Conditional Promissory Note

Conditional Promissory Note

by Smith
September 4th, 1997

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                                                                   EXHIBIT 10.40


                           CONDITIONAL PROMISSORY NOTE

                                 Non-Negotiable

$200,000.00                                                      August 19, 1997
                                                            Plymouth Meeting, PA


NOTICE TO HOLDER: PAYMENT UNDER THIS NOTE IS SUBJECT TO CERTAIN CONDITIONS THE
OCCURRENCE OF WHICH CAN RESULT IN THE CANCELLATION OF THE OBLIGATION OF THE
MAKER TO MAKE PAYMENTS.


         FOR VALUE RECEIVED, the undersigned, ATC GROUP SERVICES INC., a
Delaware corporation, ("Maker") promises and agrees to pay to the order of SMITH
TECHNOLOGY CORPORATION, a Delaware corporation ("Smith"), at One Plymouth
Meeting, Plymouth Meeting, PA 19462, or at such other place as the Smith may
from time to time designate in writing, on behalf of Smith and the other Sellers
under the Agreement for Sale and Purchase of Business Assets entered into by
Maker, Smith and such Sellers this date (the "Agreement"), the principal sum of
TWO HUNDRED THOUSAND AND NO/100 DOLLARS ($200,000.00), on or before September
19, 1997, (the "Due Date") with simple interest thereon at the prime rate quoted
by the Chase Bank of New York for this date.

         SPECIAL CONDITIONS. Maker's obligation to make payment under this note
shall be subject to the Maker's rights of set-off under Sections 1.01(b)(3),
1.01(b)(4), 1.01(b)(5) and 4.14 of the Agreement. Maker's exercise of such
set-off rights against the payment due hereunder shall not constitute a default
hereunder provided such exercise is in conformity with the terms and conditions
governing set-off rights in the Agreement and Maker promptly makes payment of
any amount so set-off finally determined, as provided in the Agreement, to have
been improperly set off. To the extent that all or some portion of a set-off
asserted by Purchaser under the Agreement is ultimately determined not to have
been proper, Maker shall pay interest on the amount determined to have been
improperly set off from the Due Date until the date such payment is made at the
interest rate set forth above.

         DEFAULT. Upon Maker's failure to pay the amount due hereunder on or
before the Due Date (exclusive of any amounts subject to the set-off procedures
of the Agreement as set forth above), or in the event of bankruptcy, insolvency,
or receivership of the Maker, it is agreed that this note shall, at the option
of Smith, become immediately due and payable for the full unpaid balance,
exclusive of any amounts properly subject to set-off by Maker under the
Agreement. If Purchaser defaults hereunder, after maturity,
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whether by acceleration or otherwise, this note shall bear interest at the rate
of ten per cent (10%) per annum. If this note is not paid in accordance with its
terms and is placed in the hands of an attorney for collection, Maker agrees to
pay, in addition to the unpaid balance and interest, the costs of collection,
including attorney's fees.

         WAIVER. The Maker waives presentment, demand, protest, notice of
dishonor and diligence in collecting.


                                    Made by:

                                    ATC GROUP SERVICES INC., Maker



                                    By: /s/ Nicholas J. Malino
                                       -----------------------------
                                       Nicholas J. Malino
                                       Senior Vice President

Terms accepted by:

SMITH TECHNOLOGY CORPORATION



By: /s/ Thomas F. Herlihy
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