Document:

Unassociated Document

    

    
      
         

        THIS NOTE
HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.

         

        UNSECURED
PROMISSORY NOTE

         

        
          	
                  $1,818,065

                	
                  New
      York, New York

                
	 
      	
                  Original
      Issuance Date: December 31, 2008

                

        

         

        FOR VALUE RECEIVED, the
undersigned, CYALUME
TECHNOLOGIES HOLDINGS, INC., a Delaware corporation (the “Company”), hereby promises to
pay to the order of RODMAN
PRINCIPAL INVESTMENTS, LLC (the “Holder”), or his registered
assigns, on the Maturity Date (as hereinafter defined) (or earlier as
hereinafter provided) the principal sum of One Million Eight Hundred Eighteen
Thousand Sixty Five Dollars ($1,818,065), plus all “PIK Amounts” (as hereinafter
defined) added to the principal amount hereof pursuant to the terms of this
Unsecured Promissory Note (this “Note”), with interest on the
unpaid principal amount of this Note from time to time as provided
herein.  For the purposes of this Note, the term “Maturity Date” shall mean June
30, 2014.

         

        
          	
                  1.

                	
                  Interest.

                

        

         

        
          	
                   
      

                	
                  (a)

                	
                  Interest
      on this Note shall accrue from the Original Issuance Date of this Note (as
      set forth on the face of this Note above) at a rate of eight percent (8%)
      per annum until repayment of the Accreted Principal Amount (as hereinafter
      defined) and payment of all accrued interest in full.  Interest
      shall accrue and be computed on the basis of the actual number of days in
      the related period over 360 days.  The Company shall pay accrued
      interest quarterly on the last business day of each March, June, September
      and December during the term hereof and on the Maturity Date, commencing
      on March 31, 2009, by the addition of such accrued interest amount to the
      principal amount outstanding under this Note (any such amount, a “PIK
      Amount”).  At any time, the outstanding principal amount
      of this Note, including all PIK Amounts added thereto through such time is
      referred to in this Note as the “Accreted Principal
      Amount”.

                

        

         

        
          	
                   
      

                	
                  (b)

                	
                  Notwithstanding
      subsection (a) of this Section 1, but subject to applicable law, upon and
      during the occurrence of an Event of Default (as defined in Section 6
      below), the Accreted Principal Amount of this Note shall bear interest,
      from the date of the occurrence of such Event of Default until such Event
      of Default is cured or waived, payable on demand at a rate equal to the
      applicable interest rate in effect hereunder plus two percent (2%) (the
      “Default Rate”)
      (and such interest shall be paid by adding a PIK Amount to the Accreted
      Principal Amount of this Note in respect of such interest).  In
      addition, any overdue interest on this Note shall bear interest, payable
      on demand at a rate equal to the applicable interest rate in effect
      hereunder plus two percent (2%) (and such interest shall be paid by adding
      a PIK Amount to the Accreted Principal Amount of this Note in respect of
      such interest).

                

        

         

        
          	
                   
      

                	
                  (c)

                	
                  In
      the event that any interest rate provided for herein shall be determined
      to be unlawful, such interest rate shall be computed at the highest rate
      permitted by applicable law.  Any payment by the Company of any
      interest amount in excess of that permitted by law shall be considered a
      mistake, with the excess being applied to the principal of this Note
      without prepayment premium or
penalty.

                

        

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

         

        
          	
                  2.

                	
                  Principal. The
      Company shall pay the principal amount due under this Note including all
      PIK Amounts and all accrued and unpaid interest (all of which shall be
      payable in cash and no portion of which shall be payable by addition of a
      PIK Amount to the Accreted Principal Amount) on the Maturity
      Date.

                

        

         

        
          	
                  3.

                	
                  Voluntary
      Prepayment.  This Note is subject to prepayment at the
      option of the Company, in whole or in part, at any time and from time to
      time without premium or penalty.  All prepayments under this
      Section 3 shall include payment of accrued interest on the Accreted
      Principal Amount so prepaid (which interest shall be paid entirely in cash
      and no portion of which shall be payable by the addition of a PIK Amount
      to the Accreted Principal Amount) and shall be applied first to the
      payment of default interest, if any, then to payment of accrued and unpaid
      interest, if any, to but not including the date of prepayment, and
      thereafter to principal.  The Company agrees, subject to the
      approval of its lenders or the lenders of its subsidiary, to use a portion
      of the proceeds of any debt or equity financing to pay off a portion of
      this Note.

                

        

         

        
          	
                  4.

                	
                  Amendment.
      Amendments and modifications of this Note shall be made only by written
      agreement signed by the Company and the
Holder.

                

        

         

        
          	
                  5.

                	
                  Transfer;
      Registration.

                

        

         

        
          	
                   
      

                	
                  (a)

                	
                  The
      term “Holder” as
      used herein shall also include any registered transferee of this
      Note.  The initial Holder by its acceptance hereof and each
      transferee of this Note acknowledges that this Note has not been
      registered under the Securities Act (as hereinafter defined) and the
      Holder agrees that, prior to any proposed transfer of this Note, if such
      transfer is not made pursuant to either an effective registration
      statement under the Securities Act or pursuant to an exemption from
      registration under the Securities Act, the Holder will, if requested by
      the Company, deliver to the
Company:

                

        

         

        
          	
                   
      

                	
                  (i)

                	
                  investment
      representations, in customary substance and form, reasonably acceptable to
      the Company, signed by the proposed
transferee;

                

        

         

        
          	
                   
      

                	
                  (ii)

                	
                  an
      agreement by such transferee to the inclusion of and compliance with the
      restrictive investment legend set forth on this Note;
  and

                

        

         

        
          	
                   
      

                	
                  (iii)

                	
                  an
      agreement by such transferee to be bound by the provisions of this Section
      5 relating to the transfer of such
Note.

                

        

         

        
          	
                   
      

                	
                  (b)

                	
                  The
      Company shall maintain a register (the “Note Register”) in its
      principal offices for the purpose of registering this Note and any
      transfer thereof, which register shall reflect and identify, at all times,
      the ownership of any interest in this Note.  Upon the issuance
      of this Note, the Company shall record the name of the initial Holder of
      this Note in the Note Register as the first Holder.  Upon
      surrender for registration of transfer or exchange of this Note at the
      principal offices of the Company, the Company shall, at the Company’s
      expense, execute and deliver a new Note of like tenor and of a like
      aggregate principal amount, registered in the name of the Holder or a
      transferee or transferees.  Every Note surrendered for
      registration of transfer or exchange shall be duly endorsed, or be
      accompanied by written instrument of transfer duly executed by the Holder
      of such Note or such holder’s attorney duly authorized in
      writing.  The Company shall not have any obligation hereunder to
      any person other than the registered Holder of this
  Note.

                

        

         

        
          
            
            

          

          
            2

            
              

            

          

          
            
            

          

        

         

        
          	
                   
      

                	
                  (c)

                	
                  This
      Note may be transferred or assigned by the Holder at any time subject to
      Sections 5(a), 5(b) and 8 hereof.

                

        

         

        
          	
                   
      

                	
                  (d)

                	
                  In
      the event that the Holder intends to transfer this Note to more than one
      transferee, the Company shall, in good faith, cooperate with the Holder to
      effectuate such a transfer and to issue replacement Notes in the
      appropriate denominations.

                

        

         

        
          	
                  6.

                	
                  Events of
      Default. The occurrence of any one or more of the following events
      shall constitute an “Event of Default”
      hereunder:

                

        

         

        
          	
                   
      

                	
                  (a)

                	
                  a
      default shall be made in the payment of any amount due and owing under
      this Note when and as the same shall become due and payable and such
      default shall continue unremedied for a period of three (3) business
      days;

                

        

         

        
          	
                   
      

                	
                  (b)

                	
                  default
      shall be made in the due observance or performance by the Company of any
      covenant, condition or agreement contained in this Note (other than those
      specified in paragraph (a) immediately above) and such default shall
      continue unremedied or shall not be waived for a period of 30 days after
      written notice thereof from the Holder to the
  Company;

                

        

         

        
          	
                   
      

                	
                  (c)

                	
                  this
      Note or any material provision hereof in favor of the Holder shall at any
      time and for any reason be declared by a court of competent jurisdiction
      to be null and void, or a proceeding shall be commenced by any person who
      is not affiliated with or an agent of the Holder, seeking to establish the
      invalidity or unenforceability of this Note or any material provision
      hereof in favor of the Holder (exclusive of questions of interpretation of
      any provision hereof), or the Company shall repudiate or deny any portion
      of its liability or obligation for its obligations
    hereunder;

                

        

         

        
          	
                   
      

                	
                  (d)

                	
                  an
      involuntary proceeding shall be commenced or an involuntary petition shall
      be filed in a court of competent jurisdiction seeking (i) relief in
      respect of the Company, or of a substantial part of the property of the
      Company, under the provisions of Title 11 of the United States Code, 11
      U.S.C., §§101 et seq., as now and hereafter in effect, any successors to
      such statute and any other applicable insolvency or similar law of any
      jurisdiction including, without limitation, any law of any jurisdiction
      permitting a debtor to obtain a stay or a compromise of the claims of its
      creditors against it (the “Bankruptcy Code”), as
      now constituted or hereafter amended, or any other federal, state or
      foreign bankruptcy, insolvency, receivership or similar law; (ii) the
      appointment of a receiver, trustee, custodian, sequestrator, conservator
      or similar official for the Company or for a substantial part of the
      property of the Company; or (iii) the winding-up or liquidation of the
      Company; and such proceeding or petition shall continue undismissed for 60
      consecutive days or an order or decree approving or ordering any of the
      foregoing shall be entered; or

                

        

         

        
          	
                   
      

                	
                  (e)

                	
                  the
      Company shall (i) voluntarily commence any proceeding or file any petition
      seeking relief under the Bankruptcy Code, as now constituted or hereafter
      amended, or any other federal, state or foreign bankruptcy, insolvency,
      receivership or similar law; (ii) consent to the institution of, or fail
      to contest in a timely and appropriate manner, any proceeding or the
      filing of any petition described in clause (d) above; (iii) apply for or
      consent to the appointment of a receiver, trustee, custodian,
      sequestrator, conservator or similar official for the Company or for a
      substantial part of the property of the Company; (iv) file an answer
      admitting the material allegations of a petition filed against it in any
      such proceeding; (v) make a general assignment for the benefit of
      creditors; (vi) become unable, admit in writing its inability or fail
      generally to pay its debts as they become due; (vii) take any action for
      the purpose of effecting any of the foregoing; or (viii) wind up or
      liquidate.

                

        

         

        
          
            
            

          

          
            3

            
              

            

          

          
            
            

          

        

         

        At any
time on or after an Event of Default, and notwithstanding anything in this Note
to the contrary, and in addition to any rights or remedies available to the
Holders (or its affiliates) at law or in equity, the Holder, in its sole and
absolute discretion, may: (A) declare the whole Accreted Principal Amount then
outstanding with accrued interest and any outstanding PIK Amounts (which PIK
Amounts shall be payable in cash) to be immediately due and payable; and (B)
from time to time, increase the rate of interest hereunder to the Default Rate;
provided, however, in
the case of an Event of Default under clauses (d) or (e) of this Section 6, all
such amounts shall immediately, without notice, further action or deed become
due and payable.  The exercise of any rights by the Holder under this
Section 6 shall not be deemed an election of remedies precluding the further
exercise of any rights or remedies in response to or in connection with the
events giving rise to such exercise.

         

        
          	
                  7.

                	
                  Replacement of
      Note. On receipt by the Company of an affidavit of an authorized
      representative of the Holder stating the circumstances of the loss, theft,
      destruction or mutilation of this Note (and in the case of any such
      mutilation, on surrender and cancellation of this Note), the Company, at
      its expense, will promptly execute and deliver, in lieu thereof, a new
      Note of like tenor.

                

        

         

        
          	
                  8.

                	
                  Successors and
      Assigns; Assignment. All the covenants, stipulations, promises and
      agreements in this Note shall inure to the benefit of and be binding upon
      the successors and permitted assigns of the Holder and the
      Company.  The Company shall not assign any of its rights under
      this Note without the prior written consent of the Holder, any such
      purported assignment without such consent being null and
    void.

                

        

         

        
          	
                  9.

                	
                  GOVERNING LAW.
      THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
      OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF
      LAW OF SUCH STATE OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
      OF THE STATE OF NEW YORK.

                

        

         

        
          	
                  10.

                	
                  Waivers. The
      Company hereby waives presentment, demand for payment, protest and notice
      of protest and notice of dishonor of this
Note

                

        

         

        
          	
                  11.

                	
                  RIGHTS, CUMULATIVE;
      FORBEARANCE.  The rights, powers and remedies given to
      the Holder under this Note shall be in addition to and not in lieu of all
      rights, powers and remedies given to it under the law or in
      equity.  Any forbearance, failure or delay by the Holder in
      exercising any right, power or remedy under this Note, or that may
      otherwise be available to the Holder shall not be deemed to be a waiver of
      such right, power or remedy, nor shall any single or partial exercise of
      any right, power or remedy preclude the further exercise
      thereof.

                

        

         

        
          
            
            

          

          
            4

            
              

            

          

          
            
            

          

        

         

        
          	
                  12.

                	
                  WAIVER OF JURY TRIAL;
      CONSENT TO JURISDICTION.  EACH OF THE COMPANY AND THE
      HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF HEREBY WAIVES, TO THE EXTENT
      PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN ANY LITIGATION IN ANY COURT
      WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF THIS NOTE OR ANY
      AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY OR THE VALIDITY,
      PROTECTION, INTERPRETATION, OR ENFORCEMENT HEREOF OR
      THEREOF.  THE SCOPE OF THIS WAIVER IS INTENDED TO BE
      ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT
      AND THAT RELATE TO THIS NOTE, INCLUDING WITHOUT LIMITATION, CONTRACT
      CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND
      STATUTORY CLAIMS.  EACH OF THE COMPANY AND THE HOLDER OF THIS
      NOTE ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO
      A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS WAIVER IN
      ENTERING INTO THIS TRANSACTION, AND THAT EACH WILL CONTINUE TO RELY ON
      THIS WAIVER IN ITS RELATED FUTURE DEALINGS.  EACH OF THE COMPANY
      AND THE HOLDER OF THIS NOTE FURTHER WARRANTS AND REPRESENTS THAT EACH HAS
      REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH HAS KNOWINGLY
      AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH
      LEGAL COUNSEL.  THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
      NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY
      TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
      THE TRANSACTION DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS
      RELATING TO THIS NOTE.  IN THE EVENT OF LITIGATION, THIS
      AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
      COURT.  EACH OF THE COMPANY AND THE HOLDER OF THIS NOTE ALSO
      WAIVES ANY BOND OR SURETY OR SECURITY UPON SUCH BOND THAT MIGHT, BUT FOR
      THIS WAIVER, BE REQUIRED OF EACH.  EACH OF THE COMPANY AND THE
      HOLDER OF THIS NOTE HEREBY IRREVOCABLY AGREES THAT ANY LEGAL ACTION OR
      PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR ANY AGREEMENTS OR
      TRANSACTIONS CONTEMPLATED HEREBY MAY BE BROUGHT IN THE COURTS OF THE STATE
      OF NEW YORK LOCATED IN NEW YORK COUNTY OR OF THE UNITED STATES OF AMERICA
      FOR THE SOUTHERN DISTRICT OF NEW YORK AND HEREBY EXPRESSLY SUBMITS TO THE
      PERSONAL JURISDICTION AND VENUE OF SUCH COURTS FOR THE PURPOSES THEREOF
      AND EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE AND ANY CLAIM THAT SUCH
      COURTS ARE AN INCONVENIENT FORUM.  EACH OF THE COMPANY AND THE
      HOLDER OF THIS NOTE HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS
      OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING
      BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
      PREPAID, TO ITS ADDRESS SET FORTH IN THE PREAMBLE TO THIS NOTE (OR AT SUCH
      OTHER ADDRESS AS THE COMPANY OR THE HOLDER MAY PROVIDE IN WRITING TO THE
      OTHER), SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH
      MAILING.

                

        

         

        
          	
                  13.

                	
                  Headings. The
      headings in this Note are for convenience of reference only and shall not
      limit or otherwise affect the meaning
hereof.

                

        

         

        
          	
                  14.

                	
                  Severability.
      If any one or more of the provisions contained herein, or the application
      thereof in any circumstance, is held invalid, illegal or unenforceable in
      any respect for any reason, the validity, legality and enforceability of
      any such provision in every other respect and of the remaining provisions
      hereof shall not be in any way impaired, unless the provisions held
      invalid, illegal or unenforceable shall substantially impair the benefits
      of the remaining provisions hereof.

                

        

         

        [Signature Page
Follows]

         

        
          
            
            

          

          
            5

            
              

            

          

          
            
            

          

        

         

         

        IN WITNESS WHEREOF, the
Company has caused this Unsecured Promissory Note to be duly executed as of the
date first written above.

         

         

        
          
            
              
                	 	COMPANY	 
	 	 	 
	 	CYALUME TECHNOLOGIES HOLDINGS,
      INC.	 
	 	 	 	 
	
                         

                      	
                        By:
      

                      	/s/ Derek
      Dunaway	 
	 	 	Name:
      Derek Dunaway	 
	 	 	Title:
      Chief Executive Officer & President	 
	 	 	 	 

              

            

          

        

         

        
          
            
            

          

          
            6Unassociated Document

    

    ASSET
PURCHASE AGREEMENT

    

    This
ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of
December 31, 2008 and effective as of November 30, 2008, is by and between JDCO,
Inc., a California corporation (“Seller”) and Java NorCal,
LLC, a California limited liability company (“Buyer”).

    

    WITNESSETH:

    

    WHEREAS,
Seller is engaged in the business of selling gourmet coffees, whole leaf teas
and other beverages through a Seller-owned retail store in Marysville,
California (the “Marysville
Business”) located at 515 3rd Street,
Marysville, California, 95901 (the “Marysville Business Facility”)
and a Seller-owned retail store in Yuba City, California (the “Yuba City Business”) located
at 554 Colusa Avenue, Yuba City, California 95991 (the “Yuba City Business Facility” and
together with the Marysville Business Facility, the “Business Facilities”),
collectively (the “YM
Business”);

    

    WHEREAS,
Seller desires to sell all of the Assets (as defined in Section 1.1 herein) to
Buyer, and Buyer desires to purchase such Assets from Seller; and

    

    NOW THEREFORE, in consideration of the
foregoing and of the mutual covenants set forth below, the parties hereby agree
as follows:

    

    Article
1.

    Asset
Sale and Purchase Transaction

    

                   
1.1         Sale and Purchase of
Assets.

    

    Subject
to the terms and conditions of this Agreement, Seller shall grant, convey, sell,
assign, transfer, and deliver to Buyer on the Closing Date (as defined in
Section 2.1 herein), and Buyer shall purchase on the Closing Date, free and
clear of all covenants, restrictions, liens, security interests, claims,
pledges, assignments, subleases, options, rights of refusal, charges, leases,
licenses, encumbrances and any other restriction of any kind or nature
(collectively, “Liens”),
all properties, assets, privileges, rights, interests and claims, real and
personal, tangible and intangible, of every type and description, wherever
located, including the YM Business as a going concern and goodwill, that are
owned, used, or held for use by Seller and related to the YM Business, except
for those assets which are expressly excluded pursuant to Section 1.2 hereof
(collectively, the “Assets”) Without limiting the
generality of the foregoing, the Assets shall include, without limitation, items
in the following categories that conform to the definition of the term
“Assets”:

    

    (a)          Inventories.  All
inventories (including raw materials, work-in-progress, and finished good) and
supplies of Seller (collectively, the “Inventory”) held at the
Business Facilities including all inventories held at YM Business storage
units;

    

    (b)          Prepaid Items.  All
prepaid items and expenses;

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (c)          Machinery, Equipment, and Other
Personal Property.  All physical assets, machinery, equipment,
furniture, fixtures, office materials and supplies, computer hardware and
software, spare parts, and other tangible personal property of every kind and
description owned, leased, or licensed by Seller and used or held for use in
connection with the YM Business as set forth on Schedule
1.1;

    

    (d)          Real
Property.  Seller’s interest in all of the leaseholds,
including but not limited to Seller’s rights to any and all deposits or refunds
at termination and to any improvements made to leasehold by Seller, and other
estates in real property and appurtenances thereto, leased or owned by Seller
and used or held for use in connection with the YM Business (collectively, the
“Business Real
Properties”);

    

    (e)          Contracts.  Seller’s
rights under all contracts, leases, licenses, indenture, agreements, whether
oral or written, express or implied, including rights to any deposits or refunds
at termination as set forth on Schedule 1.1(e)
(collectively, the “Assumed Contracts”);

    

    (f)           Files and
Records.  All files, records, books of account, general,
financial, and accounting records, invoices, computer programs, tapes,
electronic data processing software, customer and supplier lists,
correspondence, and other records of Seller;

    

    (g)          Permits, Licenses and
Authorizations.  All governmental permits, licenses and
authorizations held by Seller listed on Schedule 1.1(g) to
the extent the same may be transferred to Buyer;

    

    (h)          Guaranties.  All
guaranties, warranties, indemnities, and similar rights in favor of Seller with
respect to the YM Business or any of the Assets;

    

    (i)           Asset List.  Those
items listed on the asset list attached as Schedule 1.1(i)
hereto; and

    

    (j)           Goodwill.  Seller’s
goodwill in, and the going concern value of, the YM Business.

    

                   
1.2          Excluded
Assets.

    

    Notwithstanding
the foregoing, Seller shall retain, and the Assets shall not include, any assets
of Seller not specifically identified in Section 1.1 above.  The
Assets shall not include, and
nothing in this Agreement shall be construed as an attempt to assign, any
contract or agreement that is by its terms nonassignable without the consent of
the other party or parties thereto, unless such consent shall have been given
(“Excluded
Assets”).

    

    1.3          Liabilities.

    

    All
debts, liabilities, taxes, claims, costs and expenses of or against Seller,
including but not limited to all accounts payable balances and any accrued
payroll incurred or arising prior to the Closing Date shall be the
responsibility of Seller.  Buyer does not hereby and shall not assume
or in any way undertake to pay, perform, satisfy or discharge any obligation or
liability of any nature or kind whatsoever of Seller, whether arising before, on
or after the Closing Date the (“Retained Liabilities”) except
that Buyer shall assume and agree to pay, perform and discharge when due those
liabilities and obligations of Seller that accrue from and after and relate
solely to the period after the Closing Date under the Assumed Contracts and such
liabilities shall not constitute Retained Liabilities.  Seller shall
pay and satisfy when due all Retained Liabilities.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    1.4        Purchase
Price; Payment of Purchase Price.

    

    (a)         Purchase
Price.  Buyer shall purchase the Assets for an aggregate
purchase price of One-million, Four-Hundred and Fifty-Five Thousand Dollars
($1,455,000), in accordance with the terms and subject to the conditions set
forth in this Agreement including, without limitation, the post-Closing
adjustment as provided in Section 1.6 below (the “Purchase Price”).

    

    This
Purchase Price will include five (5) Franchise Fees of $28,500 for a total of
$142,500 which will be applied against the franchise fees for the YM Business
($57,000) and as a credit of $28,500 to Buyer upon signing its third Franchise
Agreement for store number three, as a credit of $28,500 to Buyer upon signing
its fourth Franchise Agreement for store number four and as a credit of $28,500
to Buyer upon signing its fifth Franchise Agreement for store number
five.  If Buyer does not open any franchises other than the franchises
for the YM Business before six months from the date hereof, all unused credits
for franchise fees will expire.  Additionally the Purchase Price will
include two-years of pre-paid royalty’s of $2,000 per month per store for a
total of $96,000.

    

    (b)         Payment of Purchase
Price.  An amount equal to the Purchase Price, as calculated
using Schedule
4.4, shall be paid at Closing by wire transfer in immediately available
funds to Seller pursuant to written instructions provided by
Seller.  The entire remaining Purchase Price shall be paid by Buyer to
Seller by a Promissory Note attached hereto as Exhibit E.

    

    1.5        Allocation
of Consideration.

    

    The
Purchase Price shall be allocated among the Assets in accordance with the
allocations set forth in Schedule
1.5.  To the extent consistent with law, Buyer and Seller shall
report the federal, state and local income and other tax consequences of the
purchase and sale contemplated hereby in a manner consistent with such
allocation and none of them shall take any position inconsistent therewith upon
examination of any tax return, in any refund claim, in any litigation, or
otherwise.

    

    1.6        Purchase
Price Adjustment.

    

    At the time of closing and out of the
purchase price, the Seller will pay $30,000 to the Buyer to use as working
capital and to pay for deferred maintenance for the buildings, equipment and
signage of the Business Facilities.  The Buyer will, at Buyer’s
expense, (a) order within 60 days of the Closing Date a new monument sign
and directional signs for the Yuba City and Marysville stores and
(b) within 150 days of the Closing Date, slurry seal both
store parking lots and repair pavement where needed; provided that, Buyer shall
only be required to spend up to $15,000 on items (a) and (b). The final new sign
design must be approved by Seller prior to installation.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    1.7           Royalty
Payments.

    
       

      The Buyer
shall pay the Seller 4% of Monthly Net Sales from the Yuba City Business and
Marysville Business by the fifteenth of each month except for the first two
years which will be paid by a fixed amount of $2,000 (two thousand dollars) per
month per store. Both parties agree that the Purchase Price includes pre-paid
royalty payments for the first two years (24 months) of $2,000 per month per
store for a total of $96,000 (ninety six thousand dollars). The first royalty
payment of 4% for each store will therefore be due Jan 15, 2011 which would
cover net sales from December, 2010 for each store.

    

    

    Article
2.

    Closing;
Conditions Precedent to Closing; Proceedings

    

                   
2.1          Closing.

    

    The closing of the sale and transfer of
the Assets (the “Closing”) and the
consummation of the other transactions contemplated by this Agreement shall take
place on or before November 30, 2008 (the “Closing Date”), or at such
other place and time as the parties may agree upon in writing.

    

    2.2          Conditions
Precedent to Closing.

    

    (a)           Conditions Precedent to Obligation of
Buyer.  The obligation of Buyer to proceed with the Closing is
expressly subject to the fulfillment prior to or at Closing of the conditions
precedent set forth in this Section 2.2(a).  Any one or more of these
conditions precedent may be waived, in whole or in part, in writing by Buyer at
Buyer’s sole option.

    

    (i)           Representations and
Warranties.  The representations and warranties of Seller
contained in Article 4 shall be, individually and collectively, true and correct
(in the case of any representation or warranty containing any materiality
qualification) or true and correct in all material respects (in the case of any
representation or warranty without any materiality qualification) (i) at and as
of the date of this Agreement and (ii) on and as of the Closing Date as if made
on the Closing Date.  

    

    (ii)          Agreement.  Seller
shall have performed in all material respects all of the agreements and complied
with all of the provisions required by this Agreement and the Seller Transaction
Documents to be performed or complied with by such party at or before the
Closing Date.

    

    (iii)         Legal
Proceedings.  No order of any governmental body shall be in
effect that restrains or prohibits the transactions contemplated hereby, and to
Seller’s knowledge, there shall not have been threatened, nor shall there be
pending, any action or proceeding by or before any governmental body challenging
the lawfulness of or seeking to prevent or delay any aspect of this transaction
or seeking monetary or other relief by reason of the consummation of any of such
transactions.

    

    (iv)         Financing.  Buyer
shall have secured financing, the terms of which are acceptable to Buyer in its
sole discretion, to finance the transactions contemplated by this
Agreement.  If Buyer is unable to secure financing, this Asset
Purchase Agreement is terminated.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (v)          Unencumbered
Title.  Buyer shall have received copies of such releases and
documents, and reviewed other such evidence as Buyer deems necessary to assure
Buyer that the Assets are being delivered free and clear of all liens and
encumbrances.

    

    (vi)         Landlord
Consent.

    

    (a)           Landlord
Consent.  The Landlord (as defined below) under the Marysville
Lease (as defined below) shall have consented in writing to assignment of such
lease to Buyer as contemplated by this Agreement and acknowledged and agreed in
writing that Seller has the authority to assign the Marysville Lease in its
entirety with Steven Binninger and Michael Binninger having previously assigned
their interests in such lease to Seller.

    

    (b)           Landlord
Consent.  The Landlord (as defined below) under the Yuba City
Lease (as defined below) shall have consented in writing to assignment of such
lease to Buyer as contemplated by this Agreement and acknowledged and agreed in
writing that Seller has the authority to assign the Yuba City Lease in its
entirety with Seller having previously assigned their interests in such lease to
Buyer.

    

    (vii)         Attorney
Review.  Buyer’s attorney shall have had an opportunity to
review and consent to Buyer’s consummation of the transactions contemplated
under this Agreement, such consent not to be unreasonably withheld.

    

    (viii)        Required
Authorizations.  Seller and Buyer shall have received all
required authorizations under any applicable law necessary to consummate the
transactions contemplated by this Agreement.

    

    (ix)           Closing
Documents.  Buyer shall have received the other agreements and
documents referred to in Section 2.3(a).

    

    (b)                      Conditions Precedent to Obligation of
Seller.  The obligation of each Seller to proceed with the
Closing is expressly subject to the fulfillment prior to or at Closing of the
conditions precedent set forth in this Section 2.2(b).  Any one or
more of these conditions may be waived, in whole or in part, in writing by any
Seller at the sole option of such Seller

    

    (i)           Representations and
Warranties.  The representations and warranties of Buyer
contained in Article 5 shall be, individually and collectively, true and correct
(in the case of any representation or warranty containing any materiality
qualification) or true and correct in all material respects (in the case of any
representation or warranty without any materiality qualification) (i) at and as
of the date of this Agreement, and (ii) on and as of the Closing Date as if made
on the Closing Date.

    

    (ii)          Agreements.  Buyer
shall have performed in all material respects all of the agreements and complied
with all of the provisions required by this Agreement to be performed or
complied with by it at or before the Closing Date.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (iii)          Legal
Proceedings.  No order of any governmental body shall be in
effect that restrains or prohibits the transactions contemplated hereby, and
there shall not have been threatened, nor shall there be pending, any action or
proceeding challenging any of the transactions contemplated by this Agreement
seeking monetary relief by reason of the consummation of such
transactions.

    

    (iv)          Closing
Documents.  Seller shall have received the documents and other
items referred to in Section 2.3(b).

    

    (v) Tax Clearance
Certificates.  Seller shall
obtain tax clearance certificates from the California Employment Development
Department and the Board of Equalization evidencing that all payroll and sales
taxes are paid.

    

               2.3                      Proceedings.

    

               (a)                       Deliveries by Seller.  At Closing,
Seller shall deliver to Buyer:

    

    (i)           
The Assets.

    

    (ii)          
A certification that all third party debt and obligations of Seller related to,
or that is secured by, the Assets has been paid in full.

    

    (iii)         
A certification that any and all obligations of Seller related to, or that is
secured by, any equipment being acquired by Buyer pursuant to Section 1.1(c) has
been paid in full.

    

    (iv)         
A certification that any and all liens on the Assets have been released and all
financing statements terminated.

    

    (v)           An
executed Bill of Sale (the “Bill of Sale”) in
substantially the form of Exhibit A attached
hereto.

    

                                  (vi-a)       An
executed single-unit franchise agreement for the Marysville Business, (the
“Maryville Franchise
Agreement”) in substantially the form of Exhibit C attached
hereto.

    

    (vii-b)       An
executed single-unit franchise agreement for the Yuba City Business (the “Yuba City Franchise Agreement” and
together with the Maryville Franchise Agreement, the “Franchise Agreements”) in
substantially the form of Exhibit D attached
hereto.

    

    (vii)           Seller
shall have delivered a certificate executed by an officer of Seller, dated as of
the Closing Date, certifying to the fulfillment of the conditions set forth in
subsections (i), (ii) and (iii) of Section 2.2(a).

    

    (viii)         Tax Clearance
Certificates.  Seller shall furnish to Buyer appropriate
clearances from the California Employment Development Department for employee
tax clearances and the Board of Equalization for sales tax
clearances.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (b)            Deliveries by Buyer. At Closing, Buyer shall
deliver to Seller:

    

    (i-a)           An
executed single-unit franchise agreement for the Marysville Business, (the
“Maryville Franchise
Agreement”) in substantially the form of Exhibit C attached
hereto.

    

    (i-b)           An
executed single-unit franchise agreement for the Yuba City Business (the “Yuba City Franchise Agreement” in
substantially the form of Exhibit D attached
hereto.

    

    (ii)           Buyer
shall have delivered a certificate executed by its manager, dated as of the
Closing Date, certifying to the fulfillment of the conditions set forth in
subsections (i), (ii) and (iii) of Section 2.2(b).

     

    Article
3.

    Certain
Covenants

    

    3.1           Conduct
of YM Business’s Pending Closing.

    

    From and
after the date hereof and until the Closing Date, unless the Buyer shall
otherwise consent in writing, Seller shall conduct the affairs of the YM
Business in the ordinary course and consistent with past
practice.  Seller shall take reasonable actions to maintain the YM
Business’ property, equipment and other assets in substantially the same
condition as such assets existed on the date of this Agreement and consistent
with past practice and shall, subject to available resources, comply in a timely
fashion with the provisions of all the Assumed Contracts and its other
agreements and commitments.  Further, Seller shall not incur
additional debt (including, without limitation, any capital lease obligations)
through the Closing without the prior written consent of Buyer.

     

                  
3.2            Buyer’s
Right of First Refusal to Purchase Auburn Store.

    

    Seller
and Buyer acknowledge and agree that in the event that Seller shall desire to
sell its interest in its company-owned retail store currently 405 Grass Valley
Highway, Auburn, California 95603 (the “Auburn Store,” Seller shall
grant Buyer a right of first refusal to purchase such store; provided, that Buyer
shall have sixty (60) days from receipt of notice from Seller in which to elect
to exercise such right to purchase the Offered Store; provided, further that Buyer’s
right shall either be exercised or canceled upon the expiration of such sixty
(60) day period as it applies to each Offer unless the parties mutually agree
otherwise in writing.

     

    3.3           Buyer’s
Right of First Refusal to Purchase Marysville Property.

    

    Seller
and Buyer acknowledge and agree that in the event that Seller or any affiliate
or principal of Seller shall desire to acquire the premises located at 515
3rd
Street, Marysville, California, also known as Assessor’s Parcel Number
010-231-004 (the “Marysville
Property”) currently being leased pursuant to that certain Ground Lease
(the “Marysville Lease”)
dated as of November 5, 2002 by and between William E. Hamon, Jr. and Carol B.
Hamon (collectively, the “Landlord”), and Seller,
Michael Binninger and Steven Binninger, Seller or any affiliate or principal of
Seller, as applicable, shall grant Buyer a right of first refusal to purchase
the Marysville Property from Landlord; provided, that Buyer
shall have thirty (30) days from receipt of notice from Seller in which to elect
to exercise such right to purchase the Marysville Property; provided, further that Buyer’s
right shall either be exercised or canceled upon the expiration of such thirty
(30)-day period unless the parties mutually agree otherwise in
writing.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    3.4         Seller’s
Right of First Refusal to Purchase Yuba City & Marysville
Store.

    

    Seller
and Buyer acknowledge and agree that in the event that Buyer shall desire to
sell its interest in its stores (the “Marysville Business”) located
at 515 3rd Street,
Marysville, California, 95901 (the “Business Facility”) and (the
“Yuba City Business”)
located at 554 Colusa Avenue, Yuba City, California 95991 (the “Business Facility”),
collectively (the “YM
Business”) Buyer shall grant Seller a right of first refusal to purchase
such stores at the same multiple of 4.75 times store level earnings before
interest, taxes, depreciation and amortization (EBITDA); provided, that Buyer
shall have sixty (60) days from receipt of notice from Seller in which to elect
to exercise such right to purchase the Offered Store; provided, further that Buyer’s
right shall either be exercised or canceled upon the expiration of such sixty
(60) day period as it applies to each Offered Store unless the parties mutually
agree otherwise in writing.

     

    3.5         NO
RELIANCE ON 2008 FINANCIAL PROJECTIONS.

    

    BUYER
AGREES AND ACKNOWLEDGES THAT IT HAS UNDERTAKEN AN INDEPENDENT REVIEW AND
ANALYSIS OF THE TERMS OF THIS AGREEMENT INCLUDING, WITHOUT LIMITATION, THE
PURCHASE PRICE AND IT HAS NOT RELIED IN ANY WAY ON SELLER’S 2008 FINANCIAL
PROJECTIONS PREVIOUSLY PROVIDED TO BUYER IN NEGOTIATING THE TERMS OF THIS
AGREEMENT.  BUYER FURTHER ACKNOWLEDGES THAT SUCH PROJECTIONS WERE ONLY
PROVIDED FOR THE SOLE PURPOSE OF DELIVERING INFORMATION REQUIRED IN ORDER TO
ALLOW BUYER TO SECURE FINANCING. BUYER ALSO ACKNOWLEDGES THAT SELLER HAS NOT
PROVIDED TO BUYER ANY TYPE OF FINANCIAL PROJECTION(S) FOR EITHER STORE IN ANY
MATTER OR FORM NEITHER WRITTEN NOR VERBAL NOR ELECTRONICALLY AT ANY
TIME.

     

    3.6         Certain
Transitional Matters.

    

    (a)          Remit Funds.  After
the Closing, (i) Seller shall promptly transfer and deliver to Buyer any cash or
other property, if any, that Seller may receive related to the YM Business or
the Assets which was earned by the YM Business after the Closing; and (ii) Buyer
shall promptly transfer and deliver to Seller any cash or other property, if
any, that Buyer may receive related to the YM Business or the Assets which was
earned by the YM Business prior to the Closing.

    

    (b)          Assistance.  Seller
shall cooperate with and assist Buyer and its authorized representatives in
order to provide, to the extent reasonably requested by Buyer, an efficient
transfer of control of the Assets, and to avoid any undue interruption in the
activities and operations of the YM Business following the Closing
Date.  Such assistance shall include, among other reasonable requests,
assistance in retaining the customers of the YM Business for the benefit of
Buyer after the Closing Date.  Buyer shall reimburse the party
providing assistance for direct out-of-pocket expenses incurred in providing
such assistance.

    

    (c)           Assignment of Assumed Contracts;
Consents.  Seller shall use its best efforts prior to, and if
necessary after, the Closing Date, to obtain at the earliest practicable date
but no later than thirty (30) days after the Closing Date, the consent to the
assignment to Buyer of the Assumed Contracts which require consent to
assignment, without any conditions adverse to Buyer.  To the extent
that such consents are obtained after the Closing Date, Seller shall keep the
applicable contracts in effect and shall give Buyer the benefit of such
contracts to the same extent as if they had been assigned and Buyer shall
perform the obligations under such contracts relating to the benefit obtained by
Buyer.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (d)          Publicity.  Buyer
shall consult with Seller before issuing any press release or otherwise making
any public announcements, including any announcement to employees, with respect
to this Agreement or the transactions contemplated hereby (except to the
respective directors and officers of Seller and Buyer), and shall not issue any
such press release or make any such public announcement prior to such
consultation and written consent of Seller, except as required by
law.  Seller shall not make any press release or external public
announcement regarding this Agreement or the transactions contemplated hereby
without prior approval of the Buyer.

    

    Article
4.

    Representations
and Warranties of Seller

    

    Seller
hereby represents and warrants to Buyer that all statements set forth in this
Article 4 are true and correct.

    

    4.1         Organization.

    

    Seller is
a corporation duly organized, validly existing and in good standing under the
laws of the State of California.  Seller has the corporate power and
authority to operate, own and lease its properties and carry on its business as
now conducted.  Seller has the absolute and unrestricted power,
authority and capacity to enter into this Agreement and any agreements related
hereto to which it is or is to become a party and perform its obligations under
this Agreement and such related agreements.  Copies of the articles of
incorporation and bylaws of Seller, which have been delivered to Buyer, are
complete and correct.

    

    4.2         Authorization;
Enforceability.

    

    This
Agreement and all agreements contemplated hereby to which Seller is a party have
been duly executed and delivered by such party and constitute the legal, valid
and binding obligations of such party, enforceable against it in accordance with
their respective terms.  Seller has duly and validly authorized this
Agreement and all agreements contemplated hereby to which it is or is to become
a party and all of the transactions contemplated thereby.

    

    4.3         No
Violation of Laws or Agreements.

    

    Neither the execution and delivery of
this Agreement, the consummation of the transactions contemplated hereby nor the
compliance with or fulfillment of the terms, conditions or provisions hereof by
Seller will: (i) result in a breach of, constitute a default or an event of
default under any of the terms of, or give to any other person the right to
cause a termination of, any of the Assets or any other contract to which Seller
is a party or by which its Assets may be bound, (ii) result in the creation,
maturation or acceleration of any liability of Seller, (iii) violate any law or
violate any judgment or order of any governmental body to which Seller is
subject or by which any of the Assets may be bound or affected, or (iv) result
in the creation or imposition of any Lien or encumbrance upon any of the Assets
or give to any other person any interest or right therein.

    

                  
4.4        Condition of Assets;
Title.

    

    Seller has and is conveying good,
marketable and exclusive title to all of the Assets.  None of the
Assets is subject to any Lien, encumbrance, impairment, burden or charge of any
kind or nature whatsoever, legal or equitable, or any item similar or related to
the foregoing. Seller warrants that the assets are in good working order or
condition and the assets sold under the Agreement are all of the material assets
needed to run the business.  Schedule 4.4
identifies any outstanding liability in connection with the YM Business and the
Assets.  The Assets being sold by the Seller pursuant to this
Agreement are less than one half of Seller's inventory and equipment, as
measured by the fair market value on the date hereof.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

                  
4.5          Legal
Proceedings.

    

    No action, suit, investigation, claim
or proceeding of any nature or kind whatsoever, whether civil, criminal or
administrative, by or before any governmental body or arbitrator is pending or,
to the knowledge of Seller, threatened against or affecting Seller, any of the
Assets or any of the transactions contemplated by this
Agreement.  Seller does not have pending any litigation against any
third party related to the Assets.

    

    4.6         Consents;
Assignment of Assumed Contracts.

    

    Except as set forth on Schedule 4.6, no
consent of any third party is required for the transfer to Buyer of any of the
Assets, including the Assumed Contracts.  Except as set forth on Schedule 4.6, the
assignment of each of the Assumed Contracts does not require the consent of any
third parties.  To the extent that any of the Assumed Contracts
requires the consent of any third parties, Seller has obtained all such consents
on or before the Closing Date.

    

    4.7         Undisclosed
Liabilities; Creditors.

    

    Seller has no debts, obligations or
liabilities, absolute, fixed, contingent or otherwise, of any nature whatsoever,
whether due or to become due (including unasserted claims), whether incurred
directly or by any predecessor thereto, and whether arising out of any condition
that occurred or existed on or before the Closing Date, whether or not then
known, due or payable.  Schedule 4.7
identifies all of Seller’s creditors relating to the YM Business and Seller
represent and warrant that they have no debts, obligations or liabilities,
absolute, fixed, contingent or otherwise, of any nature whatsoever, whether due
or to become due to such creditors or otherwise, which such debt or obligation
would adversely affect the YM Business or the Assets or the sale thereof to
Buyer.

    

                  
4.8          Compliance with
Laws.

    

    The operation of the YM Business is not
in violation of any law (including any environmental law), permit or license,
and no event has occurred or condition or state of facts exist which could give
rise t o any violation.

    

    4.9         Customer
Relations.

    

    There exists no condition or state of
facts or circumstances involving Seller’s customers, suppliers, distributors or
sales representatives that Seller can reasonably foresee that could adversely
affect the YM Business or the Assets after the Closing Date.

    

    4.10       Finders’
Fees; No Existing Discussions.

    

    Neither Seller nor any of its
respective officers, members or employees has employed any broker or finder or
incurred any liability for any brokerage fee, commission or finders’ fee in
connection with any of the transactions contemplated by this
Agreement.  As of the date of this Agreement, Seller is not engaged,
directly or indirectly, in any discussions or negotiations with any other party
with respect to a proposal to acquire, in any manner, the Assets, the YM
Business or the capital stock of Seller.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    4.11                     
Disclosure.

    

    None of the representations or
warranties of Seller contained in this Article 4 and none of the information
contained in the Schedules referred to in this Article 4 is false or misleading
in any material respect or omits to state a fact necessary to make the
statements in this Article 4 or in the Schedules to Article 4 not misleading in
any material respect.

    

    4.12                    
Financial Statements.

    

    The books
of account and related records of the Seller are complete and correct and have
been maintained in accordance with sound business practices and reflect in
detail its assets, liabilities, revenues, expenses, cash flows, and other
transactions.  There has been delivered to Buyer the audited balance
sheets for the Seller at December 31, 2007, 2006 and 2005, and income statements
and statements of cash flows for the years then ended and the interim audited
balance sheet for the Seller at June 30, 2008, and income statement for the six
(6)-month period then ended (the “Financial
Statements”).  The Financial Statements (i) are accurate,
correct and complete in accordance with the books of account and records of the
Seller, (ii) have been prepared in accordance with GAAP (except that the interim
statements do not reflect normal year-end adjustments) on a consistent basis
throughout the indicated periods, and (iii) fairly present, in all material
respects, the financial position of the Seller and the results of operations and
cash flows of the Seller at the dates and for the relevant periods
indicated.

     

    Article
5.

    Representations
and Warranties of Buyer

    

    Buyer represents and warrants to Seller
as follows:

    

    5.1                      Organization.

    

    Buyer is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of California.  Buyer has full power and authority to operate,
own and lease its properties and carry on its business as now
conducted.  Buyer has the absolute and unrestricted power, authority
and capacity to enter into this Agreement and any agreements related hereto to
which it is or is to become a party and perform its obligations under this
Agreement and such agreements contemplated hereby.  Copies of the
operating agreement of Buyer, which have been delivered to Seller, are complete
and correct.

    

                  
5.2                      Authorization;
Enforceability.

    

    This Agreement and all agreements
contemplated hereby to which Buyer becomes a party, has been duly executed and
delivered by Buyer, and constitutes the legal, valid and binding obligations of
Buyer enforceable against it in accordance with their respective
terms.  Each agreement contemplated hereby to which Buyer is to become
a party, when executed and delivered by Buyer, will constitute the legal, valid
and binding obligation of Buyer, enforceable against it in accordance with the
terms of such legal agreement.  All agreements contemplated hereby to
which Buyer is or is to become a party have been duly and validly authorized by
all necessary limited liability company proceedings by Buyer.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

                  
5.3                      No
Violation of Laws or Agreements.

     

    Neither the execution and delivery of
this Agreement, the consummation of the transactions contemplated hereby nor the
compliance with or fulfillment of the terms, conditions or provisions hereof by
Buyer will: (i) result in a breach of, constitute a default or an event of
default under any of the terms of, or give to any other person the right to
cause a termination of, any of the Assets or any other contract to which Buyer
is a party or by which its Assets may be bound, (ii) result in the creation,
maturation or acceleration of any liability of Buyer, (iii) violate any law or
violate any judgment or order of any governmental body to which Seller is
subject or by which any of the Assets may be bound or affected, or (iv) result
in the creation or imposition of any lien or encumbrance upon any of the Assets
or give to any other person any interest or right therein.

    

    5.4                      Legal
Proceedings.

    

    No action, suit, investigation, claim
or proceeding of any nature or kind whatsoever, whether civil, criminal or
administrative, by or before any governmental body or arbitrator is pending or,
to the knowledge of Buyer, threatened against or affecting Buyer that questions
the validity of this Agreement, or the right of Buyer to enter into this
Agreement or to consummate the transactions contemplated hereby, or wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would prevent
consummation of the transactions contemplated hereby or adversely affect the
Buyer’s performance under this Agreement.

    

    5.5                      Finders’
Fees.

    

    Neither
Buyer nor any of its officers, members or employees has employed any broker or
finder or incurred any liability for any brokerage fee, commission or finders’
fee in connection with any of the transactions contemplated hereby.

    

    Article
6.

    Survival
of Representations, Warranties and Covenants; Indemnification.

    

    6.1                      Survival
of Representations, Warranties and Covenants.

    

    Subject to the limitations set forth in
this Article 6, all representations, warranties, covenants and obligations made
by any party in this Agreement shall survive the Closing.  Any
limitation or qualification set forth in any particular representation or
warranty in Article 4 or 5 shall not limit or qualify any other representation
or warranty in Article 4 or 5.  The right to indemnification under
this Article 6 or any other remedy based on the breach or inaccuracy of any
representation or warranty in Articles 4 or 5, or breach of, or noncompliance
with, any covenant or obligation in this Agreement will not be affected by (a)
any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the Closing
Date, with respect to any such representation, warranty covenant or obligation,
or (b) the expiration of any statute of limitations applicable to the underlying
claims against or applicable to the Damages incurred by the Indemnified
Party.  The waiver by any party of any condition at Closing of the
breach or inaccuracy of any representation or warranty, or breach of, or
noncompliance with, any covenant or obligation, will not affect the right of
such party to indemnification, payment of damages or other remedy based on such
breach, inaccuracy or noncompliance.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

                   
6.2                      Indemnification
by Seller.

    

    Seller shall severally indemnify,
defend, save and hold harmless Buyer, its affiliates and their respective
officers, directors, employees, and agents (each, a “Buyer Indemnitee”) from and
against all Damages (collectively, “Buyer Damages”) directly or
indirectly asserted against, imposed upon, resulting to, or incurred or required
to be paid by any Buyer Indemnitee from or in connection with, (i) any breach or
inaccuracy of any representation or warranty made by Seller in this Agreement,
or in any certificate or document delivered by Seller in connection with this
Agreement or any other agreement to which Seller is or is to become a party; and
(ii) a breach or nonperformance of any covenant made or obligation undertaken by
Seller in or in connection with this Agreement or any other agreement to which
Seller is or is to become a party.

    

    6.3                      Indemnification
by Buyer.

    

    Buyer shall indemnify, defend, save and
hold harmless Seller and its officers, directors, employees, affiliates and
agents (each, a “Seller
Indemnitee”) from and against any and all Damages (collectively, “Seller Damages”) directly or
indirectly asserted against, imposed upon, resulting to, or incurred or required
to be paid by Seller Indemnitee from or in connection with, (i) any breach
or inaccuracy of any representation or warranty made by Buyer in this Agreement
or in any certificate or document delivered by Buyer in connection with this
Agreement or any other agreement to which Buyer is a party, and (ii) a
breach or nonperformance of any covenant made or obligation undertaken by Buyer
in or in connection with this Agreement or any other agreement to which Buyer is
or is to become a party.

    

    6.4                      Notice
of Claims.

    

    If any Buyer Indemnitee or Seller
Indemnitee (an “Indemnified
Party”) believes that it has suffered or incurred any Buyer Damages or
Seller Damages, as the case may be (“Damages”) for which it is
entitled to indemnification under this Article 6, such Indemnified Party shall
so notify the party or parties from whom indemnification is being claimed (the
“Indemnifying Parties”)
with reasonable promptness and reasonable particularity in light of the
circumstances then existing.  If any action at law or suit in
equity is instituted by or against a third party with respect to which any
Indemnified Party intends to claim any Damages, such Indemnified Party shall
promptly notify the Indemnifying Parties of such action or suit.  The
failure of an Indemnified Party to give any notice required by this
Section 6.4 shall not affect any of such party’s rights under this
Article 6 except and to the extent that such failure is actually
prejudicial to the rights or obligations of the Indemnified Party.

    

    6.5                      Third
Party Claims.

    

    The
Indemnified Party shall have the right to conduct and control, through counsel
of its choosing and reasonably acceptable to the Indemnifying Parties, any third
party claim, action or suit, and the Indemnified Party may compromise or settle
the same; provided, that the
Indemnified Party shall give the Indemnifying Parties advance notice of any
proposed compromise or settlement; provided, further, that the
Indemnified Party obtains the consent of the Indemnifying Party, which consent
shall not be unreasonably withheld.  The Indemnified Party shall
permit the Indemnifying Parties to participate in the defense of any such action
or suit through counsel chosen by them, provided that the fees and expenses of
such counsel shall be borne by the Indemnifying Parties.  If the
Indemnifying Parties undertake, conduct and control the conduct and settlement
of such action or suit, (i) the Indemnifying Parties shall not thereby permit to
exist any lien, encumbrance or other adverse charge upon any asset of the
Indemnified Party; (ii) the Indemnifying Parties shall not consent to any
settlement that does not include as an unconditional term thereof the giving of
a complete release from liability with respect to such action or suit to the
Indemnified Party; (iii) the Indemnifying Parties shall permit the Indemnified
Party to participate in (but not control) such conduct or settlement, at the
Indemnified Party’s sole expense, through counsel chosen by the Indemnified
Party; (iv) the Indemnifying Parties shall agree promptly to reimburse the
Indemnified Party for the full amount of any Damages including fees and expenses
of counsel for the Indemnified Party incurred after giving the foregoing notice
to the Indemnifying Parties and prior to the assumption of the conduct and
control of such action or suit by the Indemnifying Parties.  If the
Indemnified Party conducts and controls any such claim, action or suit, clauses
(i) through (iii) of the preceding sentence of this Section 6.5 shall apply for
the benefit of the Indemnifying Party.  In the event of dispute or
disagreement between the Indemnified Party and the Indemnifying Parties with
respect to the proposed compromise or settlement of any third party claim,
action or suit which is subject to indemnification pursuant to this Article 6,
such dispute or disagreement shall be subject to binding arbitration in San
Francisco County, California, under the then-prevailing rules and procedures of
the American Arbitration Association and the laws of the State of
California.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Article
7.

    Miscellaneous

    

                   
7.1                      Costs
and Expenses.

    

    Buyer and
Seller shall each pay its respective legal and other transactional fees and
expenses incurred by or on behalf of it in connection with this Agreement and
the transactions contemplated hereby.  All brokerage fees, transfer
taxes, all applicable sales, income, or use taxes in connection with the
conveyance of the Assets to Buyer and to effect the other transactions
contemplated hereby shall be borne by Seller.

    

    7.2                      Further
Assurances.

    

    After the Closing, without further
consideration, Seller shall take or cause to be taken such actions (including
the execution, acknowledgment and deliver of instruments, documents, transfers
and assurances) as Buyer may reasonably request for the better conveying,
transferring, assigning and delivering of the Assets to Buyer.

    

                   
7.3                      Notices.

    

    All notices given or made in connection
with this Agreement shall be in writing.  Delivery of written notices
shall be effective upon receipt.  All deliveries shall be made to the
following addresses:

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (i)              
if to Buyer, to:

    

    
      	
               
      

            	
              Ronald
      J. Sands

            

    

    
      	
               
      

            	
              Java
      NorCal LLC

            

    

    
      	
               
      

            	
              322
      28th
      Avenue

            

    

    
      	
               
      

            	
              San
      Francisco, CA 94121

            

    

    

    
      	
               
      

            	
              with
      a required copy to:

            

    

    

    The
Goralka Law Firm

    4470
Duckhorn Drive

    Sacramento,
CA  95834

    Attn:  John M. Goralka,
Esq.

    
      Facsimile:
(916)
440-8038

    

    

    

    (ii)             if
to Seller:

    

    
      	
               
      

            	
              JDCO,
      Inc.

            

    

    
      	
               
      

            	
              1550
      Bryant Street

            

    

    
      	
               
      

            	
              Suite
      500

            

    

    
      	
               
      

            	
              San
      Francisco, CA 94103

            

    

    
      	
               
      

            	
              Attn:  Michael
      Binninger

            

    

    

    
      	
               
      

            	
              with
      a required copy to:

            

    

    

    
      	
               
      

            	
              Sichenzia,
      Ross, Friedman & Ference

            

    

    
      	
               
      

            	
              61
      Broadway, 32nd
      Floor

            

    

    
      	
               
      

            	
              New
      York, NY 10006

            

    

    
      	
               
      

            	
              Attn:  Peter
      Dichiara, Esq.

            

    

    
      	
               
      

            	
              Facsimile:  (212)
      930-9725

            

    

    

    Any party
may change the address to which notice (or copies) to it shall be addressed by
giving notice of that change to the other parties in accordance with this
Section.

               

    7.4                      Assignment.

    

    This Agreement and all the rights and
powers granted by this Agreement shall bind and inure to the benefit of the
parties and their respective successors and permitted assigns.  This
Agreement and the rights, interests and obligations under this Agreement may not
be assigned by operation of law or otherwise by any party without the prior
written consent of the other parties; provided that Buyer may assign this
Agreement and its rights, interests or obligations hereunder to any affiliate of
Buyer.

    

    7.5                      Consideration;
Recitals; Governing Law; Jurisdiction.

    

    The parties acknowledge the mutual
receipt and sufficiency of valuable consideration for the formation of the
legally binding contract represented by this Agreement.  The
consideration includes all of the representations, warranties, covenants and
obligations contained in this Agreement.  The recitals set forth on
page one of this Agreement are incorporated into this Agreement and made a part
of this Agreement.  Except with respect to injunctive relief, for any
disputes arising between the parties in connection with this Agreement and the
transactions contemplated hereby, the parties shall make a good faith effort to
reach an amicable resolution for a period of thirty (30) days.  Any
dispute arising from or related to this Agreement and the transactions
contemplated hereby shall be decided by a court of law in the State of
California in San Francisco County or the District Court of the United States,
Northern District of California without regard to venue, forum nonconveniens or
personal jurisdiction issues, all challenges to which are hereby
waived.  This Agreement shall be governed by and construed in
accordance with the laws of the State of California without regard to its
conflict of law doctrines.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    7.6                      Schedules.

    

    Any item disclosed on any Schedule to
this Agreement shall only be deemed to be disclosed in connection with (i) the
specific representation and warranty to which such Schedule is expressly
referenced, (ii) any specific representation and warranty which expressly
cross-references such Schedule and (iii) any specific representation and
warranty to which any other Schedule to this Agreement is expressly referenced
if such other Schedule expressly cross-references such Schedule.

    

                   
7.7                      Amendment
and Waiver; Cumulative Effect.

    

    To be effective, any amendment or
waiver under this Agreement must be in writing and signed by the parties
hereto.  Neither the failure of any party to exercise any right, power
or remedy provided under this Agreement or to insist upon compliance by any
other party with its obligations under this Agreement, nor any custom or
practice of the parties at variance with the terms of this Agreement, shall
constitute a waiver by such party of its right to exercise any such right, power
or remedy or to demand such compliance.  The rights and remedies of
the parties are cumulative and not exclusive of the rights and remedies that
they otherwise might have now or hereafter at law, in equity, by statute or
otherwise.

    

                   
7.8                      Entire
Agreement; No Third-Party Beneficiaries.

    

    This Agreement and the Schedules and
Exhibits set forth all of the promises, covenants, agreements, conditions and
undertakings between the parties with respect to the subject matter of this
Agreement.  This Agreement supersedes all prior or contemporaneous
agreements and understandings, negotiations, inducements or conditions, express
or implied, oral or written, among the parties.  Except for the
provisions of Sections 6.2 and 6.3 relating to Buyer Indemnitees and Seller
Indemnitees, this Agreement is not intended to confer upon any person other than
the parties any rights or remedies under this Agreement.

    

                   
7.9                      Severability.

    

    If any term or other provision of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal or
incapable of being enforced under any applicable legal requirement in any
particular respect or under any particular circumstances, then, so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party, (a) such term or
provision shall nevertheless remain in full force and effect in all other
respects and under all other circumstances, and (b) all other terms, conditions
and provisions of this Agreement shall remain in full force and
effect.  Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner so that the transactions
contemplated hereby are fulfilled to the fullest extent possible.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

                   
7.10                      Counterparts.

    

    This Agreement may be executed in two
or more counterparts, each of which shall be deemed to be an original but all of
which together shall be deemed to be one and the same instrument.

    

    7.11 Sales and Transfer
Taxes.

    

    Seller shall pay all sales, use and
transfer taxes arising from the transfer of assets described in this
Agreement.  Seller shall pay its portion, prorated as of the closing
date, of the personal property taxes of the Business.

    

    7.12 Dispute
Resolution.

     

    If a
dispute arises between any of the parties hereto arising from, relating to or in
connection with this Agreement (“Dispute”), the parties hereto
agree that the Dispute shall be submitted to mandatory, good-faith
mediation.  The mediation must be held within thirty (30) calendar
days after the appointment of a mediator on a mutually agreeable date, or on a
date ordered by the mediator.  Any statute of limitations applicable
to any such Dispute shall be tolled for the period beginning on the date
mediation is requested until ten (10) calendar days after termination of the
mediation.  Evidence of anything said, any admissions made, and any
documents prepared in the course of the mediation shall not be admissible in
evidence or subject to discovery in any arbitration or court action pursuant to
Evidence Code Section 1152.5.  The mediator shall be mutually agreed
upon by the parties hereto, or, if the parties hereto are unable to agree upon a
mediator within ten (10) calendar days after a request for mediation delivered
to a party hereto, a request may be made by any party hereto to the American
Arbitration Association to appoint a mediator.  The mediation shall be
conducted in accordance with such rules as the parties hereto agree upon, or in
the absence of agreement, in accordance with the Commercial Mediation Rules and
Procedures of the American Arbitration Association.  The mediation
shall take place in San Francisco County, California.  The cost of
mediation (including the mediator’s fees and costs) shall be split equally
between the Buyer on one hand and the Seller on the other hand, but each party
hereto shall bear its own attorneys’ fees and costs, unless agreed
otherwise.  Subject to the provisions of Section 7.__ of this
Agreement, any Dispute that is not resolved by mediation shall be heard by
judicial reference pursuant to the provisions of California Code of Civil
Procedure Sections 638 through 645.2, inclusive.

     

    

    

    [Remainder
of Page Intentionally Left Blank]

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    The parties, each intending to be
legally bound by this Agreement, have executed this Agreement as of the first
date identified in the first sentence of this Agreement.

    

    

    
      	
               
      

            	
              JDCO,
      INC.

            

    

    

    

    
      
      

    

    
      
        	 	 	
                By:    
      _____________________________

              
	
                 
      

              	
              	
                Name:_____________________________

              

      

    

    
      	
               
      

            	
            	
              Title:
      ______________________________

            

    

    

    

    

    
      	
               
      

            	
              JAVA
      NORCAL, LLC

            

    

    

    

    
      	
               
      

            	
            	
              By:    
      ______________________________ 

            

    

    
      	
               
      

            	
            	
              Name:______________________________ 

            

    

    
      	
               
      

            	
            	
              Title: 
      ______________________________

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