**THIS
      NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
      (“SECURITIES ACT”), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT
      (I) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
      OR
      (II) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, BUT
      ONLY UPON THE PAYEE FIRST HAVING OBTAINED A WRITTEN OPINION OF MAKER’S COUNSEL,
      OR OTHER COUNSEL ACCEPTABLE TO MAKER, THAT THE PROPOSED DISPOSITION IS
      CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT AND ANY
      APPLICABLE “BLUE SKY” OR OTHER SIMILAR SECURITIES LAW.**





**SENIOR
      SECURED CONVERTIBLE PROMISSORY NOTE**





**$______,000**
            **August
                8, 2007**








FOR
      VALUE
      RECEIVED, **SMF
      Energy Corporation** ,
      a
      Delaware corporation (“ **Maker** ”), promises
      to pay to the order of **_________________** or his/
      her/ its assigns **** (“ **Payee** ”),
      at
      such place as the Payee may designate in writing, in lawful money of the United
      States of America, the principal sum of ______________________ Thousand Dollars
      ($____,000). Capitalized
      terms used but not otherwise defined herein shall have the meanings ascribed
      to
      them in the Indenture (as defined below).





**1.**  **Principal
      Payments** **.** The
      principal amount of this promissory note (the “ **Note** ”
and,
      collectively with substantially identical promissory notes of Maker, the
“ **Notes** ”)
      shall
      be due and payable on December 31, 2009 (the “ **Due
      Date** ”).
      The
      outstanding principal balance of this Note may be prepaid by Maker prior to
      maturity as provided in Section 5 of this Note.





**2.**  **Interest** **.** The
      outstanding principal balance of this Note shall accrue interest at a fixed
      rate
      of eleven and one-half percent (111⁄2%); provided, however, that following an
      Event of Default (as defined below), the outstanding principal balance of this
      Note shall bear interest as provided in Section 8 of this Note. Interest shall
      be calculated on the basis of a 360-day year. Accrued interest on this Note
      shall be paid semi-annually, on each January 1 and July 1, beginning January
      1,
      2008, until the outstanding principal balance of this Note is paid in full.





**3.**  **Interest
      Method of Payment; Application** **.**  All
      payments (including any prepayments) shall be made on the due date thereof
      by
      wire transfer of immediately available funds to such bank account as Payee
      may
      from time to time designate in writing. All cash payments of interest shall
      be
      made on the due date thereof by check drawn on a United States bank. Payments
      (including all prepayments) received by Payee on this Note shall be applied
      first to the payment of accrued and unpaid interest and only thereafter to
      the
      outstanding principal balance of this Note.








**4.**  **Subordination** **.** Payee
      agrees that, except for the first priority security interest in certain
      collateral (the “ **Collateral** ”)
      granted by Maker and its subsidiaries H & W Petroleum Company, Inc.
      (“ **H
      & W** ”)
      and
      SMF Services, Inc. (“ **SSI** ”)
      (Maker, H & W and SSI are referred to collectively as the “ **Companies** ”)
      to
      Payee and other holders of the Notes (collectively, the “ **Payees** ”),
      pursuant to the Security Agreement of even date herewith (the “ **Security
      Agreement** ”)
      between the Companies and the trustee (“ **Trustee** ”)
      named
      in the Indenture Agreement for the Notes (the “ **Indenture** ”),
      the
      payment of principal and interest on this Note are expressly subordinated to
      the
      rights and interests of Wachovia Bank, National Association, successor by merger
      to Congress Financial Corporation (Florida) (“ **Wachovia”** )
      pursuant to and in connection with, and the payment of all existing and future
      amounts owed to Wachovia by the Companies under, the line of credit facility
      between Wachovia and Companies pursuant to that certain Loan and Security
      Agreement dated September 26, 2002, as now or hereafter amended (the
“ **Line
      of Credit** ”),
      and
      to any other institutional credit facility into which Maker may subsequently
      enter to replace the Line of Credit requiring that the lender rank in a senior
      position to other debt of Maker (the “ **Replacement
      Facility** ”)
      (the
      Line of Credit and the Replacement Facility are collectively referred to as
      the
“ **Loan
      Agreements** ”).
      Payee
      and Maker agree that, except for Payee’s first priority security interest in the
      Collateral under the Security Agreement, the terms and conditions governing
      and
      applicable to the subordination of this Note and the indebtedness evidenced
      hereby are and shall be, in all material respects (conformed, as necessary,
      for
      this Note and the related indebtedness) identical to the terms and conditions
      of
      that certain Subordination Agreement (the “ **Subordination
      Agreement** ”)
      dated
      July 13, 2007, by, Wachovia, Maker, and a creditor of Maker (“ **Loan
      Holder** ” **)** ,
      a copy
      of which is attached hereto as Exhibit
      B and
      incorporated by reference herein. By Payee’s acceptance of this Note, Payee
      shall be deemed to have joined as a party to the Subordination Agreement and
      to
      be a Loan Holder thereunder and this Note shall be deemed to be part of the
      “Notes” and “Subordinated Debt” referenced therein, except with respect to the
      first priority security interest in the Collateral granted by the Companies
      to
      Payees pursuant to the Security Agreement. Payee and Maker hereby expressly
      ratify, approve and adopt the terms of the Subordination Agreement (conformed,
      as necessary) with respect to this Note and the indebtedness represented hereby.
      Payee and Maker further agree that this Note may not, without the prior written
      consent of Wachovia (or the new lender if the Line of Credit has been fully
      repaid and terminated and there is a Replacement Facility in place), be repaid
      from the proceeds of Maker’s issuance or sale of new debt securities or other
      indebtedness, provided, however, nothing herein restricts or limits Maker’s
      ability to repay this Note with the proceeds of Maker’s issuance of equity
      securities unless such repayment is prohibited by the Loan Agreements. Nothing
      herein shall be deemed to restrict or limit the rights of Payees and Trustee
      with respect to the Collateral under the Security Agreement, which rights are
      not affected in any way by the Subordination Agreement. Upon request, Payee
      agrees to execute and deliver such other documents and instruments as Wachovia
      or any senior institutional lender may reasonably request to acknowledge and
      effect the foregoing subordination.





**5.**  **Redemption
      and Prepayment** **.**





(a)  Optional
      Redemption .
      At any
      time after the date of this Note, Maker shall have the option to redeem this
      Note, in whole or in part, without prepayment penalty or premium, except that,
      if such pre-payment is proposed to be made before the first anniversary of
      the
      issuance of the Note, then a prepayment penalty equal to three percent (3%)
      of
      the principal amount being redeemed shall also be paid. In addition to the
      principal amount being pre-paid and the pre-payment penalty, if any, Maker
      shall
      also pay any accrued but unpaid interest on the entire outstanding principal
      balance of this Note at the time of redemption.








(b)  Notice
      to Wachovia .
      If
      Maker elects to redeem this Note in accordance with the terms of this Section
      5 ,
      it
      shall furnish to Wachovia, at least fifteen (15) days (unless Wachovia agrees
      in
      writing to a shorter period) but not more than sixty (60) days before a
      redemption date, notice in writing that includes the redemption date, the amount
      of principal due on this Note to be redeemed. Trustee must also approve a notice
      period shorter than fifteen (15) days.





(c)  Notice
      to Payee .
      At
      least fifteen (15) days **** but
      not
      more than sixty (60) days (the “ **Payee
      Notice Period** ”)
      before
      a redemption date, Maker shall mail or cause to be mailed a notice of redemption
      to Payee. The notice shall state:





(i)  the
      redemption date;





(ii)  the
      redemption price;





(iii)  that
      this
      Note called for redemption must be surrendered to Maker to collect the
      redemption price; and





(iv)  that,
      unless Maker defaults in making such redemption payment, interest on this Note
      called for redemption ceases to accrue on the redemption date.





(d)  Effect
      of Notice of Redemption .
      This
      Note will become irrevocably due and payable on the redemption date at the
      redemption price. A notice of redemption may not be conditional.





(e)  Conversion
      Prior to Redemption or Merger .
      During
      the Payee Notice Period, the Payee may elect to convert fifty percent (50%)
      of
      the original principal amount of this Note into common stock of Maker in
      accordance with Section 6 hereof rather than permit the Note to be redeemed.
      If
      there is a partial redemption and Payee elects to convert a portion of this
      Note
      instead of permitting the redemption of this Note, Payee may apply all or any
      portion of Payee’s fifty percent (50%) conversion right to the amount that would
      otherwise be redeemed, as Payee so elects. If and to the extent that there
      is a
      partial redemption and Payee elects not to exercise Payee’s conversion rights,
      Payee’s conversion rights will remain at fifty percent (50%) of the original
      principal amount or this Note, reduced by the amount, if any, that was converted
      at any time prior to such redemption.





(f)  Note
      Redeemed or Converted in Part .
      If less
      than the entire principal amount of this Note is redeemed or converted, Maker
      will deliver to Payee, at Maker’s expense, a new promissory note in the same
      form of this Note in an amount equal in principal to the unredeemed and
      unconverted portion of this Note not more than thirty (30) days after such
      partial conversion or redemption.











**6.**  **Conversion** **.**





(a)  Fifty
      percent (50%) of the original principal amount of this Note is convertible
      by
      the holder hereof into shares (“ **Shares** ”)
      of
      Maker’s common stock (“ **Common**  **Stock** ”)
      at
      $1.46 per share, the official closing price of the Common Stock as reported
      by
      the Nasdaq Stock Market on July 31, 2007 (the “ **Initial
      Conversion Price** ”).





(b)  The
      remaining fifty percent (50%) of the principal amount of the Notes (the
“ **Balance
      Amount** ”)
      will
      be convertible into Shares only if Maker subsequently determines, in its
      discretion, to grant additional conversion rights to Payee. Any such grant
      of
      additional conversion rights by Maker shall be accompanied by written notice
      of
      the terms and conditions of such grant to Payee. Any such additional conversion
      rights will be granted at a price set by Maker, which price will in no event
      be
      less than the official closing price of the Common Stock as reported by the
      Nasdaq Stock Market on the day such additional conversion rights are granted
      or
      on the immediately preceding trading day (the “ **Balance
      Conversion Price** ”)(the
      Balance Conversion Price and the Initial Conversion Price are referred to
      collectively herein as the “ **Note
      Price** ”).





(c)  Upon
      conversion of this Note, certificates for the Shares so purchased shall be
      delivered to Payee within three (3) business days of the Maker’s actual receipt
      of this original Note and a completed Notice of Conversion in substantially
      the
      same form attached hereto as Exhibit
      A .





(d)  The
      number and kind of securities purchasable upon the conversion of this Note
      and
      the Note Price shall be subject to adjustment from time to time upon the
      occurrence of certain events, as follows:





(i)  In
      case
      of any reclassification or change of outstanding securities of the Common Stock
      (other than a change in par value, or from par value to no par value, or from
      no
      par value to par value, or as a result of a subdivision or combination), or
      in
      case of any merger of Maker with or into another corporation (other than a
      merger with another corporation in which Maker is a continuing corporation
      and
      which does not result in any reclassification or change of outstanding
      securities issuable upon conversion of this Note), or in case of any sale of
      all
      or substantially all of the assets of Maker, Payee shall have the right upon
      conversion of this Note to receive, in lieu of Shares of Common Stock
      theretofore issuable upon conversion of this Note, the kind and amount of shares
      of stock, other securities, money and property receivable upon such
      reclassification, change or merger by the holder of one share of Common Stock.
      These provisions shall similarly apply to successive reclassifications, changes,
      mergers and transfers.





(ii)  If
      Maker
      at any time while this Note remains outstanding and unexpired shall subdivide
      or
      combine its Common Stock, the Note Price shall be proportionately adjusted.
      In
      the case of a subdivision, the Note Price shall be proportionately
      decreased and the number of Shares shall be proportionately increased. In the
      case of a combination, the Note Price shall be proportionately increased and
      the
      number of Shares shall be proportionately decreased.








(iii)  If
      Maker
      at any time while this Note is outstanding and unexpired shall pay a dividend
      or
      other distribution with respect to Common Stock or any other equity interest
      in
      Maker which is payable in Common Stock (except any distribution specifically
      provided for in the foregoing paragraph (i) or (ii)) then the Note Price and
      the
      number of Shares into which this Note may be converted shall be adjusted, from
      and after the date of determination of stockholders entitled to receive such
      dividend or distribution to that price determined by multiplying the Note Price
      in effect immediately prior to such date of determination by a fraction (a)
      the
      numerator of which shall be the total number of shares of Common Stock
      outstanding immediately prior to such dividend or distribution and (b) the
      denominator of which shall be the total number of shares of Common Stock
      outstanding immediately after such dividend or distribution.





(iv)  When
      there is an adjustment in the Note Price and a corresponding increase in the
      number of Shares of Common Stock that can be obtained by conversion, the
      adjustment to the number of Shares shall be made by multiplying the number
      of
      Shares purchasable immediately prior to such adjustment in the Note Price by
      a
      fraction, the numerator of which shall be the Note Price immediately prior
      to
      such adjustment and the denominator of which shall be the Note Price immediately
      thereafter, with the adjustment being made to the nearest whole
      share.





(v)  Whenever
      the Note Price shall be adjusted, Maker shall make a certificate signed by
      its
      chief financial officer setting forth, in reasonable detail, the event requiring
      the adjustment, the amount of the adjustment, the method by which such
      adjustment was calculated, and the Note Price or Prices after giving effect
      to
      such adjustment, and shall cause copies of such certificate to be mailed (by
      first class mail, postage prepaid) to the Payee.





(vi)  If
      Maker
      proposes (A) to declare any dividend or distribution upon any class or series
      of
      its stock, whether in cash, property, stock or other securities, whether or
      not
      a regular cash dividend and whether or not out of earnings or earned surplus;
      (B) to effect any reclassification or recapitalization of the Common Stock
      outstanding involving a change in the Common Stock; or (C) to merge or
      consolidate with or into any other entity, or sell, lease or convey all or
      substantially all its assets or property, or to liquidate, dissolve or wind
      up,
      whether voluntary or involuntary, then Maker shall send to the Payee at least
      ten (10) days’ prior written notice of the record date for any such event and
      prompt notice of any material change in the terms of any such
      transaction.





(e)  No
      fractional Shares of Common Stock will be issued in connection with any
      conversion of this Note.








(f)  Payee
      shall not be entitled to vote or receive dividends or be deemed the holder
      of
      Common Stock or any other securities of Maker which may at any time be issuable
      on the exercise hereof for any purpose, nor shall anything contained herein
      be
      construed to confer upon Payee any of the rights of a stockholder of Maker
      before this Note has been converted.





**7.**  **Notices** **.**





(a)  Maker
      shall give prompt written notice to Trustee and Payee under those circumstances
      in which notice is required to be given by Maker pursuant to the terms of the
      Indenture or this Note.





(b)  Trustee
      and any successor Trustee shall (i) provide prompt written notices to Payee
      under those circumstances in which notice is required to be given by Trustee
      pursuant to the terms of the Indenture and as provided in Section
      10 below
      and (ii) mail
      to
      all Payees any notice it receives from Payee pursuant to Section
      10 below.





(c)  Except
      as
      otherwise provided herein, all notices, approvals, consents, correspondence
      or
      other communications required or desired to be given hereunder shall be given
      in
      writing and shall be delivered by overnight courier, hand delivery or certified
      or registered mail, postage prepaid, (i) if to Trustee, to the address set
      forth
      in Section
      12.1 of the
      Indenture or to such other address as shall be designated by Trustee to Maker
      and Payees in writing, (ii) if to Payee, to the address noted under Payee’s name
      on the signature page attached to the Securities Purchase Agreement or to such
      other address as shall be designated by Payee to Maker and Trustee in writing
      and (iii) if to Wachovia, to the address noted in Section
      7(e) below or
      to such other address as shall be designated by Wachovia to Payee, Maker and
      Trustee in writing. All such notices and correspondence shall be effective
      when
      received.





(d)  If
      Maker
      or Payee mail a notice to one another pursuant to the terms of this Note, they
      shall also deliver or mail a copy to Trustee and Wachovia at the same time.
      Any
      notice from Wachovia to Payees shall be sufficiently provided if delivered
      to
      the Trustee pursuant to this Section 7.





(e)  Any
      notice to be delivered to Wachovia shall be delivered to the following address
      (unless otherwise amended in writing to the entity delivering such
      notice):




Wachovia
        Bank, National Association
 110
        East
        Broward Blvd., Suite 2050
 Ft.
        Lauderdale, FL 33301
 Phone
        No.: (954) 467-2262
 Facsimile
        No.: (954) 467-5520
 Attention:
        Pat Cloninger








**8.**  **Events
      of Default** **.** The
      entire principal balance of this Note shall, at the option of Payee and pursuant
      to the provisions set forth in Section
      10 ,
      immediately be due and payable upon the occurrence of one or more of the
      following events (each, an “ **Event
      of Default** ”):
      (i)
      Maker shall default in any payment of principal or interest on this Note when
      the same shall become due and payable, whether by acceleration or otherwise,
      when such default is not cured within thirty (30) days after Payee or Trustee
      provides written notice to Maker of such default; (ii) Maker shall default
      in
      any payment of principal or interest on any other senior indebtedness for
      borrowed money, including, but not limited to the Line of Credit; (iii) Maker
      shall apply for, or consent to, the appointment of a receiver, trustee or
      liquidator of Maker or of its property, admit in writing its inability to pay
      its debts as they mature, or make a general assignment for the benefit of
      creditors; or (iv) Maker shall file a voluntary petition in bankruptcy or a
      petition or an answer seeking reorganization, or an arrangement with creditors,
      or a court order approving a petition filed against Maker under the federal
      bankruptcy laws shall be entered against Maker, which order shall not have
      been
      vacated or set aside within thirty (30) days. Upon the occurrence of any one
      or
      more Events of Default (i) Payee or Trustee, at its option and without further
      notice, demand or presentment for payment to Maker or others, may declare
      immediately due and payable the entire unpaid principal amount hereof; (ii)
      thereafter interest shall accrue on the outstanding principal balance at fifteen
      percent (15%) per annum from the date of such Event of Default until the date
      the unpaid principal balance hereof is paid in full; and (iii) Maker shall
      pay
      all costs, fees and expenses, including, without limitation, reasonable trial
      and appellate attorneys’ fees and expenses, paid or incurred by Payee or Trustee
      in connection with collection of this Note, whether paid or incurred in
      connection with collection by suit or otherwise. The waiver by Payee or Trustee
      of Maker’s prompt and complete performance of, or default under, any provision
      of this Note shall not operate nor be construed as a waiver of any subsequent
      breach or default, and the failure by Payee or Trustee to exercise any right
      or
      remedy which it may possess hereunder shall not operate nor be construed as
      a
      bar to the exercise of any such right or remedy upon the occurrence of any
      subsequent breach or default. No remedy conferred hereby shall be exclusive
      of
      any other remedy referred to herein or therein or now or hereafter available
      at
      law, in e quity,
      by
      statute or otherwise.




**9.**  **SEC
      Reports** .
      In the
      event Maker is no longer a reporting company with the Securities and Exchange
      Commission (“ **SEC** ”),
      Maker
      will provide Payee with copies of the information and financial statements
      that
      would be required to be filed pursuant to Section 13 or 15(d) of the
      Securities Exchange Act of 1934, as amended, on Forms 10-K and 10-Q, at such
      times that any such form would be required to be filed with the SEC if Maker
      were a reporting company. At such time, Maker will also make available copies
      of
      any quarterly and annual reports that Maker makes available to its stockholders.
      Any delivery of such reports, information, documents, and other reports to
      Payee
      is for informational purposes only and Payee’s receipt thereof will not
      constitute notice or constructive notice of any information contained in such
      reports or determinable from information contained in such reports.





**10.**  **Limitation
      on Suits** **.**





(a)  Other
      than as provided in Sections
      10(c) and 10(d) below,
      upon an Event of Default, Payee may pursue any available remedy, whether
      provided for in this Note, the Indenture, the Security Agreement, or otherwise,
      only if:





(i)  Trustee
      has notice of such Event of Default;








(ii)  Holders
      of at least twenty-five
      percent (25%) in
      principal amount of the Notes make a written request to Trustee to pursue the
      remedy;





(iii)  Trustee
      either (A) gives to such holders notice that Trustee will not comply with
      such request, or (B) does not comply with such request within fifteen
      (15) days
      after receipt of the request from such holders; and





(iv)  Holders
      of more than sixty-six and 2/3 percent (66 2 / 3 %)
      of the
      principal amount of the Notes do not give Trustee written notice inconsistent
      with the request delivered under Section
      10(a)(ii) prior to
      the earlier of (A) the date on which Trustee delivers a notice under Section 10(a)(iii)(A) or (B)
      the expiration of the period described in Section 10(a)(iii)(B) .





(b)  Payee
      may
      not use this Note to prejudice the rights of another Payee or to obtain a
      preference or priority over another Payee.





(c)  Notwithstanding
      any other provision of this Note, Payee’s right to receive payment of principal
      and interest on this Note on or after the respective due dates expressed in
      this
      Note, or to bring suit for the enforcement of any such payment on or after
      such
      respective dates, will not be impaired or affected without the written consent
      of Payee.





(d)  Except
      as
      otherwise provided in the Subordination Agreement, nothing in this Note will
      limit or defer Payee’s right or ability to petition for commencement of a case
      under federal bankruptcy laws pertaining to Maker.





**11.**  **Miscellaneous** **.** This
      Note shall be construed in accordance with and be governed by the internal
      laws
      of the State of Delaware. Maker hereby: (i) waives demand, presentment, protest,
      notice of dishonor, suit against or joinder of any other person, and all other
      requirements necessary to charge or hold Maker liable with respect to this
      Note;
      (ii) waives any right to immunity from any such action or proceeding and waives
      any immunity or exemption of any property, wherever located, from garnishment,
      levy, execution, seizure or attachment prior to or in execution of judgment,
      or
      sale under execution or other process for the collection of debts; (iii) waives
      any right to interpose any set-off or non-compulsory counterclaim or to plead
      laches or any statute of limitations as a defense in any such action or
      proceeding. Notwithstanding anything to the contrary contained herein, the
      interest rate payable hereon shall not exceed the maximum rate of interest
      permissible under applicable law. To
      the
      extent any payment to Payee, or to Trustee on Payee’s behalf, or any part
      thereof, is subsequently invalidated, declared to be fraudulent or preferential,
      set aside and/or required to be repaid to Maker or its successors or assigns
      under any bankruptcy law, state or federal law, common law or equitable cause,
      then, to the extent of such payment or repayment, the obligations, or part
      thereof, under this Note that have been paid, reduced or satisfied by such
      amount shall be reinstated and continued in full force and effect as of the
      time
      immediately preceding such initial payment, reduction or
      satisfaction. Maker
      agrees to pay any documentary stamp required with respect to the execution,
      delivery, performance or enforcement of this Note. Maker’s obligations hereunder
      shall be absolute and unconditional and shall not be affected by any
      circumstance, happening or event whatsoever, including any setoff, counterclaim,
      recoupment, defense or other right that Maker may have against Payee or any
      other person for any reason whatsoever, whether arising out of or as a result
      of
      any contract, agreement or transaction between Maker and Payee, or otherwise.
      This Note may not be modified, amended or terminated, except in a writing
      executed by Maker and Payee; provided that, Wachovia shall receive ten (10)
      days
      prior written notice of any such modification, amendment or termination and
      provided further if and to the extent that any modification, amendment or
      termination affects the rights of Wachovia provided by the subordination
      provisions of this Note or the Subordination Agreement, such modification,
      amendment or termination shall also require Wachovia’ written consent. A consent
      to an amendment or a waiver by Payee will bind Payee and every subsequent holder
      of this Note or portion of the Note that evidences the same debt as the
      consenting Payee’s Note, even if a notation of the consent or waiver is not made
      on the Note. Time is of the essence with respect to Maker’s obligations and
      agreements under this Note.








IN
      WITNESS WHEREOF, the parties have caused this Note to be executed by their
      duly
      respective officers or persons as of the date first set forth
      above.







SMF
                ENERGY CORPORATION
              
              
              By:
                _____________________________
              Richard
                E. Gathright
              Chief
                Executive Officer and President








AGREED
      TO
      AND ACCEPTED:








_____________________________________





_____________________________________


Signature





_____________________________________


Title
      (if
      applicable)








**Exhibit
      A**





**NOTICE
      OF CONVERSION**











TO:
            SMF
                ENERGY CORPORATION





1.  The
      undersigned note holder (“Holder”) hereby elects to convert $____________ of the
      principal amount of the August 8, 2007 111⁄2% Senior Secured Convertible
      Promissory Note (the “Note”) of SMF Energy Corporation (“SMF”) payable to Holder
      into ____________ shares of the Common Stock of SMF (the “Shares”) at the
      $________per Share price prescribed by the Note (the “Note Price”). Enclosed
      herewith is the original Note, tendered for such conversion. If and to the
      extent that additional sums remain owed under the Note after such conversion,
      SMF is directed to issue a new replacement Note to Holder representing the
      unpaid balance of the Note after the conversion.





2.  By
      this
      conversion, Holder does not waive any payment of unpaid interest on the
      converted portion of the Note that accrued prior to the date of conversion.
      Any
      such accrued but unpaid interest is not payable until the next regular date
      set
      forth in the Note for payment of interest on the Note.





2.  Please
      issue a certificate or certificates representing the Shares in the name of
      Holder or in such other names as may be specified below:
















3.  [ ***For
      use only in the absence of an effective registration statement covering the
      Shares*** ]
      Holder
      represents that the Shares are being acquired for the account of Holder, for
      investment purposes, and not with a view to, or for resale in connection with,
      the distribution thereof and that Holder has no present intention of
      distributing or reselling such Shares. In support thereof, Holder has executed
      an Investment Representation Statement attached to this Notice as Attachment
      1.





NAME
      OF
      HOLDER: _________________________________





Date:
                __________________________
            __________________________________________(Signature
                of Holder)











Attachment
      1


to
      Notice of Conversion





**INVESTMENT
      REPRESENTATION STATEMENT**








HOLDER:
            ________________________





COMPANY:
            SMF
                ENERGY CORPORATION





SECURITY:
            SENIOR
                SECURED CONVERTIBLE PROMISSORY NOTE AND UNDERLYINGCOMMON
                STOCK





AMOUNT:
            ________________________





DATE:
            ________________________





In
      connection with the purchase of the above-listed securities (the “ **Securities** ”),
      the
      undersigned (“ **Holder** ”)
      represents to Company the following:





(a)  Holder
      is
      aware of Company’s business affairs and financial condition, and has acquired
      sufficient information about Company to reach an informed and knowledgeable
      decision to acquire the Securities. Holder is purchasing these Securities for
      Holder’s own account for investment purposes only and not with a view to, or for
      the resale in connection with, any “distribution” thereof for purposes of the
      Securities Act of 1933, as amended (the “ **Securities
      Act** ”).





(b)  Holder
      understands that the Securities have not been registered under the Securities
      Act in reliance upon a specific exemption therefrom, which exemption depends
      upon, among other things, the bona fide nature of Holder’s investment intent as
      expressed herein. In this connection, Holder understands that, in the view
      of
      the Securities and Exchange Commission (“ **SEC** ”),
      the
      statutory basis for such exemption may be unavailable if Holder’s representation
      was predicated solely upon a present intention to hold these Securities for
      the
      minimum capital gains period specified under tax statutes, for a deferred sale,
      for or until an increase or decrease in the market price of the Securities,
      or
      for a period of one year or any other fixed period in the future.








(c)  Holder
      further understands that the Securities must be held indefinitely unless
      subsequently registered under the Securities Act or unless an exemption from
      registration is otherwise available. Moreover, Holder understands that Company
      is under no obligation to register the Securities except as set forth in the
      Warrant. In addition, Holder understands that the certificate evidencing the
      Securities will be imprinted with a legend which prohibits the transfer of
      the
      Securities unless they are registered or such registration is not required
      in
      the opinion of counsel for Company.





(d)  Holder
      is
      aware of the provisions of Rule 144, promulgated under the Securities Act,
      which, in substance, permits limited public resale of “restricted securities”
acquired, directly or indirectly, from the issuer thereof (or from an affiliate
      of such issuer), in a non- public offering subject to the satisfaction of
      certain conditions.





(e)  Holder
      further understands that at the time Holder wishes to sell the Securities there
      may be no public market upon which to make such a sale.





(f)  Holder
      further understands that in the event all of the requirements of Rule 144
      are not satisfied, registration under the Securities Act, compliance with
      Regulation A, or some other registration exemption will be required; and
      that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of
      the SEC has expressed its opinion that persons proposing to sell private
      placement securities other than in a registered offering and otherwise than
      pursuant to Rule 144 will have a substantial burden of proof in
      establishing that an exemption from registration is available for such offers
      or
      sales, and that such persons and their respective brokers who participate in
      such transactions do so at their own risk.








Signature
                of Holder:Date:
                _________________________
            _________________________________








**Exhibit
      B**





**SUBORDINATION
      AGREEMENT**