Exhibit 10.1
 
SECURITIES PURCHASE AGREEMENT
 
This Securities Purchase Agreement (this “Agreement”) is dated as of May 7,
2007, among WHO’S YOUR DADDY, INC., a Nevada corporation (the “Company”), and
each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser” and collectively the “Purchasers”).
 
WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Sections 3(a)(9) and 4(2) of the Securities Act (as defined herein)
and Rule 506 promulgated thereunder, the Company desires to issue and sell to
each Purchaser, and each Purchaser, severally but not jointly, desires to
purchase from the Company certain securities of the Company, as more fully
described in this Agreement.
 
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. With respect to a
Purchaser, any investment fund or managed account that is managed on a
discretionary basis by the same investment manager as such Purchaser will be
deemed to be an Affiliate of such Purchaser.
 
“Closing” means the closing of the transaction pursuant to Section 2.1 and 2.2.
 
“Closing Date” means the Trading Day when all of the Transaction Documents have
been executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Purchasers’ obligations to pay the Subscription
Amount and (ii) the Company’s obligations to deliver the Securities have been
satisfied or waived.
 
“Commission” means the Securities and Exchange Commission.
 
“Common Stock” means the common stock of the Company, par value $0.001 per
share, and any securities into which such common stock may hereafter be
reclassified.
 
“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.
 
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“Company Counsel” means Solomon Warde Seidenwurm & Smith, LLP.
 
“Disclosure Schedules” means the Disclosure Schedules of the Company delivered
concurrently herewith.
 
“Effective Date” means the date that the Registration Statement is first
declared effective by the Commission.
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to
employees, officers or directors of the Company pursuant to any stock or option
plan duly adopted by a majority of the non-employee members of the Board of
Directors of the Company or a majority of the members of a committee of
non-employee directors established for such purpose, (b) securities upon the
exercise of or conversion of any securities issued hereunder, convertible
securities, options or warrants issued and outstanding on the date of this
Agreement, provided that such securities have not been amended since the date of
this Agreement to increase the number of such securities, and (c) securities
issued pursuant to acquisitions or strategic transactions, provided any such
issuance shall only be to a Person which is, itself or through its subsidiaries,
an operating company in a business synergistic with the business of the Company
and in which the Company receives benefits in addition to the investment of
funds, but shall not include a transaction in which the Company is issuing
securities primarily for the purpose of raising capital or to an entity whose
primary business is investing in securities.
 
“Intellectual Property Rights” shall have the meaning ascribed to such term in
Section 3.1(o).
 
“JB” means Joel Bernstein, attorney-at-law with an office located at 2666
Tigertail Ave., Suite 104, Miami, FL 33133.
 
“Knowledge” means the actual, personal and present knowledge of the executive
officers of the Company and such knowledge as a reasonable person charged with
the duties and responsibilities of such person would reasonably be deemed to
have.
 
“Liens” means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
 
“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(m).
 
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“Option” means the option granted to the Purchasers to purchase shares of Common
Stock in Section 2.3.
 
“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.
 
“Pro Rata Portion” shall mean the ratio of (x) the Subscription Amount of
Securities purchased by a participating Purchaser and (y) the sum of the
aggregate Subscription Amount of all participating Purchasers.
 
“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
 
“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.
 
“Required Approvals” shall have the meaning ascribed to such term in Section
3.1(e).
 
“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).
 
“Securities” means the 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, including the shares issuable or issued upon
exercise of the Option.
 
“Subscription Amount” means, as to each Purchaser, the amounts set forth below
such Purchaser’s signature block on the signature page hereto, in United States
dollars and in immediately available funds.
 
“Subsidiary” shall mean the subsidiaries of the Company, if any, set forth on
Schedule 3.1(a).
 
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“Trading Day” means a day on which the Common Stock is traded on a Trading
Market.
 
“Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: over-the-counter
market, the American Stock Exchange, the New York Stock Exchange, the Nasdaq
Stock Market.
 
“Transaction Documents” means this Agreement, the Registration Rights Agreement
and any other documents or agreements executed in connection with the
transactions contemplated hereunder.
 
ARTICLE II.
PURCHASE AND SALE
 
2.1    Subject to the terms and conditions contained herein, Company shall
assign and Purchasers shall assume the rights and obligation of Company under
the Securities Repurchase Agreement (the “Repurchase Agreement”) dated as of
April 3, 2007 by and among the Company and AJW Partners, LLC, AJW Qualified
Partners, LLC, AJW Offshore, Ltd. and New Millennium Partners II, LLC (the
“Sellers”), a true and correct copy of which is filed as Exhibit 2.1 to
Company’s Current Report on Form 8-K filed with the Securities and Exchange
Commission on April 13, 2007, to purchase from the Sellers $1,750,000 in secured
promissory notes issued by the Company (the “Notes”) and warrants to purchase
876,170 shares of the Company’s Common Stock (the “Warrants”) and to pay to the
Sellers $1,000,000, 1,000,000 shares of Company’s restricted Common Stock (which
restricted shares will be delivered to the Company Counsel for delivery to the
Sellers) and 1,000,000 shares of Company’s Common Stock as set forth of Schedule
I hereto. The Company shall be responsible for all other obligations under the
Repurchase Agreement.
 
2.2    Subject to the terms and conditions contained herein, the Company shall
issue to the Purchasers 4,500,000 shares of Company Common Stock in exchange for
the Notes and Warrants being acquired by the Purchasers pursuant to the
Repurchase Agreement as set forth of Schedule I hereto.
 
2.3    Subject to the terms and conditions contained herein, and as set forth on
Schedule I hereto, the Purchasers shall have the option to acquire up to
2,000,000 shares of the Company’s unregistered Common Stock from the Company
(the “Option”) for $.50 per share (the “Option Price”) from time to time within
60 days following the Closing herein. The Option shall be exercised by written
notice directed to the President of the Company, at the Company's principal
place of business, accompanied by check in payment of the Option Price for the
number of shares specified. The Company shall deliver a certificate representing
such shares within five (5) business days after receipt of such notice and
payment for such shares. In the event of any change in the outstanding shares of
Common Stock of the Company by reason of any stock dividend, stock split,
combination or exchange of shares, recapitalization, reclassification, merger,
consolidation, reorganization, or other similar transactions (the "Capital
Adjustments"), appropriate adjustments in the number and purchase price of
shares covered by this Option shall be made.
 
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2.4    Closing. On the Closing Date, (a) each Purchaser shall purchase from the
Sellers severally and not jointly with the other Purchasers, the Notes and
Warrants and shall deliver to the Sellers their pro rata portion of the cash and
Company Common Stock required to be paid to the Sellers pursuant to the
Repurchase Agreement as set forth on Schedule I, and (b) each Purchaser shall
exchange the Notes and Warrants purchased from the Sellers as set forth in this
Section 2.4 for the shares of the Company Common Stock pursuant to Section 2.2.
Upon satisfaction of each of the conditions set forth in Section 2.6, the
Closing shall occur.
 
2.5    Deliveries.
 
(a)    On or before the Closing Date, the Company shall deliver or cause to be
delivered to the Purchasers the following:
 
(i)    this Agreement duly executed by the Company;
 
(ii)   certificates for 4,500,000 shares of Company Common Stock registered as
set forth in Schedule I hereto;
 
(iii)   the Registration Rights Agreement, duly executed by the Company;
 
(iv)   a legal opinion of Company Counsel, in agreed form and addressed to the
Purchasers; and
 
(v)    evidence of the insurance policy referred to in Section 4.15.
 
(b)    On or before the Closing Date, the Purchasers shall deliver or cause to
be delivered the following:
 
(i)    this Agreement duly executed by such Purchaser;
 
(ii)    $1,000,000 by wire transfer to the Sellers pursuant to the Repurchase
Agreement;
 
(iii)   1,000,000 shares of Company Common Stock required to be transferred to
the Sellers pursuant to the Repurchase Agreement.
 
(iv)   1,000,000 restricted shares of Company Common Stock shall be delivered to
the Company Counsel for reissue and delivery to the Sellers; and
 
(v)    the Registration Rights Agreement duly executed by such Purchaser.
 
2.6    Closing Conditions. 
 
(a)    The obligations of the Company hereunder in connection with the Closing
are subject to the following conditions being met:
 
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(i)    the accuracy in all material respects when made and on the Closing Date
of the representations and warranties of the Purchasers contained herein;
 
(ii)    all obligations, covenants and agreements of the Purchasers required to
be performed at or prior to the Closing Date shall have been performed; and
 
(iii)    the delivery by the Purchasers of the items set forth in Section 2.5(b)
of this Agreement.
 
(b)    The respective obligations of the Purchasers hereunder in connection with
the Closing are subject to the following conditions being met:
 
(i)    the accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained herein;
 
(ii)    all obligations, covenants and agreements of the Company required to be
performed at or prior to the Closing Date shall have been performed;
 
(iii)    the delivery by the Company of the items set forth in Section 2.5(a) of
this Agreement;
 
(iv)    the delivery by the Sellers of the Notes and Warrants pursuant to the
Repurchase Agreement;
 
(v)    there shall have been no Material Adverse Effect with respect to the
Company since the date hereof;
 
(vi)    From the date hereof to the Closing Date, trading in the Common Stock
shall not have been suspended by the Commission (except for any suspension of
trading of limited duration agreed to by the Company, which suspension shall be
terminated prior to the Closing), and, at any time prior to the Closing Date,
trading in securities generally as reported by Bloomberg Financial Markets shall
not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such service, or on any
Trading Market, nor shall a banking moratorium have been declared either by the
United States or New York State authorities nor shall there have occurred any
material outbreak or escalation of hostilities or other national or
international calamity of such magnitude in its effect on, or any material
adverse change in, any financial market which, in each case, in the reasonable
judgment of each Purchaser, makes it impracticable or inadvisable to purchase
the Shares at the Closing; and
 
(vii)    Purchasers shall have received confirmation from the Company’s Chief
Executive Officer and President that the executive compensation matters set
forth in Section 4.17 have been agreed upon and are effective.
 
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES
 
3.1    Representations and Warranties of the Company. Except as set forth under
the corresponding section of the Disclosure Schedules, which Disclosure
Schedules shall be deemed a part hereof, the Company hereby makes the
representations and warranties set forth below to each Purchaser (which
representations and warranties are supplemented by the Company’s SEC Reports, as
defined in Section 3.1(h), below, copies of which have been provided to the
Purchaser):
 
(a)    Subsidiaries. All of the direct and indirect subsidiaries of the Company
are set forth on Schedule 3.1(a). For the purpose of this Agreement, a
“Subsidiary” means (i) a corporation or other entity whose shares of stock or
other ownership interests having ordinary voting power (other than stock or
other ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the directors of such corporation, or other
persons or entites performing similar functions for such person or entity, are
owned, directly or indirectly, by such person or entity, or (ii) a corporation
or other entity in which such person or entity owns, directly or indirectly,
more than 50% of the equity interests at such time.  
 
(b)    Organization and Qualification. Each of the Company and the Subsidiaries
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 currently
conducted. Neither the Company nor any Subsidiary is in violation or default 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 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, could not have or reasonably be expected to result
in (i) a material adverse effect on the legality, validity or enforceability of
any Transaction Document, (ii) a material adverse effect on the results of
operations, assets, business, prospects or financial condition of the Company
and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on
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”) and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.
 
(c)    Authorization; Enforcement. The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
each of the Transaction Documents and otherwise to carry out its obligations
thereunder. The execution and delivery of each of the Transaction Documents 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 in connection therewith other than
in connection with the Required Approvals (as defined below). Each Transaction
Document 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, and (ii) as limited by
general principles of equity that restrict the availability of equitable or
legal remedies.
 
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(d)    No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company, the issuance and sale of the Shares and the
consummation by the Company of the other 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, or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, result in the creation of any Lien upon any of the properties or
assets of the Company or any Subsidiary, 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, or
(iii) subject to the Required Approvals (defined below) and to the Company’s
Knowledge, conflict with or result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations), or by which any
property or asset of the Company or a Subsidiary is bound or affected; except in
the case of each of clauses (ii) and (iii), such as would not result in a
Material Adverse Effect.
 
(e)    Filings, Consents and Approvals. The Company is not required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other than
(i) filings required pursuant to Section 4.4 of this Agreement, (ii) the filing
with the Commission of the Registration Statement, and (iii) the filing of Form
D with the Commission and such filings as are required to be made under
applicable state securities laws (collectively, the “Required Approvals”).
 
(f)    Issuance of the Shares. The Shares are 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
imposed by the Company other than restrictions on transfer provided for in the
Transaction Documents. The Company has reserved from its duly authorized capital
stock the maximum number of shares of Common Stock issuable pursuant to this
Agreement and the Option.
 
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(g)    Capitalization. On the date of this Agreement, the authorized capital
stock of the Company consists of an aggregate of 100,000,000 shares of common
stock, $0.001 par value (“Common Stock”), of which 23,264,208 shares are issued
and outstanding, and 20,000,000 shares of preferred stock, $.001 par value
(“Preferred Stock”) of which 2,000,000 are issued and outstanding. Other than
Around the Clock Partners, LP, 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 a result
of the purchase and sale of the Securities, as disclosed in the SEC Reports and
as set forth on Schedule 3.1(g), 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 Purchasers) 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. All of the outstanding shares of
capital stock of the Company are validly issued, fully paid and nonassessable,
and to the Company’s Knowledge have been issued in compliance with all federal
and state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities. No further approval or authorization of any stockholder,
the Board of Directors of the Company or others is required for the issuance and
sale of the Shares. Except as disclosed in the SEC Reports, there are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to
the Knowledge of the Company, between or among any of the Company’s
stockholders.
 
(h)    SEC Reports; Financial Statements. The Company has filed all reports
required to be filed by it under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law to file such material) (the foregoing materials, including the exhibits
thereto, being collectively referred to herein as the “SEC Reports”). As of
their respective dates, the SEC Reports 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 comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing and such financial statements have
been prepared in accordance with United States 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.
 
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(i)    Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports, (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 not
required to be reflected in the Company's financial statements pursuant to GAAP
or 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 stock option plans. The Company does not have pending before the
Commission any request for confidential treatment of information.
 
(j)    Litigation. There is no action, suit, inquiry, notice of violation,
proceeding or investigation 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) except as disclosed in the SEC Reports, could, if there
were an unfavorable decision, have or reasonably be expected to result in a
Material Adverse Effect. Neither the Company nor any Subsidiary, nor any
director, officer or employee 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 are no actions, claims or
investigations pending, or to the Knowledge of any of the Company’s officers,
threatened, which relate to (a) employment discrimination, age discrimination,
sex discrimination and/or sexual harassment; (b) unpaid wages; (c) wrongful
discharge, retaliation or breach of any alleged employment or other contracts;
or (d) claims based on any tort, such as invasion of privacy, defamation, fraud
and infliction of emotional distress by any of the Company, any Subsidiary or
any of their current or former employees, officers or managers which could, if
there were an unfavorable decision, have or reasonably be expected to result in
a Material Adverse Effect. To the Company’s Knowledge, there is no basis for
bringing any such action, claim or investigation. 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.
 
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(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
which could reasonably be expected to result in a Material Adverse Effect.
 
(l)    Compliance. Except as set forth in the SEC Reports, 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,
would 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 indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any of
its properties is bound (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) 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 applicable to its business except in each
case as could not have a Material Adverse Effect. The Company has performed all
procedures and complies with all statutes and regulations imposed by any agency
or instrumentality of any governmental body relative to manufacture and sale of
its products including all "labeling" as contemplated by the Federal Food, Drug
and Cosmetic Act, as amended, and any other applicable law, rule and regulation.
The Company’s packaging complies which any applicable recycling laws and the
Company is in compliance with any recycling requirements.
 
(m)    Regulatory Permits. Except as set forth on Schedule 3.1(m), 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, except where the failure to possess such permits could 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.
 
(n)    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 the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens disclosed in the SEC Reports and Liens that do not
materially affect the value of such property and do not materially interfere
with the use made and proposed to be made of such property by the Company and
the Subsidiaries and Liens for the payment of federal, state or other taxes, the
payment of which is neither delinquent nor subject to penalties. Any real
property and facilities held under lease by the Company and the Subsidiaries are
held by them under valid, subsisting and enforceable leases of which the Company
and the Subsidiaries are in compliance.
 
(o)    Patents and Trademarks. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights necessary or material for use in connection with their respective
businesses as described in the SEC Reports and which the failure to so have
could have a Material Adverse Effect (collectively, the “Intellectual Property
Rights”). Neither the Company nor any Subsidiary has received a written notice
that the Intellectual Property Rights as presently used by the Company or any
Subsidiary violates or infringes upon the rights of any Person. 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 of others.
 
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(p)    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. To the best of Company’s Knowledge, such insurance
contracts and policies are accurate and complete. 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.
 
(q)    Transactions With Affiliates and Employees. Except as set forth in the
SEC Reports, 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), 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 $60,000 other than (i) for payment of salary
or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) for other employee benefits,
including stock option agreements under any stock option plan of the Company.
 
(r)    Sarbanes-Oxley; Internal Accounting Controls. To the Company’s Knowledge,
it is in material compliance with all provisions of the Sarbanes-Oxley Act of
2002 which are applicable to it as of the Closing Date. The Company and the
Subsidiaries maintain 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 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. The Company has established disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
Company and designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its Subsidiaries, is
made known to the certifying officers by others within those entities,
particularly during the period in which the Company's most recently filed
periodic report under the Exchange Act, as the case may be, is being prepared.
The Company's certifying officers have evaluated the effectiveness of the
Company's controls and procedures as of the date prior to the filing date of the
most recently filed periodic report under the Exchange Act (such date, the
“Evaluation Date”). The Company presented in its most recently filed periodic
report under the Exchange Act the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there have
been no significant changes in the Company's internal controls (as such term is
defined in Item 307(b) of Regulation S-K under the Exchange Act) or, to the
Company's Knowledge, in other factors that could significantly affect the
Company's internal controls.
 
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(s)    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.
 
(t)    Private Placement. Assuming the accuracy of the Purchasers
representations and warranties set forth in Section 3.2, no registration under
the Securities Act is required for the offer and sale of the Securities by the
Company to the Purchasers as contemplated hereby. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of the
Trading Market.
 
(u)    Investment Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Shares, will not be or be an
Affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended. The Company shall conduct its business in a
manner so that it will not become subject to the Investment Company Act.
 
(v)    Registration Rights. Except for the Sellers pursuant to the Repurchase
Agreement and as disclosed in Section 3.1(v), no Person has any right to cause
the Company to effect the registration under the Securities Act of any
securities of the Company and the Company has not agreed to do so.
 
(w)    Listing and Maintenance Requirements. The Company’s Common Stock is
registered pursuant to Section 12(g) of the Exchange Act, and the Company has
taken no action designed to, or which to its Knowledge is likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act nor has the Company received any notification that the Commission is
contemplating terminating such registration. The Company has not, in the 12
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.
 
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(x)    Application of Takeover Protections. To the best of the Company’s
Knowledge, the Company and its Board of Directors have taken all necessary
action, if any, in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company's
Certificate of Incorporation (or similar charter documents) or the laws of its
state of incorporation or any other state that is or could become applicable to
the Purchasers as a result of the Purchasers and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including without limitation the Company's issuance of the Securities and the
Purchasers’ ownership of the Securities.
 
(y)    Full Disclosure. Each of the Company and each of its Subsidiaries has
provided the Purchaser with its SEC Reports which contain all information
requested by the Purchaser in connection with its decision to purchase the
Shares. Neither this Agreement, the Transaction Documents, the schedules hereto
and thereto nor any other document delivered by the Company or any of its
Subsidiaries to the Purchaser or its attorneys or agents in connection herewith
or therewith or with the transactions contemplated hereby or thereby, as
qualified by the statements of the Company in its SEC Reports, contain any
untrue statement of a material fact nor omit to state a material fact necessary
in order to make the statements contained herein or therein, in light of the
circumstances in which they are made, not misleading.
 
(z)    No Integrated Offering. Assuming the accuracy of the Purchasers’
representations and warranties set forth in Section 3.2 and to the Company’s
Knowledge, neither the Company, nor any of its affiliates, nor any Person acting
on its or their behalf has, directly or indirectly, made any offers or sales of
any security or solicited any offers to buy any security, under circumstances
that would cause this offering of the Securities to be integrated with prior
offerings by the Company for purposes of the Securities Act or any applicable
shareholder approval provisions, including, without limitation, under the rules
and regulations of any exchange or automated quotation system on which any of
the securities of the Company are listed or designated.
 
(aa)    Solvency. Based on the financial condition of the Company as of the
Closing Date after giving effect to the receipt by the Company of the proceeds
from the sale of the Securities hereunder, (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).
 
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(bb)    Taxes. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary has filed all necessary federal, state
and foreign income and franchise tax returns and has paid or accrued all taxes
shown as due thereon, and the Company has no Knowledge of a tax deficiency which
has been asserted or threatened against the Company or any Subsidiary.
 
(cc)    General Solicitation. Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Shares by any form of
general solicitation or general advertising. The Company has offered the
Securities for sale only to the Purchasers.
 
(dd)    Foreign Corrupt Practices. Neither the Company, nor to the Knowledge of
the Company, any agent or other person acting on behalf of the Company, has (i)
directly or indirectly, used any corrupt funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law, or (iv) violated in
any material respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended.
 
(ee)    Accountants. The Company’s accountants are Baum & Company, P.A. Such
firm is a registered public accounting firm as required by the Securities Act.
Such firm has not advised the Company of any matters which must be disclosed
under Item 304(a)(1)(iv)(B) of Commission Regulation S-B.
 
(ff)    Acknowledgment Regarding Purchasers’ Purchase of Shares. 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 the Transaction Documents
and the transactions contemplated hereby. The Company further acknowledges that
no Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by any Purchaser or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to the Purchasers’
purchase of the Shares. The Company further represents to each Purchaser that
the Company’s decision to enter into this Agreement has been based solely on the
independent evaluation of the transactions contemplated hereby by the Company
and its representatives.
 
(gg)    Conduct of Business. The Company manufactures, distributes and sells
“King of Energy™” drinks as set for in its SEC Reports and press releases issued
prior to the date hereof concerning such business and has entered into the
distribution agreements as described in such SEC Reports and press releases.
 
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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 full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the 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 have been duly authorized by all necessary corporate or similar
action on the part of such Purchaser. Each Transaction Document to which it is a
party has been duly executed by such Purchaser, and when delivered by such
Purchaser in accordance with the terms hereof, will constitute the valid and
legally binding obligation of such Purchaser, enforceable against it in
accordance with its terms, except (i) as limited by general equitable principles
and 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) insofar as
indemnification and contribution provisions may be limited by applicable law.
 
(b)    Investment Intent. Such Purchaser understands that the Shares, Notes and
Warrants are “restricted securities” and have not been registered under the
Securities Act or any applicable state securities law and 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, has no present
intention of distributing any of such Securities and has no arrangement or
understanding with any other persons regarding the distribution of such
Securities (this representation and warranty not limiting such Purchaser’s right
to sell the Securities pursuant to the Registration Statement or otherwise in
compliance with applicable federal and state securities laws). 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 except as set forth herein.
 
(c)    Purchaser Status. At the time such Purchaser was offered the Securities,
it was, and at the date hereof it is, and on each date on which it exercises the
Option, it will be either: (i) an “accredited investor” as defined in Rule
501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a
“qualified institutional buyer” as defined in Rule 144A(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.
 
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(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.
 
(f)    Certain Trading Activities. Each Purchaser represents that from the 60th
day prior to the date hereof until the closing date hereof, it has not directly
or indirectly made, nor has any Person over which such Purchaser has direct
control directly or indirectly made, any purchases or sales of, or granted any
option for the purchase of or entered into any hedging or similar transaction
with the same economic effect as a short sale, of the Common Stock.
 
(g)    Access to Information. Such Purchaser acknowledges that it 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 Shares and the merits and risks of
investing in the Securities; (ii) access to public 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 publicly disseminated 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 rely on the truth, accuracy and completeness of the
Company’s representations and warranties contained in the Transaction Documents.
 
(h)    Independent Investment Decision. Such Purchaser has independently
evaluated the merits of its decision to purchase Securities pursuant to the
Transaction Documents, and such Purchaser confirms that it has not relied on the
advice of any other Purchaser’s business and/or legal counsel in making such
decision.
 
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.
 
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(a)    The Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of Securities other
than pursuant to an effective registration statement or Rule 144, to the Company
or 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 JB or such other counsel selected by the transferor
and to which the Company has no reasonable objection, 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 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
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. 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 a Purchaser may from time to time
pledge pursuant to a bona fide margin agreement with a registered broker-dealer
or grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and the Registration Rights Agreement and, if required under the terms of such
arrangement, 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. Further, 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.
 
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(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
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). The Company shall cause
its counsel to issue a legal opinion to the Company’s transfer agent promptly
after the Effective Date if required by the Company’s transfer agent to effect
the removal of the legend hereunder. If all or any portion of the Option is
exercised at a time when there is an effective registration statement to cover
the resale of the Shares purchased pursuant to exercise of the Option, such
Shares shall be issued free of all legends. 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 5 Trading Days following the
delivery by a Purchaser to the Company or the Company’s transfer agent of a
certificate representing Shares, as the case may be, issued with a restrictive
legend (such date, the “Legend Removal Date”), deliver or cause to be delivered
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)    In addition to such Purchaser’s other available remedies, the Company
shall pay to a Purchaser, in cash, as partial liquidated damages and not as a
penalty, for each $1,000 of Shares (based on the Closing Price of the Common
Stock on the date such Securities are submitted to the Company’s transfer agent)
subject to Section 4.1(c), $10 per Trading Day (increasing to $20 per Trading
Day five (5) Trading Days after such damages have begun to accrue) for each
Trading Day after the Legend Removal Date until such certificate is delivered.
Nothing herein shall limit such Purchaser’s right to pursue actual damages for
the Company’s failure to deliver certificates representing any Securities as
required by the Transaction Documents, and such Purchaser shall have the right
to pursue all remedies available to it at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief.
 
(e)    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 the Company’s
reliance that the Purchaser will sell any Securities pursuant to either the
registration requirements of the Securities Act, including any applicable
prospectus delivery requirements, or an exemption therefrom.
 
(f)    Until the date that each Purchaser holds less than 20% of the Shares
initially purchased hereunder by such Purchaser, the Company shall not undertake
a reverse or forward stock split or reclassification of the Common Stock without
the prior written consent of the Purchasers holding a majority in interest of
the Shares.
 
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4.2    Furnishing of Information. As long as any Purchaser owns Securities, the
Company covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act. As long as any
Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, 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, all 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 it believes 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 shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.
 
4.4    Securities Laws Disclosure; Publicity. The Company shall, by 8:30 a.m.
Eastern time on the fourth (4th) Trading Day following the date hereof, issue a
Current Report on Form 8-K, reasonably acceptable to each Purchaser disclosing
the material terms of the transactions contemplated hereby and shall attach the
Transaction Documents thereto. The Company and each Purchaser shall consult with
each other in issuing any other press releases with respect to the transactions
contemplated hereby, and neither the Company nor any Purchaser shall issue any
such press release or otherwise make any such public statement without the prior
consent of the Company, with respect to any press release of any Purchaser, or
without the prior consent of each Purchaser, with respect to any press release
of the Company, which consent shall not unreasonably be withheld, except if such
disclosure is required by law, in which case the disclosing party shall promptly
provide the other party with prior notice of such public statement or
communication. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without
the prior written consent of such Purchaser, except (i) as required by federal
securities law in connection with the registration statement contemplated by the
Registration Rights Agreement, and (ii) to the extent such disclosure is
required by law or Trading Market regulations, in which case the Company shall
provide the Purchasers with prior notice of such disclosure permitted under
subclause (i) or (ii).
 
4.5    Shareholder Rights Plan. No claim will be made or enforced by the Company
or, to the Knowledge of the Company, any other Person that any Purchaser is an
“Acquiring Person” under any shareholder rights plan or similar plan or
arrangement in effect or hereafter adopted by the Company, or that any Purchaser
could be deemed to trigger the provisions of any such plan or arrangement, by
virtue of receiving Securities under the Transaction Documents or under any
other agreement between the Company and the Purchasers. The Company shall
conduct its business in a manner so that it will not become subject to the
Investment Company Act.
 
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4.6    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.
 
4.7    Simultaneous Closing. The transactions set forth in Sections 2.1 and 2.2
herein shall take place simultaneously. In the event such transactions have not
closed as of the Closing Date unless otherwise extended, this Agreement shall be
null and void.
 
4.8    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. 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, 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.
 
4.9    Indemnification of Purchasers. Subject to the provisions of this Section
4.9, the Company will indemnify and hold the Purchasers and their directors,
officers, shareholders, partners, employees and agents (each, a “Purchaser
Party”) harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such Purchaser Party may suffer or incur as a result of
or relating to (a) any breach of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or in the other
Transaction Documents, or (b) any action instituted against a Purchaser, or any
of them or their respective Affiliates, by any stockholder of the Company who is
not an Affiliate of such Purchaser, with respect to any of the transactions
contemplated by the Transaction Documents (unless such action is based upon a
breach of such Purchaser’s representations, warranties or covenants under the
Transaction Documents or any agreements or understandings such Purchaser may
have with any such stockholder or any violations by the Purchaser of state or
federal securities laws or any conduct by such Purchaser which constitutes
fraud, gross negligence, willful misconduct or malfeasance). If any action shall
be brought against any Purchaser Party in respect of which indemnity may be
sought pursuant to this Agreement, such Purchaser Party shall promptly notify
the Company in writing, and the Company shall have the right to assume the
defense thereof with counsel of its own choosing. Any Purchaser Party shall have
the right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Purchaser Party except to the extent that (i) the employment
thereof has been specifically authorized by the Company in writing, (ii) the
Company has failed after a reasonable period of time to assume such defense and
to employ counsel, or (iii) in such action there is, in the reasonable opinion
of such separate counsel, a material conflict on any material issue between the
position of the Company and the position of such Purchaser Party. The Company
will not be liable to any Purchaser Party under this Agreement (i) for any
settlement by a Purchaser Party effected without the Company’s prior written
consent, which shall not be unreasonably withheld or delayed, or (ii) to the
extent, but only to the extent that a loss, claim, damage or liability is
attributable to any Purchaser Party’s breach of any of the representations,
warranties, covenants or agreements made by the Purchasers in this Agreement or
in the other Transaction Documents.
 
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4.10    Reservation of Common Stock. As of the date hereof, the Company has
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 including any exercise of the Option.
 
4.11    Listing of Common Stock. The Company hereby agrees to use best efforts
to secure the listing of the Common Stock on the American Stock Exchange
(“ASE”). The Company shall use its best efforts to adopt and comply with all
Corporate Governance Rules and Regulations as is required for listing by the ASE
within 60 days of the Closing. The Company shall submit its application for
listing on the ASE within the later of 90 days of the execution of this
agreement or 15 days after the Company meets the listing requirements of the
ASE. If all appropriate actions have been completed by the Company to gain ASE
listing and the stock price at that time is less than $2.00 per share, a member
of the Board of Directors of the Company shall contact the ASE to determine if
it is reasonable to submit the application at that time. If the Company is
advised by the ASE it is allowed to submit an application to the ASE under an
exception rule, the Company shall make the filing. Prior to listing on the ASE,
the Company shall use its best efforts to maintain the quotation of its Common
Stock on the OTC Bulletin Board.
 
4.12    Equal Treatment of Purchasers. No consideration shall be offered or paid
to any person to amend or consent to a waiver or modification of any provision
of any of the Transaction Documents unless the same consideration is also
offered to all of the parties to the Transaction Documents. For clarification
purposes, this provision constitutes a separate right granted to each Purchaser
by the Company and negotiated separately by each Purchaser, and is intended to
treat for the Company the Purchasers as a class and shall not in any way be
construed as the Purchasers acting in concert or as a group with respect to the
purchase, disposition or voting of Securities or otherwise.
 
4.13    Future Financing. The Company agrees no debt financing will be issued
for a period of 24 months from the Closing without the direct consent and prior
approval of the Purchasers. This paragraph does not limit the Company from
expanding its production credit line or obtaining additional credit lines for
operations. From the date hereof until 12 months after the Closing Date, upon
any financing by the Company by sale of its Common Stock or Common Stock
Equivalents in an amount exceeding $3,000,000 and provided that
 
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each Purchaser continues to hold at least 60% of the Shares (a “Subsequent
Financing”), each Purchaser shall have the right to participate in up to 100% of
such Subsequent Financing (the “Participation Maximum”).  At least 15 Trading
Days prior to the closing of the Subsequent Financing, the Company shall deliver
to each Purchaser a written notice of its intention to effect a Subsequent
Financing (“Pre-Notice”), which Pre-Notice shall ask such Purchaser if it wants
to review the details of such financing (such additional notice, a “Subsequent
Financing Notice”).  Upon the request of a Purchaser, and only upon a request by
such Purchaser, for a Subsequent Financing Notice, the Company shall promptly,
but no later than 1 Trading Day after such request, deliver a Subsequent
Financing Notice to such Purchaser.  The Subsequent Financing Notice shall
describe in reasonable detail the proposed terms of such Subsequent Financing,
the amount of proceeds intended to be raised thereunder, the Person with whom
such Subsequent Financing is proposed to be effected, and attached to which
shall be a term sheet or similar document relating thereto.  If by 6:30 p.m.
(Eastern time) on the second Trading Day after all of the Purchasers have
received the Pre-Notice, notifications by the Purchasers of their willingness to
participate in the Subsequent Financing (or to cause their designees to
participate) is, in the aggregate, less than the total amount of the
Participation Maximum, then the Company may effect the remaining portion of such
Subsequent Financing on the terms and to the Persons set forth in the Subsequent
Financing Notice.  If the Company receives no notice from a Purchaser as of such
2nd Trading Day, such Purchaser shall be deemed to have notified the Company
that it does not elect to participate.  The Company must provide the Purchasers
with a second Subsequent Financing Notice, and the Purchasers will again have
the right of participation set forth above in this Section 4.13, if the
Subsequent Financing subject to the initial Subsequent Financing Notice is not
consummated for any reason on the terms set forth in such Subsequent Financing
Notice within 60 Trading Days after the date of the initial Subsequent Financing
Notice. In the event the Company receives responses to Subsequent Financing
Notices from Purchasers seeking to purchase more than the aggregate amount of
the Participation Maximum, each such Purchaser shall have the right to purchase
their Pro Rata Portion of the Participation Maximum.  Notwithstanding the
foregoing, this Section 4.13 shall not apply in respect of an Exempt Issuance.
 
4.14    Subsequent Equity Sales. Except for (i) the transactions provided for
herein, (ii) the vesting of stock options in the ordinary course, (iii) the
exercise of currently outstanding warrants, and (iv) the payment of restricted
Common Stock for director fees, from the date hereof until 90 days after the
Effective Date neither the Company nor any Subsidiary shall issue shares of
Common Stock or Common Stock Equivalents; provided, however, the 90 day period
set forth in this Section 4.14 shall be extended for the number of Trading Days
during such period in which (y) trading in the Common Stock is suspended by any
Trading Market, or (z) following the Effective Date, the Registration Statement
is not effective or the prospectus included in the Registration Statement may
not be used by the Purchasers for the resale of the Shares and Option Shares. In
addition to the limitations set forth herein, from the date hereof until such
time as no Purchaser holds any of the Securities, the Company shall be
prohibited from effecting or entering into an agreement to effect any Subsequent
Financing involving a “Variable Rate Transaction” or an “MFN Transaction” (each
as defined below). The term “Variable Rate Transaction” shall mean a transaction
in which the Company issues or sells (i) any debt or equity securities that are
convertible into, exchangeable or exercisable for, or include the right to
receive additional shares of Common Stock either (A) at a conversion, exercise
or exchange rate or other price that is based upon and/or varies with the
trading prices of or quotations for the shares of Common Stock at any
 
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time after the initial issuance of such debt or equity securities, or (B) with a
conversion, exercise or exchange price that is subject to being reset at some
future date after the initial issuance of such debt or equity security or upon
the occurrence of specified or contingent events directly or indirectly related
to the business of the Company or the market for the Common Stock. The term “MFN
Transaction” shall mean a transaction in which the Company issues or sells any
securities in a capital raising transaction or series of related transactions
which grants to an investor the right to receive additional shares based upon
future transactions of the Company on terms more favorable than those granted to
such investor in such offering. Any Purchaser shall be entitled to obtain
injunctive relief against the Company to preclude any such issuance, which
remedy shall be in addition to any right to collect damages. Notwithstanding the
foregoing, this Section 4.14 shall not apply in respect of an Exempt Issuance,
except that no Variable Rate Transaction or MFN Transaction shall be an Exempt
Issuance.
 
4.15    Insurance. The Company will purchase a life insurance policy in the
amount of $1,000,000 naming the Purchasers as the beneficiaries, on Mr. Eldon
Moya1 as long as he is employed by the Company and on any future Chief Executive
Officer of the Company. Each such policy shall be a 10 year term policy. The
insurance purchase shall be applied for no later than May 7, 2007 and the
Company shall use commercially reasonable efforts to complete this insurance
purchase by no later than May 31, 2007. Each Purchaser shall be a pro rata
beneficiary of each such life insurance policy based on the Shares of Common
Stock acquired under this Agreement.
 
4.16    (a) Optional Purchaser Designated Directors; Expenses of Directors.
 
(i)    Contingent upon and effective as of the Closing, the Company’s Board of
Directors shall have elected up to two (2) persons, one of which shall be
designated by Around the Clock Partners, LP (“ATC”) (which director shall be
Wayne Anderson or such other person to whom the Company has no reasonable
objection) and one of whom shall be jointly designated by ATC and Cohiba
Partners (“Cohiba”) to the Company’s Board of Directors (the “ATC Directors”)
and one such director appointed by ATC shall serve on the Company’s compensation
committee. The Company shall not appoint an executive committee. At each annual
meeting of the stockholders of the Company and at each special meeting of the
stockholders of the Company called for the purposes of electing directors, and
at any time at which stockholders of the Company shall have the right to, or
shall, vote for or consent to the election of directors, then the Company shall
nominate for election the ATC Directors provided that ATC continues to hold 20%
of the Shares it purchased hereunder and provided further that neither ATC nor
Cohiba are in material default under any agreement with the Company or are in
breach of their respective fiduciary obligations to the Company, and such
default or breach has not been cured within 30 days after receipt of notice from
the Company specifying such default or breach. The ATC Directors shall have the
right to attend any meetings of the Board of Directors and its committees by
telephone conference call and shall receive all reports and materials provided
to the directors of the Company at the time such reports and materials are
provided to the other Company directors.
 
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(ii)    ATC shall timely notify the Company in writing of the person or persons
designated by pursuant to this Section as nominee for election to the Board, and
shall promptly furnish all information necessary for all required filings with
the SEC. In the absence of any notice from ATC, the ATC Directors then serving
and previously designated by ATC shall be renominated.
 
(iii)    Any vacancy on the Board of Directors created by the resignation,
removal, incapacity, or death of any ATC Director may be filled by another ATC
Director selected by ATC.
 
(iv)    The ATC Directors shall be entitled to reimbursement for reasonable
out-of-pocket expenses incurred in connection with the attending of meetings of
the Board of Directors and any committees of the Board of Directors and
performance of their duties as a Director. The ATC Directors shall be provided
with indemnification and advancement of expenses to the fullest extent allowed
under the laws of the Company’s state of incorporation. The ATC Directors shall
be covered by such indemnification insurance and indemnification policies and
compensation policies established by the Board of Directors for all Directors
generally in addition to any rights that the ATC Directors may have at common
law, pursuant to the Company's Articles of Incorporation, the Company's Bylaws,
Resolutions of the Board of Directors, or otherwise.
 
(b)    Observer Rights. ATC and Cohiba shall each be allowed one representative
(the “Board Observer”) of its choice (which individual shall be reasonably
acceptable to the Company) to attend all meetings of the Company’s Board of
Directors and all committees thereof for so long as ATC and Cohiba shall have
the option to have a ATC Director appointed but there is no ATC Director on the
Company’s Board of Directors. In connection therewith, the Company shall provide
the Board Observer with copies of all notices, minutes, consents, and other
materials, financial or otherwise, that the Company provides to its Board of
Directors. The Company shall reimburse the Board Observer for any reasonable
expenses incurred in connection with its function as a Board Observer, including
travel and lodging expenses incurred to attend meetings of the Company’s Board
of Directors and its committees. The Board Observer shall have the right to
attend any such meetings by telephone conference call. The Board Observer’s
rights shall be limited to observation and shall not include the right to vote
or otherwise participate in any meeting of the Company’s Board of Directors.
Notwithstanding the foregoing, the Company’s Board of Directors, acting upon the
advice of counsel, may limit the observation rights provided hereunder to the
extent that such limitation may be reasonably necessary to preserve for the
Company the benefit of the attorney-client privilege. The Company also may
require each Board Observer to enter into such confidentiality arrangements as
may be reasonably necessary to preserve, in connection with the observation
rights granted hereunder, the confidentiality of information made available to
the Company’s Board of Directors.
 
4.17    Certain Executive Compensation Matters. The current Chief Executive
Officer and President of the Company shall forgo their right to receive any
compensation from the Company based on Company Gross Revenues, as set forth in
their Employment Agreements dated December 27, 2005. In lieu of this payment,
the Chief Executive Officer and President shall receive five year options to
purchase Company Common Stock based on annual gross revenues of the Company in
each year during the term of their respective employment agreements. In each
year beginning on January 1, 2007, at the time it is determined the Company
surpasses $5 million in gross revenues, options will be issued to the Chief
 
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Executive Officer and President to purchase Company Common Stock. The strike
price of such option will be at 100% of the closing price of the Company’s
Common Stock on the day of such option grant(s) and the number of shares of such
options shall be $120,000 divided by the strike price. For each additional $5
million in gross revenues in each year, warrants will be issued on the same
basis except that the number of shares subject to purchase on exercise of such
options shall be $100,000 divided by the applicable strike price. At the end of
each year they will receive additional stock options on a pro-rata basis for any
sales over $5 million in such year for which they have not previously received
stock options. For example, if annual sales were $9 million, they will have
receive options on the first $5 million of sales during the year and will be
entitled to received additional options on the last trading day of the year with
an aggregate option price of $80,000 ($4 million/$5 million x $100,000). As
compensation for amending their Employment Agreements as set forth herein, the
CEO and President will receive 5 year stock options for 100,000 shares of Common
Stock with an exercise price of $1.50 per share. In the event any outstanding
stock options and warrants held by the CEO, President and any other employee,
officer or director of the Company allows cashless exercise, such options and
warrants will be modified to require a full cash payment to the Company upon
exercise and cashless exercise shall not be permitted. The Purchasers likewise
agree to exercise any options and warrants held by them by cash payment of the
purchase price and not by cashless exercise.
 
4.18    Use of Proceeds. The Company shall use the proceeds from the sale of
Shares set forth in Section 2.3 for current working capital requirements of the
business of the Company and not for payment of past wages or other debts,
liabilities and obligations outstanding as of the date hereof.
 
ARTICLE V.
MISCELLANEOUS
 
5.1    Fees and Expenses. The Company shall reimburse Around the Clock Partners,
LP any legal fees and expenses in connection with the transactions herein,
including expenses in connection with filing any forms, reports and schedules
with the Commission, in an amount not to exceed $17,500. Except as otherwise set
forth in this Agreement, each party shall pay the fees and expenses of its
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. (Eastern
time) on a Trading Day, (b) the next Trading Day after 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 on a day that is not a
Trading Day or later than 6:30 p.m. (Eastern 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.
 
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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 each Purchaser 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.
 
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 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
California, without regard to the principles of conflicts of law thereof. Each
party 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.
The parties hereby waive all rights to a trial by jury. If either party shall
commence an action or proceeding to enforce any provisions of the Transaction
Documents, 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.
 
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5.9     Survival. The representations and warranties herein shall survive the
Closing and delivery of the Shares.
 
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.
 
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    Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then the
Company has the right to cure such failure upon 30 business days prior written
notice to the Company. If the Company fails to perform its obligations by the
expiration of the 30 day cure period, then such Purchaser may rescind or
withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.
 
5.13    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
indemnification agreement, if requested, but no indemnity bond shall be required
in connection with such replacement. 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.
 
5.14    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.
 
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5.15    Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
 
5.16    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. For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through JB. JB does not represent all of
the Purchasers but only Around the Clock Partners, LP. 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.
 
5.17    Liquidated Damages. The Company’s obligations to pay any partial
liquidated damages or other amounts owing under the Transaction Documents is a
continuing obligation of the Company and shall not terminate until all unpaid
partial liquidated damages and other amounts have been paid notwithstanding the
fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.
 
(Signature Page Follows)
 
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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.
 

WHO’S YOUR DADDY, INC., a Nevada Corporation
Address for Notice:
President
Who’s Your Daddy, Inc.
5840 El Camino Real
Suite 108
Carlsbad, CA 92008
By: /s/ Edon Moyal                                              
       Name: Edon Moyal
       Title: CEO
 
 
With a copy to (which shall not constitute notice):
 
Harry J. Proctor, Esq.
SOLOMON WARD SEIDENWURM & SMITH LLP
401 “B” Street, Suite 1200
San Diego, California 92101
 

 
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
 
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[PURCHASER SIGNATURE PAGES TO WHO’S YOUR DADDY, INC. SECURITIES PURCHASE
AGREEMENT]

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.
 
Name of Investing Entity: AROUND THE CLOCK PARTNERS, LP
 

 
By: Around the Clock Trading and Capital Management, LLC,
General Partner
 
By: /s/ Wayne Anderson                                           
Wayne Anderson
Managing Member

 
Email Address of Authorized Entity: wanderson@aroundtheclocktcm.com

Address for Notice of Investing Entity:
 

 
Wayne Anderson, Managing Member
Around the Clock Trading and Capital Management, LLC
721 First Avenue North
Suite 106
St. Petersburg, FL 33713

 
This signature page also constitutes the signature page for the purchase of
140,000 shares of Company Common Stock for $70,000 pursuant to Section 2.3 of
the Agreement.

 
[SIGNATURE PAGES CONTINUE]

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[PURCHASER SIGNATURE PAGES TO WHO’S YOUR DADDY, INC. SECURITIES PURCHASE
AGREEMENT]

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.
 
Name of Investing Entity:      COHIBA PARTNERS INC.

Signature of Authorized Signatory of Investing Entity: /s/ Collin
Nix                                                       
Name of Authorized Signatory: Collin Nix
Title of Authorized Signatory: President
Email Address of Authorized
Entity:________________________________________________

Address for Notice of Investing Entity:

Address for Delivery of Securities for Investing Entity (if not same as above):

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[PURCHASER SIGNATURE PAGES TO WHO’S YOUR DADDY, INC. SECURITIES PURCHASE
AGREEMENT]

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.
 
Name of Investing Entity: AROUND THE CLOCK TRADING AND CAPITAL MANAGEMENT, LLC
Signature of Authorized Signatory of Investing Entity: /s/ Wayne
Anderson                                          
Name of Authorized Signatory: Wayne Anderson
Title of Authorized Signatory: Managing Member
Email Address of Authorized Entity: wanderson@aroundtheclocktcm.com

Address for Notice of Investing Entity:

Wayne Anderson, Managing Member
Around the Clock Trading and Capital Management, LLC
721 First Avenue North
Suite 106
St. Petersburg, FL 33713

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[PURCHASER SIGNATURE PAGES TO WHO’S YOUR DADDY, INC. SECURITIES PURCHASE
AGREEMENT]

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.
 
Name of Investing Entity:     STRONG PARTNERS CORPORATION

Signature of Authorized Signatory of Investing Entity: /s/ Charles
McGuirk                                          
Name of Authorized Signatory: Charles McGuirk
Title of Authorized Signatory: Chief Executive Officer
Email Address of Authorized
Entity:________________________________________________

Address for Notice of Investing Entity:

Address for Delivery of Securities for Investing Entity (if not same as above):

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[PURCHASER SIGNATURE PAGES TO WHO’S YOUR DADDY, INC. SECURITIES PURCHASE
AGREEMENT]

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.
 
Name of Investing Entity:      TURID HOLDINGS

Signature of Authorized Signatory of Investing Entity: /s/ Henry
Ward                                                 
Name of Authorized Signatory: Henry Ward
Title of Authorized Signatory: Managing Director
Email Address of Authorized
Entity:________________________________________________

Address for Notice of Investing Entity:

Address for Delivery of Securities for Investing Entity (if not same as above):

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[PURCHASER SIGNATURE PAGES TO WHO’S YOUR DADDY, INC. SECURITIES PURCHASE
AGREEMENT FOR PURCHASE PURSUANT TO SECTION 2.3]

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.
 
Name of Investors: CHUCK LAUBACH and JIM POMFRET, as joint tenants in common

Signatures: /s/ Chuck Laubach                                       
Chuck Laubach
/s/ Jim Pomfret                                                          
Jim Pomfret

 
Address for Notice of Investors:

Address for Delivery of Securities for Investors (if not same as above):
 

Subscription Amount: $250,000
Shares: 500,000
 
 
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