Document:

Exhibit 4.4

THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO SWEET SUCCESS ENTERPRISES, INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.

	
  

  	
   

  	
  Right to Purchase          
  shares of Common Stock of Sweet Success Enterprises, Inc. (subject to
  adjustment as provided herein)

  

 

FORM OF
CLASS A, CLASS B AND FINDER’S

COMMON STOCK PURCHASE WARRANT

	
  No. 2006-001

  	
   

  	
  Issue Date: August      ,
  2006

  

 

SWEET SUCCESS ENTERPRISES, INC., a corporation
organized under the laws of the State of Nevada (the “Company”), hereby
certifies that, for value received,                                        ,
                                                                                       ,
or its assigns (the “Holder”), is entitled, subject to the terms set forth
below, to purchase from the Company at any time after the Issue Date until 5:00
p.m., E.S.T on the fifth anniversary of the Actual Effective Date (as defined
in Section 11.1(iv) of the Subscription Agreement) (the “Expiration Date”),             
fully paid and nonassessable shares of Common Stock at a per share purchase
price of $          [$1.00 for Class A and Finder’s Warrants, $1.25 for Class B Warrants].  The aforedescribed purchase price per share,
as adjusted from time to time as herein provided, is referred to herein as the “Purchase
Price.”  The number and character of such
shares of Common Stock and the Purchase Price are subject to adjustment as
provided herein.  The Company may reduce
the Purchase Price without the consent of the Holder.  Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in that certain Subscription
Agreement (the “Subscription Agreement”),
dated August     , 2006, entered into by the Company and
Holders.

As
used herein the following terms, unless the context otherwise requires, have
the following respective meanings:

(a)                                  The term “Company”
shall mean Sweet Success Enterprises, Inc. and any corporation which shall
succeed or assume the obligations of Sweet Success Enterprises, Inc. hereunder.

(b)                                 The term “Common
Stock” includes (a) the Company’s common stock, $0.0001 par value per
share, as authorized on the date of the Subscription Agreement, and (b) any Other
Securities into which or for which any of the securities described in
(a) may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.

(c)                                  The term “Other
Securities” refers to any stock (other than Common Stock) and other securities
of the Company or any other person (corporate or otherwise) which the holder of
the Warrant at any time shall be entitled to receive, or shall have received,
on the exercise of the Warrant, in lieu of or in addition to Common Stock, or
which at any time shall be issuable or shall have been issued in exchange for
or in replacement of Common Stock or Other Securities pursuant to
Section 5 or otherwise.

(d)                                 The term “Warrant
Shares” shall mean the Common Stock issuable upon exercise of this Warrant.

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1.                                       Exercise of
Warrant.

1.1.                              Number of
Shares Issuable upon Exercise.  From and after the Issue Date through and
including the Expiration Date, the Holder hereof shall be entitled to receive,
upon exercise of this Warrant in whole in accordance with the terms of
subsection 1.2 or upon exercise of this Warrant in part in accordance with
subsection 1.3, Common Stock of the Company, subject to adjustment
pursuant to Section 4.

1.2.                              Full Exercise.  This Warrant may be exercised in full by the
Holder hereof by delivery of an original or facsimile copy of the form of
subscription attached as Exhibit A hereto (the “Subscription Form”) duly
executed by such Holder and surrender of the original Warrant within four (4)
days of exercise, to the Company at its principal office or at the office of
its Warrant Agent (as provided hereinafter), accompanied by payment, in cash,
wire transfer or by certified or official bank check payable to the order of
the Company, in the amount obtained by multiplying the number of shares of
Common Stock for which this Warrant is then exercisable by the Purchase Price
then in effect.

1.3.                              Partial
Exercise.  This
Warrant may be exercised in part (but not for a fractional share) by surrender
of this Warrant in the manner and at the place provided in subsection 1.2
except that the amount payable by the Holder on such partial exercise shall be
the amount obtained by multiplying (a) the number of whole shares of
Common Stock designated by the Holder in the Subscription Form by (b) the
Purchase Price then in effect.  On any
such partial exercise, the Company, at its expense, will forthwith issue and
deliver to or upon the order of the Holder hereof a new Warrant of like tenor,
in the name of the Holder hereof or as such Holder (upon payment by such Holder
of any applicable transfer taxes) may request, the whole number of shares of
Common Stock for which such Warrant may still be exercised for the balance of.

1.4.                              Fair Market
Value. Fair Market Value of a share of Common Stock as of a particular date
(the “Determination Date”) shall mean:

(a)                                  If the Company’s
Common Stock is traded on an exchange or is quoted on the National Association
of Securities Dealers, Inc. Automated Quotation (“NASDAQ”), National Market
System, the NASDAQ Capital Market or the American Stock Exchange, LLC, then the
closing or last sale price, respectively, reported for the last business day
immediately preceding the Determination Date;

(b)                                 If the Company’s
Common Stock is not traded on an exchange or on the NASDAQ National Market
System, the NASDAQ Capital Market or the American Stock Exchange, Inc., but is
traded in the over-the-counter market, then the average of the closing bid and
ask prices reported for the last business day immediately preceding the
Determination Date;

(c)                                  Except as
provided in clause (d) below, if the Company’s Common Stock is not
publicly traded, then as the Holder and the Company agree, or in the absence of
such an agreement, by arbitration in accordance with the rules then standing of
the American Arbitration Association, before a single arbitrator to be chosen
from a panel of persons qualified by education and training to pass on the
matter to be decided; or

(d)                                 If the
Determination Date is the date of a liquidation, dissolution or winding up, or
any event deemed to be a liquidation, dissolution or winding up pursuant to the
Company’s charter, then all amounts to be payable per share to holders of the
Common Stock pursuant to the charter in the event of such liquidation,
dissolution or winding up, plus all other amounts to be payable per share in
respect of the Common Stock in liquidation under the charter, assuming for the
purposes of this clause (d) that all of the shares of Common Stock then
issuable upon exercise of all of the Warrants are outstanding at the
Determination Date.

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1.5.                              Company
Acknowledgment. The Company will, at the time of the exercise of
the Warrant, upon the request of the Holder hereof acknowledge in writing its
continuing obligation to afford to such Holder any rights to which such Holder
shall continue to be entitled after such exercise in accordance with the
provisions of this Warrant. If the Holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to
afford to such Holder any such rights.

1.6.                              Trustee for
Warrant Holders. In the event that a qualified bank or trust
company shall have been appointed as trustee for the Holder of the Warrants
pursuant to Subsection 3.2, such bank or trust company shall have all the
powers and duties of a warrant agent (as hereinafter described) and shall
accept, in its own name for the account of the Company or such successor person
as may be entitled thereto, all amounts otherwise payable to the Company or
such successor, as the case may be, on exercise of this Warrant pursuant to
this Section 1.

1.7.                              Delivery of
Stock Certificates, etc. on Exercise. The Company agrees that
the shares of Common Stock purchased upon exercise of this Warrant shall be
deemed to be issued to the Holder hereof as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within four
(4) business days thereafter (“Warrant Share Delivery Date”), the Company at
its expense (including the payment by it of any applicable issue taxes) will
cause to be issued in the name of and delivered to the Holder hereof, or as
such Holder (upon payment by such Holder of any applicable transfer taxes) may
direct in compliance with applicable securities laws, a certificate or
certificates for the number of duly and validly issued, fully paid and
nonassessable shares of Common Stock (or Other Securities) to which such Holder
shall be entitled on such exercise, plus, in lieu of any fractional share to
which such Holder would otherwise be entitled, cash equal to such fraction multiplied
by the then Fair Market Value of one full share of Common Stock, together with
any other stock or other securities and property (including cash, where
applicable) to which such Holder is entitled upon such exercise pursuant to
Section 1 or otherwise.  The Company
understands that a delay in the delivery of the Warrant Shares after the
Warrant Share Delivery Date could result in economic loss to the Holder.  As compensation to the Holder for such loss,
the Company agrees to pay (as liquidated damages and not as a penalty) to the
Holder for late issuance of Warrant Shares upon exercise of this Warrant the
amount of $100 per business day after the Warrant Share Delivery Date for each
$10,000 of Purchase Price of Warrant Shares for which this Warrant is exercised
which are not timely delivered.  The
Company shall pay any payments incurred under this Section in immediately
available funds upon demand. 
Furthermore, in addition to any other remedies which may be available to
the Holder, in the event that the Company fails for any reason to effect
delivery of the Warrant Shares by the Warrant Share Delivery Date, the Holder
may revoke all or part of the relevant Warrant exercise by delivery of a notice
to such effect to the Company whereupon the Company and the Holder shall each
be restored to their respective positions immediately prior to the exercise of
the relevant portion of this Warrant, except that the liquidated damages
described above shall be payable through the date notice of revocation or rescission
is given to the Company.

2.                                       Cashless
Exercise.

(a)                                  Except as
described below, if a Registration Statement (as defined in the Subscription
Agreement) (“Registration Statement”) is effective and the Holder may sell its
shares of Common Stock upon exercise hereof pursuant to the Registration
Statement, this Warrant may be exercisable in whole or in part for cash only as
set forth in Section 1 above.  If no such
Registration Statement is available during the time that such Registration
Statement is required to be effective pursuant to the terms of the Subscription
Agreement, then commencing one year after the Issue Date, payment upon exercise
may be made at the option of the Holder either in (i) cash, wire transfer
or by certified or official bank check payable to the order of the Company
equal to the applicable aggregate Purchase Price, (ii) by cashless exercise in
accordance with Section (b) below or (iii) by a combination of
any of the foregoing methods, for the number of shares of Common Stock
specified in such form (as such exercise

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number shall be adjusted to reflect any adjustment in the total number
of shares of Common Stock issuable to the Holder per the terms of this Warrant)
and the Holder shall thereupon be entitled to receive the number of duly authorized,
validly issued, fully-paid and non-assessable shares of Common Stock (or Other
Securities) determined as provided herein.

(b)                                 If the Fair
Market Value of one share of Common Stock is greater than the Purchase Price
(at the date of calculation as set forth below), in lieu of exercising this
Warrant for cash, the Holder may elect to receive shares equal to the value (as
determined below) of this Warrant (or the portion thereof being cancelled) by
surrender of this Warrant at the principal office of the Company together with
the properly endorsed Subscription Form in which event the Company shall issue
to the Holder a number of shares of Common Stock computed using the following
formula:

X=Y
(A-B)

A

Where            X=                                the number of
shares of Common Stock to be issued to the holder

Y=                                 the number of
shares of Common Stock purchasable under the Warrant or, if only a portion of
the Warrant is being exercised, the portion of the Warrant being exercised (at
the date of such calculation)

A=                               the average of
the closing sale prices of the Common Stock for the five (5) Trading Days
immediately prior to (but not including) the Exercise Date

B=                                 Purchase Price
(as adjusted to the date of such calculation)

(c)                                  The Holder may
employ the cashless exercise feature described in Section (b) above only during
the pendency of a Non-Registration Event as described in Section 11 of the
Subscription Agreement.

For
purposes of Rule 144 promulgated under the 1933 Act, it is intended, understood
and acknowledged that the Warrant Shares issued in a cashless exercise
transaction shall be deemed to have been acquired by the Holder, and the
holding period for the Warrant Shares shall be deemed to have commenced, on the
date this Warrant was originally issued pursuant to the Subscription Agreement.

3.                                       Adjustment for
Reorganization, Consolidation, Merger, etc.

3.1.                              Reorganization,
Consolidation, Merger, etc.  In case at any time or from time to time, the
Company shall (a) effect a reorganization, (b) consolidate with or
merge into any other person or (c) transfer all or substantially all of
its properties or assets to any other person under any plan or arrangement
contemplating the dissolution of the Company, then, in each such case, as a
condition to the consummation of such a transaction, proper and adequate
provision shall be made by the Company whereby the Holder of this Warrant, on
the exercise hereof as provided in Section 1, at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and
property (including cash) to which such Holder would have been entitled upon
such consummation or in connection with such dissolution, as the case may be,
if such Holder had so exercised this Warrant, immediately prior thereto, all
subject to further adjustment thereafter as provided in Section 4.

3.2.                              Dissolution.  In the event of any dissolution of the
Company following the transfer of all or substantially all of its properties or
assets, the Company, prior to such dissolution, shall at its expense deliver or
cause to be delivered the stock and other securities and property (including
cash,

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where applicable) receivable in accordance with Section 3.1 by the
Holder upon their exercise after the effective date of such dissolution
pursuant to this Section 3 to a bank or trust company (a “Trustee”) having
its principal office in New York, NY, as trustee for the Holder.

3.3.                              Continuation of
Terms.  Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 3, this Warrant shall continue in full force
and effect and the terms hereof shall be applicable to the Other Securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any Other Securities, including, in the case of any
such transfer, the person acquiring all or substantially all of the properties
or assets of the Company, whether or not such person shall have expressly
assumed the terms of this Warrant as provided in Section 4.  In the event this Warrant does not continue
in full force and effect after the consummation of the transaction described in
this Section 3, then only in such event will the Company’s securities and
property (including cash, where applicable) receivable by the Holder of the
Warrants be delivered to the Trustee as contemplated by Section 3.2.

3.4                                 Share Issuance.  Until the Expiration Date, if the Company
shall issue any Common Stock except for the Excepted Issuances (as defined in
the Subscription Agreement), prior to the complete exercise of this Warrant for
a consideration less than the Purchase Price that would be in effect at the
time of such issue, then, and thereafter successively upon each such issue, the
Purchase Price shall be reduced to such other lower purchase price.  For purposes of this adjustment, the issuance
of any security or debt instrument of the Company carrying the right to convert
such security or debt instrument into Common Stock or of any warrant, right or
option to purchase Common Stock shall result in an adjustment to the Purchase
Price upon the issuance of the above-described security, debt instrument,
warrant, right, or option if such issuance is at a price lower than the
Purchase Price in effect upon such issuance. 
The reduction of the Purchase Price described in this Section 3.4 is
subject to the provisions of, and in addition to the other rights of the Holder
described in, the Subscription Agreement.

4.                                       Extraordinary
Events Regarding Common Stock.  In the event that the Company shall
(a) issue additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the
Common Stock into a smaller number of shares of the Common Stock, then, in each
such event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after such event, and
the product so obtained shall thereafter be the Purchase Price then in effect.
The Purchase Price, as so adjusted, shall be readjusted in the same manner upon
the happening of any successive event or events described herein in this
Section 4. The number of shares of Common Stock that the Holder of this
Warrant shall thereafter, on the exercise hereof as provided in Section 1,
be entitled to receive shall be adjusted to a number determined by multiplying
the number of shares of Common Stock that would otherwise (but for the
provisions of this Section 4) be issuable on such exercise by a fraction
of which (a) the numerator is the Purchase Price that would otherwise (but
for the provisions of this Section 4) be in effect, and (b) the
denominator is the Purchase Price in effect on the date of such exercise.

5.                                       Certificate as
to Adjustments.  In each
case of any adjustment or readjustment in the shares of Common Stock issuable
on the exercise of the Warrants, the Company at its expense will promptly cause
its Chief Financial Officer or other appropriate designee to compute such
adjustment or readjustment in accordance with the terms of the Warrant and
prepare a certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based,
including a statement of (a) the consideration received or receivable by
the Company for any additional shares of Common Stock issued or sold or deemed
to have been issued or sold, (b) the number

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of shares of Common Stock outstanding or deemed to be outstanding, and
(c) the Purchase Price and the number of shares of Common Stock to be
received upon exercise of this Warrant, in effect immediately prior to such
adjustment or readjustment and as adjusted or readjusted as provided in this
Warrant. The Company will forthwith mail a copy of each such certificate to the
Holder of the Warrant and any Warrant Agent of the Company (appointed pursuant
to Section 11 hereof).

6.                                       Reservation of
Stock, etc. Issuable on Exercise of Warrant; Financial Statements.   The Company will at all times reserve and
keep available, solely for issuance and delivery on the exercise of the
Warrants, all shares of Common Stock from time to time issuable on the exercise
of the Warrant.  This Warrant entitles
the Holder hereof to receive copies of all financial and other information
distributed or required to be distributed to the holders of the Company’s
Common Stock.

7.                                       Assignment;
Exchange of Warrant.  Subject to
compliance with applicable securities laws, this Warrant, and the rights
evidenced hereby, may be transferred by any registered holder hereof (a “Transferor”).
On the surrender for exchange of this Warrant, with the Transferor’s
endorsement in the form of Exhibit B attached hereto (the “Transferor
Endorsement Form”) and together with an opinion of counsel reasonably
satisfactory to the Company that the transfer of this Warrant will be in
compliance with applicable securities laws, the Company at its expense, twice,
only, but with payment by the Transferor of any applicable transfer taxes, will
issue and deliver to or on the order of the Transferor thereof a new Warrant or
Warrants of like tenor, in the name of the Transferor and/or the transferee(s)
specified in such Transferor Endorsement Form (each a “Transferee”), calling in
the aggregate on the face or faces thereof for the number of shares of Common
Stock called for on the face or faces of the Warrant so surrendered by the
Transferor.  No such transfers shall
result in a public distribution of the Warrant.

8.                                       Replacement of
Warrant.  On receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction of this Warrant, on delivery of an indemnity agreement or security
reasonably satisfactory in form and amount to the Company or, in the case of
any such mutilation, on surrender and cancellation of this Warrant, the Company
at its expense, twice only, will execute and deliver, in lieu thereof, a new
Warrant of like tenor.

9.                                       Registration
Rights.  The Holder of this Warrant has
been granted certain registration rights by the Company.  These registration rights are set forth in
the Subscription Agreement.  The terms of
the Subscription Agreement are incorporated herein by this reference.

10.                                 Maximum
Exercise.  The Holder
shall not be entitled to exercise this Warrant on an exercise date, in
connection with that number of shares of Common Stock which would be in excess
of the sum of (i) the number of shares of Common Stock beneficially owned
by the Holder and its affiliates on an exercise date, and (ii) the number
of shares of Common Stock issuable upon the exercise of this Warrant with
respect to which the determination of this limitation is being made on an
exercise date, which would result in beneficial ownership by the Holder and its
affiliates of more than 4.99% of the outstanding shares of Common Stock on such
date.  For the purposes of the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and
Regulation 13d-3 thereunder.  Subject to
the foregoing, the Holder shall not be limited to aggregate exercises which
would result in the issuance of more than 4.99%.  The restriction described in this
paragraph may be waived, in whole or in part, upon sixty-one (61) days
prior notice from the Holder to the Company to increase such percentage to up
to 9.99%, but not in excess of 9.99%.  The
Holder may decide whether to convert a Convertible Note or exercise this
Warrant to achieve an actual 4.99% or up to 9.99% ownership position as
described above, but not in excess of 9.99%.

11.                                 Warrant Agent.  The Company may, by written notice to the Holder
of the Warrant, appoint an agent (a “Warrant Agent”) for the purpose of issuing
Common Stock on the exercise of this

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Warrant pursuant to Section 1, exchanging this Warrant pursuant to
Section 7, and replacing this Warrant pursuant to Section 8, or any
of the foregoing, and thereafter any such issuance, exchange or replacement, as
the case may be, shall be made at such office by such Warrant Agent.

12.                                 Transfer on the
Company’s Books.  Until this
Warrant is transferred on the books of the Company, the Company may treat the
registered holder hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.

13.                                 Warrant Exercise Compensation.   The
Company has agreed to pay to the Finder identified on Schedule 8 to the Subscription
Agreement (“Finder”) Warrant Exercise Compensation as described in the
Subscription Agreement equal to ten percent (10%) of the cash proceeds payable
to the Company upon exercise of the Warrant. 
The Warrant Exercise Compensation will be paid by the Company to the
Finder not later than the fifth (5th) business day
after the Company receives cash proceeds from the exercise of this
Warrant.  The Holder of the Warrant has
no obligation or responsibility to pay Warrant Exercise Compensation.  [THIS PARAGRAPH WILL BE
RESERVED IN THE FINDER’S WARRANT.]

14.                                 Notices.   All notices, demands,
requests, consents, approvals, and other communications required or permitted
hereunder shall be in writing and, unless otherwise specified herein, shall be
(i) personally served, (ii) deposited in the mail, registered or certified,
return receipt requested, postage prepaid, (iii) delivered by reputable air
courier service with charges prepaid, or (iv) transmitted by hand delivery,
telegram, or facsimile, addressed as set forth below or to such other address
as such party shall have specified most recently by written notice.  Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand
delivery or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is
to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur or (c)
three business days after deposited in the mail if delivered pursuant to
subsection (ii) above.  The addresses for
such communications shall be: (i) if to the Company to: Sweet Success
Enterprises, Inc., 1250 NE Loop 410, Suite 630, San Antonio, TX 78209, Attn:
William J. Gallagher, CEO, telecopier: (210) 824-3398, with a copy by
telecopier only to: Law Office of Gary A. Agron, 5445 DTC Parkway, Suite 520,
Greenwood Village, CO 80111-3009, telecopier: (303) 770-7257, (ii) if to the
Holder, to the addresses and telecopier number set forth in the first paragraph
of this Warrant, with an additional copy by telecopier only to: Grushko &
Mittman, P.C., 551 Fifth Avenue, Suite 1601, New York, New York 10176, telecopier
number: (212) 697-3575, and (iii) if to the Finder: to the address and
telecopier number set forth on Schedule 8 to the Subscription Agreement.

15.                                 Miscellaneous.  This
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought. This Warrant shall
be construed and enforced in accordance with and governed by the laws of New
York.  Any dispute relating to this
Warrant shall be adjudicated in New York County in the State of New York.  The headings in this Warrant are for purposes
of reference only, and shall not limit or otherwise affect any of the terms
hereof.  The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.

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IN
WITNESS WHEREOF, the Company has executed this Warrant as of the date first
written above. 

	
  

  	
   

  	
  SWEET SUCCESS ENTERPRISES, INC. 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
   

  
	
   

  	
   

  	
   

  	
  Name: 

  
	
  Witness:

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
					

 

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Exhibit A

FORM OF SUBSCRIPTION

(to be signed only on exercise of Warrant)

TO:  Sweet Success Enterprises,
Inc.

The
undersigned, pursuant to the provisions set forth in the attached Warrant (No.      ),
hereby irrevocably elects to purchase (check applicable box):

o                                                
shares of the Common Stock covered by such Warrant; or

o                                    the maximum
number of shares of Common Stock covered by such Warrant pursuant to the cashless
exercise procedure set forth in Section 2.

The
undersigned herewith makes payment of the full purchase price for such shares
at the price per share provided for in such Warrant, which is $               .  Such payment takes the form of (check
applicable box or boxes):

o                                    $               
in lawful money of the United States; and/or

o                                    the
cancellation of the Warrant to the extent necessary, in accordance with the
formula set forth in Section 2, to exercise this Warrant with respect to
the maximum number of shares of Common Stock purchasable pursuant to the
cashless exercise procedure set forth in Section 2.

The undersigned requests that the certificates for
such shares be issued in the name of, and delivered to                                                                               
whose address is                                                                                                                                                                                                                                                                

Number
of Shares of Common Stock Beneficially Owned on the date of exercise: Less than
five percent (5%) of the outstanding Common Stock of Sweet Success Enterprises,
Inc.

The
undersigned represents and warrants that the representations and warranties in
Section 4 of the Subscription Agreement (as defined in this Warrant) are true
and accurate with respect to the undersigned on the date hereof.

The
undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Warrant
shall be made pursuant to registration of the Common Stock under the Securities
Act of 1933, as amended (the “Securities Act”), or pursuant to an exemption
from registration under the Securities Act.

	
  Dated:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature must conform to name of holder as

  specified on the face of the Warrant)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Address)

  

 

 

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Exhibit B

FORM OF TRANSFEROR ENDORSEMENT

(To be signed only on transfer of Warrant)

For
value received, the undersigned hereby sells, assigns, and transfers unto the
person(s) named below under the heading “Transferees” the right represented by
the within Warrant to purchase the percentage and number of shares of Common
Stock of Sweet Success Enterprises, Inc. to which the within Warrant relates
specified under the headings “Percentage Transferred” and “Number Transferred,”
respectively, opposite the name(s) of such person(s) and appoints each such
person Attorney to transfer its respective right on the books of Sweet Success
Enterprises, Inc. with full power of substitution in the premises.

	
  Transferees

  	
   

  	
  Percentage Transferred

  	
   

  	
  Number Transferred

  	
   

  
	
      

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
      

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature must conform to name of holder as
  specified 

  
	
   

  	
   

  	
  on the face of the warrant) 

  
	
   

  	
   

  	
   

  
	
  Signed in the presence of: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Name)

  	
   

  	
   

  
	
   

  	
   

  	
  (address)

  
	
   

  	
   

  	
   

  
	
  ACCEPTED AND AGREED:

  	
   

  	
   

  
	
  [TRANSFEREE] 

  	
   

  	
   

  
	
   

  	
   

  	
  (address)

  
	
   

  	
   

  	
   

  
	
  (Name)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).

 

2

 

“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.

 

3

 

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

 

4

 

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),

 

5

 

(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

 

6

 

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

 

7

 

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,

 

8

 

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

 

9

 

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 AGREEMENT

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