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1 Copyright 2006, California Capital Partners, LLC CONFIDENTIAL

Number:

Offeree:

CONFIDENTIAL

PRIVATE PLACEMENT MEMORANDUM©

California Capital Investors, LLC A Limited Liability Company

Up to US$4,200,000 in Unit Interests

(Minimum Investment – 2.5 Units, US$250,000)

Respond To:

CALIFORNIA CAPITAL PARTNERS, LLC

700 East Redlands Boulevard, #105

Redlands, CA 92373

(909) 954-4122, ext. 111

THESE ARE SPECULATIVE SECURITIES AND INVOLVE A

HIGH DEGREE OF RISK. THEY ARE SUITABLE ONLY FOR

INVESTORS OF SUBSTANTIAL MEANS WHO HAVE NO NEED

FOR NEAR-TERM LIQUIDITY IN THEIR INVESTMENTS.

This Confidential Private Offering Memorandum has been prepared by California Capital Partners, LLC

for its exclusive use. The information contained within is confidential and proprietary, and is not to be

copied, otherwise reproduced or disseminated to any person, through any medium of communication, without the expressed written consent of California Capital Partners, LLC.


A PRIVATE OFFERING TO ACCREDITED U.S. AND NON-U.S. INVESTORS

PRIVATE OFFERING MEMORANDUM1:

CALIFORNIA CAPITAL INVESTORS, LLC

(a Delaware limited liability company) $4,200,000 42 Units @ $100,000 per Unit CALIFORNIA CAPITAL INVESTORS, LLC, a Delaware limited liability company (the “Company”), has been formed to act as special purpose investment company with the expressed function of:

1. Investing approximately $2.2 million into “Series A” equity shares of California Capital Partners, LLC (CalCap), the manager of California Ventures Debenture Fund (CalVen), L.P. (the “Fund”), a venture capital fund that will loan and/or invest principally in U.S. based

businesses within propinquity to its offices); and, 2. Investing approximately $2.0 million into several qualifying portfolio companies, as “pre-

investments” of the CalVen Fund. Such investments may be held by the Company for their entire term or sold to the CalVen Fund or other party for a fair market value, of such sale serves the interest of the Company.

This offering (the “Offering”) of membership interests (“Units”) is being made by the

Company to obtain up to $4,200,000 of operating capital to fund the organizational expenses of the Fund and the Company’s capital contribution to the Fund. Minimum Unit purchase is 2.5 Units, or $250,000; although the Company reserves the right to authorize and accept fractional Units. Up to 8 Units are being offered at $100,000 per Unit cash to managing directors and officers of the Company. The Company reserves the right to cancel the Offering and to reject subscriptions of Units in whole or in part.

THESE ARE SPECULATIVE SECURITIES AND INVOLVE CERTAIN RISK FACTORS, INCLUDING THOSE CONCERNING ILLIQUIDITY OF AND RESTRICTIONS ON TRANSFER ON THE UNITS, LEVERAGE AND UNCONTROLLABLE MARKET CONDITIONS. SEE “RISK AND OTHER INVESTMENT FACTORS.” THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“1933 ACT”), OR THE SECURITIES LAWS OF ANY OTHER STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THESE LAWS. THESE SECURITIES CANNOT BE RESOLD UNLESS REGISTERED PURSUANT TO OR EXEMPTED FROM SUCH REGISTRATION REQUIREMENTS.

1 The date of this Private Offering Memorandum is October, 2006.


Price to Proceeds to Investors per Unit the Company

Per Unit (42 Units) $100,000 $4,200,000 TOTAL $4,200,000


NOTICE TO PROSPECTIVE INVESTORS

The information contained in this Memorandum is confidential and proprietary to the Company and is being submitted to prospective investors in the Company solely for such investors’ confidential use with the express understanding that, without the prior written permission of the Company, such persons will not release this document or discuss the information contained herein or make reproductions of or use this Memorandum for any purpose other than evaluating a potential investment in the Units. A prospective investor, by accepting delivery of this Memorandum, agrees promptly to return to the Company this Memorandum and any other documents or information furnished if the prospective investor elects not to purchase any of the Units offered hereby. The information presented herein was prepared by the Company and is being furnished by the Company solely for use by prospective investors in connection with the Offering. This Memorandum does not purport to be all-inclusive or to contain all the information that a prospective investor may desire in investigating the Company. Each investor must conduct and rely on his own evaluation of the Company and the terms of the Offering, including the merits and risks involved, in making an investment decision with respect to the Units. See “Risk Factors” for a discussion of certain factors that should be considered in connection with the purchase of Units. This Memorandum includes certain statements, estimates and projections of the Company with respect to the anticipated future performance of the Company and the Fund. Such statements, estimates and projections reflect various assumptions of management that may or may not prove to be correct, and no assurance can be made that the Company can or will attain such results. Nothing contained herein is, or should be relied on as, a promise or representation as to the future performance of the Company. This Memorandum does not constitute an offer to sell or a solicitation of an offer to buy Units in any jurisdiction where it is unlawful to make such an offer or solicitation. Prospective investors are not to construe the contents of this Memorandum or any prior or subsequent communications from the Company or any of its employees, agents or other representatives as legal, business or tax advice. Each investor should consult his own counsel, business advisor and tax advisor as to the legal, business and tax matters relating to the Offering made pursuant to this Memorandum. Offering literature in any form whatsoever employed in connection with this Offering shall be subject to, and shall be superseded by, this Memorandum (including any exhibits, amendments and supplements hereto). In the event of any conflict or perceived conflict between this Memorandum and any other Offering literature, this Memorandum shall control. All supplements to this Memorandum (which will be designated as such on the face thereof) shall be deemed to be incorporated into, and made a part of, this Memorandum. Neither the delivery of this Memorandum at any time nor the sale of the Units pursuant hereto shall


be deemed to imply that the information contained herein is correct at any time subsequent to the date set forth on the cover of this Memorandum. Upon written request by any prospective investor or his representative, the Company will, prior to the completion of this Offering, answer questions concerning the terms and conditions of this Offering and will provide additional information which may be requested, to the extent it possesses such information or can obtain access thereto without unreasonable effort or expense, for purposes of verifying the accuracy of the information set forth herein. No person has been authorized to give any information other than that contained in this Memorandum, or to make any representations in connection with the Offering made hereby, and, if given or made, such information or representations must not be relied upon as having been authorized by the Company. The Company disclaims any and all liabilities for representations or warranties, expressed or implied, contained in, or omissions from, this Memorandum or any other written or oral communication transmitted or made available to the recipient. Each investor will be entitled to rely solely on those representations and warranties that may be made to it in any subscription agreements relating to the Units. In making an investment decision, investors must rely on their own examination of the Company and the terms of the Offering, including the merits and risks involved. These securities have not been recommended by any federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of this document. Any representation to the contrary is a criminal offense. No public or other market will develop for the Units. The Units are not transferable without the consent of the Company and satisfaction of certain other conditions including registration or the availability of an exemption under the act and various state securities laws. See “Risk Factors.” Offerees should proceed only on the assumption that they may have to bear the economic risk of an investment in the Units for an indefinite period of time. FOR INVESTORS OF ALL STATES

The securities offered hereby have not been registered under the 1933 Act or the securities laws of any state and are being offered and sold in reliance on exemptions from the registration requirements of the 1933 Act and such state laws. The securities are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the 1933 Act and such state laws pursuant to registration or exemption therefrom. Investors should be aware that they will be required to bear the financial risk of this investment for an indefinite period of time. The securities offered hereby have not been qualified under the securities laws of any state and are being offered and sold in reliance on the exemption from qualification provided by Section 18 of the 1933 Act for “covered securities” issued and sold pursuant to Rule 506 of the 1933 Act, which only requires that a notice of transaction be filed in those states in which investors reside, together with a filing fee as provided in those states.


TABLE OF CONTENTS

Page The Business..................................................................................................................... 7

Summary of the Offering .................................................................................................. 11

Management ..................................................................................................................... 14

Indemnification................................................................................................................. 16

Conflicts of Interest .......................................................................................................... 16

Risk Factors...................................................................................................................... 17

Tax Aspects of the Offering .............................................................................................. 21

Additional Documents ...................................................................................................... 23

Exhibit A – Subscription Agreement for Class A Units

Exhibit B – Subscription Agreement for Class B Units

Exhibit C – Operating Agreement


THE BUSINESS

California Capital Investors, LLC was formed to provide a financing vehicle for:

1. Capitalizing California Capital Partners, LLC (CalCap), the Manager of the California Ventures Funds, a series of debenture and equity capital funds. California Ventures Debenture Fund (CalVen) L.P. initially is targeted to raise ca. $150,000,000 of capital from institutional investors, corporations, banks, individuals, and the Small Business Administration (SBA). Approximately, $50,000,000 of the capital will be obtained as private Limited Partnership interests, and this will be leveraged by regulatory capital from the SBA, initially in the amount of $100,000,000 (2 times the private LP capital).

2. Investing in several technology based portfolio companies that demonstrate the Manager’s

acumen at capturing and selecting deal-flow in the geographic areas specified for its scope of operations. These investments will be secured debt placements into qualified operating technology companies. None of these individual investments by the Company will exceed $1 million. The Company plans to bifurcate these placements between life science and information technology companies.

Furthermore, the Company is formed to perform these tasks as part of a composite group of companies formed to optimize liability security of the investors. These company entities include:

California Ventures Debenture Fund (CalVen) L.P. - The Debenture Fund, approximating $150 million, and applying to operate as a recipient SBA leveraged capital of approximately $100 million.

California Venture Partners, LLC (CalPar) - The General Partner of CalVen and the licensee

of the anticipated SBIC license. In many respects, this is a ‘virtual’ company that out-sources all management and administration duties to CalCap (below). Its structure includes the ‘investment committee’ (comprised of CalCap Managers) that make decisions on capital placements on behalf of CalVen. As the prospective license holder, it is subject to ‘look-back’ provisions from the SBA, and acts as an intermediary organization between the SBA and CalCap.

California Capital Partners, LLC (CalCap) – CalCap is a venture capital management

company. In the context of this Private Placement Memorandum, CalCap is the Fund Manager.

California Capital Investors, LLC (CCI, or the “Company”) – The Company anticipates

making at least three (3), but not more than five (5) investments. The placements into CalCap will be an equity investment into a Series “A” security, providing a preferred return, and share of the Manager’s carried interest in the capital gain(s) received from CalVen Fund

2 After an initial period of operating history, the SBA leverage can be increase to 3 times the private LP capital, that

potentially could increase fund capital up to ca. $200,000,000, depending on prevailing limits on government

provided capital.


placements. The Company’s primary focus is to provide CalCap’s financial resources for Fund syndication and capital contribution to the CalVen Limited Partnership. Moreover, the Company will make several direct investments into operating companies, from which it will seek to obtain capital gains.

The following chart depicts the functional and capital relationships of the preceding entities:

The Company Strategy. Other than placing the investments previously described, the Company will be maintained as a statutory legal entity only. It will receive proceeds from the investment

California Ventures

Debenture Fund, L.P. (CalVen)

California Venture Partners, LLC (CalPar):

General Partner (SBIC Licensee)

California Capital Partners,

LLC (CalCap): Management Company

California Capital Investors, LLC

(CCI)

CalVen Portfolio

CCI Portfolio

Companies: 3 Investments:

CalCap 1 Life Science Co

1 IT Co

($4.2 Million)

($3 Million, Series A Units)

($150 Million Placements)

($100 Million Leverage)

SBIC Leverage

Investors


placements and then to redistribute the proceeds to the unit holders, pari passu to their equity interest in the Company. This approach will keep Company costs minimal in order to optimize financial returns to the unit holders. The Fund (CalVen) Strategy. The Fund will invest in a diversified pool of qualified businesses. Investments typically will be equity-enhanced loans primarily to small- and medium-sized companies owned and managed by entrepreneurs with proven performance records. The Fund’s management believes it is qualified to perform the following essential functions necessary for successful management of the Fund:

Locating attractive investment opportunities within the business community; Recruiting and developing strong managers and entrepreneurs; Providing financing, strategic and operational assistance to portfolio companies; Accomplishing effective business analysis as well as professional and effective

transaction negotiations; and, Assisting portfolio companies in achieving the benefit of governmentally mandated

programs designed to assist financed firms. The Fund’s capital investments average approximately $5 million each; however, individual investments may range from $1.5 million to $10 million per placement. The Fund commits no more than 10% of its equity capital to any single portfolio company. In addition, this CalVen Fund targets the following portfolio composition: Convertible Sub-Debt with warrant coverage – 50%; Leases with equity participation rights – 30%; Other investment instruments – 20%. We estimate that this mix of transactions will optimize returns, while mitigating risks associated with any single genre of capital placement, and/or regulatory leverage risks associated with returns to the SBA. The Fund has bifurcated geographic targets: Primary target is Southern California; Secondary targets are Silicon Valley and the New York-Boston corridor. We generally limit capital placements to companies located within 2.5 hours travel time from the epicenters of these target areas. We aim to build a balanced portfolio with emphasis on early-stage through later growth-stage technology companies. Target companies typically have proprietary technology, including IT, life sciences, et. al. The objective is to select a portfolio of strategically complimentary companies that first underwrite the principle capital of the fund, and then optimizes capital gains to the Fund’s LP participants.

Investment exit strategies will include a combination of repayment terms; plus, portfolio liquidity events to realize equity features of the portfolio holdings. For example, if a portfolio company is able to go public (IPO), or can be acquired by a larger company for cash or marketable securities, such events will provide distribution of proceeds. Investment returns consist primarily of a combination of income from debenture terms, as well as capital gains from sale of common stock and/or redemption of warrants. SBIC License: The CalVen fund intends to operate as a Small Business Investment Company (SBIC) licensed by the U.S. government’s Small Business Administration (SBA), and has initiated the licensing process. Some features of an SBIC license include:


A 1996 Act created new exemption from Investment Company Act of 1940, allowing qualifying venture capital funds to have more than 100 shareholders or Limited Partners;

The Act provides a leveraged capital availability from the U.S. Department of Commerce

(sic, SBA) matching funds provided by private investors (Limited Partners) for amounts up to 3 times the total capital provided by the private investors in the Fund; and,

The Fund repays the SBA with considerable less than market return (based on a long-

term bond rate) without any participation in the capital gains in the Fund. The SBIC license provides initial capital from the SBA with 2:1 leverage to the ca. $50 million capitalization of CalVen, and increases the available investment capital to approximately $150 million, depending on prevailing regulatory limits on government leverage. Since the government limits its return on the leveraged capital it provides, there is opportunity for the financial returns to have significant enhancement over normal operating returns as a result of the SBIC license, as documented in the following table:

Small Business Investment Company Program

Participating Security and Debenture Leverage

Impact on Investor Returns

Portfolio IRR Investor IRR by Fund Type

Equity Fund Equity Fund Debenture Fund

No Leverage 2:1 Leverage 2:1 Leverage 3:1 Leverage

20.0% 14.0% 18.7% 22.7% 25.8%

25.0% 18.2% 25.7% 29.5% 34.2%

30.0% 22.5% 32.9% 36.9% 42.5%

Notes: Leverage is provide by the SBA. Prepared by RFE Investment Partners of New Canaan, Connecticut, adjusted to reflect 2.0% management fee with 25% carried interest.

While obtaining SBIC status with licensure is not mandatory for the successful syndication and operation of CalVen, it can confer significant financials benefit the Limited Partnership. If CalVen does not obtain an SBIC license, the Limited Partnership may consider initially operating with the sum in the private capital Limited Partnership, and/or increasing its capital with up to ca. $100 million in supplemental Limited Partnership interests. Diversification. The Fund will pursue diversification into at least three categories: (1) industry sectors; (2) stage of growth; and, (3) geographic area.

Industry emphasis will be placed on companies that have a technology or market niche that provides


for rapid growth in revenues and profits.

Initially, the Fund will address profitable small- and medium-sized companies that are expanding and in the late-stage growth phase. It also will expand into placements in early stage companies, once allowances for near-term realizations for profit have been committed. Moreover, it will consider investments into companies that locate within 2.5 hours commuting time from its offices. The Fund portfolio, therefore, will be balanced across industry/sector, stage, and geography. Deal Flow. The Fund’s Manager has an extensive referral network capable of providing a sufficient volume of quality deal flow. Included are other venture capitalists and professional service providers such as accountants and attorneys, business consultants, commercial banks, investment bankers, and government agencies. The Fund, through its management’s broad network of contacts, is well positioned to attract a broad range of exceptional opportunities throughout the U.S. and internationally, but particularly in California, where we estimate that three-fourths of the investments will be made. Participation in the Capitalist Club of Consortium Innovation Centers (CIC) also provides access to valuable "investable" opportunities in Southern California. SEIMS® (Sourcing, Evaluating, Investing, & Monitoring System®) provides standardized timely monitoring of all investments, and facilitates transparency to the partners, and also generates Investments Opportunities Directory (IOD) for qualified limited partners. We differentiate ourselves from other venture debt funds by offering competitive terms due to our low cost of capital. SBA licensing secures sustainable funding availability with competitive rates. We also promote capital syndication through pre-established arrangements with equity venture capital funds that carve-out debt allocation to provide less delusive financing. With C-level operational backgrounds and strong international industry network, the managers will proactively add value to the Fund’s portfolio companies. They usually provide potential portfolio companies with preliminary business development assistance as a part of due diligence process. In addition, this CalVen Fund targets the following portfolio composition: Convertible Sub-Debt with warrant coverage – 50%; Operating Leases with equity participation rights – 30%; Other investment instruments – 20%. We estimate that this mix of transactions will optimize returns, while mitigating risks associated with any single genre of capital placement, and/or regulatory leverage risks associated with returns to the SBA.


Fund Structure. The structure3 of the Fund is shown as follows:

General Partner – Recipient of 25% of Profits from the Fund Management Company – Management and administration of the Fund on behalf of the

General Partner, receives management fee and pass-through of General Partner’s 25% carried interest in the Fund

Management Fee - 2.0% of total commitments (capital matching) Limited Partners - 75% of Profits from the Fund Portfolio Companies - Select recipients of capital proceeds from the Fund

Management. The Company will be managed by the CalCap management team, which has extensive operational and financial experience. To obtain a further explanation of Company management in the context of its investment placements, please refer to the Private Placement Memorandum for California Capital Partners, LLC. Also, refer to the following section, “Management”. The Revenue/Cost Model. The Company’s revenue will be derived from investments returns. The Company’s Manager (the “Managing Members”) does not anticipate drawing compensation or fees from the Company. The Company will need to bear minimal on-going expenses to maintain legal reporting with associated fees, and limited book-keeping and accounting costs. Uses of Proceeds. Most of the proceeds of the Offering will be used to make three (3) to five (5) investments. It anticipates placing $2.2 million with CalCap, the Fund Manager. CalCap’s uses of the proceeds derived from the Company primarily will be for working capital related to the organizational and syndication and capital contribution costs of the Fund Offering. In addition, approximately $2.0 million of the Company’s proceeds will be deployed make several select capital placements to demonstrate the deal-flow resources and transactional acumen of the Manager and General Partner. This portfolio, or a portion thereof, may be offered to CalVen at some future time, subject to SBA approval, for admission to leveraged capital pool, and an acceptable return on deployed capital to the unit holders of the Company.

Fund’s Investment Return. The Fund’s investment returns ultimately will be driven by several factors. The primary factor in determining investor returns is the internal rate of return (“IRR”) generated by the Fund’s investment portfolio companies. The Fund will seek to invest in businesses that management believes will achieve a portfolio IRR of 25%, or higher. The current cost of SBA leverage approximates ca. 6.70% and the Company’s current business plan anticipates an initial leverage factor of 2 to 1. An illustration of portfolio returns based on a $150 million equity SBIC ($50 million of private capital and $100 million of initial SBA leverage), a 25% carried interest to

3 (a) California Ventures Debenture Fund, L.P. (the “Fund”) is a Delaware limited partnership

(b) California Capital Partners, LLC (the “Company”) will manage Fund affairs as its managing partner on behalf of the General Partner, and also will provide management services to the portfolio companies (c) California Venture Partners, LLC (the “General Partner) is the general partner of the fund that comprises the Investment Committee that makes portfolio investment decisions


the general partner, 5.70% interest cost of the SBA leverage, and a 2.00% annual management fee, for the 10-year life of the SBIC, is estimated as follows4:

Private Capital $ 50,000,000

Cumulative Distributions (assuming a portfolio IRR of ca. 30%,):

• To Limited Partners $ 309,785,820 • To General Partner $ 103,261,940 • To Manager $ 103,261,940

(pass-through from General Partner)

4 Based on the adjusted RFE Investment Partners of New Canaan, Connecticut study.


SUMMARY OF THE OFFERING

The following summary is qualified in its entirety by the detailed information appearing elsewhere in this Private Placement Memorandum. The information set forth herein has been derived from industry and other sources, which the Company believes is reliable. Statements contained in this Memorandum as to the contents of any contract or other document are not necessarily complete, and each statement is qualified in all respects by reference to such contract or other documents, a copy of which may be obtained from the Company without charge, upon request. Company: California Capital Investors, LLC is a Delaware limited liability

company, reconstituted as of October, 2006. Capital: The Company is capitalized at $4,200,000, representing 42 Units of

Membership Interests at $100,000 per Unit. Offering of Units: A Rule 506 private placement only to accredited investors through

the issuance and sale of 42 Units at a unit price of $100,000 cash per Unit or $4,200,000, with a minimum of 10 Units, or $1,000,000 (unless such minimum is waived by the Manager). 8 of the Units have been reserved for purchase by the Company officers, directors and executives at a price of $100,000 per Unit.

Minimum Purchase of Units: Minimum Unit purchase is 2.5 Units, or $250,000; although the

Company reserves the sole right to authorize and accept fractional Units.

Allocations: At the end of each fiscal year, the net profits of the Company will be

allocated to the holders of Units in proportion to their percentage ownership of the Units.

Net losses will be allocated to all holders of Units in proportion to

their contributed capital. Tax Distributions: Within 90 days following the end of each fiscal year, the Company

shall distribute to each Unit holder cash in an amount equal to 40% of the net taxable income for federal and state income tax purposes allocated to each Unit holder’s capital account during the fiscal year.

Other Distributions: The Company may make additional distributions of cash or

marketable securities from time to time in its discretion. Such distributions will be made 100% pro rata to the holders of Units in proportion to their percentage ownership of the Units.


Management of The Company: The Managing Members will be the Manager of the Company, and

will have the exclusive right to manage the business and affairs of the Company. The Manager will serve for the life of the Company, subject to the terms of the Operating Agreement.

Federal Income Tax Consequences: The Company will be treated as a partnership for federal income tax

purposes. Each Unit Holder must therefore report such Unit holder’s allocable share of the Company’s taxable income or loss on such Unit holder’s own federal income tax return. International investors may be subject to automatic federal income tax withholding. For a more complete discussion of the tax consequences of Unit ownership, see “Tax Aspects of the Offering.”

Fiscal Year: The fiscal year of the Company will be the calendar year. Term of the Company: The Company’s Operating Agreement provides that the Company

will continue indefinitely until terminated as provided in the Operating Agreement.

Method of Subscription: Each person desiring to purchase Units must execute and return the

Subscription Agreement attached as an Exhibit A to this Private Placement Memorandum, together with a check drawn on collected funds, or electronic funds transfer, payable to “California Capital Investors, LLC” for each Unit subscribed for in the amount of $100,000 per Unit subscribed.

Subscription Period: This Offer shall remain open until 30 June, 2007, unless all Units

have been sold prior to that date. The Company reserves the right to cancel the Offering and to reject subscriptions for Units in whole or in part.

Suitability of Investors: The purchase of Units is suitable only for persons of suitable

financial means that have no need for liquidity in their investments. Units will be sold only to persons that meet these and other requirements and can represent that the person (1) is an “accredited investor” as defined herein; (2) has such knowledge and experience in financial and business matters that such person is capable of evaluating the merits and risks of an investment in the Company; and, (3) is able to bear the economic risk of the investment for an indefinite period of time and can afford a complete loss of such investment. All investors must make certain representations in


connection with their purchase of Units as set forth in the Subscription Agreements.


MANAGEMENT

The Managers of the Company will have responsibility for supervising the Company’s operations and the ultimate authority in all matters affecting the business and affairs of the Company, including the responsibility for determining investments to be made by the Company. Unit Holders will have no participation in these matters or any other day-to-day business operations of the Company. Their participation will be limited to the votes and consents permitted by the Operating Agreement.

The Company will have its principal office in California. The following officers and directors will manage the Company:

John R. Nelson - Managing Director and Board Advisor Richard Rose - Managing Director and Board Advisor Gary Rushin - Managing Director and Board Advisor Shohei Sakazaki - Managing Director and Board Advisor

John R. Nelson - Mr. Nelson’s career incorporates operating experience as an executive where he has been involved with both investment finance and technology-related industries. Mr. Nelson's international experience has emphasized the Asia-Pacific region, where he has worked for two decades involved in cross-border investments, multi-national manufacturing operations, and market development. He has 20+ years as institutional venture capital Managing Partner, including leadership roles in 6 fund management groups. Before the formation of the CalCap, Mr. Nelson was Managing Director of the Technology Gateway Funds, LP of The Ventana Global Funds, Ltd. Prior to this role, he held a contract with the Commonwealth of Australia, functioning as that nation’s Investment Director, North America. In this capacity, he represented the Ministry of Treasury and the Department of Industries, Technology, and Technology (DIST) by providing investment services related to mergers and acquisitions, joint ventures, technology transfers, and greenfields manufacturing investments. He has held a variety of executive roles in operating companies ranging from Fortune 500 (National Computer Systems, where he was Sr. Vice President) to turn-arounds (Cycle, Inc. where he took over as CEO), to start-ups (such as Int’l Technology Systems, where he was Chairman/CEO). He has served on boards of directors for both public and private companies. Mr. Nelson's academic and research background include: ABD (Ph.D. qualified) from the University of Oregon; doctoral skill certification in Computer Technology; an M.B.A./D.B.A. candidacy in Marketing Management; and, B.A./B.S. from the University of Wisconsin-Madison. Richard Rose – Dr. Rose is an experienced healthcare executive with broad experience in biotechnology and healthcare. Dr. Rose was a Managing Director of MPM Capital, and in this capacity was responsible for biotechnology advisory and investment activities on the West coast of the U.S. and in Japan. From 1996-2000 he served as President and CEO of StemCells, Inc. (NASDAQ:Stem), a biotechnology company formerly named CytoTherapeutics. He is a Founder of SRS Capital, LLC, and HealthCapWest, Inc., merchant banking and financial advisory firms. He has served on a number of corporate Boards including Biofem, Inc. Modex Therapeutiques (Lausanne, Switzerland), StemCells, Inc., and the American Thoracic Society. He is a graduate (magna cum laude) of Yale College and the Harvard Medical School where he was Associate Professor of Medicine, and Chief of the Division of Pulmonary and Critical Care Medicine


at the New England Deaconess Hospital, a major Boston teaching hospital. He is a Fellow of the American College of Physicians, and is Board certified in Internal Medicine and the sub-specialties of Pulmonary Medicine and Critical Care Medicine. He is the author of over 75 scientific articles published in peer-reviewed journals, and is the author of a book on biotechnology for non-scientists. He holds an adjunct faculty appointment at UCSD School of Medicine, and a NASD broker-dealer securities license. Dr. Rose has served on numerous advisory boards including those of Genetics Institute, the MIT Biotechnology Center, the National Heart, Lung and Blood Institute, Care Group Healthcare System in Boston, CyBios, Inc., the UCSD Cancer Center, and Arizeke, Inc. From 1992-95 he served as Vice President for Drug Development at Cytel Corporation. Gary S. Rushin – Mr. Rushin’s depth and breadth of corporate experience encompasses commercial/investment banking, corporate restructuring, and operations. He has an extensive knowledge of Financial Advisory, covering the valuation of businesses and securities for solvency and capital adequacy; Corporate Finance, including mergers and acquisitions and private placements; Financial Restructuring, advising creditors and debtors on bankruptcy proceedings, including distressed mergers and acquisitions; and Information Technology. His career began in 1978 at the Irving Trust Company, Corporate Financial Counseling Department. He joined Republic Bank Dallas, N.A. elevating to country manager for South East Asia and Australia/New Zealand. Later he joined Signet Bank as a middle market lender covering the Mid-Atlantic States and then becoming a Director of Corporate Finance for an affiliate of Alex. Brown and Sons. With the implosion of the junk bond era, Mr. Rushin became an insolvency expert representing creditors on such restructurings as LTV Corporation, Wang Laboratories, Lonestar Industries, Memorex Telex Corporation, etc. Mr. Rushin led the turnaround of an information technology services company as its chief financial officer and became a banking adviser to the Governor of the Bank of Ghana for the World Bank. Mr. Rushin authored the country’s prudential regulations for supervising Non-Bank Financial Institutions covering savings banks, credit unions, venture capital funds, etc. Additionally he was instrumental in establishing the credit union association into a Self-Regulatory Organization. One of Mr. Rushin clients includes the National Association of Small Business Investment Companies (NASBIC) where he provided financial models for the SBA’s Debenture and the Participating Securities SBIC programs. A licensed Certified Public Accountant and Certified Insolvency and Restructuring Advisor, Mr. Rushin holds memberships in the American Institute of Certified Public Accountants (AICPA), the Association of Insolvency and Restructuring Advisors, and the Global Association of Risk Professionals. He is a former member of the AICPA’s Information Technology Research Subcommittee and Top Ten Technologies Committee and had written several articles on information technology. Mr. Rushin holds a Masters of Science in Computer Science from Southeastern University and a Bachelors of Business Administration from Temple University. He is on the BODs of a university and Quantum MRI. Shohei Sakazaki - Mr. Sakazaki has experience of 14 years in venture capital investing and four years in international business consulting practice. As a venture capitalist, he invested $47 million in 22 companies, of which eight made IPO and three were acquired successfully. He also served on the boards of 11 Silicon Valley startups, three as a board member and eight as a board


observer. After graduating from Waseda University, Tokyo, in 1989, Mr. Sakazaki joined Nippon Investment & Finance (currently NIF SMBC Ventures), where he organized the establishment of venture capital funds and executed investments in Asian growth companies as well as US technology startups. He also experienced international investment banking at Daiwa Securities from 1992 through 1993. From 1994 through 1996, he served as Portfolio Manager of NIF Management Singapore. He left NIF in 1997 and founded an international business communication consulting firm called Trans-it, Ltd., where he served more than fifteen corporate clients including venture firms and entrepreneurial companies. He rejoined NIF again in March 2000 and served as Managing Director of the Palo Alto office until February 2006.


INDEMNIFICATION

The Operating Agreement provides that the management of the Company will not be liable to the Unit Holders for any act or omission performed or omitted by them except for acts or omissions arising out of gross negligence or willful misconduct, and that the Company will indemnify each director, officer, employee and agent of the Company for any liability suffered by them arising out of their activities in connection with the Company, except for liabilities resulting from gross negligence or willful misconduct. Accordingly, the Unit Holders may have a more limited right to action than would otherwise be the case absent such provisions.

CONFLICTS OF INTEREST

The structure and proposed method of operations of the Company and the Fund and its other related entities could create certain inherent conflicts of interest between the Company and the members of management of the Company. Certain restrictions have been provided in the Operating Agreement are designed to protect the interests of the Unit holders in this regard. Notwithstanding the foregoing, the Company will be subject to various conflicts of interest arising out of its relationships with the members of management and affiliates. Selection of Investments. Some members of the Manager of the Company also may be members of the Boards of Directors of portfolio companies in which the Fund may invest. Hence, it is anticipated that they may have to negotiate dual loyalties to the Company, the Fund, the Fund’s portfolio companies, and/or with other private equity funds the Company may manage. Competition. Members of the Management Committee also may be members of the boards and equity holders in other investment companies throughout the United States. Each of these individuals and other entities from time to time also may be making investments in similar projects with, or coincidentally to, the Company and the Fund. None of these members of the Manager are required to present to the Company any of the investments in which they may be investing or evaluating outside of the confines of the Company itself. Competition by the Company with Other Entities and Activities for Management Services. The Company believes that its management will have sufficient time to discharge fully its responsibilities to the Company and other business activities (including supplemental funds) in which they are, or may become, involved. The Company will have an independent management structure, and will rely on these members of the Company’s Manager for its management and operation. Certain Managing Members of the Company, however, may be or from time to time become engaged in substantial other activities apart from the Company. Accordingly, Managing Members of the Company will devote that apportionment of their time to the business of the Company as is reasonably required in their judgment. The Company and its Managing Members may encounter conflicts of interest in allocating management time, services, and functions among the Company and any other funds it or they have organized or may organize in the future, as well as among the Company and other business ventures in which it or they are or may become involved. Legal Representation. Legal counsel to the Company may also serve as legal counsel to the portfolio


companies. In the event any controversy arises during or following the termination of the Offering in which the interest of the Company appears to be in conflict with those of the Company’s portfolio companies, it may be necessary to retain other counsel for one or both parties. Non-Arms-Length Agreements. Certain agreements and arrangements, including those relating to compensation between the Company and other entities owned and/or managed by members of its management team, have been established and may not be considered the result of arms-length negotiations.

RISK FACTORS

The purchase of Units involves various risks. Prospective purchasers should consider the following factors before making a decision to acquire Units. Ability to capitalize the Fund or its anticipated follow-on-funds. The Company must obtain sufficient capital to invest in CalCap for financing for the Fund. While initial indications of interest are strong, there can be no guarantee that the Fund will be able to complete its offering in the full amounts, or time frame anticipated. Ability of the Fund to place its capital profitably. A significant consideration of the Company’s revenue model is based on the assumption that the Fund, CalVen, will be able to access quality portfolio companies. If the Fund were unable to find such companies, its revenue and success would be seriously impacted thereby adversely impacting pass-through returns to the Company. Continuity of Key Personnel. Key people and the relationships they manage are pivotal to the success of any venture. This is also true with respect to this venture. The departure of several key personnel from the employ of the Fund Manager during the life of the Fund could impact deal-flow, fund-raising, and administrative continuity, at least temporarily. The continuing participation of the Managing Directors of the Fund Manager, CalCap, is critical to the successful operations of the Fund. Success of Portfolio Companies. The Company’s ultimate success is dependent on the performance and success of the Fund’s portfolio companies. Despite its investment condition, there can be no assurance that the Fund’s Investment Committee will be able to access and invest in successful portfolio companies. The Fund may be investing in some emerging growth companies, whose performance may be more difficult to predict that later-stage or larger business enterprises. Risks of Venture Stage Companies. The Fund intends to diversify its risk by investing in a balanced portfolio of ventures that allocates risk on across multiple regions, market sectors, and maturities. Most of these portfolio investments will be in growth-stage venture companies. These portfolio companies can be illiquid, volatile, and susceptible to numerous risks. Moreover, they may not have the operating histories or performance of more established companies. Finally, their success is often dependent on market conditions beyond the control of the portfolio companies or the Fund Manager. Issuance of an SBIC License. The CalVen fund intends to operate on capital partially derived from


an SBIC license from the U.S. government, and has initiated the licensing process. The License initially provides 2:1 leverage to the capitalization of CalVen and increases the available investment capital to approximately $150 million. Since the government limits its return on the leveraged capital it provides, there is opportunity for the Limited Partner financial returns to have significant enhancement over normal operating returns as a result of the SBIC license. There, however, is no guarantee of CalVen receiving the SBIC license, and exogenous factors such as regulatory changes, performance criteria, and other matters could affect the status and benefits of the SBIC license, providing that CalVen receives the benefit of licensure. Dependability of Assumptions. The description of the contemplated results of operations of the Company in this Private Offering Memorandum (including the financial projections) are based on various assumptions concerning many facts over which the Company has no control, including without limitation:

• The matters set forth in this “Risk Factors” section and in the “Conflicts of Interest”;

• The capabilities of the Fund’s Manager regarding the selection of investments for the Fund;

• The success of the investments made and chosen by the Fund;

• A prospective investor should be aware that the financial projections are, by nature,

uncertain projections of future results since such items are not susceptible to precise measurement. The financial projections are dependent upon many factors and are set forth herein solely as an illustration of certain potential economic events.

Other Risks of Investments in Emerging Growth Companies. The Company’s investments will be subject to the risks generally incident to the ownership of interests in emerging growth companies, including changes in international, national and local economic conditions, changes in the investment climate, changes in demand for or supply of competing companies, changes in market conditions and characteristics, the availability of ongoing funding for the portfolio companies, the obligation to meet fixed and maturing obligations (if any), unanticipated holding costs, changes in the regulatory or legal environment affecting certain technologies, changes in governmental rules and fiscal policies, acts of God (which may result in uninsured losses) and other factors beyond the control of the Company. In recent years, the proliferation of emerging growth companies has made this area of investment highly competitive. Lack of Diversification within the Company. The profitability of the Company will be dependent upon the cash flow from subsequent successes of the various investments of the Fund and the several direct investments that it makes into operating companies. Various factors, internationally and nationally, can impact on these variables, and limit the Manager’s diversification strategy, thereby potentially constraining the return on the investment of the various companies selected. Income Tax Risks to Investors. The following is a brief summary of what the Company believes are the most significant tax risks involved in an investment in the Units. An unfavorable outcome with respect to any tax risk factor may have an adverse effect on an investment in the Units. The tax


considerations involved in an investment in the Company that should be significant to the Company are discussed under “Tax Aspects of the Offering.” Those considerations involved additional tax risks not discussed below. Each prospective investor is strongly urged to review the material and to discuss with his tax advisors the tax consequences to him of an investment in the Company. Passive Activity Rules. Any Company losses will be treated as losses generated in a passive activity. Losses from passive activities generally may only be deducted against income from the same or other passive activities.

Tax Liabilities in Excess of Cash Distributions. Each Unit holder will be required to pay federal income taxes at his individual rate on his allocable share of the Company’s taxable income. The Unit holders may also be required to pay state income taxes on their share in the Company’s taxable income, depending on their state of residence. Though the Operating Agreement contemplates mandatory distribution to pay taxes, no assurance can be given that cash will be available for such distribution or will be distributed at any specific time. Accordingly, there is a risk that the Unit holders will incur tax liabilities resulting from an investment in the Company without receiving cash from the Company in an amount sufficient to pay for any part of that liability. International Investors. This Private Placement Offering Memorandum makes no effort to render any advice or counsel as to the risks that may be unique to international investors regarding U.S. tax implications. Most international investors may be subject to automatic U.S. income tax withholding on any distributions paid by the Company. Each and every international investor should consult with his/her own U.S. tax advisor, as well as a competent tax advisor from his/her own country, versed in the implications of U.S. generated income. Company Capitalization. The Company intends to sell, exchange or otherwise dispose of its investment holdings when the Company’s Manager, in its sole discretion, determines such action to be in the best interests of the Company. Provision has been made in the capitalization of the Company to fund a limited number of various investments. To the extent that expenses increase, or unanticipated expenses arise, the Company might be required to obtain additional funds through increased fundraising efforts. Limited History of Company Operations. The Company itself has been formed recently as a special purpose investing entity. Accordingly, it has no history of operations, although the executive members of its Manager do have extensive fund management experience.

Reliance on Management. The Company Manager will have the right to make decisions with respect to the management and operation of the business and affairs of the Company. Under the Company’s Operating Agreement, the Members will have no right or power to take part in the management of the Company. Accordingly, no person should purchase Units unless such person is willing to entrust all aspects of management of the Company to the Managing Members (See “Management”). The Company’s success will depend largely on the efforts and abilities of the Manager of the Company. The loss of the services of any of the members of the management team could have a material adverse effect on the business of the Company. No Market for Units. The transfer of Units will be subject to certain limitations. Moreover, it is not


anticipated that any public market for Units will develop, and the transfer of Units may result in adverse tax consequences for the transferor. See “Tax Aspects of the Offering.” Consequently, Unit holders may not be able to liquidate their investment in the event of emergency or for any other reason, and Units may not be readily accepted as collateral for a loan. The purchase of Units, therefore, should be considered only as a long-term investment. Return of Distributions. A Unit holder may be liable to the Company and its creditors, if any, for and to the extent of any distribution made to such Unit holder if, after giving effect to such distribution, including dividends, the remaining assets of the Company are not sufficient to pay its outstanding liabilities (other than liabilities to the Unit holders on account of their Units). Additionally, a Unit holder may be liable to the Company for a period of time to the extent that cash distributed to such Unit holder constitutes a return of all or a portion of such Unit holder’s Capital Contribution, together with interest thereon. Indemnification and Exoneration. Subject to certain conditions, the Company will indemnify each of its directors, officers, employees and agents against certain claims or lawsuits arising out of the Company’s activities or operations or out of this Offering, including liabilities under the 1933 Act, the Securities Exchange Act of 1934, as amended and the California Corporate Securities Law, as amended. In addition, the management of the Company will not have any liability for any failure to comply with its obligations under the Operating Agreement unless such failure was the result of gross negligence or willful misconduct. In the opinion of the Securities and Exchange Commission, indemnification for liabilities arising under the 1933 Act is contrary to public policy and therefore unenforceable. TAX ASPECTS OF THE OFFERING

General. This section of the Private Offering Memorandum describes some of the more important federal income tax consequences of participation in the Company. No information regarding international, state and local taxes is provided. Each prospective Unit holder should consult his tax advisor concerning his situation and the impact which participation in the Company may have on his federal income tax liability, as well as which state and local income and other tax laws may apply to his participation and the impact those laws may have. Although the Company will furnish the Unit holders with such information regarding the Company as is required for income tax purposes, each Unit holder will be responsible for preparing and filing his own tax returns.

Classification as a Partnership. A limited liability company will be classified for income tax purposes as a partnership if it so elects under the IRS “check-the-box” regulations. A partnership incurs no federal income tax liability. Instead, each Unit holder is required to take into account an allocable share of the Company’s net income or loss and an allocable share of certain specially characterized items (e.g., capital gains and losses) in computing his income tax liability. Cash distributions by a partnership to a Unit holder generally are not taxable unless the distributions exceed the Unit holder’s adjusted basis in his Units. The availability to Unit holders of most of the tax treatment described in this summary requires that the Company be classified as a partnership rather than as a corporation under the federal income tax laws.


Tax Consequences of Unit Ownership. A Unit holder’s distributive share of items of income, gain, loss, deduction or credit will be determined in accordance with the allocations set forth in the Operating Agreement as long as such allocations are recognized for federal income tax purposes. Subject to the at-risk rules, the passive activity limitation, the investment interest limitation and the floor on miscellaneous itemized deductions, each Unit holder will be entitled to claim as a deduction his distributive share of the Company’s net losses, if any, to the extent of that Unit holder’s basis in his Units as of the end of such taxable year. To the extent that a Unit holder’s share of Partnership losses exceeds the basis of his Units, such excess losses cannot be utilized in that year by that Unit holder for any purpose, but are not allowed as a deduction (subject to the limitations described above) only when that Unit holder’s adjusted basis for his Units at the end of any year exceeds zero (before reduction by the suspended loss).

The Company will use reasonable efforts not to make any investment, incur any liabilities, or otherwise take any actions that would result in the realization by any tax-exempt investor of “unrelated business taxable income” within the meaning of Section 512 of the Internal Revenue Code. Notwithstanding this undertaking of the Company, it is possible that the Company could realize income that would constitute unrelated business taxable income and, in that event, each tax-exempt investor would be subject to U.S. Federal income tax on its share of such income.

This Memorandum does not address all of the United States federal income tax consequences to the investors of an investment in the Company, and does not address any of the state or local tax consequences of such an investment to any investor, or the United States or foreign tax consequences of such an investment to any investor that is not a United States person or entity. Each prospective investor is advised to consult its own tax counsel as to the Federal income tax consequences of an investment in the Company and as to applicable state and local and foreign taxes. Special considerations may apply to prospective investors who are not United States persons or entities, and such investors are advised to consult their tax advisors with regard to the United States, state and foreign tax consequences of an investment in the Company. ADDITIONAL DOCUMENTS

There are other documents that potential Units holders may want to review other documents that could affect the operation and/or profitability of the Company. These documents are available upon request and include the following documents:

The Private Offering Memorandum for California Capital Partners

Various PowerPoint presentations related to CalCap and CalVen

Publications related to the licensing and operations of SBIC’s

EXHIBITS: Exhibit A – Subscription Agreement for Membership Interests Exhibit B – Operating Agreement