 days after the certificate is filed)
4. Signature: (required)

X
Signature of Officer

Filing Fee: $175.00


IMPORTANT: Failure to include any of the above information and submit with the proper fees may cause this filing to be rejected.
Nevada Secretary of State Stock Designation
This form must be accompanied by appropriate fees.
Reset Revised: 7-1-08
Certificate of Designation, page 2
Environmental Service Professionals, Inc.

3. Voting Rights

The Series A Preferred Stock has no voting rights. Shares of Series A Preferred Stock
converted into shares of Common Stock will have the same voting rights as other Common Stock.

4. Automatic Conversion

Each share of the Series A Preferred Stock will automatically convert into 17.24 shares of
Common Stock, subject to possible adjustment in accordance with Section 6 of this Certificate, at
any time six months or more after the date that the Series A Preferred Stock is issued (the “Six
Month Period”), once the Company’s Common Stock has thereafter (i.e. after the expiration of
the Six Month Period) traded at a closing bid price of $1.50 per share or more for a period of 20
consecutive trading days, to the extent that the Series A Preferred Stock has not otherwise been
redeemed or converted. Fractional shares of Common Stock will not be issued and upon a
conversion will be rounded down to the nearest whole number.

5. Conversion

Each holder of Series A Preferred Stock may, at his sole option at any time after the
Series A Preferred Stock is issued and, if applicable, until it is redeemed by the Company,
convert any or all of his shares of Series A Preferred Stock into shares of Common Stock at a
conversion rate of 17.24 shares of Common Stock for each share of Series A Preferred Stock
converted. Fractional shares of Common Stock will not be issued and upon a conversion will be
rounded down to the nearest whole number. The Company has no right to require a conversion of
any of the shares of Series A Preferred Stock.

In order to exercise the conversion privilege, a holder shall give written notice to the
Company stating that such holder elects to convert one or more shares of Series A Preferred
Stock and the number of such shares to be converted. The notice must be accompanied by the
certificate evidencing the shares of Series A Preferred Stock being converted. If less than all
shares evidenced by such certificate are converted, a new certificate for such remaining shares of
Series A Preferred Stock will be issued by the Company. Shares of Series A Preferred Stock so
converted will be deemed to have been converted immediately prior to the close of business on
the date of receipt of such notice, even if the Company’s stock transfer books are at that time
closed, and such holder will be treated for all purposes as the record owner of the shares
deliverable upon such conversion as of the close of business on such date. The Company will
issue certificates for the Common Stock into which the Series A Preferred Stock is converted or
as soon as practicable after the effective date of the conversion. If less than all of the Series A
Preferred Stock evidenced by a certificate is converted, then upon the surrender of said certificate,
a new certificate of said Series A Preferred Stock for the remaining shares of Series A Preferred
Stock will be issued by the Company.

The issue of Common Stock certificates on conversion shall be made without charge to
the holder for any tax in respect of the issue thereof, except taxes, if any, on the income of the
holder. The Company shall not, however, be required to pay any tax which may be payable in

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respect of any transfer involved in the issue and delivery of shares of Common Stock in any name
other than that of the holder.

6. Adjustment of Shares and Price

The number of shares of Common Stock into which the Series A Preferred Stock is
convertible pursuant to Paragraphs 4 and 5 herein is subject to proportionate adjustment from
time to time in the event (i) the Company subdivides or combines its outstanding Common Stock
into a greater or smaller number of shares, including stock splits and stock dividends payable in
stock, rights or convertible securities; or (ii) of a reorganization or reclassification of the
Company’s Common Stock, the consolidation or merger of the Company with or into another
company, the sale, conveyance or other transfer of substantially all of the Company’s assets to
another corporation or other similar event, whereby securities or other assets are issuable or
distributable to the holders of the outstanding Common Stock of the Company upon the
occurrence of any such event; or (iii) of the issuance by the Company to the holders of its
Common Stock of securities convertible into, or exchangeable for, such shares of Common Stock.

7. Liquidation Preference

(a) In the event of any liquidation, dissolution or winding up of the Company, the
holders of Series A Preferred Stock then outstanding shall be entitled to be paid, out of the assets
of the Company available for distribution to its shareholders, a preference (the “Liquidation
Preference”), whether from capital surplus or earnings, before any payment or declaration and
setting apart for payment of any amount is made with respect to the Common Stock of the
Company, and pro rata with the outstanding Series A Preferred Stock based on the relative
aggregate amount of liquidation preference of the outstanding shares of each of said classes of
Preferred Stock. The amount of the Liquidation Preference shall be ten dollars ($10.00) per
share. If the assets of the Company available for distribution to its shareholders are insufficient to
pay the full Liquidation Preference to holders of the Series A Preferred Stock, such holders of
said Preferred Stock shall share ratably in any distribution of assets according to the respective
amounts which would be payable with respect to the shares held by them upon distribution if all
amounts payable with respect to said shares were paid in full.

(b) The following events shall be considered a liquidation under this Section 7:

(i) any consolidation or merger of the Company with or into any other
corporation or other entity or person, or any other corporate reorganization, in which the
outstanding shares of the Company are exchanged for securities or other consideration issued by
or on behalf of the acquiring corporation or as a result of which the shareholders of the Company
immediately prior to such transaction hold less than 50% of the equity securities of the surviving
or resulting corporation, excluding any consolidation or merger effected exclusively to change the
domicile of the Company and any consolidation or merger affected exclusively with an entity that
has no meaningful business or operations for the purpose of creating a public market for the
Company’s Common Stock (an “Acquisition”); or

(ii) a sale, lease or other disposition of all or substantially all of the assets of
the Company (an “Asset Transfer”).

(c) In any of such events, if the consideration received is other than cash, its value
will be deemed to be its fair market value as determined in good faith by the Board of Directors.
Any securities shall be valued as follows:

-3-
(i) Securities not subject to investment letter or other similar restrictions on
free marketability covered by (ii) below:

(1) If traded on a securities exchange or through the Nasdaq


National Market, the value shall be deemed to be the average of the closing prices of the
securities on such quotation system over the thirty (30) day period ending three (3) days prior to
the closing of such Acquisition or Asset Transfer;

(2) If actively traded over-the-counter, the value shall be deemed to


be the average of the closing bid or sale prices (whichever is applicable) over the thirty (30) day
period ending three (3) days prior to the closing of such Acquisition or Asset Transfer; and

(3) If there is no active public market, the value shall be the fair
market value thereof, as determined by the Board of Directors.

(ii) The method of valuation of securities subject to investment letter or other


restrictions on free marketability (other than restrictions arising solely by virtue of a shareholder’s
status as an affiliate or former affiliate) shall be to make an appropriate discount from the market
value determined as above in (i) (1), (2) or (3) to reflect the approximate fair market value
thereof, as determined by the Board of Directors.

8. Redemption

The Series A Preferred Stock is redeemable by the Company only upon the mutual
written agreement of the Company and the holder of the Series A Preferred Stock to be redeemed,
and only in accordance with the terms and conditions of said agreement.

9. Notices

Any notice required by the provisions hereof to be given to the holders of shares of Series
A Preferred Stock shall be deemed given when personally delivered to such holder or five
business days after the same has been deposited in the United States mail, certified or registered
mail, return receipt requested, postage prepaid, and addressed to each holder of record at his
address appearing on the books of the Company.

-4-
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (as amended, restated,


supplemented or otherwise modified from time to time, the “Agreement”) is entered into as of [
], 2008 by and between Environmental Service Professionals, Inc., a Nevada corporation
(together with its successors and assigns, the “Corporation”), and [ ] the “Investor”).

RECITALS

This Agreement is made pursuant to the Subscription Agreement, of even date herewith,
by and between the Investor and the Corporation (the “Subscription Agreement”).

In consideration of the premises and the mutual covenants and obligations hereinafter set
forth and other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

Section 1. (a) Definitions. As used herein, each of the following terms shall have the
meaning set forth or referred to below:

“Affiliate” of any Person (hereinafter “first Person”) shall mean (i) any other Person who,
directly or indirectly, is in Control of, is Controlled by or is under common Control with such
first Person; (ii) any Person who is a director or executive officer (as defined in Rule 3b-7
promulgated under the Exchange Act) of such first Person or any Person described in clause (i)
above; or (iii) any Person who is an immediate family member of any Person described in clause
(ii) above.

“Business Day” shall mean any day that is not a Saturday, Sunday or legal holiday on
which banking institutions in the State of New York are authorized or obligated to close.

“Common Stock” shall mean shares of common stock, par value $0.001 per share, of the
Corporation, as constituted on the date hereof, and any stock into which such Common Stock
shall have been changed or any stock resulting from any reclassification of such Common Stock.

“Control” of a Person shall mean the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person, whether through the ownership of
voting securities, by contract or otherwise; and the terms “Controlling” and “Controlled” have
meanings correlative to the foregoing.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

“FINRA” shall mean the Financial Industry Regulatory Authority, or any successor
thereof.

“Holders” shall mean Investor who holds Registrable Shares.

“Interruption Period” shall have the meaning set forth in Section 5(i) hereof.

“Losses” shall have the meaning set forth in Section 8(a) hereof.

-1-
“Person” shall mean any natural person, corporation, limited partnership, limited liability
company, general partnership, joint stock company, joint venture, association, company, trust,
bank, trust company, land trust, business trust or other organization whether or not a legal entity,
and any government or agency or political subdivision thereof

“Piggyback Registration” shall have the meaning set forth in Section 3(a) hereof.

“Proposing Holders” shall have the meaning set forth in Section 3(b) hereof.

“Prospectus” shall mean the prospectus included in any Registration Statement (including
a prospectus that discloses information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Shares covered by such Registration Statement and all
other amendments and supplements to such prospectus, including post-effective amendments,
and all material incorporated by reference or deemed to be incorporated by reference in such
prospectus.

“Registrable Shares” shall mean (a) the shares of Common Stock of the Corporation
obtained by the Investor through the conversion of the Series A Preferred Stock issuable
pursuant to the Subscription Agreement and (b) any other securities issued and issuable with
respect to any such shares described in clause (a) above by way of a stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger, consolidation, sale of
assets or other reorganization (it being understood that, for purposes of this Agreement, a Person
shall be deemed to be a holder of Registrable Shares whenever such Person has the right to
acquire or obtain from the Corporation any Registrable Shares, whether or not such acquisition
has actually been effected); if and so long as (1) such Shares have not been sold to or through a
broker or dealer or underwriter in a public distribution or a public securities transaction and (2)
such Shares have not been sold in a transaction exempt from the registration and prospectus
delivery requirements of the Securities Act under Section 4(l) thereof so that all transfer
restrictions and restrictive legends with respect to such Shares are removed upon the
consummation of such sale and the seller and purchaser of such shares of Common Stock shall
have received an opinion of counsel for the Corporation, which shall be in form and content
reasonably satisfactory to the seller and purchaser and their respective counsel, to the effect that
such shares of Common Stock in the hands of the purchaser are freely transferable without
restriction or registration under the Securities Act in any public or private transaction.

“Registration” shall mean registration under the Securities Act of an offering of


Registrable Shares pursuant to a Piggyback Registration.

“Registration Statement” shall mean any registration statement of the Corporation under
the Securities Act that covers any of the Registrable Shares pursuant to the provisions of this
Agreement, including the related Prospectus, all amendments and supplements to such
registration statement (including pre- and post-effective amendments), all exhibits thereto and all
material incorporated by reference or deemed to be incorporated by reference in such registration
statement.

-2-
“SEC” shall mean the United States Securities and Exchange Commission, or any
successor thereof.

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Shares” shall mean shares of Common Stock.

“underwritten registration or underwritten offering” shall mean a registration under the


Securities Act in which securities of the Corporation are sold to an underwriter for reoffering to
the public.

(b) Words used herein, regardless of the number and gender specifically used,
shall be deemed and construed to include any other number, singular or plural, and any other
gender, masculine, feminine or neuter, as the context requires. The word “or” is not exclusive and
the word “including” means “including without limitation.” Unless otherwise specified, all
accounting terms used in this Agreement shall be interpreted in accordance with generally
accepted accounting principles in the United States as in effect from time to time, applied on a
consistent basis.

Section 2. [RESERVED]

Section 3. Piggyback Registration. (a) If at any time the Corporation proposes to file
a registration statement under the Securities Act with respect to a public offering of Shares for its
own account or for the account of any holder of Shares (other than a registration statement (i) on
Form S-8 or any successor form thereto, (ii) filed solely in connection with a dividend
reinvestment plan or employee benefit plan covering officers or directors of the Corporation or
its Affiliates or (iii) on Form S-4 or any successor form thereto, in connection with a merger,
acquisition, exchange offer or similar corporate transaction), then the Corporation shall give
written notice of such proposed filing to the Holders at least ten (10) Business Days before the
anticipated filing date. Such notice shall offer the Holders the opportunity to register such
amount of Registrable Shares as they may request (a “Piggyback Registration”). Subject to
Section 3(b) hereof, the Corporation shall include in each such Piggyback Registration all
Registrable Shares with respect to which the Corporation has received written requests for
inclusion therein within seven (7) Business Days after such notice has been given to the
Holders. Each Holder shall be permitted to withdraw all or any portion of the Registrable Shares
of such Holder from a Piggyback Registration at any time prior to the effective date of such
Piggyback Registration.

(b) The Corporation shall permit the Holders to include all such Registrable
Shares on the same terms and conditions as any similar securities, if any, of the Corporation
included therein. Notwithstanding the foregoing, in the event that any Piggyback Registration
involves an underwritten offering and the managing underwriter(s) participating in such offering
advise in writing to the Holders requesting registration that the total amount of securities
requested to be included in such Piggyback Registration exceeds the amount which can be sold in
(or during the time of) such offering without delaying or jeopardizing the success of the offering
(including the price per share of the securities to be sold), then the amount of securities to be
offered for the account of the Corporation and of any holder of securities (including the Holders)
shall be reduced to a number deemed satisfactory by such managing underwriter(s), provided that

-3-
the securities to be excluded shall be determined on a pro rata basis, based upon the number or
amount of securities requested to be registered by such Holders and the Corporation, respectively.

(c) The Corporation shall keep such Registration Statement continuously


effective under the Securities Act until the date which is the earlier date of when (i) the
Registrable Securities included therein have been sold or (ii) such Registrable Securities may be
sold immediately without registration under the Securities Act and without volume restrictions
pursuant to Rule 144, pursuant to a written opinion letter from counsel to the Corporation to such
effect, addressed and acceptable to the Corporation’s transfer agent and the Holders. Within five
(5) Business Days of the date that such Registration Statement is declared effective, the
Corporation shall cause its counsel to issue a blanket opinion to the transfer agent stating that the
shares are subject to an effective registration statement and can be reissued free of restrictive
legend upon notice of a sale by the Holders thereof and confirmation by such Holders that they
have complied with the prospectus delivery requirements. Copies of the blanket opinion required
by this Section 3(c) shall be delivered to the Holders within the time frame set forth above.

Section 4. [RESERVED]

Section 5. Registration Procedures. In connection with the registration obligations of


the Corporation pursuant to and in accordance with Section 3 hereof (and subject to Section 3
hereof), the Corporation shall use best efforts to effect such registration to permit the sale of
Registrable Shares in accordance with the intended method or methods of disposition thereof,
and pursuant thereto the Corporation shall as expeditiously as possible (but subject to Section 3
hereof):

(a) prepare and file with the SEC a Registration Statement for the sale of the
Registrable Shares on any form for which the Corporation then qualifies or which counsel for the
Corporation shall deem appropriate, provided such form is not inconsistent with the Holders’
intended method or methods of distribution thereof, if applicable, and use best efforts to cause
such Registration Statement to become effective and remain effective as provided herein;

(b) prepare and file with the SEC such amendments (including post-effective
amendments) to such Registration Statement, and such supplements to the related Prospectus, as
may be required by the applicable rules, regulations or instructions under the Securities Act
during the applicable period, in accordance with the intended methods of disposition specified by
the holders of the Registrable Shares covered by such Registration Statement, make generally
available earnings statements satisfying the provisions of Section 11(a) of the Securities Act
(provided that the Corporation shall be deemed to have compiled with this clause if it has
complied with Rule 158 under the Securities Act), and cause the related Prospectus as so
supplemented to be filed pursuant to Rule 424 under the Securities Act, if necessary;

(c) notify the holders of any Registrable Shares covered by such Registration
Statement promptly (i) when a Registration Statement, Prospectus or Prospectus supplement or
pre-effective or post-effective amendment thereto has been filed, and, with respect to such
Registration Statement or any post-effective amendment, when the same has become effective,
(ii) of any request by the SEC for amendments or supplements to such Registration Statement or
the related Prospectus or for additional information regarding such holders, (iii) of the issuance by
the SEC of any stop order suspending the effectiveness of such Registration Statement or the

-4-
initiation of any proceedings for that purpose, (iv) of the receipt by the Corporation of any
notification with respect to the suspension of the qualification or exemption from qualification of
any of the Registrable Shares for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose and (v) of the happening of any event that requires the making of any
changes in such Registration Statement, Prospectus or documents incorporated or deemed
incorporated therein by reference so that they will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or necessary to make the
statements therein not misleading;

(d) use best efforts to obtain the withdrawal of any order suspending the
effectiveness of such Registration Statement, or the lifting of any suspension of the qualification
or exemption from qualification of any Registrable Shares for sale in any jurisdiction in the
United States;

(e) prior to any public offering of Registrable Shares covered by such


Registration Statement, use best efforts to register or qualify such Registrable Shares for offer and
sale under the securities or Blue Sky laws of such jurisdictions as the holders of such Registrable
Shares shall reasonably request in writing; provided, however, that the Corporation shall in no
event be required to qualify generally to do business as a foreign corporation or as a dealer in any
jurisdiction where it is not at the time so qualified or to execute or file a general consent to service
of process in any such jurisdiction where it has not theretofore done so or to take any action that
would subject it to general service of process or taxation in any such jurisdiction where it is not
then subject;

(f) upon the occurrence of any event contemplated by Section 5(c)(v) above,
prepare a supplement or post-effective amendment to such Registration Statement or the related
Prospectus or any document incorporated or deemed to be incorporated therein by reference and
file any other required document so that, as thereafter delivered to the purchasers of the
Registrable Shares being sold thereunder (including upon the termination of any Delay Period),
such Prospectus will not contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading;

(g) use its best efforts to cause all Registrable Shares covered by such
Registration Statement to be listed on each securities exchange or trading market on which similar
securities issued by the Corporation are then listed or quoted;

(h) on or before the effective date of such Registration Statement, provide the
transfer agent of the Corporation for the Registrable Shares with printed certificates for the
Registrable Shares covered by such Registration Statement, which are in a form eligible for
deposit with The Depository Trust Company;

(i) The Corporation may require each holder of Registrable Shares covered by
a Registration Statement to furnish such information in writing regarding such holder and such
holder’s intended method of disposition of such Registrable Shares as it may from time to time
reasonably request in writing. Each holder of Registrable Shares covered by a Registration
Statement agrees that, upon receipt of any notice from the Corporation of the happening of any
event of the kind described in Section 5(c)(ii), 5(c)(iii), 5(c)(iv) or 5(c)(v) hereof, that such holder

-5-
shall forthwith discontinue disposition of any Registrable Shares covered by such Registration
Statement or the related Prospectus until receipt of the copies of the supplement or amendment to
such Prospectus or any document incorporated or deemed to be incorporated therein by reference,
contemplated by Section 5(f) hereof, or until such holder is advised in writing by the Corporation
that the use of the applicable Prospectus may be resumed (such period during which disposition is
discontinued being an “Interruption Period”) and, if requested by the Corporation, the holder shall
deliver to the Corporation (at the expense of the Corporation) all copies then in its possession,
other than permanent file copies then in such holder’s possession, of the Prospectus covering such
Registrable Shares at the time of receipt of such request. Each holder of Registrable Shares
covered by a Registration Statement further agrees not to utilize any material other than the
applicable current preliminary prospectus or Prospectus in connection with the offering and/or
sale of such Registrable Shares.

Section 6. Registration Expenses. Whether or not any Registration Statement is filed


or becomes effective, the Corporation shall pay all costs, fees and expenses incident to the
Corporation’s performance of or compliance with this Agreement, including (i) all registration
and filing fees, including FINRA filing fees and (ii) all fees and expenses of compliance with
securities or Blue Sky laws, including reasonable fees and disbursements of counsel in
connection therewith. Notwithstanding the foregoing, any discounts, commissions or brokers’
fees or fees of similar securities industry professionals and any transfer taxes relating to the
disposition of the Registrable Shares by a Holder, will be payable by such Holder and the
Corporation will have no obligation to pay any such amounts.

Section 7. [RESERVED]

Section 8. Indemnification.

(a) Indemnification by the Corporation. The Corporation shall, without


limitation as to time, indemnify and hold harmless, to the full extent permitted by law, each
holder of Registrable Shares whose Registrable Shares are covered by a Registration Statement or
Prospectus, the shareholders, members, partners, officers, directors and agents and employees of
each of them, each Person who controls each such holder (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) and the shareholders, members, partners,
officers, directors, agents and employees of each such controlling Person, to the fullest extent
lawful, from and against any and all losses, claims, damages, liabilities, judgments, costs
(including, without limitation, costs of investigation, preparation and reasonable attorneys’ fees)
and expenses (collectively, “Losses”), as incurred, arising out of or based upon any untrue or
alleged untrue statement of a material fact contained in such Registration Statement or Prospectus
or any amendment or supplement thereto, or any preliminary prospectus, or arising out of or
based upon any omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the same are based
upon information furnished in writing to the Corporation by or on behalf of such holder expressly
for use therein.

(b) Indemnification by Holders. In connection with any Registration


Statement in which a Holder is participating, such Holder shall indemnify and hold harmless, to
the full extent permitted by law, the Corporation, the other Holders, and their respective
shareholders, members, partners, directors, officers, agents and employees, each Person who

-6-
controls the Corporation (within the meaning of Section 15 of the Securities Act and Section 20
of the Exchange Act) and the shareholders, members, partners, directors, officers, agents or
employees of such controlling Persons, from and against any and all Losses arising out of or
based upon any untrue or alleged untrue statement of a material fact contained in such
Registration Statement or the related Prospectus or any amendment or supplement thereto, or any
preliminary prospectus, or arising out of or based upon any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements therein not
misleading, to the extent, but only to the extent, that such untrue or alleged untrue statement or
omission or alleged omission is based upon any information furnished in writing by or on behalf
of such Holder to the Corporation expressly for use in such Registration Statement or Prospectus.
Each Holder’s indemnity obligations under this Section 8 shall be limited to the total sales
proceeds (net of all underwriting discounts and commissions) actually received by such Holder in
connection with the applicable offering.

(c) Conduct of Indemnification Proceedings. If any Person shall be entitled to


indemnity hereunder (an “indemnified party”), such indemnified party shall give prompt notice to
the party from which such indemnity is sought (the “indemnifying party”) of any claim or of the
commencement of any proceeding with respect to which such indemnified party seeks
indemnification or contribution pursuant hereto; provided, however, that the delay or failure to so
notify the indemnifying party shall not relieve the indemnifying party from any obligation or
liability except to the extent that the indemnifying party has been prejudiced by such delay or
failure. The indemnifying party shall have the right, exercisable by giving written notice to an
indemnified party promptly after the receipt of written notice from such indemnified party of such
claim or proceeding, to assume, at the indemnifying party’s expense, the defense of any such
claim or proceeding, with counsel reasonably satisfactory to such indemnified party; provided,
however, that (i) an indemnified party shall have the right to employ separate counsel in any such
claim or proceeding and to participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless: (1) the indemnifying party
agrees to pay such fees and expenses; (2) the indemnifying party fails promptly to assume the
defense of such claim or proceeding or fails to employ counsel reasonably satisfactory to such
indemnified party; or (3) the named parties to any proceeding (including impleaded parties)
include both such indemnified party and the indemnifying party, and such indemnified party shall
have been advised by counsel that there may be one or more legal defenses available to it that are
inconsistent with those available to the indemnifying party or that a conflict of interest is likely to
exist among such indemnified party and any other indemnified parties (in which case the
indemnifying party shall not have the right to assume the defense of such action on behalf of such
indemnified party); and (ii) subject to clause (3) above, the indemnifying party shall not, in
connection with any one such claim or proceeding or separate but substantially similar or related
claims or proceedings in the same jurisdiction, arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one firm of attorneys (together
with appropriate local counsel) at any time for all of the indemnified parties, or for fees and
expenses that are not reasonable. Whether or not such defense is assumed by the indemnifying
party, such indemnified party shall not be subject to any liability for any settlement made without
its consent. The indemnifying party shall not consent to entry of any judgment or enter into any
settlement unless (i) there is no finding or admission of any violation of any rights of any Person
and no effect on any other claims that may be made against the indemnified party, (ii) the sole
relief provided is monetary damages that are paid in full by the indemnifying party and (iii) such
judgment or settlement includes as an unconditional term thereof the giving by the claimant or

-7-
plaintiff to such indemnified party of a release, in form and substance reasonably satisfactory to
the indemnified party, from all liability in respect of such claim or litigation for which such
indemnified party would be entitled to indemnification hereunder.

(d) Contribution. If the indemnification provided for in this Section 8 is


unavailable to an indemnified party in respect of any Losses (other than in accordance with its
terms), then each applicable indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a result of such
Losses, in such proportion as is appropriate to reflect the relative fault of the indemnifying party,
on the one hand, and such indemnified party, on the other hand, in connection with the actions,
statements or omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such indemnifying party, on the one hand, and indemnified
party, on the other hand, shall be determined by reference to, among other things, whether any
action in question, including any untrue statement of a material fact or omission or alleged
omission to state a material fact, has been taken by, or relates to information supplied by, such
indemnifying party or indemnified party, and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent any such action, statement or omission. The
amount paid or payable by a party as a result of any Losses shall be deemed to include any legal
or other fees or expenses incurred by such party in connection with any investigation or
proceeding. The parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 8(d) were determined by pro rata allocation or by any other method of
allocation that does not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this Section 8(d), an indemnifying party that is a Holder shall
not be required to contribute any amount which is in excess of the amount by which the total
proceeds (net of all underwriting discounts and commissions) received by such Holder from the
sale of the Registrable Shares sold by such Holder in the applicable offering exceeds the amount
of any damages that such indemnifying party has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

Section 9. Transferability of Registration Rights. The registration rights set forth in


this Agreement are transferable to each transferee of Registrable Shares who receives any
Registrable Shares, subject to compliance with any transfer restrictions contained in any
agreement with the Corporation. Each subsequent holder of Registrable Shares must consent in
writing to be bound by the terms and conditions of this Agreement in order to acquire the rights
granted pursuant to this Agreement.

Section 10. Miscellaneous.

(a) Termination. This Agreement and the obligations of the Corporation and
the Holders (other than Section 8 hereof) shall terminate on the first date on which no Registrable
Shares remain outstanding.

(b) Notices. All notices, demands, requests or other communications that may
be or are required to be given, served, or sent by any party to any other party pursuant to this
Agreement shall be in writing and shall be given in accordance with the notice provisions of the
Stock Issuance Agreement.

-8-
(c) Severability. If any provision of this Agreement shall be declared to be
invalid or unenforceable, in whole or in part, such invalidity or unenforceability shall not affect
the remaining provisions hereof which shall remain in full force and effect.

(d) Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, devisees, legatees, legal representatives,
successors and assigns.

(e) No Third Party Beneficiary. The terms and provisions of this Agreement
are intended solely for the benefit of each party hereto, their respective successors or assigns and
any other holder of Registrable Shares, and it is not the intention of the parties to confer third-
party beneficiary rights upon any other Person other than any Person entitled to indemnity under
Section 8.

(f) Entire Agreement. This Agreement represents the entire agreement of the
parties and shall supersede any and all previous contracts, arrangements or understandings
between the parties hereto with respect to the subject matter hereof.

(g) Amendments and Waivers. Except as otherwise provided herein, the


provisions of this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the Corporation has
obtained the written consent of the holders of at least 51% of the Registrable Shares.

(h) Interpretation. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

(i) Counterparts. This Agreement may be executed in counterparts, all of


which shall be one and the same agreement, and shall become effective when counterparts have
been signed by each of the parties and delivered to each other party.

(j) Remedies. No remedy conferred by any of the provisions of this


Agreement is intended to be exclusive of any other remedy, and each and every remedy hall be
cumulative and shall be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute or otherwise. The election of any one or more remedies
by any party hereto shall not constitute a waiver by any such party of the right to pursue any other
available remedies. It is acknowledged that a breach of the provisions of this Agreement could
not be compensated adequately by money damages. Accordingly, any party hereto shall be
entitled, in addition to any other right or remedy available to it, to seek an injunction restraining
such breach or threatened breach and to specific performance of any provisions of this
Agreement, and in either case no bond or other security shall be required in connection therewith.
If any action shall be brought in equity to enforce any of the provisions of this Agreement, none
of the parties hereto shall raise the defense that there is an adequate remedy at law and each of the
parties hereto waives any and all defenses it may have on the ground of lack of jurisdiction or
competence of the court to grant such injunction or other equitable relief.

(k) Governing Law; Consent to Jurisdiction and Venue. In all respects,


including all matters of construction, validity and performance, this Agreement and the
obligations arising hereunder shall be governed by, and construed and enforced in accordance
with, the laws of the State of California, without regard to the principles thereof regarding

-9-
conflicts of laws, and any applicable laws of the United States of America. THE
CORPORATION AND EACH HOLDER HEREBY CONSENT TO PERSONAL
JURISDICTION, WAIVE ANY OBJECTION AS TO JURISDICTION OR VENUE, AND
AGREE NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR
VENUE, IN THE CITY OF LOS ANGELES, STATE OF CALIFORNIA. Nothing herein shall
preclude any Holder or the Corporation from bringing suit or taking other legal action in any
other jurisdiction.

(l) Calculation of Time Periods. Except as otherwise indicated, all periods of


time referred to herein shall include all Saturdays, Sundays and holidays; provided, however, that
if the date to perform the act or give any notice with respect to this Agreement shall fall on a day
other than a Business Day, such act or notice may be timely performed or given if performed or
given on the next succeeding Business Day.

IN WITNESS WHEREOF, the parties hereto have executed this Registration


Rights Agreement as of the date and year first written above.

CORPORATION: ENVIRONMENTAL SERVICE PROFESSIONALS,


INC., a Nevada corporation

By:
Name:
Title:

INVESTOR:

[INVESTOR]

-10-
EXHIBIT D
ESP LIBACSM Fund, LLC
Limited Liability Company Agreement
_______________________________

ESP LIBACSM FUND, LLC


________________________________

LIMITED LIABILITY COMPANY AGREEMENT

Dated as of November 1, 2008

THE MEMBERSHIP INTERESTS REPRESENTED BY THIS LIMITED LIABILITY


COMPANY AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY OTHER
APPLICABLE SECURITIES LAWS. SUCH MEMBERSHIP INTERESTS MAY NOT BE
SOLD, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF AT ANY TIME WITHOUT
EFFECTIVE REGISTRATION UNDER SUCH ACT AND LAWS OR EXEMPTION
THEREFROM, AND COMPLIANCE WITH THE OTHER RESTRICTIONS ON
TRANSFERABILITY SET FORTH HEREIN.

THE MEMBERSHIP INTERESTS REPRESENTED BY THIS LIMITED LIABILITY


COMPANY AGREEMENT ARE SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER SET FORTH IN THIS AGREEMENT.

366350v.4
TABLE OF CONTENTS

ARTICLE 1 Incorporated Definitions .............................................................................................1


ARTICLE 2 GENERAL PROVISIONS; INVESTMENT REPRESENTATIONS........................4
2.1 Name and Office. ................................................................................................4
2.2 Principal Office; Registered Office.....................................................................4
2.3 Ratification of Acts of Organizer. .......................................................................4
ARTICLE 3 MEMBERS, CAPITAL CONTRIBUTIONS AND INTEREST ...............................4
3.1 Members..............................................................................................................4
3.2 Capital Contributions. .........................................................................................5
3.3 Withdrawal of Capital. ........................................................................................6
3.4 Limited Liability and Capacity of Members. ......................................................6
3.5 Loans and Advances by Members. .....................................................................6
ARTICLE 4 ALLOCATIONS OF PROFIT AND LOSS ...............................................................7
4.1 Capital Accounts. ................................................................................................7
4.2 Allocation of Profits and Losses. ........................................................................7
4.3 Consequences of Allocations. .............................................................................7
ARTICLE 5 DISTRIBUTIONS TO MEMBERS............................................................................7
5.1 Distributions of Cash Flow. ................................................................................7
5.2 Distributions upon Sale of Substantially All of the Company’s Assets..............7
5.3 Tax Distributions.................................................................................................7
5.4 Amounts Withheld. .............................................................................................8
5.5 No Distribution Upon the Occurrence of a Threshold Event or Conversion
Event. ..................................................................................................................8
5.6 Consequences of Distributions............................................................................8
ARTICLE 6 MANAGEMENT........................................................................................................9
6.1 Management. .......................................................................................................9
6.2 Limitations on the Rights of the Special Limited Member.................................9
6.3 Powers of the Manager........................................................................................9
6.4 No Authority. ....................................................................................................11
6.5 Performance of Duties; Liability of Manager. ..................................................11
6.6 No Exclusive Duty to Company........................................................................11
6.7 Indemnity of the Managers, Employees and Other Agents. .............................11
6.8 Resignation by a Manager.................................................................................12
6.9 Meetings. ...........................................................................................................12
6.10 Determination of Matters Not Provided For In This Agreement. .....................12
ARTICLE 7 TRANSFER OF INTEREST; ADMISSION OF ADDITIONAL MEMBERS .......13
7.1 Transfers of Membership Interest. ...................................................................13
7.2 Additional Members and Assignees..................................................................13
7.3 Sole Member’s Right to Transfer Membership Interest....................................13
7.4 Prohibited Transfers. .........................................................................................13
7.5 Rights of an Administrator................................................................................14
ARTICLE 8 DISSOLUTION AND LIQUIDATION ...................................................................14
8.1 Dissolution. .......................................................................................................14
8.2 Liquidation and Termination.............................................................................14
8.3 Cancellation of Certificate. ...............................................................................15

(i)

366350v.4
8.4 Reasonable Time for Winding Up. ...................................................................15
8.5 Return of Capital. ..............................................................................................15
ARTICLE 9 BOOKS AND RECORDS, REPORTS AND TAX ELECTIONS...........................15
9.1 Books and Records; Certificates. ......................................................................15
9.2 Records and Reports..........................................................................................16
9.3 Tax Returns. ......................................................................................................16
9.4 Tax Matters Partner...........................................................................................16
9.5 Tax Audit of Company......................................................................................17
9.6 Tax Audits of Members.....................................................................................17
9.7 Tax Elections.....................................................................................................17
ARTICLE 10 CONFIDENTIAL INFORMATION ......................................................................17
10.1 Nondisclosure....................................................................................................17
10.2 Definition of Confidential information and Duration of Restrictions...............18
10.3 Third Party Information. ...................................................................................18
10.4 Acknowledgements by the Members. ...............................................................19
10.5 Equitable Relief.................................................................................................19
ARTICLE 11 MISCELLANEOUS ...............................................................................................19
11.1 Notices...............................................................................................................19
11.2 Headings; Person and Gender. ..........................................................................19
11.3 Entire Agreement. .............................................................................................19
11.4 Amendment, Modification of Agreement. ........................................................20
11.5 Application of Georgia Law..............................................................................21
11.6 Counterparts and Facsimile Signatures. ............................................................21
11.7 Waiver of Action for Partition. .........................................................................21
11.8 Binding Effect on Successors............................................................................21
11.9 Independent Activities.......................................................................................21
11.10 Invalidity and Severability. ...............................................................................22
11.11 Execution of Additional Instruments. ...............................................................22
11.12 Waivers..............................................................................................................22
11.13 Rights and Remedies Cumulative. ....................................................................22
11.14 Creditors. ...........................................................................................................22

(ii)

366350v.4
SCHEDULES

Exhibit A - Schedule of Members

iii

366350v.4
ESP LIBACSM FUND, LLC
LIMITED LIABILITY COMPANY AGREEMENT

THIS LIMITED LIABILITY COMPANY AGREEMENT is entered into effective as


of , 2008 by and among the Members and the Special Limited Member.

WHEREAS, the Members have caused the Company to be formed as a limited liability
company in accordance with the Delaware Act for the purposes set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and


other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

ARTICLE 1
INCORPORATED DEFINITIONS

Certain terms are defined in the recitals to this Agreement and in the Appendix to this
Agreement. Other capitalized words and phrases used in this Agreement shall have the meaning
set forth in this Article 1.

“Accredited Investor” has the meaning set forth in Section 7.2.

“Affiliate” means, with respect to any Person, (i) any relative of such Person; (ii) any
Person directly or indirectly controlling, controlled by, or under common control with such
Person, (iii) any officer, director, manager or general partner of such Person, (iv) any Person who
is an officer, director, general partner, manager or trustee of any Person described in clauses (ii)
and (iii) of this sentence, or (v) any Person directly or indirectly having common ownership with
such Person. For purposes of this definition, the term “controlling”, “controlled by”, “under
common control with”, or other similar terms or phrases, means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise. For purposes of this
definition, the term “common ownership” means that one or more of the shareholders, partners,
members or owners of such Person holds at least fifty percent (50%) of the: (i) total value of any
class of issued and outstanding shares of stock of such Person if such Person is a corporation; (ii)
capital interest or profit interest in such Person if such Person is a partnership or limited liability
company; or (iii) ownership interests in such Person, if such Person is neither a corporation,
partnership or limited liability company.

“Agreement” means this limited liability company agreement and all amendments hereto
pursuant to Section 11.4 hereof.

“Cash Flow” for any Fiscal Year or other applicable period of the Company, means all
cash received in such period by the Company (including but not limited to death benefits paid
under life insurance policies, annuity payments, dividends, interest income and proceeds of sales
or redemptions of assets owned by the Company), plus any cash that becomes available from
reserves, after deducting therefrom the following items for such period:

1
366350v.4
(a) all cash operating expenses of the Company;

(b) all capital expenditures by the Company;

(c) payments of principal and interest currently due and payable on


indebtedness of the Company (excluding loans from Members);

(d) payment of principal and interest on indebtedness of the Company to any


Affiliate thereof;

(e) payments of principal and interest on indebtedness of the Company to


Members; and

(f) an amount which the Manager determines to be a reasonable reserve for


working capital needs or for the payment of anticipated costs, expenses or potential liabilities of
the Company;

provided, however, that Cash Flow shall not include cash received by the Company in
connection with any financing activity, including but not limited to capital contributions from
Members, or loans or advances from any Person.

“Code” means the Internal Revenue Code of 1986, as amended.

“Confidential Information” has the meaning set forth in Section 10.2.

“Conversion Event” means the conversion by any Member of all or a part of the ESP
Preferred Stock owned by such Member into ESP Common Stock, which preferred stock was
issued to the Member in connection with the Unit to which the Membership Interest relates.

“Delaware Act” means the Delaware Limited Liability Company Act, 6 Del. L. §§ 18-, et
seq., as it may be amended from time to time, and any successor to the Delaware Act.

“ESP” means Environmental Service Professionals, Inc.

“ESP Common Stock” means the shares of common stock of ESP.

“ESP Preferred Stock” means the shares of Series A Preferred Stock of ESP acquired by
a Member concurrently with such Member’s acquisition of a Membership Interest.

“Event of Withdrawal” means the Resignation, death, retirement, expulsion, bankruptcy


or dissolution of a Member or the occurrence of any other event that terminates the continued
membership of a Member in the Company.

“Liquidation Event” has the meaning set forth in Section 8.1.

“Management Indemnitee” has the meaning set forth in Section 6.7.

“Manager” means Insured Capital Management, Inc., a wholly-owned subsidiary of


CGP.

2
366350v.4
“Member” means each Person identified on Exhibit A as of the date hereof who has
executed this Agreement or a counterpart hereof, or has, by execution of the subscription
agreement pursuant to which the Member agreed to acquire his Membership Interest, agreed that
the execution thereof shall be and thereby is deemed, for all purposes, to be such Member’s
execution hereof, , and each Person who is hereafter admitted as a Member in accordance with
the terms of this Agreement and the Delaware Act, in each case so long as such Person is shown
on the Company’s books and records as the owner of a Membership Interest.

“Membership Interest” means a Member’s interest in the Company and the right, if any,
to participate in the management of the business and affairs of the Company, including the right,
if any, to vote on, consent to or otherwise participate in any decision or action of or by the
Members and the right to receive information concerning the business and affairs of the
Company, in each case only to the limited extent expressly provided in this Agreement or
otherwise required by the Delaware Act.

“Organizer” has the meaning set forth in Section 2.4.

“Person” means an individual or entity, and the heirs, executors, administrators, legal
representatives, successors, and assigns of such “Person” where the context so permits.

“Prohibited Transfer” has the meaning set forth in Section 7.4.

“Resignation” means a resignation of a Member, in accordance with Section 18-603, of


the Delaware Act, upon either a Conversion Event by such Member or upon the collective
deemed resignation of all Members upon the Threshold Event.

“Sole Member” has the meaning set forth in Section 3.1(c).

“Special Limited Member” means ESP.

“Supermajority Vote” means an affirmative vote of the Members holding eighty percent
(80%) of the Membership Interests.

“Tax Matters Partner” has the meaning set forth in Section 9.4.

“Threshold Event” means the occurrence of ESP Common Stock trading at a closing bid
price of at least $1.50 per share for twenty (20) consecutive trading days, when such event occurs
no sooner than six(6) months after the final closing of the Unit Offering.

“Treasury Regulations” means the income tax regulations promulgated from time to time
under the Code.

“Unit” means collectively the Membership Interest and the ESP Preferred Stock acquired
by the Members pursuant to the Unit Offering.

“Unit Offering” means the private placement offering by ESP of up to 1,000,000 Units
for a purchase price of $10.00 per Unit, in accordance to that certain private placement
memorandum of ESP dated November 1, 2008.

3
366350v.4
ARTICLE 2
GENERAL PROVISIONS; INVESTMENT REPRESENTATIONS

2.1 Name and Office.

The name of the limited liability company formed hereby is ESP LIBACsm Fund, LLC,
and its office shall be located at 405 E. Lexington Avenue, Suite 201, El Cajon, California 92020
or such other location as may hereafter be determined by the Manager.

2.2 Principal Office; Registered Office.

The principal office of the Company initially shall be located at 405 E. Lexington
Avenue, Suite 201, El Cajon, California 92020 and may be any such other place as the Manager
may from time to time designate. All business and activities of the Company shall be deemed to
have occurred at its principal office. The Company may maintain offices at such other place or
places as the Manager deems advisable. Notification of any such change shall be given to all
Members. The address of the registered office of the Company in the State of Delaware shall be
2711 Centreville Road, Suite 400, Wilmington, Delaware 19808, and the registered agent for
service of process on the Company in the State of Delaware at such registered office shall be
Corporation Service Company.

2.3 Business of the Company.

The business of the Company shall be to create a trust will acquire, indirectly from
individuals who are residents of a state of the United States non-variable life insurance policies
which have been in-force for more than two (2) years and annuity type guaranteed income
contracts that provide regular payments and to engage in such other lawful activities as the
Manager may deem appropriate from time to time.

2.4 Ratification of Acts of Organizer.

By their execution of this Agreement, the undersigned Manager and Members do hereby
ratify the acts of ESP, as Organizer, (the “Organizer”) in executing and filing the Articles of
Organization of the Company and effecting the organization of the Company. The undersigned
Manager and Members do hereby further agree, by their execution of this Agreement, to
indemnify the Organizer against any losses, damages or liabilities to which the Organizer may
become subject as a result of his services as Organizer of the Company.

ARTICLE 3
MEMBERS, CAPITAL CONTRIBUTIONS AND INTEREST

3.1 Members.

(a) The mailing addresses of the Members and the Special Limited Member
shall be maintained by the Manager. The Members and the Special Limited Member were
admitted to the Company as Members of the Company upon the effective execution by each of
them of this Agreement.

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366350v.4
(b) Upon the occurrence of the a Conversion Event, the affected Member’
Membership Interest shall automatically be reduced, pro tanto, to the extent of the Member’s
conversion of the member’s ESP Preferred Stock to ESP Common Stock and the Special Limited
Partner shall succeed to the Membership Interest of such Member, provided, however, such
Special Limited Partner shall not enjoy any voting rights with respect to such Membership
Interest obtained by it through such Conversion Event. When and if a Member converts all of
the Member’s ESP Preferred Stock to ESP Common Stock, such Member shall automatically
cease to be a Member of the Company and shall be deemed to have “resigned”, as such term is
used in Section 18-603 of the Delaware Act.

(c) The occurrence of the Threshold Event automatically shall cause all
Members to cease to be Members of the Company, and such occurrence will be deemed to be a
Resignation by all of the Members. The occurrence of the Threshold Event shall, without any
action of any Person and simultaneously with the occurrence of the Resignation of all Members,
cause the Special Limited Member to automatically be admitted to the Company as the sole
remaining Member of the Company (the “Sole Member”) which event will cause a continuation
of the Company without dissolution. The Special Limited Member may not resign from the
Company or transfer its rights as Special Limited Member unless (i) a successor Special Limited
Member has been admitted to the Company as Special Limited Member by executing a
counterpart to this Agreement upon the admission to the Company, which admission shall be at
the sole and absolute discretion of the Manager. The Special Limited Member shall
automatically cease to be a member of the Company upon the admission to the Company of a
substitute Special Limited Member.

(d) The Special Limited Member shall be a member of the Company that has
no interest in the profits, losses and capital of the Company and has no right to receive any
distributions of Company assets. Pursuant to Section 18-301 of the Delaware Act, a Special
Limited Member shall not be required to make any capital contributions to the Company and
shall not receive a limited liability company interest in the Company. The Special Limited
Member, in its capacity as Special Limited Member, may not bind the Company. Except as
required by any mandatory provision of the Delaware Act, the Special Limited Member, in its
capacity as Special Limited Member, shall have no right to vote on, approve or otherwise
consent to any action by, or relating to, the Company, including, without limitation, the merger,
consolidation or conversion of the Company. In order to implement the admission to the
Company of the Special Limited Member, and its springing right to become a Member without
voting rights upon the occurrence of a Conversion Event or the Sole Member upon the
occurrence of the Threshold Event or Conversion Events that result in the conversion of all ESP
Preferred Stock into ESP Common Stock, the Special Limited Member shall execute a
counterpart to this Agreement.

3.2 Capital Contributions.

No Member shall be obligated to make any Capital Contributions to the Company except
as such Member shall agree in writing.

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366350v.4
3.3 Withdrawal of Capital.

No Member shall withdraw any amount of the Capital Contribution without the consent
of the Manager, which consent may be withheld at the sole and absolute discretion of the
Manager. No Member shall have the right to receive any property other than cash as a
distribution from the Company, except as may be approved by the Manager. Members shall not
be paid interest on their Capital Accounts.

3.4 Limited Liability and Capacity of Members.

No Member shall:

(a) Have any personal liability or obligation for any liability or obligation of
the Company;

(b) Be obligated to lend or advance funds to the Company for any purpose;

(c) Be responsible for the obligations of any other Member;

(d) Have any interest in any specific Company property; or

(e) Be entitled to dissent from, and obtain payment of the fair value of his or
its Membership Interest in the event of any of the actions enumerated in the Delaware Act,
including but not limited to the sale, exchange or other disposition of all, or substantially all, of
the Company’s assets which is to occur as part of a single transaction or plan or the merger of the
Company;

provided, however, each Member shall be personally liable for the repayment to the Company of
any money or property wrongfully, mistakenly or incorrectly distributed to such Member.

3.5 Loans and Advances by Members.

No Member shall have the right to lend and advance to the Company any amounts as a
loan except with the express and specific approval of the Manager. Any loan to the Company
from a Member shall be evidenced by a promissory note in a form reasonably acceptable to
counsel to the Company. If a Member makes a loan to the Company pursuant to this Section 3.5,
the amount of the loan shall not entitle the lending Member to any increase in its share of
distributions of the Company or entitle it to any greater proportion of the Profit or Loss of the
Company. The amount of the loan shall be deemed a debt from the Company to the lending
Member and shall bear interest from the date of the loan at the same rate as the interest set forth
in the promissory note.

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ARTICLE 4
ALLOCATIONS OF PROFIT AND LOSS

4.1 Capital Accounts.

A Capital Account shall be separately maintained for each Member in accordance with
the terms of the Capital Account definition set forth in the Appendix.

4.2 Allocation of Profits and Losses.

After giving effect to the special allocations set forth in Items III(A) and III(B) of the
Appendix, Profits and Losses for any Fiscal Year shall be allocated to the Members pro rata
according to their respective Membership Interests from time to time during the period to which
such allocation relates.

4.3 Consequences of Allocations.

Upon the determination of tax allocations and the calculation thereof in the manner
provided in this Article 4, made in good faith, the Manager shall incur no liability to any
Member on account of such allocation.

ARTICLE 5
DISTRIBUTIONS TO MEMBERS

5.1 Distributions of Cash Flow.

Except as provided in Section 5.2 hereof, the Company may distribute Cash Flow from
time to time as shall be determined in the sole and absolute discretion of the Manager to the
Members pro rata according to their respective Membership Interests from time to time during
the period to which such distribution relates. It is the current general intent of the Manager to
distribute to the Members the death benefit proceeds of

5.2 Distributions upon Sale of Substantially All of the Company’s Assets.

Any proceeds from the sale of all or substantially all of the Company’s assets shall be
distributed in accordance with the provisions of Section 8.2.

5.3 Tax Distributions.

Notwithstanding anything to the contrary set forth in this Article 5, the Company shall,
for each taxable year, distribute to each Member, cash in the minimum amount of such
Member’s proportionate share of the Company’s income taxable to its Members for such taxable
year, multiplied by the sum of the combined maximum federal income tax rate and the maximum
applicable state income tax rate applicable to such income, taking into account any impact of the
deductibility of state income taxes for purposes of determining federal income taxes; provided,
however, that no such distribution shall be made to the extent that the Manager determines, in its
sole discretion, that funds are not legally available for such distribution or that such funds are
reasonably necessary for the working capital needs or the payment of anticipated costs, expenses

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366350v.4
or potential liabilities of the Company. The Manager’s determination of the minimum amount of
cash to be distributed to each Member pursuant to this Section 5.3 shall be made no later than
sixty (60) days following the end of the taxable year of the Company with respect to which such
distribution is made. Notwithstanding the preceding sentence, any Member who is required to
make estimated tax payments for federal income tax purposes may request that the Company
make estimated distributions to such Member equal to one-fourth (1/4) of the estimated annual
distribution to such Member for such taxable year on or before such dates as correspond to such
Member’s quarterly estimated tax payments, and the Company shall be required to comply with
any such request. Nothing in this Section 5.3 shall be construed to prevent the Company from
making distributions to any Member more frequently or in amounts larger than the minimum
required distributions provided in this Section 5.3.

5.4 Amounts Withheld.

All amounts withheld pursuant to the Code or any provision of any state or local tax law
with respect to any payment, distribution or allocation to the Company or the Members shall be
treated as amounts distributed to the Members pursuant to this Article 5 for all purposes under
this Agreement. The Company is authorized to withhold from distributions, or with respect to
allocations, to the Members and to pay over to any federal, state or local government any
amounts required to be so withheld pursuant to the Code or any provisions of any other federal,
state or local law and shall allocate any such amounts to the Members with respect to which such
amount was withheld.

5.5 No Distribution Upon the Occurrence of a Threshold Event or Conversion Event.

Unless otherwise approved by the Manager, upon a the occurrence of a Threshold Event
or a Conversion Event, no affected Member shall be entitled to receive the fair value of his or its
Membership Interest. Other than upon the Resignation of all Members following the Threshold
Event or an individual Resignation after the Conversion Event for a Member, no Member may
voluntarily withdraw from the Company without the prior written consent of the Manager, which
consent may be withheld or conditioned, with or without reason, in the sole and absolute
discretion of the Manager.

5.6 Consequences of Distributions.

Upon the determination by the Manager to distribute Cash Flow and the calculation
thereof in the manner provided in this Article 5, made in good faith, the Manager shall incur no
liability on account of such distribution, even though such distribution be in error or may have
resulted in the Company’s retaining insufficient funds for the operation of its business, which
insufficiency results in loss to the Company or necessitates the borrowing of funds by the
Company.

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ARTICLE 6
MANAGEMENT

6.1 Management.

The business and affairs of the Company will be managed solely and exclusively by the
Manager. Except for situations in which the approval of the Members is required by
nonwaivable provisions of applicable law, the Manager shall have full, complete and absolute
authority, power and discretion to manage and control all of the business, affairs and properties
of the Company, to make all decisions regarding those matters and to perform any and all other
acts or activities customary or incident to the management of the Company’s business. The
Manager will serve until resignation or until it is removed and replaced by a Supermajority Vote
in the event the Manager (a) commits fraud or dishonesty against the Company and the Company
suffers a material adverse effect due to such act, or (b) the Manager acts in a grossly negligent
manner or engages in willful conduct during the course of performing its duties as Manager and
the Company suffers a material adverse effect due to such act or acts. The Manager may, from
time to time, delegate to any Person (including any Member or officer of the Company) such
authority and powers to act on behalf of the Company as it shall deem advisable in its sole and
absolute discretion. Any such delegation by the Manager may be revoked at any time and for
any reason or no reason by the Manager in its sole and absolute discretion.

6.2 Limitations on the Rights of the Special Limited Member.

The Special Limited Member shall not have the right to vote as a Special Limited
Member at any meeting of Members or otherwise, or participate in any action to be taken by
members under the Delaware Act on any matters concerning the Company, including but not
limited to the selection or removal of any Manager, a merger or dissolution of the Company, the
sale, exchange, lease, or other transfer of all or substantially all of the assets of the Company.

6.3 Powers of the Manager.

Without limiting the generality of Section 6.1, the Manager shall have power and
authority, on behalf of the Company:

(a) To acquire property from any Person as the Manager may determine. The
fact that the Manager is directly or indirectly affiliated or connected with any such Person shall
not prohibit the Manager from dealing with that Person.

(b) To vote any equity or other securities owned beneficially or of record by


the Company for or against any matter as the Manager, in good faith, reasonably believes to be
in the best interest of the Company and all Members, to appoint proxies therefor, and to represent
the Company at any shareholder or other similar meeting of the issuer of the securities so owned
by the Company.

(c) To borrow money for the Company from banks, other lending institutions,
the Manager, Members, or Affiliates of the Manager or Members on such terms as the Manager
deems appropriate, and in connection therewith, to hypothecate, encumber and grant security
interests in the assets of the Company to secure repayment of the borrowed sums. No debt shall

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366350v.4
be contracted or liability incurred by or on behalf of the Company except by the Manager, or to
the extent permitted under the Delaware Act, by agents or employees of the Company expressly
authorized to contract such debt or incur such liability by the Manager.

(d) To purchase liability and other insurance to protect the Company’s


property, personnel and business.

(e) To hold and own any Company real and/or personal properties in the name
of the Company.

(f) To open bank accounts from time to time in the name of the Company,
and any Manager, or any Person appointed in writing by the Manager, may be the sole signatory
thereon.

(g) To deposit in such depository bank or banks or in such broker account or


accounts or in such federal savings and loan association account or accounts as shall be
determined by the Manager from time to time and shall be subject to withdrawal by such Persons
as shall be determined and designated by the Manager.

(h) To invest any Company funds temporarily (by way of example but not
limitation) in time deposits, short-term governmental obligations, commercial paper or other
investments.

(i) To sell or otherwise dispose of all or substantially all of the assets of the
Company as part of a single transaction or plan so long as such disposition is not in violation of
or a cause of a default under any other agreement to which the Company may be bound. The
affirmative vote of the Members shall not be required with respect to any sale or disposition of
the Company’s assets in the ordinary course of the Company’s business.

(j) To execute on behalf of the Company all instruments and documents,


including, without limitation, checks; drafts; notes and other negotiable instruments; mortgages
or deeds of trust; security agreements; financing statements; documents providing for the
acquisition, mortgage or disposition of the Company’s property; assignments; bills of sale;
leases; partnership agreements, operating agreements of other limited liability companies; and
any other instruments or documents necessary, in the opinion of the Manager, to the business of
the Company.

(k) To employ accountants, legal counsel, managing agents (including a


Member or Manager), consultants or other experts to perform services for the Company and to
compensate them from Company funds.

(l) To enter into any and all other agreements on behalf of the Company,
necessary, in the opinion of the Manager, to the business of the Company, with any other Person
for any purpose, in such forms as the Manager may approve.

(m) To appoint officers of the Company, including but not limited to a


chairman, vice-chairman, chief executive officer, a president, a chief operating officer, a
treasurer, a chief financial officer, one or more vice presidents of varying rank, a secretary and

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366350v.4
one or more assistant officers, all of whom shall have such duties and responsibilities as shall be
delegated or assigned to them from time to time by the Manager.

(n) To do and perform all other acts as may be necessary or appropriate to the
conduct of the Company’s business.

6.4 No Authority.

Unless authorized to do so by this Agreement or by the Manager, no attorney-in-fact,


manager, employee or other agent of the Company shall have any power or authority to bind the
Company in any way, to pledge its credit or to render it liable pecuniarily or otherwise for any
purpose. No Member shall have any power or authority to bind the Company unless the Member
has been authorized by the Manager to act as an agent of the Company in accordance with the
previous sentence.

6.5 Performance of Duties; Liability of Manager.

In performing its duties, the Manager shall be entitled to rely in good faith on the
provisions of this Agreement and on information, opinions, reports, or statements (including
financial statements and information, opinions, reports or statements as to the value or amount of
the assets, liabilities, Profits or Losses of the Company or any facts pertinent to the existence and
amount of assets from which distributions to Members might properly be paid), of the following
other Persons or groups: (a) one or more officers or employees of the Company; (b) any
attorney, independent accountant, or other Person employed or engaged by the Company; or (c)
any other Person who has been selected with reasonable care by or on behalf of the Company, in
each case as to matters which such relying Person reasonably believes to be within such other
Person’s professional or expert competence. The preceding sentence shall in no way limit any
Person’s right to rely on information to the extent provided in Section 18-406 of the Delaware
Act. No individual who is a Manager of the Company, or any combination of the foregoing,
shall be personally liable under any judgment of a court, or in any other manner, for any debt,
obligation, or liability of the Company, whether that liability or obligation arises in contract, tort,
or otherwise, solely by reason of being a Manager of the Company or any combination of the
foregoing.

6.6 No Exclusive Duty to Company.

The Manager shall not be required to manage the Company as its sole and exclusive
function, and the Manager may have other business interests and may engage in other activities
in addition to those relating to the Company. Neither the Company nor any Member, including
the Special Limited Member, shall have any right, by virtue of this Agreement or otherwise, to
share or participate in such other investments or activities of the Manager or its Affiliates or to
the income or proceeds derived therefrom. The Manager shall incur no liability to the Company
or to any of the Members as a result of engaging in any other business or venture.

6.7 Indemnity of the Manager, Employees and Other Agents.

The Manager, and its designees (“Management Indemnitee”) shall be indemnified and
held harmless by the Company (subject to the final two sentences of this paragraph) from and

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366350v.4
against any and all losses, claims, damages, liabilities, expenses (including legal fees and
expenses), judgments, fines, settlements and other amounts arising from any and all claims,
demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative,
that relate to or arise out of the Company or its assets, business or affairs, in which the
Management Indemnitee may be involved, or threatened to be involved, as a party or otherwise
by reason of such Management Indemnitee’s status as the Manager, or an owner, manager,
director, officer, partner, agent or employee of any of the foregoing, if (a) the Management
Indemnitee acted in good faith and in a manner such Management Indemnitee believed to be in
the best interests of the Company and, with respect to any criminal proceeding, had no
reasonable cause to believe such Management Indemnitee’s conduct was unlawful and (b) the
Management Indemnitee’s conduct did not constitute gross negligence or willful or wanton
misconduct. The termination of any action, suit or proceeding by judgment, order, settlement or
conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the Management Indemnitee acted in a manner contrary to that specified in
subsections (a) and (b) above. Any indemnification shall be made only out of the assets of the
Company, and no Manager or Member shall have any personal liability on account thereof. All
calculations of claims and the amount of indemnification to which any Management Indemnitee
is entitled shall be made after (a) giving effect to the tax consequences of any such claim and (b)
deduction of all proceeds of insurance net of retroactive premiums and self-insurance retention
recoverable by the Management Indemnitee with respect to such claims.

6.8 Resignation by a Manager.

The Manager may resign at any time by giving written notice to the Members. The
resignation of the Manager shall take effect upon receipt of notice thereof or at such later time as
shall be specified in such notice; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective. The resigning Manager may designate
and appoint its successor which shall thereafter serve as the Manager.

6.9 Vacancies.

Any vacancy occurring for any reason in the office of the Manager, other than a vacancy
filled by the designation and appointment of a successor Manager by a resigning Manager, may
be filled by a Supermajority Vote.

6.10 Meetings.

Meetings of Members may be called by the Manager by providing at least five (5) days’
notice of all meetings of Members, and the Manager shall preside at all meetings of Members.
Notwithstanding the preceding sentence, meetings of Members shall not be required.

6.11 Determination of Matters Not Provided For In This Agreement.

The Manager may decide any questions arising with respect to the Company and this
Agreement which are not specifically or expressly provided for in this Agreement, and, except as
expressly provided for in this Agreement, the Manager may take any action without the approval,
consent or notice to the Members.

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ARTICLE 7
TRANSFER OF INTEREST; ADMISSION OF ADDITIONAL MEMBERS

7.1 Transfers of Membership Interest.

Subject to Section 7.2 below, without the prior written consent of the Manager (which
consent may be withheld or conditioned in the sole and absolute discretion of the Manager),
except as otherwise specifically provided herein, no Member shall have the right, during his
lifetime, to (a) sell, assign, pledge, hypothecate, transfer, exchange or otherwise transfer for
consideration (collectively, “sell”), or (b) gift or otherwise transfer for no consideration, whether
or not by operation of law (collectively “gift”) all or part of his or its Membership Interest.

7.2 Additional Members and Assignees.

The Manager, on behalf of the Company, may accept subscriptions for additional
Membership Interests in exchange for Capital Contributions, and the Membership Interests shall
thereupon be appropriately adjusted by the Manager, provided that if the subscriber therefor is
not, at the time of such subscription, a Member of the Company, the subscriber shall not be
admitted as a Member of the Company unless such Membership Interest was acquired pursuant
to the Unit Offering. In order for a subscriber, assignee or transferee to be admitted as a Member
of the Company: (a) the Manager must give written consent to such admission or assignment, (b)
the subscriber, assignee or transferee must agree, in writing, to become a party to this Agreement
and be bound by all of its terms and conditions and to assume all debts and obligations of the
assignor or transferor, if applicable, with respect to the assigned or transferred Interest and (c)
the subscriber, assignee or transferee must be an “Accredited Investor” as that term is defined
under Regulation D of the Federal Act.

7.3 Sole Member’s Right to Transfer Membership Interest.

Upon the occurrence of the Threshold Event or Conversion Events that cumulatively
result in ESP holding all Membership Interests of the Company (which Threshold Event or
cumulative Conversion Events triggers the springing rights of the Special Limited Member to
become the Sole Member), the Sole Member shall have right to sell, transfer, assign or otherwise
dispose of all of the Membership Interests, at its sole and absolute discretion.

7.4 Prohibited Transfers.

Any transfer, sale or assignment of Membership Interest in violation of the prohibitions


of this Article 7 (hereinafter a “Prohibited Transfer”) shall be null and void and of no force or
effect. If the Company chooses or is required to recognize a Prohibited Transfer, then the
Membership Interest assigned or transferred shall be strictly limited to the transferor’s economic
rights to allocations and distributions as provided by this Agreement with respect to the
transferred Membership Interest. Furthermore, any such transferee or assignee shall be not be
considered a Member and shall not be entitled to vote on any matters coming before the
Members or participate in the management of the Company.

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7.5 Rights of an Administrator.

If a Member who is an individual dies or a court of competent jurisdiction adjudges him


to be incompetent to manage his person or his property, the Member’s executor, administrator,
guardian, conservator, or other legal representative shall only have the rights of an assignee of
Membership Interest as described in Section 7.4 above, shall not be a Member, and may exercise
such rights hereunder for the sole and limited purpose of settling his estate or administering his
property.

ARTICLE 8
DISSOLUTION AND LIQUIDATION

8.1 Dissolution.

The Company shall not be dissolved by the Resignation of any Member. Upon the
Resignation of all Members, the Special Limited Partner’s springing rights to admission as the
Sole Member, in accordance with Section 3.1(c), shall take effect.

The Company shall dissolve, and its affairs shall be wound up upon the first of the
following to occur:

(a) Upon an affirmative Supermajority Vote and the consent of the Manager;
or

(b) the entry of a decree of judicial dissolution of the Company under Section
18-802 of the Delaware Act.

Except as otherwise set forth in this Section 8.1, the Company is intended to have
perpetual existence. An Event of Withdrawal shall not cause a dissolution of the Company, and
the Company shall continue in existence subject to the terms and conditions of this Agreement.

8.2 Liquidation and Termination.

(a) On the dissolution of the Company, the Manager shall act as liquidator.
The liquidator shall proceed diligently to wind up the affairs of the Company and make final
distributions as provided herein and in the Delaware Act. The costs of liquidation shall be borne
as a Company expense. Until final distribution, the liquidator shall continue to operate the
Company with all of the power and authority of the Manager. The steps to be accomplished by
the liquidator are as follows:

(i) the liquidator shall pay, satisfy or discharge from Company funds
all of the debts, liabilities and obligations of the Company (including, without limitation,
all expenses incurred in liquidation) or otherwise make adequate provision for payment
and discharge thereof (including, without limitation, the establishment of a cash fund for
contingent liabilities in such amount and for such term as the liquidator may reasonably
determine); and

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(ii) after payment or provision for payment of all of the Company’s
liabilities has been made in accordance with Section 8.2(a)(i), a final allocation of all
items of income, gain, loss and expense shall be made to all Members on a pro-rata basis.

(b) The distribution of cash or property to a Member in accordance with the


provisions of this Section 8.2 constitutes a complete return to the Member of its Capital
Contributions and a complete distribution to the Member of its interest in the Company and all
the Company’s property and constitutes a compromise to which all Members have consented
within the meaning of the Delaware Act. To the extent that a Member returns funds to the
Company, it has no claim against any other Member for those funds.

8.3 Cancellation of Certificate.

On completion of the distribution of Company assets as provided herein, the Company is


terminated (and the Company shall not be terminated prior to such time), and the Manager (or
such other Person or Persons as the Delaware Act may require or permit) shall file a certificate of
cancellation with the Secretary of State of Delaware, cancel any other filings made pursuant to
this Agreement that are or should be canceled and take such other actions as may be necessary to
terminate the Company. The Company shall be deemed to continue in existence for all purposes
of this Agreement until it is terminated pursuant to this Section 8.3.

8.4 Reasonable Time for Winding Up.

A reasonable time shall be allowed for the orderly winding up of the business and affairs
of the Company and the liquidation of its assets pursuant to Section 8.2 in order to minimize any
losses otherwise attendant upon such winding up.

8.5 Return of Capital.

The liquidator shall not be personally liable for the return of Capital Contributions or any
portion thereof to the Members (it being understood that any such return shall be made solely
from Company assets).

ARTICLE 9
BOOKS AND RECORDS, REPORTS AND TAX ELECTIONS

9.1 Books and Records; Certificates.

(a) The books and records of the Company shall be maintained by such
Person or Persons as the Manager may designate, shall be kept at the principal office of the
Company or at such other office or offices as shall be determined by the Manager, and shall be
kept in an accurate, complete and consistent manner according to the cash or accrual method as
the Manager shall determine, together with such supplemental books and records as may be
required to properly maintain Capital Accounts or otherwise comply with applicable
Regulations. All Members shall at all times have access to the books and records of the
Company listed in Section 9.2 below for any proper purposes, subject to reasonable standards as
may be determined by the Manager from time to time, Members shall not have access to any

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366350v.4
other books, records, files or documents of the Company except as may be permitted by the
Manager in its sole and absolute discretion.

(b) The Company shall not issue separate certificates to Members evidencing
their Membership Interests.

9.2 Records and Reports.

At the expense of the Company, the Manager shall maintain records and accounts of all
operations and expenditures of the Company. The Company shall keep at its principal place of
business the following records:

(a) A current list of each Member;

(b) Copies of records to enable a Member to determine the relative voting


rights, if any;

(c) A copy of the certificate of formation of the Company and all amendments
thereto;

(d) Copies of the Company’s federal, state, and local income tax returns and
reports, if any, for the three most recent years; and

(e) Copies of the Company’s limited liability company agreement, together


with any amendments thereto.

9.3 Tax Returns.

The Company will file all income tax and other returns which the Company may be
required to file under the laws of the United States or any other jurisdiction and will provide to
each Member such information concerning the Company’s assets, liabilities, Cash Flow, gains,
income, deductions, Profits or Losses which may be reasonably required to prepare any returns
required of him or it by any such jurisdiction. In preparing such returns or providing such
information, the Company will make such adjustments to its books and records or keep
supplemental books and records which are reasonably required to comply with the statutes,
regulations or other requirements of any jurisdiction which are inconsistent with the
requirements of the Code or Regulations.

9.4 Tax Matters Partner.

For purposes of Sections 6221 through 6231 of the Code, the Manager shall serve as the
“Tax Matters Partner” and shall have responsibility in dealings with the Internal Revenue
Service and to represent the Company and the Members before taxing authorities or courts of
competent jurisdiction in tax matters affecting the Company and the Members, in their capacities
as Members, and to file any tax returns and to execute any agreements or other documents
relating to or affecting such tax matters, including agreements or other documents that bind the
Members with respect to such tax matters or otherwise affect the rights of the Company and
Members.

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9.5 Tax Audit of Company.

If any income tax return of the Company is subjected to an audit by the Internal Revenue
Service, the Tax Matters Partner may determine that it is necessary to contest proposed
adjustments to items reported in the Company return. If such a determination is made, the
contest of the proposed adjustments will be financed out of the Cash Flow of the Company. In
addition, if the proposed adjustment is one which would affect the tax liability of all Members, or
if the Cash Flow of the Company is insufficient to allow the Tax Matters Partner to contest or
continue to contest a proposed adjustment to the Company return, the Manager may, but shall
not be obligated to, call upon the Members to make Capital Contributions to the Company in an
amount sufficient to permit the Tax Matters Partner to contest the proposed adjustment to the
Company return.

9.6 Tax Audits of Members.

If any income tax return of a Member is subject to an audit by the Internal Revenue
Service, the Tax Matters Partner will cooperate with the Member under audit by making
available to said Member, at the Member’s expense, the books and records of the Company and
by taking such other actions which the Member may request and which the Tax Matters Partner,
in his discretion, deems appropriate.

9.7 Tax Elections.

The Manager shall have the discretion and authority to make any and all elections for
federal, state, and local tax purposes including, without limitation, any election, if permitted by
applicable law: (i) to adjust the basis of Company property pursuant to Code Sections 754,
734(b), and 743(b), or comparable provisions of state or local law, in connection with transfers
of interests in the Company and Company distributions in the manner provided in Regulations
Section 1.754-1(b); and (ii) to extend the statute of limitations for assessment of tax deficiencies
against the Members with respect to adjustments to the Company’s federal, state, or local tax
returns. The Manager intends that the Company shall be treated as a partnership for United
States federal income tax purposes.

ARTICLE 10
CONFIDENTIAL INFORMATION

10.1 Nondisclosure.

The Company may disclose to the Members Confidential Information (defined below).
The Members acknowledge and agree that the each have a special, unique and fiduciary
relationship with the Company and that the Confidential Information is the sole and exclusive
property of the Company (or a third party providing such information to the Company) and that
the Company or such third party owns all worldwide rights therein under patent, patent
applications, copyright, trade or service marks or applications thereto, trade secret, confidential
information, industrial property, intellectual property or other property rights laws. The
Members acknowledge and agree that the disclosure of Confidential Information to the Members
does not confer upon the Members any license, interest or rights of any kind in or to the
Confidential Information. The Members may use Confidential Information solely for the benefit

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366350v.4
of the Company. The Members will hold in confidence and not reproduce, distribute, transmit,
reverse engineer, decompile, disassemble, or transfer, directly or indirectly, in any form, by any
means, or use for any other purpose or for the Member’s own benefit or for the benefit of any
other Person or to the detriment of the Company, Confidential Information or any portion
thereof. The Members agree to return to the Company, upon request by the Company and in any
event upon the termination of this Agreement, Confidential Information and all materials relating
thereto.

10.2 Definition of Confidential information and Duration of Restrictions.

The obligations of the Members under this Agreement with regard to the trade secrets as
that term is defined under applicable law shall remain in effect for as long as such information
shall remain a trade secret under such applicable law. The obligations of the Members with
regard to the Confidential Information which is not a trade secret under applicable law shall
remain in effect while the Members are Members and for five (5) years thereafter. As used
herein, “Confidential Information” means information of the Company in any form which (i)
derives economic value, actual or potential, from not being generally known to, and not being
readily ascertainable by proper means by, other Persons who can obtain economic value from its
disclosure or use; and (ii) is the subject of efforts by the Company that are reasonable under the
circumstances to maintain its secrecy. Confidential Information includes, without limitation,
trade secrets as defined under applicable law, studies, analyses, technical or non-technical data,
formulas, patterns, compilations, programs, devices, methods, models (including but not limited
to cost and/or pricing models and operating models) techniques, drawings, processes, financial
data and information, financial plans, future business plans, product plans, the identity of actual
or potential customers or suppliers, marketing plans and strategies, advertising campaigns,
information regarding the Company’s Members, Managers, executives and employees (including
but not limited to compensation arrangements), and the terms and conditions of this Agreement.
For purposes of this Agreement, “Confidential Information” shall not include: (i) any
information that was or becomes generally available to the public other than as a result of
unauthorized disclosure by a Member, or (ii) becomes available to a Member on a non-
confidential basis from a source other than the Company, provided that such source is lawfully in
possession of such information and is not prohibited from disclosing such information by a
fiduciary, contractual or legal obligation to the Company or any other Person with respect to
such information.

10.3 Third Party Information.

The Company may have received and in the future will receive confidential or
proprietary information from third parties subject to a duty on the Company’s part to maintain
the confidentiality of such information and, in some cases, to use it only for certain limited
purposes. The Members agree that the Members owe the Company and such third parties, both
during the term of a Member’s status as a Member of the Company and thereafter for a period of
five (5) years, a duty to hold all such confidential or proprietary information in the strictest
confidence and, except as is consistent with the Company’s agreement with the third party, not
to disclose it to any Person or use it for the benefit of anyone other than the Company or such
third party, or to the detriment of the Company or such third party, unless expressly authorized in
writing to act otherwise by the Manager.

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366350v.4
10.4 Acknowledgements by the Members.

The Members acknowledge that prior to and during the term of this Agreement, the
Company has furnished and will furnish to the Members, and the Members will observe,
Confidential Information which could be used by the Members on behalf of a competitor of the
Company to the Company’s substantial and continuing detriment. The Members recognize and
agree that these restrictions are fair and reasonable under the circumstances, and that these
restrictions contained in Article 10 will not cause the Members substantial hardship.

10.5 Equitable Relief.

The parties to this Agreement acknowledge that a breach or threatened breach by a


Member of any of the terms or conditions of this Article 10 will result in material and irreparable
damage, injury and harm to the Company, that it would be difficult or impossible to establish the
full monetary value of such damage and that the remedies at law for such breach or threatened
breach will not adequately compensate the Company for damages it has suffered or may suffer.
Accordingly, the Members agree that in the event of such breach or threatened breach, the
Company shall be entitled, without necessity of posting any bond, to preliminary, temporary and
permanent injunctive relief, or such other equitable remedy as a court of competent jurisdiction
or arbitrator may provide. Nothing contained herein will be construed to limit the Company’s
right to any remedies at law, including the recovery of damages for breach or threatened breach
of this Article 10 or any other provision of this Agreement.

ARTICLE 11
MISCELLANEOUS

11.1 Notices.

Any notice, payment, demand or communication required or permitted to be given by any


provision of this Agreement shall be deemed to have been sufficiently given or served for all
purposes if delivered personally or by courier to the Member to whom the same is directed, or if
sent by registered or certified mail, postage and charges prepaid, addressed to any Member at the
most recent address for such Member as shown on the records of the Company.

11.2 Headings; Person and Gender.

The headings in this Agreement are inserted for convenience and identification only and
are in no way intended to describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof. The masculine gender shall include the feminine, and neuter
genders and the singular shall include the plural.

11.3 Entire Agreement.

This Agreement is intended by the parties hereto to be the final expression of their
agreement with respect to the specific subject matters hereof and is the complete and exclusive
statement thereof, notwithstanding any representation, course of conduct, inducements,
agreements, promises or statements to the contrary (if any) heretofore made. No additional
provision, condition, promise, inducement, representation, agreement or covenant not herein

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366350v.4
contained, whether by the course of conduct or performance of the parties or custom or trade
usage or as might otherwise be implied as a matter of law, shall be deemed to be a part hereof for
any purpose. This Agreement and the documents referred to herein and to be delivered pursuant
hereto constitute the entire agreement between the parties pertaining to the subject matter hereof,
and supersede all prior and contemporaneous agreements, understandings, negotiations and
discussions of the parties, whether oral or written, and there are no warranties, representations or
other agreements between the parties in connection with the subject matter hereof, except as
specifically set forth herein.

11.4 Amendment, Modification of Agreement.

No amendment, waiver, modification or alteration of the terms hereof shall be binding


unless the same shall be in writing, shall be approved by the Manager in writing and shall be
duly approved and executed by a Supermajority Vote. Notwithstanding the foregoing, the
Manager may amend this Agreement without the consent of the Limited Partners if such
amendments are:

(a) of an inconsequential nature, as reasonably determined by the Manager;

(b) for the purpose of reflecting the admission of additional Members, the withdrawal
of Members or additions to or reductions from capital, as permitted by this Agreement;

(c) necessary to maintain the Company’s status as a limited partnership for federal
income tax purposes or in any jurisdiction;

(d) necessary to preserve the validity of any and all allocations for Company income,
gains, losses or deductions;

(e) contemplated by this Agreement;

(f) to accommodate a change in any federal or state law affecting the operations of
the Company;

(g) to modify the Company’s strategy, as reasonably determined by the Manager;

(h) to clarify any clerical inaccuracy, ambiguity or reconcile any inconsistency in this
Agreement;

(i) to add to the representations, duties or obligations of the Manager or surrender


any right or power of the Manager for the benefit of the Members;

(j) to delete or add any provision of or to this Agreement required to be deleted or


added by the Securities and Exchange Commission or any other federal agency or any state
“Blue Sky” official or similar official or in order to opt to be governed by any amendment or
successor statute to the Act;

(k) to change the name of the Company and to make any modifications to this
Agreement to reflect the admission of an additional or substitute manager;

20
366350v.4
(l) to make any amendment that is appropriate or necessary, in the opinion of the
Manager, to prevent the Company or the Manager or its directors, officers or controlling Persons
from in any manner being subjected to the provisions of the Investment Company Act of 1940
Act or the Investment Advisers Act of 1940; or

(m) to make any amendment necessary to ensure that Company income not be deemed
to constitute “unrelated business taxable income” or be adversely affected by the “passive loss”
rules under the Code.

11.5 Application of Delaware Law.

This Agreement and the enforcement, application or interpretation hereof shall be


governed exclusively by the terms of the laws of the State of Delaware.

11.6 Counterparts and Facsimile Signatures.

This Agreement and any amendments hereto may be executed in counterparts, each of
which will be considered an original, but all of which together will constitute the same
instrument. Without limiting the foregoing, a faxed copy of this Agreement or any amendment
hereto or copy of this Agreement or any amendment hereto sent via email in a PDF format will
be considered an original. Delivery of an executed counterpart signature page by facsimile or by
email of a signature page in a PDF format is as effective as executing and delivering this
Agreement or any amendment hereto in the presence of the other party. Any party delivering an
executed counterpart of this Agreement or any amendment hereto by facsimile or by email of a
signature page in a PDF format will, upon request of the other party, also deliver a counterpart of
this Agreement or any amendment hereto executed in wet ink as soon as reasonably practicable
following transmittal by facsimile or by email of a signature page in a PDF format, but the
failure to do so does not affect the validity, enforceability or binding effect of this Agreement or
any amendment hereto.

11.7 Waiver of Action for Partition.

Each of the Members irrevocably waives during the term of the Company created
hereunder any right that he or it may have to maintain any action for partition with respect to any
property of the Company.

11.8 Binding Effect on Successors.

Subject to the limits on transferability and assignment contained herein, each and all of
the covenants, terms, provisions and agreements herein contained shall be binding upon and
inure to the benefit of the successors, transferees, heirs and assigns of the respective parties
hereto.

11.9 Independent Activities.

Except as provided in Article 10, the Members may engage in whatever activities they
choose without having or incurring any obligation to disclose or to offer any interest in such
activities to the Company or any of the other Members.

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366350v.4
11.10 Invalidity and Severability.

The parties agree that, and it is their intent that, this is a severable contract and agreement
which contains multiple promises based on and supported by multiple considerations. If any
provision or part of any provision of this Agreement is held invalid or unenforceable by a court
of competent jurisdiction or an arbitrator, such holding shall not affect the enforceability of any
other provisions or parts hereof, and all other provisions and parts hereof shall continue in full
force and effect and this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.

11.11 Execution of Additional Instruments.

Each Member hereby agrees to execute such other and further statements of interest and
holdings, designations, powers of attorney and other instruments necessary to comply with any
laws, rules or regulations.

11.12 Waivers.

The failure of any party to seek redress for violation of or to insist upon the strict
performance of any covenant or condition of this Agreement shall not prevent a subsequent act,
which would have originally constituted a violation, from having the effect of an original
violation. No waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision or breach or future breach of this Agreement, whether
or not similar, unless otherwise expressly provided.

11.13 Rights and Remedies Cumulative.

The rights and remedies provided by this Agreement are cumulative and the use of any
one right or remedy by any party shall not preclude or waive the right not use any or all other
remedies. Such rights and remedies are given in addition to any other rights the parties may have
by law, statute, ordinance or otherwise.

11.14 Creditors.

None of the provisions of this Agreement shall be for the benefit of or enforceable by any
creditors of the Company.

(Signature page follows)

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366350v.4
IN WITNESS WHEREOF, the undersigned have signed this Agreement under seal as of
the date hereof.

COMPANY

ESP LIBACSM FUND, LLC,


a Delaware limited liability company

By: Insured Capital Management, Inc.

By: _______________________________
Name: Jerry Sexton
Title: President
Date: _______________________________

SPECIAL LIMITED MEMBER

ENVIRONMENTAL
SERVICE PROFESSIONALS, INC.
a Nevada Corporation

By: _______________________________
Name: Edward Torres
Title: Chief Executive Officer
Date: _______________________________

MEMBERS

SEE APPENDIX ATTACHED

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366350v.4
APPENDIX

LIMITED LIABILITY COMPANY AGREEMENT


OF
SM
ESP LIBAC FUND, LLC

ITEM I.

TAX MATTERS GENERALLY:

This Appendix is attached to and is a part of the limited liability company agreement (the
“Agreement”) of ESP LIBACSM FUND, LLC (the “Company”). The provisions of this
Appendix are intended to comply with the requirements of Treasury Regulation Section 1.704-
1(b)(2) and Treasury Regulation Section 1.704-2 with respect to partnership allocations and
maintenance of capital accounts as such Regulations are applicable to a limited liability company
characterized as a partnership under the Code and Treasury Regulations, and shall be interpreted
and applied accordingly. For the purpose of the application of the Code and the Treasury
Regulations, and the concepts defined therein, to the provisions of this Appendix (as
incorporated into the Agreement), the term “Company” shall have the equivalent meaning to the
term “Partnership” as used in the Code and the Treasury Regulations, and the term “Member”
shall have the equivalent meaning to the term “Partner” as used in the Code and the Treasury
Regulations. It is the intention of the Members that the Company be characterized as a
partnership and that each Member be treated as a partner for purposes of income taxation.

ITEM II.
DEFINITIONS:

Capitalized words and phrases used in this Agreement and in this Appendix shall have
the following meanings:

“Adjusted Capital Account Deficit” means, with respect to a Member, the deficit balance,
if any, in such Member’s Capital Account as of the end of the relevant Fiscal Year, after giving
effect to the following adjustments:

(a) Credit to such Capital Account any amounts which such Member is
obligated to restore pursuant to any provision of this Agreement or is deemed to be
obligated to restore pursuant to the penultimate sentences of Regulations Sections 1.704-
2(g)(1) and 1.704-2(I)(5); and

(b) Debit to such Capital Account items described in Sections 1.704-


1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6) of the Regulations.

The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the
provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently
therewith.

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366350v.4
“Capital Account” means the Capital Account maintained for any Member in accordance
with the following provisions:

(a) To each Member’s Capital Account there shall be credited such Member’s
Capital Contributions, such Member’s distributive share of Profit, and the amount of any
Company liabilities assumed by such Member or which are secured by any property
distributed to such Member.

(b) To each Member’s Capital Account there shall be debited the amount of
cash and the Gross Asset Value of any property distributed to such Member pursuant to
any provision of this Agreement, such Member’s distributive share of Loss and the
amount of any liabilities of such Member assumed by the Company or which are secured
by any property contributed by such Member to the Company.

(c) In determining the amount of any liability for purposes of paragraphs (a)
and (b) of this definition, there shall be taken into account Code Section 752(c) and any
other applicable provisions of the Code and Regulations.

(d) In the event any Interest is transferred in accordance with the terms of this
Agreement, the transferee shall succeed to the Capital Account of the transferor to the
extent it relates to the transferred interest.

(e) The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with Regulations
Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with such
Regulations. In the event the Manager shall determine that it is prudent to modify the
manner in which the Capital Accounts, or any debits or credits thereto, are computed in
order to comply with such Regulations, the Manager may make such modification,
provided that it is not likely to have a material effect on the amounts distributable to any
Member pursuant to Article 8 of the Agreement upon the dissolution of the Company.
The Manager shall adjust the amounts debited or credited to the Capital Accounts with
respect to (i) any property contributed to the Company or distributed to a Member, and
(ii) any liabilities which are assumed by the Company or a Member, in the event the
Manager determines such adjustments are necessary or appropriate pursuant to
Regulations Section 1.704-1(b)(2)(iv). The Manager also shall make any appropriate
modifications in the event unanticipated events might otherwise cause this Agreement not
to comply with Regulations Section 1.704-1(b).

“Capital Contribution” means, with respect to any Member, the amount of money and
the initial Gross Asset Value of any property (other than money) contributed to the Company by
such Member.

“Company Minimum Gain” has the meaning set forth in Regulations Sections
1.704-2(b)(2) and 1.704-2(d).

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366350v.4
“Depreciation” means, for each taxable year or other period, an amount equal to the
depreciation, amortization or other cost recovery deduction allowable with respect to an asset for
such year or other period, except that if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such year or other period,
Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value
as the federal income tax depreciation, amortization or other cost recovery deduction for such
year or other period bears to such beginning adjusted tax basis; provided, however, that if the
adjusted basis for federal income tax purposes of an asset at the beginning of such Fiscal Year is
zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using
any reasonable method selected by the Manager.

“Fiscal Year” means (a) the period commencing on the date of this Agreement and
ending on December 31, (b) any subsequent twelve (12) month period commencing on January 1
and ending on December 31, or (c) any portion of the period described in clause (b) for which
the Company is required to allocate Profits, Losses, and other items of Company income, gain,
loss, or deduction pursuant to the Agreement and this Appendix.

“Gross Asset Value” means, with respect to any asset, the asset’s adjusted basis for
federal income tax purposes, except as follows:

(a) The initial Gross Asset Value of any asset contributed by a Member to the
Company shall be the gross fair market value of such asset, as determined by the
contributing Member and the Manager;

(b) The Gross Asset Values of all Company assets shall be adjusted to equal
their respective gross fair market values, as determined by the Manager, as of the
following times: (i) the acquisition of Membership Interest or an additional interest in the
Company by any new or existing Member, including the Sole Member, in exchange for
more than a de minimis Capital Contribution; (ii) the distribution by the Company to a
Member of more than a de minimis amount of Company property or money as
consideration for an interest in the Company; (iii) upon the Resignation of any Member;
(iv) the liquidation of the Company within the meaning of Regulations Section 1.704-
1(b)(2)(ii)(g); provided, however, that adjustments pursuant to clauses (i) and (ii) above
shall be made only if the Manager reasonably determines that such adjustments are
necessary or appropriate to reflect the relative economic interests of the Members in the
Company;

(c) The Gross Asset Value of any Company asset distributed to any Member
shall be adjusted to equal the gross fair market value of such asset on the date of
distribution as determined by the distributee and the Manager;

(d) The Gross Asset Values of Company assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code
Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are
taken into account in determining Capital Accounts pursuant to Regulations Section
1.704-1(b)(2)(iv)(m) and subparagraph (e) of the definition of “Profit” and “Loss” and

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366350v.4
Item III(A)(7) hereof; provided, however, that Gross Asset Values shall not be adjusted
pursuant to this subparagraph (d) to the extent the Manager determines that an adjustment
pursuant to subparagraph (b) of this definition is necessary or appropriate in connection
with a transaction that would otherwise result in an adjustment pursuant to this
subparagraph (d); and

(e) If the Gross Asset Value of an asset has been determined or adjusted
pursuant to this definition, such Gross Asset Value shall thereafter be adjusted by any
Depreciation taken into account with respect to such asset for purposes of computing
Profit and Loss.

“Member Nonrecourse Debt” has the meaning set forth in Section 1.704-2(b)(4) of the
Regulations.

“Member Nonrecourse Debt Minimum Gain” means an amount, with respect to each
Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if such
Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance
with Section 1.704-2(I)(3) of the Regulations.

“Member Nonrecourse Deductions” has the meaning set forth in Sections 1.704-2(i)(1)
and 1.704-2(i)(2) of the Regulations.

“Nonrecourse Deductions” has the meaning set forth in Section 1.704-2(b)(1) of the
Regulations.

“Nonrecourse Liability” has the meaning set forth in Section 1.704-2(b)(3) of the
Regulations.

“Profit” and “Loss” means, for each Fiscal Year or other period, an amount equal to the
Company’s taxable income or loss for such year or period, determined in accordance with Code
Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with
the following adjustments:

(a) Any income of the Company that is exempt from federal income tax and
not otherwise taken into account in computing Profit or Loss pursuant to this definition
shall be added to such taxable income or loss;

(b) Any expenditures of the Company described in Code Section 705(a)(2)(B)


or treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section
1.704(b)(2)(iv)(i), and not otherwise taken into account in computing Profit or Loss
pursuant to this definition shall be subtracted from such taxable income or loss;

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366350v.4
(c) In the event the Gross Asset Value of any Company asset is adjusted
pursuant to the definition of Gross Asset Value, the amount of such adjustment shall be
taken into account as gain or loss from the disposition of such asset for purposes of
computing Profit and Loss;

(d) Gain or loss resulting from any disposition of Company property, and
Depreciation with respect to such property (in lieu of any depreciation, amortization or
other cost recovery deductions taken into account in computing such taxable income or
loss) shall be computed with reference to the Gross Asset Value of such property
notwithstanding that such Gross Asset Value differs from the adjusted tax basis of such
property;

(e) To the extent an adjustment to the adjusted tax basis of any Company
asset pursuant to Code Section 734(b) or Code Section 743(b) is required pursuant to
Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining
Capital Accounts as a result of a distribution other than in liquidation of a Member’s
interest in the Company, the amount of such adjustment shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if the adjustment
decreases the basis of the asset) from the disposition of the asset and shall be taken into
account for purposes of computing Profit or Loss; and

(f) Notwithstanding any other provision of this definition, any items which
are specially allocated pursuant to Items III(A) and III(B) of this Appendix shall not be
taken into account in computing Profit or Loss. The amounts of the items of Company
income, gain, loss or deduction available to be specially allocated pursuant to Items
III(A) and III(B) of this Appendix shall be determined by applying rules analogous to
those set forth in subparagraphs (a) through (e) above.

“Regulations” means the Treasury Regulations promulgated under the Code, as such
Regulations may be amended from time to time (including corresponding provisions of
succeeding Regulations).

ITEM III.
SPECIAL AND TAX ALLOCATIONS:

A. Special Allocations. The following special allocations shall be made in the


following order:

1. Minimum Gain Chargeback. Except as otherwise provided in Section


1.704-2(f) of the Regulations, notwithstanding any other provision of Article 4 of the
Agreement, if there is a net decrease in Company Minimum Gain during any Company
Fiscal Year, each Member shall be specially allocated items of Company income and
gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal
to such Member’s share of the net decrease in Company Minimum Gain, determined in
accordance with Regulations Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be allocated to

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366350v.4
each Member pursuant thereto. The items to be so allocated shall be determined in
accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations. This Item
III(A)(1) is intended to comply with the minimum gain chargeback requirement in
Section 1.704-1(f) of the Regulations and shall be interpreted consistently therewith.

2. Member Nonrecourse Debt Minimum Gain Chargeback. Except as


otherwise provided in Section 1.704-1(i)(4) of the Regulations, notwithstanding any other
provision of Article 4 of the Agreement and this Item III, if there is a net decrease in
Member Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt
during any Company Fiscal Year, each Member who has a share of the Member
Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt,
determined in accordance with Section 1.704-2(i)(5) of the Regulations, shall be specially
allocated items of Company income and gain for such Fiscal Year (and, if necessary,
subsequent Fiscal Years) in an amount equal to such Member’s share of the net decrease
in Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse
Debt, determined in accordance with Regulations Section 1.704-2(I)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Member pursuant thereto. The items to be so allocated
shall be determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the
Regulations. This Item III(A)(2) is intended to comply with the minimum gain
chargeback requirement in Section 1.704-2(i)(4) of the Regulations and shall be
interpreted consistently therewith.

3. Qualified Income Offset. In the event any Member unexpectedly receives


any adjustments, allocations, or distributions described in Section 1.704-1(b)(2)(ii)(d)(4),
Section 1.704-1(b)(2)(ii)(d)(5), or Section 1.704-1(b)(2)(ii)(d)(6) of the Regulations,
items of Company income and gain shall be specially allocated to such Member in an
amount and manner sufficient to eliminate, to the extent required by the Regulations, the
Adjusted Capital Account Deficit of such Member as quickly as possible, provided that
an allocation pursuant to this Item III(A)(3) shall be made only if and to the extent that
such Member would have an Adjusted Capital Account Deficit after all other allocations
provided for in Article 4 of the Agreement and this Item III(A) have been tentatively
made as if this Item III(A)(3) were not in the Agreement.

4. Gross Income Allocation. In the event any Member has a deficit Capital
Account at the end of any Company Fiscal year which is in excess of the sum of (I) the
amount such Member is obligated to restore pursuant to any provision of this Agreement,
and (ii) the amount such Member is deemed to be obligated to restore pursuant to the
penultimate sentences of Regulation Sections 1.704-2(g)(1) and 1.704-2(I)(5), each such
Member shall be specially allocated items of Company income and gain in the amount of
such excess as quickly as possible, provided that an allocation pursuant to Item III(A)(4)
shall be made only if and to the extent that such Member would have a deficit Capital
Account in excess of such sum after all other allocations provided for in Article 4 of the
Agreement and this Item III have been made as if Item III(A)(3) hereof and this Item
III(A)(4) were not in the Agreement.

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366350v.4
5. Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year
shall be specially allocated among the Members in proportion to their Membership
Interest.

6. Member Nonrecourse Deductions. Any Member Nonrecourse Deductions


for any Fiscal Year shall be specially allocated to the Member who bears the economic
risk of loss with respect to the Member Nonrecourse Debt to which such Member
Nonrecourse Deductions are attributable in accordance with Regulations Section
1.704-2(I)(1).

7. Code Section 754 Adjustment. To the extent an adjustment to the adjusted


tax basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b)
is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or Regulations
Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital
Accounts as the result of a distribution to a Member in complete liquidation of his or her
interest in the Company, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis) and such gain or loss shall be specially allocated to the
Members in accordance with their interests in the Company in the event Regulations
Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Members to whom such distribution
was made in the event Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.

B. Curative Allocations. The allocations set forth in Item III(A) hereof (the
“Regulatory Allocations”) are intended to comply with certain requirements of the Regulations.
It is the intent of the Members that, to the extent possible, all Regulatory Allocations shall be
offset either with other Regulatory Allocations or with special allocations of other items of
Company income, gain, loss, or deduction pursuant to this Item III(B). Therefore,
notwithstanding any other provision of Article 4 of the Agreement and this Item III (other than
the Regulatory Allocations), the Manager shall make such offsetting special allocations of
Company income, gain, loss or deduction in whatever manner he determines appropriate so that,
after such offsetting allocations are made, each Member’s Capital Account balance is, to the
extent possible, equal to the Capital Account balance such Member would have had if the
Regulatory Allocations were not part of the Agreement and all Company items were allocated
pursuant to Sections 4.2 and 4.3 of the Agreement. In exercising its discretion under this Item
III(B), the Manager shall take into account future Regulatory Allocations under Items III(A)(1)
and III(A)(2) that, although not yet made, are likely to offset other Regulatory Allocations
previously made under Items III(A)(5) and III(A)(6).

C. Other Allocation Rules.

1. The Members are aware of the income tax consequences of the allocations
made by Article 4 of the Agreement and this Item III and hereby agree to be bound by the
provisions of Article 4 of the Agreement and this Item III in reporting their shares of
Company income and loss for income tax purposes.

A-7
366350v.4
2. For purposes of determining the Profits, Losses, or any other items
allocable to any period, Profits, Losses, and any such other items shall be determined on a
daily, monthly, or other basis, as determined by the Manager using any permissible
method under Code Section 706 and the Regulations thereunder.

3. Solely for purposes of determining a Member’s proportionate share of the


“excess nonrecourse liabilities” of the Company, within the meaning of Regulations
Section 1.752-3(a)(3), the Members’ interests in Company profits are in proportion to
their Membership Interest.

4. To the extent permitted by Section 1.704-2(h)(3) of the Regulations, the


Manager shall endeavor not to treat distributions of Cash Flow as having been made from
the proceeds of a Nonrecourse Liability or a Member Nonrecourse Debt.

D. Tax Allocations: Code Section 704(c).

1. In accordance with Code Section 704(c) and the Regulations thereunder,


income, gain, loss, and deduction with respect to any property contributed to the capital
of the Company shall, solely for tax purposes, be allocated among the Members so as to
take account of any variation between the adjusted basis of such property to the Company
for federal income tax purposes and its initial Gross Asset Value.

2. In the event the Gross Asset Value of any Company asset is adjusted,
subsequent allocations of income, gain, loss, and deduction with respect to such asset
shall take account of any variation between the adjusted basis of such asset for federal
income tax purposes and its Gross Asset Value in the same manner as under Code
Section 704(c) and the Regulations thereunder.

3. Any elections or other decisions relating to such allocations shall be made


by the Manager in any manner that reasonably reflects the purpose and intention of this
Agreement. Allocations pursuant to this Item III(D) are solely for purposes of federal,
state, and local taxes and shall not affect, or in any way be taken into account in
computing, any Member’s Capital Account or share of Profits, Losses, other items, or
distributions pursuant to any provisions of this Agreement.

[END OF APPENDIX]

A-8
366350v.4
EXHIBIT A

Capital Contributions and Memberships Interest

Capital Membership
Member Name and Address Contribution Interest
$

366350v.4
EXHIBIT E

FINANCIAL STATEMENTS*
* Available in public reports filed with the Securities
and Exchange Commission at www.sec.gov/edgar.shtml.
EXHIBIT F
SUBSCRIPTION DOCUMENTS
SUBSCRIPTION BOOKLET

Edward L. Torres, President


Environmental Service Professionals Inc.
1111 East Tahquitz Canyon Way, Suite 110
Palm Springs, California 92262

Re: Environmental Service Professionals, Inc. – 1,000,000 Units, Each Unit Consisting of One
Share of Series A Preferred Stock and One Membership Interest in ESP LIBACSM Fund,
LLC (the “Units”)

In connection with the offer and proposed sale to “Accredited Investors” (the “Offering”) by
Environmental Service Professionals Inc. (the “Company”), a Nevada corporation, of up to 1,000,000 Units
consisting of 1,000,000 shares of the Company's Series A Convertible Preferred Stock and up to 1,000,000
Membership Interests in ESP LIBACSM Fund, LLC, the undersigned prospective investor (the “Investor”) and the
Company hereby agree as follows:

1. Subscription. The Investor hereby subscribes for, and agrees, to purchase the number of Units set
forth on the signature page of this Subscription Booklet (the “Booklet”), subject to the following conditions and
understandings:

(i) Acceptance or Rejection. The Company, in its sole discretion and for any reason, may
accept or reject this subscription, in whole or in part and at any time. The Company may also allocate to
the Investor less than the number of Units subscribed for, in which case there shall be remitted to the
Investor the difference between the subscription amount paid and the subscription price allocable to the
Units accepted.

(ii) Closing. All funds will be held in a non-interest bearing escrow account until the
minimum funding level of $500,000 (the “Minimum Offering”) is reached. This escrow agent will continue
as the distribution agent after the minimum impound is reached and until the Offering is terminated.

(iii) Treatment of Funds Submitted in Connection with Rejected Subscriptions. If the


Company rejects this subscription in its entirety, the Investor's check or wire transfer accompanying this
subscription will be returned to the Investor without interest or deduction. If this subscription is accepted
in whole or in part, the Investor's check will be cashed or the wire transfer approved with funds paid to the
Company and the Company will promptly remit to the Investor the funds relating to that portion of the
subscription, if any that is not accepted.

2. Representations and Warranties. The Investor makes the acknowledgments, representations and
warranties set forth in this Section with the intent that the same may be relied upon in determining the Investor's
suitability as a purchaser of Units. The obligations of the Investor and the acknowledgments, representations and
warranties herein contained shall be binding upon each such person and his respective heirs, executors,
administrators, and assigns.

(i) No Regulatory Review. The Investor acknowledges that this is a limited offering and that
no federal, state or other agency has made nor will make any finding or determination as to the fairness of
the investment or make nor made any recommendation or endorsement of the Units.

(ii) Ability to Evaluate. The Investor, by reason of the Investor's knowledge and experience
in financial and business matters, is capable of evaluating the risks and merits of an investment in the Units.
The Investor recognizes that the Units are speculative and that investment in the Units involves a high
degree of risk. The Investor is prepared to bear the economic risk of an investment in the Units for an
indefinite period of time and is able to withstand a total loss of the Investor's investment in the Units.

(iii) Investment Intent. The Investor acknowledges that the purchase of Units hereunder is
being made for the Investor's own account, for investment purposes only and not with the present intention
of distributing or reselling the Units in whole or in part. The Investor further understands that the Units

1
have not been and will not be registered under the Securities Act (the “Act”), or under any state securities
laws by reason of specific exemptions there from, which depend upon, among other things, the accuracy of
the Investor's representations as expressed in this Booklet. The Investor acknowledges that transfer of the
Units is restricted under the Act and under applicable state securities laws. The Investor further
acknowledges that the Company has urged the Investor to consult with his or her counsel regarding the
restrictions on resale of the Units prior to any resale thereof.

(iv) Investment Information. The Investor will rely solely on investigations made by the
Investor in making a decision to purchase the Units. In particular, and without limiting the generality of the
foregoing, the Investor has not relied on, nor has the Investor's decision to subscribe for Units been
influenced by: (i) newspaper, magazine or other media articles or reports related to the Company or its
business; or (ii) promotional literature or other materials used by the Company for sales or marketing
purposes. The Investor has had the opportunity to discuss all aspects of this transaction with management
of the Company, has made or has had the opportunity to make such inspection of the books and records of
the Company as the Investor has deemed necessary in connection with this investment, and any questions
asked have been answered to the satisfaction of the Investor.

(v) Accredited Investor Status. The Investor is an “Accredited Investor” as such term is
defined in Rule 501(a) of Regulation D under the Securities Act of 1933 (the “Act”), as amended, and
within the meaning of similar regulations under state securities laws for the reasons indicated in the
“Investor Acknowledgments” accompanying this Booklet. To be an Accredited Investor for the purpose of
this Offering, the investor must (i) be a natural person who had an individual income in excess of $200,000
in each of the last two years or joint income with that person's spouse in excess of $300,000 in each of the
last two years and has a reasonable expectation of realizing the same income level in the current year; or
(ii) be a natural person whose individual net worth, or joint net worth with that person's spouse, exceeds
$1,000,000; or (iii) be an organization or entity consisting solely of persons who meet the requirements
specified in (i) or (ii) above; or (iv) be any other “Accredited Investor” as that term is defined in Rule 501
of Regulation D under the Act.

(vi) Escrow Agent Status. The Investor acknowledges that U.S. Bank National Association is
acting only as an escrow agent in connection with the Offering of the Units described herein, and has not
endorsed, recommended or guaranteed the purchase, value or repayment of such Units.

3. Survival. The representations and warranties contained in Section 2 herein will survive the
Closing.

4. Reliance on Representations and Warranties; Indemnification. The Investor understands that the
Company will rely on the representations and warranties of the Investor herein in determining whether a sale of the
Units to the Investor is in compliance with federal and applicable state securities laws. The Investor hereby agrees
to indemnify the Company and its respective affiliates, and hold the Company and its affiliates harmless from and
against any and all liability, damage, cost or expense (including reasonable attorneys' fees) incurred on the account
of or arising out of: (a) any inaccuracy in the Investor's Acknowledgments, representations and warranties set forth
in this Booklet; (b) the disposition of any of the Units which the Investor will receive, contrary to the Investor's
acknowledgments, representations and warranties in this Booklet; (c) any suit or proceeding based upon the claim
that said acknowledgments, representations or warranties were inaccurate or misleading or otherwise cause for
obtaining damages or redress from the Company or any of its affiliates or the disposition of all or any part of the
Investor's Units; and (d) the Investor's failure to fulfill any or all of the Investor's obligations herein.

5. Updating Information. All of the information set forth herein with respect to the Investor,
including, without limitation all of the acknowledgments, representations and warranties set forth herein, is correct
and complete as of the date hereof and, if there should be any material change in such information prior to the
acceptance of this subscription by the Company, the Investor will immediately furnish the revised or corrected
information to the Company.

2
6. Execution of Additional Documents. The parties to this Booklet will execute and deliver the
Investor Acknowledgments form, attached hereto as Appendix 1, and any other documents, transfers, assurances and
procedures necessary, in the opinion of counsel for the Company, for the purposes of giving effect to or perfecting
the transactions contemplated by this Booklet.

7. Notices. Any notices or other communication required or permitted hereunder shall be sufficiently
given if in writing and sent by registered or certified mail, postage prepaid and return receipt requested if to the
Company to: Edward L. Torres, President, Environmental Service Professionals Inc., 1111 East Tahquitz Canyon
Way, Suite 110, Palm Springs, California 92262 (760) 327-5284 , and if to the Investor, at the address set forth
following the Investor's signature to this Booklet, or to such other address as either the Company or the Investor
shall designate to the other by notice in writing.

8. Successors; Amendment. This Booklet inures to the benefit of and is binding upon the parties to
this Booklet and their heirs, executors, administrators, successors and permitted assigns. This Booklet may be
amended, modified or terminated only by an agreement in writing, signed by the parties to be changed by such
amendment, modification or termination.

9. Governing Law. This Booklet shall be governed by and construed in accordance with the laws of
the state of California.

10. Representation. The Investor acknowledges that legal counsel for the Company has acted as
counsel solely to the Company and not to the Investor. The Investor is advised to have his/her/its own legal counsel
and other advisors review the Offering Memorandum prior to subscribing for Units.

11. Signature Below is Deemed for all Purposes to be Undersigned Investor’s Signature on the
Signature Page of the Limited Liability Company Agreement; The undersigned, by the undersigned’s signature
below, shall be deemed for all purposes to have executed and delivered the limited liability company
agreement (the “Operating Agreement”) of ESP LIBACSM Fund, LLC, a Delaware limited liability company
(the “LLC”), a copy of which Operating Agreement has been provided to the undersigned, and the
undersigned’s signature below conclusively and irrevocably evidences the undersigned’s agreement to be
bound by all of the terms of the Operating Agreement.

12. The undersigned acknowledges that U.S. Bank National Association is acting only as an
escrow agent in connection with the offering of the Interests described herein, and has not endorsed,
recommended or guaranteed the purchase, value or repayment of such Interests.

13. Signatures. The Investor declares under penalty of perjury that the statements, acknowledgments,
representations and warranties contained herein are true, correct and complete and that this Booklet was executed

at_________________________ in ______________________
(Place) (State)

____________________________________
Print Name

____________________________________
Address

____________________________________
City State

By: __________________________________ By:


Signature Signature of Spouse (if applicable)

Dated: ______________________________

3
(SUBMIT WITH CHECK)

Number of Units subscribed for: _______@ $10.00 per Unit (1,000 Unit Minimum).

Dollar Amount of Units subscribed for: $_________________

Make all certified or bank checks payable to: ESPI Escrow Account

If you wish to execute a wire transfer, please contact Lorie Cook of Capital Growth Resources (Placement
Agent) at (800) 440-1023 for wire instructions. NOTE: All funds, whether by check or wire transfer, must
be drawn on a United States bank for same day and in United States funds.

Print exact name(s) in which Units are to be registered:

NAME (1):

SS# or Tax I.D.:

Telephone No.:
Email Address:

NAME (2):

SS# or Tax I.D.:

Telephone No.:

Email Address:

ENTITY:

ADDRESS:

The investment is to be held as follows (check one):

(a)____Husband & Wife, as community property


(b)____Joint Tenants
(c)____Tenants in Common
(d)____Individual
(e)____Corporation
(f)____ Partnership
(g)____Trust
(h)____Other

If interest, dividend payments or other payments are to be disbursed to a third party, including distributions to be
made from the ESP LIBACsm Fund, LLC, please provide the following:

NAME:
ADDRESS:
ACCOUNT NO.:

4
Broker/Dealer Information

Name of Broker/Dealer:
Address:

TEL: ( ) FAX: ( )
Registered Representative:
Rep. Address (If Different):

Rep. Telephone & Fax: ( ) ( )

ACCEPTANCE OF SUBSCRIPTION

Accepted by Environmental Service Professionals Inc., as of , 200__.

By ______________________________
Edward L. Torres, President
Environmental Service Professionals, Inc.

THIS SPACE INTENTIONALLY LEFT BLANK

5
ANTI-MONEY LAUNDERING PROVISIONS

How big is the problem and


The USA PATRIOT Act What is money laundering? why is it important?
The USA PATRIOT Act is Money laundering is the process The use of the U.S. financial
designed to detect, deter, and of disguising illegally obtained system by criminals to facilitate
punish terrorists in the United money so that the funds appear to terrorism or other crimes could
States and abroad. The Act come from legitimate sources or taint our financial markets.
imposes new anti-money activities. Money laundering According to the U.S. State
laundering requirements on occurs in connection with a wide Department, one recent estimate
brokerage firms and financial variety of crimes, including puts the amount of worldwide
institutions. Since April 24, illegal arms sales, drug money laundering activity at $1
2002, all brokerage firms have trafficking, robbery, fraud, trillion a year.
been required to have new, racketeering, and terrorism.
comprehensive anti-money
laundering programs.
To help you understand these
efforts, we want to provide you
with some information about
money laundering and our steps
to implement the USA PATRIOT
Act.

What are we required to do to eliminate money laundering?


Under new rules required by the USA PATRIOT As part of our required program, we may ask you to
Act, our anti-money laundering program must provide various identification documents or other
designate a special compliance officer, set up information. Until you provide the information or
employee training, conduct independent audits, and documents we need, we may not be able to effect
establish policies and procedures to detect and any transactions for you.
report suspicious transactions and ensure
compliance with the new laws.

PATRIOT ACT REQUIREMENTS

The Patriot Act requires us to obtain the following information from you to detect and prevent the misuse
of the world financial system.

1. In the space provided below, please provide details of where monies were transferred from to the
Company in relation to your subscription for Units.

COUNTRY NAME OF CONTACT NAME OF ACCOUNT


BANK/FINANCIAL NAME/PHONE ACCOUNTHOLDER NUMBER
INSTITUTION NUMBER AT
BANK/FINANCIAL
INSTITUTION

If the country from which the monies were transferred appears in the Approved Country List below, please
go to number 3. If the country does not appear, please go to number 2.

6
Approved Country List:

Argentina Germany Liechtenstein Spain


Australia Gibraltar Luxembourg Switzerland
Bermuda Guernsey Mexico Turkey
Belgium Hong Kong Netherlands United Kingdom
Brazil Iceland New Zealand United States
British Virgin Islands Ireland Norway
Canada Isle of Man Panama
Denmark Italy Portugal
Finland Japan Singapore
France Jersey

2. If subscription monies were transferred to the Company from any country other than on the Approved
Country List (see above), please provide the following documentation to the Company (all copies should be in
English and certified as being “true and correct copies of the original” by a notary public of the jurisdiction of which
you are resident).

(a) For Individuals:

(i) evidence of name, signature, date of birth and photographic identification,

(ii) evidence of permanent address, and

(iii) where possible, a reference from a bank with whom the individual maintains a current
relationship and has maintained such relationship for at least two years

(b) For Companies:

(i) a copy of its certificate of incorporation and any change of name certificate,

(ii) a certificate of good standing,

(iii) a register or other acceptable list of directors and officers,

(iv) a properly authorized mandate of the company to subscribe in the form, for example, of a
certified resolution which includes naming authorized signatories,

(v) a description of the nature of the business of the company,

(vi) identification, as described above for individuals, for at least two directors and authorized
signatories,

(vii) a register of members or list of shareholders holding a controlling interest, and

(viii) identification, as described above, for individuals who are beneficial owners of corporate
shareholders which hold 10% or more of the capital share of the company.

(c) For Partnerships and Unincorporated Businesses:

(i) a copy of any certificate of registration and a certificate of good standing, if registered,

(ii) identification, as described above, for individuals and, where relevant, companies
constituting a majority of the partners, owners or managers and authorized signatories,

(iii) a copy of the mandate from the partnership or business authorizing the subscription in the
form, for example, of a certified resolution which includes naming authorized signatories,
and

7
(iv) a copy of constitutional documents (formation and partnership agreements).

(d) For Trustees:

(i) identification, as described above, for individuals or companies (as the case may be) in
respect of the trustees,

(ii) identification, as described above for individuals, of beneficiaries, any person on whose
instructions or in accordance with whose wishes the trustee/nominee is prepared or
accustomed to act and the settlor of the trust, and

(iii) evidence of that nature of the duties or capacity of the trustee.

3. The Company is also required to verify the source of funds. To this end, summarize the underlying source
of the funds remitted to us (for example, where subscription monies were the profits of business (and if so please
specify type of business), investment income, savings, etc.).

Source of Funds

ANTI-MONEY LAUNDERING ACT

WIRING FUNDS: Due to the Anti-Money Laundering Act, Compliance must grant approval prior to
funds being wired from any account other than National Financial Services (NFS) or an IRA Custodial Account.
Thus, please adhere to the following procedure:

A. Complete Sections 1 through 3 in the Patriot Act Requirements section above, as applicable,
utilizing the information for the bank from which the wire will originate.

B. Attach a copy of your “Letter of Instruction” or other wire instructions showing your name,
financial institution name (where wire will originate), account number, wire amount, and wire
instructions (escrow agent information such as ABA routing number, escrow account number etc)
– this must be signed and dated.

C. If monies will be wired from an account not matching the name on this Subscription Agreement,
additional documentation is necessary (please contact Lorie Cook at (619) 440-7023 for
assistance).

D. Submit Subscription Agreement to Lorie Cook for processing and compliance approval.

E. Upon notification of approval from, wire funds.

F. will obtain wire confirmation from escrow agent. If wire confirmation does NOT show account
number of wire origination, additional documentation will be required.

WIRING FUNDS IN ADVANCE OF COMPLIANCE APPROVAL IS PROHIBITED

8
PRIVACY POLICY

It is the policy of Capital Growth Resources to respect the privacy of customers who subscribe to
transactions underwritten by Capital Growth Resources.

Whether its own brokers introduce Customers to or the introduction was made through Selling Agents,
(hereinafter referred to as “Subscribers”) non-public personal information is protected by Capital Growth Resources.

Capital Growth Resources does not disclose any nonpublic personal information about Subscribers to
anyone, except as required or permitted by law and to effect, administer, or enforce transactions requested by
Subscribers in the ordinary processing, servicing or maintaining their accounts. Furthermore, Capital Growth
Resources does not reserve the right to disclose Subscriber’s nonpublic personal information in the future without
first notifying the Subscriber of a change in privacy policy and providing a convenient opportunity for Subscriber to
opt out of information sharing with nonaffiliated third parties.

Under the USA PATRIOT Act of 2001 (Public Law 107-56)(together with all rules and regulations
promulgated hereunder, the “Patriot Act”), and/or your broker may be required or requested to disclose to one or
more regulatory and/or law enforcement bodies certain information regarding transactions relating to your account
involving transactions with foreign entitles and individuals, other transactions in your account as required in the
Patriot Act and other activities described in the Patriot Act as “suspicious activities.” Neither nor your broker shall
have any obligation to advise you of any such disclosures or reports made in compliance with the Patriot Act.

THIS SPACE INTENTIONALLY LEFT BLANK

9
APPENDIX 1

INVESTOR ACKNOWLEDGMENTS
The information contained herein is being furnished to Environmental Service Professionals Inc. (the “Company”)
in connection with the undersigned Investor's interest in participating in the Offering of Units of the Company to
“Accredited Investors.” The Investor acknowledges and understands that the Company will rely upon the
information contained herein for purposes of determining whether the offer and sale of the Units to the Investor will
be exempt from registration under the Securities Act and certain exemptions from qualification under applicable
state securities law.

In order to induce the Company to accept the accompanying subscription for Units, the Investor expressly
acknowledges the following by placing his or her initials in each of the spaces provided below:

THE INVESTOR HAS RECEIVED, CAREFULLY READ, AND UNDERSTANDS THIS


CONFIDENTIAL PRIVATE PLACEMENT OFFERING AND IN PARTICULAR, IS AWARE OF THE
RISKS OF AN INVESTMENT IN THE UNITS DESCRIBED IN THIS OFFERING.

THE INVESTOR HAS CAREFULLY READ THE ACCOMPANYING PRIVATE PLACEMENT


MEMORANDUM AND, IN PARTICULAR, HAS CAREFULLY READ AND UNDERSTANDS THE
INVESTOR'S REPRESENTATIONS AND WARRANTIES MADE THEREIN, AND CONFIRMS THAT
ALL SUCH REPRESENTATIONS AND WARRANTIES ARE TRUE AND CORRECT.

By checking the appropriate box below, the Investor represents that he/she/it is an “Accredited Investor” within the
meaning of Rule 501 of Regulation D promulgated under the Securities Act of 1933, since he/she hereby certifies
that:

… Such investor is a natural person who has a net worth or joint net worth with the investor’s spouse exceeding
$1,000,000 at the time of the investor’s purchase.

… Such investor is a natural person who had an individual income in excess of $200,000 in each of the two most
recent years and who reasonably expects an income in excess of $200,000 in the current year, or who together
with his/her spouse had joint income in excess of $300,000 in each of the two most recent years and who
reasonably expects a joint income in excess of $300,000 in the current year.

… Such investor is a (i) bank, savings and loan association or trust company, (ii) a broker/dealer registered under
the Securities Exchange Act of 1934, (iii) an insurance company, (iv) an investment company registered under
the Investment Company Act of 1940, (v) a pension or profit sharing trust (other than a self-employed
individual retirement plan or individual retirement account), (vi) a governmental agency, (vii) a small business
investment company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958, (viii) a business development company as defined in Section 2(a)(48)
of the Investment Company Act of 1940, or (ix) a private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940.

… Such investor is an officer or director of the Company.

… Such investor is a trust with total assets in excess of $5,000,000 and was not formed for the specific purpose of
acquiring the Interests.

… Such investor is a tax-exempt organization described in Section 501(c)(3) of the Internal Revenue Code of
1986, as amended (the “Code”), and has assets of not less than $5,000,000 as of its most recent audited financial
statements.

… Such investor is a corporation, partnership, trust or other entity and each and every equity owner of such entity
meets the qualifications set forth in the preceding paragraphs.

10
SIGNATURES

To the best of the Investor's knowledge and belief, the Investor declares that the above information is complete, true
and correct in all respects and the Investor understands that the Company will rely on the accuracy of such
information.

Executed this ______ day of _________________, 2008 at

______________________, ______________. _________


City State Zip

___________________________________
Name (Please print or type)

___________________________________
Signature

___________________________________
Signature of Spouse (if applicable)

11