Document:

Exhibit 4.3

NATIONAL STORM MANAGEMENT, INC.

SECURITIES PURCHASE AGREEMENT

This Securities
Purchase Agreement (this “Agreement”) is
dated as of December 28, 2005, among National Storm Management, Inc.,
a Nevada corporation (the “Company”), and
the purchasers identified on the signature pages hereto (each a “Purchaser” and collectively the “Purchasers”);
and

WHEREAS, subject
to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of
the Securities Act (as defined below), and Rule 506 promulgated
thereunder, the Company desires to issue and sell to the Purchasers, and the
Purchasers, severally and not jointly, desire to purchase from the Company in
the aggregate, up to $150,000 of Common Stock, together with Warrants to
purchase additional shares of Common Stock equal to 100% of the number of
shares of Common Stock purchased hereunder (each unit of one share of Common
Stock and one Warrant to purchase one share of Common Stock is referred to
herein as a “Unit”).

NOW, THEREFORE, IN
CONSIDERATION of the mutual covenants contained in this Agreement, and for
other good and valuable consideration the receipt and adequacy of which are
hereby acknowledged, the Company and each Purchaser agrees as follows:

ARTICLE I.

DEFINITIONS

1.1       Definitions. In addition to the
terms defined elsewhere in this Agreement, for all purposes of this Agreement,
the following terms have the meanings indicated in this Section 1.1:

“Action” shall have the meaning ascribed to such term in Section 3.1(j).

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

“Authorization” shall have the meaning ascribed to such term
to Section 3.1(e).

“Business Day” means any day except Saturday, Sunday and any
day which shall be a federal legal holiday or a day on which banking
institutions in the State of Illinois are authorized or required by law or
other governmental action to close.

“Closing” means the closing of the purchase and sale of the
Units pursuant to Section 2.1.

“Closing Date” means the date of the Closing.

“Commission” means the Securities and Exchange Commission.

“Common Stock” means the common stock of the Company, $0.001
par value per share, and any securities into which such common stock may hereafter
be reclassified.

“Disclosure Materials” shall have the meaning ascribed to
such term in Section 3.1(h).

“Disclosure Schedules” means the Disclosure Schedules
attached hereto.

 

“Effective Date” means the date that the Registration
Statement is first declared effective by the Commission.

“Effectiveness Period” shall have the meaning ascribed to
such term in the Registration Rights Agreement.

“Evaluation Date” shall have the meaning ascribed to such
term in Section 3.1(u).

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

“GAAP” shall have the meaning ascribed to such term in Section 3.1(h).

“Governmental Entity” shall have the meaning ascribed to such
term in Section 3.1(e).

“Intellectual Property Rights” shall have the meaning
ascribed to such term in Section 3.1(p).

“Law” shall have the meaning ascribed to such term in Section 3.1(e).

“Legend
Removal Date” shall have the meaning ascribed to such term in
Section 4.1(c).

“Liens” shall have the meaning ascribed to such term in Section 3.1(a).

“Material Adverse Effect” shall have the meaning ascribed to
such term in Section 3.1(b).

“Material Permits” shall have the meaning ascribed to such
term in Section 3.1(n).

“Order” shall have the meaning ascribed to such term in Section 3.1(d).

“Per Unit Purchase Price” equals $[.15], subject to
adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur
after the date of this Agreement.

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

“Registration Rights Agreement” means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company and each
Purchaser, in the form of Exhibit A hereto.

“Registration Statement” means a registration statement
meeting the requirements set forth in the Registration Rights Agreement and
covering the resale by the Purchasers of the Shares.

“Regulation D” shall have the meaning ascribed to such term
in Section 3.1(ff).

“Rule 144” means Rule 144 promulgated by the
Commission pursuant to the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such Rule.

“SEC Reports” shall have the meaning ascribed to such term in
Section 3.1 (h).

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“Securities” means the Shares, the Warrants and the Warrant
Shares.

“Securities Act” means the Securities Act of 1933, as
amended.

“Shares” means the shares of Common Stock issued or issuable
to each Purchaser pursuant to this Agreement.

“Subscription Amount” means, as to each Purchaser, the
amounts specified as the Subscription Amount and set forth on Schedule A
hereto, in United States dollars and in immediately available funds.

“Subsidiary” means any “significant subsidiary” as defined in
Rule l-02(w) of Regulation S-X promulgated by the Commission under the
Exchange Act.

“Trading Day” means (i) a day on which the Common Stock
is traded on a Trading Market, or (ii) if the Common Stock is not listed
on a Trading Market, a day on which the Common Stock is traded on the
over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if
the Common Stock is not quoted on the OTC Bulletin Board, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); provided, that in the event that
the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof,
then Trading Day shall mean a Business Day.

“Trading Market” means the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in question:
the American Stock Exchange, the Illinois Stock Exchange, the Nasdaq National
Market or the Nasdaq SmallCap Market (the Nasdaq National Market and Nasdaq
SmallCap Market, “NASDAQ”).

“Transaction Documents” means this Agreement, the
Registration Rights Agreement, the Warrant and any other documents or
agreements executed in connection with the transactions contemplated hereunder.

“Warrants” means Common Stock Purchase Warrants, in the form of
Exhibit B, issuable to the Purchasers at Closing, which warrants
shall be exercisable immediately and have an exercise price equal to $[.20] per
share of Common Stock and a term of exercise of five (5) years.

“Warrant Shares” means the shares of Common Stock issuable
upon exercise of the Warrants.

ARTICLE II.

PURCHASE AND SALE

2.1       Closing. Subject to the terms and
conditions set forth in this Agreement, at the Closing, each Purchaser shall
purchase, severally and not jointly, and the Company shall issue and sell, to
each Purchaser such number of Units set forth opposite such Purchaser’s name as
the Subscription Amount on Schedule A hereto at the Per Unit
Purchase Price. The Closing shall occur at the offices of Schwartz, Cooper,
Greenberger & Krauss Chtd., 180 North LaSalle Street, Suite 2700,
Chicago, Illinois 60601 on December 28, 2005, or on such other date and at
such other location as the Company and Purchasers shall mutually agree.

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2.2       Closing Deliveries.

(a)       At the Closing the Company shall deliver
or cause to be delivered to each Purchase the following:

(i)        this Agreement duly executed by the
Company;

(ii)       a certificate evidencing a number of
Shares equal to such Purchaser’s Subscription Amount divided by the Per Unit
Purchase Price, registered in the name of such Purchaser;

(iii)      a Warrant, registered in the name of such
Purchaser, pursuant to which such Purchaser shall have the right to acquire up
to the number of shares of Common Stock equal to 100% of the number of Shares
purchased at the Closing and set forth opposite such Purchaser’s name on Schedule A
hereto;

(iv)      the Registration Rights Agreement duly
executed by the Company; and

(b)       At the Closing each Purchaser shall
deliver or cause to be delivered to the Company the following:

(i)        this Agreement duly executed by such
Purchaser,

(ii)       such Purchaser’s Subscription Amount by
wire transfer to the account designated in writing by the Company;

(iii)      the Registration Rights Agreement duly
executed by such Purchaser; and

(iv)      completed Purchaser Instructions and
Purchaser Information and all attachments, in the form attached as Exhibit B
hereto, completed by such Purchaser.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

3.1       Representations and Warranties of the
Company. Except as set forth in the SEC Reports or under the corresponding section of
the Disclosure Schedules delivered concurrently herewith, the Company hereby
makes the following representations and warranties as of the date hereof and as
of the Closing Date to each Purchaser:

(a)       Subsidiaries. The Company owns,
directly or indirectly, all of the capital stock of each Subsidiary free and
clear of any lien, charge, security interest, encumbrance, right of first
refusal or other restriction (collectively, “Liens”),
and all the issued and outstanding shares of capital stock of each Subsidiary
are validly issued and are fully paid, non-assessable and free of preemptive
and similar rights.

(b)       Organization and Qualification.
Each of the Company and each Subsidiary is an entity duly incorporated or
otherwise organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation or organization (as applicable), with the
requisite power and authority to own and use its properties and assets and to
carry on its business as described in the Disclosure Materials. Each Subsidiary
is a direct or indirect wholly owned

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Subsidiary of the
Company. Neither the Company nor any Subsidiary is in violation of any of the
provisions of its respective certificate or articles of incorporation, bylaws
or other organizational or charter documents. Each of the Company and the Subsidiaries
is duly qualified or licensed to conduct business and is in good standing as a
foreign corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, would not have or reasonably be expected to (i) result
in a material adverse effect on the legality, validity or enforceability of any
Transaction Document, (ii) result in a material adverse effect on the
results of operations, assets, business or financial condition of the Company
and the Subsidiaries, taken as a whole, or (iii) adversely impair the
Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect”).

(c)       Authorization; Enforcement. The
Company has the requisite corporate power and authority to execute and deliver
each of the Transaction Documents and to enter into and to consummate the
transactions contemplated by each of the Transaction Documents to which it is
party and otherwise to carry out its obligations thereunder. The execution and
delivery of each of the Transaction Documents to which it is a party by the
Company and the consummation by it of the transactions contemplated thereby
have been duly authorized by all necessary action on the part of the
Company and no further action is required by the Company or its stockholders in
connection therewith. Each Transaction Document including this Agreement has
been (or upon delivery will have been) duly executed by the Company and, when
delivered in accordance with the terms hereof, will constitute the valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies and (iii) with respect to indemnification and
contribution in Section 4.9 hereof, as limited by laws, or public
policy underlying such laws.

(d)       No Conflicts. The execution,
delivery and performance of the Transaction Documents to which it is a party by
the Company and the consummation by the Company of the transactions
contemplated thereby do not and will not (i) conflict with or violate any
provision of the Company’s or any Subsidiary’s certificate or articles of
incorporation, bylaws or other organizational or charter documents; (ii) conflict
with, or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice,
lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding
to which the Company or any Subsidiary is a party or by which any property or
asset of the Company or any Subsidiary is bound or affected; (iii) to the
Company’s knowledge, conflict with, or result in or constitute any violation
of, any award, decision, judgment, decree, injunction, writ, order, subpoena,
ruling, verdict or arbitration award entered, issued, made or rendered by any
federal, state, local or foreign government or any other Governmental Entity
(each an “Order”), or any Law,
applicable to the Company or any of its Subsidiaries, or to any of their
respective properties or assets, or to any Securities; (iv) result in the
creation or imposition of (or the obligation to create or impose) any Lien on
any of the properties or assets of the Company or any of its subsidiaries, or
on any of the Securities; or (v) conflict with, or result in or constitute
any violation of, or result in the termination, suspension or revocation of,
any Authorization applicable to the Company or any of its subsidiaries, or to
any of their respective properties or assets, or to any of the Securities, or
result in any other impairment of the rights of the holder of any such
Authorization; except in the case of each of clauses (ii),

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(iii), (iv) and (v),
such as would not, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect.

(e)       Filings, Consents and Approvals.
Assuming the accuracy of the representation of each Purchaser set forth in Section 3.2
hereof, to registration (including any registration under the Securities Act)
or filing with, or any notification to, or any approval, permission, consent,
ratification, waiver, authorization, order, finding of suitability, permit,
license, franchise, exemption, certification or similar instrument or document
(each, an “Authorization”) of or
from, any court, arbitral tribunal, arbitrator, administrative or regulatory
agency or commission or other governmental or regulatory authority, agency or
governing body, domestic or foreign, including without limitation any Trading
Market (each, a “Governmental Entity”),
or any other person, or under any statute, law, ordinance, rule, regulation or
agency requirement of any Governmental Entity, (each, a “Law”), on the part of the Company or
any of its subsidiaries is required in connection with the execution or
delivery by the Company of the Transaction Documents or the performance by the
Company of its obligations under each of the Transaction Documents except (i) as
would not have a Material Adverse Effect on the Company or its performance of
its obligations under the Transaction Documents and (ii) Form D and
blue sky filings and (iii) the filings contemplated by the Transaction
Documents.

(f)        Issuance of the Securities. The
Securities have been duly authorized and, when issued and paid for in
accordance with the Transaction Documents, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens, except for such
restrictions on transfer or ownership imposed by applicable federal or state
securities laws or set forth in this Agreement. The Company has reserved from
its duly authorized capital stock the maximum number of shares of Common Stock
issuable pursuant to this Agreement.

(g)       Capitalization. As of the date
hereof, the authorized capital stock of the Company consists of 200,000,000
shares, 200,000,000 shares of which are common stock, $0.001 par value per
share and 0 shares of which are preferred stock. As of the date hereof and
immediately prior to the transactions contemplated hereby, there are 48,258,689
shares of Common Stock issued and outstanding and no shares of preferred stock
issued and outstanding. Other than as contemplated in this Agreement, the
Company has not issued any capital stock since December 20, 2005 other
than pursuant to the exercise of (i) stock options or restricted grants
held by employees, officers, directors, or consultants, whether or not pursuant
to the Company’s equity incentive plans or stock option plans, or (ii) the
issuance of shares of Common Stock to employees pursuant to the Company’s
equity incentive plans, stock option plans, stock option agreements, restricted
stock agreements, stock ownership plans or dividend reinvestment plans, or (iii) Regulation
S sales with respect to Ischian Services pursuant to that certain Regulation S
Stock Purchase Agreement dated July 8, 2005, which was cancelled and (iv) Stock
Agreement with Interium Capital, Inc. pursuant to which it has been
granted options for 2,000,000 shares at a strike price of $0.75. No Person has
any right of first refusal, preemptive right, right of participation, or any
similar right to participate in the transactions contemplated by the
Transaction Documents. Except as disclosed above in this section and in
the filings with Pink Sheets LLC, there are no outstanding options, warrants,
script rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound
to issue additional shares of Common Stock, or securities or rights convertible
or exchangeable into shares of Common Stock. The issue and sale of the
Securities will not obligate the Company to issue shares of Common Stock or
other securities to any Person (other than the shares of Common Stock being
issued to

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the Purchasers hereunder)
and will not result in a right of any holder of Company securities to adjust
the exercise, conversion, exchange or reset price under such securities.

(h)       SEC Reports; Financial Statements.
The Company is not required to file reports under the Securities Act and the
Exchange Act, being collectively referred to herein as the “SEC Reports” and, together with the
Disclosure, Schedules to this Agreement, the “Disclosure
Materials”). As of their respective dates, the SEC Reports, if any,
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the Commission
promulgated thereunder, and none of the SEC Reports, when filed, contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC Reports,
if any, and on the Pink Sheets, LLC comply in all material respects with
applicable accounting requirements as in effect at the time of filing. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(“GAAP”), except as may be
otherwise specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the financial
position of the Company and its consolidated subsidiaries as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments. All material agreements to which the Company and
its Subsidiaries are a party or to which any of their respective property or
assets are subject that are required to be filed with respect to the rules and
regulations of Pink Sheets, LLC are included as a part of, or specifically
identified in, such filings.

(i)        Material Changes. Since December 31,
2004, the date of the latest audited financial statements of the Company,
except as disclosed in the financial statements filed in Pink Sheets, LLC (i) there
has been no event, occurrence or development that has had or that could
reasonably be expected to result in a Material Adverse Effect, (ii) the
Company has not incurred any liabilities (contingent or otherwise) other than (A) trade
payables and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities that would not be
required to be reflected in the Company’s financial statements pursuant to GAAP
or that would not be required to be disclosed in filings made with the
Commission, (iii) the Company has not altered its method of accounting, (iv) the
Company has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock and (v) the Company has
not issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company equity incentive plans, stock option plans, stock
option agreements, restricted stock agreements, stock ownership plans or
dividend reinvestment plans. The Company does not have pending before the
Commission any request for confidential treatment of information.

(j)        Litigation. Except as disclosed
in the Disclosure Materials, there are no actions, suits, inquiries, notices of
violation, proceedings or investigations pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or any of
their respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an “Action”)
which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or (ii) would
have or reasonably be expected to result in a Material Adverse Effect. Neither
the Company nor any Subsidiary, nor any director or officer thereof, is or has
been the subject of any Action involving a claim of violation of or liability
under federal or state securities laws or a claim of breach of fiduciary duty.
There has not been, and to the

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knowledge of the Company,
there is not pending or contemplated, any investigation by the Commission
involving the Company or any current or former director or officer of the
Company. The Commission has not issued any stop order or other order suspending
the effectiveness of any registration statement filed by the Company or any Subsidiary
under the Exchange Act or the Securities Act.

(k)       Labor Relations. No material labor
dispute exists or, to the knowledge of the Company, is imminent with, respect
to any of the employees of the Company or any Subsidiary which could reasonably
be expected to result in a Material Adverse Effect.

(l)        Taxes. Each of the Company and
its Subsidiaries has filed all necessary material federal, state and foreign
income and franchise tax returns and has paid or accrued all material taxes
shown as due thereon, and neither the Company nor any of its Subsidiaries has
knowledge of a tax deficiency which has been or might be asserted or threatened
against it which could reasonably be expected to result in a Material Adverse
Effect.

(m)      Compliance. Neither the Company nor
any Subsidiary (i) is in default under or in violation of (and no event
has occurred that has not been waived that, with notice or lapse of time or
both, could result in a default by the Company or any Subsidiary under), nor
has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any agreement, credit facility,
debt or other instrument (evidencing a Company or Subsidiary debt or otherwise)
or other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected (whether or not such default or violation has been waived), (ii) is
in violation of any order of any court, arbitrator or governmental body, or (iii) to
the Company’s knowledge, is or has been in violation of any statute, rule or
regulation of any governmental authority, including without limitation all
foreign, federal, state and local laws relating to taxes, environmental
protection, kickbacks and false claims in healthcare programs, occupational
health and safety, product quality and safety and employment, labor matters,
except in each case as would not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect. The Company is
in compliance with the applicable requirements of the Sarbanes-Oxley Act of
2002 and the rules and regulations thereunder promulgated by the
Commission, except where such noncompliance would not have or reasonably be
expected to result in a Material Adverse Effect.

(n)       Regulatory Permits. The Company
and the Subsidiaries possess all certificates, authorizations and permits
issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described in
the SEC Reports, if any, and in Pink Sheets, LLC, except where the failure to
possess such permits would not have or reasonably be expected to result in a Material Adverse Effect (“Material Permits”), and neither the Company
nor any Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.

(o)       Title to Assets. The Company and
the Subsidiaries have good and marketable title in fee simple to all real
property owned by them that is material to their respective businesses and good
and marketable title in all personal property owned by them that is material to
their respective businesses, in each case free and clear of all Liens, except
for (i) Liens described on Schedule 3.1(o) of the Disclosure
Schedules, (ii) Liens as do not materially affect the value of such
property, do not materially interfere with the use made and proposed to be made
of such property by the Company and the Subsidiaries, (iii) Liens for
taxes not yet due and payable and (iv) Liens which would not, individually
or in the aggregate, reasonably be expected to have or result in a Material
Adverse Effect. To the Company’s knowledge, any real property and facilities
held under lease by the Company and the Subsidiaries are held by them under
valid,

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subsisting and
enforceable leases of which the Company and the Subsidiaries are in compliance
except, in each case, as would not reasonably be expected to result in a
Material Adverse Effect.

(p)       Patents and Trademarks. The
Company and the Subsidiaries own (and are the record owner of) or possess
adequate licenses to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses,
confidential information, technology and other similar rights (and all goodwill
associated therewith) that are necessary or that are used in connection with
their respective businesses and which the failure to so own or have would,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect (collectively, the “Intellectual
Property Rights”). Except as set forth in the Disclosure Materials,
neither the Company nor any Subsidiary has received a written notice that any
of the Intellectual Property Rights violates or infringes upon or conflicts
with the rights of any Person. Except as set forth in the Disclosure Materials,
or as would not reasonably be expected to result in a Material Adverse Effect,
to the knowledge of the Company, all such Intellectual Property Rights are
enforceable and there is no existing infringement by another Person of any of
the Intellectual Property Rights.

(q)       [Intentionally Omitted.]

(r)        Insurance. The Company and the
Subsidiaries are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as are prudent and customary
in the businesses in which the Company and the Subsidiaries are engaged.
Neither the Company nor any Subsidiary has any reason to believe that it will
not be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business without a significant increase in cost.

(s)       Price of Common Stock. The Company
has not taken, and will not take, directly or indirectly, any action designed
to cause or result in, or which has constituted or which might reasonably be
expected to constitute, the stabilization or manipulation of the price of the
shares of the Common Stock to facilitate the sale or resale of the Securities.

(t)        Transactions With Affiliates and
Employees. Except as set forth in the Pink Sheets, LLC and the attached Exhibit 3.1(t),
none of the officers or directors of the Company and, to the knowledge of the
Company, none of the employees of the Company is presently a party to any
transaction with the Company or any Subsidiary (other than for services as
employees, officers and directors) which would be required to be disclosed by
the Company pursuant to Item 402 under Regulation S-K under the Exchange Act,
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner, in each case in excess of
$5,000.00 other than (a) for payment of salary or consulting fees for
services rendered, (b) reimbursement for expenses incurred on behalf of
the Company and (c) for other employee benefits, including stock option
agreements, whether or not issued, under any stock option plan of the Company.

(u)       Internal Accounting Controls. The
Company and each of its subsidiaries maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted

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only in accordance with
management’s general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.

(v)       Solvency. Based on
the financial condition of the Company as of the Closing Date (and assuming
that the Closing shall have occurred), (i) the Company’s fair saleable
value of  its assets
exceeds the amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company’s assets do not constitute
unreasonably small capital to carry on its business for the current fiscal year
as now conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business
conducted by the Company, and projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to liquidate all
of its assets, after taking into account all anticipated uses of the cash,
would be sufficient to pay all amounts on or in respect of its debt when such
amounts are required to be paid. The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be payable on or in respect of its debt).

(w)      Certain Fees. No brokerage or
finder’s fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
this Agreement. The Purchasers shall have no obligation with respect to any
fees or with respect to any claims made by or on behalf of other Persons for
fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement.

(x)        Certain Registration Matters.
Assuming the accuracy of the Purchasers’ representations and warranties set
forth in Section 3.2(b)-(e), no registration under the Securities
Act is required for the offer and sale of the Securities by the Company to the
Purchasers under the Transaction Documents.

(y)       Registration Rights. No Person has
any right to cause the Company to effect the registration under the Securities
Act of any securities of the Company.

(z)        Listing and Maintenance Requirements.
Except as specified in the Disclosure Materials, the Company has not, in the
twenty-four months preceding the date hereof, received notice from any Trading
Market on which the Common Stock is or has been listed or quoted to the effect
that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in
compliance with all such listing and maintenance requirements. The Company is
in compliance with the listing and maintenance requirements for continued
listing of the Common Stock on the Pink Sheets.

(aa)     Investment Company. The Company is
not, and after giving effect to the sale of the Securities and the application
of the net proceeds therefrom, will not be, an “investment company” within the
meaning of the Investment Company Act of 1940, as amended, or an Affiliate of
an “investment company.”

(bb)     No Additional Agreements. The
Company does not have any agreement or understanding with any Purchaser with
respect to the transactions contemplated by the Transaction Documents other
than as specified in this Agreement.

(cc)     Disclosure. The Company confirms
that, neither the Company nor any other Person acting on its behalf has
provided any of the Purchasers or their agents or counsel with any

 10
 

 

information that
constitutes or might constitute material, non-public information. The Company
understands and confirms that the Purchasers will rely on the foregoing
representations and covenants in effecting transactions in securities of the
Company. All disclosure provided to the Purchasers regarding the Company, its
business and the transactions contemplated hereby, including the Disclosure
Schedules to this Agreement furnished by or on behalf of the Company are true
and correct in all material respects and do not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they
were made, not misleading.

(dd)     Regulation D. None of the Company or
any affiliate (as defined in Rule 501(b) of Regulation D (“Regulation D”) under the Securities Act) of
the Company has directly, or through any agent, (a) sold, offered for
sale, solicited offers to buy or otherwise negotiated in respect of any
security (as defined in the Securities Act) which is or will be integrated with
the sale of the Securities in a manner that would require the registration of
the Securities under the Securities Act, or (b) engaged in or used any form of
general solicitation or general advertising (within the meaning of Regulation
D) in connection with the sale of the Securities, including articles, notices
or other communications published in any newspaper, magazine or similar medium
or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising.

(ee)     Acknowledgment Regarding Purchasers’
Purchase of Company Securities. The Company acknowledges and agrees that
each of the Purchasers is acting solely in the capacity of an arm’s length
purchaser with respect to this Agreement and the transactions contemplated
hereby. The Company further acknowledges that no Purchaser is acting as a
financial advisor or fiduciary of the Company or any other Purchaser (or in any
similar capacity) with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and any advice given by any
Purchaser or any of their respective representatives or agents in connection
with the Transaction Document and the transactions contemplated hereby and
thereby is merely incidental to such Purchaser’s purchase of the Securities.
The Company further represents to each Purchaser that the Company’s decision to
enter into the Transaction Documents has been based solely on the independent
evaluation of the transactions contemplated hereby by the Company and its
representatives.

3.2       Representations and Warranties of the
Purchasers. Each Purchaser hereby, for itself and for no other Purchaser,
represents and warrants as of the date hereof and as of the Closing Date to the
Company as follows:

(a)       Organization; Authority. Such
Purchaser is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization with the requisite
corporate or partnership power and authority to enter into and to consummate
the transactions contemplated by the applicable Transaction Documents and
otherwise to carry out its obligations thereunder. The execution, delivery and
performance by such Purchaser of the transactions contemplated by this
Agreement has been duly authorized by all necessary corporate or, if such
Purchaser is not a corporation, such partnership, limited liability company or
other applicable like action, on the part of such Purchaser. Each of this
Agreement and the Registration Rights Agreement has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with terms
hereof, will constitute the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms.

(b)       Investment Intent. Such Purchaser
is acquiring the Securities as principal for its own account and not with a
view to or for distributing or reselling such Securities or any part thereof,
without prejudice, however, to such Purchaser’s right, subject to the
provisions of this

 11
 

 

Agreement, at all times
to sell or otherwise dispose of all or any part of such Securities
pursuant to an effective registration statement under the Securities Act or
under an exemption from such registration and otherwise in compliance with
applicable federal and state securities laws. Subject to the immediately
preceding sentence, nothing contained herein shall be deemed a representation
or warranty by such Purchaser to hold the Securities for any period of time.
Such Purchaser is acquiring the Securities hereunder in the ordinary course of
its business. Such Purchaser does not have any agreement or understanding,
directly or indirectly, with any Person to distribute any of the Securities.

(c)       Purchaser Status. At the time such
Purchaser was offered the Securities, it was, and at the date hereof it is an “accredited
investor” as defined in Rule 501(a) under the Securities Act. Such Purchaser
is not required to be registered as a broker-dealer under Section 15 of
the Exchange Act.

(d)       Experience of such Purchaser. Such
Purchaser, either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial matters so
as to be capable of evaluating the merits and risks of the prospective
investment in the Securities, and has so evaluated the merits and risks of such
investment. Such Purchaser is able to bear the economic risk of an investment
in the Securities and, at the present time, is able to afford a complete loss
of such investment. Such Purchaser has requested, received, reviewed and
considered all information it deems relevant in making an informed decision to
purchase the Securities.

(e)       General Solicitation. Such
Purchaser is not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities published in
any newspaper, magazine or similar media or broadcast over television or radio
or presented at any seminar or any other general solicitation or general
advertisement. At no time was the Purchaser presented with or solicited by any
publicly issued or circulated newspaper, mail, radio, television, or to the
Purchaser’s knowledge, any other form of general advertising or
solicitation in connection with the offer, sale and purchase of the Securities.

(f)        Registration Required. Such
Purchaser hereby covenants with the Company not to, directly or indirectly,
offer, sell, pledge, transfer, or otherwise dispose of (or solicit offers to
buy, purchase or otherwise acquire or take pledge of) any of the Securities
without complying with the provisions hereof, the Registration Rights Agreement
and the Securities Act and the applicable rules and regulations of the
Commission thereunder, including without limitation, the prospectus delivery
requirement under the Securities Act to be satisfied (unless such Purchaser is
selling such Securities in a transaction not subject to the
prospectus delivery requirement), and such Purchaser acknowledges that the
certificates evidencing the Shares will be imprinted with a legend that
prohibits their transfer except in accordance therewith.

(g)       Access to Information. Such
Purchaser acknowledges that it has reviewed the Disclosure Materials and has
been afforded (i) the opportunity to ask such questions as it has deemed
necessary of, and to receive answers from, representatives of the Company
concerning the terms and conditions of the offering of the Securities and the
merits and risks of investing in the Securities; (ii) access to
information about the Company and the Subsidiaries and their respective
financial condition, results of operations, business, properties, management
and prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information that the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment. Neither such
inquiries nor any other investigation conducted by or on behalf of such
Purchaser or its representatives or counsel shall modify, amend or affect such
Purchaser’s right to

 12
 

 

rely on the truth,
accuracy and completeness of the Disclosure Materials and the Company’s
representations and warranties contained in the Transaction Documents.

(h)       Certain Fees. Except for the fees
that will be payable by the Company under Section 3.1(w), such
Purchaser has not entered into any agreement or arrangement that would entitle any broker or finder to compensation
by the Company in connection with the sale of the Company Securities to such
Purchaser.

(i)        Broker-Dealer Status. Such
Purchaser is not and is not required to be registered as a broker-dealer
pursuant to the Exchange Act.

(j)        Reliance. Such Purchaser
understands and acknowledges that (i) the Securities are being offered and
sold to it without registration under the Securities Act in a private placement
that is exempt from the registration requirements of the Securities Act and (ii) the
availability of such exemption, depends in part on, and the Company will
rely upon the accuracy and truthfulness of, the foregoing representations and
warranties and such Purchaser hereby consents to such reliance.

The Company
acknowledges and agrees that each Purchaser does not make or has not made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

4.1       Transfer Restrictions.

(a)       The Securities may only be disposed
of in compliance with state and federal securities laws, including pursuant to
an exemption therefrom. In connection with any transfer of the Securities other
than pursuant to an effective registration statement, pursuant to paragraph (k)
of Rule 144, to the Company, to an Affiliate of a Purchaser or in
connection with a pledge as contemplated in Section 4.1(b), the
Company may require the transferor thereof to provide to the Company an
opinion of counsel selected by the transferor, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred Securities
under the Securities Act. As a condition of transfer, any such transferee shall
agree in writing to be bound by the terms of this Agreement and the
Registration Rights Agreement and shall have the rights of a Purchaser under
this Agreement and the Registration Rights Agreement.

(b)       The Purchasers agree to the imprinting,
so long as is required by this Section 4.1(b), of a legend on any
of the Securities in the following form:

THESE SECURITIES HAVE NOT
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH

 13
 

 

APPLICABLE STATE
SECURITIES LAWS. SUBJECT TO COMPLIANCE WITH APPLICABLE SECURITIES LAWS, THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT
IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501 (a) UNDER THE
SECURITIES ACT.

The Company
acknowledges and agrees that, subject to compliance with applicable securities
laws, a Purchaser may from time to time pledge and/or grant a security
interest pursuant to a bona fide margin agreement in a bona fide margin account
and, if required under the terms of such arrangement, agreement or account,
such Purchaser may transfer pledged or secured Securities to the pledgees
or secured parties. Such a pledge or transfer would not be subject to approval
of the Company and no legal opinion of legal counsel of the pledgee, secured
party or pledgor shall be required in connection therewith. No notice shall be
required of such pledge. At the appropriate Purchaser’s expense, the Company
will execute and deliver such reasonable documentation as a pledgee or secured
party of Securities may reasonably request in connection with a pledge or
transfer of the Securities, including, if the Securities are subject to
registration pursuant to the Registration Rights Agreement, the preparation and
filing of any required prospectus supplement under Rule 424(b)(3) under
the Securities Act or other applicable provision of the Securities Act to
appropriately amend the list of Selling Stockholders thereunder.

(c)       Certificates evidencing the Shares shall
not contain any legend (including the legend set forth in Section 4.1(b)),
(i) while a registration statement (including the Registration Statement)
covering the resale of such security is effective under the Securities Act, or (ii) following
any sale of such Shares pursuant to Rule 144, or (iii) if such Shares
are eligible for sale or are sold under Rule 144(k), or (iv) if such
legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the Staff of
the Commission). Promptly following effectiveness of a registration statement
contemplated under clause (i) of this Section 4.1(c), the
Company shall, or shall cause its counsel to, deliver to the Company’s transfer
agent written notice that such a registration statement is effective, and that
such Shares may be sold pursuant thereto by Purchasers without any legend.
In addition, in the case of clause (ii) of this Section 4.1(c),
the Company shall, if requested by its transfer agent, direct the Company’s
counsel to issue a legal opinion to such transfer agent to effect the removal
of the legend hereunder and, if required by the Company’s transfer agent, such
legal opinion need not be issued until the Company’s transfer agent has first
received a copy of the Purchaser’s broker representation letter relating to the
Purchaser’s Shares. The Company agrees that following the Effective Date or at
such time as such legend is no longer required under this Section 4.1(c), it will, no later than four Trading Days
following the delivery by a Purchaser to the Company or the Company’s transfer
agent of a certificate representing Shares with a restrictive legend (such
date, the “Legend Removal Date”),
direct the transfer agent to deliver to such Purchaser a certificate
representing such Securities that is free from all restrictive and other
legends. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section.

(d)       Each Purchaser, severally and not jointly
with the other Purchasers, agrees that the removal of the restrictive legend
from certificates representing Securities as set forth in this Section 4.1
is predicated upon (i) the Company’s reliance that the Purchaser will sell
any Shares pursuant to either the registration requirements of the Securities
Act, including any applicable prospectus delivery requirements, or an exemption
therefrom, and/or (ii) that in the context of a sale under Rule 144, if
requested by the Company’s transfer agent, the Purchaser shall have delivered
to the transfer agent a broker representation letter relating to the Purchaser’s
Shares.

 14
 

 

4.2       Furnishing of Information. As long
as any Purchaser owns the Securities, the Company covenants to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports, if any, required to be filed by the Company after the date
hereof pursuant to the Exchange Act and Pink Sheets, LLC. Upon the request of
any such holder of Securities, the Company shall deliver to such holder a
written certification of a duly authorized officer as to whether it has
complied with the preceding sentence unless such statement has been included in
the Company’s most recent report filed pursuant to Section 13 or Section 15(d) of
the Exchange Act. As long as any Purchaser owns Securities, if the Company is
not required to file reports pursuant to such laws, it will prepare and furnish
to the purchasers and make publicly available in accordance with Rule 144(c) such
information as is required for the purchasers to sell the Securities under Rule 144.
The Company further covenants that it will take such further action as any
holder of Securities may reasonably request to the extent required from
time to time to enable such Person to sell such Securities without registration
under the Securities Act within the limitation of the exemptions provided by Rule 144.

4.3       Integration. The Company shall not
sell, offer for sale or solicit offers to buy or otherwise negotiate in respect
of any security (as defined in Section 2 of the Securities Act) that would
be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers or
that would be integrated with the offer or sale of the Securities for purposes
of the rules and regulations of any Trading Market such that it would
require stockholder approval prior to the closing of such other transaction
unless stockholder approval is obtained before the closing of such subsequent
transaction.

4.4       [Intentionally Omitted.]

4.5       Rights to Purchase.

(a)       Right to Participate in Certain Sales
of Additional Securities. The Company agrees that it will not sell or
issue: (a) any shares of capital stock of the Company, (b) securities
convertible into or exercisable or exchangeable for capital stock of the
Company or (c) options, warrants or rights carrying any rights to purchase
capital stock of the Company (in each case, “Additional
Shares”), unless the Company first complies with all of the
provisions of this Section 4.5.

(b)       Participation Right. The Company
will not sell or issue any Additional Shares unless it first submits a written
notice to each Purchaser (each an “Applicable
Investor” and collectively “Applicable
Investors”), identifying the terms of the proposed sale (including
price, number or aggregate principal amount of securities and all other
material terms), and offers to each Applicable Investor the opportunity to
purchase its Pro Rata Allotment (as defined below) of the securities (subject
to increase for over-allotment in the discretion of the board of the Company if
some Applicable Investors do not fully exercise their rights) on terms and
conditions, including price, not less favorable than those on which the Company
proposes to sell such securities to a third party or parties. The Company’s
offer shall remain open and irrevocable for a period of 7 business days
following receipt by the Applicable Investors of such written notice.

(c)       Applicable Investor Acceptance.
Each Applicable Investor may elect to purchase the securities so offered
by giving written notice thereof to the Company within such 7 business day
period, including in such written notice the maximum number of shares of
capital stock or other securities of the Company that the Applicable Investor
wishes to purchase, including the number of such shares it would purchase if
one or more other Applicable Investors do not elect to purchase their
respective Pro Rata Allotments.

(d)       Calculation of Pro Rata Allotment.
Each Applicable Investor’s “Pro Rata
Allotment” of such securities shall be based on the ratio which the
number of shares of Common

 15
 

 

Stock owned by such
Applicable Investor on a fully-diluted basis bears to all of the issued and
outstanding Common Stock owned by all Stockholders on a fully-diluted basis as
of the date of such written offer. If one or more Applicable Investors do not
elect to purchase their respective Pro Rata Allotment, the Company shall
allocate such additional shares to third party purchasers or to each of the
electing Applicable Investors on a pro rata basis based upon the relative
holdings of shares of each of the electing Applicable Investors in the case of
over-subscription.

(e)       Sale to Third Party. Any
securities so offered that are not purchased by the Applicable Investors
pursuant to the offers set forth in Section 4.5(b) above, may be
sold by the Company at any time within 60 calendar days following the
termination of the 7 business day period described in Section 4.5(b),
but only on terms and conditions substantially identical (including price) to
the purchasers than those set forth in the notice to the Applicable Investors.

(f)        Assignment of Rights. Each
Applicable Investor shall have the right to assign its rights under this Section 4
to any permitted transferee,

4.6       Full-Ratchet Anti-Dilution. In the
event the Company sells Additional Shares for consideration per share less than
the consideration per share paid by Purchaser or convertible into shares of
Common Stock at a price per share less than the conversion price per share
granted to Purchaser (as adjusted for stock splits, stock dividends,
reclassifications, reorganizations or other similar transactions), then the
Company shall issue Purchaser, concurrently with such issue, the number of
shares of Common Stock to ensure that Purchaser has the number of shares that
it would have had if it purchased Common Stock in such subsequent offering at
such lower purchase price or lower the conversion price of Purchaser with
regard to the applicable security, if any, to the lowest price at which
Additional Shares are convertible into Common Stock.

4.7       Non-Public Information. The
Company covenants and agrees that neither it nor any other Person acting on its
behalf will provide any Purchaser or its agents or counsel with any information
that the Company believes constitutes material non-public information, unless
prior thereto such Purchaser shall have executed a written agreement regarding
the confidentiality and use of such information. The Company understands and
confirms that each Purchaser shall be relying on the foregoing representations
in effecting transactions in securities of the Company.

4.8       Use of Proceeds. The Company shall
use the net proceeds from the sale of the Securities hereunder for general
corporate purposes and working capital including the funding of new and
existing business initiatives.

4.9       Reimbursement. If any Purchaser
becomes involved in any capacity in any Proceeding by or against any Person who
is a stockholder of the Company (except as a result of sales, pledges, margin
sales and similar transactions by such Purchaser to or with any current
stockholder), solely as a result of such Purchaser’s acquisition of the
Securities under this Agreement, the Company will reimburse such Purchaser for
its reasonable legal and other expenses (including the cost of any
investigation preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred; provided, that the Company
shall only be required to reimburse any Purchaser pursuant to this Section 4.9
with respect to a Proceeding in which (i) the Proceeding primarily results
from the Company’s breach of the terms of this Agreement and (ii) the
Proceeding does not primarily result from any action in violation of the terms
of this Agreement or other wrongful acts by the Purchaser requesting
reimbursement. The reimbursement obligations of the Company under this
paragraph shall be in addition to any liability which the Company may otherwise
have, shall extend upon the same terms and conditions to any Affiliates of the
Purchasers who are actually named in such action, proceeding or investigation,
and partners, directors, agents, employees and controlling persons (if any), as
the case may be, of the Purchasers and any such Affiliate, and shall be
binding upon and inure to the benefit of any successors,

 16
 

 

assigns, heirs and
personal representatives of the Company, the Purchasers and any such Affiliate
and any such Person. The Company also agrees that neither the Purchasers nor
any such Affiliates, partners, directors, agents, employees or controlling
persons shall have any liability to the Company or any Person asserting claims
on behalf of or in right of the company solely as a result of acquiring the
Securities under this Agreement.

4.10     Reservation of Common Stock. As of
the Closing Date, the Company shall have reserved and the Company shall
continue to reserve and keep available at all times, free of preemptive rights,
a sufficient number of shares of Common Stock for the purpose of enabling the
Company to issue Shares pursuant to this Agreement and to issue Warrant Shares
pursuant to the Warrants.

ARTICLE V.

MISCELLANEOUS

5.1       Fees and Expenses. The Company
shall pay the fees and expenses of Purchaser and the Company and their
advisers, counsel, accountants and other experts, if any, and all other
expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. The Company shall pay
all stamp and other taxes and duties levied in connection with the sale of the
Securities.

5.2       Entire Agreement. The Transaction
Documents, together with the exhibits and schedules thereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with
respect to such matters, which the parties acknowledge have been merged into
such documents, exhibits and schedules.

5.3       Notices. Any and all notices or
other communications or deliveries required or permitted to be provided
hereunder shall be in writing and shall be deemed given and effective on the
earliest of (a) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number set forth on the signature pages attached
hereto prior to 6:30 p.m. (Chicago time) on a Trading Day or by email to
the email address set forth on the signature pages attached hereto if such
email is sent prior to 6:30 p.m. (Chicago time) on a Trading Day, (b) the
next Trading Day after the date of transmission or email, if such notice or
communication is delivered via facsimile at the facsimile number set forth on
the signature pages attached hereto or by email to the email address set
forth on the signature pages attached hereto on a day that is not a
Trading Day or later than 6:30 p.m. (Chicago time) on any Trading Day, (c) the
second Trading Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (d) upon actual receipt by the
party to whom such notice is required to be given. The address for such notices
and communications shall be as set forth on the Signature pages attached
hereto.

5.4       Amendments;
Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the
Company and the Purchasers or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought No waiver of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof,
nor shall any delay or omission of either party to exercise any right hereunder
in any manner Impair the exercise of any such right.

5.5       Construction. The headings herein
are for convenience only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any of the provisions hereof. The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict
construction will be applied against any party. This Agreement shall be
construed as if drafted jointly by the parties, and no presumption or burden of
proof shall arise favoring or disfavoring

 17
 

 

any party by virtue of
the authorship of any provisions of this Agreement or any of the Transaction
Documents.

5.6       Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of each Purchaser. Any Purchaser may assign any or all of its
rights under this Agreement in connection with a transfer of Common Stock
pursuant to Section 4.1(a) to any Person to whom such
Purchaser assigns or transfers any Securities, provided such transferee agrees
in writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the “Purchasers”.

5.7       No Third-Party Beneficiaries. This
Agreement is intended for the benefit of the parties hereto and their
respective successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except as otherwise set
forth in Section 4.9.

5.8       Governing Law. All questions
concerning the construction, validity, enforcement and interpretation of the
Transaction Documents shall be governed by and construed and enforced in
accordance with the internal laws of the State of Illinois, without regard to
the principles of conflicts of law thereof. Each party agrees that all legal
proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective affiliates,
directors, officers, stockholders, employees or agents) shall be commenced
exclusively in the state and federal courts sitting in the City of Illinois.
Each party hereto hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in the City of Chicago, Illinois for the
adjudication of any dispute hereunder or in connection herewith, or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is improper. Each party hereto
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of
delivery) to such party at the address in effect for notices to it under this
Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
Each party hereto (including its affiliates, agents, officers, directors and
employees) hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby. If either party shall commence an action or proceeding to enforce any
provisions of a Transaction Document, then the prevailing party in such action
or proceeding shall be reimbursed by the other party for its attorneys fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.

5.9       Survival. The representations,
warranties, agreements and covenants contained herein shall survive each
Closing and the delivery of the Securities.

5.10     Execution. This Agreement may be
executed in two or more counterparts, all of which when taken together shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party,
it being understood that both parties need not sign the same counterpart. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid and binding obligation of the party executing
(or on whose behalf such signature is executed) with the same force and effect
as if such facsimile signature page were an original thereof.

 18
 

 

5.11     Severability. If any provision of
this Agreement is held to be invalid or unenforceable in any respect, the
validity and enforceability of the remaining terms and provisions of this
Agreement shall not in any way be affected or impaired thereby and the parties
will attempt to agree upon a valid and enforceable provision that is a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.

5.12     Replacement of Securities. If any
certificate or instrument evidencing any Securities is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
customary and reasonable indemnity, if requested. The applicants for a new
certificate or instrument under such circumstances shall also pay any
reasonable third-party costs associated with the issuance of such replacement
Securities.

5.13     Remedies. In addition to being
entitled to exercise all rights provided herein or granted by law, including,
recovery of damages, each of the Purchasers and the Company will be entitled to
specific performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of obligations described in the foregoing sentence and
hereby agrees to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.

5.14     Independent Nature of Purchasers’
Obligations and Rights. The obligations of each Purchaser under any
Transaction Document are several and not joint with the obligations of any
other Purchaser, and no Purchaser shall be responsible in any way for the
performance of the obligations of any other Purchaser under any Transaction
Document. Nothing contained herein or in any Transaction Document, and no
action taken by any Purchaser pursuant thereto, shall be deemed to constitute
the Purchasers as a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Purchasers are in any way
acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Document. Each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose. Each
Purchaser has been represented by its own separate legal counsel in their review
and negotiation of the Transaction Documents. The Company has elected to
provide all Purchasers with the same terms and Transaction Documents for the
convenience of the Company and not because it was required or requested to do
so by the Purchasers.

ARTICLE VI.

CONDITIONS

6.1       Conditions to the Closing of the
Purchasers. Each Purchaser’s obligation to purchase the portion of the
Securities being issued at the Closing is subject to the satisfaction, or
waiver by such Purchaser, of the following conditions:

(a)       Representations and Warranties.
The representations and warranties of the Company set forth in this Agreement
shall be true and correct in all material respects (except for those qualified
as to materiality or a Material Adverse Effect, which shall be true and correct
in all respects) as of the date of this Agreement and as of the Closing Date
(except to the extent that such representation or warranty speaks of an earlier
date, in which case such representation or warranty shall be true and correct in
all material respects (or if qualified as to materiality or a Material Adverse
Effect, true and correct in all respects) as of such date) as though made on
and as of the Closing Date.

 19
 

 

(b)       Performance of Obligations of Company.
The Company shall have performed in all material respects all agreements and
covenants required to be performed by it under this Agreement on or prior to
the Closing Date.

6.2       Conditions to the Closing of the
Company. The Company’s obligation to issue and sell the portion of the Securities
being issued at the Closing is subject to the satisfaction, or waiver by the
Company, of the following conditions:

(a)       Representations and Warranties.
The representations and warranties of each Purchaser set forth in this
Agreement shall be true and correct in all material respect as of the date of
this Agreement and as of the Closing Date (except to the extent that such
representation or warranty speaks of an earlier date, in which case such
representation or warranty shall be true and correct in all material respects
as of such date) as though made on and as of the Closing Date.

(b)       Performance of Obligations of the
Purchasers. Each of the Purchasers shall have performed in all material
respects all agreements and covenants required to be performed by it under this
Agreement on or prior to the Closing Date.

[SIGNATURE PAGES FOLLOW]

 20
 

 

IN WITNESS
WHEREOF, the parties hereto have caused this Securities Purchase Agreement to
be duly executed by their respective authorized signatories as of the date
first indicated above.

	
   

  	
   

  	
   

  	
  NATIONAL STORM MANAGEMENT, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/
  Terry Kiefer

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Terry
  Kiefer

  
	
   

  	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  With copy to (which shall not constitute notice):

  	
  Address for Notice:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  999 N. Main Street

  	
   

  
	
   

  	
   

  	
  Suite 202

  	
   

  
	
   

  	
   

  	
  Glen Ellyn, IL 60137

  	
   

  
	
  Mark Noffke 

  999 N. Main Street 

  Suite 202 

  Glen Ellyn, IL 60137

  	
   

  	
   

  
								

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES FOR PURCHASERS FOLLOW]

 21
 

 

IN WITNESS
WHEREOF, the undersigned have caused this Securities Purchase Agreement to be
duly executed by their respective authorized signatories as of the date first
indicated above.

	
  NITE CAPITAL, L.P.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:  Manager

  
				

[SIGNATURE PAGE CONTINUED]

 22

 

Schedule A

LIST OF PURCHASERS

	
  Purchaser Name

  	
   

  	
  Address

  	
   

  	
  Subscription

  Amount

  	
   

  	
  Number of Units

  at Closing

  	
   

  
	
  Nite
  Capital, L.P.

  	
   

  	
  100 East Cook Avenue, Suite 201
  Libertyville, IL 60048

  	
   

  	
  $

  	
  150,000

  	
   

  	
  1,000,000

  	
   

  
									

 

 

Disclosure Schedule

National Storm Management, Inc

Securities Purchase Agreement

Nite Capital, L.P.

Schedule 3.1(j)
Litigation:

Pinnacle Roofing
Contractors, Inc -

On December 13, 2004
potential name dispute, although litigation has been threaten by Pinnacle
Roofing Contractors, Inc no litigation has been filed. Furthermore the parties
had been actively engaged in settlement negotiations and appear to close to
reaching a mutually agreeable resolution. However, discussion have ceased for
over six months.

TB & Associates
-

On September 19,
2005 the Company relieved its long term payable obligation with TB & Associates through the issuances of
6,000,000 shares. The agreement was originally entered on June 1, 2001
within The Company’s KSMS - Missouri LLC affiliate. These shares of common
stock were issued without any restriction, in reliance upon TB &
Associates outside counsel. The Company believes that the issuance of these
shares without restrictions, and the subsequent sale by the recipient, have
sufficient documentation to support the Company’s actions as promulgated under rule 144(a)(k)
of the Securities Act of 1933. To date, there has not been any action by any
regulatory enforcement agency questioning this transaction for a possible
violation under federal and slate securities laws. Therefore, it is not
determinable if a liability exists for this security issuance. Given the
material nature of shares issued the Company believes that this must be
disclosed.

U.S. Securities and
Exchange Commission (SEC) non- public fact finding inquiry- On September 22,
2005 the Company along with several other Micro Cap Companies received a
request for documents surrounding the creation of the public shell company by
the Company’s former owners used in the reverse merger transaction on February 24,
2005 with National Storm Management Services, Inc. and the Company
formerly named “18th letter Inc.” The SEC has not ruled on this
manner and The Company believes all documents in the creation of the shell were
appropriately applied and will withstand any further inquiry.

This combination of
National Storm Management, Inc. (formerly 18th letter Inc) and National
Storm Management Services, Inc. was treated as a recapitalization of
National Storm Management Services, Inc. and all equity transactions have
been revised to reflect the recapitalization. As a result of the merger, the
shareholders of National Storm Management Services, Inc. received
approximately 85% of the then issued and outstanding common stock of the
Company on a fully diluted basis, which resulted in National Storm Management
Services, Inc. being treated as the accounting acquirer and thus the
operations and the financial statements of National Storm Management Services, Inc.
prior to the merger have become those of the Company. In connection with the
merger, the Company changed its name to National Storm Management, Inc.

 1
 

 

General Manners -

The Company is involved
in certain litigation arising in the normal course of business. In the opinion
of management, the ultimate resolution of such pending litigation would not
materially affect its financial condition or results of operations.

Schedule 3.1(t)
Transactions with Affiliates and Employees:

EXECUTIVE COMPENSATION

The following
compensation table sets forth all cash compensation paid by the Company to its
executive officers and directors for the past two completed fiscal years:

Summary
Compensation Table

	
  Name and

  	
   

  	
   

  	
   

  	
  Annual

  Compensation

  	
   

  	
   

  	
   

  	
  Long Term

  Compensation

  	
   

  	
   

  	
   

  
	
  Principal

  Position

  	
   

  	
  Year

  	
   

  	
  Salary

  	
   

  	
  Bonus

  	
   

  	
  Securities

  Stock Options

  	
   

  	
  All Other

  Compensation

  	
   

  
	
  Terry Kiefer

  	
   

  	
  2003

  	
   

  	
  $

  	
  107,000

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
  32,315

  	
   

  
	
  President, CEO

  	
   

  	
  2004

  	
   

  	
  $

  	
  111,100

  	
   

  	
  $

  	
  6,000

  	
   

  	
   

  	
   

  	
  $

  	
  100,946

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Don Humphrey

  	
   

  	
  2003

  	
   

  	
  $

  	
  91,000

  	
   

  	
  $

  	
  37,390

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Vice President

  	
   

  	
  2004

  	
   

  	
  $

  	
  109,000

  	
   

  	
  $

  	
  71,000

  	
   

  	
  5,000,000

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Mark Noffke

  	
   

  	
  2003

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CFO

  	
   

  	
  2004

  	
   

  	
  $

  	
  63,808

  	
   

  	
  $

  	
  2,000

  	
   

  	
  2,000,000

  	
   

  	
  $

  	
  330

  	
   

  

Stock Options and
Long Term Incentive Plans

The Company has extended
the option to purchase Eighteen Million (18,000,000) Common shares of the
Company at a price of $0.001 per share to employees in various management
positions (see “Security Ownership of Certain Beneficial Owners and Management”).

The Company does not
currently have Long Term Incentive Plans in place however, management plans to
implement such plans for its employees in the future.

 2
 

 

EMPLOYMENT AGREEMENTS AND FUTURE EXECUTIVE
COMPENSATION

The Company does not
currently maintain employment agreements with its officers and directors. The
company intends to pay its Executives and Directors salaries, wages, or fees
commensurate with experience and industry standards in relationship to the
future success of the Company.

 3

 

Exhibit A

FORM OF
REGISTRATION RIGHTS AGREEMENTExhibit 4.4

THIS
NOTE HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS.

	
  No. 1

  	
   

  	
  Original Issue
  Date: July 24, 2006

  
	
  Holder:

  	
   

  	
  John Fife

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
  303 East Wacker Drive

  
	
   

  	
   

  	
  Suite 301

  
	
   

  	
   

  	
  Chicago, IL 60601

  

ORIGINAL
ISSUE DISCOUNT SECURED NOTE

THIS Note is one
of a duly authorized issue of Notes of NATIONAL STORM MANAGEMENT, INC., a
Nevada corporation, having a principal place of business at 999 North Main
Street, Suite 202, Glen Ellyn, IL 60137 (the “Company”), designated as
its Note (the “Note”) in an aggregate face amount of up to One Million
Six Hundred and Fifty Thousand and 00/100 Dollars ($1,650,000.00), as adjusted
pursuant to Schedule A hereto (the “Maturity Amount”).  The Note shall be due upon the earlier of (i)
the effective date of a Company registration statement on Form SB-2; (ii)
February 14, 2007, or (iii) an event of default, as defined below, but in no
event other than an event of default shall the Note be due prior to October 31,
2006 (“Maturity Date”).

FOR VALUE
RECEIVED, the Company promises to pay the Maturity Amount to the Holder or
registered assigns on the Maturity Date. Upon an event of default the Maturity
Amount, as determined as of the date of payment by Schedule A hereto, shall
bear interest at the rate of 18% per annum from the day such interest is due
hereunder through and including the date of payment. The principal of, and
interest on, this Note are payable in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts, at the address of the Holder last appearing on the
Note Register.

This Note is
subject to the following additional provisions:

Section 1.               The Notes are exchangeable for an
equal aggregate principal amount of Notes of different authorized
denominations, as requested by the Holder surrendering the same but shall not
be issuable in denominations of less than integral multiples of Twenty Thousand
Dollars ($20,000) unless such amount represents the full principal balance of
Notes outstanding to such Holder.  No service
charge will be made for such registration of transfer or exchange.

Section 2.               Transfer of Note.

(a)           The Holder, by acceptance hereof,
agrees to give written notice to the Company before transferring this Note;
such notice will describe briefly the proposed transfer and will give the
Company the name, address, and tax identification number of the proposed
transferee, and will further provide the Company with an opinion of the Holder’s
counsel that such transfer can be accomplished in accordance with federal and
applicable state securities laws (unless such transaction is permitted by the
plan of distribution in an effective Registration Statement).  Promptly upon receiving such written notice,
the Company shall present copies thereof to the Company’s counsel.

 

(i)            If in the opinion of such counsel
the proposed transfer may be effected without registration or qualification
(under any federal or state securities laws), the Company, as promptly as
practicable, shall notify the Holder of such opinion, whereupon the Holder
shall be entitled to transfer this Note or to dispose of Underlying Shares
received upon the previous conversion of this Note, all in accordance with the
terms of the notice delivered by the Holder to the Company; provided that an
appropriate legend may be endorsed on this Note respecting restrictions upon
transfer thereof necessary or advisable in the opinion of counsel and
satisfactory to the Company to prevent further transfers which would be in
violation of Section 5 of the Securities Act and applicable state securities
laws; and provided further that the prospective transferee or purchaser shall
execute such documents and make such representations, warranties, and
agreements as may be required solely to comply with the exemptions relied upon
by the Company for the transfer or disposition of the Note.

(ii)           If in the opinion of the counsel
referred to in this Section 2, the proposed transfer or disposition of this
Note described in the written notice given pursuant to this Section 2 may not be
effected without registration or qualification of this Note, the Company shall
promptly give written notice thereof to the Holder, and the Holder will limit
its activities in respect to such as, in the opinion of such counsel, are
permitted by law.

(b)           Prior to transfer of this Note in
compliance with this Section 2, the Company and any agent of the Company may
treat the person in whose name this Note is duly registered on the Note
Register as the owner hereof for the purpose of receiving payment as herein
provided and for all other purposes, whether or not this Note is overdue, and
neither the Company nor any such agent shall be affected by notice to the
contrary.

Section 3.               Events of Default.

“Event of
Default” wherever used herein, means any one of the following events
(whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of
any court, or any order, rule or regulation of any administrative or
governmental body):

(i)            any default in the payment of the
principal of, interest on, or other obligations in respect of, this Note, free
of any claim of subordination, as and when the same shall become due and
payable, (whether on the Maturity Date or by acceleration or otherwise), and
said default in payment is not cured within five (5) business days; or

(ii)           the Company or any Pledgor shall fail
to observe or perform any other covenant, agreement or warranty contained in,
or otherwise commit any breach of, this Note or the Stock Pledge Agreement,
including but not limited to the obligation of the Pledgor to issue additional
Collateral, and such failure or breach shall not have been remedied within 10
days after the date on which notice of such failure or breach shall have been
given; or

(iii)          the Company shall commence a voluntary
case under the United States Bankruptcy Code or insolvency laws as now or
hereafter in effect or any successor thereto (the “Bankruptcy Code”); or
an involuntary case is commenced against the Company under the Bankruptcy Code
and the petition is not controverted within 30 days, or is not dismissed within
60 days, after commencement of such involuntary case; or a “custodian” (as
defined in the Bankruptcy Code) is appointed for, or takes charge of, all or
any substantial part of the property of the Company or the Company commences
any other proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Company or
there is commenced against the Company any such proceeding which remains
undismissed for a period of 60 days; or the Company is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any

 

such case or
proceeding is entered; or the Company suffers any appointment of any custodian
or the like for it or any substantial part of its property which continues
undischarged or unstayed for a period of 60 days; or the Company makes a
general assignment for the benefit of creditors; or the Company shall fail to
pay, or shall state that it is unable to pay its debts generally as they become
due; the Company shall call a meeting of all of its creditors with a view to
arranging a composition or adjustment of its debts; or the Company shall by any
act or failure to act indicate its consent to, approval of or acquiescence in
any of the foregoing; or any corporate or other action is taken by the Company
for the purpose of effecting any of the foregoing; or

(iv)          the Company shall default in any of
its obligations under any mortgage, credit agreement or other facility,
indenture, agreement or other instrument under which there may be issued, or by
which there may be secured or evidenced any indebtedness of the Company in an
amount exceeding $750,000.00, whether such indebtedness now exists or shall
hereafter be created and such default shall result in such indebtedness
becoming or being declared due and payable prior to the date on which it would
otherwise become due and payable; or

(v)           the Company shall be a party to any
Change of Control Transaction (as defined in Section 6), shall sell or dispose
of all or in excess of 49% of its assets (based on book value calculation as
reflected in the Company’s most recent financial statements) in one or more
transactions (whether or not such sale would constitute a Change of Control
Transaction); or

(vi)          the Company shall have its Common
Stock suspended or delisted from trading for in excess of three (3) Trading
Days; or

(vii)         the Company shall fail to become
required to file periodic reports pursuant to Section 13 or 15(d) Securities
Exchange Act of 1934 by October 15, 2006, and shall thereafter fail to file any
reports required by Section 13 or 15(d) of the Exchange Act in a timely manner;
or

(viii)        a determination by the U.S. Securities
and Exchange Commission or National Association of Securities Dealers that the
Company has violated U.S. Securities Laws; or

(ix)           the representations and warranties of
the Company and Guarantor are not true and correct in all material respects as
of the date when made and as of the Closing Date as though made at that time,
except for representations and warranties that are expressly made as of a
particular date, which shall be true and correct in all material respects as of
such date; or

(x)            an action, suit or proceeding in the
ordinary course of business is commenced against the Company seeking damages in
an amount against which the Company is not insured exceeding $500,000.

(xi)           an action, suit or proceeding not in
the ordinary course of business is commenced against the Company seeking
damages in an amount against which the Company is not insured exceeding
$500,000.

Section 4.               Interest Rate Limitation.
The parties intend to conform strictly to the applicable usury laws in effect
from time to time during the term of the Loan. Accordingly, if any transaction
contemplated hereby would be usurious under such laws, then notwithstanding any
other provision hereof: (i) the aggregate of all interest that is contracted
for, charged, or received under this Agreement or under any other Loan Document
shall not exceed the maximum amount of interest allowed by applicable law (the “Highest
Lawful Rate”), and any excess shall be promptly credited to Borrower by Lender
(or, to the extent that such consideration shall have been paid, such excess
shall be promptly refunded to Borrower by Lender); (ii) neither Borrower nor
any other Person now or hereafter liable hereunder shall be obligated to pay
the

 

amount of such
interest to the extent that it is in excess of the Highest Lawful Rate; and
(iii) the effective rate of interest shall be reduced to the Highest Lawful
Rate. All sums paid, or agreed to be paid, to Lender for the use, forbearance, and
detention of the debt of Borrower to Lender shall, to the extent permitted by
applicable law, be allocated throughout the full term of the Note until payment
is made in full so that the actual rate of interest does not exceed the Highest
Lawful Rate in effect at any particular time during the full term thereof. If
at any time the rate of interest under the Note exceeds the Highest Lawful
Rate, the rate of interest to accrue pursuant to this Agreement shall be
limited, notwithstanding anything to the contrary in this Agreement, to the
Highest Lawful Rate, but any subsequent reductions in the Base Rate shall not
reduce the interest to accrue pursuant to this Agreement below the Highest
Lawful Rate until the total amount of interest accrued equals the amount of
interest that would have accrued if a varying rate per annum equal to the
interest rate under the Note had at all times been in effect. If the total
amount of interest paid or accrued pursuant to this Agreement under the
foregoing provisions is less than the total amount of interest that would have
accrued if a varying rate per annum equal to the interest rate under the Note
had been in effect, then Borrower agrees to pay to Lender an amount equal to
the difference between (x) the lesser of (A) the amount of interest that would
have accrued if the Highest Lawful Rate had at all times been in effect, or (B)
the amount of interest that would have accrued if a varying rate per annum
equal to the interest rate under the Note had at all times been in effect, and
(y) the amount of interest accrued in accordance with the other provisions of
this Agreement.

Section 5.               Prepayment.

(a)           The Company shall have the right to
prepay this Note in whole or in part thereon prior to the Maturity Date.

(b)           The Company shall give at least five
(5)  business days, but not more than ten
(10) business days, written notice of any intention to prepay this Note prior
to the Maturity Date to the Holder which notice shall specify the “Prepayment
Date”.

Section 6.               Definitions.  For the purposes hereof, the following terms
shall have the following meanings:

“Business Day”
means any day except Saturday, Sunday and any day which shall be a legal
holiday or a day on which banking institutions in the State of New York are
authorized or required by law or other government action to close.

“Change of
Control Transaction” means the occurrence of any of (i) an acquisition
after the date hereof by an individual or legal entity or “group” (as described
in Rule 13d-5(b)(1) promulgated under the Exchange Act) of in excess of 49% of
the voting securities of the Company coupled with a replacement of more than
one-half of the members of the Company’s board of directors which is not
approved by those individuals who are members of the board of directors on the
date hereof in one or a series of related transactions, or (ii) the merger of
the Company with or into another entity, consolidation or sale of all or
substantially all of the assets of the Company in one or a series of related
transactions, unless following such transaction, the holders of the Company’s
securities continue to hold at least 40% of such securities following such
transaction. The execution by the Company of an agreement to which the Company
is a party or by which it is bound providing for any of the events set forth
above in (i) or (ii) does not constitute the occurrence of the event until
after the event in fact occurs.

Section 7.               Except as expressly provided
herein, no provision of this Note shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of, interest
and liquidated damages (if any) on, this Note at the time, place, and rate, and
in the coin or  currency, herein
prescribed.  This Note is a direct
obligation of the Company.

 

Section 8.               If this Note shall be mutilated,
lost, stolen or destroyed, the Company shall execute and deliver, in exchange
and substitution for and upon cancellation of a mutilated Note, or in lieu of
or in substitution for a lost, stolen or destroyed Note, a new Note for the
principal amount of this Note so mutilated, lost, stolen or destroyed but only
upon receipt of evidence of such loss, theft or destruction of such Note, and
of the ownership hereof, and indemnity, if requested, all reasonably satisfactory
to the Company.

Section 9.               Choice of Law and Venue;
Submission to Jurisdiction; Service of Process.

(a)           THE VALIDITY OF THIS NOTE, ITS
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES
HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CHOICE OF LAW
PRINCIPLES THEREOF). THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING
IN CONNECTION WITH THIS NOTE SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND
FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK OR, AT THE
SOLE OPTION OF HOLDER, IN ANY OTHER COURT IN WHICH HOLDER SHALL INITIATE LEGAL
OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER
IN CONTROVERSY.

(b)           COMPANY HEREBY SUBMITS FOR ITSELF AND
IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, TO THE JURISDICTION
OF THE AFORESAID COURTS AND WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE
LAW, ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO
OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS
SECTION.

(c)           COMPANY HEREBY WAIVES PERSONAL
SERVICE OF THE SUMMONS, COMPLAINT, OR OTHER PROCESS ISSUED IN ANY ACTION OR
PROCEEDING AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT, OR OTHER PROCESS
MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO COMPANY.

(d)           NOTHING IN THIS AGREEMENT SHALL BE
DEEMED OR OPERATE TO AFFECT THE RIGHT OF 
HOLDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR
TO PRECLUDE THE ENFORCEMENT BY HOLDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH
FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY
OTHER APPROPRIATE FORUM OR JURISDICTION.

(e)                                  To
the extent determined by such court, the Company shall reimburse the Holder for
any reasonable legal fees and disbursements incurred by the Holder in
enforcement of or protection of any of its rights under any of this Note.

Section 10.             Any waiver by the Company or the
Holder of a breach of any provision of this Note shall not operate as or be
construed to be a waiver of any other breach of such provision or of any breach
of any other provision of this Note.  The
failure of the Company or the Holder to insist upon strict adherence to any
term of this Note on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Note.  Any waiver must be in writing.

Section 11.              If any provision of this Note is
invalid, illegal or unenforceable, the balance of this Note shall remain in
effect, and if any provision is inapplicable to any person or circumstance, it
shall nevertheless remain applicable to all other persons and circumstances.

 

Section 12.             Whenever any payment or other
obligation hereunder shall be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day (or, if such next
succeeding Business Day falls in the next calendar month, the preceding
Business Day in the appropriate calendar month).

Section 13.             Security.  The obligation of the Company for payment of
principal, interest and all other sums hereunder, in the event of a default and
failure of the Company to perform hereunder, is secured by the pledge of
certain securities (the “Pledged Shares”) by Terry Kiefer as Pledgor
under the terms and conditions of a Stock Pledge Agreement, and a Guaranty
executed and delivered by such Pledgor.

Section 14.             Lock-Up. Except as provided
below, as long as any portion of the Note remains outstanding, the Company’s
Chief Executive Officer, Terry Kiefer, shall not sell, pledge, hypothecate,
transfer or otherwise dispose of or encumber any portion of the Company’s
common stock owned by him, or engage in any short sale or other derivative or
hedging transaction with respect to the Company’s common stock. Notwithstanding
the foregoing, Mr. Kiefer may sell (i) up to one (1%) percent of the total
number of the outstanding shares of the Company’s common stock during every
ninety (90) day period commencing on the effective date of a registration
statement, and (ii) up to four (4%) percent of the total number of the
outstanding shares of the Company’s common stock during each such ninety (90)
day period at a price equal to or greater than fifty ($0.50) cents per share.

Terry Kiefer has pledged
2,000,000 shares of the Borrower’s common stock to secure a note issued by the
Borrower  to Equities First Holdings, LLC
on April 4, 2006.  The Holder hereby
acknowledges having received a copy of said note and any related documents.

Section 15.             Payment of Legal Fees. The
Company shall pay legal fees and expenses incurred by the Holder in connection
with negotiating and entering into the Note in an amount not to exceed Six
Thousand ($6,000) Dollars.

Section 16.             Waiver of Jury Trial.

THE COMPANY HEREBY
WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS NOTE . COMPANY REPRESENTS THAT EACH HAS
REVIEWED THIS WAIVER AND KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY
OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

IN
WITNESS WHEREOF, the Company has caused this instrument to be
duly executed by an officer duly authorized for such purpose, as of the date
first above indicated.

	
   

  	
  NATIONAL STORM
  MANAGEMENT, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Terry Kiefer

  	
   

  
	
   

  	
  Name:

  	
  Terry Kiefer

  	
   

  
	
   

  	
  Title:

  	
  Chief Executive Officer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Mark Noffke

  	
   

  	
   

  	
   

  	
   

  
	
  Name: Mark Noffke

  	
   

  	
   

  	
   

  	
   

  

 

 

SCHEDULE
A

	
  Registration Statement Effective Date

  	
   

  	
  Maturity Amount

  	
   

  	
  Original Issue Discount

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Prior to October
  31, 2006

  	
   

  	
  $

  	
  1,350,000

  	
   

  	
  25.92

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Following
  October 31, 2006 but on or prior to November 15, 2006

  	
   

  	
  $

  	
  1,400,000

  	
   

  	
  28.57

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Following
  November 15, 2006 but on or prior to November 30, 2006

  	
   

  	
  $

  	
  1,450,000

  	
   

  	
  31.03

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Following
  November 30, 2006 but on or prior to December 15, 2006

  	
   

  	
  $

  	
  1,500,000

  	
   

  	
  33.33

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Following
  December 15, 2006 but on or prior to January 15, 2007

  	
   

  	
  $

  	
  1,550,000

  	
   

  	
  35.45

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Following
  January 15, 2007 but on or prior to February 15, 2007

  	
   

  	
  $

  	
  1,600,000

  	
   

  	
  37.50

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Following February 15,
  2007

  	
   

  	
  $

  	
  1,650,000

  	
   

  	
  39.39

  	
  %

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00113-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00113-of-00352.parquet"}]]