Document:

EXHIBIT
10.11

[FORM
OF SERIES C WARRANT]

NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE
HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

JAVO BEVERAGE COMPANY, INC.

SERIES C WARRANT TO PURCHASE COMMON STOCK

Warrant No.: C-              

Number of Shares
of Common Stock:                 

Date of Issuance:
December 15, 2006 (“Issuance Date”)

Javo Beverage Company, Inc., a Delaware corporation
(the “Company”), hereby certifies
that, for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, [CAPITAL VENTURES INTERNATIONAL] [OTHER BUYERS], the
registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms
set forth below, to purchase from the Company, at the Exercise Price (as defined
below) then in effect, upon surrender of this Warrant to Purchase Common Stock
(including any Warrants to Purchase Common Stock issued in exchange, transfer
or replacement hereof, the “Warrant”),
at any time or times on or after June 15, 2007, but not after 11:59 p.m.,
New York time, on the Expiration Date (as defined below),                       (                      )(1)
(the “Warrant Share Total”) fully paid
nonassessable shares of Common Stock (as defined below) (the “Warrant
Shares”).  Except as otherwise
defined herein, capitalized terms in this Warrant shall have the meanings set
forth in Section 15.  This Warrant is one
of the Warrants to purchase Common Stock (the “SPA Warrants”) issued pursuant to Section 1 of that certain
Securities Purchase Agreement, dated as of December 14, 2006 (the “Subscription Date”), by and among the

 

(1)           Insert a number of
shares equal to the number of Conversion Shares issuable upon conversion of the
Notes issued to the Holder pursuant to the Securities Purchase Agreement.

 

Company
and the investors (the “Buyers”)
referred to therein (the “Securities Purchase
Agreement”).

1.     EXERCISE OF WARRANT.

(a)   Mechanics of Exercise. 
Subject to the terms and conditions hereof (including, without
limitation, the limitations set forth in Section 1(f)), this Warrant may be
exercised by the Holder on any day on or after June 15, 2007, in whole or
in part, by (i) delivery of a written notice, in the form attached hereto
as Exhibit A (the “Exercise
Notice”), of the Holder’s election to exercise this Warrant and
(ii) (A) payment to the Company of an amount equal to the applicable
Exercise Price multiplied by the number of Warrant Shares as to which this
Warrant is being exercised (the “Aggregate Exercise Price”)
in cash or by wire transfer of immediately available funds or (B) by notifying
the Company that this Warrant is being exercised pursuant to a Cashless
Exercise (as defined in Section 1(d)). 
The Holder shall not be required to deliver the original Warrant in
order to effect an exercise hereunder. 
Execution and delivery of the Exercise Notice with respect to less than
all of the Warrant Shares shall have the same effect as cancellation of the
original Warrant and issuance of a new Warrant evidencing the right to purchase
the remaining number of Warrant Shares. 
On or before the first (1st)
Business Day following the date on which the Company has received each of the
Exercise Notice and the Aggregate Exercise Price (or notice of a Cashless
Exercise) (the “Exercise Delivery Documents”), the
Company shall transmit by facsimile an acknowledgment of confirmation of
receipt of the Exercise Delivery Documents to the Holder and the Company’s
transfer agent (the “Transfer Agent”).  On or before the third (3rd) Business Day following the date on
which the Company has received all of the Exercise Delivery Documents (the “Share Delivery Date”), the Company shall (X) provided that
the Transfer Agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program, upon the
request of the Holder, credit such aggregate number of shares of Common Stock
to which the Holder is entitled pursuant to such exercise to the Holder’s or
its designee’s balance account with DTC through its Deposit Withdrawal Agent
Commission system, or (Y) if the Transfer Agent is not participating in the DTC
Fast Automated Securities Transfer Program, issue and dispatch by overnight
courier to the address as specified in the Exercise Notice, a certificate,
registered in the Company’s share register in the name of the Holder or its
designee, for the number of shares of Common Stock to which the Holder is
entitled pursuant to such exercise.  Upon
delivery of the Exercise Notice and Aggregate Exercise Price referred to in
clause (ii)(A) above or notification to the Company of a Cashless Exercise
referred to in Section 1(d), the Holder shall be deemed for all corporate
purposes to have become the holder of record of the Warrant Shares with respect
to which this Warrant has been exercised, irrespective of the date of delivery
of the certificates evidencing such Warrant Shares.  If this Warrant is submitted in connection
with any exercise pursuant to this Section 1(a) and the number of Warrant Shares
represented by this Warrant submitted for exercise is greater than the number
of Warrant Shares being acquired upon an exercise, then the Company shall as
soon as practicable and in no event later than three Business Days after any
exercise and at its own expense, issue a new Warrant (in accordance with
Section 7(d)) representing the right to purchase the number of Warrant Shares
purchasable immediately prior to such exercise under this Warrant, less the
number of Warrant Shares with respect to which this Warrant is exercised.  No fractional shares of Common Stock are to
be issued upon the exercise of this Warrant, but rather the number of shares of
Common Stock to be issued shall be rounded up to the nearest whole number.  The Company shall pay any and all 

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taxes which may be payable with respect to
the issuance and delivery of Warrant Shares upon exercise of this Warrant.  NOTWITHSTANDING ANY
PROVISION OF THIS WARRANT TO THE CONTRARY, NO MORE THAN THE MAXIMUM ELIGIBILITY
NUMBER OF WARRANT SHARES SHALL BE EXERCISABLE HEREUNDER.

(b)   Exercise Price.  For
purposes of this Warrant, “Exercise
Price” means $1.79, subject to adjustment as provided herein.

(c)   Company’s Failure to Timely Deliver Securities.  If the Company shall fail for any reason or
for no reason to issue to the Holder within five (5) Business Days of receipt
of the Exercise Delivery Documents, a certificate for the number of shares of
Common Stock to which the Holder is entitled and register such shares of Common
Stock on the Company’s share register or to credit the Holder’s balance account
with DTC for such number of shares of Common Stock to which the Holder is
entitled upon the Holder’s exercise of this Warrant, then, in addition to all
other remedies available to the Holder, the Company shall pay in cash to the
Holder on each day after such fifth Business
Day that the issuance of such shares of Common Stock is not timely effected an
amount equal to 1.0% of the product of (A) the sum of the number of shares of
Common Stock not issued to the Holder on a timely basis and to which the Holder
is entitled and (B) the Weighted Average Price of the shares of Common Stock on
the Trading Day immediately preceding the last possible date which the Company
could have issued such shares of Common Stock to the Holder without violating
Section 1(a).  In addition to the
foregoing, if within five (5) Trading Days after the Company’s receipt of the
facsimile copy of a Exercise Notice the Company shall fail to issue and deliver
a certificate to the Holder and register such shares of Common Stock on the
Company’s share register or credit the Holder’s balance account with DTC for
the number of shares of Common Stock to which the Holder is entitled upon the
Holder’s exercise hereunder, and if on or after such Trading Day the Holder
purchases (in an open market transaction or otherwise) shares of Common Stock
to deliver in satisfaction of a sale by the Holder of shares of Common Stock
issuable upon such exercise that the Holder anticipated receiving from the Company
(a “Buy-In”), then the Company shall,
within three (3) Business Days after the Holder’s request and in the Holder’s
discretion, either (i) pay cash to the Holder in an amount equal to the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased (the “Buy-In Price”),
at which point the Company’s obligation to deliver such certificate (and to
issue such shares of Common Stock) shall terminate, or (ii) promptly honor its
obligation to deliver to the Holder a certificate or certificates representing
such shares of Common Stock and pay cash to the Holder in an amount equal to
the excess (if any) of the Buy-In Price over the product of (A) such number of
shares of Common Stock, times (B) the Weighted Average Price on the date of
exercise.

(d)           Cashless Exercise.
 Notwithstanding
anything contained herein to the contrary, if a Registration Statement (as
defined in the Registration Rights Agreement) covering the Warrant Shares that
are the subject of an Exercise Notice (the “Unavailable
Warrant Shares”) is not available for the resale of such Unavailable
Warrant Shares, the Holder may, in its sole discretion, exercise this Warrant
in whole or in part and, in lieu of making the cash 

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payment otherwise contemplated to be made to
the Company upon such exercise in payment of the Aggregate Exercise Price,
elect instead to receive upon such exercise the “Net Number” of shares of Common
Stock determined according to the following formula (a “Cashless Exercise”):

Net Number = (A
x B) - (A x C)

B

For
purposes of the foregoing formula:

A= the total number of
shares with respect to which this Warrant is then being exercised.

B= the arithmetic average
of the Weighted Average Prices of the shares of Common Stock (as reported by
Bloomberg) for the five (5) consecutive Trading Days ending on the date
immediately preceding the date of the Exercise Notice.

C= the
Exercise Price then in effect for the applicable Warrant Shares at the time of
such exercise.

(e)   Disputes.  In the
case of a dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall promptly issue
to the Holder the number of Warrant Shares that are not disputed and resolve
such dispute in accordance with Section 12.

(f)    Limitations on Exercises. 

(1)           Beneficial
Ownership.  The Company shall not
effect the exercise of this Warrant, and the Holder shall not have the right to
exercise this Warrant, to the extent that after giving effect to such exercise,
such Person (together with such Person’s affiliates) would beneficially own in
excess of 4.99% of the shares of Common Stock outstanding immediately after
giving effect to such exercise (subject to change as described below, the “Maximum Percentage”).  For purposes of the foregoing sentence, the
aggregate number of shares of Common Stock beneficially owned by such Person
and its affiliates shall include the number of shares of Common Stock issuable
upon exercise of this Warrant with respect to which the determination of such
sentence is being made, but shall exclude shares of Common Stock which would be
issuable upon (i) exercise of the remaining, unexercised portion of this
Warrant beneficially owned by such Person and its affiliates and (ii) exercise
or conversion of the unexercised or unconverted portion of any other securities
of the Company beneficially owned by such Person and its affiliates (including,
without limitation, any convertible notes or convertible preferred stock or
warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein.  Except as
set forth in the preceding sentence, for purposes of this 

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paragraph,
beneficial ownership shall be calculated in accordance with Section 13(d) of
the Securities Exchange Act of 1934, as amended.  For purposes of this Warrant, in determining
the number of outstanding shares of Common Stock, the Holder may rely on the
number of outstanding shares of Common Stock as reflected in (1) the Company’s
most recent Form 10-K, Form 10-KSB, Form 10-Q, Form 10-QSB, Current Report on
Form 8-K or other public filing with the Securities and Exchange Commission, as
the case may be, (2) a more recent public announcement by the Company or (3)
any other notice by the Company or the Transfer Agent setting forth the number
of shares of Common Stock outstanding. 
For any reason at any time, upon the written or oral request of the
Holder, the Company shall within one Business Day confirm orally and in writing
to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares
of Common Stock shall be determined after giving effect to the conversion or
exercise of securities of the Company, including the SPA Securities and the SPA
Warrants, by the Holder and its affiliates since the date as of which such
number of outstanding shares of Common Stock was reported.  By written notice to the Company, the Holder
may from time to time increase or decrease the Maximum Percentage to any other
percentage not in excess of 9.99% specified in such notice; provided that (i)
any such increase will not be effective until the sixty-first (61st) day after such notice is
delivered to the Company, and (ii) any such increase or decrease will apply
only to the Holder and not to any other holder of SPA Warrants.

(2)           Principal Market
Regulation.  The Company shall not be
obligated to issue any shares of Common Stock upon exercise of this Warrant or
conversion of SPA Securities and no Buyer shall be entitled to receive any
shares of Common Stock if the issuance of such shares of Common Stock would
exceed that number of shares of Common Stock which the Company may issue upon
exercise or conversion, as applicable, of the SPA Warrants and SPA Securities
or otherwise without breaching the Company’s obligations under the rules or
regulations of any applicable Eligible Market (the “Exchange Cap”), except that such limitation shall not apply
in the event that the Company (A) obtains the approval of its stockholders as
required by the applicable rules of the Eligible Market for issuances of shares
of Common Stock in excess of such amount or (B) obtains a written opinion from
outside counsel to the Company that such approval is not required, which
opinion shall be reasonably satisfactory to the Required Holders.  Until such approval or written opinion is
obtained, no Buyer shall be issued in the aggregate, upon exercise or
conversion, as applicable, of any SPA Warrants or SPA Securities, shares of
Common Stock in an amount greater than the product of the Exchange Cap
multiplied by a fraction, the numerator of which is the total number of shares
of Common Stock underlying the SPA Warrants issued to such Buyer pursuant to
the Securities Purchase Agreement on the Issuance Date and the denominator of
which is the aggregate number of shares of 

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Common Stock
underlying the SPA Warrants issued to the Buyers pursuant to the Securities
Purchase Agreement on the Issuance Date (with respect to each Buyer, the “Exchange Cap Allocation”). 
In the event that any Buyer shall sell or otherwise transfer any of such
Buyer’s SPA Warrants, the transferee shall be allocated a pro rata portion of
such Buyer’s Exchange Cap Allocation, and the restrictions of the prior
sentence shall apply to such transferee with respect to the portion of the
Exchange Cap Allocation allocated to such transferee.  In the event that any holder of SPA Warrants
shall exercise all of such holder’s SPA Warrants into a number of shares of
Common Stock which, in the aggregate, is less than such holder’s Exchange Cap
Allocation, then the difference between such holder’s Exchange Cap Allocation
and the number of shares of Common Stock actually issued to such holder shall
be allocated to the respective Exchange Cap Allocations of the remaining
holders of SPA Warrants on a pro rata basis in proportion to the shares of
Common Stock underlying the SPA Warrants then held by each such holder.  In the event that the Company is prohibited
from issuing any Warrant Shares for which an Exercise Notice has been received
as a result of the operation of this Section 1(f)(2), the Company shall pay
cash in exchange for cancellation of such Warrant Shares, at a price per Warrant
Share equal to the difference between the Weighted Average Price and the
Exercise Price as of the date of the attempted exercise.

(g)           Insufficient
Authorized Shares.  If at any time
while any of the Warrants remain outstanding the Company does not have a
sufficient number of authorized and unreserved shares of Common Stock to
satisfy its obligation to reserve for issuance upon exercise of the Warrants at
least a number of shares of Common Stock equal to 130% (the “Required
Reserve Amount”) of
the number of shares of Common Stock as shall from time to time be necessary to
effect the exercise of all of the Warrants then outstanding (an “Authorized
Share Failure”),
then the Company shall immediately take all action necessary to increase the
Company’s authorized shares of Common Stock to an amount sufficient to allow
the Company to reserve the Required Reserve Amount for the Warrants then
outstanding.  Without limiting the
generality of the foregoing sentence, as soon as practicable after the date of
the occurrence of an Authorized Share Failure, but in no event later than sixty
(60) days after the occurrence of such Authorized Share Failure, the Company
shall hold a meeting of its stockholders for the approval of an increase in the
number of authorized shares of Common Stock. 
In connection with such meeting, the Company shall provide each
stockholder with a proxy statement and shall use its best efforts to solicit
its stockholders’ approval of such increase in authorized shares of Common
Stock and to cause its board of directors to recommend to the stockholders that
they approve such proposal.

2.     ADJUSTMENT OF EXERCISE
PRICE AND NUMBER OF WARRANT SHARES. 
The Exercise Price and the number of Warrant Shares shall be adjusted
from time to time as follows:

(a)   Adjustment upon Issuance of shares of Common Stock.  If and whenever on or after the Subscription
Date the Company issues or sells, or in accordance with 

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this Section 2 is deemed to have issued or
sold, any shares of Common Stock (including the issuance or sale of shares of
Common Stock owned or held by or for the account of the Company, but excluding
shares of Common Stock deemed to have been issued by the Company in connection
with any Excluded Securities (as defined in the SPA Securities) for a consideration
per share less than a price (the “Applicable
Price”) equal to the Exercise Price in effect immediately prior to
such issue or sale or deemed issuance or sale (the foregoing a “Dilutive Issuance”), then immediately after such Dilutive
Issuance, the Exercise Price then in effect shall be reduced to an amount equal
to the product of (A) the Exercise Price in effect immediately prior to
such Dilutive Issuance and (B) the quotient determined by dividing
(1) the sum of (I) the product derived by multiplying the Exercise Price
in effect immediately prior to such Dilutive Issuance and the number of shares
of Common Stock Deemed Outstanding immediately prior to such Dilutive Issuance
plus (II) the consideration, if any, received (or deemed received as set
forth below) by the Company upon such Dilutive Issuance, by (2) the product
derived by multiplying (I) the Exercise Price in effect immediately prior
to such Dilutive Issuance by (II) the number of shares of Common Stock
Deemed Outstanding immediately after such Dilutive Issuance.  Upon each such adjustment of the Exercise
Price hereunder, the number of Warrant Shares shall be adjusted to the number
of shares of Common Stock determined by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Shares
acquirable upon exercise of this Warrant immediately prior to such adjustment
and dividing the product thereof by the Exercise Price resulting from such
adjustment.  For purposes of determining
the adjusted Exercise Price under this Section 2(a), the following shall be
applicable:

(i)            Issuance of
Options.  If the Company in any
manner grants any Options and the lowest price per share for which one share of
Common Stock is issuable upon the exercise of any such Option or upon
conversion, exercise or exchange of any Convertible Securities issuable upon
exercise of any such Option is less than the Applicable Price, then such share
of Common Stock shall be deemed to be outstanding and to have been issued and
sold by the Company at the time of the granting or sale of such Option for such
price per share.  For purposes of this
Section 2(a)(i), the “lowest price per share for which one share of Common
Stock is issuable upon exercise of such Options or upon conversion, exercise or
exchange of such Convertible Securities” shall be equal to the sum of the
lowest amounts of consideration (if any) received or receivable by the Company
with respect to any one share of Common Stock upon the granting or sale of the
Option, upon exercise of the Option and upon conversion, exercise or exchange
of any Convertible Security issuable upon exercise of such Option.  No further adjustment of the Exercise Price
or number of Warrant Shares shall be made upon the actual issuance of such
shares of Common Stock or of such Convertible Securities upon the exercise of
such Options or upon the actual issuance of such shares of Common Stock upon
conversion, exercise or exchange of such Convertible Securities.

 

 7

 

(ii)           Issuance of Convertible Securities.  If the Company in any manner issues or sells
any Convertible Securities and the lowest price per share for which one share
of Common Stock is issuable upon the conversion, exercise or exchange thereof
is less than the Applicable Price, then such share of Common Stock shall be
deemed to be outstanding and to have been issued and sold by the Company at the
time of the issuance or sale of such Convertible Securities for such price per
share.  For the purposes of this Section
2(a)(ii), the “lowest price per share for which one share of Common Stock is
issuable upon the conversion, exercise or exchange” shall be equal to the sum
of the lowest amounts of consideration (if any) received or receivable by the
Company with respect to one share of Common Stock upon the issuance or sale of
the Convertible Security and upon conversion, exercise or exchange of such
Convertible Security.  No further
adjustment of the Exercise Price or number of Warrant Shares shall be made upon
the actual issuance of such shares of Common Stock upon conversion, exercise or
exchange of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which
adjustment of this Warrant has been or is to be made pursuant to other
provisions of this Section 2(a), no further adjustment of the Exercise Price or
number of Warrant Shares shall be made by reason of such issue or sale.

(iii)          Change in Option Price or Rate of
Conversion.  If the purchase price
provided for in any Options, the additional consideration, if any, payable upon
the issue, conversion, exercise or exchange of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or
exercisable or exchangeable for shares of Common Stock increases or decreases
at any time, the Exercise Price and the number of Warrant Shares in effect at
the time of such increase or decrease shall be adjusted to the Exercise Price
and the number of Warrant Shares which would have been in effect at such time
had such Options or Convertible Securities provided for such increased or
decreased purchase price, additional consideration or increased or decreased
conversion rate, as the case may be, at the time initially granted, issued or
sold.  For purposes of this Section
2(a)(iii), if the terms of any Option or Convertible Security that was
outstanding as of the date of issuance of this Warrant are increased or
decreased in the manner described in the immediately preceding sentence, then
such Option or Convertible Security and the shares of Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be deemed to have
been issued as of the date of such increase or decrease.  No adjustment pursuant to this Section 2(a)
shall be made if such adjustment would result in an increase of the Exercise
Price then in effect or a decrease in the number of Warrant Shares.

(iv)          Calculation of Consideration
Received.  In case any Option is
issued in connection with the issue or sale of other securities of the

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Company,
together comprising one integrated transaction, the Options will be deemed to
have been issued for the difference of (x) the aggregate fair market value of
such Options and other securities issued or sold in such integrated
transaction, less (y) the fair market value of the securities other than such
Option, issued or sold in such transaction and the other securities issued or
sold in such integrated transaction will be deemed to have been issued or sold
for the balance of the consideration received by the Company.  If any shares of Common Stock, Options or
Convertible Securities are issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor will be deemed to be the net amount
received by the Company therefor.  If any
shares of Common Stock, Options or Convertible Securities are issued or sold
for a consideration other than cash, the amount of such consideration received
by the Company will be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Company will be the Weighted Average Price of such security on
the date of receipt.  If any shares of
Common Stock, Options or Convertible Securities are issued to the owners of the
non-surviving entity in connection with any merger in which the Company is the
surviving entity, the amount of consideration therefor will be deemed to be the
fair value of such portion of the net assets and business of the non-surviving
entity as is attributable to such shares of Common Stock, Options or
Convertible Securities, as the case may be. 
The fair value of any consideration other than cash or securities will be
determined jointly by the Company and the Required Holders.  If such parties are unable to reach agreement
within ten (10) days after the occurrence of an event requiring valuation (the
“Valuation Event”),
the fair value of such consideration will be determined within five (5)
Business Days after the tenth day following the Valuation Event by an
independent, reputable appraiser jointly selected by the Company and the
Required Holders.  The determination of
such appraiser shall be final and binding upon all parties absent manifest
error and the fees and expenses of such appraiser shall be borne by the
Company.

(v)           Record Date.  If the Company takes a record of the holders
of shares of Common Stock for the purpose of entitling them (A) to receive
a dividend or other distribution payable in shares of Common Stock, Options or
in Convertible Securities or (B) to subscribe for or purchase shares of
Common Stock, Options or Convertible Securities, then such record date will be
deemed to be the date of the issue or sale of the shares of Common Stock deemed
to have been issued or sold upon the declaration of such dividend or the making
of such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.

(b)   Adjustment upon Subdivision or Combination of Common Stock.  If the Company at any time on or after the
Subscription Date subdivides (by any stock split, stock 

 9
 

 

dividend, recapitalization or otherwise) one
or more classes of its outstanding shares of Common Stock into a greater number
of shares, the Exercise Price in effect immediately prior to such subdivision
will be proportionately reduced and the number of Warrant Shares will be
proportionately increased.  If the
Company at any time on or after the Subscription Date  combines (by combination, reverse stock split
or otherwise) one or more classes of its outstanding shares of Common Stock
into a smaller number of shares, the Exercise Price in effect immediately prior
to such combination will be proportionately increased and the number of Warrant
Shares will be proportionately decreased. 
Any adjustment under this Section 2(b) shall become effective at the
close of business on the date the subdivision or combination becomes effective.

(c)   Other Events.  If any
event occurs of the type contemplated by the provisions of this Section 2 but
not expressly provided for by such provisions (including, without limitation,
the granting of stock appreciation rights, phantom stock rights or other rights
with equity features), then the Company’s Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of Warrant Shares
so as to protect the rights of the Holder; provided that no such adjustment
pursuant to this Section 2(c) will increase the Exercise Price or decrease the
number of Warrant Shares as otherwise determined pursuant to this Section 2.

3.     RIGHTS UPON DISTRIBUTION
OF ASSETS.  If the Company shall
declare or make any dividend or other distribution of its assets (or rights to
acquire its assets) to holders of shares of Common Stock, by way of return of
capital or otherwise (including, without limitation, any distribution of cash,
stock or other securities, property or options by way of a dividend, spin off,
reclassification, corporate rearrangement, scheme of arrangement or other similar
transaction) (a “Distribution”),
at any time after the issuance of this Warrant, then, in each such case:

(a)   any Exercise Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders of shares of
Common Stock entitled to receive the Distribution shall be reduced, effective
as of the close of business on such record date, to a price determined by
multiplying such Exercise Price by a fraction of which (i) the numerator shall
be the Weighted Average Price of the shares of Common Stock on the Trading Day
immediately preceding such record date minus the value of the Distribution (as
determined in good faith by the Company’s Board of Directors) applicable to one
share of shares of Common Stock, and (ii) the denominator shall be the Weighted
Average Price of the shares of Common Stock on the Trading Day immediately
preceding such record date; and

(b)   the number of Warrant Shares shall be increased to a number of
shares equal to the number of shares of Common Stock obtainable immediately
prior to the close of business on the record date fixed for the determination
of holders of shares of Common Stock entitled to receive the Distribution
multiplied by the reciprocal of the fraction set forth in the immediately
preceding paragraph (a); provided that in the event that the Distribution is of
shares of Common Stock (or common stock) (“Other Shares of Common Stock”) of a company whose common
shares are traded on a national securities exchange or a national automated
quotation system, then the Holder may elect to receive a warrant to purchase
Other Shares of Common Stock in lieu of an increase in the number of Warrant
Shares, the terms of which shall 

 10
 

 

be identical to those of this Warrant, except
that such warrant shall be exercisable into the number of shares of Other
Shares of Common Stock that would have been payable to the Holder pursuant to
the Distribution had the Holder exercised this Warrant immediately prior to
such record date and with an aggregate exercise price equal to the product of
the amount by which the exercise price of this Warrant was decreased with
respect to the Distribution pursuant to the terms of the immediately preceding
paragraph (a) and the number of Warrant Shares calculated in accordance with
the first part of this paragraph (b).

4.     PURCHASE RIGHTS;
FUNDAMENTAL TRANSACTIONS.

(a)   Purchase Rights.  In
addition to any adjustments pursuant to Section 2 above, if at any time the
Company grants, issues or sells any Options, Convertible Securities or rights
to purchase stock, warrants, securities or other property pro rata to the
record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the Holder could have acquired if the Holder had held the
number of shares of Common Stock acquirable upon complete exercise of this
Warrant (without regard to any limitations on the exercise of this Warrant) immediately
before the date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as of which the
record holders of shares of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights.

(b)   Fundamental Transactions. 
The
Company shall not enter into or be party to a Fundamental Transaction unless
(i)  the Successor Entity assumes in writing all of the obligations of the
Company under this Warrant and the other Transaction Documents in accordance
with the provisions of this Section (4)(b) pursuant to written agreements in
form and substance satisfactory to the Required Holders and approved by the
Required Holders prior to such Fundamental Transaction, including agreements to
deliver to each holder of Warrants
in exchange for such Warrants
a security of the
Successor Entity evidenced by a written instrument substantially similar
in form and substance to this Warrant,
including, without limitation, an adjusted exercise price equal to the value
for the shares of Common Stock reflected by the terms of such Fundamental
Transaction, and exercisable for a corresponding number of shares of capital
stock equivalent to the shares of Common Stock acquirable and receivable upon
exercise of this Warrant (without regard to any limitations on the exercise of
this Warrant) prior to such Fundamental Transaction, and satisfactory to the
Required Holders; provided, however in the event the Successor Entity is not a
Public Successor Entity (as defined below) (a “Private Successor Entity”) such Fundamental Transaction must
be consummated for consideration consisting solely of cash.  Upon
the occurrence of any Fundamental Transaction, the Successor Entity shall
succeed to, and be substituted for (so that from and after the date of such
Fundamental Transaction, the provisions of this Warrant referring to the
“Company” shall refer instead to the Successor Entity), and may exercise every
right and power of the Company and shall assume all of the obligations of the
Company under this Warrant with the same effect as if such Successor Entity had
been named as the Company herein.  Upon
consummation of the Fundamental Transaction, the Successor Entity shall deliver
to the Holder confirmation that there shall be issued upon exercise of this Warrant at any time after the consummation of the Fundamental
Transaction, in lieu of the shares of the Common Stock (or other
securities, cash, assets or other property) purchasable
upon the exercise of the Warrant prior to such Fundamental 

 11
 

 

Transaction, (i) if the Successor
Entity is a publicly traded corporation whose stock is traded on an Eligible
Market (a “Public Successor Entity”),
such shares of stock, securities, cash, assets or any other property whatsoever
(including warrants or other purchase or subscription rights) which the Holder
would have been entitled to receive upon the happening of such Fundamental
Transaction had this Warrant been converted immediately prior to such
Fundamental Transaction or (ii) if the Successor Entity is a Private Successor
Entity, cash in an amount equal to the Black Scholes Value of the
remaining unexercised portion of this Warrant on the date of such Fundamental
Transaction, each as adjusted in accordance
with the provisions of this Warrant.  In addition to and not in substitution
for any other rights hereunder, prior to the consummation of any Fundamental
Transaction pursuant to which holders of shares of Common Stock are entitled to
receive securities or other assets with respect to or in exchange for shares of
Common Stock (a “Corporate Event”), the Company
shall make appropriate provision to insure that the Holder will thereafter have
the right to receive upon an exercise of this Warrant at any time after the consummation of the Fundamental Transaction but
prior to the Expiration Date, in lieu of the
shares of the Common Stock (or other securities, cash, assets or other
property) purchasable upon the exercise of the
Warrant prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property
whatsoever (including warrants or other purchase or subscription rights) which
the Holder would have been entitled to receive upon the happening of such
Fundamental Transaction had the Warrant been exercised immediately prior to
such Fundamental Transaction.  Provision
made pursuant to the preceding sentence shall be in a form and substance
reasonably satisfactory to the Required Holders.  The provisions of this Section shall apply
similarly and equally to successive Fundamental Transactions and Corporate
Events and shall be applied without regard to any limitations on the exercise
of this Warrant.

(c)   Notwithstanding the foregoing, in the event of a Fundamental
Transaction where the Successor Entity is a Public Successor Entity, at the
request of the Holder delivered before the 90th day after such Fundamental
Transaction, the Company (or the Successor Entity) shall purchase
this Warrant from the Holder by paying to the Holder, within five Business Days
after such request (or, if later, on the effective date of the Fundamental
Transaction), cash in an amount equal to the Black Scholes Value of the
remaining unexercised portion of this Warrant on the date of such Fundamental
Transaction.

5.     NONCIRCUMVENTION.  The Company hereby covenants and agrees that
the Company will not, by amendment of its Certificate of Incorporation, Bylaws
or through any reorganization, transfer of assets, consolidation, merger,
scheme of arrangement, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, and will at all times in good faith carry out all
the provisions of this Warrant and take all action as may be required to
protect the rights of the Holder. 
Without limiting the generality of the foregoing, the Company
(i) shall not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, (ii) shall take all such actions as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) shall, so long as any of the SPA Warrants are outstanding, take all
action necessary to reserve and keep available out of its authorized and
unissued shares of Common Stock, solely for the purpose of effecting the
exercise of the SPA Warrants, 130% of the number of shares of Common Stock as shall
from 

 12
 

 

time to time be necessary to effect the exercise of the SPA Warrants
then outstanding (without regard to any limitations on exercise).

6.     WARRANT
HOLDER NOT DEEMED A STOCKHOLDER. 
Except as otherwise specifically provided herein, the Holder, solely in
such Person’s capacity as a holder of this Warrant, shall not be entitled to
vote or receive dividends or be deemed the holder of share capital of the
Company for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the Holder, solely in such Person’s capacity as the
Holder of this Warrant, any of the rights of a stockholder of the Company or
any right to vote, give or withhold consent to any corporate action (whether
any reorganization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings, receive dividends
or subscription rights, or otherwise, prior to the issuance to the Holder of
the Warrant Shares which such Person is then entitled to receive upon the due
exercise of this Warrant.  In addition,
nothing contained in this Warrant shall be construed as imposing any
liabilities on the Holder to purchase any securities (upon exercise of this
Warrant or otherwise) or as a stockholder of the Company, whether such
liabilities are asserted by the Company or by creditors of the Company.  Notwithstanding this Section 6, the Company
shall provide the Holder with copies of the same notices and other information
given to the stockholders of the Company generally, contemporaneously with the
giving thereof to the stockholders.  The
filing of any such information via EDGAR shall satisfy the requirements of the
preceding sentence.

 13
 

 

7.     REISSUANCE
OF WARRANTS.

(a)   Transfer of Warrant. 
If this Warrant is to be transferred, the Holder shall surrender this
Warrant to the Company, whereupon the Company will forthwith issue and deliver
upon the order of the Holder a new Warrant (in accordance with Section 7(d)),
registered as the Holder may request, representing the right to purchase the
number of Warrant Shares being transferred by the Holder and, if less then the
total number of Warrant Shares then underlying this Warrant is being
transferred, a new Warrant (in accordance with Section 7(d)) to the Holder
representing the right to purchase the number of Warrant Shares not being
transferred.

(b)   Lost, Stolen or Mutilated Warrant.  Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant, and, in the case of loss, theft or destruction, of
any indemnification undertaking by the Holder to the Company in customary form
and, in the case of mutilation, upon surrender and cancellation of this
Warrant, the Company shall execute and deliver to the Holder a new Warrant (in
accordance with Section 7(d)) representing the right to purchase the Warrant
Shares then underlying this Warrant.

(c)   Exchangeable for Multiple Warrants.  This Warrant is exchangeable, upon the
surrender hereof by the Holder at the principal office of the Company, for a
new Warrant or Warrants (in accordance with Section 7(d)) representing in the
aggregate the right to purchase the number of Warrant Shares then underlying
this Warrant, and each such new Warrant will represent the right to purchase
such portion of such Warrant Shares as is designated by the Holder at the time
of such surrender; provided, however, that no Warrants for fractional shares of
Common Stock shall be given.

(d)   Issuance of New Warrants. 
Whenever the Company is required to issue a new Warrant pursuant to the
terms of this Warrant, such new Warrant (i) shall be of like tenor with this
Warrant, (ii) shall represent, as indicated on the face of such new Warrant,
the right to purchase the Warrant Shares then underlying this Warrant (or in
the case of a new Warrant being issued pursuant to Section 7(a) or Section
7(c), the Warrant Shares designated by the Holder which, when added to the
number of shares of Common Stock underlying the other new Warrants issued in
connection with such issuance, does not exceed the number of Warrant Shares
then underlying this Warrant), (iii) shall have an issuance date, as indicated
on the face of such new Warrant which is the same as the Issuance Date, and
(iv) shall have the same rights and conditions as this Warrant.

8.     NOTICES.  Whenever notice is required to be given under
this Warrant, unless otherwise provided herein, such notice shall be given in
accordance with Section 9(f) of the Securities Purchase Agreement.  The Company shall provide the Holder with
prompt written notice of all actions taken pursuant to this Warrant, including
in reasonable detail a description of such action and the reason
therefore.  Without limiting the
generality of the foregoing, the Company will give written notice to the Holder
(i) immediately upon any adjustment of the Exercise Price, setting forth in
reasonable detail, and certifying, the calculation of such adjustment and (ii)
at least fifteen days prior to the date on which the Company closes its books
or takes a record (A) with respect to any dividend or distribution upon the
shares of Common 

 14
 

 

Stock, (B) with
respect to any grants, issuances or sales of any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property to
holders of shares of Common Stock or (C) for determining rights to vote with
respect to any Fundamental Transaction, dissolution or liquidation, provided in
each case that such information shall be made known to the public prior to or
in conjunction with such notice being provided to the Holder.

9.     AMENDMENT AND WAIVER.  Except as otherwise provided herein, the
provisions of this Warrant may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed
by it, only if the Company has obtained the written consent of the Required
Holders; provided that no such action may increase the exercise price of any
SPA Warrant or decrease the number of shares or class of stock obtainable upon
exercise of any SPA Warrant without the written consent of the Holder.  No such amendment shall be effective to the
extent that it applies to less than all of the holders of the SPA Warrants then
outstanding.

10.   GOVERNING LAW.  This Warrant shall be governed by and construed
and enforced in accor­dance with, and all questions concerning the
construction, validity, interpretation and performance of this Warrant shall be
governed by, the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York.

11.   CONSTRUCTION; HEADINGS.  This Warrant shall be deemed to be jointly
drafted by the Company and all the Buyers and shall not be construed against
any person as the drafter hereof.  The
headings of this Warrant are for convenience of reference and shall not form
part of, or affect the interpretation of, this Warrant.

12.   DISPUTE RESOLUTION.  In the case of a dispute as to the
determination of the Exercise Price or the arithmetic calculation of the
Warrant Shares, the Company shall submit the disputed determinations or
arithmetic calculations via facsimile within two Business Days of receipt of
the Exercise Notice giving rise to such dispute, as the case may be, to the
Holder.  If the Holder and the Company
are unable to agree upon such determination or calculation of the Exercise
Price or the Warrant Shares within three Business Days of such disputed
determination or arithmetic calculation being submitted to the Holder, then the
Company shall, within two Business Days submit via facsimile (a) the disputed
determination of the Exercise Price to an independent, reputable investment
bank selected by the Company and approved by the Holder  or (b) the disputed arithmetic calculation of
the Warrant Shares to the Company’s independent, outside accountant.  The Company shall cause at its expense the
investment bank or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the Holder of the
results no later than ten Business Days from the time it receives the disputed
determinations or calculations.  Such
investment bank’s or accountant’s determination or calculation, as the case may
be, shall be binding upon all parties absent demonstrable error.

13.   REMEDIES, OTHER
OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.  The remedies provided in this Warrant shall
be cumulative and in addition to all other remedies available under this
Warrant and the other Transaction Documents, at law or in equity 

 15
 

 

(including a
decree of specific performance and/or other injunctive relief), and nothing
herein shall limit the right of the Holder right to pursue actual damages for
any failure by the Company to comply with the terms of this Warrant.  The Company acknowledges that a breach by it
of its obligations hereunder will cause irreparable harm to the Holder and that
the remedy at law for any such breach may be inadequate.  The Company therefore agrees that, in the
event of any such breach or threatened breach, the holder of this Warrant shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.

14.   TRANSFER.  This Warrant may be offered for sale, sold,
transferred or assigned without the consent of the Company, except as may
otherwise be required by Section 2(f) of the Securities Purchase Agreement.

15.   CERTAIN DEFINITIONS.  For purposes of this Warrant, the following
terms shall have the following meanings:

(a)   “Black Scholes Value”
means the value of this Warrant based on the Black and Scholes Option Pricing
Model obtained from the “OV” function on Bloomberg determined as of the day
immediately following the public announcement of the applicable Fundamental
Transaction and reflecting (i) a risk-free interest rate corresponding to the
U.S. Treasury rate for a period equal to the remaining term of this Warrant as
of such date of request and (ii) an expected volatility equal to the greater of
(i) 70% and (ii) the 100 day volatility obtained from the HVT function on
Bloomberg, but in no event shall such expected volatility exceed 100%.

(b)   “Bloomberg”
means Bloomberg Financial Markets.

(c)   “Business Day”
means any day other than Saturday, Sunday or other day on which commercial
banks in The City of New York are authorized or required by law to remain
closed.

(d)   “Common Stock”
means (i) the Company’s shares of Common Stock, par value $0.001 per
share, and (ii) any share capital into which such Common Stock shall have
been changed or any share capital resulting from a reclassification of such
Common Stock.

(e)   “Common Stock Deemed
Outstanding” means, at any given time, the number of shares of
Common Stock actually outstanding at such time, plus the number of shares of
Common Stock deemed to be outstanding pursuant to Sections 2(a)(i) and 2(a)(ii)
hereof regardless of whether the Options or Convertible Securities are actually
exercisable at such time, but excluding any shares of Common Stock owned or
held by or for the account of the Company or issuable upon exercise of the SPA
Warrants.

(f)    “Convertible Securities”
means any stock or securities (other than Options) directly or indirectly
convertible into or exercisable or exchangeable for shares of Common Stock.

 16
 

 

(g)   “Eligible Market”
means the Principal Market, The New York Stock Exchange, Inc., the American Stock
Exchange, The NASDAQ Global Market, The NASDAQ Global Select Market or The
NASDAQ Capital Market.

(h)   “Expiration Date”
means as to any Warrant Shares, the date thirty-six (36) months after the date
this Warrant became exercisable for such Warrant Shares or, if such date falls
on a day other than a Business Day or on which trading does not take place on
the Principal Market (a “Holiday”), the
next date that is not a Holiday.

(i)    “Fundamental Transaction”
means that the Company shall,
directly or indirectly, in one or more related transactions, (i) consolidate or
merge with or into (whether or not the Company is the surviving corporation)
another Person, or (ii) sell, assign, transfer, convey or otherwise dispose of
all or substantially all of the properties or assets of the Company to another
Person, or (iii) allow another Person to make a purchase, tender or
exchange offer that is accepted by the holders of more than the 50% of the
outstanding shares of Common Stock (not
including any shares of Common Stock held by the Person or Persons making or
party to, or associated or affiliated with the Persons making or party to, such
purchase, tender or exchange offer), or (iv) consummate a stock purchase
agreement or other business combination (including, without limitation,
a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other
Person acquires more than the 50% of the outstanding shares of Common
Stock (not including any
shares of Common Stock held by the other Person or other Persons making or
party to, or associated or affiliated with the other Persons making or party
to, such stock purchase agreement or other business combination), (v) reorganize, recapitalize or
reclassify its Common Stock, or (vi) any “person” or “group” (as these
terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is
or shall become the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting
power represented by issued and outstanding Common Stock.

(j)    “Options” means
any rights, warrants or options to subscribe for or purchase shares of Common
Stock or Convertible Securities.

(k)   “Parent Entity”
of a Person means an entity
that, directly or indirectly, controls the applicable Person and whose common
stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such
Person or Parent Entity, the Person or Parent Entity with the largest public market
capitalization as of the date of consummation of the Fundamental Transaction.

(l)    “Person” means
an individual, a limited liability company, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization, any other entity and a
government or any department or agency thereof.

(m)  “Principal Market”
means the NASD OTC Bulletin Board.

(n)   “Maximum Eligibility Number”
means initially zero and shall be increased successively each time that the
Company elects an Optional Redemption (as defined in the Notes) to that number
of shares of Common Stock issuable upon conversion of the Notes being redeemed
by the Company at such time.

 17
 

 

(o)   “Registration Rights
Agreement” means that certain registration rights agreement by and
among the Company and the Buyers.

(p)   “Required Holders”
means the holders of the SPA Warrants representing at least a majority of
shares of Common Stock underlying the SPA Warrants then outstanding.

(q)   “SPA Securities”
means the Notes issued pursuant to the Securities Purchase Agreement.

(r)    “Successor Entity”
means the Person (or, if so
elected by the Required Holders, the Parent Entity) formed by, resulting from
or surviving any Fundamental Transaction or the Person (or, if so elected by
the Required Holders, the Parent Entity) with which such Fundamental
Transaction shall have been entered into.

(s)   “Trading Day” means
any day on which the Common Stock are traded on the Principal Market, or, if
the Principal Market is not the principal trading market for the Common Stock,
then on the principal securities exchange or securities market on which the
Common Stock are then traded; provided that “Trading Day” shall not include any
day on which the Common Stock are scheduled to trade on such exchange or market
for less than 4.5 hours or any day that the Common Stock are suspended from
trading during the final hour of trading on such exchange or market (or if such
exchange or market does not designate in advance the closing time of trading on
such exchange or market, then during the hour ending at 4:00:00 p.m., New York
time).

(t)    “Weighted Average Price”
means, for any security as of any date, the dollar volume-weighted average
price for such security on the Principal Market during the period beginning at
9:30:01 a.m., New York City time, and ending at 4:00:00 p.m., New York City
time, as reported by Bloomberg through its “Volume at Price” function or, if
the foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York City time,
and ending at 4:00:00 p.m., New York City time, as reported by Bloomberg, or,
if no dollar volume-weighted average price is reported for such security by
Bloomberg for such hours, the average of the highest closing bid price and the
lowest closing ask price of any of the market makers for such security as
reported in the “pink sheets” by Pink
Sheets LLC (formerly the National Quotation Bureau, Inc.).  If the Weighted Average Price cannot be
calculated for such security on such date on any of the foregoing bases, the
Weighted Average Price of such security on such date shall be the fair market
value as mutually determined by the Company and the Required Holders.  If the Company and the Required Holders are
unable to agree upon the fair market value of the such security, then such
dispute shall be resolved pursuant to Section 12 with the term “Weighted
Average Price” being substituted for the term “Exercise Price.” All such
determinations shall be appropriately adjusted for any share dividend, share
split or other similar transaction during such period.

[Signature
Page Follows]

 18

 

IN WITNESS WHEREOF, the Company has caused
this Warrant to Purchase Common Stock to be duly executed as of the Issuance
Date set out above.

 

	
   

  	
  JAVO BEVERAGE COMPANY, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Cody C.
  Ashwell

  	
   

  
	
   

  	
  Name:

  	
  Cody C. Ashwell

  	
   

  
	
   

  	
  Title: 

  	
  Chairman and Chief Executive

  	
   

  
	
   

  	
   

  	
  Officer

  	
   

  
						

 

EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE
THIS

WARRANT TO PURCHASE COMMON STOCK

JAVO BEVERAGE COMPANY

The undersigned holder hereby exercises the right to
purchase                            
of the shares of Common Stock (“Warrant
Shares”) of Javo Beverage Company, a Delaware corporation (the “Company”), evidenced by the attached
Warrant to Purchase Common Stock (the “Warrant”).  Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.

1.  Form of
Exercise Price.  The Holder intends that
payment of the Exercise Price shall be made as:

                         a
“Cash Exercise” with respect to                          Warrant
Shares; and/or

                         a
“Cashless Exercise” with respect to                          Warrant
Shares.

2.  Payment of
Exercise Price.  In the event that the
holder has elected a Cash Exercise with respect to some or all of the Warrant
Shares to be issued pursuant hereto, the holder shall pay the Aggregate
Exercise Price in the sum of $                               to
the Company in accordance with the terms of the Warrant.

3.  Delivery
of Warrant Shares.  The Company shall
deliver to the holder                       Warrant
Shares in accordance with the terms of the Warrant.

4.  Notwithstanding anything to the contrary
contained herein, this Exercise Notice shall constitute a representation by the
holder of the Warrant submitting this Exercise Notice that, after giving effect
to the exercise provided for in this Exercise Notice, such holder (together
with its affiliates) will not have beneficial ownership (together with the
beneficial ownership of such Person’s affiliates) of a number of shares of
Common Stock which exceeds the Maximum Percentage of the total outstanding
shares of Company Common Stock as determined pursuant to the provisions of
Section 1(f) of the Warrant.

	
  Date:

  	
   

  	
   

  	
   

  	
  ,

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name of
  Registered Holder

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
									

 

ACKNOWLEDGMENT

The
Company hereby acknowledges this Exercise Notice and hereby directs [Transfer Agent] to issue the above
indicated number of shares of Common Stock in accordance with the Transfer
Agent Instructions dated December [    ], 2006 from the
Company and acknowledged and agreed to by [Transfer
Agent].

	
   

  	
  JAVO BEVERAGE COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:Exhibit 10.1

CAREER
EDUCATION CORPORATION

SEVERANCE
PLAN FOR CORPORATE EXECUTIVE LEVEL EMPLOYEES

PLAN
DOCUMENT AND SUMMARY PLAN DESCRIPTION

[TIER
THREE PLAN DOCUMENT]

(Effective
as of January 1, 2007)

Career Education
Corporation (“CEC”) has implemented this Severance Plan for Corporate Executive
Level Employees (the “Plan”) to describe the circumstances under which certain
Eligible Employees of CEC and its subsidiaries (collectively, the “Company”)
may receive severance benefits if their employment with the Company is
involuntarily terminated.  The purpose of
the Plan is to assist Eligible Employees, as defined below, during the
transition to their next employment.  The
Plan is effective for terminations occurring on or after the Effective Date and
supersedes and replaces any and all prior severance policies, plans, and
programs applicable to the Eligible Employees, as in effect prior to the
Effective Date.

I.      ELIGIBILITY

A.  Eligibility
for Discretionary Benefit Upon Involuntary Termination.

If the Plan Administrator (as defined in Section
III.A) determines that the employment of an Eligible Employee (as defined in
Section I.B) is involuntarily terminated by action of the Company, the Plan
Administrator may, in its sole discretion, provide such Eligible Employee a
benefit, determined in accordance with Section II.A.  An individual who does not meet the
requirements of this Section I shall not be entitled to receive a benefit under
the Plan.

B.  Eligible
Employees.

Employees of the
Company (i) whose regular place of employment is at a location in the United
States, and (ii) who are designated as Executive Level Employees by the Board
of Directors of the Company are eligible to participate in the Plan (“Eligible
Employees”).

C.  Terminations
Deemed Not Involuntary.

If the Plan Administrator determines that an Eligible
Employee’s employment with the Company has terminated (i) for Cause, (ii) due
to an agreement between the Company and the Eligible Employee whereby the
Eligible Employee becomes a consultant or independent contractor with the
Company, (iii) by reason of death, disability, retirement (including voluntary
retirement under a special early retirement incentive program), or (iv) for any
form of voluntary termination, such termination shall not be considered
involuntary, and such Eligible Employee shall not be eligible to receive a
benefit under the Plan.  An employee’s
termination of employment with the Company shall be a termination for Cause if
the employee is discharged by 

 

the
Company for poor performance, non-performance, or misconduct.  Misconduct shall include, but is not limited
to, insubordination, dishonesty, theft, violation of Company rules, and willful
destruction of Company property.

D.  Early Departure.

The Plan Administrator, in its sole discretion, shall
determine the date that an Eligible Employee terminates employment with the
Company for purposes of determining eligibility for benefits under the
Plan.  An Eligible Employee shall not be
deemed terminated simply upon notice by the Company of termination or possible
termination at some future date, whether or not such date is fixed and
certain.  Any Employee who resigns before
any termination date specified by the Company or while the Company still desires
such Employee’s continuing services shall not be eligible to receive a benefit
under the Plan.

E.  Reemployment
and Offers of Reemployment.

Benefits under the Plan for any Eligible Employee who
is terminated by the Company and thereafter reemployed or offered reemployment
by the Company or a related entity of the Company shall cease as of and upon
such Eligible Employee’s reemployment, or offer of reemployment in a similar
position, regardless of whether the Eligible Employee was otherwise entitled to
additional benefits under the Plan.

F.  Offer
of Another Position.

If an Employee is terminated after having refused
another position with the Company or a related entity (or, in the event of any
type of corporate transaction, with a purchaser or other acquiring entity, or a
related entity of the Company, purchaser, or acquiring entity), such
termination shall not be considered involuntary, and such employee shall not be
eligible to receive a benefit under the Plan; provided, however, that the Plan
Administrator, in its sole discretion, may treat such termination as
involuntary if such position is not the same as or similar to the employee’s
current position or is at a location sufficiently distant from the location of
the employee’s current position as would require relocation of such employee’s residence.

G.  Release
of Claims.

In addition to the terms and conditions for benefits
stated above, the Plan Administrator shall require that as a condition of
eligibility for severance benefits, an Eligible Employee shall sign a release
of claims in a form acceptable to the Plan Administrator.   The Eligible Employee’s failure or refusal
to sign such release or the Eligible Employee’s revocation of such release, to
the extent revocation is permitted by the terms of the release and this Plan,
shall disqualify the Eligible Employee from receiving any benefits under this
Plan.

The Plan
Administrator shall advise such Eligible Employee to consult an attorney at his
or her own expense prior to executing such release and shall, in accordance
with the circumstances of the termination, afford such Eligible Employee either
(a) a reasonable period of time, as determined solely within the Plan
Administrator’s discretion, or (b) the period of time required by applicable
law, to consider whether to execute such release.  If an Eligible Employee 

 2
 

 

signs such release, he or
she shall have seven (7) days after execution of such release to revoke such
release.  Upon the expiration of the
seven (7) day revocation period, if the Eligible Employee has not effectively
revoked his or her release (as provided in the release document), then such
release shall become irrevocable.

If an Eligible
Employee files a lawsuit, charge, complaint or other claim asserting any claim
or demand within the scope of any such release, the Company and Plan
Administrator, whether or not such claim may be valid, shall retain all rights
and benefits of the release and this Plan and shall have the right to recoup
the value of all payments made in accordance with the Plan, together with costs
and attorneys fees, in accordance with applicable law.  Nothing provided herein shall restrict the
Company’s ability or freedom to make any offer in settlement of any claim
against the Company, Plan Administrator, or any of the Company’s employee
benefit plans without regard to the terms of this Plan.

H.  Non-Solicitation,
Non-Competition and Confidentiality Agreement.

In addition to the other
requirements for benefits set forth in this Section I, the Plan Administrator
shall require an Eligible Employee to enter into a non-solicitation,
non-competition and confidentiality agreement with the Company as a condition
to obtaining benefits under the Plan.

I.  Supplements.

The Plan Administrator may also attach, as a
Supplement to this Plan, the terms and conditions (including the amount) of a
severance arrangement applicable to one or more Eligible Employees as the
result of a corporate event, such as a down-sizing, reduction in force, or
closing of a division or facility.  Any
such Supplement will be subject to the provisions of this Plan, unless
otherwise set forth in such Supplement.

II.    AMOUNT AND PAYMENT OF SEVERANCE BENEFITS

A. Generally.

If, in accordance
with Section I.A, the Plan Administrator determines that an individual is an
Eligible Employee under the terms of the Plan, the Plan Administrator shall
determine, in its sole discretion and on a nondiscriminatory basis, the amount
of such benefit the Eligible Employee shall receive, subject to this Section II
and taking into account any factors that the Plan Administrator deems
reasonable and appropriate.  The Plan
Administrator may establish, and may from time to time and at any time amend,
standards or definitions applicable to such determinations if the Plan
Administrator deems such standards or definitions appropriate.

An Eligible
Employee, whose employment is involuntarily terminated for any reason, other
than a termination deemed not involuntary under Section I.C., shall be entitled
to a minimum of twenty-six (26) weeks of Pay and a maximum of fifty-two (52)
weeks of Pay at the time of termination to be paid in accordance with Section
II.B and to be calculated as follows:

 3
 

 

1.               An Eligible
Employee with up to thirteen (13) full years of Continuous Service with the
Company at the time of termination shall be entitled to twenty-six (26) weeks
of Pay.

2.               An Eligible
Employee with fourteen (14) to twenty-five (25) full years of Continuous
Service with the Company at the time of termination shall be entitled to two
(2) weeks of Pay per year of Continuous Service.

3.               An Eligible
Employee with twenty-six (26) or more years of Continuous Service with the
Company at the time of termination shall be entitled to fifty-two (52) weeks of
Pay.

An Eligible Employee shall also be entitled to a lump
sum payment of his or her pro-rated bonus earned during the year of
termination, calculated in accordance with the method for determining bonuses
for other similarly situated employees and paid in accordance with the normal
procedures but not later than two and one-half months after the close of the
calendar year in which the termination takes place.

For purposes of
computing an Eligible Employee’s benefits under the Plan, “Continuous Service”
shall mean the Eligible Employee’s most recent unbroken period of employment
with the Company, including service with a predecessor employer acquired by the
Company.  Continuous service shall not
include any period of earned, unused vacation or any period during which the
Eligible Employee was a consultant or independent contractor of the
Company.  For purposes of this
definition, multiple periods of employment with the Company separated by a
leave of absence of less than one (1) year shall be considered one continuous
period of employment.

For purposes of
this section, an Eligible Employee’s “Pay” shall mean his or her base pay at
the time of termination.

B.  Payment.

Payment of severance benefits shall be subject to the
following terms and conditions:

1.               Severance benefits
will be paid in a lump sum following termination of employment.  Payment of severance benefits shall be made
on or before March 15th of the year following the year in which an Eligible
Employee’s termination occurs.

2.               Bonus payments will
be paid in a lump sum as soon as practical in the year following the year in
which an Eligible Employee’s termination occurs; but in no event will payment
of bonus payments be made after March 15th of the year following  the year in which an Eligible Employee’s
termination occurs.

3.               Severance payments
shall be subject to all applicable federal and state tax withholding, including
FICA, and any other withholdings required under applicable law.

 

 4

 

4.               Severance payments
shall be in addition to any pay for accrued but unused vacation to which a
terminated Eligible Employee may be entitled.

5.               Severance payments
shall not be considered “compensation” for purposes of determining any benefits
provided under any pension, savings or other employee benefit plan maintained
by the Company.

C.  Interaction
With WARN Act.

Notwithstanding anything in this Plan to the contrary,
benefits payable under the Plan will be reduced (but not below zero) by any
amounts required to be paid to each Eligible Employee pursuant to the Worker
Adjustment and Retraining Notification Act (“WARN”), without regard to whether
Eligible Employees assert such rights. 
The Plan is not intended to duplicate payments already required by WARN.

D.  Other
Offsets.

Any benefit payment due to an Eligible Employee under
this Plan will also be reduced (but not below zero) by any severance pay,
salary continuation, termination pay, or similar pay or allowance (“Other
Benefit Arrangement”) which the Eligible Employee receives or is entitled to
receive under any employment, severance or other agreement between the Eligible
Employee and the Company.  This Plan is
not intended to, and shall not result in any duplication of payments or
benefits to any Eligible Employee under any Other Benefit Arrangement.

III.   PLAN ADMINISTRATION

A.  Employee
Benefits Committee is Plan Administrator.

The Board of Directors of CEC has appointed the
Employee Benefits Committee as the Plan Administrator and the Named Fiduciary
of the Plan.  The Plan Administrator may
delegate its powers and responsibilities for administration of the Plan to one
or more persons or subcommittees.  The
Plan Administrator may adopt such rules and regulations and may make such
decisions as it deems necessary or desirable for the proper administration of
the Plan.

B.  Plan
Administrator’s Determination.

All determinations regarding benefits will be made by
the Plan Administrator in accordance with the written terms of the Plan.  The Plan Administrator shall have the express
discretionary authority to determine eligibility for benefits and the amount of
benefits, to decide factual and other questions relating to the Plan, and to
interpret the terms of the Plan.  Determinations
and interpretations by the Plan Administrator, including without limitation
decisions relating to eligibility for, entitlement to, and payment of benefits,
shall be conclusive and binding for all purposes (unless determined by a court
of competent jurisdiction to be an arbitrary and capricious abuse of
discretion).  When making any
determination or calculation, the Plan Administrator shall be entitled to rely
upon the accuracy and completeness of information furnished by the Company’s
employees and agents.

 5
 

 

IV.   CLAIMS FOR BENEFITS

A.  Submission
of Claims.

All claims for benefits must be submitted to the Plan
Administrator.

B.  Denial
of Claims.

If a claim for benefits is denied in whole or in part,
the claimant shall receive a written or electronic notice explaining the denial
of the claim within ninety (90) days after the Plan Administrator’s receipt of
the claim.   If the Plan Administrator
determines that for reasons beyond its control, a ninety (90) day extension of
time is necessary to process the claim, the claimant shall be notified in
writing of the extension and reason for the extension within ninety (90) days
after the Plan Administrator’s receipt of the claim.  The written extension notification shall also
indicate the date by which the Plan Administrator expects to render a final
decision.  A notice of denial of claim
shall contain the following:

1.               The specific reason
or reasons for the denial;

2.               Reference to the
specific Plan provisions on which the denial is based;

3.               A description of
any additional materials or information necessary for such claimant to perfect
the claim and an explanation of why such material or information is necessary;
and

4.               A description of
the Plan’s review procedures and the time limits applicable to such procedures,
including a statement of the claimant’s right to bring a civil action under
Section 502(c) of ERISA following an adverse benefit determination on review.

C.  Review
of Denied Claims.

A claimant may file a written request for a review of
the denial of a claim within sixty (60) days after receiving written notice of
the denial.  The claimant may submit
written comments, documents, records and other relevant information in support
of the claim.  A claimant shall be
provided, upon request and without charge, reasonable access to, and copies of,
all documents, records, and other information relevant to the claimant’s claim
for benefits.  A document, record, or
other information shall be considered relevant if it:  (a) was relied upon in denying the claim; (b)
submitted, considered or generated in the course of processing the claim,
regardless of whether it was relied upon; (c) demonstrates compliance with the
claims procedures process; or (d) constitutes a statement of Plan policy or
guidance concerning the denied benefit. 
In reviewing a denied claim, the reviewer shall take into consideration
all comments, documents, records, and other information submitted by the
claimant in support of the claim, without regard to whether such information
was submitted or considered in the initial benefit determination.  The Plan Administrator will notify the
claimant in writing of its decision on the appeal.  Such notification will be in writing in a
form designed to be understood by the claimant. 
If the claim is denied in whole or in part on appeal, the notification
will also contain:

 6
 

 

1.               The specific reason
or reasons for the denial;

2.               Reference to the
specific Plan provisions on which the determination is based;

3.               A statement that
the claimant is entitled to receive, upon request and free of charge, reasonable
access to, and copies of, all documents, records, and other information
relevant to the claimant’s claim for benefits. A document, record, or other
information shall be considered relevant if it: 
(i) was relied upon in denying the claim; (ii) submitted, considered or
generated in the course of processing the claim, regardless of whether it was
relied upon; (iii) demonstrates compliance with the claims procedures process;
or (iv) constitutes a statement of Plan policy or guidance concerning the denied
benefit; and

4.               A statement that
the claimant has a right to bring an action under Section 502(a) of ERISA.

Such notification
will be given by the Plan Administrator within sixty (60) days after the
complete appeal is received by the Plan Administrator (or within one hundred
twenty (120) days if the Plan Administrator determines special circumstances
require an extension of time for considering the appeal, and if written notice
of such extension and circumstances is given to the claimant within the initial
sixty (60) day period). Such written extension notice shall also indicate the
date by which the Plan Administrator expects to render a decision.

D.  Legal
Action.

If a claimant decides to take legal action related to
a claim for benefits or such claimant’s rights under the Plan, the agent to
receive legal process is the Plan Administrator.

V.    MISCELLANEOUS

A.  Status
of Plan.

The Plan is a severance plan and is therefore a
welfare benefit plan within the meaning of Section 3(1) of ERISA, rather than a
pension or retirement plan.  Benefits
payable under the Plan are not contingent, directly or indirectly, on an
Eligible Employee’s retirement.  Eligible
Employees have no vested right to benefits under the Plan.

B.  Effective
Date.

The Effective Date of the Plan is January 1, 2007.

C.  No
Vested Benefits.

Inclusion as an Eligible Employee does not confer any
vested benefits on a participant.  No
benefits are vested until an Eligible Employee has been terminated and notified
of his or her benefits under the Plan.

 7
 

 

D.  Amendment
and Termination.

CEC reserves the right to amend, modify or terminate,
in whole or in part, the Plan at any time.

E.  Funding
of Benefits.

Plan benefits are paid from the Company’s general
assets as benefits become payable under the Plan.  No separate trust or segregated assets shall
be required to be established to pay benefits.

F.  Binding
on Successors and Assigns.

The provisions of this Plan shall be binding on the
Company and its successors and assigns.

G.  Severability.

In
the event that any provision of this Plan is held illegal or invalid, the
remaining provisions of this Plan shall not be affected thereby.

H.  Non-alienation of Benefits.

The Company shall not in any manner be liable for or
subject to the debts or liabilities of any individual by reason of the
existence or operation of the Plan.  No
right or benefit under the Plan shall, at any time, be subject to alienation,
sale, transfer, assignment, pledge, or any encumbrance of any kind.  If an Eligible Employee or former Eligible
Employee shall attempt to or shall alienate, sell, transfer, assign, pledge or
otherwise encumber his or her rights, benefits, or amounts payable under the
Plan, or any part thereof, or if by reason of his or her bankruptcy or other
events happening at any time, such benefits would otherwise be received by
anyone else or would not be enjoyed by him or her, the Plan Administrator in
its sole discretion may terminate his or her interest in any such right or
benefit and hold or pay it to, or for the benefit of, such person, his or her
spouse, children, or other dependents, or any of them as the Plan Administrator
may determine.

I.  No
Employment Contract.

Nothing contained in this Plan shall be construed to
be an employment contract between any Eligible Employee and the Company nor
shall it prohibit the Company from being able to terminate any Employee, or the
Employee from being able to quit, at any time, at the will of the Company or
the Employee, respectively, for any reason or for no reason, with or without
notice.  All Company employees remain
employees at-will.  No rights shall be
deemed to vest under the Plan.

J.  Governing
Law.

This Plan shall be construed and enforced in
accordance with, and governed by, the laws of the State of Illinois, to the extent
not preempted by applicable federal law.

 

 8

 

K.  Dispute
Resolution.

1.               In the event of a
dispute under this Plan between the Company and an Employee where Article IV is
not applicable or where the requirements of Article IV have been satisfied, the
claim shall be promptly submitted to binding arbitration.  The arbitration hearing shall be completed
within ninety (90) days of the submission to arbitration.

2.               Such arbitration
shall be conducted in accordance with this Plan and, where not inconsistent,
the appropriate commercial arbitration rules of the American Arbitration
Association (“AAA”), and shall be held in the City of Chicago at such location
within Chicago as shall be determined by the AAA.  Each side shall name one arbitrator. The two
arbitrators shall select a third arbitrator either by mutual agreement or from
a list submitted by the AAA in accordance with AAA rules.  The arbitrators shall permit reasonable
discovery in accordance with Federal Rules of Civil Procedure and the local
Rules of the U.S. District Court for the Northern District of Illinois.  The arbitrators shall make written findings
of fact and conclusions of law reflecting the appropriate substantive law.  The decision of the arbitrators shall be rendered
within thirty (30) days of the close of the arbitration hearing and shall be
final and binding.  The Company and the
Employee shall pay their own expenses of arbitration and legal fees, and the
expenses of the arbitrators and the AAA shall be equally shared; providing,
however, that if, in the opinion of the arbitrators, any claim under this Plan
or any defense in objection thereto was unreasonable, the arbitrators may
assess, as part of their award, all or any part of the arbitration expenses
(including reasonable attorneys’ fees of the other party and arbitrators’ fees
under the standards and law applicable under Rules 11 and 27 of the Federal
Rules of Civil Procedure) against the party raising such unreasonable claim,
defense or objection.

3.               In any arbitration
proceeding pursuant to subsection (2) above, this Plan shall be governed as to
all matters, including validity, interpretation and enforcement, by the laws of
the State of Illinois, except as superseded by the laws of the United States.

4.               Judicial orders to
enforce the arbitration provisions of this Plan and otherwise in aid of
arbitration may be entered by the federal and state courts located in Chicago,
Illinois, at any time prior to or after a final decision by the arbitrators,
and the Company and Employee hereby submit to personal jurisdiction in the
State of Illinois and to venue in such courts.

VI.   PARTICIPANT RIGHTS

Eligible Employees
covered by the Plan (“Participants”) are entitled to certain rights and
protections under ERISA, as amended. 
ERISA provides that all Plan Participants shall be entitled to the
following:

 9
 

 

·                  Participants may
examine, without charge, at the Company’s office or its Human Resources
Department, all Plan documents, including insurance contracts, and copies of
all documents filed with respect to the Plan with the U.S. Department of Labor,
such as annual reports and Plan descriptions. 
These documents are available during regular business hours.

·                  Participants may
obtain copies of all Plan documents and other Plan information upon written
request to the Plan Administrator.  The
Plan Administrator may assess a reasonable charge for copies.

·                  The law provides
that Participants cannot be fired or discriminated against to prevent them from
attaining a benefit or for exercising their rights under ERISA.  If a Participant’s claim for welfare benefits
is denied in whole or in part, the Participant must receive a written
explanation of the reason for the denial. 
The Participant has the right to have his or her claim reviewed and
reconsidered.

·                  Under ERISA,
Participants can take certain steps to enforce the rights described above.  For example, if a Participant requests Plan
materials, he or she must receive them within thirty (30) days.  However, if the materials have not been
received after about twenty (20) days, he or she should check with the Plan Administrator
to see if there are any problems with the request.  Then, if he or she has not received the
materials within thirty (30) days of the request, a Participant can file suit
in federal court.  The court can require
the Plan Administrator to provide the materials and pay up to $110 for each day
of delay until the Participant receives the materials, unless they were not
sent because of reasons beyond the control of the Plan Administrator.  If a Participant has a claim for benefits
which is denied or ignored, in whole or in part, he or she may file suit in
state or federal court, or ask the U.S. Department of Labor for help.  If a Participant thinks Plan fiduciaries are
misusing the Plan’s money, or feels that he or she is being discriminated
against for exercising protected rights, he or she can get assistance from the
U.S. Department of Labor or file suit in federal court.  Any time a Participant sues, the court will
decide who should pay court costs and legal fees.  If the Participant wins, the court may order
the person he or she sued to pay these costs and fees.  If he or she loses, the court may order the
Participant to pay these costs and fees.

·                  In addition to
creating rights for Plan Participants, ERISA imposes duties upon the people who
are responsible for the operation of the employee benefit plan.  The people who operate the Plan, called “fiduciaries”
of the Plan, have certain duties to act prudently and in the interest of Plan
Participants.

A Participant with
questions about the Plan should contact the Plan Administrator.  A Participant with questions about his or her
rights under ERISA should contact the nearest Area Office of the Pension and
Welfare Benefits Administration, U.S. Department of Labor, listed in the
telephone directory or the Division of Technical Assistance and Inquiries,
Pension and Welfare Benefits Administration, U.S. Department of Labor, 200
Constitution Avenue, N.W., Washington, D.C. 20210.  A Participant may also obtain certain publications
about his or her rights and responsibilities under ERISA by calling the
publications hotline of the Pension and 

 10
 

 

Welfare Benefits
Administration.

*     *     *    
*     *     *    
*     *     *    
*     *     *

IN WITNESS WHEREOF,
Career Education Corporation has caused this Plan to be executed this 12th day
of December, 2006.

CAREER EDUCATION
CORPORATION

By:   /s/ Patrick K. Pesch                                                                     

        Patrick K. Pesch

        Executive Vice President, Chief
Financial Officer, and Assistant Secretary

IMPORTANT PLAN
INFORMATION

Plan Name

Career Education
Corporation Severance Plan for Executive Level Employees

Plan Number

507

Plan Year

The Plan Year is the
calendar year.  The end of the year for
purposes of maintaining the Plan’s fiscal records is December 31.

Plan Sponsor 

Career Education Corporation

847-781-3600

Employer Identification Number (EIN): 36-3932190

Plan Administrator

Career Education Corporation Employee Benefits Committee

c/o Career Education Corporation

2895 Greenspoint Parkway

Suite 600

Hoffman Estates, IL 60169

847-781-3600

 

 11

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