Document:

Letter of Intent

EXHIBIT 10.1

 

September 5, 2007

Letter of Intent to Purchase the Assets of 

Communications Advantage LLC, and Web-Breeze Networks, LLC

Attn:  Mr. Eric Shippam

	

Re:
	

Letter of Intent for Rapid Link, Incorporated, a Delaware corporation, (OTCBB: RPID) ("RAPID LINK"), to acquire the Assets of (the "Asset Purchase") Communications Advantage, LLC and Web-Breeze Networks, LLC ("Comm Adv" or "the Company"), both California, Limited Liability Companies.

	 	 

Dear Mr. Shippam:

This Letter of Intent  ("LOI") will confirm the  following  general  terms  upon  which  our  respective  Board  of  Directors  or  similar  governing  body (collectively  referred to as the "Parties") will adopt a Definitive Asset Purchase Agreement  (the "Agreement"),  and  recommend  that the Comm Adv stockholders approve the Agreement, subject to the approval of a sufficient number of Comm. Adv. stockholders.

This LOI sets forth the material terms of the Asset Purchase and reflects the current, good faith intentions of RAPID LINK and Comm Adv with respect thereto.

1.     The Asset Purchase.

(a)     The time of Closing shall be not later than October 15, 2007 (the "Closing Date"), unless extended by mutual consent of the parties.

(b)     RAPID LINK will pay the Comm Adv Stockholders shares of common stock and cash as outlined below as compensation ("Purchase Price") for the purchase of all Comm Adv assets, which Purchase Price shall be paid as follows:

i.     1,000,000 shares of RAPID LINK common stock shall be delivered to the Comm Adv Stockholders within Five (5) days of the Closing Date, provided that Comm Adv gross monthly retail billed revenues are at least $40,000.00 for the calendar month ending September 30, 2007.  A proportionate number of shares will be withheld should monthly billed retail revenues fall short of $40,000.00. The stock value at time of transfer to Comm Adv shall have a value of no less than $100,000.  Should the value at the time of transfer have a value of less than $100,000 then RAPID LINK will issue additional stock to achieve a value at the time of transfer of no less than $100,000, provided that in no instance shall RAPID LINK issue more than 1,500,000 shares of common stock.  Stock value will be determined by the OTC closing price of the stock of the day prior to transfer. No less than 1,000,000 shares will be issued regardless of stock price on the day of transfer.

ii.     $75,000 shall be wired pursuant to written instructions to the designated account of the Stockholders of Comm Adv within five (5) days of the Closing Date, based on the same criteria as described in (i) above.  A proportionate amount of this cash payment will be withheld should gross monthly billed retail revenues fall short of $40,000.00

iii.     $50,000 Note payable within 180 days of closing.

iv.     Earn-out Period and payment #1: 30% of net revenue increase for the period ending 1 year from closing will be paid within 45 days of period ending 1 year from closing provided: revenues grow above $240,000 (from wireless, dial up, web hosting and VoIP combined, on networks built or owned in Amador and Calaveras counties).  Should Earn Out Period #1 ending revenues fall below $300,000 no Earn Out #1 payment will be paid. Earn out will be paid in cash or CA may elect to take Earn out in stock which will be calculated at 90% of market at the time of earn out calculation.

v.     Earn-out Period and payment #2: 30% of net revenue increase for the period ending 2 years from closing and beginning 1 year from closing will be paid within 45 days of period ending 2 years from closing provided: revenues are greater at beginning of this Earn Out period than at the start of Earn Out Period #1 (from wireless, dial up, web hosting and VoIP combined, on networks built or owned in Amador and Calaveras counties).  Should Earn Out Period #2 ending revenues fall below $400,000, no Earn Out #2 payment will be paid.  Earn out will be paid in cash or CA may elect to take Earn out in stock which will be calculated at 90% of market at the time of earn out calculation.

vi.     Earn-out Period and payment #3: 30% of net revenue increase for the period ending 3 years from closing and beginning 2 years from closing will be paid within 45 days of period ending 3 years from closing provided: revenues are greater at beginning of this Earn Out period than at the start of Earn Out Period #2 (from wireless, dial up, web hosting and VoIP combined, on networks built or owned in Amador and Calaveras counties).  Should Earn Out Period #3 ending revenues fall below $600,000, no Earn Out #3 payment will be paid. Earn out will be paid in cash or CA may elect to take Earn out in stock which will be calculated at 90% of market at the time of earn out calculation.

vii.     Securities issued to the stockholders of Comm Adv shall have "piggy back" rights on any registration statement filed by RAPID LINK subsequent to closing of this transaction.

2.     Definitive Agreement.  The parties shall enter into a definitive Asset Purchase agreement containing the material provisions as set forth in this LOI.  Both parties will endeavor to close this transaction as soon as possible. The Agreement shall specifically include, but shall not be limited, to the following:

(a)     Representations and warranties.  Customary and usual representations and warranties and covenants by the parties, and the principal executive officer shall certify that these representations and warranties are true as of the Closing Date.

i.     None of the Parties to the Asset Purchase, nor their officers, directors, members or affiliates, promoter or control person, nor any predecessor thereof, have been subject to the following:

(A)     Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses) within the past five years;

(B)     Any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and

(C)     Any finding, ruling or judgment by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

ii.     Each party shall have good title to all of its respective tangible and intangible assets including, but not limited to, intellectual properties necessary or required to successfully develop and commercially exploit its business enterprise as more fully described in its current business plan.

iii.     The Comm Adv Stockholders own 100% of the issued and outstanding stock of Comm Adv and shall indemnify RAPID LINK with respect to the Company's representations and warranties.

iv.     The Agreement will include representations and warranties with respect to the absence of undisclosed  liabilities,  liens and  encumbrances  of the  assets  of  Comm Adv and the financial condition  and  results of  operations  of  Comm Adv and with  respect to the  absence  of any  material  adverse  changes in Comm Adv financial condition, earnings, and business operations with respect to the contemplated assets RAPID LINK is purchasing.

(b)     Opinions of Counsel.  The delivery at Closing of favorable opinions of legal counsel for Comm Adv regarding the customary and usual matters of law and fact covered under similar acquisitions and related agreements.

(c)     Opinions of Auditors.  For the delivery at the Closing of financial statements reasonably acceptable to RAPID LINK, Comm Adv shall deliver to RAPID LINK financial statements for the last two completed fiscal years as well as reviewed financial statements for the interim period(s) ended at the Closing Date prepared in accordance with Generally Accepted Accounting Principles. The cost of the audit will be borne by Comm Adv.  

(d)     Conditions Precedent.  In addition, the Agreement shall contain the following conditions precedent:

i.     RAPID LINK shall have all SEC, state and federal filings and reports current, up to date, in proper form, and be, to the best of management's knowledge, in compliance with all state and federal regulations governing a public company.

ii.     For a period of at least sixty (30) days prior to the Closing Date, Comm Adv will afford to the officers and authorized representatives of RAPID LINK full access to the properties, books and records of Comm Adv in order that RAPID LINK may have a full opportunity to make such reasonable  investigation as it shall desire regarding the affairs of Comm Adv, and Comm Adv will furnish RAPID LINK with such additional financial and operating data and other information as to the business and properties of Comm Adv as RAPID LINK shall from time to time reasonably request.  To the extent the state and federal filings and reports do not provide such information, Comm Adv shall have similar access to the properties, books and records of RAPID LINK.  Any such investigations and examinations shall be conducted at reasonable times and under reasonable circumstances, and each party hereto shall cooperate fully therein.  The parties have entered into a Confidentiality, Restricted Use and Non-Solicitation Agreement and hereby acknowledge that all information exchanged by the parties which is not in the public domain shall be deemed confidential and proprietary and shall be subject to the provisions governing non-disclosure as set forth in such Agreement.  No investigation by either party hereto shall, however, diminish or waive in any way any of the representations, warranties, covenants or agreements of the other party under the Agreement.

iii.     Comm Adv will prepare a detailed listing of all outstanding liabilities, together with existing agreements and creditor consents for term payments of listed liabilities, which RAPID LINK agrees to assume and honor.  This assumption of liabilities will not exceed $140,000.00 and shall generally match those liabilities and monthly payment amounts listed in Exhibit 1.

iv.     Comm Adv shall have obtained and delivered to RAPID LINK all consents, waivers and approvals necessary to affect the Asset Purchase from the stockholders and Board of Directors of Comm Adv.

v.     There shall not be any pending or threatened litigation regarding the Asset Purchase and the Agreement or any related transactions contemplated thereby or therein.

vi.     Customary legal opinions, closing certificates and other documentation in a form satisfactory to RAPID LINK and Comm Adv, respectively, shall be delivered by the Parties.

vii.     There shall not be any material breach by the Parties of any representation or warranty contained in the Agreement, and the Parties shall be in compliance with each covenant contained in the Agreement.

viii.     Rapid Link shall have completed the usual, customary and reasonable due diligence of Comm Adv to Rapid Link's satisfaction in its sole and exclusive judgment.

ix.     The Agreement shall contain additional mutually acceptable closing conditions to be determined by the Parties.

(e)     Conditions Subsequent.  The Asset Purchase shall be subject to the occurrence of the following term and condition to occur within a reasonable time subsequent to the Closing:

i.     RAPID LINK shall file a Form 8-K with the SEC within four business days of entering into the Agreement disclosing the material terms of the Asset Purchase.

ii.     RAPID LINK and Eric Shippam shall enter into an irrevocable 3 year employment contract which will pay Eric Shippam a salary of $120,000 annually for three years. The agreement will contain a non-compete clause, with 5 year lock-out of Amador and Calaveras Counties. RAPID LINK may cancel this employment contract at any time after year one by paying Eric Shippam 70% of any unpaid portion of the employment contract within 30 days of termination of said employment agreement.  Employment Agreement is attached hereto as Exhibit 2.

iii.     Rapid Link will commit $300,000 of the $3 million dollars committed to Rapid Link in the financing completed by Westside Capital (per publicly filed Form 8K on June 21, 2007), for the purpose of expansion and revenue growth into the Amador and Calaveras broadband internet markets. 

3.     Expenses.  Each party shall pay its own legal, accounting and other expenses in connection with the Asset Purchase.

 

4.     Conduct of Business of Comm Adv Prior to Closing.

          Until consummation or termination of the contemplated Asset Purchase, Comm Adv will conduct business only in the ordinary course and no material assets of Comm Adv shall be sold, encumbered, hypothecated or disposed of except in the ordinary course of business and only with the written consent of the other party which consent will not be unreasonably withheld.  

5.     Miscellaneous Provisions:

(a)     On or  before  the  Closing  Date,  RAPID LINK,  Comm Adv  and  all of the Comm Adv Stockholders will have received all permits, authorizations, regulatory  approvals  and  third  party  consents necessary  for  the  consummation  of  the Asset Purchase, and  all applicable legal requirements shall have been satisfied.

(b)     The Asset Purchase shall be consummated and the Agreement shall be executed as soon as practicable, and RAPID LINK shall instruct its legal counsel to immediately prepare all necessary documentation upon execution of this LOI.

(c)     Before Closing, the Board of Directors of RAPID LINK shall have approved the Asset Purchase and the Agreement.  Prior to signing the LOI, Comm Adv's shareholders shall have approved the transaction as outlined in the LOI.

(d)     All notices or other information deemed required or necessary to be given  to  any  of the  parties  shall  be  given  at the  following addresses:

 

	 	
RAPID LINK:
	
Rapid Link Inc.

Attn: Chris Canfield

5408 No. 99th Street

Omaha, NE  68134

Facsimile: (402) 392-7585

	 
	 	
Comm Adv:
	
Communications Advantage, LLC / Web Breeze LLC

54 Main St. Second Flr.

Sutter Creek, CA

Facsimile: (888) 320-0441 

(e)     No agent,  broker,  investment  banker,  person or firm is acting on behalf of the Parties or under their  authority is or will be entitled to any broker's or finder's fee or any other  commission  or similar fee,  directly or indirectly,  in connection  with any of the transactions contemplated herein.

(f)     The Agreement shall contain customary and usual indemnification, hold harmless provisions and investment representation language.

(g)     Except  where  the  laws of  another  jurisdiction  are  necessarily applicable,  the transactions which are contemplated  herein and the legal relationships  among  the  parties  hereto,  to  the  extent permitted, shall be governed by and construed in accordance with the laws (except  for  conflict of law  provisions)  of the  State  of California.

(h)     The substance of any press release or other public announcement with respect  to the  Asset Purchase,  the  Agreement and the transactions contemplated herein and therein, other than notices required by law, shall be approved  in writing in advance by all  parties and their respective legal counsel.

6.     Counterparts.  This LOI may be executed in any number of counterparts and each such counterpart shall be deemed to be an original instrument, but all of such counterparts together shall constitute but one agreement.

7.     Amendments. Subject to applicable law, this LOI and any attachments hereto may be amended only by an instrument in writing signed by an officer or authorized representative of each of the parties hereto.

8.     Headings. The descriptive headings of the sections and subsections of this LOI are inserted for convenience only and do not constitute a part of this LOI.

9.     Waiver.  No purported waiver by any party of any default by any other party of any term, covenant or condition contained herein shall be deemed to be waiver of such term, covenant or condition unless the waiver is in writing and signed by the waiving party.  No such waiver shall in any event be deemed a waiver of any subsequent default under the same or any other term, covenant or condition contained herein.

10.     Entire Agreement.  This LOI, together with the exhibits or other documents given or delivered  pursuant hereto,  sets forth the entire  understanding  among  the  parties   concerning  the  subject  matter  of  this  LOI  and incorporates  all  prior  negotiations  and  understandings.  There are no covenants, promises, agreements, conditions or understandings, either oral or written,  between them relating to the subject matter of this LOI other than those set forth herein. No alteration, amendment, change or addition to this LOI shall be binding upon any party unless in writing and signed by the party to be charged.

11.     No Partnership.  Nothing  contained  in this  LOI  will be  deemed  to or construed  by the  parties  hereto  or by any third  person to create  the  relationship of principal and agent or partnership or joint venture.

12.     Joint Preparation.  This LOI has been negotiated and prepared jointly by the parties hereto and any uncertainty or ambiguity  existing  herein,  if any, shall not be interpreted  against any party, but shall be interpreted according  to the  applicable  rules of  interpretation  for arm's  length agreements.

13.     Partial Invalidation.  If any term,  covenant or condition in this LOI or the  application  thereof to any party,  person or  circumstance  shall be invalid or unenforceable,  the remainder of this LOI or the application of such term,  covenant or condition to persons or circumstances,  other than those as to which it is held invalid, shall be unaffected thereby and each  term, covenant or condition of this LOI shall be valid and enforced to the fullest extent permitted by law. 

14.     No Shopping.  Prior to October 15, 2007 or the date of closing, in consideration of the resources to be committed to the transactions contemplated herein by RAPID LINK and its representatives and agents, neither Comm Adv nor any of its officers, directors, shareholders, agents or representatives shall, directly or indirectly, solicit, initiate, encourage or participate in any negotiation or discussion or enter into any agreement in respect of or cooperate with any person regarding (including, without limitation, by way of furnishing any non-public information concerning, or affording access to, the business, properties or assets of Comm Adv) any Asset Purchase Proposal, and any and all such discussions, other than those described in this letter, shall be immediately terminated.  The term "Asset Purchase Proposal" means any proposal (other than a proposal by RAPID LINK) for the acquisition of all or a substantial portion of the stock or assets of Comm Adv or for a merger, consolidation or other business combination pursuant to which any other person would acquire Comm Adv or any substantial equity interest in Comm Adv.

15.     Binding Effect; Break-up Fee.  Subject to the provisions of Section 2 hereof, this LOI is binding on the parties hereto.  In the event either party to this transaction terminates this LOI at any time before to the execution of a Definitive Agreement, it shall pay a break-up fee to the damaged party in the amount of $80,000 cash. 

16.     Time is of the Essence.  Comm Adv shall sign this LOI no later than 5:00 P.M., Central Standard Time, September 5, 2007, as time is of the essence.

17.     Public Announcement.  RAPID LINK and Comm Adv mutually agree that neither party shall issue any press release or make any  public  announcement  of the Asset Purchase  or any other  matter which is the subject of this LOI or any subsequent  definitive  Agreement  without the prior  consent of the other party, except where a public announcement is required by law as reasonably determined by such party or is in connection with such party's enforcement of its rights or remedies  hereunder or  there under  for any breach by the other party.  Notwithstanding the foregoing, Comm Adv acknowledges that upon signing this LOI, RAPID LINK is required and shall file a Form 8-K with the SEC describing the material terms of the LOI and Comm Adv hereby consents to such filing.

18.     Consents.  RAPID LINK and Comm Adv will cooperate with one another and proceed, as promptly as is reasonably practicable,  to seek to obtain all necessary consents and  approvals  from lenders,  shareholders,  landlords and other third  parties  and  to  endeavor  to  comply  with  all  other  legal  or contractual  requirements  for  or  preconditions  to  the  execution  and consummation of the Asset Purchase and the Agreement.

19.        Efforts.  RAPID LINK and  Comm Adv  will  negotiate  in good faith and use their commercially  reasonable  efforts  to  arrive  at  a  mutually  acceptable  definitive Agreement for approval,  execution and delivery on the earliest  reasonably  practicable  date.  RAPID LINK and Comm Adv will thereupon use their commercially reasonable efforts to affect the Closing and to proceed with the transactions contemplated by this LOI as promptly as is reasonably practicable.

20.     Confidentiality.  RAPID LINK and Comm Adv  agree that (except as may be required by law) it will not  disclose or use any  "Confidential  Information"  (as hereinafter  defined)  with  respect  to the  other,  furnished,  or to be furnished in connection herewith at any time or in any manner and will not use such  information  other than in connection with its evaluation of the Asset Purchase. For the purposes of this paragraph "Confidential Information "means any  information  identified as such in writing or, given the nature of the information or the circumstances surrounding its disclosure,  which reasonably  should be considered as confidential  or  proprietary.  The parties agree to continue to be bound by that certain Confidentiality, Restricted Use and Non-Solicitation Agreement entered into on or about September 2007.  If for any reason the Asset Purchase is not consummated, the receiving party will promptly return all documents to the party with provided such documents. The provisions of this paragraph shall survive the termination of this LOI.

           If the foregoing correctly sets forth the substance of the understanding of the parties, please execute this LOI in triplicate, retain one original copy for your records, and return the other original copies to Chris Canfield at the address listed below.   Also, please fax a signed copy to RAPID LINK, Inc. at (402) 392-7585.

	 	 	
Yours truly,

	 	 	 
	 	 	
Rapid Link Inc. / 

Rapid Link, Incorporated

	 	

	 
	 	 	 
	 	 	
_________________________________

	 	 	
Chris Canfield 

	 	 	
President 

	 	 	
September 5, 2007

 

	 	 	
Accepted this 5th day of
 September, 2007.

	 	 	 
	 	 	
Web-Breeze Networks LLC / Communications Advantage, LLC

	 	 	 
	 	 	 

	 	 	
Eric Shippam

	 	 	
Managing Director

Exhibit 1

	
Debt Outstanding
	
Total
	
Monthly payment

	
TNC
	
75,000
	
7,500

	
EDD
	
19,000
	
1,000

	
TESSCO
	
15,000
	
500

	
Hostopia
	
27,000
	
500 

	
Total
	
 $     137,000 
	
 $        9,500 

	
	
	

 

Exhibit 2

Employment Agreement

Exhibit 2 - Letter of Intent 9/5/07

THIS AGREEMENT made as of, (Closing Date) 2007 between Telenational Communications, Inc. with its principal place of business located at 5408 No. 99th Street, Omaha, NE 68134 (the "Employer") and, Eric Shippam.(the "Employee"). 

WHEREAS the Board of Directors of the Employer considers it to be in the best interests of the Employer to enter into this Agreement with the Employee, and this Agreement has been duly approved by the Board of Directors of the Employer; 

NOW THEREFORE this agreement witnesses that in consideration of the foregoing and the mutual covenants and agreements set out below and of other good and valuable consideration, the parties hereby agree as follows:

Definitions. Whenever used in this Agreement the following words and phrases shall have the following respective meanings:

"Business Day" shall mean the day upon which the principal office of all of the chartered banks in Nebraska are open for the transaction of business.

"Date of Termination" shall mean the date the Employee ceases to be employed by the Employer for whatever reason.

"GAAP" shall mean generally accepted accounting principles.

"Guaranteed Amount" shall mean an amount equal to number of months payment to be made to Employee in the event of termination without cause (ie. twelve (12) times the base monthly salary payable to the Employee by the Employer during the calendar month immediately preceding the Date of Termination.

Employment.

Term and Position. The Employer will continue to employ the Employee as until the Employee's employment is terminated in accordance with the provisions of this Agreement.

Reporting Relationship and Responsibilities.

Service. During the term of his employment with the Employer, the Employee will devote his full time, attention, and abilities to furthering the business of the Employer and will faithfully serve the Employer and use his best efforts to promote the interests of the Employer. The Employer agrees that the Employee will be free to hold equity interests in businesses which do not compete with the business of the Employer.

Compensation.

Salary. The Employee will receive a salary of One Hundred Twenty Thousand Dollars ($120,000) per annum payable in equal bi-weekly installments. The Employee's salary will be reviewed by Employee's immediate supervisor from time to time at the supervisors discretion, but in any event will be reviewed not later than January 1, 2009, and annually thereafter.  Any salary review will be done with a view to assessing the Employee's achievement of overall objectives established from time to time by the Employee's supervisor and considering market rates of remuneration paid to Position of Employees of comparable international companies.

Expenses. The Employer will reimburse the Employee for all reasonable direct out-of-pocket expenses incurred in connection with the performance of his duties and responsibilities, or in carrying out any request made of the Employee by the Employer.

Vacation. During the term of his employment, the Employee will be entitled to such reasonable periods of vacation as per the Employer handbook, but not less than two (2) weeks every year. Such vacation shall be taken at such time as the Employee may from time to time reasonably decide, provided such time, in the opinion of Employee's immediate supervisor acting reasonably, does not materially interfere with the Employee's duties hereunder. The Employee shall adhere to the terms and conditions outlined in the Telenational Communications, Inc. handbook.

Benefits. The Employee will be entitled to participate on equal terms and conditions in all insurance and other benefit plans which the Employer offers to its senior executives and will continue to receive all such benefits as he now enjoys.

Termination.

Voluntary Resignation. The Employee may terminate his employment with the Employer at any time by giving six (6) months' notice to the Employee's immediate supervisor.

Termination for Just Cause. The Employer may terminate the Employee's employment at any time for just cause, without notice or payment of any compensation.

Termination of Employee's Employment Without Cause. The Employer shall have the right to terminate the Employee's employment hereunder at any time without cause whereupon:

the Employer shall pay to the Employee an amount equal to the Guaranteed Amount;

if the Employee holds any options granted to him pursuant to the Employer's stock option plan for employees, the date to exercise such options shall be extended for the lesser of 1 months from the Date of Termination and the expiry date under such options;

the Employer shall pay to the Employee all outstanding and accrued salary and vacation pay to the Date of Termination within 30 days after the Date of Termination and reimburse the Employee for all proper expenses incurred by the Employee in carrying out his duties to the Employer prior to the Date of Termination;

if, at the Date of Termination, there were any memberships in any clubs, social, or athletic organizations paid for by the Employer that were for the regular use of the Employee, the Employer will not take any action to terminate such memberships, but need not renew any such membership that expires; and

prior to or contemporaneously with the payments set forth above, the Employee shall deliver a release in favor of the Employer, its subsidiaries, and their respective directors, officers, and shareholders in the form acceptable to Employer.

The Employer agrees to make payments contemplated herein irrespective of whether the Employee finds (or seeks) alternative employment.

Constructive Dismissal. In the event the Employer alters the Employee's remuneration, title, reporting relationship, or responsibilities to the extent that the Employee has been constructively dismissed, the Employer shall make all the payments and provide the benefits specified hereof, from and after the date of such constructive dismissal.

No Payment if Just Cause, Resignation, or Retirement. The Employer shall not have any obligation to make any of the payments described herein, other than the payment contemplated in this contract, or to extend the date for exercising any outstanding stock options, if:

the Employee's employment with the Employer has been terminated for just cause;

the Employee by reason of illness, mental or physical disability, or incapacity fails for an aggregate of six (2) months within any twenty-four (12) month period to perform his duties hereunder;

the Employee's employment terminates because of death or retirement.

Covenants of the Employee.

Employee's Acknowledgements. The Employee acknowledges that:

the Employer and its subsidiaries have carried on and will hereinafter carry on the business of the Employer;

in the course of carrying out, performing, and fulfilling his responsibilities to the Employer, the Employee will have access to and will be entrusted with and receive confidential and proprietary information and trade secrets of the Employer ("Confidential Information") relating to the foregoing business, the disclosure of any of which to competitors or to the general public may be detrimental to the best interests of the Employer;

in the course of performing his obligations to the Employer hereunder, the Employee will be one of the key representatives of the Employer and as such will be significantly responsible for the maintaining or enhancing the goodwill of the Employer;

the right to maintain the confidentiality of such Confidential Information and the right to preserve the goodwill of the Employer constitutes proprietary rights which the Employer is entitled to protect.

Non-Disclosure. The Employee agrees that during his employment and for a period of twenty-four (24) months after he ceases to be employed by the Employer for any reason whatsoever, the Employee will not disclose, directly or indirectly, any Confidential Information or use any Confidential Information for any purpose whatsoever other than for the benefit of the Employer, provided that this does not apply to Confidential Information that has become public through no breach of this Agreement on the Employee's part.

Non-Solicitation and Non-Competition.

Non-Competition and Non-Solicitation. Employee covenants and agrees that during the period of his employment and for a period of 24 months from the Date of Termination, if the termination of the Employee's employment is caused by reason of his voluntary resignation as provided herein, or his retirement as provided for herein or his termination for just cause as provided for herein, the Employee will not, either alone or in conjunction with any individual, firm, corporation, association, or other entity (except for the Employer and its subsidiaries), whether as principal, agent, director, officer, employee, investor, consultant, or in any other capacity whatsoever: (i) carry on, be engaged in, concerned with, or interested in, or advise, lend money to, guarantee the debts or obligations of, or permit his name to be used or employed by, any person or persons, firm, association, syndicate, or corporation engaged in or concerned with the business being carried on by the Employer or its subsidiaries at the Date of Termination, including, without limitation, the business of within any State of the United States of America or Province or Territory of Canada (provided that the foregoing shall not prevent the Employee from purchasing as a passive investor up to 5% of the outstanding publicly-traded shares or other securities of any class of an issuer listed on a recognized stock exchange); or (ii) attempt, directly or indirectly, to solicit or approach any employee, customers, or suppliers of the Employee or any of its subsidiaries. In this contract, (I) "customer" shall mean any customer with which the Employer or its subsidiaries will have transacted business within a period of three (3) years prior to the Date of Termination, and (II) "supplier" shall mean any supplier with which the Employer or its subsidiaries which exist at the Time of Termination and any supplier with which the Employer or its subsidiaries have done business within a period of three (3) years prior to the Date of Termination. The Employee agrees that this section reflects separate covenants and each shall be severable one from the other. The Employee further acknowledges and agrees that all of the covenants and restrictions in this section are reasonable and valid and all defenses to the strict enforcement thereof by the Employer are hereby expressly waived.

Breach by the Employee of Non-Competition and Non-Solicitation. In addition to any other remedy available to the Employer, the Employee agrees that a breach of any of the provisions shall be regarded as a fundamental breach of the Employee's obligations hereunder entitling the Employer (i) to refuse to perform or to continue performing its obligations hereunder, including payment of the Guaranteed Amount and (ii) if paid, to seek repayment from the Employee.

Injunctions. The Employee hereby acknowledges and agrees that any breach whatsoever of the terms of this Agreement by him shall cause, and shall be deemed to be, a breach of his fiduciary obligations to the Employer and shall cause serious damages and injury to the Employer for which monetary damages would not, alone or in part, adequately compensate the Employer. Accordingly, the Employee agrees that if he should violate any of the terms if this Agreement, the Employer shall be entitled, either on its own initiative or with such others as it may decide, to all appropriate remedies, including an interim, interlocutory, or permanent injunction to be issued by any competent court enjoining and restraining the Employee from such wrongful acts.

Severability. Each of the sections contained herein shall be and remain separate from, independent of, and severable from all and any other sections herein except as otherwise indicated by the context of this Agreement. Any decision or declaration that one or more of the sections or subsections are null and void shall have no effect on the remaining sections or subsections in this Agreement.

Notices. Any notice in writing required or permitted to be given to the Employee shall be delivered personally or mailed by registered mail, postage prepaid, addressed to the Employee at his last residential address known to the Employee's immediate supervisor. Any such notice mailed shall be deemed to have been received by the Employee on the second business day following the date of mailing. Any notice in writing required or permitted to be given to the Employer shall be given by registered mail, postage prepaid, addressed to the Employer at . Any such notice mailed shall be deemed to have been received by the Employer on the second business day following the date of mailing. Such address for the giving of notices may be changed by notice in writing.

Termination of Prior Agreements. Any previous agreements, written or oral, express or implied, between the Employee and Employer relating to the employment of the Employee by the Employer are terminated and cancelled, and the Employee and the Employer release and forever discharge each other of and from all manners of action, causes of action, claims, and demands whatsoever under or in respect of any such prior agreement.

Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto and contains all of the covenants, representations, and warranties of the respective parties. There are no oral representations or warranties between the parties of any kind. This Agreement may not be amended in any respect except by written instrument, signed by the parties. Any oral amendments or modifications will be of no force or effect and will be void.

General.

Tendering Resignations. The Employee agrees that after termination of his employment, he will tender his resignation from any position he may hold as an officer or director of the Employer or its subsidiaries. Doing so will not reduce the obligations of the Employer described herein.

Delivery of Records. Upon any termination of employment, the Employee shall, within five (5) business days, deliver or cause to be delivered to the Employer all books, documents, effects, monies, securities, or other property belonging to the Employer or its subsidiaries or for which the Employer or its subsidiaries are liable to others, which are in the possession, charge, control, or custody of the Employee.

Benefit and Binding Nature of Agreement. This Agreement shall enure to the benefit of and be binding upon the Employee and his heirs, executors, legal personal representatives, and administrators, and upon the Employer and its successors and assigns.

No Derogation. Nothing herein derogates from any rights the Employee may have under applicable law except as set forth in this Section. The parties agree that the rights, entitlements, and benefits set out in this Agreement to be paid to the Employee are in full satisfaction of all rights of the Employee under any statute, law or legislation in any other jurisdiction, and any rights or entitlements the Employee may otherwise have as a result of the termination of his employment whether against the Employer or any of the Employer's subsidiaries.

No Oral Waiver. Neither party may waive or shall be deemed to have waived any rights it or he may have under this Agreement (including under this Section) except to the extent that such waiver is in writing.

Governing Law. This Agreement shall be construed and interpreted in accordance with the laws of the State of Nebraska. Each of the parties hereto irrevocably attorn to the jurisdiction of the courts of the State of Nebraska with respect to any matters arising out of this Agreement. Each party irrevocably submits to the non-exclusive jurisdiction of any court (or arbitrator) sitting in the State of Nebraska over any suit, action, or proceeding arising out of or relating to this Agreement. To the fullest extent, the Employee and the Employer may do so under applicable law, each of them irrevocably waives and agrees not to assert, by way of motion, as a defense or otherwise, any claim that he or it is not subject to the jurisdiction of any such court, any objection which he or it may now or hereafter have to the laying of the venue of any such jurisdiction or proceeding brought in any such court, and any such claim that any such suit, action, or proceeding brought in any such court has been brought in an inconvenient forum. The Employee agrees, to the fullest extent he may effectively do so under applicable law, that a final judgment (to which all appeals have been taken or the time limits for appeal have expired) in any suit, action, or proceeding brought in any such court shall be conclusive and binding upon him and may be enforced by a suit upon such judgment in the courts of any jurisdiction to which the Employee is or may then be subject.

Legal Representation. The Employee acknowledges to the Employer that he has been represented and has had opportunity to be represented by separate legal counsel in connection with the negotiation and finalization of this Agreement.

 

IN WITNESS WHEREOF the parties have executed this Agreement as of the date first above written.  

 

	
By: 
	
_________________________

	
 
	 
	
Name:
	
_________________________

	 	 
	
Title:
	
_________________________

	 	 
	
Date:
	
_________________________

	 	 
	 	 
	
By:
	
_________________________

	 	 
	
Name:
	
 Chris Canfield

	 	 
	
Its:
	
President

	 	 
	
Date
	
_________________________Exhibit 4.1

      THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS
      WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
      AS AMENDED. EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN A SECURITIES
      PURCHASE AGREEMENT DATED AS OF MARCH 28, 2007, NEITHER THIS WARRANT
      NOR ANY OF SUCH SHARES MAY BE SOLD, TRANSFERRED OR ASSIGNED IN THE
      ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES
      UNDER SAID ACT OR, AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND
      SCOPE, CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS,
      THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD
      PURSUANT TO RULE 144 OR REGULATIONS UNDER SUCH ACT.

                                                                Right to
                                                                Purchase [----]
                                                                Shares of
                                                                Common
                                                                Stock, par
                                                                value $.00005
                                                                per share

                             STOCK PURCHASE WARRANT

      THIS CERTIFIES THAT, for value received, [-----] or its registered
assigns, is entitled to purchase from MIDNIGHT HOLDINGS GROUP, INC., a Delaware
corporation (the "Company"), at any time or from time to time during the period
specified in Paragraph 2 hereof, [-----] fully paid and nonassessable shares of
the Company's Common Stock, par value $.00005 per share (the "Common Stock"), at
an exercise price per share equal to $.08 (the "Exercise Price"). The term
"Warrant Shares," as used herein, refers to the shares of Common Stock
purchasable hereunder. The Warrant Shares and the Exercise Price are subject to
adjustment as provided in Paragraph 4 hereof. The term "Warrants" means this
Warrant and the other warrants issued pursuant to that certain Securities
Purchase Agreement, dated March 28, 2007, by and among the Company and the
Buyers listed on the execution page thereof (the "Securities Purchase
Agreement").

      This Warrant is subject to the following terms, provisions, and
conditions:

      1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
Subject to the provisions hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, by certified or official bank check or by wire
transfer for the account of the Company of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement or

<PAGE>

(ii) if the resale of the Warrant Shares by the holder is not then registered
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "Securities Act"), delivery to the Company of a written
notice of an election to effect a "Cashless Exercise" (as defined in Section
11(c) below) for the Warrant Shares specified in the Exercise Agreement. The
Warrant Shares so purchased shall be deemed to be issued to the holder hereof or
such holder's designee, as the record owner of such shares, as of the close of
business on the date on which this Warrant shall have been surrendered, the
completed Exercise Agreement shall have been delivered, and payment shall have
been made for such shares as set forth above. Certificates for the Warrant
Shares so purchased, representing the aggregate number of shares specified in
the Exercise Agreement, shall be delivered to the holder hereof within a
reasonable time, not exceeding five (5) business days, after this Warrant shall
have been so exercised. The certificates so delivered shall be in such
denominations as may be requested by the holder hereof and shall be registered
in the name of such holder or such other name as shall be designated by such
holder. If this Warrant shall have been exercised only in part, then, unless
this Warrant has expired, the Company shall, at its expense, at the time of
delivery of such certificates, deliver to the holder a new Warrant representing
the number of shares with respect to which this Warrant shall not then have been
exercised. In addition to all other available remedies at law or in equity, if
the Company fails to deliver certificates for the Warrant Shares within five (5)
business days after this Warrant is exercised, then the Company shall pay to the
holder in cash a penalty (the "Penalty") equal to 2% of the number of Warrant
Shares that the holder is entitled to multiplied by the Market Price (as
hereinafter defined) for each day that the Company fails to deliver certificates
for the Warrant Shares. For example, if the holder is entitled to 100,000
Warrant Shares and the Market Price is $2.00, then the Company shall pay to the
holder $4,000 for each day that the Company fails to deliver certificates for
the Warrant Shares. The Penalty shall be paid to the holder by the fifth day of
the month following the month in which it has accrued.

            Notwithstanding anything in this Warrant to the contrary, in no
event shall the holder of this Warrant be entitled to exercise a number of
Warrants (or portions thereof) in excess of the number of Warrants (or portions
thereof) upon exercise of which the sum of (i) the number of shares of Common
Stock beneficially owned by the holder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unexercised Warrants and the unexercised or unconverted portion of any other
securities of the Company (including the Notes (as defined in the Securities
Purchase Agreement)) subject to a limitation on conversion or exercise analogous
to the limitation contained herein) and (ii) the number of shares of Common
Stock issuable upon exercise of the Warrants (or portions thereof) with respect
to which the determination described herein is being made, would result in
beneficial ownership by the holder and its affiliates of more than 4.9% of the
outstanding shares of Common Stock. For purposes of the immediately preceding
sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13D-G
thereunder, except as otherwise provided in clause (i) of the preceding
sentence. Notwithstanding anything to the contrary contained herein, the
limitation on exercise of this Warrant set forth herein may not be amended
without (i) the written consent of the holder hereof and the Company and (ii)
the approval of a majority of shareholders of the Company.

      2. PERIOD OF EXERCISE. This Warrant is exercisable at any time or from
time to time on or after the date on which this Warrant is issued and delivered
pursuant to the terms of the

                                      - 2 -

<PAGE>

Securities Purchase Agreement and before 6:00 p.m., New York, New York time on
the fifth (5th) anniversary of the date of issuance (the "Exercise Period").

      3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and
agrees as follows:

            (a) SHARES TO BE FULLY PAID. Subject to the completion of the
Charter Amendment Actions (as such term is defined in the Securities Purchase
Agreement), all Warrant Shares will, upon issuance in accordance with the terms
of this Warrant, be validly issued, fully paid, and nonassessable and free from
all taxes, liens, and charges with respect to the issue thereof.

            (b) RESERVATION OF SHARES. Subject to the completion of the Charter
Amendment Actions, during the Exercise Period, the Company shall at all times
have authorized, and reserved for the purpose of issuance upon exercise of this
Warrant, a sufficient number of shares of Common Stock to provide for the
exercise of this Warrant.

            (c) LISTING. The Company shall use it best efforts to secure the
listing of the shares of Common Stock issuable upon exercise of the Warrant upon
each national securities exchange or automated quotation system, if any, upon
which shares of Common Stock are then listed (subject to official notice of
issuance upon exercise of this Warrant) and shall maintain, so long as any other
shares of Common Stock shall be so listed, such listing of all shares of Common
Stock from time to time issuable upon the exercise of this Warrant; and the
Company shall so list on each national securities exchange or automated
quotation system, as the case may be, and shall maintain such listing of, any
other shares of capital stock of the Company issuable upon the exercise of this
Warrant if and so long as any shares of the same class shall be listed on such
national securities exchange or automated quotation system.

            (d) CERTAIN ACTIONS PROHIBITED. The Company will not, by amendment
of its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect, and (ii)
will take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.

            (e) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all the Company's assets.

      4. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise Price
and the number of Warrant Shares shall be subject to adjustment from time to
time as provided in this Paragraph 4.

                                      - 3 -

<PAGE>

      In the event that any adjustment of the Exercise Price as required herein
results in a fraction of a cent, such Exercise Price shall be rounded up to the
nearest cent.

            (a) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON ISSUANCE
OF COMMON STOCK. Except as otherwise provided in Paragraphs 4(c) and 4(e)
hereof, if and whenever on or after the date of issuance of this Warrant, the
Company issues or sells, or in accordance with Paragraph 4(b) hereof is deemed
to have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share (before deduction of reasonable expenses or commissions
or underwriting discounts or allowances in connection therewith) less than the
Market Price on the date of issuance (a "Dilutive Issuance"), then immediately
upon the Dilutive Issuance, the Exercise Price will be reduced to a price
determined by multiplying the Exercise Price in effect immediately prior to the
Dilutive Issuance by a fraction, (i) the numerator of which is an amount equal
to the sum of (x) the number of shares of Common Stock actually outstanding
immediately prior to the Dilutive Issuance, plus (y) the quotient of the
aggregate consideration, calculated as set forth in Paragraph 4(b) hereof,
received by the Company upon such Dilutive Issuance divided by the Market Price
in effect immediately prior to the Dilutive Issuance, and (ii) the denominator
of which is the total number of shares of Common Stock Deemed Outstanding (as
defined below) immediately after the Dilutive Issuance.

            (b) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:

                  (i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any
manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or other
securities convertible into or exchangeable for Common Stock ("Convertible
Securities") (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as "Options") and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the Market Price on the date of issuance or grant of such Options,
then the maximum total number of shares of Common Stock issuable upon the
exercise of all such Options will, as of the date of the issuance or grant of
such Options, be deemed to be outstanding and to have been issued and sold by
the Company for such price per share. For purposes of the preceding sentence,
the "price per share for which Common Stock is issuable upon the exercise of
such Options" is determined by dividing (i) the total amount, if any, received
or receivable by the Company as consideration for the issuance or granting of
all such Options, plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the exercise of all such Options, plus, in
the case of Convertible Securities issuable upon the exercise of such Options,
the minimum aggregate amount of additional consideration payable upon the
conversion or exchange thereof at the time such Convertible Securities first
become convertible or exchangeable, by (ii) the maximum total number of shares
of Common Stock issuable upon the exercise of all such Options (assuming full
conversion of Convertible Securities, if applicable). No further adjustment to
the Exercise Price will be made upon the actual issuance of such Common Stock
upon the exercise of such Options or upon the conversion or exchange of
Convertible Securities issuable upon exercise of such Options.

                  (ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Securities, whether or not immediately
convertible (other than where the same are issuable upon the exercise of
Options) and the price per share for which

                                      - 4 -

<PAGE>

Common Stock is issuable upon such conversion or exchange is less than the
Market Price on the date of issuance, then the maximum total number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities will, as of the date of the issuance of such Convertible Securities,
be deemed to be outstanding and to have been issued and sold by the Company for
such price per share. For the purposes of the preceding sentence, the "price per
share for which Common Stock is issuable upon such conversion or exchange" is
determined by dividing (i) the total amount, if any, received or receivable by
the Company as consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange thereof at the time
such Convertible Securities first become convertible or exchangeable, by (ii)
the maximum total number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities. No further adjustment to the
Exercise Price will be made upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.

                  (iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there is a
change at any time in (i) the amount of additional consideration payable to the
Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the conversion or exchange of
any Convertible Securities; or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock (other than
under or by reason of provisions designed to protect against dilution), the
Exercise Price in effect at the time of such change will be readjusted to the
Exercise Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold.

                  (iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. If, in any case, the total number of shares of Common Stock issuable
upon exercise of any Option or upon conversion or exchange of any Convertible
Securities is not, in fact, issued and the rights to exercise such Option or to
convert or exchange such Convertible Securities shall have expired or
terminated, the Exercise Price then in effect will be readjusted to the Exercise
Price which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination (other than in respect of
the actual number of shares of Common Stock issued upon exercise or conversion
thereof), never been issued.

                  (v) CALCULATION OF CONSIDERATION RECEIVED. If any Common
Stock, Options or Convertible Securities are issued, granted or sold for cash,
the consideration received therefor for purposes of this Warrant will be the
amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or sale.
In case any Common Stock, Options or Convertible Securities are issued or sold
for a consideration part or all of which shall be other than cash, the amount of
the consideration other than cash received by the Company will be the fair value
of such consideration, except where such consideration consists of securities,
in which case the amount of consideration received by the Company will be the
Market Price thereof as of the date of receipt. In case any Common Stock,
Options or Convertible Securities are issued in connection with any acquisition,
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration

                                      - 5 -

<PAGE>

therefor will be deemed to be the fair value of such portion of the net assets
and business of the non-surviving corporation as is attributable to such Common
Stock, Options or Convertible Securities, as the case may be. The fair value of
any consideration other than cash or securities will be determined in good faith
by the Board of Directors of the Company.

                  (vi) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No adjustment
to the Exercise Price will be made (i) upon the exercise of any warrants,
options or convertible securities granted, issued and outstanding on the date of
issuance of this Warrant; (ii) upon the grant or exercise of any stock or
options which may hereafter be granted or exercised under any employee benefit
plan, stock option plan or restricted stock plan of the Company now existing or
to be implemented in the future, so long as the issuance of such stock or
options is approved by a majority of the independent members of the Board of
Directors of the Company or a majority of the members of a committee of
independent directors established for such purpose; or (iii) upon the exercise
of the Warrants.

            (c) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company at
any time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company at any
time combines (by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the shares of Common Stock acquirable hereunder
into a smaller number of shares, then, after the date of record for effecting
such combination, the Exercise Price in effect immediately prior to such
combination will be proportionately increased.

            (d) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Paragraph 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be adjusted
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.

            (e) CONSOLIDATION, MERGER OR SALE. In case of any consolidation of
the Company with, or merger of the Company into any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the holder of this Warrant
will have the right to acquire and receive upon exercise of this Warrant in lieu
of the shares of Common Stock immediately theretofore acquirable upon the
exercise of this Warrant, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for the number of shares of
Common Stock immediately theretofore acquirable and receivable upon exercise of
this Warrant had such consolidation, merger or sale or conveyance not taken
place. In any such case, the Company will make appropriate provision to insure
that the provisions of this Paragraph 4 hereof will thereafter be applicable as
nearly as may be in relation to any shares of stock or securities thereafter
deliverable upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument the obligations under this Paragraph 4 and the obligations to
deliver to the holder of

                                      - 6 -

<PAGE>

this Warrant such shares of stock, securities or assets as, in accordance with
the foregoing provisions, the holder may be entitled to acquire.

            (f) DISTRIBUTION OF ASSETS. In case the Company shall declare or
make any distribution of its assets (including cash) to holders of Common Stock
as a partial liquidating dividend, by way of return of capital or otherwise,
then, after the date of record for determining shareholders entitled to such
distribution, but prior to the date of distribution, the holder of this Warrant
shall be entitled upon exercise of this Warrant for the purchase of any or all
of the shares of Common Stock subject hereto, to receive the amount of such
assets which would have been payable to the holder had such holder been the
holder of such shares of Common Stock on the record date for the determination
of shareholders entitled to such distribution.

            (g) NOTICE OF ADJUSTMENT. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease in the number of Warrant Shares purchasable at such price upon
exercise, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Such calculation shall be certified
by the Chief Financial Officer of the Company.

            (h) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.

            (i) NO FRACTIONAL SHARES. No fractional shares of Common Stock are
to be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the Market Price of a share of Common
Stock on the date of such exercise.

            (j) OTHER NOTICES. In case at any time:

                  (i) the Company shall declare any dividend upon the Common
Stock payable in shares of stock of any class or make any other distribution
(including dividends or distributions payable in cash out of retained earnings)
to the holders of the Common Stock;

                  (ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;

                  (iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all its assets to,
another corporation or entity; or

                  (iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;

                                      - 7 -

<PAGE>

then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the date
on which the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii), (iii)
and (iv) above.

            (k) CERTAIN EVENTS. If any event occurs of the type contemplated by
the adjustment provisions of this Paragraph 4 but not expressly provided for by
such provisions, the Company will give notice of such event as provided in
Paragraph 4(g) hereof, and the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of shares of Common
Stock acquirable upon exercise of this Warrant so that the rights of the holder
shall be neither enhanced nor diminished by such event.

            (l) CERTAIN DEFINITIONS.

                  (i) "COMMON STOCK DEEMED OUTSTANDING" shall mean the number of
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) pursuant to Paragraph
4(b)(i) hereof, the maximum total number of shares of Common Stock issuable upon
the exercise of Options, as of the date of such issuance or grant of such
Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof, the maximum
total number of shares of Common Stock issuable upon conversion or exchange of
Convertible Securities, as of the date of issuance of such Convertible
Securities, if any.

                  (ii) "MARKET PRICE," as of any date, (i) means the average of
the last reported sale prices for the shares of Common Stock on the OTCBB for
the five (5) Trading Days immediately preceding such date as reported by
Bloomberg, or (ii) if the OTCBB is not the principal trading market for the
shares of Common Stock, the average of the last reported sale prices on the
principal trading market for the Common Stock during the same period as reported
by Bloomberg, or (iii) if market value cannot be calculated as of such date on
any of the foregoing bases, the Market Price shall be the fair market value as
reasonably determined in good faith by (a) the Board of Directors of the Company
or, at the option of a majority-in-interest of the holders of the outstanding
Warrants by (b) an independent investment bank of nationally recognized standing
in the valuation of businesses similar to the business of the corporation. The
manner of determining the Market Price of the Common Stock set forth in the
foregoing definition shall apply with respect to any other security in respect
of which a determination as to market value must be made hereunder.

                  (iii) "COMMON STOCK," for purposes of this Paragraph 4,
includes the Common Stock, par value $.00005 per share, and any additional class
of stock of the Company

                                      - 8 -

<PAGE>

having no preference as to dividends or distributions on liquidation, provided
that the shares purchasable pursuant to this Warrant shall include only shares
of Common Stock, par value $.00005 per share, in respect of which this Warrant
is exercisable, or shares resulting from any subdivision or combination of such
Common Stock, or in the case of any reorganization, reclassification,
consolidation, merger, or sale of the character referred to in Paragraph 4(e)
hereof, the stock or other securities or property provided for in such
Paragraph.

      5. ISSUE TAX. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.

      6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.

      7. TRANSFER, EXCHANGE, AND REPLACEMENT OF WARRANT.

            (a) RESTRICTION ON TRANSFER. This Warrant and the rights granted to
the holder hereof are transferable, in whole or in part, upon surrender of this
Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Paragraph 7(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Paragraph 7(f) hereof and to the applicable
provisions of the Securities Purchase Agreement. Until due presentment for
registration of transfer on the books of the Company, the Company may treat the
registered holder hereof as the owner and holder hereof for all purposes, and
the Company shall not be affected by any notice to the contrary. Notwithstanding
anything to the contrary contained herein, the registration rights described in
Paragraph 8 are assignable only in accordance with the provisions of that
certain Registration Rights Agreement, dated March 28, 2007, by and among the
Company and the other signatories thereto (the "Registration Rights Agreement").

            (b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This Warrant
is exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Paragraph 7(e) below, for new Warrants of
like tenor representing in the aggregate the right to purchase the number of
shares of Common Stock which may be purchased hereunder, each of such new
Warrants to represent the right to purchase such number of shares as shall be
designated by the holder hereof at the time of such surrender.

            (c) REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.

                                      - 9 -

<PAGE>

            (d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided in
this Paragraph 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by the holder or
transferees) and charges payable in connection with the preparation, execution,
and delivery of Warrants pursuant to this Paragraph 7.

            (e) REGISTER. The Company shall maintain, at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to the holder hereof), a register for this Warrant, in which the Company
shall record the name and address of the person in whose name this Warrant has
been issued, as well as the name and address of each transferee and each prior
owner of this Warrant.

            (f) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time of
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act of 1933, as amended (the "Securities Act") and under applicable state
securities or blue sky laws, the Company may require, as a condition of allowing
such exercise, transfer, or exchange, (i) that the holder or transferee of this
Warrant, as the case may be, furnish to the Company a written opinion of
counsel, which opinion and counsel are acceptable to the Company, to the effect
that such exercise, transfer, or exchange may be made without registration under
said Act and under applicable state securities or blue sky laws, (ii) that the
holder or transferee execute and deliver to the Company an investment letter in
form and substance acceptable to the Company and (iii) that the transferee be an
"accredited investor" as defined in Rule 501(a) promulgated under the Securities
Act; provided that no such opinion, letter or status as an "accredited investor"
shall be required in connection with a transfer pursuant to Rule 144 under the
Securities Act. The first holder of this Warrant, by taking and holding the
same, represents to the Company that such holder is acquiring this Warrant for
investment and not with a view to the distribution thereof.

      8. REGISTRATION RIGHTS. The initial holder of this Warrant (and certain
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in Section 2 of the Registration
Rights Agreement.

      9. NOTICES. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail or by recognized overnight mail courier, postage prepaid and
addressed, to such holder at the address shown for such holder on the books of
the Company, or at such other address as shall have been furnished to the
Company by notice from such holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to the office of the Company at 22600 Hall Road, Suite
205, Clinton Township, MI 48036, Attention: Chief Executive Officer, or at such
other address as shall have been furnished to the holder of this Warrant by
notice from the Company. Any such notice, request, or other communication may be
sent by facsimile, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail or by recognized
overnight mail courier as provided above. All notices, requests, and other
communications shall be deemed to have been given either at the time of the
receipt

                                     - 10 -

<PAGE>

thereof by the person entitled to receive such notice at the address of such
person for purposes of this Paragraph 9, or, if mailed by registered or
certified mail or with a recognized overnight mail courier upon deposit with the
United States Post Office or such overnight mail courier, if postage is prepaid
and the mailing is properly addressed, as the case may be.

      10. GOVERNING LAW. THIS WARRANT SHALL BE ENFORCED, GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS LOCATED IN NEW YORK,
NEW YORK WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS WARRANT, THE AGREEMENTS
ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO
THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT
SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN
EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR
PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS WARRANT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.

      11. MISCELLANEOUS.

            (a) AMENDMENTS. This Warrant and any provision hereof may only be
amended by an instrument in writing signed by the Company and the holder hereof.

            (b) DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.

            (c) CASHLESS EXERCISE. Notwithstanding anything to the contrary
contained in this Warrant, if the resale of the Warrant Shares by the holder is
not then registered pursuant to an effective registration statement under the
Securities Act, this Warrant may be exercised by presentation and surrender of
this Warrant to the Company at its principal executive offices with a written
notice of the holder's intention to effect a cashless exercise, including a
calculation of the number of shares of Common Stock to be issued upon such
exercise in accordance with the terms hereof (a "Cashless Exercise"). In the
event of a Cashless Exercise, in lieu of paying the Exercise Price in cash, the
holder shall surrender this Warrant for that number of shares of Common Stock
determined by multiplying the number of Warrant Shares to which it would
otherwise be entitled by a fraction, the numerator of which shall be the
difference between the then current Market Price per share of the Common Stock
and the Exercise Price, and the denominator of which shall be the then current
Market Price per share of Common Stock. For

                                     - 11 -

<PAGE>

example, if the holder is exercising 100,000 Warrants with a per Warrant
exercise price of $0.75 per share through a cashless exercise when the Common
Stock's current Market Price per share is $2.00 per share, then upon such
Cashless Exercise the holder will receive 62,500 shares of Common Stock.

            (d) REMEDIES. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the holder, by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
under this Warrant will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Warrant, that the
holder shall be entitled, in addition to all other available remedies at law or
in equity, and in addition to the penalties assessable herein, to an injunction
or injunctions restraining, preventing or curing any breach of this Warrant and
to enforce specifically the terms and provisions thereof, without the necessity
of showing economic loss and without any bond or other security being required.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                     - 12 -

<PAGE>

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

                                        MIDNIGHT HOLDINGS GROUP, INC.

                                        By: _______________________________
                                            Nicholas Cocco
                                            Chief Executive Officer

Dated as of March 28, 2007

<PAGE>

                           FORM OF EXERCISE AGREEMENT

                                                        Dated: ________ __, 200_

To:    ______________________

      The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check in the
amount of, or, if the resale of such Common Stock by the undersigned is not
currently registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended, by surrender of securities issued by the
Company (including a portion of the Warrant) having a market value (in the case
of a portion of this Warrant, determined in accordance with Section 11(c) of the
Warrant) equal to $_________. Please issue a certificate or certificates for
such shares of Common Stock in the name of and pay any cash for any fractional
share to:

                                     Name: _____________________________________

                                     Signature:
                                     Address: __________________________________
                                             ___________________________________

                                     Note:     The above signature should
                                               correspond exactly with the
                                               name on the face of the
                                               within Warrant, if applicable.

and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.

<PAGE>

                               FORM OF ASSIGNMENT

      FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock covered thereby set forth hereinbelow, to:

Name of Assignee                    Address                        No of Shares
----------------                    -------                        ------------

, and hereby irrevocably constitutes and appoints ______________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.

Dated: ___________ __, 200_

In the presence of:                       _______________________________

                                     Name: ______________________________

                                     Signature: _________________________
                                     Title of Signing Officer or Agent (if any):
                                                 _______________________________
                                     Address:    _______________________________
                                                 _______________________________

                                         Note:   The above signature should
                                                 correspond exactly with the
                                                 name on the face of the
                                                 within Warrant, if applicable.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00129-of-00352.parquet"}]]