EXHIBIT 10.6

SECURITIES PURCHASE AGREEMENT

SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of December 14, 2006,
by and among Javo Beverage Company, Inc., a Delaware corporation, with
headquarters located at 1311 Specialty Drive, Vista, CA. 92081 (the ”Company”),
and the investors listed on the Schedule of Buyers attached hereto
(individually, a “Buyer” and collectively, the “Buyers”).

WHEREAS:

A.            The Company and each Buyer is executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the “1933 Act”), and
Rule 506 of Regulation D (“Regulation D”) as promulgated by the United States
Securities and Exchange Commission (the “SEC”) under the 1933 Act.

B.            The Company has authorized a new series of senior convertible
notes of the Company, in the form attached hereto as Exhibit A (the “Notes”),
which Notes shall be convertible into the Company’s common stock, par value
$0.001 per share (the ”Common Stock”) (as converted, the “Conversion Shares”),
in accordance with the terms of the Notes.

C.            Each Buyer wishes to purchase, and the Company wishes to sell,
upon the terms and conditions stated in this Agreement, (i) that aggregate
principal amount of the Notes set forth opposite such Buyer’s name in column (3)
on the Schedule of Buyers attached hereto (which aggregate amount for all Buyers
shall be $21,000,000); (ii) warrants, in substantially the form attached hereto
as Exhibit B-1 (the “Series A Warrants”), to acquire up to that number of
additional shares of Common Stock set forth opposite such Buyer’s name in column
(4) of the Schedule of Buyers (as exercised, collectively, the “Series A Warrant
Shares”); (iii) warrants, in substantially the form attached hereto as Exhibit
B-2 (the “Series B Warrants”), to acquire up to that number of additional shares
of Common Stock set forth opposite such Buyer’s name in column (5) of the
Schedule of Buyers (as exercised, collectively, the “Series B Warrant Shares”);
and (iv) warrants, in substantially the form attached hereto as Exhibit B-3 (the
“Series C Warrants”, and together with the Series A Warrants and the Series B
Warrants, the “Warrants”), to acquire, upon an Optional Redemption (as set forth
in Section 9 of each of the Notes) additional shares of Common Stock, up to that
number of additional shares of Common Stock set forth opposite such Buyer’s name
in column (6) of the Schedule of Buyers (as exercised, collectively, the “Series
C Warrant Shares”, and together with the Series A Warrant Shares and the Series
B Warrant Shares, the “Warrant Shares”).

D.            The Notes bear interest, which at the option of the Company,
subject to certain conditions, may be paid in shares of Common Stock (the
“Interest Shares”).

E.             Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement, substantially in the form attached hereto as Exhibit C (the
“Registration Rights Agreement”), pursuant to which the Company will agree to
provide certain registration rights with respect to the Registrable

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Securities (as defined in the Registration Rights Agreement) under the 1933 Act
and the rules and regulations promulgated thereunder, and applicable state
securities laws.

F.             The Notes, the Conversion Shares, the Interest Shares, the
Warrants and the Warrant Shares collectively are referred to herein as the
“Securities”.

G.            The Notes will rank senior to all outstanding and future
indebtedness of the Company, other than Permitted Senior Indebtedness (as
defined in the Notes).

NOW, THEREFORE, the Company and each Buyer hereby agree as follows:

1.             PURCHASE AND SALE OF NOTES AND WARRANTS.

(A)           PURCHASE OF NOTES AND WARRANTS.

(I)            NOTES AND WARRANTS.  SUBJECT TO THE SATISFACTION (OR WAIVER) OF
THE CONDITIONS SET FORTH IN SECTIONS 6 AND 7 BELOW, THE COMPANY SHALL ISSUE AND
SELL TO EACH BUYER, AND EACH BUYER SEVERALLY, BUT NOT JOINTLY, AGREES TO
PURCHASE FROM THE COMPANY ON THE CLOSING DATE (AS DEFINED BELOW), (W) A
PRINCIPAL AMOUNT OF NOTES AS IS SET FORTH OPPOSITE SUCH BUYER’S NAME IN COLUMN
(3) ON THE SCHEDULE OF BUYERS, (X) THE SERIES A WARRANTS TO ACQUIRE UP TO THAT
NUMBER OF SERIES A WARRANT SHARES AS IS SET FORTH OPPOSITE SUCH BUYER’S NAME IN
COLUMN (4) ON THE SCHEDULE OF BUYERS, (Y) THE SERIES B WARRANTS TO ACQUIRE UP TO
THAT NUMBER OF SERIES B WARRANT SHARES AS IS SET FORTH OPPOSITE SUCH BUYER’S
NAME IN COLUMN (5) ON THE SCHEDULE OF BUYERS AND (Z) THE SERIES C WARRANTS TO
ACQUIRE UP TO THAT NUMBER OF SERIES C WARRANT SHARES AS IS SET FORTH OPPOSITE
SUCH BUYER’S NAME IN COLUMN (6) ON THE SCHEDULE OF BUYERS (THE “CLOSING”).

(II)           CLOSING.  THE DATE AND TIME OF THE CLOSING (THE “CLOSING DATE”)
SHALL BE 10:00 A.M., NEW YORK CITY TIME, ON THE DATE HEREOF (OR SUCH LATER DATE
AS IS MUTUALLY AGREED TO BY THE COMPANY AND EACH BUYER) AFTER NOTIFICATION OF
SATISFACTION (OR WAIVER) OF THE CONDITIONS TO THE CLOSING SET FORTH IN SECTIONS
6 AND 7 BELOW AT THE OFFICES OF SCHULTE ROTH & ZABEL LLP, 919 THIRD AVENUE, NEW
YORK, NEW YORK 10022.

(III)          PURCHASE PRICE.  THE AGGREGATE PURCHASE PRICE FOR THE NOTES AND
THE WARRANTS TO BE PURCHASED BY EACH SUCH BUYER AT THE CLOSING (THE “PURCHASE
PRICE”) SHALL BE THE AMOUNT SET FORTH OPPOSITE EACH BUYER’S NAME IN COLUMN (7)
OF THE SCHEDULE OF BUYERS.  EACH BUYER SHALL PAY $1,000 FOR EACH $1,000 OF
PRINCIPAL AMOUNT OF NOTES AND RELATED WARRANTS TO BE PURCHASED BY SUCH BUYER AT
THE CLOSING.

(B)           FORM OF PAYMENT.  ON THE CLOSING DATE, (I) EACH BUYER SHALL PAY
ITS PURCHASE PRICE TO THE COMPANY FOR THE NOTES AND THE WARRANTS TO BE ISSUED
AND SOLD TO SUCH BUYER AT THE CLOSING, BY WIRE TRANSFER OF IMMEDIATELY AVAILABLE
FUNDS IN ACCORDANCE WITH THE COMPANY’S WRITTEN WIRE INSTRUCTIONS AND (II) THE
COMPANY SHALL DELIVER TO EACH BUYER THE NOTES (ALLOCATED IN THE PRINCIPAL
AMOUNTS AS SUCH BUYER SHALL REQUEST) WHICH SUCH BUYER IS THEN PURCHASING
HEREUNDER ALONG WITH THE WARRANTS (ALLOCATED IN THE AMOUNTS AS SUCH BUYER SHALL
REQUEST) WHICH SUCH BUYER IS PURCHASING, IN EACH CASE DULY EXECUTED ON BEHALF OF
THE COMPANY AND REGISTERED IN THE NAME OF SUCH BUYER OR ITS DESIGNEE.

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2.             BUYER’S REPRESENTATIONS AND WARRANTIES.  EACH BUYER, SEVERALLY
AND NOT JOINTLY, REPRESENTS AND WARRANTS WITH RESPECT TO ONLY ITSELF THAT:

(A)           NO SALE OR DISTRIBUTION.  SUCH BUYER IS ACQUIRING THE NOTES, AND
THE WARRANTS, AND UPON CONVERSION OF THE NOTES AND EXERCISE OF THE WARRANTS
(OTHER THAN PURSUANT TO A CASHLESS EXERCISE (AS DEFINED IN THE WARRANTS)) WILL
ACQUIRE THE CONVERSION SHARES ISSUABLE UPON CONVERSION OF THE NOTES AND THE
WARRANT SHARES ISSUABLE UPON EXERCISE OF THE WARRANTS, FOR ITS OWN ACCOUNT AND
NOT WITH A VIEW TOWARDS, OR FOR RESALE IN CONNECTION WITH, THE PUBLIC SALE OR
DISTRIBUTION THEREOF, EXCEPT PURSUANT TO SALES REGISTERED OR EXEMPTED UNDER THE
1933 ACT; PROVIDED, HOWEVER, THAT BY MAKING THE REPRESENTATIONS HEREIN, SUCH
BUYER DOES NOT AGREE TO HOLD ANY OF THE SECURITIES FOR ANY MINIMUM OR OTHER
SPECIFIC TERM AND RESERVES THE RIGHT TO DISPOSE OF THE SECURITIES AT ANY TIME IN
ACCORDANCE WITH OR PURSUANT TO A REGISTRATION STATEMENT OR AN EXEMPTION UNDER
THE 1933 ACT AND PURSUANT TO THE APPLICABLE TERMS OF THE TRANSACTION DOCUMENTS
(AS DEFINED IN SECTION 3(B)).  SUCH BUYER IS ACQUIRING THE SECURITIES HEREUNDER
IN THE ORDINARY COURSE OF ITS BUSINESS.  SUCH BUYER DOES NOT PRESENTLY HAVE ANY
AGREEMENT OR UNDERSTANDING, DIRECTLY OR INDIRECTLY, WITH ANY PERSON TO
DISTRIBUTE ANY OF THE SECURITIES.

(B)           ACCREDITED INVESTOR STATUS.  SUCH BUYER IS AND AT ALL TIMES SINCE
THE COMPANY OR ITS AGENT FIRST CONTACTED THE BUYER(S) REGARDING AN INVESTMENT
OPPORTUNITY WITH THE COMPANY UNTIL THE CLOSING WAS AN “ACCREDITED INVESTOR” AS
THAT TERM IS DEFINED IN RULE 501(A) OF REGULATION D.

(C)           RELIANCE ON EXEMPTIONS.  SUCH BUYER UNDERSTANDS THAT THE
SECURITIES ARE BEING OFFERED AND SOLD TO IT IN RELIANCE ON SPECIFIC EXEMPTIONS
FROM THE REGISTRATION REQUIREMENTS OF UNITED STATES FEDERAL AND STATE SECURITIES
LAWS AND THAT THE COMPANY IS RELYING IN PART UPON THE TRUTH AND ACCURACY OF, AND
SUCH BUYER’S COMPLIANCE WITH, THE REPRESENTATIONS, WARRANTIES, AGREEMENTS,
ACKNOWLEDGMENTS AND UNDERSTANDINGS OF SUCH BUYER SET FORTH HEREIN IN ORDER TO
DETERMINE THE AVAILABILITY OF SUCH EXEMPTIONS AND THE ELIGIBILITY OF SUCH BUYER
TO ACQUIRE THE SECURITIES.

(D)           INFORMATION.  SUCH BUYER AND ITS ADVISORS, IF ANY, HAVE BEEN
FURNISHED WITH ALL MATERIALS RELATING TO THE BUSINESS, FINANCES AND OPERATIONS
OF THE COMPANY AND MATERIALS RELATING TO THE OFFER AND SALE OF THE SECURITIES
THAT HAVE BEEN REQUESTED BY SUCH BUYER.  SUCH BUYER AND ITS ADVISORS, IF ANY,
HAVE BEEN AFFORDED THE OPPORTUNITY TO ASK QUESTIONS OF THE COMPANY.  NEITHER
SUCH INQUIRIES NOR ANY OTHER DUE DILIGENCE INVESTIGATIONS CONDUCTED BY SUCH
BUYER OR ITS ADVISORS, IF ANY, OR ITS REPRESENTATIVES SHALL MODIFY, AMEND OR
AFFECT SUCH BUYER’S RIGHT TO RELY ON THE COMPANY’S REPRESENTATIONS AND
WARRANTIES CONTAINED HEREIN.  SUCH BUYER UNDERSTANDS THAT ITS INVESTMENT IN THE
SECURITIES INVOLVES A HIGH DEGREE OF RISK AND IS ABLE TO AFFORD A COMPLETE LOSS
OF SUCH INVESTMENT.  SUCH BUYER HAS SOUGHT SUCH ACCOUNTING, LEGAL AND TAX ADVICE
AS IT HAS CONSIDERED NECESSARY TO MAKE AN INFORMED INVESTMENT DECISION WITH
RESPECT TO ITS ACQUISITION OF THE SECURITIES.

(E)           NO GOVERNMENTAL REVIEW.  SUCH BUYER UNDERSTANDS THAT NO UNITED
STATES FEDERAL OR STATE AGENCY OR ANY OTHER GOVERNMENT OR GOVERNMENTAL AGENCY
HAS PASSED ON OR MADE ANY RECOMMENDATION OR ENDORSEMENT OF THE SECURITIES OR THE
FAIRNESS OR SUITABILITY OF THE INVESTMENT IN THE SECURITIES NOR HAVE SUCH
AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING OF THE
SECURITIES.

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(F)            TRANSFER OR RESALE.  SUCH BUYER UNDERSTANDS THAT EXCEPT AS
PROVIDED IN THE REGISTRATION RIGHTS AGREEMENT: (I) THE SECURITIES HAVE NOT BEEN
AND ARE NOT BEING REGISTERED UNDER THE 1933 ACT OR ANY STATE SECURITIES LAWS,
AND MAY NOT BE OFFERED FOR SALE, SOLD, ASSIGNED OR TRANSFERRED UNLESS (A)
SUBSEQUENTLY REGISTERED THEREUNDER, (B) SUCH BUYER SHALL HAVE DELIVERED TO THE
COMPANY AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, TO THE EFFECT
THAT SUCH SECURITIES TO BE SOLD, ASSIGNED OR TRANSFERRED MAY BE SOLD, ASSIGNED
OR TRANSFERRED PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION, OR (C) SUCH
BUYER PROVIDES THE COMPANY WITH REASONABLE ASSURANCE THAT SUCH SECURITIES CAN BE
SOLD, ASSIGNED OR TRANSFERRED PURSUANT TO RULE 144 OR RULE 144A PROMULGATED
UNDER THE 1933 ACT, AS AMENDED (OR A SUCCESSOR RULE THERETO) (COLLECTIVELY,
“RULE 144”); (II) ANY SALE OF THE SECURITIES MADE IN RELIANCE ON RULE 144 MAY BE
MADE ONLY IN ACCORDANCE WITH THE TERMS OF RULE 144 AND FURTHER, IF RULE 144 IS
NOT APPLICABLE, ANY RESALE OF THE SECURITIES UNDER CIRCUMSTANCES IN WHICH THE
SELLER (OR THE PERSON (AS DEFINED IN SECTION 3(S)) THROUGH WHOM THE SALE IS
MADE) MAY BE DEEMED TO BE AN UNDERWRITER (AS THAT TERM IS DEFINED IN THE 1933
ACT) MAY REQUIRE COMPLIANCE WITH SOME OTHER EXEMPTION UNDER THE 1933 ACT OR THE
RULES AND REGULATIONS OF THE SEC THEREUNDER; AND (III) NEITHER THE COMPANY NOR
ANY OTHER PERSON IS UNDER ANY OBLIGATION TO REGISTER THE SECURITIES UNDER THE
1933 ACT OR ANY STATE SECURITIES LAWS OR TO COMPLY WITH THE TERMS AND CONDITIONS
OF ANY EXEMPTION THEREUNDER.  THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES AND SUCH PLEDGE OF SECURITIES SHALL NOT BE DEEMED TO BE A TRANSFER,
SALE OR ASSIGNMENT OF THE SECURITIES HEREUNDER, AND NO BUYER EFFECTING A PLEDGE
OF SECURITIES SHALL BE REQUIRED TO PROVIDE THE COMPANY WITH ANY NOTICE THEREOF
OR OTHERWISE MAKE ANY DELIVERY TO THE COMPANY PURSUANT TO THIS AGREEMENT OR ANY
OTHER TRANSACTION DOCUMENT (AS DEFINED IN SECTION 3(B)), INCLUDING, WITHOUT
LIMITATION, THIS SECTION 2(F).

(G)           LEGENDS.  SUCH BUYER UNDERSTANDS THAT THE CERTIFICATES OR OTHER
INSTRUMENTS REPRESENTING THE NOTES AND THE WARRANTS AND, UNTIL SUCH TIME AS THE
RESALE OF THE CONVERSION SHARES AND THE WARRANT SHARES HAVE BEEN REGISTERED
UNDER THE 1933 ACT AS CONTEMPLATED BY THE REGISTRATION RIGHTS AGREEMENT, THE
STOCK CERTIFICATES REPRESENTING THE CONVERSION SHARES AND THE WARRANT SHARES,
EXCEPT AS SET FORTH BELOW, SHALL BEAR ANY LEGEND AS REQUIRED BY THE “BLUE SKY”
LAWS OF ANY STATE AND A RESTRICTIVE LEGEND IN SUBSTANTIALLY THE FOLLOWING FORM
(AND A STOP-TRANSFER ORDER MAY BE PLACED AGAINST TRANSFER OF SUCH STOCK
CERTIFICATES):

[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] [EXERCISABLE]
HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN]
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY

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BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for resale under the 1933 Act, (ii) in connection with
a sale, assignment or other transfer, such holder provides the Company with an
opinion of a law firm reasonably acceptable to the Company (with Schulte Roth &
Zabel LLP being deemed acceptable), in a generally acceptable form, to the
effect that such sale, assignment or transfer of the Securities may be made
without registration under the applicable requirements of the 1933 Act, or (iii)
such holder provides the Company with reasonable assurance that the Securities
can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A.

(H)           VALIDITY; ENFORCEMENT.  THIS AGREEMENT AND THE REGISTRATION RIGHTS
AGREEMENT HAVE BEEN DULY AND VALIDLY AUTHORIZED, EXECUTED AND DELIVERED ON
BEHALF OF SUCH BUYER AND SHALL CONSTITUTE THE LEGAL, VALID AND BINDING
OBLIGATIONS OF SUCH BUYER ENFORCEABLE AGAINST SUCH BUYER IN ACCORDANCE WITH
THEIR RESPECTIVE TERMS, EXCEPT AS SUCH ENFORCEABILITY MAY BE LIMITED BY GENERAL
PRINCIPLES OF EQUITY OR TO APPLICABLE BANKRUPTCY, INSOLVENCY, REORGANIZATION,
MORATORIUM, LIQUIDATION AND OTHER SIMILAR LAWS RELATING TO, OR AFFECTING
GENERALLY, THE ENFORCEMENT OF APPLICABLE CREDITORS’ RIGHTS AND REMEDIES.

(I)            NO CONFLICTS.  THE EXECUTION, DELIVERY AND PERFORMANCE BY SUCH
BUYER OF THIS AGREEMENT AND THE REGISTRATION RIGHTS AGREEMENT AND THE
CONSUMMATION BY SUCH BUYER OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY
WILL NOT (I) RESULT IN A VIOLATION OF THE ORGANIZATIONAL DOCUMENTS OF SUCH BUYER
OR (II) CONFLICT WITH, OR CONSTITUTE A DEFAULT (OR AN EVENT WHICH WITH NOTICE OR
LAPSE OF TIME OR BOTH WOULD BECOME A DEFAULT) UNDER, OR GIVE TO OTHERS ANY
RIGHTS OF TERMINATION, AMENDMENT, ACCELERATION OR CANCELLATION OF, ANY
AGREEMENT, INDENTURE OR INSTRUMENT TO WHICH SUCH BUYER IS A PARTY, OR (III)
RESULT IN A VIOLATION OF ANY LAW, RULE, REGULATION, ORDER, JUDGMENT  OR DECREE
(INCLUDING FEDERAL AND STATE SECURITIES LAWS) APPLICABLE TO SUCH BUYER, EXCEPT
IN THE CASE OF CLAUSES (II) AND (III) ABOVE, FOR SUCH CONFLICTS, DEFAULTS,
RIGHTS OR VIOLATIONS WHICH WOULD NOT, INDIVIDUALLY OR IN THE AGGREGATE,
REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT ON THE ABILITY OF SUCH
BUYER TO PERFORM ITS OBLIGATIONS HEREUNDER.

(J)            RESIDENCY.  SUCH BUYER IS A RESIDENT OF THAT JURISDICTION
SPECIFIED BELOW ITS ADDRESS ON THE SCHEDULE OF BUYERS.

(K)           CERTAIN TRADING ACTIVITIES.  OTHER THAN WITH RESPECT TO THE
TRANSACTIONS CONTEMPLATED HEREIN, SINCE THE TIME THAT SUCH BUYER WAS FIRST
CONTACTED BY THE COMPANY, THE AGENT (AS DEFINED BELOW) OR ANY OTHER PERSON
REGARDING THE INVESTMENT IN THE COMPANY SET FORTH HEREIN NEITHER THE BUYER NOR
ANY AFFILIATE OF SUCH BUYER WHICH (X) HAD KNOWLEDGE OF THE TRANSACTIONS
CONTEMPLATED HEREBY, (Y) HAS OR SHARES DISCRETION RELATING TO SUCH BUYER’S
INVESTMENTS OR TRADING OR INFORMATION CONCERNING SUCH BUYER’S INVESTMENTS AND
(Z) IS SUBJECT TO SUCH BUYER’S REVIEW OR INPUT CONCERNING SUCH AFFILIATE’S
INVESTMENTS OR TRADING (COLLECTIVELY, “TRADING AFFILIATES”) HAS DIRECTLY OR
INDIRECTLY, NOR HAS ANY PERSON ACTING ON BEHALF OF OR PURSUANT TO ANY
UNDERSTANDING WITH SUCH BUYER OR TRADING AFFILIATE, EFFECTED OR AGREED TO EFFECT
ANY TRANSACTIONS IN THE SECURITIES OF THE COMPANY.  SUCH BUYER HEREBY COVENANTS
AND AGREES NOT

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TO, AND SHALL CAUSE ITS TRADING AFFILIATES NOT TO, ENGAGE, DIRECTLY OR
INDIRECTLY, IN ANY TRANSACTIONS IN THE SECURITIES OF THE COMPANY OR INVOLVING
THE COMPANY’S SECURITIES DURING THE PERIOD FROM THE DATE HEREOF UNTIL SUCH TIME
AS (I) THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT ARE FIRST PUBLICLY
ANNOUNCED AS DESCRIBED IN SECTION 4(I) HEREOF OR (II) THIS AGREEMENT IS
TERMINATED PURSUANT TO SECTION 8 HEREOF.

3.             REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

The Company represents and warrants to each of the Buyers that:

(A)           ORGANIZATION AND QUALIFICATION.  THE COMPANY AND ITS
“SUBSIDIARIES” (WHICH FOR PURPOSES OF THIS AGREEMENT MEANS ANY JOINT VENTURE OR
ANY ENTITY IN WHICH THE COMPANY, DIRECTLY OR INDIRECTLY, OWNS ANY OF THE CAPITAL
STOCK OR HOLDS AN EQUITY OR SIMILAR INTEREST) ARE ENTITIES DULY ORGANIZED AND
VALIDLY EXISTING AND, TO THE EXTENT LEGALLY APPLICABLE, IN GOOD STANDING UNDER
THE LAWS OF THE JURISDICTION IN WHICH THEY ARE FORMED, AND HAVE THE REQUISITE
POWER AND AUTHORIZATION TO OWN THEIR PROPERTIES AND TO CARRY ON THEIR BUSINESS
AS NOW BEING CONDUCTED.  EACH OF THE COMPANY AND ITS SUBSIDIARIES IS DULY
QUALIFIED AS A FOREIGN ENTITY TO DO BUSINESS AND, TO THE EXTENT LEGALLY
APPLICABLE, IS IN GOOD STANDING IN EVERY JURISDICTION IN WHICH ITS OWNERSHIP OF
PROPERTY OR THE NATURE OF THE BUSINESS CONDUCTED BY IT MAKES SUCH QUALIFICATION
NECESSARY, EXCEPT TO THE EXTENT THAT THE FAILURE TO BE SO QUALIFIED OR BE IN
GOOD STANDING WOULD NOT REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE
EFFECT.  AS USED IN THIS AGREEMENT, “MATERIAL ADVERSE EFFECT” MEANS ANY MATERIAL
ADVERSE EFFECT ON THE BUSINESS, PROPERTIES, ASSETS, OPERATIONS, RESULTS OF
OPERATIONS, CONDITION (FINANCIAL OR OTHERWISE) OR PROSPECTS OF THE COMPANY AND
ITS SUBSIDIARIES, INDIVIDUALLY OR TAKEN AS A WHOLE, OR ON THE TRANSACTIONS
CONTEMPLATED HEREBY OR IN THE OTHER TRANSACTION DOCUMENTS OR BY THE AGREEMENTS
AND INSTRUMENTS TO BE ENTERED INTO IN CONNECTION HEREWITH OR THEREWITH, OR ON
THE AUTHORITY OR ABILITY OF THE COMPANY TO PERFORM ITS OBLIGATIONS UNDER THE
TRANSACTION DOCUMENTS (AS DEFINED BELOW).  THE COMPANY HAS NO SUBSIDIARIES
EXCEPT AS SET FORTH ON SCHEDULE 3(A).

(B)           AUTHORIZATION; ENFORCEMENT; VALIDITY.  THE COMPANY HAS THE
REQUISITE POWER AND AUTHORITY TO ENTER INTO AND PERFORM ITS OBLIGATIONS UNDER
THIS AGREEMENT, THE NOTES, THE REGISTRATION RIGHTS AGREEMENT, THE IRREVOCABLE
TRANSFER AGENT INSTRUCTIONS (AS DEFINED IN SECTION 5(B)), THE WARRANTS AND EACH
OF THE OTHER AGREEMENTS ENTERED INTO BY THE PARTIES HERETO IN CONNECTION WITH
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT (COLLECTIVELY, THE “TRANSACTION
DOCUMENTS”) AND TO ISSUE THE SECURITIES IN ACCORDANCE WITH THE TERMS HEREOF AND
THEREOF.  THE EXECUTION AND DELIVERY OF THE TRANSACTION DOCUMENTS BY THE COMPANY
AND THE CONSUMMATION BY THE COMPANY OF THE TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY, INCLUDING, WITHOUT LIMITATION, THE ISSUANCE OF THE NOTES AND THE
WARRANTS, THE RESERVATION FOR ISSUANCE AND THE ISSUANCE OF THE CONVERSION SHARES
ISSUABLE UPON CONVERSION OF THE NOTES, AND THE RESERVATION FOR ISSUANCE AND
ISSUANCE OF WARRANT SHARES ISSUABLE UPON EXERCISE OF THE WARRANTS HAVE BEEN DULY
AUTHORIZED BY THE COMPANY’S BOARD OF DIRECTORS AND NO FURTHER FILING, CONSENT,
OR AUTHORIZATION IS REQUIRED BY THE COMPANY, ITS BOARD OF DIRECTORS OR ITS
STOCKHOLDERS.  THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS OF EVEN DATE
HEREWITH HAVE BEEN DULY EXECUTED AND DELIVERED BY THE COMPANY, AND CONSTITUTE
THE LEGAL, VALID AND BINDING OBLIGATIONS OF THE COMPANY, ENFORCEABLE AGAINST THE
COMPANY IN ACCORDANCE WITH THEIR RESPECTIVE TERMS, EXCEPT AS SUCH ENFORCEABILITY
MAY BE LIMITED BY GENERAL PRINCIPLES OF EQUITY OR APPLICABLE BANKRUPTCY,
INSOLVENCY,

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REORGANIZATION, MORATORIUM, LIQUIDATION OR SIMILAR LAWS RELATING TO, OR
AFFECTING GENERALLY, THE ENFORCEMENT OF APPLICABLE CREDITORS’ RIGHTS AND
REMEDIES.

(C)           ISSUANCE OF SECURITIES.  THE ISSUANCE OF THE NOTES AND THE
WARRANTS ARE DULY AUTHORIZED AND ARE FREE FROM ALL TAXES, LIENS AND CHARGES WITH
RESPECT TO THE ISSUE THEREOF.  AS OF THE CLOSING, A NUMBER OF SHARES OF COMMON
STOCK SHALL HAVE BEEN DULY AUTHORIZED AND RESERVED FOR ISSUANCE WHICH EQUALS OR
EXCEEDS 130% OF THE AGGREGATE OF THE MAXIMUM NUMBER OF SHARES OF COMMON STOCK
ISSUABLE (I) UPON CONVERSION OF THE NOTES, (II) AS INTEREST SHARES PURSUANT TO
THE TERMS OF THE NOTES AND (III) UPON EXERCISE OF THE SERIES A WARRANTS AND
SERIES B WARRANTS.  UPON CONVERSION OR EXERCISE IN ACCORDANCE WITH THE NOTES OR
THE WARRANTS, AS THE CASE MAY BE, THE CONVERSION SHARES, THE INTEREST SHARES AND
THE WARRANT SHARES, RESPECTIVELY, WILL BE VALIDLY ISSUED, FULLY PAID AND
NONASSESSABLE AND FREE FROM ALL PREEMPTIVE OR SIMILAR RIGHTS, TAXES, LIENS AND
CHARGES WITH RESPECT TO THE ISSUE THEREOF, WITH THE HOLDERS BEING ENTITLED TO
ALL RIGHTS ACCORDED TO A HOLDER OF COMMON STOCK.  ASSUMING THE ACCURACY OF EACH
OF THE REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 2 OF THIS AGREEMENT,
THE OFFER AND ISSUANCE BY THE COMPANY OF THE SECURITIES IS EXEMPT FROM
REGISTRATION UNDER THE 1933 ACT.

(D)           NO CONFLICTS.  THE EXECUTION, DELIVERY AND PERFORMANCE OF THE
TRANSACTION DOCUMENTS BY THE COMPANY AND THE CONSUMMATION BY THE COMPANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY (INCLUDING, WITHOUT LIMITATION, THE
ISSUANCE OF THE NOTES AND WARRANTS AND RESERVATION FOR ISSUANCE AND ISSUANCE OF
THE CONVERSION SHARES, THE INTEREST SHARES AND THE WARRANT SHARES) WILL NOT (I)
RESULT IN A VIOLATION OF ANY CERTIFICATE OF INCORPORATION, CERTIFICATE OF
FORMATION, ANY CERTIFICATE OF DESIGNATIONS OR OTHER CONSTITUENT DOCUMENTS OF THE
COMPANY OR ANY OF ITS SUBSIDIARIES, ANY CAPITAL STOCK OF THE COMPANY OR ANY OF
ITS SUBSIDIARIES OR BYLAWS OF THE COMPANY OR ANY OF ITS SUBSIDIARIES OR (II)
CONFLICT WITH, OR CONSTITUTE A DEFAULT (OR AN EVENT WHICH WITH NOTICE OR LAPSE
OF TIME OR BOTH WOULD BECOME A DEFAULT) IN ANY RESPECT UNDER, OR GIVE TO OTHERS
ANY RIGHTS OF TERMINATION, AMENDMENT, ACCELERATION OR CANCELLATION OF, ANY
AGREEMENT, INDENTURE OR INSTRUMENT TO WHICH THE COMPANY OR ANY OF ITS
SUBSIDIARIES IS A PARTY, OR (III) RESULT IN A VIOLATION OF ANY LAW, RULE,
REGULATION, ORDER, JUDGMENT OR DECREE (INCLUDING FOREIGN, FEDERAL AND STATE
SECURITIES LAWS AND REGULATIONS AND THE RULES AND REGULATIONS OF THE NASDAQ
OVER-THE-COUNTER BULLETIN BOARD (THE “PRINCIPAL MARKET”) APPLICABLE TO THE
COMPANY OR ANY OF ITS SUBSIDIARIES OR BY WHICH ANY PROPERTY OR ASSET OF THE
COMPANY OR ANY OF ITS SUBSIDIARIES IS BOUND OR AFFECTED.

(E)           CONSENTS.  NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES IS
REQUIRED TO OBTAIN ANY CONSENT, AUTHORIZATION OR ORDER OF, OR MAKE ANY FILING OR
REGISTRATION WITH, ANY COURT, GOVERNMENTAL AGENCY OR ANY REGULATORY OR
SELF-REGULATORY AGENCY OR ANY OTHER PERSON IN ORDER FOR IT TO EXECUTE, DELIVER
OR PERFORM ANY OF ITS OBLIGATIONS UNDER OR CONTEMPLATED BY THE TRANSACTION
DOCUMENTS, IN EACH CASE IN ACCORDANCE WITH THE TERMS HEREOF OR THEREOF, EXCEPT
FOR THE FOLLOWING CONSENTS, AUTHORIZATIONS, ORDERS, FILINGS AND REGISTRATIONS
(NONE OF WHICH IS REQUIRED TO BE FILED OR OBTAINED BEFORE THE CLOSING): (I) THE
FILING WITH THE SEC OF ONE OR MORE REGISTRATION STATEMENTS IN ACCORDANCE WITH
THE REQUIREMENTS OF THE REGISTRATION RIGHTS AGREEMENT AND THE 8-K FILING (AS
DEFINED BELOW) AND (II) THE FILING OF A LISTING APPLICATION FOR THE CONVERSION
SHARES, THE INTEREST SHARES AND WARRANT SHARES WITH THE PRINCIPAL MARKET, WHICH
SHALL BE DONE PURSUANT TO THE RULES OF THE PRINCIPAL MARKET.  THE COMPANY AND
ITS SUBSIDIARIES ARE UNAWARE OF ANY FACTS OR CIRCUMSTANCES THAT MIGHT PREVENT
THE COMPANY FROM OBTAINING OR EFFECTING ANY OF THE REGISTRATION, APPLICATION OR
FILINGS PURSUANT TO THE PRECEDING SENTENCE.  THE COMPANY IS NOT IN

7

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VIOLATION OF THE LISTING REQUIREMENTS OF THE PRINCIPAL MARKET AND HAS NO
KNOWLEDGE OF ANY FACTS THAT WOULD REASONABLY LEAD TO DELISTING OR SUSPENSION OF
THE COMMON STOCK IN THE FORESEEABLE FUTURE.  THE ISSUANCE BY THE COMPANY OF THE
SECURITIES SHALL NOT HAVE THE EFFECT OF DELISTING OR SUSPENDING THE COMMON STOCK
FROM THE PRINCIPAL MARKET.

(F)            ACKNOWLEDGMENT REGARDING BUYER’S PURCHASE OF SECURITIES.  THE
COMPANY ACKNOWLEDGES AND AGREES THAT EACH BUYER IS ACTING SOLELY IN THE CAPACITY
OF AN ARM’S LENGTH PURCHASER WITH RESPECT TO THE TRANSACTION DOCUMENTS AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY AND THAT NO BUYER IS (I) AN OFFICER
OR DIRECTOR OF THE COMPANY, (II) AN “AFFILIATE” OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES (AS DEFINED IN RULE 144) OR (III) TO THE KNOWLEDGE OF THE COMPANY,
A “BENEFICIAL OWNER” OF MORE THAN 10% OF THE SHARES OF COMMON STOCK (AS DEFINED
FOR PURPOSES OF RULE 13D-3 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
(THE “1934 ACT”)).  THE COMPANY FURTHER ACKNOWLEDGES THAT NO BUYER IS ACTING AS
A FINANCIAL ADVISOR OR FIDUCIARY OF THE COMPANY OR ANY OF ITS SUBSIDIARIES (OR
IN ANY SIMILAR CAPACITY) WITH RESPECT TO THE TRANSACTION DOCUMENTS AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, AND ANY ADVICE GIVEN BY A BUYER OR
ANY OF ITS REPRESENTATIVES OR AGENTS IN CONNECTION WITH THE TRANSACTION
DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY IS MERELY
INCIDENTAL TO SUCH BUYER’S PURCHASE OF THE SECURITIES.  THE COMPANY FURTHER
REPRESENTS TO EACH BUYER THAT THE COMPANY’S DECISION TO ENTER INTO THE
TRANSACTION DOCUMENTS HAS BEEN BASED SOLELY ON THE INDEPENDENT EVALUATION BY THE
COMPANY AND ITS REPRESENTATIVES.

(G)           NO GENERAL SOLICITATION; PLACEMENT AGENT’S FEES.  NEITHER THE
COMPANY, NOR ANY OF ITS SUBSIDIARIES OR AFFILIATES, NOR ANY PERSON ACTING ON ITS
OR THEIR BEHALF, HAS ENGAGED IN ANY FORM OF GENERAL SOLICITATION OR GENERAL
ADVERTISING (WITHIN THE MEANING OF REGULATION D) IN CONNECTION WITH THE OFFER OR
SALE OF THE SECURITIES.  THE COMPANY SHALL BE RESPONSIBLE FOR THE PAYMENT OF ANY
PLACEMENT AGENT’S FEES, FINANCIAL ADVISORY FEES, OR BROKERS’ COMMISSIONS (OTHER
THAN FOR PERSONS ENGAGED BY ANY BUYER OR ITS INVESTMENT ADVISOR) RELATING TO OR
ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING, WITHOUT
LIMITATION, PLACEMENT AGENT FEES PAYABLE TO COWEN & COMPANY AS PLACEMENT AGENT
(THE “AGENT”) IN CONNECTION WITH THE SALE OF THE SECURITIES.  THE COMPANY SHALL
PAY, AND HOLD EACH BUYER HARMLESS AGAINST, ANY LIABILITY, LOSS OR EXPENSE
(INCLUDING, WITHOUT LIMITATION, ATTORNEY’S FEES AND OUT-OF-POCKET EXPENSES)
ARISING IN CONNECTION WITH ANY SUCH CLAIM.  THE COMPANY ACKNOWLEDGES THAT IT HAS
ENGAGED THE AGENT IN CONNECTION WITH THE SALE OF THE SECURITIES.  OTHER THAN THE
AGENT, NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES HAS ENGAGED ANY PLACEMENT
AGENT OR OTHER AGENT IN CONNECTION WITH THE SALE OF THE SECURITIES.

(H)           NO INTEGRATED OFFERING.  NONE OF THE COMPANY, ITS SUBSIDIARIES,
ANY OF THEIR AFFILIATES, AND ANY PERSON ACTING ON THEIR BEHALF HAS, DIRECTLY OR
INDIRECTLY, MADE ANY OFFERS OR SALES OF ANY SECURITY OR SOLICITED ANY OFFERS TO
BUY ANY SECURITY, UNDER CIRCUMSTANCES THAT WOULD REQUIRE REGISTRATION OF ANY OF
THE SECURITIES UNDER THE 1933 ACT OR CAUSE THIS OFFERING OF THE SECURITIES TO BE
INTEGRATED WITH PRIOR OFFERINGS BY THE COMPANY FOR PURPOSES OF THE 1933 ACT OR
ANY APPLICABLE STOCKHOLDER APPROVAL PROVISIONS, INCLUDING, WITHOUT LIMITATION,
UNDER THE RULES AND REGULATIONS OF ANY EXCHANGE OR AUTOMATED QUOTATION SYSTEM ON
WHICH ANY OF THE SECURITIES OF THE COMPANY ARE LISTED OR DESIGNATED.  NONE OF
THE COMPANY, ITS SUBSIDIARIES, THEIR AFFILIATES AND ANY PERSON ACTING ON THEIR
BEHALF WILL TAKE ANY ACTION OR STEPS REFERRED TO IN THE PRECEDING SENTENCE THAT
WOULD REQUIRE REGISTRATION OF ANY OF THE SECURITIES UNDER THE 1933 ACT OR CAUSE
THE OFFERING OF THE SECURITIES TO BE INTEGRATED WITH OTHER OFFERINGS.

8

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(I)            DILUTIVE EFFECT.  THE COMPANY UNDERSTANDS AND ACKNOWLEDGES THAT
THE NUMBER OF CONVERSION SHARES ISSUABLE UPON CONVERSION OF THE NOTES AND THE
WARRANT SHARES ISSUABLE UPON EXERCISE OF THE WARRANTS WILL INCREASE IN CERTAIN
CIRCUMSTANCES.  THE COMPANY FURTHER ACKNOWLEDGES THAT ITS OBLIGATION TO ISSUE
CONVERSION SHARES UPON CONVERSION OF THE NOTES IN ACCORDANCE WITH THIS AGREEMENT
AND THE NOTES AND ITS OBLIGATION TO ISSUE THE WARRANT SHARES UPON EXERCISE OF
THE WARRANTS IN ACCORDANCE WITH THIS AGREEMENT AND THE WARRANTS IS, IN EACH
CASE, ABSOLUTE AND UNCONDITIONAL REGARDLESS OF THE DILUTIVE EFFECT THAT SUCH
ISSUANCE MAY HAVE ON THE OWNERSHIP INTERESTS OF OTHER STOCKHOLDERS OF THE
COMPANY.

(J)            APPLICATION OF TAKEOVER PROTECTIONS; RIGHTS AGREEMENT.  THE
COMPANY AND ITS BOARD OF DIRECTORS HAVE TAKEN ALL NECESSARY ACTION, IF ANY, IN
ORDER TO RENDER INAPPLICABLE ANY CONTROL SHARE ACQUISITION, BUSINESS
COMBINATION, POISON PILL (INCLUDING ANY DISTRIBUTION UNDER A RIGHTS AGREEMENT)
OR OTHER SIMILAR ANTI-TAKEOVER PROVISION UNDER THE CERTIFICATE OF INCORPORATION
(AS DEFINED IN SECTION 3(R)) OR THE LAWS OF THE STATE OF ITS INCORPORATION WHICH
IS OR COULD BECOME APPLICABLE TO ANY BUYER AS A RESULT OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE COMPANY’S
ISSUANCE OF THE SECURITIES AND ANY BUYER’S OWNERSHIP OF THE SECURITIES.  THE
COMPANY AND ITS BOARD OF DIRECTORS HAVE TAKEN ALL NECESSARY ACTION, IF ANY, IN
ORDER TO RENDER INAPPLICABLE ANY STOCKHOLDER RIGHTS PLAN OR SIMILAR ARRANGEMENT
RELATING TO ACCUMULATIONS OF BENEFICIAL OWNERSHIP OF COMMON STOCK OR A CHANGE IN
CONTROL OF THE COMPANY.

(K)           SEC DOCUMENTS; FINANCIAL STATEMENTS.  DURING THE TWO (2) YEARS
PRIOR TO THE DATE HEREOF, THE COMPANY HAS FILED ALL REPORTS, SCHEDULES, FORMS,
STATEMENTS AND OTHER DOCUMENTS REQUIRED TO BE FILED BY IT WITH THE SEC PURSUANT
TO THE REPORTING REQUIREMENTS OF THE 1934 ACT (ALL OF THE FOREGOING FILED PRIOR
TO THE DATE HEREOF AND ALL EXHIBITS INCLUDED THEREIN AND FINANCIAL STATEMENTS,
NOTES AND SCHEDULES THERETO AND DOCUMENTS INCORPORATED BY REFERENCE THEREIN
BEING HEREINAFTER REFERRED TO AS THE “SEC DOCUMENTS”).  THE COMPANY HAS
DELIVERED TO THE BUYERS OR THEIR RESPECTIVE REPRESENTATIVES TRUE, CORRECT AND
COMPLETE COPIES OF THE SEC DOCUMENTS NOT AVAILABLE ON THE EDGAR SYSTEM.  EXCEPT
AS SET FORTH ON SCHEDULE 3(K), AS OF THEIR RESPECTIVE FILING DATES, THE SEC
DOCUMENTS COMPLIED IN ALL MATERIAL RESPECTS WITH THE REQUIREMENTS OF THE 1934
ACT AND THE RULES AND REGULATIONS OF THE SEC PROMULGATED THEREUNDER APPLICABLE
TO THE SEC DOCUMENTS, AND NONE OF THE SEC DOCUMENTS, AT THE TIME THEY WERE FILED
WITH THE SEC, CONTAINED ANY UNTRUE STATEMENT OF A MATERIAL FACT OR OMITTED TO
STATE A MATERIAL FACT REQUIRED TO BE STATED THEREIN OR NECESSARY IN ORDER TO
MAKE THE STATEMENTS THEREIN, IN THE LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY
WERE MADE, NOT MISLEADING.  AS OF THEIR RESPECTIVE FILING DATES, THE FINANCIAL
STATEMENTS OF THE COMPANY INCLUDED IN THE SEC DOCUMENTS COMPLIED AS TO FORM IN
ALL MATERIAL RESPECTS WITH APPLICABLE ACCOUNTING REQUIREMENTS AND THE PUBLISHED
RULES AND REGULATIONS OF THE SEC WITH RESPECT THERETO.  SUCH FINANCIAL
STATEMENTS HAVE BEEN PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES, CONSISTENTLY APPLIED, DURING THE PERIODS INVOLVED (EXCEPT (I) AS MAY
BE OTHERWISE INDICATED IN SUCH FINANCIAL STATEMENTS OR THE NOTES THERETO, OR
(II) IN THE CASE OF UNAUDITED INTERIM STATEMENTS, TO THE EXTENT THEY MAY EXCLUDE
FOOTNOTES OR MAY BE CONDENSED OR SUMMARY STATEMENTS) AND FAIRLY PRESENT IN ALL
MATERIAL RESPECTS THE FINANCIAL POSITION OF THE COMPANY AS OF THE DATES THEREOF
AND THE RESULTS OF ITS OPERATIONS AND CASH FLOWS FOR THE PERIODS THEN ENDED
(SUBJECT, IN THE CASE OF UNAUDITED STATEMENTS, TO NORMAL YEAR-END AUDIT
ADJUSTMENTS).  NO OTHER INFORMATION PROVIDED BY OR ON BEHALF OF THE COMPANY TO
THE BUYERS WHICH IS NOT INCLUDED IN THE SEC DOCUMENTS, INCLUDING, WITHOUT
LIMITATION, INFORMATION REFERRED TO IN SECTION 2(D) OF THIS AGREEMENT OR IN ANY
DISCLOSURE SCHEDULES, CONTAINS

9

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ANY UNTRUE STATEMENT OF A MATERIAL FACT OR OMITS TO STATE ANY MATERIAL FACT
NECESSARY IN ORDER TO MAKE THE STATEMENTS THEREIN, IN THE LIGHT OF THE
CIRCUMSTANCE UNDER WHICH THEY ARE OR WERE MADE, NOT MISLEADING.

(L)            ABSENCE OF CERTAIN CHANGES.  SINCE DECEMBER 31, 2005, THERE HAS
BEEN NO MATERIAL ADVERSE CHANGE AND NO MATERIAL ADVERSE DEVELOPMENT IN THE
BUSINESS, PROPERTIES, OPERATIONS, CONDITION (FINANCIAL OR OTHERWISE), RESULTS OF
OPERATIONS OR PROSPECTS OF THE COMPANY OR ITS SUBSIDIARIES.  EXCEPT AS DISCLOSED
IN SCHEDULE 3(L), SINCE DECEMBER 31, 2005, THE COMPANY HAS NOT (I) DECLARED OR
PAID ANY DIVIDENDS, (II) SOLD ANY ASSETS, INDIVIDUALLY OR IN THE AGGREGATE, IN
EXCESS OF $100,000 OUTSIDE OF THE ORDINARY COURSE OF BUSINESS OR (III) HAD
CAPITAL EXPENDITURES, INDIVIDUALLY OR IN THE AGGREGATE, IN EXCESS OF $500,000. 
NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES HAS TAKEN ANY STEPS TO SEEK
PROTECTION PURSUANT TO ANY BANKRUPTCY LAW NOR DOES THE COMPANY HAVE ANY
KNOWLEDGE OR REASON TO BELIEVE THAT ITS CREDITORS INTEND TO INITIATE INVOLUNTARY
BANKRUPTCY PROCEEDINGS OR ANY ACTUAL KNOWLEDGE OF ANY FACT THAT WOULD REASONABLY
LEAD A CREDITOR TO DO SO.  THE COMPANY AND ITS SUBSIDIARIES, INDIVIDUALLY AND ON
A CONSOLIDATED BASIS, ARE NOT AS OF THE DATE HEREOF, AND AFTER GIVING EFFECT TO
THE TRANSACTIONS CONTEMPLATED HEREBY TO OCCUR AT THE CLOSING, WILL NOT BE
INSOLVENT (AS DEFINED BELOW).  FOR PURPOSES OF THIS SECTION 3(L), “INSOLVENT”
MEANS, WITH RESPECT TO ANY PERSON (AS DEFINED IN SECTION 3(S)), (I) THE PRESENT
FAIR SALEABLE VALUE OF SUCH PERSON’S ASSETS IS LESS THAN THE AMOUNT REQUIRED TO
PAY SUCH PERSON’S TOTAL INDEBTEDNESS (AS DEFINED IN SECTION 3(S)), (II) SUCH
PERSON IS UNABLE TO PAY ITS DEBTS AND LIABILITIES, SUBORDINATED, CONTINGENT OR
OTHERWISE, AS SUCH DEBTS AND LIABILITIES BECOME ABSOLUTE AND MATURED, (III) SUCH
PERSON INTENDS TO INCUR OR BELIEVES THAT IT WILL INCUR DEBTS THAT WOULD BE
BEYOND ITS ABILITY TO PAY AS SUCH DEBTS MATURE OR (IV) SUCH PERSON HAS
UNREASONABLY SMALL CAPITAL WITH WHICH TO CONDUCT THE BUSINESS IN WHICH IT IS
ENGAGED AS SUCH BUSINESS IS NOW CONDUCTED AND IS PROPOSED TO BE CONDUCTED.

(M)          NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES. 
NO EVENT, LIABILITY, DEVELOPMENT OR CIRCUMSTANCE HAS OCCURRED OR EXISTS, OR IS
CONTEMPLATED TO OCCUR WITH RESPECT TO THE COMPANY, ITS SUBSIDIARIES OR THEIR
RESPECTIVE BUSINESS, PROPERTIES, PROSPECTS, OPERATIONS OR FINANCIAL CONDITION,
THAT WOULD BE REQUIRED TO BE DISCLOSED BY THE COMPANY UNDER APPLICABLE
SECURITIES LAWS ON A REGISTRATION STATEMENT ON FORM S-1 FILED WITH THE SEC
RELATING TO AN ISSUANCE AND SALE BY THE COMPANY OF ITS COMMON STOCK AND WHICH
HAS NOT BEEN PUBLICLY ANNOUNCED.

(N)           CONDUCT OF BUSINESS; REGULATORY PERMITS.  NEITHER THE COMPANY NOR
ANY OF ITS SUBSIDIARIES IS IN VIOLATION OF ANY TERM OF OR IN DEFAULT UNDER ITS
CERTIFICATE OF INCORPORATION, ANY CERTIFICATE OF DESIGNATIONS OF ANY OUTSTANDING
SERIES OF PREFERRED STOCK OF THE COMPANY OR THE BYLAWS OR THEIR ORGANIZATIONAL
CHARTER OR BYLAWS, RESPECTIVELY.  NEITHER THE COMPANY NOR ANY OF ITS
SUBSIDIARIES IS IN VIOLATION OF ANY JUDGMENT, DECREE OR ORDER OR ANY STATUTE,
ORDINANCE, RULE OR REGULATION APPLICABLE TO THE COMPANY OR ITS SUBSIDIARIES, AND
NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES WILL CONDUCT ITS BUSINESS IN
VIOLATION OF ANY OF THE FOREGOING, EXCEPT FOR POSSIBLE VIOLATIONS WHICH COULD
NOT, INDIVIDUALLY OR IN THE AGGREGATE, REASONABLY BE EXPECTED TO HAVE A MATERIAL
ADVERSE EFFECT.  WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE COMPANY
IS NOT IN VIOLATION OF ANY OF THE RULES, REGULATIONS OR REQUIREMENTS OF THE
PRINCIPAL MARKET AND HAS NO KNOWLEDGE OF ANY FACTS OR CIRCUMSTANCES THAT WOULD
REASONABLY LEAD TO DELISTING OR SUSPENSION OF THE COMMON STOCK BY THE PRINCIPAL
MARKET IN THE FORESEEABLE FUTURE.  DURING THE TWO (2) YEARS PRIOR TO THE DATE
HEREOF, (I) THE COMMON STOCK HAS BEEN

10

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DESIGNATED FOR QUOTATION ON THE PRINCIPAL MARKET, (II) TRADING IN THE COMMON
STOCK HAS NOT BEEN SUSPENDED BY THE SEC OR THE PRINCIPAL MARKET AND (III) THE
COMPANY HAS RECEIVED NO COMMUNICATION, WRITTEN OR ORAL, FROM THE SEC OR THE
PRINCIPAL MARKET REGARDING THE SUSPENSION OR DELISTING OF THE COMMON STOCK FROM
THE PRINCIPAL MARKET.  THE COMPANY AND ITS SUBSIDIARIES POSSESS ALL
CERTIFICATES, AUTHORIZATIONS AND PERMITS ISSUED BY THE APPROPRIATE REGULATORY
AUTHORITIES NECESSARY TO CONDUCT THEIR RESPECTIVE BUSINESSES, EXCEPT WHERE THE
FAILURE TO POSSESS SUCH CERTIFICATES, AUTHORIZATIONS OR PERMITS WOULD NOT HAVE,
INDIVIDUALLY OR IN THE AGGREGATE, A MATERIAL ADVERSE EFFECT, AND NEITHER THE
COMPANY NOR ANY SUCH SUBSIDIARY HAS RECEIVED ANY NOTICE OF PROCEEDINGS RELATING
TO THE REVOCATION OR MODIFICATION OF ANY SUCH CERTIFICATE, AUTHORIZATION OR
PERMIT.

(O)           FOREIGN CORRUPT PRACTICES.  NEITHER THE COMPANY NOR ANY OF ITS
SUBSIDIARIES NOR ANY DIRECTOR, OFFICER, AGENT, EMPLOYEE OR OTHER PERSON ACTING
ON BEHALF OF THE COMPANY OR ANY OF ITS SUBSIDIARIES HAS, IN THE COURSE OF ITS
ACTIONS FOR, OR ON BEHALF OF, THE COMPANY OR ANY OF ITS SUBSIDIARIES (I) USED
ANY CORPORATE FUNDS FOR ANY UNLAWFUL CONTRIBUTION, GIFT, ENTERTAINMENT OR OTHER
UNLAWFUL EXPENSES RELATING TO POLITICAL ACTIVITY; (II) MADE ANY DIRECT OR
INDIRECT UNLAWFUL PAYMENT TO ANY FOREIGN OR DOMESTIC GOVERNMENT OFFICIAL OR
EMPLOYEE FROM CORPORATE FUNDS; (III) VIOLATED OR IS IN VIOLATION OF ANY
PROVISION OF THE U.S. FOREIGN CORRUPT PRACTICES ACT OF 1977, AS AMENDED; OR (IV)
MADE ANY UNLAWFUL BRIBE, REBATE, PAYOFF, INFLUENCE PAYMENT, KICKBACK OR OTHER
UNLAWFUL PAYMENT TO ANY FOREIGN OR DOMESTIC GOVERNMENT OFFICIAL OR EMPLOYEE.

(P)           SARBANES-OXLEY ACT.  THE COMPANY IS IN COMPLIANCE WITH ANY AND ALL
APPLICABLE REQUIREMENTS OF THE SARBANES-OXLEY ACT OF 2002 THAT ARE EFFECTIVE AS
OF THE DATE HEREOF, AND ANY AND ALL APPLICABLE RULES AND REGULATIONS PROMULGATED
BY THE SEC THEREUNDER THAT ARE EFFECTIVE AS OF THE DATE HEREOF.

(Q)           TRANSACTIONS WITH AFFILIATES.  EXCEPT AS SET FORTH IN THE SEC
DOCUMENTS FILED AT LEAST TEN (10) DAYS PRIOR TO THE DATE HEREOF AND OTHER THAN
THE GRANT OF STOCK OPTIONS DISCLOSED ON SCHEDULE 3(Q), NONE OF THE OFFICERS,
DIRECTORS OR EMPLOYEES OF THE COMPANY OR ANY OF ITS SUBSIDIARIES IS PRESENTLY A
PARTY TO ANY TRANSACTION WITH THE COMPANY OR ANY OF ITS SUBSIDIARIES (OTHER THAN
FOR ORDINARY COURSE SERVICES AS EMPLOYEES, OFFICERS OR DIRECTORS), INCLUDING ANY
CONTRACT, AGREEMENT OR OTHER ARRANGEMENT PROVIDING FOR THE FURNISHING OF
SERVICES TO OR BY, PROVIDING FOR RENTAL OF REAL OR PERSONAL PROPERTY TO OR FROM,
OR OTHERWISE REQUIRING PAYMENTS TO OR FROM ANY SUCH OFFICER, DIRECTOR OR
EMPLOYEE OR, TO THE KNOWLEDGE OF THE COMPANY OR ANY OF ITS SUBSIDIARIES, ANY
CORPORATION, PARTNERSHIP, TRUST OR OTHER ENTITY IN WHICH ANY SUCH OFFICER,
DIRECTOR, OR EMPLOYEE HAS A SUBSTANTIAL INTEREST OR IS AN OFFICER, DIRECTOR,
TRUSTEE OR PARTNER.

(R)            EQUITY CAPITALIZATION.  AS OF DECEMBER 7, 2006, THE AUTHORIZED
CAPITAL STOCK OF THE COMPANY CONSISTS OF (W) 300,000,000 SHARES OF COMMON STOCK,
OF WHICH AS OF THE DATE HEREOF, 149,504,927 ARE ISSUED AND OUTSTANDING, NO
SHARES ARE RESERVED FOR ISSUANCE PURSUANT TO THE COMPANY’S STOCK OPTION AND
PURCHASE PLANS AND 384,031 SHARES ARE RESERVED FOR ISSUANCE PURSUANT TO
SECURITIES (OTHER THAN THE AFOREMENTIONED OPTIONS, THE NOTES AND THE WARRANTS)
EXERCISABLE OR EXCHANGEABLE FOR, OR CONVERTIBLE INTO, SHARES OF COMMON STOCK,
(X) 5,850,000 SHARES OF UNDESIGNATED PREFERRED STOCK, OF WHICH AS OF THE DATE
HEREOF, NONE ARE ISSUED AND OUTSTANDING, (Y) 150,000 SHARES OF SERIES A JUNIOR
PARTICIPATING PREFERRED STOCK, PAR VALUE

11

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$0.001 PER SHARE, OF WHICH AS OF THE DATE HEREOF, NONE ARE ISSUED AND
OUTSTANDING, AND (Z) 4,000,000 SHARES OF SERIES B PREFERRED STOCK, PAR VALUE
$0.001 PER SHARE, OF WHICH AS OF THE DATE HEREOF, 1,775,166 SHARES ARE ISSUED
AND OUTSTANDING.  ALL OF SUCH OUTSTANDING SHARES HAVE BEEN, OR UPON ISSUANCE
WILL BE, VALIDLY ISSUED AND ARE FULLY PAID AND NONASSESSABLE.  EXCEPT AS
DISCLOSED IN SCHEDULE 3(R): (I) NONE OF THE COMPANY’S CAPITAL STOCK IS SUBJECT
TO PREEMPTIVE RIGHTS OR ANY OTHER SIMILAR RIGHTS OR ANY LIENS OR ENCUMBRANCES
SUFFERED OR PERMITTED BY THE COMPANY; (II) THERE ARE NO OUTSTANDING OPTIONS,
WARRANTS, SCRIP, RIGHTS TO SUBSCRIBE TO, CALLS OR COMMITMENTS OF ANY CHARACTER
WHATSOEVER RELATING TO, OR SECURITIES OR RIGHTS CONVERTIBLE INTO, OR EXERCISABLE
OR EXCHANGEABLE FOR, ANY CAPITAL STOCK OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES, OR CONTRACTS, COMMITMENTS, UNDERSTANDINGS OR ARRANGEMENTS BY WHICH
THE COMPANY OR ANY OF ITS SUBSIDIARIES IS OR MAY BECOME BOUND TO ISSUE
ADDITIONAL CAPITAL STOCK OF THE COMPANY OR ANY OF ITS SUBSIDIARIES OR OPTIONS,
WARRANTS, SCRIP, RIGHTS TO SUBSCRIBE TO, CALLS OR COMMITMENTS OF ANY CHARACTER
WHATSOEVER RELATING TO, OR SECURITIES OR RIGHTS CONVERTIBLE INTO, OR EXERCISABLE
OR EXCHANGEABLE FOR, ANY CAPITAL STOCK OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES; (III) THERE ARE NO OUTSTANDING DEBT SECURITIES, NOTES, CREDIT
AGREEMENTS, CREDIT FACILITIES OR OTHER AGREEMENTS, DOCUMENTS OR INSTRUMENTS
EVIDENCING INDEBTEDNESS OF THE COMPANY OR ANY OF ITS SUBSIDIARIES OR BY WHICH
THE COMPANY OR ANY OF ITS SUBSIDIARIES IS OR MAY BECOME BOUND; (IV) THERE ARE NO
FINANCING STATEMENTS SECURING OBLIGATIONS IN ANY MATERIAL AMOUNTS, EITHER SINGLY
OR IN THE AGGREGATE, FILED IN CONNECTION WITH THE COMPANY OR ANY OF ITS
SUBSIDIARIES; (V) THERE ARE NO AGREEMENTS OR ARRANGEMENTS UNDER WHICH THE
COMPANY OR ANY OF ITS SUBSIDIARIES IS OBLIGATED TO REGISTER THE SALE OF ANY OF
THEIR SECURITIES UNDER THE 1933 ACT (EXCEPT PURSUANT TO THE REGISTRATION RIGHTS
AGREEMENT); (VI) THERE ARE NO OUTSTANDING SECURITIES OR INSTRUMENTS OF THE
COMPANY OR ANY OF ITS SUBSIDIARIES WHICH CONTAIN ANY REDEMPTION OR SIMILAR
PROVISIONS, AND THERE ARE NO CONTRACTS, COMMITMENTS, UNDERSTANDINGS OR
ARRANGEMENTS BY WHICH THE COMPANY OR ANY OF ITS SUBSIDIARIES IS OR MAY BECOME
BOUND TO REDEEM A SECURITY OF THE COMPANY OR ANY OF ITS SUBSIDIARIES; (VII)
THERE ARE NO SECURITIES OR INSTRUMENTS CONTAINING ANTI-DILUTION OR SIMILAR
PROVISIONS THAT WILL BE TRIGGERED BY THE ISSUANCE OF THE SECURITIES; (VIII) THE
COMPANY DOES NOT HAVE ANY STOCK APPRECIATION RIGHTS OR “PHANTOM STOCK” PLANS OR
AGREEMENTS OR ANY SIMILAR PLAN OR AGREEMENT; AND (IX) THE COMPANY AND ITS
SUBSIDIARIES HAVE NO LIABILITIES OR OBLIGATIONS REQUIRED TO BE DISCLOSED IN THE
SEC DOCUMENTS BUT NOT SO DISCLOSED IN THE SEC DOCUMENTS, OTHER THAN THOSE
INCURRED IN THE ORDINARY COURSE OF THE COMPANY’S OR ITS SUBSIDIARIES’ RESPECTIVE
BUSINESSES AND WHICH, INDIVIDUALLY OR IN THE AGGREGATE, DO NOT OR WOULD NOT HAVE
A MATERIAL ADVERSE EFFECT.  THE COMPANY HAS FURNISHED TO THE BUYERS TRUE,
CORRECT AND COMPLETE COPIES OF THE COMPANY’S CERTIFICATE OF INCORPORATION, AS
AMENDED AND AS IN EFFECT ON THE DATE HEREOF (THE “CERTIFICATE OF
INCORPORATION”), AND THE COMPANY’S BYLAWS, AS AMENDED AND AS IN EFFECT ON THE
DATE HEREOF (THE “BYLAWS”), AND THE TERMS OF ALL SECURITIES CONVERTIBLE INTO, OR
EXERCISABLE OR EXCHANGEABLE FOR, SHARES OF COMMON STOCK AND THE MATERIAL RIGHTS
OF THE HOLDERS THEREOF IN RESPECT THERETO.

(S)           INDEBTEDNESS AND OTHER CONTRACTS.  EXCEPT AS DISCLOSED IN SCHEDULE
3(S), NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES (I) HAS ANY OUTSTANDING
INDEBTEDNESS (AS DEFINED BELOW), (II) IS A PARTY TO ANY CONTRACT, AGREEMENT OR
INSTRUMENT, THE VIOLATION OF WHICH, OR DEFAULT UNDER WHICH, BY THE OTHER
PARTY(IES) TO SUCH CONTRACT, AGREEMENT OR INSTRUMENT COULD REASONABLY BE
EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT, (III) IS IN VIOLATION OF ANY
TERM OF OR IN DEFAULT UNDER ANY CONTRACT, AGREEMENT OR INSTRUMENT RELATING TO
ANY INDEBTEDNESS, EXCEPT WHERE SUCH VIOLATIONS AND DEFAULTS WOULD NOT RESULT,
INDIVIDUALLY OR IN THE AGGREGATE, IN A MATERIAL ADVERSE EFFECT, OR (IV) IS A
PARTY TO ANY CONTRACT, AGREEMENT OR INSTRUMENT RELATING TO ANY INDEBTEDNESS, THE
PERFORMANCE OF WHICH, IN THE JUDGMENT OF THE COMPANY’S OFFICERS, HAS OR IS
EXPECTED TO HAVE

12

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A MATERIAL ADVERSE EFFECT.  SCHEDULE 3(S) PROVIDES A DETAILED DESCRIPTION OF THE
MATERIAL TERMS OF ANY SUCH OUTSTANDING INDEBTEDNESS.  FOR PURPOSES OF THIS
AGREEMENT:  (X) “INDEBTEDNESS” OF ANY PERSON MEANS, WITHOUT DUPLICATION (A) ALL
INDEBTEDNESS FOR BORROWED MONEY, (B) ALL OBLIGATIONS ISSUED, UNDERTAKEN OR
ASSUMED AS THE DEFERRED PURCHASE PRICE OF PROPERTY OR SERVICES (INCLUDING,
WITHOUT LIMITATION, “CAPITAL LEASES” IN ACCORDANCE WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES) (OTHER THAN TRADE PAYABLES ENTERED INTO IN THE ORDINARY
COURSE OF BUSINESS), (C) ALL REIMBURSEMENT OR PAYMENT OBLIGATIONS WITH RESPECT
TO LETTERS OF CREDIT, SURETY BONDS AND OTHER SIMILAR INSTRUMENTS, (D) ALL
OBLIGATIONS EVIDENCED BY NOTES, BONDS, DEBENTURES OR SIMILAR INSTRUMENTS,
INCLUDING OBLIGATIONS SO EVIDENCED INCURRED IN CONNECTION WITH THE ACQUISITION
OF PROPERTY, ASSETS OR BUSINESSES, (E) ALL INDEBTEDNESS CREATED OR ARISING UNDER
ANY CONDITIONAL SALE OR OTHER TITLE RETENTION AGREEMENT, OR INCURRED AS
FINANCING, IN EITHER CASE WITH RESPECT TO ANY PROPERTY OR ASSETS ACQUIRED WITH
THE PROCEEDS OF SUCH INDEBTEDNESS (EVEN THOUGH THE RIGHTS AND REMEDIES OF THE
SELLER OR BANK UNDER SUCH AGREEMENT IN THE EVENT OF DEFAULT ARE LIMITED TO
REPOSSESSION OR SALE OF SUCH PROPERTY), (F) ALL MONETARY OBLIGATIONS UNDER ANY
LEASING OR SIMILAR ARRANGEMENT WHICH, IN CONNECTION WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES, CONSISTENTLY APPLIED FOR THE PERIODS COVERED THEREBY, IS
CLASSIFIED AS A CAPITAL LEASE, (G) ALL INDEBTEDNESS REFERRED TO IN CLAUSES (A)
THROUGH (F) ABOVE SECURED BY (OR FOR WHICH THE HOLDER OF SUCH INDEBTEDNESS HAS
AN EXISTING RIGHT, CONTINGENT OR OTHERWISE, TO BE SECURED BY) ANY MORTGAGE,
LIEN, PLEDGE, CHARGE, SECURITY INTEREST OR OTHER ENCUMBRANCE UPON OR IN ANY
PROPERTY OR ASSETS (INCLUDING ACCOUNTS AND CONTRACT RIGHTS) OWNED BY ANY PERSON,
EVEN THOUGH THE PERSON WHICH OWNS SUCH ASSETS OR PROPERTY HAS NOT ASSUMED OR
BECOME LIABLE FOR THE PAYMENT OF SUCH INDEBTEDNESS, AND (H) ALL CONTINGENT
OBLIGATIONS IN RESPECT OF INDEBTEDNESS OR OBLIGATIONS OF OTHERS OF THE KINDS
REFERRED TO IN CLAUSES (A) THROUGH (G) ABOVE; (Y) “CONTINGENT OBLIGATION” MEANS,
AS TO ANY PERSON, ANY DIRECT OR INDIRECT LIABILITY, CONTINGENT OR OTHERWISE, OF
THAT PERSON WITH RESPECT TO ANY INDEBTEDNESS, LEASE, DIVIDEND OR OTHER
OBLIGATION OF ANOTHER PERSON IF THE PRIMARY PURPOSE OR INTENT OF THE PERSON
INCURRING SUCH LIABILITY, OR THE PRIMARY EFFECT THEREOF, IS TO PROVIDE ASSURANCE
TO THE OBLIGEE OF SUCH LIABILITY THAT SUCH LIABILITY WILL BE PAID OR DISCHARGED,
OR THAT ANY AGREEMENTS RELATING THERETO WILL BE COMPLIED WITH, OR THAT THE
HOLDERS OF SUCH LIABILITY WILL BE PROTECTED (IN WHOLE OR IN PART) AGAINST LOSS
WITH RESPECT THERETO; AND (Z) “PERSON” MEANS AN INDIVIDUAL, A LIMITED LIABILITY
COMPANY, A PARTNERSHIP, A JOINT VENTURE, A CORPORATION, A TRUST, AN
UNINCORPORATED ORGANIZATION AND A GOVERNMENT OR ANY DEPARTMENT OR AGENCY
THEREOF.

(T)            ABSENCE OF LITIGATION.  EXCEPT AS SET FORTH IN SCHEDULE 3(T),
THERE IS NO ACTION, SUIT, PROCEEDING, INQUIRY OR INVESTIGATION BEFORE OR BY THE
PRINCIPAL MARKET, ANY COURT, PUBLIC BOARD, GOVERNMENT AGENCY, SELF-REGULATORY
ORGANIZATION OR BODY PENDING OR, TO THE KNOWLEDGE OF THE COMPANY, THREATENED
AGAINST OR AFFECTING THE COMPANY OR ANY OF ITS SUBSIDIARIES, THE COMMON STOCK OR
ANY OF THE COMPANY’S SUBSIDIARIES OR ANY OF THE COMPANY’S OR ITS SUBSIDIARIES’
OFFICERS OR DIRECTORS.

(U)           INSURANCE.  THE COMPANY AND EACH OF ITS SUBSIDIARIES ARE INSURED
BY INSURERS OF RECOGNIZED FINANCIAL RESPONSIBILITY AGAINST SUCH LOSSES AND RISKS
AND IN SUCH AMOUNTS AS MANAGEMENT OF THE COMPANY BELIEVES TO BE PRUDENT AND
CUSTOMARY IN THE BUSINESSES IN WHICH THE COMPANY AND ITS SUBSIDIARIES ARE
ENGAGED.  NEITHER THE COMPANY NOR ANY SUCH SUBSIDIARY HAS BEEN REFUSED ANY
INSURANCE COVERAGE SOUGHT OR APPLIED FOR AND NEITHER THE COMPANY NOR ANY SUCH
SUBSIDIARY HAS ANY REASON TO BELIEVE THAT IT WILL NOT BE ABLE TO RENEW ITS
EXISTING INSURANCE COVERAGE AS AND WHEN SUCH COVERAGE EXPIRES OR TO OBTAIN
SIMILAR COVERAGE FROM SIMILAR INSURERS

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AS MAY BE NECESSARY TO CONTINUE ITS BUSINESS AT A COST THAT WOULD NOT HAVE A
MATERIAL ADVERSE EFFECT.

(V)           EMPLOYEE RELATIONS.  (I)  NEITHER THE COMPANY NOR ANY OF ITS
SUBSIDIARIES IS A PARTY TO ANY COLLECTIVE BARGAINING AGREEMENT OR EMPLOYS ANY
MEMBER OF A UNION.  THE COMPANY AND ITS SUBSIDIARIES BELIEVE THAT THEIR
RELATIONS WITH THEIR EMPLOYEES ARE GOOD.  NO EXECUTIVE OFFICER OF THE COMPANY OR
ANY OF ITS SUBSIDIARIES (AS DEFINED IN RULE 501(F) OF THE 1933 ACT) HAS NOTIFIED
THE COMPANY OR ANY SUCH SUBSIDIARY THAT SUCH OFFICER INTENDS TO LEAVE THE
COMPANY OR ANY SUCH SUBSIDIARY OR OTHERWISE TERMINATE SUCH OFFICER’S EMPLOYMENT
WITH THE COMPANY OR ANY SUCH SUBSIDIARY.  NO EXECUTIVE OFFICER OF THE COMPANY OR
ANY OF ITS SUBSIDIARIES IS, OR IS NOW EXPECTED TO BE, IN VIOLATION OF ANY
MATERIAL TERM OF ANY EMPLOYMENT CONTRACT, CONFIDENTIALITY, DISCLOSURE OR
PROPRIETARY INFORMATION AGREEMENT, NON-COMPETITION AGREEMENT, OR ANY OTHER
CONTRACT OR AGREEMENT OR ANY RESTRICTIVE COVENANT, AND THE CONTINUED EMPLOYMENT
OF EACH SUCH EXECUTIVE OFFICER DOES NOT SUBJECT THE COMPANY OR ANY OF ITS
SUBSIDIARIES TO ANY LIABILITY WITH RESPECT TO ANY OF THE FOREGOING MATTERS.

(II)           THE COMPANY AND ITS SUBSIDIARIES ARE IN COMPLIANCE WITH ALL
FEDERAL, STATE, LOCAL AND FOREIGN LAWS AND REGULATIONS RESPECTING LABOR,
EMPLOYMENT AND EMPLOYMENT PRACTICES AND BENEFITS, TERMS AND CONDITIONS OF
EMPLOYMENT AND WAGES AND HOURS, EXCEPT WHERE FAILURE TO BE IN COMPLIANCE WOULD
NOT, EITHER INDIVIDUALLY OR IN THE AGGREGATE, REASONABLY BE EXPECTED TO RESULT
IN A MATERIAL ADVERSE EFFECT.

(W)          TITLE.  THE COMPANY AND ITS SUBSIDIARIES HAVE GOOD AND MARKETABLE
TITLE IN FEE SIMPLE TO ALL REAL PROPERTY AND GOOD AND MARKETABLE TITLE TO ALL
PERSONAL PROPERTY OWNED BY THEM WHICH IS MATERIAL TO THE BUSINESS OF THE COMPANY
AND ITS SUBSIDIARIES, IN EACH CASE FREE AND CLEAR OF ALL LIENS, ENCUMBRANCES AND
DEFECTS EXCEPT SUCH AS DO NOT MATERIALLY AFFECT THE VALUE OF SUCH PROPERTY AND
DO NOT INTERFERE WITH THE USE MADE AND PROPOSED TO BE MADE OF SUCH PROPERTY BY
THE COMPANY AND ANY OF ITS SUBSIDIARIES.   ANY REAL PROPERTY AND FACILITIES HELD
UNDER LEASE BY THE COMPANY OR ANY OF ITS SUBSIDIARIES ARE HELD BY THEM UNDER
VALID, SUBSISTING AND ENFORCEABLE LEASES WITH SUCH EXCEPTIONS AS ARE NOT
MATERIAL AND DO NOT INTERFERE WITH THE USE MADE AND PROPOSED TO BE MADE OF SUCH
PROPERTY AND BUILDINGS BY THE COMPANY AND ITS SUBSIDIARIES.

(X)            INTELLECTUAL PROPERTY RIGHTS.  THE COMPANY AND ITS SUBSIDIARIES
OWN OR POSSESS ADEQUATE RIGHTS OR LICENSES TO USE ALL TRADEMARKS, SERVICE MARKS
AND ALL APPLICATIONS AND REGISTRATIONS THEREFOR, TRADE NAMES, PATENTS, PATENT
RIGHTS, COPYRIGHTS, ORIGINAL WORKS OF AUTHORSHIP, INVENTIONS, TRADE SECRETS AND
OTHER INTELLECTUAL PROPERTY RIGHTS (“INTELLECTUAL PROPERTY RIGHTS”) NECESSARY TO
CONDUCT THEIR RESPECTIVE BUSINESSES AS NOW CONDUCTED.  NONE OF THE COMPANY’S
REGISTERED, OR APPLIED FOR, INTELLECTUAL PROPERTY RIGHTS HAVE EXPIRED OR
TERMINATED OR HAVE BEEN ABANDONED, OR ARE EXPECTED TO EXPIRE OR TERMINATE OR
EXPECTED TO BE ABANDONED, WITHIN THREE YEARS FROM THE DATE OF THIS AGREEMENT. 
THE COMPANY DOES NOT HAVE ANY KNOWLEDGE OF ANY INFRINGEMENT BY THE COMPANY OR
ITS SUBSIDIARIES OF INTELLECTUAL PROPERTY RIGHTS OF OTHERS.  THERE IS NO CLAIM,
ACTION OR PROCEEDING BEING MADE OR BROUGHT, OR TO THE KNOWLEDGE OF THE COMPANY,
BEING THREATENED, AGAINST THE COMPANY OR ITS SUBSIDIARIES REGARDING ITS
INTELLECTUAL PROPERTY RIGHTS.  NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES
IS AWARE OF ANY FACTS OR CIRCUMSTANCES WHICH MIGHT GIVE RISE TO ANY OF THE
FOREGOING INFRINGEMENTS OR CLAIMS, ACTIONS OR PROCEEDINGS.  THE COMPANY AND ITS
SUBSIDIARIES HAVE TAKEN REASONABLE SECURITY MEASURES TO PROTECT THE SECRECY,
CONFIDENTIALITY AND VALUE OF ALL OF THEIR INTELLECTUAL PROPERTY RIGHTS.

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(Y)           ENVIRONMENTAL LAWS.  THE COMPANY AND ITS SUBSIDIARIES (I) ARE IN
COMPLIANCE WITH ANY AND ALL ENVIRONMENTAL LAWS (AS HEREINAFTER DEFINED), (II)
HAVE RECEIVED ALL PERMITS, LICENSES OR OTHER APPROVALS REQUIRED OF THEM UNDER
APPLICABLE ENVIRONMENTAL LAWS TO CONDUCT THEIR RESPECTIVE BUSINESSES AND (III)
ARE IN COMPLIANCE WITH ALL TERMS AND CONDITIONS OF ANY SUCH PERMIT, LICENSE OR
APPROVAL WHERE, IN EACH OF THE FOREGOING CLAUSES (I), (II) AND (III), THE
FAILURE TO SO COMPLY COULD BE REASONABLY EXPECTED TO HAVE, INDIVIDUALLY OR IN
THE AGGREGATE, A MATERIAL ADVERSE EFFECT.  THE TERM “ENVIRONMENTAL LAWS” MEANS
ALL FEDERAL, STATE, LOCAL OR FOREIGN LAWS RELATING TO POLLUTION OR PROTECTION OF
HUMAN HEALTH OR THE ENVIRONMENT (INCLUDING, WITHOUT LIMITATION, AMBIENT AIR,
SURFACE WATER, GROUNDWATER, LAND SURFACE OR SUBSURFACE STRATA), INCLUDING,
WITHOUT LIMITATION, LAWS RELATING TO EMISSIONS, DISCHARGES, RELEASES OR
THREATENED RELEASES OF CHEMICALS, POLLUTANTS, CONTAMINANTS, OR TOXIC OR
HAZARDOUS SUBSTANCES OR WASTES (COLLECTIVELY, “HAZARDOUS MATERIALS”) INTO THE
ENVIRONMENT, OR OTHERWISE RELATING TO THE MANUFACTURE, PROCESSING, DISTRIBUTION,
USE, TREATMENT, STORAGE, DISPOSAL, TRANSPORT OR HANDLING OF HAZARDOUS MATERIALS,
AS WELL AS ALL AUTHORIZATIONS, CODES, DECREES, DEMANDS OR DEMAND LETTERS,
INJUNCTIONS, JUDGMENTS, LICENSES, NOTICES OR NOTICE LETTERS, ORDERS, PERMITS,
PLANS OR REGULATIONS ISSUED, ENTERED, PROMULGATED OR APPROVED THEREUNDER.

(Z)            SUBSIDIARY RIGHTS.  THE COMPANY OR ONE OF ITS SUBSIDIARIES HAS
THE UNRESTRICTED RIGHT TO VOTE, AND (SUBJECT TO LIMITATIONS IMPOSED BY
APPLICABLE LAW) TO RECEIVE DIVIDENDS AND DISTRIBUTIONS ON, ALL CAPITAL
SECURITIES OF ITS SUBSIDIARIES AS OWNED BY THE COMPANY OR SUCH SUBSIDIARY.

(AA)         TAX STATUS.  THE COMPANY AND EACH OF ITS SUBSIDIARIES (I) HAS MADE
OR FILED ALL FOREIGN, FEDERAL AND STATE INCOME AND ALL OTHER TAX RETURNS,
REPORTS AND DECLARATIONS REQUIRED BY ANY JURISDICTION TO WHICH IT IS SUBJECT,
(II) HAS PAID ALL TAXES AND OTHER GOVERNMENTAL ASSESSMENTS AND CHARGES THAT ARE
MATERIAL IN AMOUNT, SHOWN OR DETERMINED TO BE DUE ON SUCH RETURNS, REPORTS AND
DECLARATIONS, EXCEPT THOSE BEING CONTESTED IN GOOD FAITH AND (III) HAS SET ASIDE
ON ITS BOOKS PROVISION REASONABLY ADEQUATE FOR THE PAYMENT OF ALL TAXES FOR
PERIODS SUBSEQUENT TO THE PERIODS TO WHICH SUCH RETURNS, REPORTS OR DECLARATIONS
APPLY.  THERE ARE NO UNPAID TAXES IN ANY MATERIAL AMOUNT CLAIMED TO BE DUE BY
THE TAXING AUTHORITY OF ANY JURISDICTION, AND THE OFFICERS OF THE COMPANY KNOW
OF NO BASIS FOR ANY SUCH CLAIM.

(BB)         INTERNAL ACCOUNTING AND DISCLOSURE CONTROLS.  THE COMPANY AND EACH
OF ITS SUBSIDIARIES MAINTAIN A SYSTEM OF INTERNAL ACCOUNTING CONTROLS SUFFICIENT
TO PROVIDE REASONABLE ASSURANCE THAT (I) TRANSACTIONS ARE EXECUTED IN ACCORDANCE
WITH MANAGEMENT’S GENERAL OR SPECIFIC AUTHORIZATIONS, (II) TRANSACTIONS ARE
RECORDED AS NECESSARY TO PERMIT PREPARATION OF FINANCIAL STATEMENTS IN
CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND TO MAINTAIN ASSET
AND LIABILITY ACCOUNTABILITY, (III) ACCESS TO ASSETS OR INCURRENCE OF
LIABILITIES IS PERMITTED ONLY IN ACCORDANCE WITH MANAGEMENT’S GENERAL OR
SPECIFIC AUTHORIZATION AND (IV) THE RECORDED ACCOUNTABILITY FOR ASSETS AND
LIABILITIES IS COMPARED WITH THE EXISTING ASSETS AND LIABILITIES AT REASONABLE
INTERVALS AND APPROPRIATE ACTION IS TAKEN WITH RESPECT TO ANY DIFFERENCE.  THE
COMPANY MAINTAINS DISCLOSURE CONTROLS AND PROCEDURES (AS SUCH TERM IS DEFINED IN
RULE 13A-14 UNDER THE 1934 ACT) THAT ARE EFFECTIVE IN ENSURING THAT INFORMATION
REQUIRED TO BE DISCLOSED BY THE COMPANY IN THE REPORTS THAT IT FILES OR SUBMITS
UNDER THE 1934 ACT

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IS RECORDED, PROCESSED, SUMMARIZED AND REPORTED, WITHIN THE TIME PERIODS
SPECIFIED IN THE RULES AND FORMS OF THE SEC, INCLUDING, WITHOUT LIMITATION,
CONTROLS AND PROCEDURES DESIGNED IN TO ENSURE THAT INFORMATION REQUIRED TO BE
DISCLOSED BY THE COMPANY IN THE REPORTS THAT IT FILES OR SUBMITS UNDER THE 1934
ACT IS ACCUMULATED AND COMMUNICATED TO THE COMPANY’S MANAGEMENT, INCLUDING ITS
PRINCIPAL EXECUTIVE OFFICER OR OFFICERS AND ITS PRINCIPAL FINANCIAL OFFICER OR
OFFICERS, AS APPROPRIATE, TO ALLOW TIMELY DECISIONS REGARDING REQUIRED
DISCLOSURE.  DURING THE TWELVE MONTHS PRIOR TO THE DATE HEREOF NEITHER THE
COMPANY NOR ANY OF ITS SUBSIDIARIES HAVE RECEIVED ANY NOTICE OR CORRESPONDENCE
FROM ANY ACCOUNTANT RELATING TO ANY POTENTIAL MATERIAL WEAKNESS IN ANY PART OF
THE SYSTEM OF INTERNAL ACCOUNTING CONTROLS OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES.

(CC)         RANKING OF NOTES.  EXCEPT AS SET FORTH ON SCHEDULE 3(CC), NO
INDEBTEDNESS OF THE COMPANY IS SENIOR TO OR RANKS PARI PASSU WITH THE NOTES IN
RIGHT OF PAYMENT, WHETHER WITH RESPECT OF PAYMENT OF REDEMPTIONS, INTEREST,
DAMAGES OR UPON LIQUIDATION OR DISSOLUTION OR OTHERWISE.

(DD)         OFF BALANCE SHEET ARRANGEMENTS.  THERE IS NO TRANSACTION,
ARRANGEMENT, OR OTHER RELATIONSHIP BETWEEN THE COMPANY AND AN UNCONSOLIDATED OR
OTHER OFF BALANCE SHEET ENTITY THAT IS REQUIRED TO BE DISCLOSED BY THE COMPANY
IN ITS 1934 ACT FILINGS AND IS NOT SO DISCLOSED OR THAT OTHERWISE WOULD BE
REASONABLY LIKELY TO HAVE A MATERIAL ADVERSE EFFECT.

(EE)         INVESTMENT COMPANY STATUS.  THE COMPANY IS NOT, AND UPON
CONSUMMATION OF THE SALE OF THE SECURITIES WILL NOT BE, AN “INVESTMENT COMPANY,”
A COMPANY CONTROLLED BY AN “INVESTMENT COMPANY” OR AN “AFFILIATED PERSON” OF, OR
“PROMOTER” OR “PRINCIPAL UNDERWRITER” FOR, AN “INVESTMENT COMPANY” AS SUCH TERMS
ARE DEFINED IN THE INVESTMENT COMPANY ACT OF  1940, AS AMENDED.

(FF)           FORM S-3 ELIGIBILITY.  THE COMPANY IS ELIGIBLE TO REGISTER THE
CONVERSION SHARES, THE INTEREST SHARES AND THE WARRANT SHARES FOR RESALE BY THE
BUYERS USING FORM S-3 PROMULGATED UNDER THE 1933 ACT.

(GG)         TRANSFER TAXES.  ON THE CLOSING DATE, ALL STOCK TRANSFER OR OTHER
TAXES (OTHER THAN INCOME OR SIMILAR TAXES) WHICH ARE REQUIRED TO BE PAID IN
CONNECTION WITH THE SALE AND TRANSFER OF THE SECURITIES TO BE SOLD TO EACH BUYER
HEREUNDER WILL BE, OR WILL HAVE BEEN, FULLY PAID OR PROVIDED FOR BY THE COMPANY,
AND ALL LAWS IMPOSING SUCH TAXES WILL BE OR WILL HAVE BEEN COMPLIED WITH.

(HH)         MANIPULATION OF PRICE.  THE COMPANY HAS NOT, AND TO ITS KNOWLEDGE
NO ONE ACTING ON ITS BEHALF HAS, (I) TAKEN, DIRECTLY OR INDIRECTLY, ANY ACTION
DESIGNED TO CAUSE OR TO RESULT, OR THAT COULD REASONABLY BE EXPECTED TO CAUSE OR
RESULT, IN THE STABILIZATION OR MANIPULATION OF THE PRICE OF ANY SECURITY OF THE
COMPANY TO FACILITATE THE SALE OR RESALE OF ANY OF THE SECURITIES, (II) OTHER
THAN THE AGENT, SOLD, BID FOR, PURCHASED, OR PAID ANY COMPENSATION FOR
SOLICITING PURCHASES OF, ANY OF THE SECURITIES OR (III) PAID OR AGREED TO PAY TO
ANY PERSON ANY COMPENSATION FOR SOLICITING ANOTHER TO PURCHASE ANY OTHER
SECURITIES OF THE COMPANY.

(II)           ACKNOWLEDGEMENT REGARDING BUYERS’ TRADING ACTIVITY.  ANYTHING IN
THIS AGREEMENT OR ELSEWHERE HEREIN TO THE CONTRARY NOTWITHSTANDING, BUT SUBJECT
TO COMPLIANCE BY THE BUYERS WITH APPLICABLE LAW AND THE PROVISIONS OF SECTION
4(T) HERETO, IT IS UNDERSTOOD AND ACKNOWLEDGED BY THE COMPANY (I) THAT NONE OF
THE BUYERS HAVE BEEN ASKED BY THE COMPANY OR ITS SUBSIDIARIES TO AGREE, NOR HAS
ANY BUYER AGREED WITH THE COMPANY OR ITS SUBSIDIARIES, TO DESIST FROM PURCHASING
OR SELLING, LONG AND/OR SHORT, SECURITIES OF THE COMPANY, OR “DERIVATIVE”

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SECURITIES BASED ON SECURITIES ISSUED BY THE COMPANY OR TO HOLD THE SECURITIES
FOR ANY SPECIFIED TERM; (II) THAT PAST OR FUTURE OPEN MARKET OR OTHER
TRANSACTIONS BY ANY BUYER, INCLUDING, WITHOUT LIMITATION, SHORT SALES OR
“DERIVATIVE” TRANSACTIONS, BEFORE OR AFTER THE CLOSING OF THIS OR FUTURE PRIVATE
PLACEMENT TRANSACTIONS, MAY NEGATIVELY IMPACT THE MARKET PRICE OF THE COMPANY’S
PUBLICLY-TRADED SECURITIES; (III) THAT ANY BUYER, AND COUNTER PARTIES IN
“DERIVATIVE” TRANSACTIONS TO WHICH ANY SUCH BUYER IS A PARTY, DIRECTLY OR
INDIRECTLY, PRESENTLY MAY HAVE A “SHORT” POSITION IN THE COMMON STOCK, AND (IV)
THAT EACH BUYER SHALL NOT BE DEEMED TO HAVE ANY AFFILIATION WITH OR CONTROL OVER
ANY ARM’S LENGTH COUNTER-PARTY IN ANY “DERIVATIVE” TRANSACTION.  THE COMPANY
FURTHER UNDERSTANDS AND ACKNOWLEDGES THAT (A) ONE OR MORE BUYERS MAY ENGAGE IN
HEDGING AND/OR TRADING ACTIVITIES AT VARIOUS TIMES DURING THE PERIOD THAT THE
SECURITIES ARE OUTSTANDING, INCLUDING, WITHOUT LIMITATION, DURING THE PERIODS
THAT THE VALUE OF THE CONVERSION SHARES, INTEREST SHARES AND THE WARRANT SHARES
DELIVERABLE WITH RESPECT TO SECURITIES ARE BEING DETERMINED AND (B) SUCH HEDGING
AND/OR TRADING ACTIVITIES, IF ANY, CAN REDUCE THE VALUE OF THE EXISTING
STOCKHOLDERS’ EQUITY INTEREST IN THE COMPANY BOTH AT AND AFTER THE TIME THE
HEDGING AND/OR TRADING ACTIVITIES ARE BEING CONDUCTED.  THE COMPANY ACKNOWLEDGES
THAT SUCH AFOREMENTIONED HEDGING AND/OR TRADING ACTIVITIES DO NOT CONSTITUTE A
BREACH OF THIS AGREEMENT, THE NOTES, THE WARRANTS OR ANY OF THE DOCUMENTS
EXECUTED IN CONNECTION HEREWITH.

(JJ)           U.S. REAL PROPERTY HOLDING CORPORATION.  THE COMPANY IS NOT, NOR
HAS EVER BEEN, A U.S. REAL PROPERTY HOLDING CORPORATION WITHIN THE MEANING OF
SECTION 897 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, AND THE COMPANY
SHALL SO CERTIFY UPON BUYER’S REQUEST.

(KK)         DISCLOSURE.  THE COMPANY CONFIRMS THAT NEITHER IT NOR ANY OTHER
PERSON ACTING ON ITS BEHALF HAS PROVIDED ANY OF THE BUYERS OR THEIR AGENTS OR
COUNSEL WITH ANY INFORMATION THAT CONSTITUTES OR COULD REASONABLY BE EXPECTED TO
CONSTITUTE MATERIAL, NONPUBLIC INFORMATION.  THE COMPANY UNDERSTANDS AND
CONFIRMS THAT EACH OF THE BUYERS WILL RELY ON THE FOREGOING REPRESENTATIONS IN
EFFECTING TRANSACTIONS IN SECURITIES OF THE COMPANY.  ALL DISCLOSURE PROVIDED TO
THE BUYERS REGARDING THE COMPANY OR ANY OF ITS SUBSIDIARIES, THEIR BUSINESS AND
THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING THE SCHEDULES TO THIS AGREEMENT,
FURNISHED BY OR ON BEHALF OF THE COMPANY IS TRUE AND CORRECT AND DOES NOT
CONTAIN ANY UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT TO STATE ANY MATERIAL
FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS MADE THEREIN, IN THE LIGHT OF THE
CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING.  EACH PRESS RELEASE
ISSUED BY THE COMPANY OR ANY OF ITS SUBSIDIARIES DURING THE TWELVE (12) MONTHS
PRECEDING THE DATE OF THIS AGREEMENT DID NOT AT THE TIME OF RELEASE CONTAIN ANY
UNTRUE STATEMENT OF A MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT REQUIRED TO
BE STATED THEREIN OR NECESSARY IN ORDER TO MAKE THE STATEMENTS THEREIN, IN THE
LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING.  NO EVENT
OR CIRCUMSTANCE HAS OCCURRED OR INFORMATION EXISTS WITH RESPECT TO THE COMPANY
OR ANY OF ITS SUBSIDIARIES OR ITS OR THEIR BUSINESS, PROPERTIES, PROSPECTS,
OPERATIONS OR FINANCIAL CONDITIONS, WHICH, UNDER APPLICABLE LAW, RULE OR
REGULATION, REQUIRES PUBLIC DISCLOSURE OR ANNOUNCEMENT BY THE COMPANY BUT WHICH
HAS NOT BEEN SO PUBLICLY ANNOUNCED OR DISCLOSED.

4.             COVENANTS.

(A)           BEST EFFORTS.  EACH PARTY SHALL USE ITS BEST EFFORTS TIMELY TO
SATISFY EACH OF THE CONDITIONS TO BE SATISFIED BY IT AS PROVIDED IN SECTIONS 6
AND 7 OF THIS AGREEMENT.

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(B)           FORM D AND BLUE SKY.  THE COMPANY AGREES TO FILE A FORM D WITH
RESPECT TO THE SECURITIES AS REQUIRED UNDER REGULATION D AND TO PROVIDE A COPY
THEREOF TO EACH BUYER PROMPTLY AFTER SUCH FILING.  THE COMPANY SHALL, ON OR
BEFORE THE CLOSING DATE, TAKE SUCH ACTION AS THE COMPANY SHALL REASONABLY
DETERMINE IS NECESSARY IN ORDER TO OBTAIN AN EXEMPTION FOR OR TO QUALIFY THE
SECURITIES FOR SALE TO THE BUYERS AT THE CLOSING PURSUANT TO THIS AGREEMENT
UNDER APPLICABLE SECURITIES OR “BLUE SKY” LAWS OF THE STATES OF THE UNITED
STATES (OR TO OBTAIN AN EXEMPTION FROM SUCH QUALIFICATION), AND SHALL PROVIDE
EVIDENCE OF ANY SUCH ACTION SO TAKEN TO THE BUYERS ON OR PRIOR TO THE CLOSING
DATE.  THE COMPANY SHALL MAKE ALL FILINGS AND REPORTS RELATING TO THE OFFER AND
SALE OF THE SECURITIES REQUIRED UNDER APPLICABLE SECURITIES OR “BLUE SKY” LAWS
OF THE STATES OF THE UNITED STATES FOLLOWING THE CLOSING DATE.

(C)           REPORTING STATUS.  UNTIL THE DATE ON WHICH THE INVESTORS (AS
DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) SHALL HAVE SOLD ALL THE CONVERSION
SHARES, THE INTEREST SHARES AND WARRANT SHARES AND NONE OF THE NOTES OR WARRANTS
IS OUTSTANDING (THE “REPORTING PERIOD”), THE COMPANY SHALL TIMELY FILE ALL
REPORTS REQUIRED TO BE FILED WITH THE SEC PURSUANT TO THE 1934 ACT, AND THE
COMPANY SHALL NOT TERMINATE ITS STATUS AS AN ISSUER REQUIRED TO FILE REPORTS
UNDER THE 1934 ACT EVEN IF THE 1934 ACT OR THE RULES AND REGULATIONS THEREUNDER
WOULD NO LONGER REQUIRE OR OTHERWISE PERMIT SUCH TERMINATION, AND THE COMPANY
SHALL TAKE ALL ACTIONS NECESSARY TO MAINTAIN ITS ELIGIBILITY TO REGISTER THE
CONVERSION SHARES AND WARRANT SHARES FOR RESALE BY THE BUYERS ON FORM S-3.

(D)           USE OF PROCEEDS.  THE COMPANY WILL USE THE PROCEEDS FROM THE SALE
OF THE SECURITIES FOR GENERAL CORPORATE PURPOSES, INCLUDING SALES, MARKETING,
WORKING CAPITAL, GENERAL AND ADMINISTRATIVE EXPENSES AND NOT FOR (I) EXCEPT AS
SET FORTH ON SCHEDULE 4(D), THE REPAYMENT OF ANY OUTSTANDING INDEBTEDNESS OF THE
COMPANY OR ANY OF ITS SUBSIDIARIES OR (II) THE REDEMPTION OR REPURCHASE OF ANY
OF ITS OR ITS SUBSIDIARIES’ EQUITY SECURITIES.

(E)           FINANCIAL INFORMATION.  AS LONG AS ANY NOTES OR WARRANTS ARE
OUTSTANDING, THE COMPANY AGREES TO SEND THE FOLLOWING TO EACH INVESTOR (AS
DEFINED IN THE REGISTRATION RIGHTS AGREEMENT) DURING THE REPORTING PERIOD (I)
UNLESS THE FOLLOWING ARE FILED WITH THE SEC THROUGH EDGAR AND ARE AVAILABLE TO
THE PUBLIC THROUGH THE EDGAR SYSTEM, WITHIN ONE (1) BUSINESS DAY AFTER THE
FILING THEREOF WITH THE SEC, A COPY OF ITS ANNUAL REPORTS AND QUARTERLY REPORTS
ON FORM 10-K, 10-KSB, 10-Q OR 10-QSB, ANY INTERIM REPORTS OR ANY CONSOLIDATED
BALANCE SHEETS, INCOME STATEMENTS, STOCKHOLDERS’ EQUITY STATEMENTS AND/OR CASH
FLOW STATEMENTS FOR ANY PERIOD OTHER THAN ANNUAL, ANY CURRENT REPORTS ON FORM
8-K AND ANY REGISTRATION STATEMENTS (OTHER THAN ON FORM S-8) OR AMENDMENTS FILED
PURSUANT TO THE 1933 ACT, (II) ON THE SAME DAY AS THE RELEASE THEREOF, FACSIMILE
OR E-MAILED COPIES OF ALL PRESS RELEASES ISSUED BY THE COMPANY OR ANY OF ITS
SUBSIDIARIES, AND (III) COPIES OF ANY NOTICES AND OTHER INFORMATION MADE
AVAILABLE OR GIVEN TO THE STOCKHOLDERS OF THE COMPANY GENERALLY,
CONTEMPORANEOUSLY WITH THE MAKING AVAILABLE OR GIVING THEREOF TO THE
STOCKHOLDERS; PROVIDED, THAT EACH SUCH INVESTOR PROVIDES TO THE COMPANY AN EMAIL
ADDRESS ON THE SCHEDULE OF BUYERS FOR THE PROVISION OF SUCH INFORMATION.  AS
USED HEREIN, “BUSINESS DAY” MEANS ANY DAY OTHER THAN SATURDAY, SUNDAY OR OTHER
DAY ON WHICH COMMERCIAL BANKS IN THE CITY OF NEW YORK ARE AUTHORIZED OR REQUIRED
BY LAW TO REMAIN CLOSED.

(F)            LISTING.  THE COMPANY SHALL PROMPTLY SECURE THE LISTING OF ALL OF
THE REGISTRABLE SECURITIES (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT)
UPON EACH NATIONAL SECURITIES EXCHANGE AND AUTOMATED QUOTATION SYSTEM, IF ANY,
UPON WHICH THE COMMON STOCK IS

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THEN LISTED (SUBJECT TO OFFICIAL NOTICE OF ISSUANCE) AND SHALL MAINTAIN, IN
ACCORDANCE WITH THE NOTES AND WARRANTS, SUCH LISTING OF ALL REGISTRABLE
SECURITIES FROM TIME TO TIME ISSUABLE UNDER THE TERMS OF THE TRANSACTION
DOCUMENTS.  THE COMPANY SHALL MAINTAIN THE COMMON STOCKS’ AUTHORIZATION FOR
QUOTATION ON THE PRINCIPAL MARKET.  NEITHER THE COMPANY NOR ANY OF ITS
SUBSIDIARIES SHALL TAKE ANY ACTION WHICH WOULD BE REASONABLY EXPECTED TO RESULT
IN THE DELISTING OR SUSPENSION OF THE COMMON STOCK ON THE PRINCIPAL MARKET.  THE
COMPANY SHALL PAY ALL FEES AND EXPENSES IN CONNECTION WITH SATISFYING ITS
OBLIGATIONS UNDER THIS SECTION 4(F).

(G)           FEES.  SUBJECT TO SECTION 8 BELOW, AT CLOSING, THE COMPANY SHALL
PAY AN EXPENSE ALLOWANCE TO CAPITAL VENTURES INTERNATIONAL (A BUYER) OR ITS
DESIGNEE(S) (IN ADDITION TO ANY OTHER EXPENSE AMOUNTS PAID TO ANY BUYER PRIOR TO
THE DATE OF THIS AGREEMENT) FOR ALL REASONABLE COSTS AND EXPENSES INCURRED IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS
(INCLUDING ALL REASONABLE LEGAL FEES AND DISBURSEMENTS IN CONNECTION THEREWITH,
DOCUMENTATION AND IMPLEMENTATION OF THE TRANSACTIONS CONTEMPLATED BY THE
TRANSACTION DOCUMENTS AND DUE DILIGENCE IN CONNECTION THEREWITH), IN AN AMOUNT
NOT TO EXCEED $120,000  (IN ADDITION TO ANY OTHER EXPENSE AMOUNTS PAID TO ANY
BUYER PRIOR TO THE DATE OF THIS AGREEMENT), WHICH AMOUNT SHALL BE WITHHELD BY
SUCH BUYER FROM ITS PURCHASE PRICE AT THE CLOSING.  THE COMPANY SHALL BE
RESPONSIBLE FOR THE PAYMENT OF ANY PLACEMENT AGENT’S FEES, FINANCIAL ADVISORY
FEES, OR BROKER’S COMMISSIONS RELATING TO OR ARISING OUT OF THE TRANSACTIONS
CONTEMPLATED HEREBY, INCLUDING, WITHOUT LIMITATION, ANY FEES PAYABLE TO THE
AGENT.  THE COMPANY SHALL PAY, AND HOLD EACH BUYER HARMLESS AGAINST, ANY
LIABILITY, LOSS OR EXPENSE (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEY’S
FEES AND OUT-OF-POCKET EXPENSES) ARISING IN CONNECTION WITH ANY CLAIM RELATING
TO ANY SUCH PAYMENT.

(H)           PLEDGE OF SECURITIES.  THE COMPANY ACKNOWLEDGES AND AGREES THAT
THE SECURITIES MAY BE PLEDGED BY AN INVESTOR (AS DEFINED IN THE REGISTRATION
RIGHTS AGREEMENT) IN CONNECTION WITH A BONA FIDE MARGIN AGREEMENT OR OTHER LOAN
OR FINANCING ARRANGEMENT THAT IS SECURED BY THE SECURITIES.  THE PLEDGE OF
SECURITIES SHALL NOT BE DEEMED TO BE A TRANSFER, SALE OR ASSIGNMENT OF THE
SECURITIES HEREUNDER, AND NO INVESTOR EFFECTING A PLEDGE OF SECURITIES SHALL BE
REQUIRED TO PROVIDE THE COMPANY WITH ANY NOTICE THEREOF OR OTHERWISE MAKE ANY
DELIVERY TO THE COMPANY PURSUANT TO THIS AGREEMENT OR ANY OTHER TRANSACTION
DOCUMENT, INCLUDING, WITHOUT LIMITATION, SECTION 2(F) HEREOF; PROVIDED THAT AN
INVESTOR AND ITS PLEDGEE SHALL BE REQUIRED TO COMPLY WITH THE PROVISIONS OF
SECTION 2(F) HEREOF IN ORDER TO EFFECT A SALE, TRANSFER OR ASSIGNMENT OF
SECURITIES TO SUCH PLEDGEE.  THE COMPANY HEREBY AGREES TO EXECUTE AND DELIVER
SUCH DOCUMENTATION AS A PLEDGEE OF THE SECURITIES MAY REASONABLY REQUEST IN
CONNECTION WITH A PLEDGE OF THE SECURITIES TO SUCH PLEDGEE BY AN INVESTOR.

(I)            DISCLOSURE OF TRANSACTIONS AND OTHER MATERIAL INFORMATION.  ON OR
BEFORE 8:30 A.M., NEW YORK CITY TIME, ON THE SECOND BUSINESS DAY FOLLOWING THE
DATE OF THIS AGREEMENT, THE COMPANY SHALL ISSUE A PRESS RELEASE AND FILE A
CURRENT REPORT ON FORM 8-K DESCRIBING THE TERMS OF THE TRANSACTIONS CONTEMPLATED
BY THE TRANSACTION DOCUMENTS IN THE FORM REQUIRED BY THE 1934 ACT AND ATTACHING
THE MATERIAL TRANSACTION DOCUMENTS (INCLUDING, WITHOUT LIMITATION, THIS
AGREEMENT (AND ALL SCHEDULES TO THIS AGREEMENT), THE FORM OF THE NOTES, THE FORM
OF WARRANT, AND THE FORM OF THE REGISTRATION RIGHTS AGREEMENT) AS EXHIBITS TO
SUCH FILING (INCLUDING ALL ATTACHMENTS, THE “8-K FILING”).  FROM AND AFTER THE
FILING OF THE 8-K FILING WITH THE SEC, NO BUYER SHALL BE IN POSSESSION OF ANY
MATERIAL, NONPUBLIC INFORMATION RECEIVED FROM THE COMPANY, ANY OF ITS
SUBSIDIARIES OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES OR
AGENTS, THAT IS

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NOT DISCLOSED IN THE 8-K FILING.  THE COMPANY SHALL NOT, AND SHALL CAUSE EACH OF
ITS SUBSIDIARIES AND ITS AND EACH OF THEIR RESPECTIVE OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS, NOT TO, PROVIDE ANY BUYER WITH ANY MATERIAL, NONPUBLIC
INFORMATION REGARDING THE COMPANY OR ANY OF ITS SUBSIDIARIES FROM AND AFTER THE
FILING OF THE 8-K FILING WITH THE SEC WITHOUT THE EXPRESS PRIOR WRITTEN CONSENT
OF SUCH BUYER.  IF A BUYER HAS, OR BELIEVES IT HAS, RECEIVED ANY SUCH MATERIAL,
NONPUBLIC INFORMATION REGARDING THE COMPANY OR ANY OF ITS SUBSIDIARIES, IT SHALL
PROVIDE THE COMPANY WITH WRITTEN NOTICE THEREOF.  THE COMPANY SHALL, WITHIN FIVE
(5) TRADING DAYS (AS DEFINED IN THE NOTES) OF RECEIPT OF SUCH NOTICE, MAKE
PUBLIC DISCLOSURE OF SUCH MATERIAL, NONPUBLIC INFORMATION.  IN THE EVENT OF A
BREACH OF THE FOREGOING COVENANT BY THE COMPANY, ANY OF ITS SUBSIDIARIES, OR ANY
OF ITS OR THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS, IN
ADDITION TO ANY OTHER REMEDY PROVIDED HEREIN OR IN THE TRANSACTION DOCUMENTS, A
BUYER SHALL HAVE THE RIGHT TO MAKE A PUBLIC DISCLOSURE, IN THE FORM OF A PRESS
RELEASE, PUBLIC ADVERTISEMENT OR OTHERWISE, OF SUCH MATERIAL, NONPUBLIC
INFORMATION WITHOUT THE PRIOR APPROVAL BY THE COMPANY, ITS SUBSIDIARIES, OR ANY
OF ITS OR THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS.  NO BUYER
SHALL HAVE ANY LIABILITY TO THE COMPANY, ITS SUBSIDIARIES, OR ANY OF ITS OR
THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, STOCKHOLDERS OR AGENTS FOR ANY
SUCH DISCLOSURE.  SUBJECT TO THE FOREGOING, NEITHER THE COMPANY, ITS
SUBSIDIARIES NOR ANY BUYER SHALL ISSUE ANY PRESS RELEASES OR ANY OTHER PUBLIC
STATEMENTS WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY; PROVIDED,
HOWEVER, THAT THE COMPANY SHALL BE ENTITLED, WITHOUT THE PRIOR APPROVAL OF ANY
BUYER, TO MAKE ANY PRESS RELEASE OR OTHER PUBLIC DISCLOSURE WITH RESPECT TO SUCH
TRANSACTIONS (I) IN SUBSTANTIAL CONFORMITY WITH THE 8-K FILING AND
CONTEMPORANEOUSLY THEREWITH AND (II) AS IS REQUIRED BY APPLICABLE LAW AND
REGULATIONS (PROVIDED THAT IN THE CASE OF CLAUSE (I) EACH BUYER SHALL BE
CONSULTED BY THE COMPANY IN CONNECTION WITH ANY SUCH PRESS RELEASE OR OTHER
PUBLIC DISCLOSURE PRIOR TO ITS RELEASE).  WITHOUT THE PRIOR WRITTEN CONSENT OF
ANY APPLICABLE BUYER, NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES OR
AFFILIATES SHALL DISCLOSE THE NAME OF SUCH BUYER IN ANY FILING, ANNOUNCEMENT,
RELEASE OR OTHERWISE.

(J)            ADDITIONAL NOTES; VARIABLE SECURITIES; DILUTIVE ISSUANCES.  SO
LONG AS ANY BUYER BENEFICIALLY OWNS ANY NOTES OR WARRANTS, THE COMPANY WILL NOT
ISSUE ANY NOTES (OTHER THAN TO THE BUYERS AS CONTEMPLATED HEREBY) AND THE
COMPANY SHALL NOT ISSUE ANY OTHER SECURITIES THAT WOULD CAUSE A BREACH OR
DEFAULT UNDER THE NOTES.  FOR SO LONG AS ANY NOTES OR WARRANTS REMAIN
OUTSTANDING, THE COMPANY SHALL NOT, IN ANY MANNER, ISSUE OR SELL ANY RIGHTS,
WARRANTS OR OPTIONS TO SUBSCRIBE FOR OR PURCHASE COMMON STOCK OR DIRECTLY OR
INDIRECTLY CONVERTIBLE INTO OR EXCHANGEABLE OR EXERCISABLE FOR COMMON STOCK AT A
PRICE WHICH VARIES OR MAY VARY WITH THE MARKET PRICE OF THE COMMON STOCK,
INCLUDING BY WAY OF ONE OR MORE RESET(S) TO ANY FIXED PRICE UNLESS THE
CONVERSION, EXCHANGE OR EXERCISE PRICE OF ANY SUCH SECURITY CANNOT BE LESS THAN
THE THEN APPLICABLE CONVERSION PRICE (AS DEFINED IN THE NOTES) WITH RESPECT TO
THE COMMON STOCK INTO WHICH ANY NOTE IS CONVERTIBLE OR THE THEN APPLICABLE
EXERCISE PRICE (AS DEFINED IN THE WARRANTS) WITH RESPECT TO THE COMMON STOCK
INTO WHICH ANY WARRANT IS EXERCISABLE.  FOR SO LONG AS ANY NOTES OR WARRANTS
REMAIN OUTSTANDING, THE COMPANY SHALL NOT, IN ANY MANNER, ENTER INTO OR AFFECT
ANY DILUTIVE ISSUANCE (AS DEFINED IN THE NOTES) IF THE EFFECT OF SUCH DILUTIVE
ISSUANCE IS TO CAUSE THE COMPANY TO BE REQUIRED TO ISSUE UPON CONVERSION OF ANY
NOTE OR EXERCISE OF ANY WARRANT ANY SHARES OF COMMON STOCK IN EXCESS OF THAT
NUMBER OF SHARES OF COMMON STOCK WHICH THE COMPANY MAY ISSUE UPON CONVERSION OF
THE NOTES AND EXERCISE OF THE WARRANTS WITHOUT BREACHING THE COMPANY’S
OBLIGATIONS UNDER THE RULES OR REGULATIONS OF THE PRINCIPAL MARKET.

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(K)           CORPORATE EXISTENCE.  SO LONG AS ANY BUYER BENEFICIALLY OWNS ANY
SECURITIES, THE COMPANY SHALL NOT BE PARTY TO ANY FUNDAMENTAL TRANSACTION (AS
DEFINED IN THE NOTES) UNLESS THE COMPANY IS IN COMPLIANCE WITH THE APPLICABLE
PROVISIONS GOVERNING FUNDAMENTAL TRANSACTIONS SET FORTH IN THE NOTES AND THE
WARRANTS.

(L)            RESERVATION OF SHARES.  THE COMPANY SHALL TAKE ALL ACTION
NECESSARY TO AT ALL TIMES HAVE AUTHORIZED, AND RESERVED FOR THE PURPOSE OF
ISSUANCE, NO LESS THAN 130% OF THE SUM OF  THE NUMBER OF SHARES OF COMMON STOCK
ISSUABLE (I) UPON CONVERSION OF THE NOTES ISSUED AT THE CLOSING, (II) AS
INTEREST SHARES PURSUANT TO THE TERMS OF THE NOTES AND (III) UPON EXERCISE OF
THE WARRANTS ISSUED AT THE CLOSING (WITHOUT TAKING INTO ACCOUNT ANY LIMITATIONS
ON THE CONVERSION OF THE NOTES OR EXERCISE OF THE WARRANTS SET FORTH IN THE
NOTES AND WARRANTS, RESPECTIVELY).

(M)          CONDUCT OF BUSINESS.  THE BUSINESS OF THE COMPANY AND ITS
SUBSIDIARIES SHALL NOT BE CONDUCTED IN VIOLATION OF ANY LAW, ORDINANCE OR
REGULATION OF ANY GOVERNMENTAL ENTITY, EXCEPT WHERE SUCH VIOLATIONS WOULD NOT
RESULT, EITHER INDIVIDUALLY OR IN THE AGGREGATE, IN A MATERIAL ADVERSE EFFECT.

(N)           ADDITIONAL ISSUANCES OF SECURITIES.

(I)            FOR PURPOSES OF THIS SECTION 4(N), THE FOLLOWING DEFINITIONS
SHALL APPLY.

(1)           “CONVERTIBLE SECURITIES” MEANS ANY STOCK OR SECURITIES (OTHER THAN
OPTIONS) CONVERTIBLE INTO OR EXERCISABLE OR EXCHANGEABLE FOR SHARES OF COMMON
STOCK.

(2)           “OPTIONS” MEANS ANY RIGHTS, WARRANTS OR OPTIONS TO SUBSCRIBE FOR
OR PURCHASE SHARES OF COMMON STOCK OR CONVERTIBLE SECURITIES.

(3)           “COMMON STOCK EQUIVALENTS” MEANS, COLLECTIVELY, OPTIONS AND
CONVERTIBLE SECURITIES.

(II)           FROM THE DATE HEREOF UNTIL THE DATE THAT IS SIXTY (60) TRADING
DAYS (AS DEFINED IN THE NOTES) FOLLOWING THE EFFECTIVE DATE (AS DEFINED IN THE
REGISTRATION RIGHTS AGREEMENT) (THE “TRIGGER DATE”), THE COMPANY WILL NOT,
DIRECTLY OR INDIRECTLY, FILE ANY REGISTRATION STATEMENT WITH THE SEC OTHER THAN
THE REGISTRATION STATEMENT (AS DEFINED IN THE REGISTRATION RIGHTS AGREEMENT). 
FROM THE DATE HEREOF UNTIL THE TRIGGER DATE, THE COMPANY WILL NOT, DIRECTLY OR
INDIRECTLY, OFFER, SELL, GRANT ANY OPTION TO PURCHASE, OR OTHERWISE DISPOSE OF
(OR ANNOUNCE ANY OFFER, SALE, GRANT OR ANY OPTION TO PURCHASE OR OTHER
DISPOSITION OF) ANY OF ITS OR ITS SUBSIDIARIES’ EQUITY OR EQUITY EQUIVALENT
SECURITIES, INCLUDING WITHOUT LIMITATION ANY DEBT, PREFERRED STOCK OR OTHER
INSTRUMENT OR SECURITY THAT IS, AT ANY TIME DURING ITS LIFE AND UNDER ANY
CIRCUMSTANCES, CONVERTIBLE INTO OR EXCHANGEABLE OR EXERCISABLE FOR SHARES OF
COMMON STOCK OR COMMON STOCK EQUIVALENTS (ANY SUCH OFFER, SALE, GRANT,
DISPOSITION OR ANNOUNCEMENT BEING REFERRED TO AS A “SUBSEQUENT PLACEMENT”).

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(III)          FROM THE TRIGGER DATE UNTIL THE SECOND ANNIVERSARY OF THE CLOSING
DATE, THE COMPANY WILL NOT, DIRECTLY OR INDIRECTLY, EFFECT ANY SUBSEQUENT
PLACEMENT UNLESS THE COMPANY SHALL HAVE FIRST COMPLIED WITH THIS SECTION
4(N)(III).

(1)           THE COMPANY SHALL DELIVER TO EACH BUYER AN IRREVOCABLE  WRITTEN
NOTICE (THE ”OFFER NOTICE”) OF ANY PROPOSED OR INTENDED ISSUANCE OR SALE OR
EXCHANGE (THE ”OFFER”) OF THE SECURITIES BEING OFFERED (THE “OFFERED
SECURITIES”) IN A SUBSEQUENT PLACEMENT, WHICH OFFER NOTICE SHALL (W) IDENTIFY
AND DESCRIBE THE OFFERED SECURITIES, (X) DESCRIBE THE PRICE AND OTHER TERMS UPON
WHICH THEY ARE TO BE ISSUED, SOLD OR EXCHANGED, AND THE NUMBER OR AMOUNT OF THE
OFFERED SECURITIES TO BE ISSUED, SOLD OR EXCHANGED, (Y) IDENTIFY THE PERSONS OR
ENTITIES (IF KNOWN) TO WHICH OR WITH WHICH THE OFFERED SECURITIES ARE TO BE
OFFERED, ISSUED, SOLD OR EXCHANGED AND (Z) OFFER TO ISSUE AND SELL TO OR
EXCHANGE WITH SUCH BUYERS AT LEAST FORTY PERCENT (40%) OF THE OFFERED
SECURITIES, ALLOCATED AMONG SUCH BUYERS (A) BASED ON SUCH BUYER’S PRO RATA
PORTION OF THE AGGREGATE PRINCIPAL AMOUNT OF NOTES PURCHASED HEREUNDER (THE
“BASIC AMOUNT”), AND (B) WITH RESPECT TO EACH BUYER THAT ELECTS TO PURCHASE ITS
BASIC AMOUNT, ANY ADDITIONAL PORTION OF THE OFFERED SECURITIES ATTRIBUTABLE TO
THE BASIC AMOUNTS OF OTHER BUYERS AS SUCH BUYER SHALL INDICATE IT WILL PURCHASE
OR ACQUIRE SHOULD THE OTHER BUYERS SUBSCRIBE FOR LESS THAN THEIR BASIC AMOUNTS
(THE “UNDERSUBSCRIPTION AMOUNT”), WHICH PROCESS SHALL BE REPEATED UNTIL THE
BUYERS SHALL HAVE AN OPPORTUNITY TO SUBSCRIBE FOR ANY REMAINING
UNDERSUBSCRIPTION AMOUNT.

(2)           TO ACCEPT AN OFFER, IN WHOLE OR IN PART, SUCH BUYER MUST DELIVER A
WRITTEN NOTICE TO THE COMPANY PRIOR TO THE END OF THE SECOND (2ND) BUSINESS DAY
AFTER SUCH BUYER’S RECEIPT OF THE OFFER NOTICE (THE “OFFER PERIOD”), SETTING
FORTH THE PORTION OF SUCH BUYER’S BASIC AMOUNT THAT SUCH BUYER ELECTS TO
PURCHASE AND, IF SUCH BUYER SHALL ELECT TO PURCHASE ALL OF ITS BASIC AMOUNT, THE
UNDERSUBSCRIPTION AMOUNT, IF ANY, THAT SUCH BUYER ELECTS TO PURCHASE (IN EITHER
CASE, THE “NOTICE OF ACCEPTANCE”).  IF THE BASIC AMOUNTS SUBSCRIBED FOR BY ALL
BUYERS ARE LESS THAN THE TOTAL OF ALL OF THE BASIC AMOUNTS, THEN EACH BUYER WHO
HAS SET FORTH AN UNDERSUBSCRIPTION AMOUNT IN ITS NOTICE OF ACCEPTANCE SHALL BE
ENTITLED TO PURCHASE, IN ADDITION TO THE BASIC AMOUNTS SUBSCRIBED FOR, THE
UNDERSUBSCRIPTION AMOUNT IT HAS SUBSCRIBED FOR; PROVIDED, HOWEVER, THAT IF THE
UNDERSUBSCRIPTION AMOUNTS SUBSCRIBED FOR EXCEED THE DIFFERENCE BETWEEN THE TOTAL
OF ALL THE BASIC AMOUNTS AND THE BASIC AMOUNTS SUBSCRIBED FOR (THE “AVAILABLE
UNDERSUBSCRIPTION AMOUNT”), EACH BUYER WHO HAS SUBSCRIBED FOR ANY
UNDERSUBSCRIPTION AMOUNT SHALL BE ENTITLED TO PURCHASE ONLY THAT PORTION OF THE
AVAILABLE UNDERSUBSCRIPTION AMOUNT AS THE BASIC AMOUNT OF SUCH BUYER BEARS TO
THE TOTAL BASIC AMOUNTS OF ALL BUYERS THAT HAVE SUBSCRIBED FOR UNDERSUBSCRIPTION
AMOUNTS, SUBJECT TO ROUNDING BY THE COMPANY TO THE EXTENT ITS DEEMS REASONABLY
NECESSARY.  NOTWITHSTANDING THE FOREGOING, IF THE COMPANY DESIRES TO MODIFY OR
AMEND THE TERMS AND CONDITIONS OF THE OFFER PRIOR TO THE EXPIRATION OF THE OFFER
PERIOD, THE COMPANY MAY DELIVER TO THE BUYERS A NEW OFFER NOTICE AND THE OFFER
PERIOD SHALL EXPIRE ON THE THIRD (3RD) BUSINESS DAY AFTER SUCH BUYER’S RECEIPT
OF SUCH NEW OFFER NOTICE.

(3)           THE COMPANY SHALL HAVE FIFTEEN (15) BUSINESS DAYS FROM THE
EXPIRATION OF THE OFFER PERIOD ABOVE (I) TO OFFER, ISSUE, SELL OR EXCHANGE ALL
OR ANY PART OF SUCH OFFERED SECURITIES AS TO WHICH A NOTICE OF ACCEPTANCE HAS
NOT BEEN GIVEN BY THE

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BUYERS (THE “REFUSED SECURITIES”) PURSUANT TO A DEFINITIVE AGREEMENT(S) (THE
“SUBSEQUENT PLACEMENT AGREEMENT”), BUT ONLY TO THE OFFEREES DESCRIBED IN THE
OFFER NOTICE (IF SO DESCRIBED THEREIN) AND ONLY UPON TERMS AND CONDITIONS
(INCLUDING, WITHOUT LIMITATION, UNIT PRICES AND INTEREST RATES) THAT ARE NOT
MORE FAVORABLE TO THE ACQUIRING PERSON OR PERSONS OR LESS FAVORABLE TO THE
COMPANY THAN THOSE SET FORTH IN THE OFFER NOTICE AND (II) TO PUBLICLY ANNOUNCE
(A) THE EXECUTION OF SUCH SUBSEQUENT PLACEMENT AGREEMENT, AND (B) EITHER (X) THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY SUCH SUBSEQUENT PLACEMENT
AGREEMENT OR (Y) THE TERMINATION OF SUCH SUBSEQUENT PLACEMENT AGREEMENT, WHICH
SHALL BE FILED WITH THE SEC ON A CURRENT REPORT ON FORM 8-K WITH SUCH SUBSEQUENT
PLACEMENT AGREEMENT AND ANY DOCUMENTS CONTEMPLATED THEREIN FILED AS EXHIBITS
THERETO.

(4)           IN THE EVENT THE COMPANY SHALL PROPOSE TO SELL LESS THAN ALL THE
REFUSED SECURITIES (ANY SUCH SALE TO BE IN THE MANNER AND ON THE TERMS SPECIFIED
IN SECTION 4(N)(III)(3) ABOVE), THEN EACH BUYER MAY, AT ITS SOLE OPTION AND IN
ITS SOLE DISCRETION, REDUCE THE NUMBER OR AMOUNT OF THE OFFERED SECURITIES
SPECIFIED IN ITS NOTICE OF ACCEPTANCE TO AN AMOUNT THAT SHALL BE NOT LESS THAN
THE NUMBER OR AMOUNT OF THE OFFERED SECURITIES THAT SUCH BUYER ELECTED TO
PURCHASE PURSUANT TO SECTION 4(N)(III)(2) ABOVE MULTIPLIED BY A FRACTION, (I)
THE NUMERATOR OF WHICH SHALL BE THE NUMBER OR AMOUNT OF OFFERED SECURITIES THE
COMPANY ACTUALLY PROPOSES TO ISSUE, SELL OR EXCHANGE (INCLUDING OFFERED
SECURITIES TO BE ISSUED OR SOLD TO BUYERS PURSUANT TO SECTION 4(N)(III)(3) ABOVE
PRIOR TO SUCH REDUCTION) AND (II) THE DENOMINATOR OF WHICH SHALL BE THE ORIGINAL
AMOUNT OF THE OFFERED SECURITIES.  IN THE EVENT THAT ANY BUYER SO ELECTS TO
REDUCE THE NUMBER OR AMOUNT OF OFFERED SECURITIES SPECIFIED IN ITS NOTICE OF
ACCEPTANCE, THE COMPANY MAY NOT ISSUE, SELL OR EXCHANGE MORE THAN THE REDUCED
NUMBER OR AMOUNT OF THE OFFERED SECURITIES UNLESS AND UNTIL SUCH SECURITIES HAVE
AGAIN BEEN OFFERED TO THE BUYERS IN ACCORDANCE WITH SECTION 4(N)(III)(1) ABOVE.

(5)           UPON THE CLOSING OF THE ISSUANCE, SALE OR EXCHANGE OF ALL OR LESS
THAN ALL OF THE REFUSED SECURITIES, THE BUYERS SHALL ACQUIRE FROM THE COMPANY,
AND THE COMPANY SHALL ISSUE TO THE BUYERS, THE NUMBER OR AMOUNT OF OFFERED
SECURITIES SPECIFIED IN THE NOTICES OF ACCEPTANCE, AS REDUCED PURSUANT TO
SECTION 4(N)(III)(3) ABOVE IF THE BUYERS HAVE SO ELECTED, UPON THE TERMS AND
CONDITIONS SPECIFIED IN THE OFFER.  IF THE COMPANY DOES NOT CONSUMMATE THE
CLOSING OF THE ISSUANCE, SALE OR EXCHANGE OF ALL OR LESS THAN ALL OF THE REFUSED
SECURITIES, WITHIN FIFTEEN (15) BUSINESS DAYS OF THE EXPIRATION OF THE OFFER
PERIOD, THE COMPANY SHALL ISSUE TO THE BUYERS, THE NUMBER OR AMOUNT OF OFFERED
SECURITIES SPECIFIED IN THE NOTICES OF ACCEPTANCE, AS REDUCED PURSUANT TO
SECTION 4(N)(III)(3) ABOVE IF THE BUYERS HAVE SO ELECTED, UPON THE TERMS AND
CONDITIONS SPECIFIED IN THE OFFER.  THE PURCHASE BY THE BUYERS OF ANY OFFERED
SECURITIES IS SUBJECT IN ALL CASES TO THE PREPARATION, EXECUTION AND DELIVERY BY
THE COMPANY AND THE BUYERS OF A PURCHASE AGREEMENT RELATING TO SUCH OFFERED
SECURITIES REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO THE BUYERS AND THEIR
RESPECTIVE COUNSEL.

(6)           ANY OFFERED SECURITIES NOT ACQUIRED BY THE BUYERS OR OTHER PERSONS
IN ACCORDANCE WITH SECTION 4(N)(III)(3) ABOVE MAY NOT BE ISSUED, SOLD OR
EXCHANGED UNTIL THEY ARE AGAIN OFFERED TO THE BUYERS UNDER THE PROCEDURES
SPECIFIED IN THIS AGREEMENT.

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(7)           THE COMPANY AND THE BUYERS AGREE THAT IF ANY BUYER ELECTS TO
PARTICIPATE IN THE OFFER, (X) NEITHER THE SUBSEQUENT PLACEMENT AGREEMENT WITH
RESPECT TO SUCH OFFER NOR ANY OTHER TRANSACTION DOCUMENTS RELATED THERETO
(COLLECTIVELY, THE “SUBSEQUENT PLACEMENT DOCUMENTS”) SHALL INCLUDE ANY TERM OR
PROVISIONS WHEREBY ANY BUYER SHALL BE REQUIRED TO AGREE TO ANY RESTRICTIONS IN
TRADING AS TO ANY SECURITIES OF THE COMPANY OWNED BY SUCH BUYER PRIOR TO SUCH
SUBSEQUENT PLACEMENT, AND (Y) ANY REGISTRATION RIGHTS SET FORTH IN SUCH
SUBSEQUENT PLACEMENT DOCUMENTS SHALL BE SIMILAR IN ALL MATERIAL RESPECTS TO THE
REGISTRATION RIGHTS CONTAINED IN THE REGISTRATION RIGHTS AGREEMENT.

(8)           NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS SECTION 4(N) AND
UNLESS OTHERWISE AGREED TO BY THE BUYERS, THE COMPANY SHALL EITHER CONFIRM IN
WRITING TO THE BUYERS THAT THE TRANSACTION WITH RESPECT TO THE SUBSEQUENT
PLACEMENT HAS BEEN ABANDONED OR SHALL PUBLICLY DISCLOSE ITS INTENTION TO ISSUE
THE OFFERED SECURITIES, IN EITHER CASE IN SUCH A MANNER SUCH THAT THE BUYERS
WILL NOT BE IN POSSESSION OF MATERIAL NON-PUBLIC INFORMATION, BY THE FIFTEEN
(15TH) BUSINESS DAY FOLLOWING DELIVERY OF THE OFFER NOTICE.  IF BY THE FIFTEEN
(15TH) FOLLOWING DELIVERY OF THE OFFER NOTICE NO PUBLIC DISCLOSURE REGARDING A
TRANSACTION WITH RESPECT TO THE OFFERED SECURITIES HAS BEEN MADE, AND NO NOTICE
REGARDING THE ABANDONMENT OF SUCH TRANSACTION HAS BEEN RECEIVED BY THE BUYERS,
SUCH TRANSACTION SHALL BE DEEMED TO HAVE BEEN ABANDONED AND THE BUYERS SHALL NOT
BE DEEMED TO BE IN POSSESSION OF ANY MATERIAL, NON-PUBLIC INFORMATION WITH
RESPECT TO THE COMPANY.  SHOULD THE COMPANY DECIDE TO PURSUE SUCH TRANSACTION
WITH RESPECT TO THE OFFERED SECURITIES, THE COMPANY SHALL PROVIDE EACH BUYER
WITH ANOTHER OFFER NOTICE AND EACH BUYER WILL AGAIN HAVE THE RIGHT OF
PARTICIPATION SET FORTH IN THIS SECTION 4(N)(III).  THE COMPANY SHALL NOT BE
PERMITTED TO DELIVER MORE THAN ONE SUCH OFFER NOTICE TO THE BUYERS IN ANY 60 DAY
PERIOD.

(IV)          THE RESTRICTIONS CONTAINED IN SUBSECTIONS (II) AND (III) OF THIS
SECTION 4(N) SHALL NOT APPLY IN CONNECTION WITH (X) THE ISSUANCE OF ANY EXCLUDED
SECURITIES (AS DEFINED IN THE NOTES) OR (Y) A BONA FIDE FIRM COMMITMENT
UNDERWRITTEN PUBLIC OFFERING WITH A NATIONALLY RECOGNIZED UNDERWRITER WHICH
GENERATES GROSS PROCEEDS TO THE COMPANY IN EXCESS OF $30,000,000 (OTHER THAN AN
“AT-THE-MARKET OFFERING” AS DEFINED IN RULE 415(A)(4) UNDER THE 1933 ACT AND
“EQUITY LINES”).

(O)           STOCKHOLDER APPROVAL. THE COMPANY SHALL PROVIDE EACH STOCKHOLDER
ENTITLED TO VOTE AT A SPECIAL OR ANNUAL MEETING OF STOCKHOLDERS OF THE COMPANY
(THE “STOCKHOLDER MEETING”), WHICH SHALL BE CALLED AND HELD NOT LATER THAN ONE
YEAR FOLLOWING THE CLOSING DATE (THE “STOCKHOLDER MEETING DEADLINE”), A PROXY
STATEMENT, SUBSTANTIALLY IN THE FORM WHICH HAS BEEN PREVIOUSLY REVIEWED BY THE
BUYERS AND SCHULTE ROTH & ZABEL LLP AT THE EXPENSE OF THE COMPANY, SOLICITING
EACH SUCH STOCKHOLDER’S AFFIRMATIVE VOTE AT THE STOCKHOLDER MEETING FOR APPROVAL
OF RESOLUTIONS (THE “RESOLUTIONS”) PROVIDING FOR THE ISSUANCE OF ALL OF THE
SECURITIES AS DESCRIBED IN THE TRANSACTION DOCUMENTS IN ACCORDANCE WITH
APPLICABLE LAW AND THE RULES AND REGULATIONS OF THE PRINCIPAL MARKET OR IF NOT
REQUIRED BY THE PRINCIPAL MARKET, IN ACCORDANCE WITH NASDAQ MARKETPLACE RULE
4350(I) (SUCH AFFIRMATIVE APPROVAL BEING REFERRED TO HEREIN AS THE “STOCKHOLDER
APPROVAL” AND THE DATE SUCH APPROVAL IS OBTAINED, THE “STOCKHOLDER APPROVAL
DATE”), AND THE COMPANY SHALL USE ITS REASONABLE BEST EFFORTS TO SOLICIT ITS
STOCKHOLDERS’ APPROVAL OF THE RESOLUTIONS AND TO CAUSE THE BOARD OF DIRECTORS OF
THE COMPANY TO RECOMMEND TO THE

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STOCKHOLDERS THAT THEY APPROVE THE RESOLUTIONS.  THE COMPANY SHALL BE OBLIGATED
TO SEEK TO OBTAIN THE STOCKHOLDER APPROVAL BY THE STOCKHOLDER MEETING DEADLINE. 
IF, DESPITE THE COMPANY’S REASONABLE BEST EFFORTS, THE STOCKHOLDER APPROVAL IS
NOT OBTAINED AT THE STOCKHOLDER MEETING, THE COMPANY SHALL CAUSE AN ADDITIONAL
STOCKHOLDER MEETING TO BE HELD EACH TWELVE MONTH PERIOD THEREAFTER UNTIL SUCH
STOCKHOLDER APPROVAL IS OBTAINED, PROVIDED THAT IF THE BOARD OF DIRECTORS OF THE
COMPANY DOES NOT RECOMMEND TO THE STOCKHOLDERS THAT THEY APPROVE THE RESOLUTIONS
AT ANY SUCH STOCKHOLDER MEETING AND THE STOCKHOLDER APPROVAL IS NOT OBTAINED, OR
THE NOTES ARE NO LONGER OUTSTANDING, THE COMPANY SHALL CAUSE AN ADDITIONAL
STOCKHOLDER MEETING TO BE HELD EACH CALENDAR QUARTER THEREAFTER UNTIL SUCH
STOCKHOLDER APPROVAL IS OBTAINED.

(P)           FINANCING THROUGH JAVO DISPENSER, LLC.  THE COMPANY AGREES TO NOT
INCREASE THE MAXIMUM AVAILABLE FINANCING LIMIT, CURRENTLY AT $2,000,000.00,
AVAILABLE TO THE COMPANY THROUGH JAVO DISPENSER, LLC NOR SHALL IT MODIFY THE
TERMS OR CONDITIONS OF ITS AGREEMENT WITH JAVO DISPENSER, LLC IN A MANNER THAT,
AS AMENDED, WOULD MAKE SUCH AGREEMENT INCONSISTENT WITH REASONABLE AND CUSTOMARY
COMMERCIAL LENDING TERMS AND CONDITIONS.

5.             REGISTER; TRANSFER AGENT INSTRUCTIONS.

(A)           REGISTER.  THE COMPANY SHALL MAINTAIN AT ITS PRINCIPAL EXECUTIVE
OFFICES (OR SUCH OTHER OFFICE OR AGENCY OF THE COMPANY AS IT MAY DESIGNATE BY
NOTICE TO EACH HOLDER OF SECURITIES), A REGISTER FOR THE NOTES AND THE WARRANTS
IN WHICH THE COMPANY SHALL RECORD THE NAME AND ADDRESS OF THE PERSON IN WHOSE
NAME THE NOTES AND THE WARRANTS HAVE BEEN ISSUED (INCLUDING THE NAME AND ADDRESS
OF EACH TRANSFEREE), THE PRINCIPAL AMOUNT OF NOTES HELD BY SUCH PERSON, THE
NUMBER OF CONVERSION SHARES ISSUABLE UPON CONVERSION OF THE NOTES AND THE NUMBER
OF WARRANT SHARES ISSUABLE UPON EXERCISE OF THE WARRANTS HELD BY SUCH PERSON. 
THE COMPANY SHALL KEEP THE REGISTER OPEN AND AVAILABLE AT ALL TIMES DURING
BUSINESS HOURS FOR INSPECTION OF ANY BUYER OR ITS LEGAL REPRESENTATIVES.

(B)           TRANSFER AGENT INSTRUCTIONS.  THE COMPANY SHALL ISSUE IRREVOCABLE
INSTRUCTIONS TO ITS TRANSFER AGENT, AND ANY SUBSEQUENT TRANSFER AGENT, TO ISSUE
CERTIFICATES OR CREDIT SHARES TO THE APPLICABLE BALANCE ACCOUNTS AT THE
DEPOSITORY TRUST COMPANY (“DTC”), REGISTERED IN THE NAME OF EACH BUYER OR ITS
RESPECTIVE NOMINEE(S), FOR THE CONVERSION SHARES, THE INTEREST SHARES AND THE
WARRANT SHARES ISSUED AT THE CLOSING OR UPON CONVERSION OF THE NOTES OR EXERCISE
OF THE WARRANTS IN SUCH AMOUNTS AS SPECIFIED FROM TIME TO TIME BY EACH BUYER TO
THE COMPANY UPON CONVERSION OF THE NOTES OR EXERCISE OF THE WARRANTS IN THE FORM
OF EXHIBIT D ATTACHED HERETO (THE “IRREVOCABLE TRANSFER AGENT INSTRUCTIONS”). 
THE COMPANY WARRANTS THAT NO INSTRUCTION OTHER THAN THE IRREVOCABLE TRANSFER
AGENT INSTRUCTIONS REFERRED TO IN THIS SECTION 5(B), AND STOP TRANSFER
INSTRUCTIONS TO GIVE EFFECT TO SECTION 2(G) HEREOF, WILL BE GIVEN BY THE COMPANY
TO ITS TRANSFER AGENT, AND THAT THE SECURITIES SHALL OTHERWISE BE FREELY
TRANSFERABLE ON THE BOOKS AND RECORDS OF THE COMPANY AS AND TO THE EXTENT
PROVIDED IN THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS.  IF A BUYER
EFFECTS A SALE, ASSIGNMENT OR TRANSFER OF THE SECURITIES IN ACCORDANCE WITH
SECTION 2(F), THE COMPANY SHALL PERMIT THE TRANSFER AND SHALL PROMPTLY INSTRUCT
ITS TRANSFER AGENT TO ISSUE ONE OR MORE CERTIFICATES OR CREDIT SHARES TO THE
APPLICABLE BALANCE ACCOUNTS AT DTC IN SUCH NAME AND IN SUCH DENOMINATIONS AS
SPECIFIED BY SUCH BUYER TO EFFECT SUCH SALE, TRANSFER OR ASSIGNMENT.  IN THE
EVENT THAT SUCH SALE, ASSIGNMENT OR TRANSFER INVOLVES CONVERSION SHARES, THE
INTEREST SHARES OR WARRANT SHARES SOLD, ASSIGNED OR TRANSFERRED PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR PURSUANT TO RULE 144, THE TRANSFER AGENT
SHALL ISSUE SUCH SECURITIES TO THE BUYER, ASSIGNEE OR TRANSFEREE, AS THE CASE
MAY BE, WITHOUT ANY RESTRICTIVE LEGEND.  THE COMPANY ACKNOWLEDGES THAT A BREACH
BY IT OF ITS OBLIGATIONS HEREUNDER WILL CAUSE IRREPARABLE HARM TO A BUYER. 
ACCORDINGLY, THE COMPANY ACKNOWLEDGES THAT THE REMEDY AT LAW FOR A BREACH OF ITS
OBLIGATIONS UNDER THIS SECTION 5(B) WILL BE INADEQUATE AND AGREES, IN THE EVENT
OF A BREACH OR THREATENED BREACH BY THE COMPANY OF THE PROVISIONS OF THIS
SECTION 5(B), THAT A BUYER SHALL BE ENTITLED, IN ADDITION TO ALL OTHER AVAILABLE
REMEDIES, TO AN ORDER AND/OR INJUNCTION

25

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RESTRAINING ANY BREACH AND REQUIRING IMMEDIATE ISSUANCE AND TRANSFER, WITHOUT
THE NECESSITY OF SHOWING ECONOMIC LOSS AND WITHOUT ANY BOND OR OTHER SECURITY
BEING REQUIRED.

6.             CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

The obligation of the Company hereunder to issue and sell the Notes and the
related Warrants to each Buyer at the Closing is subject to the satisfaction, at
or before the Closing Date, of each of the following conditions, provided that
these conditions are for the Company’s sole benefit and may be waived by the
Company at any time in its sole discretion by providing each Buyer with prior
written notice thereof:

(I)            SUCH BUYER SHALL HAVE EXECUTED EACH OF THE TRANSACTION DOCUMENTS
TO WHICH IT IS A PARTY AND DELIVERED THE SAME TO THE COMPANY.

(II)           SUCH BUYER AND EACH OTHER BUYER SHALL HAVE DELIVERED TO THE
COMPANY THE PURCHASE PRICE (LESS, IN THE CASE OF CAPITAL VENTURES INTERNATIONAL
THE AMOUNTS WITHHELD PURSUANT TO SECTION 4(G)) FOR THE NOTES AND THE RELATED
WARRANTS BEING PURCHASED BY SUCH BUYER AT THE CLOSING BY WIRE TRANSFER OF
IMMEDIATELY AVAILABLE FUNDS PURSUANT TO THE WIRE INSTRUCTIONS PROVIDED BY THE
COMPANY.

(III)          THE REPRESENTATIONS AND WARRANTIES OF SUCH BUYER SHALL BE TRUE
AND CORRECT IN ALL MATERIAL RESPECTS (EXCEPT FOR THOSE REPRESENTATIONS AND
WARRANTIES THAT ARE QUALIFIED BY MATERIALITY OR MATERIAL ADVERSE EFFECT, WHICH
SHALL BE TRUE AND CORRECT IN ALL RESPECTS) AS OF THE DATE WHEN MADE AND AS OF
THE CLOSING DATE AS THOUGH MADE AT THAT TIME (EXCEPT FOR REPRESENTATIONS AND
WARRANTIES THAT SPEAK AS OF A SPECIFIC DATE, WHICH SHALL BE TRUE AND CORRECT AS
OF SUCH SPECIFIED DATE), AND SUCH BUYER SHALL HAVE PERFORMED, SATISFIED AND
COMPLIED IN ALL MATERIAL RESPECTS WITH THE COVENANTS, AGREEMENTS AND CONDITIONS
REQUIRED BY THIS AGREEMENT TO BE PERFORMED, SATISFIED OR COMPLIED WITH BY SUCH
BUYER AT OR PRIOR TO THE CLOSING DATE.

7.             CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE.

The obligation of each Buyer hereunder to purchase the Notes and the related
Warrants at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are
for each Buyer’s sole benefit and may be waived by such Buyer at any time in its
sole discretion by providing the Company with prior written notice thereof:

(I)            THE COMPANY SHALL HAVE DULY EXECUTED AND DELIVERED TO SUCH BUYER
(I) EACH OF THE TRANSACTION DOCUMENTS AND (II) THE NOTES (ALLOCATED IN SUCH
PRINCIPAL AMOUNTS AS SUCH BUYER SHALL REQUEST), BEING PURCHASED BY SUCH BUYER AT
THE CLOSING PURSUANT TO THIS AGREEMENT, AND (III) THE RELATED SERIES A WARRANTS
(ALLOCATED IN SUCH AMOUNTS AS SUCH BUYER SHALL REQUEST) BEING PURCHASED BY SUCH
BUYER AT THE CLOSING PURSUANT TO THIS AGREEMENT AND (IV) THE RELATED SERIES B
WARRANTS (ALLOCATED IN SUCH AMOUNTS AS SUCH BUYER SHALL REQUEST) BEING PURCHASED
BY SUCH BUYER AT THE CLOSING PURSUANT TO THIS AGREEMENT AND (V) THE RELATED
SERIES C WARRANTS (ALLOCATED IN SUCH AMOUNTS AS SUCH BUYER SHALL REQUEST) BEING
PURCHASED BY SUCH BUYER AT THE CLOSING PURSUANT TO THIS AGREEMENT.

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(II)           SUCH BUYER SHALL HAVE RECEIVED THE OPINION OF THE YOCCA LAW FIRM
LLP, THE COMPANY’S OUTSIDE COUNSEL, DATED AS OF THE CLOSING DATE, IN
SUBSTANTIALLY THE FORM OF EXHIBIT E ATTACHED HERETO.

(III)          THE COMPANY SHALL HAVE DELIVERED TO SUCH BUYER A COPY OF THE
IRREVOCABLE TRANSFER AGENT INSTRUCTIONS, IN THE FORM OF EXHIBIT D ATTACHED
HERETO, WHICH INSTRUCTIONS SHALL HAVE BEEN DELIVERED TO AND ACKNOWLEDGED IN
WRITING BY THE COMPANY’S TRANSFER AGENT.

(IV)          THE COMPANY SHALL HAVE DELIVERED TO SUCH BUYER A CERTIFICATE
EVIDENCING THE FORMATION AND GOOD STANDING OF THE COMPANY AND EACH OF ITS
SUBSIDIARIES IN SUCH ENTITY’S JURISDICTION OF FORMATION ISSUED BY THE SECRETARY
OF STATE (OR COMPARABLE OFFICE) OF SUCH JURISDICTION, AS OF A DATE WITHIN 10
DAYS OF THE CLOSING DATE.

(V)           THE COMPANY SHALL HAVE DELIVERED TO SUCH BUYER A CERTIFICATE
EVIDENCING THE COMPANY’S QUALIFICATION AS A FOREIGN CORPORATION AND GOOD
STANDING ISSUED BY THE SECRETARY OF STATE (OR COMPARABLE OFFICE) OF EACH
JURISDICTION IN WHICH THE COMPANY CONDUCTS BUSINESS, AS OF A DATE WITHIN 10 DAYS
OF THE CLOSING DATE.

(VI)          THE COMPANY SHALL HAVE DELIVERED TO SUCH BUYER A CERTIFIED COPY OF
THE CERTIFICATE OF INCORPORATION AS CERTIFIED BY THE SECRETARY OF STATE OF THE
STATE OF DELAWARE WITHIN TEN (10) DAYS OF THE CLOSING DATE.

(VII)         THE COMPANY SHALL HAVE DELIVERED TO SUCH BUYER A CERTIFICATE,
EXECUTED BY THE SECRETARY OF THE COMPANY AND DATED AS OF THE CLOSING DATE, AS TO
(I) THE RESOLUTIONS CONSISTENT WITH SECTION 3(B) AS ADOPTED BY THE COMPANY’S
BOARD OF DIRECTORS IN A FORM REASONABLY ACCEPTABLE TO SUCH BUYER, (II) THE
CERTIFICATE OF INCORPORATION AND (III) THE BYLAWS, EACH AS IN EFFECT AT THE
CLOSING, IN THE FORM ATTACHED HERETO AS EXHIBIT F.

(VIII)        THE REPRESENTATIONS AND WARRANTIES OF THE COMPANY SHALL BE TRUE
AND CORRECT IN ALL MATERIAL RESPECTS (EXCEPT FOR THOSE REPRESENTATIONS AND
WARRANTIES THAT ARE QUALIFIED BY MATERIALITY OR MATERIAL ADVERSE EFFECT, WHICH
SHALL BE TRUE AND CORRECT IN ALL RESPECTS) AS OF THE DATE WHEN MADE AND AS OF
THE CLOSING DATE AS THOUGH MADE AT THAT TIME (EXCEPT FOR REPRESENTATIONS AND
WARRANTIES THAT SPEAK AS OF A SPECIFIC DATE, WHICH SHALL BE TRUE AND CORRECT AS
OF SUCH SPECIFIED DATE) AND THE COMPANY SHALL HAVE PERFORMED, SATISFIED AND
COMPLIED IN ALL MATERIAL RESPECTS WITH THE COVENANTS, AGREEMENTS AND CONDITIONS
REQUIRED BY THE TRANSACTION DOCUMENTS TO BE PERFORMED, SATISFIED OR COMPLIED
WITH BY THE COMPANY AT OR PRIOR TO THE CLOSING DATE.  SUCH BUYER SHALL HAVE
RECEIVED A CERTIFICATE, EXECUTED BY THE CHIEF EXECUTIVE OFFICER OF THE COMPANY,
DATED AS OF THE CLOSING DATE, TO THE FOREGOING EFFECT AND AS TO SUCH OTHER
MATTERS AS MAY BE REASONABLY REQUESTED BY SUCH BUYER IN THE FORM ATTACHED HERETO
AS EXHIBIT G.

(IX)           THE COMPANY SHALL HAVE DELIVERED TO SUCH BUYER A LETTER FROM THE
COMPANY’S TRANSFER AGENT CERTIFYING THE NUMBER OF SHARES OF COMMON STOCK
OUTSTANDING AS OF A DATE WITHIN FIVE DAYS OF THE CLOSING DATE.

(X)            THE COMMON STOCK (I) SHALL BE DESIGNATED FOR QUOTATION OR LISTED
ON THE PRINCIPAL MARKET AND (II) SHALL NOT HAVE BEEN SUSPENDED, AS OF THE
CLOSING DATE, BY THE

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SEC OR THE PRINCIPAL MARKET FROM TRADING ON THE PRINCIPAL MARKET NOR SHALL
SUSPENSION BY THE SEC OR THE PRINCIPAL MARKET HAVE BEEN THREATENED, AS OF THE
CLOSING DATE, EITHER (A) IN WRITING BY THE SEC OR THE PRINCIPAL MARKET OR (B) BY
FALLING BELOW THE MINIMUM LISTING MAINTENANCE REQUIREMENTS OF THE PRINCIPAL
MARKET.

(XI)           THE COMPANY SHALL HAVE OBTAINED ALL GOVERNMENTAL, REGULATORY OR
THIRD PARTY CONSENTS AND APPROVALS, IF ANY, NECESSARY FOR THE SALE OF THE
SECURITIES.

(XII)          THE COMPANY SHALL HAVE DELIVERED TO SUCH BUYER SUCH OTHER
DOCUMENTS RELATING TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AS SUCH
BUYER OR ITS COUNSEL MAY REASONABLY REQUEST.

8.             TERMINATION.  IN THE EVENT THAT THE CLOSING SHALL NOT HAVE
OCCURRED WITH RESPECT TO A BUYER ON OR BEFORE FIVE (5) BUSINESS DAYS FROM THE
DATE HEREOF DUE TO THE COMPANY'S OR SUCH BUYER'S FAILURE TO SATISFY THE
CONDITIONS SET FORTH IN SECTIONS 6 AND 7 ABOVE (AND THE NONBREACHING PARTY'S
FAILURE TO WAIVE SUCH UNSATISFIED CONDITION(S)), THE NONBREACHING PARTY SHALL
HAVE THE OPTION TO TERMINATE THIS AGREEMENT WITH RESPECT TO SUCH BREACHING PARTY
AT THE CLOSE OF BUSINESS ON SUCH DATE WITHOUT LIABILITY OF ANY PARTY TO ANY
OTHER PARTY; PROVIDED, HOWEVER, THAT IF THIS AGREEMENT IS TERMINATED PURSUANT TO
THIS SECTION 8, THE COMPANY SHALL REMAIN OBLIGATED TO REIMBURSE THE
NON-BREACHING BUYERS FOR THE EXPENSES DESCRIBED IN SECTION 4(G) ABOVE.

9.             MISCELLANEOUS.

(A)           GOVERNING LAW; JURISDICTION; JURY TRIAL.  ALL QUESTIONS CONCERNING
THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT
SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE
STATE OF NEW YORK OR ANY OTHER JURISDICTIONS) THAT WOULD CAUSE THE APPLICATION
OF THE LAWS OF ANY JURISDICTIONS OTHER THAN THE STATE OF NEW YORK.  EACH PARTY
HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND
FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY
TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN, AND HEREBY IRREVOCABLY
WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM
THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, THAT
SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE
VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER.  EACH PARTY HEREBY
IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING
SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF TO SUCH
PARTY AT THE ADDRESS FOR SUCH NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT
SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE
THEREOF.  NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT
TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.  EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

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(B)           COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN TWO OR MORE
IDENTICAL COUNTERPARTS, ALL OF WHICH SHALL BE CONSIDERED ONE AND THE SAME
AGREEMENT AND SHALL BECOME EFFECTIVE WHEN COUNTERPARTS HAVE BEEN SIGNED BY EACH
PARTY AND DELIVERED TO THE OTHER PARTY; PROVIDED THAT A FACSIMILE SIGNATURE
SHALL BE CONSIDERED DUE EXECUTION AND SHALL BE BINDING UPON THE SIGNATORY
THERETO WITH THE SAME FORCE AND EFFECT AS IF THE SIGNATURE WERE AN ORIGINAL, NOT
A FACSIMILE SIGNATURE.

(C)           HEADINGS.  THE HEADINGS OF THIS AGREEMENT ARE FOR CONVENIENCE OF
REFERENCE AND SHALL NOT FORM PART OF, OR AFFECT THE INTERPRETATION OF, THIS
AGREEMENT.

(D)           SEVERABILITY.  IF ANY PROVISION OF THIS AGREEMENT SHALL BE INVALID
OR UNENFORCEABLE IN ANY JURISDICTION, SUCH INVALIDITY OR UNENFORCEABILITY SHALL
NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF THE REMAINDER OF THIS AGREEMENT IN
THAT JURISDICTION OR THE VALIDITY OR ENFORCEABILITY OF ANY PROVISION OF THIS
AGREEMENT IN ANY OTHER JURISDICTION.

(E)           ENTIRE AGREEMENT; AMENDMENTS.  THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS SUPERSEDE ALL OTHER PRIOR ORAL OR WRITTEN AGREEMENTS
BETWEEN THE BUYERS, THE COMPANY, THEIR AFFILIATES AND PERSONS ACTING ON THEIR
BEHALF WITH RESPECT TO THE MATTERS DISCUSSED HEREIN, AND THIS AGREEMENT, THE
OTHER TRANSACTION DOCUMENTS AND THE INSTRUMENTS REFERENCED HEREIN AND THEREIN
CONTAIN THE ENTIRE UNDERSTANDING OF THE PARTIES WITH RESPECT TO THE MATTERS
COVERED HEREIN AND THEREIN AND, EXCEPT AS SPECIFICALLY SET FORTH HEREIN OR
THEREIN, NEITHER THE COMPANY NOR ANY BUYER MAKES ANY REPRESENTATION, WARRANTY,
COVENANT OR UNDERTAKING WITH RESPECT TO SUCH MATTERS.  NO PROVISION OF THIS
AGREEMENT MAY BE AMENDED OTHER THAN BY AN INSTRUMENT IN WRITING SIGNED BY THE
COMPANY AND THE HOLDERS OF AT LEAST A MAJORITY OF THE AGGREGATE NUMBER OF
REGISTRABLE SECURITIES ISSUED AND ISSUABLE HEREUNDER AND UNDER THE NOTES, AND
ANY AMENDMENT TO THIS AGREEMENT MADE IN CONFORMITY WITH THE PROVISIONS OF THIS
SECTION 9(E) SHALL BE BINDING ON ALL BUYERS AND HOLDERS OF SECURITIES AS
APPLICABLE.  NO PROVISION HEREOF MAY BE WAIVED OTHER THAN BY AN INSTRUMENT IN
WRITING SIGNED BY THE PARTY AGAINST WHOM ENFORCEMENT IS SOUGHT.  NO SUCH
AMENDMENT SHALL BE EFFECTIVE TO THE EXTENT THAT IT APPLIES TO LESS THAN ALL OF
THE HOLDERS OF THE APPLICABLE SECURITIES THEN OUTSTANDING.  NO CONSIDERATION
SHALL BE OFFERED OR PAID TO ANY PERSON TO AMEND OR CONSENT TO A WAIVER OR
MODIFICATION OF ANY PROVISION OF ANY OF THE TRANSACTION DOCUMENTS UNLESS THE
SAME CONSIDERATION ALSO IS OFFERED TO ALL OF THE PARTIES TO THE TRANSACTION
DOCUMENTS, HOLDERS OF NOTES OR HOLDERS OF THE WARRANTS, AS THE CASE MAY BE.  THE
COMPANY HAS NOT, DIRECTLY OR INDIRECTLY, MADE ANY AGREEMENTS WITH ANY BUYERS
RELATING TO THE TERMS OR CONDITIONS OF THE TRANSACTIONS CONTEMPLATED BY THE
TRANSACTION DOCUMENTS EXCEPT AS SET FORTH IN THE TRANSACTION DOCUMENTS.  WITHOUT
LIMITING THE FOREGOING, THE COMPANY CONFIRMS THAT, EXCEPT AS SET FORTH IN THIS
AGREEMENT, NO BUYER HAS MADE ANY COMMITMENT OR PROMISE OR HAS ANY OTHER
OBLIGATION TO PROVIDE ANY FINANCING TO THE COMPANY OR OTHERWISE.

(F)            NOTICES.  ANY NOTICES, CONSENTS, WAIVERS OR OTHER COMMUNICATIONS
REQUIRED OR PERMITTED TO BE GIVEN UNDER THE TERMS OF THIS AGREEMENT MUST BE IN
WRITING AND WILL BE DEEMED TO HAVE BEEN DELIVERED:  (I) UPON RECEIPT, WHEN
DELIVERED PERSONALLY; (II) UPON RECEIPT, WHEN SENT BY FACSIMILE (PROVIDED
CONFIRMATION OF TRANSMISSION IS MECHANICALLY OR ELECTRONICALLY GENERATED AND
KEPT ON FILE BY THE SENDING PARTY); OR (III) ONE BUSINESS DAY AFTER DEPOSIT WITH
AN OVERNIGHT COURIER SERVICE, IN EACH CASE PROPERLY ADDRESSED TO THE PARTY TO
RECEIVE THE SAME.  THE ADDRESSES AND FACSIMILE NUMBERS FOR SUCH COMMUNICATIONS
SHALL BE:

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If to the Company:

 

Javo Beverage Company, Inc.

1311 Specialty Drive

Vista, CA. 92081

Telephone:

(760) 560-5286

Facsimile:

(760) 597 - 9793

Attention:

CEO and General Counsel

 

 

Copy to:

 

 

The Yocca Law Firm LLP

19900 MacArthur Boulevard

Suite 650

Irvine, California 92612

Telephone:

(949) 253-0800

Facsimile:

(949) 253-0870

Attention:

Nicholas Yocca, Esq.

 

 

If to the Transfer Agent:

 

Corporate Stock Transfer, Inc.

3200 Cherry Creek Dr. South

Suite 430

Denver, CO 80209

Telephone:

(303) 282-4800

Facsimile:

(303) 282-5800

Attention:

Carylyn Bell

 

If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers, with copies to such Buyer’s representatives as set forth on the Schedule
of Buyers,

with a copy (for informational purposes only) to:

 

Schulte Roth & Zabel LLP

919 Third Avenue

New York, New York 10022

Telephone:

(212) 756-2000

Facsimile:

(212) 593-5955

Attention:

Eleazer N. Klein, Esq.

 

or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change. 
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender’s facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by an overnight courier

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service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from an overnight courier service in accordance with clause (i), (ii)
or (iii) above, respectively.

(G)           SUCCESSORS AND ASSIGNS.  THIS AGREEMENT SHALL BE BINDING UPON AND
INURE TO THE BENEFIT OF THE PARTIES AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS,
INCLUDING ANY PURCHASERS OF THE NOTES OR THE WARRANTS.  THE COMPANY SHALL NOT
ASSIGN THIS AGREEMENT OR ANY RIGHTS OR OBLIGATIONS HEREUNDER WITHOUT THE PRIOR
WRITTEN CONSENT OF THE HOLDERS OF AT LEAST A MAJORITY OF THE AGGREGATE NUMBER OF
REGISTRABLE SECURITIES ISSUED AND ISSUABLE HEREUNDER AND UNDER THE NOTES,
INCLUDING BY WAY OF A FUNDAMENTAL TRANSACTION (UNLESS THE COMPANY IS IN
COMPLIANCE WITH THE APPLICABLE PROVISIONS GOVERNING FUNDAMENTAL TRANSACTIONS SET
FORTH IN THE NOTES AND THE WARRANTS).  A BUYER MAY ASSIGN SOME OR ALL OF ITS
RIGHTS HEREUNDER WITHOUT THE CONSENT OF THE COMPANY, IN WHICH EVENT SUCH
ASSIGNEE SHALL BE DEEMED TO BE A BUYER HEREUNDER WITH RESPECT TO SUCH ASSIGNED
RIGHTS.

(H)           NO THIRD PARTY BENEFICIARIES.  THIS AGREEMENT IS INTENDED FOR THE
BENEFIT OF THE PARTIES HERETO AND THEIR RESPECTIVE PERMITTED SUCCESSORS AND
ASSIGNS, AND IS NOT FOR THE BENEFIT OF, NOR MAY ANY PROVISION HEREOF BE ENFORCED
BY, ANY OTHER PERSON.

(I)            SURVIVAL.  UNLESS THIS AGREEMENT IS TERMINATED UNDER SECTION 8,
THE REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE BUYERS CONTAINED IN
SECTIONS 2 AND 3 AND THE AGREEMENTS AND COVENANTS SET FORTH IN SECTIONS 4, 5 AND
9 SHALL SURVIVE THE CLOSING AND THE DELIVERY AND EXERCISE OF SECURITIES, AS
APPLICABLE.  EACH BUYER SHALL BE RESPONSIBLE ONLY FOR ITS OWN REPRESENTATIONS,
WARRANTIES, AGREEMENTS AND COVENANTS HEREUNDER.

(J)            FURTHER ASSURANCES.  EACH PARTY SHALL DO AND PERFORM, OR CAUSE TO
BE DONE AND PERFORMED, ALL SUCH FURTHER ACTS AND THINGS, AND SHALL EXECUTE AND
DELIVER ALL SUCH OTHER AGREEMENTS, CERTIFICATES, INSTRUMENTS AND DOCUMENTS, AS
ANY OTHER PARTY MAY REASONABLY REQUEST IN ORDER TO CARRY OUT THE INTENT AND
ACCOMPLISH THE PURPOSES OF THIS AGREEMENT AND THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREBY.

(K)           INDEMNIFICATION.  IN CONSIDERATION OF EACH BUYER’S EXECUTION AND
DELIVERY OF THE TRANSACTION DOCUMENTS AND ACQUIRING THE SECURITIES THEREUNDER
AND IN ADDITION TO ALL OF THE COMPANY’S OTHER OBLIGATIONS UNDER THE TRANSACTION
DOCUMENTS, THE COMPANY SHALL DEFEND, PROTECT, INDEMNIFY AND HOLD HARMLESS EACH
BUYER AND EACH OTHER HOLDER OF THE SECURITIES AND ALL OF THEIR STOCKHOLDERS,
PARTNERS, MEMBERS, OFFICERS, DIRECTORS, EMPLOYEES AND DIRECT OR INDIRECT
INVESTORS AND ANY OF THE FOREGOING PERSONS’ AGENTS OR OTHER REPRESENTATIVES
(INCLUDING, WITHOUT LIMITATION, THOSE RETAINED IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT) (COLLECTIVELY, THE “INDEMNITEES”)
FROM AND AGAINST ANY AND ALL ACTIONS, CAUSES OF ACTION, SUITS, CLAIMS, LOSSES,
COSTS, PENALTIES, FEES, LIABILITIES AND DAMAGES, AND EXPENSES IN CONNECTION
THEREWITH (IRRESPECTIVE OF WHETHER ANY SUCH INDEMNITEE IS A PARTY TO THE ACTION
FOR WHICH INDEMNIFICATION HEREUNDER IS SOUGHT), AND INCLUDING REASONABLE
ATTORNEYS’ FEES AND DISBURSEMENTS (THE “INDEMNIFIED LIABILITIES”), INCURRED BY
ANY INDEMNITEE AS A RESULT OF, OR ARISING OUT OF, OR RELATING TO (A) ANY
MISREPRESENTATION OR BREACH OF ANY REPRESENTATION OR WARRANTY MADE BY THE
COMPANY IN THE TRANSACTION DOCUMENTS OR ANY OTHER CERTIFICATE, INSTRUMENT OR
DOCUMENT CONTEMPLATED HEREBY OR THEREBY, (B) ANY BREACH OF ANY COVENANT,
AGREEMENT OR OBLIGATION OF THE COMPANY CONTAINED IN THE TRANSACTION DOCUMENTS OR
ANY OTHER CERTIFICATE, INSTRUMENT OR DOCUMENT CONTEMPLATED HEREBY OR THEREBY OR
(C) ANY CAUSE OF ACTION, SUIT OR CLAIM BROUGHT OR

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MADE AGAINST SUCH INDEMNITEE BY A THIRD PARTY (INCLUDING FOR THESE PURPOSES A
DERIVATIVE ACTION BROUGHT ON BEHALF OF THE COMPANY) AND ARISING OUT OF OR
RESULTING FROM (I) THE EXECUTION, DELIVERY, PERFORMANCE OR ENFORCEMENT OF THE
TRANSACTION DOCUMENTS OR ANY OTHER CERTIFICATE, INSTRUMENT OR DOCUMENT
CONTEMPLATED HEREBY OR THEREBY, (II) ANY TRANSACTION FINANCED OR TO BE FINANCED
IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, WITH THE PROCEEDS OF THE ISSUANCE
OF THE SECURITIES, (III) ANY DISCLOSURE MADE BY SUCH BUYER PURSUANT TO SECTION
4(I), OR (IV) THE STATUS OF SUCH BUYER OR HOLDER OF THE SECURITIES AS AN
INVESTOR IN THE COMPANY PURSUANT TO THE TRANSACTIONS CONTEMPLATED BY THE
TRANSACTION DOCUMENTS.  TO THE EXTENT THAT THE FOREGOING UNDERTAKING BY THE
COMPANY MAY BE UNENFORCEABLE FOR ANY REASON, THE COMPANY SHALL MAKE THE MAXIMUM
CONTRIBUTION TO THE PAYMENT AND SATISFACTION OF EACH OF THE INDEMNIFIED
LIABILITIES THAT IS PERMISSIBLE UNDER APPLICABLE LAW.  EXCEPT AS OTHERWISE SET
FORTH HEREIN, THE MECHANICS AND PROCEDURES WITH RESPECT TO THE RIGHTS AND
OBLIGATIONS UNDER THIS SECTION 9(K) SHALL BE THE SAME AS THOSE SET FORTH IN
SECTION 6 OF THE REGISTRATION RIGHTS AGREEMENT.

(L)            NO STRICT CONSTRUCTION.  THE LANGUAGE USED IN THIS AGREEMENT WILL
BE DEEMED TO BE THE LANGUAGE CHOSEN BY THE PARTIES TO EXPRESS THEIR MUTUAL
INTENT, AND NO RULES OF STRICT CONSTRUCTION WILL BE APPLIED AGAINST ANY PARTY.

(M)          REMEDIES.  EACH BUYER AND EACH HOLDER OF THE SECURITIES SHALL HAVE
ALL RIGHTS AND REMEDIES SET FORTH IN THE TRANSACTION DOCUMENTS AND ALL RIGHTS
AND REMEDIES WHICH SUCH HOLDERS HAVE BEEN GRANTED AT ANY TIME UNDER ANY OTHER
AGREEMENT OR CONTRACT AND ALL OF THE RIGHTS WHICH SUCH HOLDERS HAVE UNDER ANY
LAW.  ANY PERSON HAVING ANY RIGHTS UNDER ANY PROVISION OF THIS AGREEMENT SHALL
BE ENTITLED TO ENFORCE SUCH RIGHTS SPECIFICALLY (WITHOUT POSTING A BOND OR OTHER
SECURITY), TO RECOVER DAMAGES BY REASON OF ANY BREACH OF ANY PROVISION OF THIS
AGREEMENT AND TO EXERCISE ALL OTHER RIGHTS GRANTED BY LAW.  FURTHERMORE, THE
COMPANY RECOGNIZES THAT IN THE EVENT THAT IT FAILS TO PERFORM, OBSERVE, OR
DISCHARGE ANY OR ALL OF ITS OBLIGATIONS UNDER THE TRANSACTION DOCUMENTS, ANY
REMEDY AT LAW MAY PROVE TO BE INADEQUATE RELIEF TO THE BUYERS.  THE COMPANY
THEREFORE AGREES THAT THE BUYERS SHALL BE ENTITLED TO SEEK TEMPORARY AND
PERMANENT INJUNCTIVE RELIEF IN ANY SUCH CASE WITHOUT THE NECESSITY OF PROVING
ACTUAL DAMAGES AND WITHOUT POSTING A BOND OR OTHER SECURITY.

(N)           RESCISSION AND WITHDRAWAL RIGHT.  NOTWITHSTANDING ANYTHING TO THE
CONTRARY CONTAINED IN (AND WITHOUT LIMITING ANY SIMILAR PROVISIONS OF) THE
TRANSACTION DOCUMENTS, WHENEVER ANY BUYER EXERCISES A RIGHT, ELECTION, DEMAND OR
OPTION UNDER A TRANSACTION DOCUMENT AND THE COMPANY DOES NOT TIMELY PERFORM ITS
RELATED OBLIGATIONS WITHIN THE PERIODS THEREIN PROVIDED, THEN SUCH BUYER MAY
RESCIND OR WITHDRAW, IN ITS SOLE DISCRETION FROM TIME TO TIME UPON WRITTEN
NOTICE TO THE COMPANY, ANY RELEVANT NOTICE, DEMAND OR ELECTION IN WHOLE OR IN
PART WITHOUT PREJUDICE TO ITS FUTURE ACTIONS AND RIGHTS.

(O)           PAYMENT SET ASIDE.  TO THE EXTENT THAT THE COMPANY MAKES A PAYMENT
OR PAYMENTS TO THE BUYERS HEREUNDER OR PURSUANT TO ANY OF THE OTHER TRANSACTION
DOCUMENTS OR THE BUYERS ENFORCE OR EXERCISE THEIR RIGHTS HEREUNDER OR
THEREUNDER, AND SUCH PAYMENT OR PAYMENTS OR THE PROCEEDS OF SUCH ENFORCEMENT OR
EXERCISE OR ANY PART THEREOF ARE SUBSEQUENTLY INVALIDATED, DECLARED TO BE
FRAUDULENT OR PREFERENTIAL, SET ASIDE, RECOVERED FROM, DISGORGED BY OR ARE
REQUIRED TO BE REFUNDED, REPAID OR OTHERWISE RESTORED TO THE COMPANY, A TRUSTEE,
RECEIVER OR ANY OTHER PERSON UNDER ANY LAW (INCLUDING, WITHOUT LIMITATION, ANY
BANKRUPTCY LAW, FOREIGN, STATE OR FEDERAL LAW, COMMON LAW OR EQUITABLE CAUSE OF
ACTION), THEN TO THE EXTENT OF ANY SUCH RESTORATION THE

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OBLIGATION OR PART THEREOF ORIGINALLY INTENDED TO BE SATISFIED SHALL BE REVIVED
AND CONTINUED IN FULL FORCE AND EFFECT AS IF SUCH PAYMENT HAD NOT BEEN MADE OR
SUCH ENFORCEMENT OR SETOFF HAD NOT OCCURRED.

(P)           INDEPENDENT NATURE OF BUYERS’ OBLIGATIONS AND RIGHTS.  THE
OBLIGATIONS OF EACH BUYER UNDER ANY TRANSACTION DOCUMENT ARE SEVERAL AND NOT
JOINT WITH THE OBLIGATIONS OF ANY OTHER BUYER, AND NO BUYER SHALL BE RESPONSIBLE
IN ANY WAY FOR THE PERFORMANCE OF THE OBLIGATIONS OF ANY OTHER BUYER UNDER ANY
TRANSACTION DOCUMENT.  NOTHING CONTAINED HEREIN OR IN ANY OTHER TRANSACTION
DOCUMENT, AND NO ACTION TAKEN BY ANY BUYER PURSUANT HERETO OR THERETO, SHALL BE
DEEMED TO CONSTITUTE THE BUYERS AS, AND THE COMPANY ACKNOWLEDGES THAT THE BUYERS
DO NOT SO CONSTITUTE, A PARTNERSHIP, AN ASSOCIATION, A JOINT VENTURE OR ANY
OTHER KIND OF ENTITY, OR CREATE A PRESUMPTION THAT THE BUYERS ARE IN ANY WAY
ACTING IN CONCERT OR AS A GROUP, AND THE COMPANY WILL NOT ASSERT ANY SUCH CLAIM
WITH RESPECT TO SUCH OBLIGATIONS OR THE TRANSACTIONS CONTEMPLATED BY THE
TRANSACTION DOCUMENTS AND THE COMPANY ACKNOWLEDGES THAT THE BUYERS ARE NOT
ACTING IN CONCERT OR AS A GROUP WITH RESPECT TO SUCH OBLIGATIONS OR THE
TRANSACTIONS CONTEMPLATED BY THE TRANSACTION DOCUMENTS.  THE COMPANY
ACKNOWLEDGES AND EACH BUYER CONFIRMS THAT IT HAS INDEPENDENTLY PARTICIPATED IN
THE NEGOTIATION OF THE TRANSACTION CONTEMPLATED HEREBY WITH THE ADVICE OF ITS
OWN COUNSEL AND ADVISORS.  EACH BUYER SHALL BE ENTITLED TO INDEPENDENTLY PROTECT
AND ENFORCE ITS RIGHTS, INCLUDING, WITHOUT LIMITATION, THE RIGHTS ARISING OUT OF
THIS AGREEMENT OR OUT OF ANY OTHER TRANSACTION DOCUMENTS, AND IT SHALL NOT BE
NECESSARY FOR ANY OTHER BUYER TO BE JOINED AS AN ADDITIONAL PARTY IN ANY
PROCEEDING FOR SUCH PURPOSE.

[Signature Page Follows]

33

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

COMPANY:

 

 

 

JAVO BEVERAGE COMPANY, INC.

 

 

 

 

 

By:

/s/ Cody C. Ashwell

 

 

 

Name:

Cody C. Ashwell

 

 

Title:

Chairman and Chief Executive

 

 

 

Officer

 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

BUYERS:

 

 

 

CAPITAL VENTURES INTERNATIONAL

 

By:

Heights Capital Management, Inc.,

 

 

its authorized agent

 

 

 

 

 

By:

/S/ Martin Kobinger

 

 

 

By: Martin Kobinger

 

 

Title: Investment Manager

 

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

OTHER BUYERS:  Fort Mason Master, LP

 

 

 

 

 

By:

/S/ Dan German

 

 

 

By: Dan German

 

 

Title:  Managing Member, Fort Mason
Capital, LLC

 

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

OTHER BUYERS: Fort Mason Partners, LP

 

 

 

 

 

By:

/S/ Dan German

 

 

 

By: Dan German

 

 

Title:  Managing Member, Fort Mason
Capital, LLC

 

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

OTHER BUYERS: JGB Capital LP

 

 

 

 

 

By:

/S/ Brett Cohen

 

 

 

By: Brett Cohen

 

 

Title:  President

 

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

OTHER BUYERS: JGB Capital Offshore Ltd.

 

 

 

 

 

By:

/S/ Brett Cohen

 

 

 

By: Brett Cohen

 

 

Title:  President

 

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

OTHER BUYERS:  Seneca Capital
International, Ltd.

 

 

 

 

 

By:

/S/ Michael Anastasio, Jr.

 

 

 

By: Michael Anastasio, Jr.

 

 

Title: CFO

 

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

OTHER BUYERS: Seneca Capital, LP

 

 

 

 

 

By:

/S/ Michael Anastasio, Jr.

 

 

 

By: Michael Anastasio, Jr.

 

 

Title: CFO

 

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

OTHER BUYERS:

 

 

 

Guggenheim Portfolio Company XII, LLC

 

 

 

 

 

By:

/S/ Michael Anastasio, Jr.

 

 

 

By: Michael Anastasio, Jr.

 

 

Title: CFO (for Investment Advisor)

 

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

OTHER BUYERS: Scoggin International Fund,
Ltd.

 

 

 

 

 

By:

/S/ Craig Effron

 

 

 

By: Craig Effron

 

 

Title:  Scoggin LLC, Investment Manager,
Managing Member

 

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

OTHER BUYERS:

 

 

 

 

 

By:

/S/ Craig Effron

 

 

 

By:

 

 

Title:

 

 

 

 

SCOGGIN CAPITAL MANAGEMENT, LP II

 

By:   S&E Partners, LP: its general partner

 

By:   Scoggin, Inc. its: general partner

 

By:

/S/ Craig Effron

 

 

      President

 

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

OTHER BUYERS:  Gracie Capital LP

 

By: S Capital Partners, LLC

 

       Its General Manager

 

 

 

 

 

By:

/S/ Greg Pearson

 

 

 

Name: Greg Pearson

 

 

Title:   CFO

 

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

OTHER BUYERS:  Gracie Capital International

 

By: S Capital Partners, LLC,

 

       Its Investment Advisor

 

 

 

 

 

By:

/S/ Greg Pearson

 

 

 

Name: Greg Pearson

 

 

Title:   CFO

 

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

Enable Growth Partners

 

 

 

 

 

By:

/S/ Brenda O’Neil

 

 

 

Name: Brenda O’Neil

 

 

Title:   Principal and Portfolio Manager

 

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

Enable Opportunity Partners LP

 

 

 

 

 

By:

/S/ Brenda O’Neil

 

 

 

Name: Brenda O’Neil

 

 

Title:   Principal and Portfolio Manager

 

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective
signature page to this Securities Purchase Agreement to be duly executed as of
the date first written above.

 

Pierce Diversified Strategy Master Fund
LLC, Ena

 

 

 

 

 

By:

/S/ Brenda O’Neil

 

 

 

Name: Brenda O’Neil

 

 

Title:   Principal and Portfolio Manager

--------------------------------------------------------------------------------

 

SCHEDULE OF BUYERS

(1)

 

(2)

 

(3)

 

(4)

 

(5)

 

(6)

 

(7)

 

(8)

 

(9)

Investor

 

Buyer

 

Address and
Facsimile Number

 

Aggregate
Principal
Amount of
Notes

 

Number of
Series A
Warrant Shares

 

Number of
Series B
Warrant Shares

 

Number of
Series C
Warrant
Shares

 

Purchase Price

 

Legal Representative’s
Address and Facsimile
Number

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Heights Capital

 

Capital Ventures International LP

 

c/o Heights Capital Management,
Inc.
101 California Street, Suite 3250
San Francisco, CA 94111
Attention: Martin Kobinger

Facsimile: (415) 403-6525
Telephone: (415) 403-6500
Residence: Cayman Islands

 

$

6,000,006.61

 

1,005,588

 

892,858

 

3,351,959

 

$

6,000,006.6

 

Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Attention: Eleazer Klein, Esq.
Facsimile: (212) 593-5955 Telephone: (212) 756-2376

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fort Mason

 

Fort Mason Master, LP

 

c/o Fort Mason Capital, LLC
Four Embarcadero Center,
Suite 2050
San Francisco, CA94111

Telephone: 415-288-8100
Fax:415.288.8113
Residence: California

 

$

5,165,048.58

 

865,651

 

768,608

 

2,885,502

 

$

5,165,048.58

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fort Mason

 

Fort Mason Partners. LP

 

c/o Fort Mason Capital, LLC
Four Embarcadero Center,
Suite 2050
San Francisco, CA94111

Telephone: 415-288-8100
Fax:415.288.8113
Residence: California

 

$

334,948.38

 

56,137

 

49,844

 

187,122

 

$

334,948.38

 

 

 

--------------------------------------------------------------------------------

 

JGB Capital

 

JGB Capital Offshore, Ltd.

 

c/o Appleby Corporate Services
(Cayman) Limited
Clifton House
75 Fort Street
George Town, Grand Cayman

Additional copy to:

JGB Capital Offshore, Ltd.
c/o JGB Management Inc.
660 Madison Avenue
21st Floor`
New York, NY 10021
Attn: Brett Cohen

Tel:(212) 355-5771
Residence: Cayman Islands

 

$

249,998.56

 

41,899

 

37,202

 

139,664

 

$

249,998.56

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

JGB Capital

 

JGB Capital, LP

 

660 Madison Avenue
21st Floor
New York, NY 10021
Attn: Brett Cohen

Fax:(212) 253-4093
Tel:(212)355-5771
Residence: Delaware

 

$

1,000,004.98

 

167,599

 

148,810

 

558,662

 

$

1,000,004.98

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

JGB Capital

 

Scoggin International Fund, Ltd.

 

c/o Scoggin LLC.
660 Madison Avenue
20th Floor`
New York, NY 10021

Fax: (212) 355-7480
Tel:(212) 355-5771
Residence: Bahamas

 

$

624,999.98

 

104,749

 

93,006

 

349,162

 

$

624,999.98

 

 

 

--------------------------------------------------------------------------------

 

JGB Capital

 

Scoggin Capital Management, LP II

 

c/o Scoggin LLC
660 Madison Avenue
20th Floor`
New York, NY 10021

Fax:(212) 355-7480
Tel:(212) 355-7527
Residence: Delaware

 

$

624,999.98

 

104,749

 

93,006

 

349,162

 

$

624,999.98

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

JGB Capital

 

Seneca Capital International, Ltd.

 

590 Madison Avenue
28th Floor`
New York, NY 10022

Fax:(212) 826-1108
Tel:(212) 888-2999
Residence: Cayman Islands

 

$

787,499.76

 

131,983

 

117,187

 

439,944

 

$

787,499.76

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

JGB Capital

 

Seneca Capital LP

 

590 Madison Avenue
21st Floor
New York, NY 10021

Fax:(826)-1108
Tel:(212) 888-2999
Residence: Delaware

 

$

399,998.77

 

67,039

 

59,524

 

223,463

 

$

399,998.77

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

JGB Capital

 

Guggenheim Portfolio Company XII LLC

 

590 Madison Avenue
28th Floor
New York, NY 10021

Fax: (212) 826-1108
Tel:(212) 355-5771
Residence: Delaware

 

$

62,499.64

 

10,475

 

9,301

 

34,916

 

$

62,499.64

 

 

 

--------------------------------------------------------------------------------

 

JGB Capital

 

Gracie Capital International, Ltd.

 

590 Madison Avenue
28thFloor`
New York, NY 10021

Fax: (212) 308-7180
Tel:(212) 355-5771
Residence: Cayman Islands

 

$

462,498.41

 

77,514

 

68,824

 

258,379

 

$

462,498.41

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

JGB Capital

 

Gracie Capital LP

 

590 Madison Avenue
28thFloor`
New York, NY 10021

Tel:(212) 355-5771
Residence: Delaware

 

$

787,499.76

 

131,983

 

117,187

 

439,944

 

$

787,499.76

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Enable Capital

 

Enable Growth Partners LP

 

One Ferry Building,
Suite 255
San Francisco, CA 94111

Tel: 415-677-1578
Residence: California

 

$

3,824,999.09

 

641,061

 

569,196

 

2,136,871

 

$

3,824,999.09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Enable Capital

 

Enable Opportunity Partners LP

 

One Ferry Building,
Suite 255
San Francisco, CA 94111

Tel: 415-677-1578
Residence: California

 

$

449,998.84

 

75,419

 

66,964

 

251,396

 

$

449,998.84

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Enable Capital

 

Pierce Diversified Strategy Master Fund LLC

 

One Ferry Building,
Suite 255
San Francisco, CA 94111

Tel: 415-677-1578
Residence: California

 

$

224,999.42

 

37,709

 

33,482

 

125,698

 

$

224,999.42

 

 

 

--------------------------------------------------------------------------------

EXHIBITS

 

Exhibit A

Form of Notes

Exhibit B-1

Form of Series A Warrants

Exhibit B-2

Form of Series B Warrants

Exhibit B-3

Form of Series B Warrants

Exhibit C

Registration Rights Agreement

Exhibit D

Irrevocable Transfer Agent Instructions

Exhibit E

Form of Outside Company Counsel Opinion

Exhibit F

Form of Secretary’s Certificate

Exhibit G

Form of Officer’s Certificate

 

SCHEDULES

Schedule 3(a)

Subsidiaries

Schedule 3(k)

SEC Documents; Financial Statements

Schedule 3(l)

Absence of Certain Changes

Schedule 3(q)

Transactions with Affiliates

Schedule 3(r)

Capitalization

Schedule 3(s)

Indebtedness and Other Contracts

Schedule 3(t)

Litigation

Schedule 3(cc)

Ranking of Notes

Schedule 4(d)

Use of Proceeds

 

--------------------------------------------------------------------------------

Exhibit D

JAVO BEVERAGE COMPANY

December 15, 2006

Corporate Stock Transfer, Inc.
3200 Cherry Creek Dr. South
Suite 430
Denver, CO  80209
Attention: Carylyn Bell

Ladies and Gentlemen:

Reference is made to that certain Securities Purchase Agreement, dated as of
December 14, 2006 (the “Agreement”), by and among Javo Beverage Company, a
Delaware corporation (the “Company”), and the investors named on the Schedule of
Buyers attached thereto (collectively, the “Holders”), pursuant to which the
Company is issuing to the Holders (i) senior convertible notes of the Company
(the “Notes”), which will be convertible into shares of the Company’s common
stock, $0.001 par value per share (the ”Common Stock”), and (ii) two series of
warrants (the “Warrants”), which are exercisable to purchase shares of Common
Stock.

This letter shall serve as our authorization and direction to you (provided that
you are the transfer agent of the Company at such time):

(I)            TO ISSUE SHARES OF COMMON STOCK UPON CONVERSION OF THE NOTES (THE
“CONVERSION SHARES”) TO OR UPON THE ORDER OF A HOLDER FROM TIME TO TIME UPON
DELIVERY TO YOU OF A PROPERLY COMPLETED AND DULY EXECUTED CONVERSION NOTICE, IN
THE FORM ATTACHED HERETO AS EXHIBIT I, WHICH HAS BEEN ACKNOWLEDGED BY THE
COMPANY AS INDICATED BY THE SIGNATURE OF A DULY AUTHORIZED OFFICER OF THE
COMPANY THEREON;

(II)           TO ISSUE SHARES OF COMMON STOCK UPON EXERCISE OF THE WARRANTS
(THE “WARRANT SHARES”) TO OR UPON THE ORDER OF A HOLDER FROM TIME TO TIME UPON
DELIVERY TO YOU OF A PROPERLY COMPLETED AND DULY EXECUTED EXERCISE NOTICE, IN
THE FORM ATTACHED HERETO AS EXHIBIT II, WHICH HAS BEEN ACKNOWLEDGED BY THE
COMPANY AS INDICATED BY THE SIGNATURE OF A DULY AUTHORIZED OFFICER OF THE
COMPANY THEREON.

You acknowledge and agree that so long as you have previously received (a)
written confirmation from the General Counsel of the Company (or its outside
legal counsel) that either (i) a registration statement covering resales of the
Conversion Shares or the Warrant Shares has been declared effective by the
Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933,
as amended (the “1933 Act”), or (ii) that sales of the after your receipt of a
notice of transfer, Conversion Notice or the Exercise Notice, you shall issue
the certificates representing the Conversion Shares and/or the Warrant Shares,
as applicable, and such certificates shall not bear any legend restricting
transfer of the Conversion Shares or the Warrant Shares thereby and should not
be subject to any stop-transfer restriction; provided, however, that if such
Conversion Shares and Warrant Shares are not registered for

--------------------------------------------------------------------------------

resale under the 1933 Act or able to be sold under Rule 144, then the
certificates for such Conversion Shares and/or Warrant Shares shall bear the
following legend:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. 
THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN
THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL, IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
(II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. 
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH
A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.

A form of written confirmation from the General Counsel of the Company or the
Company’s outside legal counsel that a registration statement covering resales
of the Conversion Shares and the Warrant Shares has been declared effective by
the SEC under the 1933 Act is attached hereto as Exhibit III.

Please execute this letter in the space indicated to acknowledge your agreement
to act in accordance with these instructions.  Should you have any questions
concerning this matter, please contact me at (760) 560-5286.

Very truly yours,

 

 

 

JAVO BEVERAGE COMPANY

 

 

 

 

 

By:

 

 

 

Name: William Marshall

 

 

Title: General Counsel, Exec. Vice President

 

--------------------------------------------------------------------------------

THE FOREGOING INSTRUCTIONS ARE
ACKNOWLEDGED AND AGREED TO

this 15th day of December, 2006

CORPORATE STOCK TRANSFER, INC.

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

Enclosures

cc:       Parties as listed on Schedule of Buyers to the Securities Purchase
Agreement dated December 14, 2006.

--------------------------------------------------------------------------------

EXHIBIT I

JAVO BEVERAGE COMPANY
CONVERSION NOTICE

Reference is made to the Senior Convertible Note (the “Note”) issued to the
undersigned by Javo Beverage Company (the “Company”).  In accordance with and
pursuant to the Note, the undersigned hereby elects to convert the Conversion
Amount (as defined in the Note) of the Note indicated below into shares of
Common Stock par value $0.001 per share (the “Common Stock”) of the Company, as
of the date specified below.

Date of Conversion:

 

 

 

Aggregate Conversion Amount to be converted:

 

 

 

Please confirm the following information:

 

 

 

Conversion Price:

 

 

 

Number of shares of Common Stock to be issued:

 

 

 

Please issue the Common Stock into which the Note is being converted in the
following name and to the following address:

 

 

Issue to:

 

 

 

 

 

 

 

 

 

 

 

Facsimile Number:

 

 

 

Authorization:

 

 

 

By:

 

 

 

Title:

 

 

 

Dated:

 

 

 

Account Number:

 

  (if electronic book entry transfer)

 

 

 

Transaction Code Number:

 

  (if electronic book entry transfer)

 

 

 

Installment Amounts to be reduced and amount of reduction:

 

 

--------------------------------------------------------------------------------

Notwithstanding anything to the contrary contained herein, this Conversion
Notice shall constitute a representation by the holder of the Note submitting
this Conversion Notice that, after giving effect to the conversion provided for
in this Conversion Notice, such holder (together with its affiliates) will not
have beneficial ownership (together with the beneficial ownership of such
Person’s affiliates) of a number of shares of Common Stock which exceeds the
Maximum Percentage of the total outstanding shares of Company Common Stock as
determined pursuant to the provisions of Section 3(d)(i) of the Note.

--------------------------------------------------------------------------------

ACKNOWLEDGMENT

The Company hereby acknowledges this Conversion Notice and hereby directs
Corporate Stock Transfer, Inc. to issue the above indicated number of shares of
Common Stock in accordance with the Transfer Agent Instructions dated
December 15, 2006 from the Company and acknowledged and agreed to by Corporate
Stock Transfer, Inc.

JAVO BEVERAGE COMPANY

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

--------------------------------------------------------------------------------

EXHIBIT II

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT TO PURCHASE COMMON STOCK

JAVO BEVERAGE COMPANY

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

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

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

____________    a “Cashless Exercise” with respect to _______________ Warrant
Shares.

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

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

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

Date: _______________ __, ______

 

   Name of Registered Holder

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

--------------------------------------------------------------------------------

ACKNOWLEDGMENT

The Company hereby acknowledges this Exercise Notice and hereby directs
Corporate Stock Transfer, Inc. to issue the above indicated number of shares of
Common Stock in accordance with the Transfer Agent Instructions dated December
15, 2006 from the Company and acknowledged and agreed to by Corporate Stock
Transfer, Inc.

JAVO BEVERAGE COMPANY

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

--------------------------------------------------------------------------------

EXHIBIT III

FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT

Corporate Stock Transfer, Inc.
3200 Cherry Creek Dr. South
Suite 430
Denver, CO  80209
Attention:  Carylyn Bell

Re:          Javo Beverage Company, Inc.

Ladies and Gentlemen:

[We are][I am] counsel to Javo Beverage Company, Inc., a Delaware corporation
(the “Company”), and have represented the Company in connection with that
certain Securities Purchase Agreement (the “Securities Purchase Agreement”)
entered into by and among the Company and the buyers named therein
(collectively, the “Holders”) pursuant to which the Company issued to the
Holders senior convertible notes (the “Notes”) convertible into the Company’s
common stock, $0.001 par value per share (the ”Common Stock”) and two series of
warrants exercisable for shares of Common Stock (the “Warrants”).  Pursuant to
the Securities Purchase Agreement, the Company also has entered into a
Registration Rights Agreement with the Holders (the “Registration Rights
Agreement”) pursuant to which the Company agreed, among other things, to
register the Registrable Securities (as defined in the Registration Rights
Agreement), including the shares of Common Stock issuable upon conversion of the
Notes and the shares of Common Stock issuable upon exercise of the Warrants,
under the Securities Act of 1933, as amended (the “1933 Act”).  In connection
with the Company’s obligations under the Registration Rights Agreement, on
____________ ___, 200_, the Company filed a Registration Statement on Form S-3
(File No. 333-_____________) (the “Registration Statement”) with the Securities
and Exchange Commission (the “SEC”) relating to the Registrable Securities which
names each of the Holders as a selling stockholder thereunder.

In connection with the foregoing, [we][I] advise you that a member of the SEC’s
staff has advised [us][me] by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and [we][I] have no
knowledge, after telephonic inquiry of a member of the SEC’s staff, that any
stop order suspending its effectiveness has been issued or that any proceedings
for that purpose are pending before, or threatened by, the SEC and the
Registrable Securities are available for resale under the 1933 Act pursuant to
the Registration Statement.

This letter shall serve as our standing instruction to you that the shares of
Common Stock are freely transferable by the Holders pursuant to the Registration
Statement.  You need not require further letters from us to effect any future
legend-free issuance or reissuance of shares of Common Stock to the Holders as
contemplated by the Company’s Irrevocable Transfer Agent Instructions dated
December 15, 2006, provided at the time of such

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reissuance, the Company has not otherwise notified you that the Registration
Statement is unavailable for the resale of the Registrable Securities.

Very truly yours,

 

 

 

[ISSUER’S COUNSEL]

 

 

 

 

 

By:

 

 

 

 

 

CC:          [LIST NAMES OF HOLDERS]

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Exhibit E

The Yocca Law Firm LLP
Lawyers
19900 MacArthur Boulevard
Suite 650 Irvine, California 92612

TELEPHONE (949) 253-0800 FACSIMILE (949) 253-0870

 

December 15, 2006

DRAFT
VIA FEDERAL EXPRESS
Investors Listed on the Attached List of Investors

Re:                               Issuance and sale by Javo Beverage Company,
Inc., a Delaware corporation, of Senior Convertible Notes in an aggregate
principal amount of $21,000,000 and Warrants to purchase up to an aggregate of
18,376,396 shares of Common Stock

Ladies and Gentlemen:

We have acted as outside counsel to Javo Beverage Company, a Delaware
corporation (the “Corporation”), in connection with an issuance and sale by the
Corporation of (i) Senior Convertible Notes in an aggregate principal amount of
$21,000,000 (“Notes”); and (ii) Warrants to purchase up to an aggregate of
18,376,396 shares of the Corporation’s Common Stock, par value $0.001 per share,
(“Warrants”) pursuant to the Securities Purchase Agreement dated as of December
14, 2006, by and among the Corporation and the investors listed on the Schedule
of Buyers attached thereto (“Securities Purchase Agreement”).  This opinion is
being furnished to you as a supporting document at the request of the
Corporation pursuant to Section 7(ii) of the Securities Purchase Agreement. 
Unless specifically defined herein or the context requires otherwise,
capitalized terms used herein shall have the meanings ascribed to them in the
Securities Purchase Agreement.

In furnishing this opinion, we have examined and relied upon: (a) the Securities
Purchase Agreement; (b) the Notes; (c) the Registration Rights Agreement; (d)
the Irrevocable Transfer Agent Instructions; (e) the Warrants; (f) the
Corporation’s Certificate of Incorporation, as amended; (g) the Corporation’s
Bylaws as certified to us by an officer of the Company; (h) certain records of
the Corporation’s corporate proceedings certified to be as reflected in its
minute books; and (i) such statutes, records and other documents as we have
deemed relevant. We have assumed that, except for (a) through (e) above
(“Transaction Documents”), there are no other documents or agreements between
the Company and any Buyer which would expand or otherwise modify the respective
rights and obligations of the Company and each Buyer as set forth in the
Transaction Documents.

We have assumed the authenticity of all documents submitted to us as originals
and the conformity with originals of all documents submitted to us as copies and
the genuineness of all signatures.  We have also assumed the legal capacity of
all natural persons and that, with respect to all parties to agreements or
instruments relevant hereto other than the Company, such parties had the
requisite power and authority to execute, deliver and perform such agreements or

       

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instruments, that such agreements or instruments have been duly authorized by
all requisite action and have been duly executed and delivered by such parties
and that such agreements or instruments are the valid, binding and enforceable
obligations of such parties.

As to questions of fact material to our opinions, we have relied upon the
representations of each party made in the Transaction Documents and the other
documents and certificates delivered in connection therewith, certificates of
officers of the Company, and certificates and advices of public officials.

Whenever a statement herein is qualified by “known to us,” “to our current
actual knowledge,” or similar phrase, it is intended to indicate that, during
the course of our representation of the Company, no information that would give
us current actual knowledge of the inaccuracy of such statement has come to the
attention of those attorneys in this firm principally responsible for handling
current matters for the Company.  However, except as otherwise expressly
indicated, we have not undertaken any independent investigation to determine the
accuracy of such statement, and any limited inquiry undertaken by us during the
preparation of this opinion letter should not be regarded as such an
investigation; no inference as to our knowledge of any matters bearing on the
accuracy of any such statement should be drawn from the fact of our
representation of the Company.

On the basis of the foregoing, subject to the assumptions, exceptions,
qualifications and limitations herein, it is our opinion that:

1.             The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the state of its incorporation.  The
Company has the requisite corporate power to own, lease and operate its
properties and to conduct its business as presently conducted.  The Company is
duly qualified as a foreign corporation to do business and is in good standing
in each jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not
reasonably be expected to have a Material Adverse Effect.

2.             The Company has the requisite corporate power and authority to
execute, deliver and perform all of its obligations under the Transaction
Documents, including the issuance of the Notes, the Conversion Shares, the
Interest Shares, the Warrants and the Warrant Shares in accordance with the
terms thereof.  The execution and delivery of the Transaction Documents by the
Company and the consummation of the transactions contemplated therein (including
without limitation, the issuance and sale of the Notes and Warrants) have been
duly authorized by all necessary corporate action.  The Transaction Documents
have been duly executed and delivered by the Company.  The Transaction Documents
constitute valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, except as such enforceability
may be limited by general principles of equity (whether in a proceeding at law
or in equity) or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation

2

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or similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.

3.             The execution, delivery and performance by the Company of its
obligations as contemplated in the Transaction Documents, including without
limitation, the issuance of the Notes and the Warrants, the Conversion Shares,
the Interest Shares and the Warrant Shares, and the consummation by the Company
of the transactions contemplated by the Transaction Documents and the compliance
by the Company with the terms thereof (a) do not and will not violate, conflict
with or constitute a default (or an event which, with the giving of notice or
lapse of time or both, constitutes or would constitute a default), give rise to
any right of termination, cancellation or acceleration under (i) the Certificate
of Incorporation or Bylaws of the Company; (ii) any agreement, note, lease,
mortgage, deed or other instrument to which the Company is a party or by which
the Company is bound or affected that was publicly filed as an exhibit by the
Company on the Edgar filing system (the “Publicly Filed Exhibits”); or (iii) to
our knowledge any statute, law, rule or regulation of the United States, the
Principal Market or the Delaware General Corporation Laws (the “DGCL”)
applicable to the Company as of immediately prior to the Closing or, to our
knowledge, any order, writ, injunction or decree binding on the Company; and (b)
to our knowledge do not and will not result in or require the creation of any
lien, security interest or other charge or encumbrance (other than pursuant to
the Transactions Documents) upon or with respect to any of the Company’s
properties.

4.             When so issued in accordance with and in exchange for payment as
contemplated by the Transaction Documents, the Notes, the Warrants, the
Conversion Shares, the Interest Shares and the Warrant Shares will be duly
authorized and validly issued, fully paid and nonassessable, and free of any and
all liens and charges (but not free of restrictions on transfer as may exist
pursuant to federal and applicable state securities laws) and preemptive or
similar rights contained in the Company’s Certificate of Incorporation or Bylaws
or any agreement, note, lease, mortgage deed or other instrument to which the
Company is a party or by which the Company is bound that is a Publicly Filed
Exhibit.  The Conversion Shares, the Interest Shares and the Warrant Shares have
been duly and validly authorized and reserved for issuance by all necessary
corporate action.

5.             As of the date hereof, to our knowledge, the authorized capital
stock of the Company consists of (i) three hundred million (300,000,000) shares
of Common Stock with a par value of $0.001 per share and (ii) ten million
(10,000,000) shares of Preferred Stock with a par value of $0.001 per share. 
None of the outstanding Common Stock is subject to preemptive rights or other
rights of the stockholders of the Company pursuant to the Certificate of
Incorporation or the Bylaws or under the DGCL or pursuant to any Publicly Filed
Exhibits.  Except as set forth in the Disclosure Schedule, there are no
outstanding securities or instruments of the Company that are Publicly Filed
Exhibits containing anti-dilution or similar provisions that will be triggered
by the issuance of the Notes, the Conversion Shares, the Interest Shares, the
Warrants or the Warrant Shares as contemplated pursuant to the Transaction
Documents.

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6.             The offer and sale of the Notes and the Warrants in accordance
with the Securities Purchase Agreement and the issuance of the Conversion
Shares, the Interest Shares and the Warrant Shares in accordance with the
Transaction Documents constitute transactions exempt from the registration
requirements of the Securities Act of 1933, as amended, assuming that the
representations and warranties of each Buyer made pursuant to Sections 2(a),
2(b), and 2(d) of the Securities Purchase Agreement are true and correct, and
assuming further that the appropriate restrictive legends will be placed on the
certificates or other instruments representing the Notes, the Warrants, the
Conversion Shares, the Interest Shares and the Warrant Shares.

7.             No authorization, approval, consent, filing, or other order of
any federal or state governmental body, regulatory agency, self-regulatory
organization or stock exchange or market, or the stockholders of the Company, or
any court, or to our knowledge, any third party is required to be obtained by
the Company to enter into the Transaction Documents or for the issuance and sale
of the Notes, the Conversion Shares, the Interest Shares, the Warrants or the
Warrant Shares in accordance with the Transaction Documents, or for the exercise
of any rights and remedies under any Transaction Documents, except for the
Stockholder Approval as contemplated to be obtained pursuant to the Securities
Purchase Agreement and any approvals, authorizations, designations, declarations
or filings as have been made or obtained on or before the date hereof or which
are not required to be made or obtained until after the date hereof, including
(i) filings on Form D under Regulation D of the Securities Act of 1933, as
amended, and each applicable state securities law’s corresponding notice
requirement, and (ii) filings on Form 8-K pursuant to the Securities Exchange
Act of 1934, as amended.

8.             To our knowledge, no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body or any governmental
agency or self-regulatory organization is pending or threatened against the
Company or any of the properties or assets of the Company.

9.             The Company and its Board of Directors have taken necessary
action to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s Certificate of
Incorporation or provisions of the DGCL applicable to the Buyers and their
affiliates as a result of the Buyers and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including without limitation, the Company’s issuance of Notes on the date hereof
and Warrants (and the shares of Common Stock issuable upon conversion or
exercise thereof) and the Buyers’ and their affiliates’ ownership of such
securities or any other securities of the Company acquired by the Buyer or their
affiliates.

10.           To our knowledge, the Company is not an “investment company” or
any entity controlled by an “investment company,” as such term is defined in the
Investment Company Act of 1940, as amended.

We express no opinion as to your compliance with any federal or state law
pertaining to your legal or regulatory status or the nature of your business.

4

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We express no opinion as to the Company’s compliance or non-compliance with (i)
antifraud provisions of applicable federal or state securities laws; (ii)
applicable federal or state antitrust laws and regulations; (iii) unfair
competition or trade practice laws and regulations; (iv) pension and employee
benefit laws and regulations; (v) SEC staff policies; or (vi) any law,
regulation or rule applicable solely to the Company’s industry.

We express no opinion with respect to the enforceability of provisions releasing
or indemnifying a party against liability for its own wrongful or negligent
acts, or where indemnification is contrary to public policy, provisions to the
effect that failure to exercise or delay in exercising any right or remedy will
not operate as a waiver of that right or remedy, or provisions to the effect
that failure to exercise or delay in exercising any right or remedy will not
operate as a waiver of that right or remedy.

We express no opinion as to the effect of judicial decisions which may permit
the introduction of extrinsic evidence to modify the terms or the interpretation
of the Transaction Documents.

We express no opinion with respect to the limitations on the exercise of certain
contractual rights and remedies if the defaults are not material or the
penalties bear no reasonable relation to the damages suffered by the aggrieved
party as a result of the delinquencies or defaults, on strict enforcement of
certain covenants in debt instruments absent a showing of damage to the lender,
impairment of value of collateral or impairment of the debtor’s ability to pay
or otherwise under circumstances which would violate the lender’s covenant of
good faith and fair dealing.

We express no opinion with respect to the unenforceability under certain
circumstances of provisions requiring arbitration, waiving jury trials, or
selecting venue; provisions permitting various self help or summary remedies
without adequate notice or opportunity for hearing or cure; or provisions having
the effect of requiring the Company to repurchase, redeem or make a distribution
on any of its shares of capital stock.

We express no opinion as to (a) the enforceability of the choice of law
provisions of the Transaction Documents, (b) California laws relating to usury
or permissible rates of interest upon the transactions contemplated by the
Transaction Documents, (c) California Civil Code Section 1670.5 which provides
that a court may refuse to enforce, or may limit the application of, a contract
or any clause thereof which the court finds as a matter of law to have been
unconscionable at the time it was made, (d) California Civil Code Section 1671
which provides in part that a contractual provision liquidating the damages for
breach of contract in a commercial transaction will be invalid if it is
established that the provision was “unreasonable” under the circumstances
existing at the time the contract was made, and (e) Section 1698 of the
California Civil Code which provides, in part, that provisions of any instrument
or agreement may only be waived in writing will not be enforced to the extent
that an oral agreement has been executed modifying provisions of such instrument
or agreement.

5

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We are members of the Bar of the State of California and, accordingly, do not
express any opinions herein concerning the laws of any jurisdiction other than
the Delaware General Corporation Law, the laws of the State of California and
the federal laws of the United States of America, and we express no opinion
herein as to the effect of any other laws.  For purposes of our opinions, we
have assumed that applicable New York law is the same as the California law.

This opinion is being rendered solely as of this date for your benefit in
connection with the issuance and sale to the Buyers of the Notes and Warrants at
the Closing and may not be relied upon by any other person without our prior
written consent.  We expressly decline any undertaking to advise you of any
matters arising subsequent to the date hereof which would cause us to amend any
portion of the foregoing in whole or in part.

Very truly yours,

 

UNSIGNED DRAFT

 

6

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Address List of Investors

Capital Ventures International LP
c/o Heights Capital Management
101 California Street, Suite 3250
San Francisco, CA 94111

Attn.: Martin Kobinger, Investment Manager

 

Fort Mason Master, LP
c/o Fort Mason Capital, LLC
Four Embarcadero Center, Suite 2050
San Francisco, CA 94111

 

JGB Capital Offshore, Ltd.
c/o Appleby Corporate Services (Cayman)
Limited
Clifton House
75 Fort Street
George Town, Grand Cayman

 

Courtesy copy to:

JGB Capital Offshore, Ltd.
c/o JGB Management Inc.
660 Madison Avenue, 21st Floor
New York, NY 10021
Attn.: Brett Cohen

 

Enable Capital
One Ferry Building, Suite 255
San Francisco, CA 94111

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Exhibit F

JAVO BEVERAGE COMPANY

SECRETARY’S CERTIFICATE

The undersigned hereby certifies that he is the duly elected, qualified and
acting Secretary of Javo Beverage Company, a Delaware corporation (the
“Company”), and that as such he is authorized to execute and deliver this
certificate in the name and on behalf of the Company and in connection with the
Securities Purchase Agreement, dated as of December 14, 2006, by and among the
Company and the investors listed on the Schedule of Buyers attached thereto (the
“Securities Purchase Agreement”), [g256041ke13i001.gif]and further certifies in
his official capacity, in the name and on behalf of the Company, the items set
forth below.  Capitalized terms used but not otherwise defined herein shall have
the meaning set forth in the Securities Purchase Agreement.

1.                                       ATTACHED HERETO AS EXHIBIT A IS A TRUE,
CORRECT AND COMPLETE COPY OF THE RESOLUTIONS DULY ADOPTED BY THE BOARD OF
DIRECTORS OF THE COMPANY AT A MEETING OF THE BOARD OF DIRECTORS HELD ON NOVEMBER
1, 2006.  SUCH RESOLUTIONS HAVE NOT IN ANY WAY BEEN AMENDED, MODIFIED, REVOKED
OR RESCINDED, HAVE BEEN IN FULL FORCE AND EFFECT SINCE THEIR ADOPTION TO AND
INCLUDING THE DATE HEREOF AND ARE NOW IN FULL FORCE AND EFFECT.

2.                                       ATTACHED HERETO AS EXHIBIT B IS A TRUE,
CORRECT AND COMPLETE COPY OF THE CERTIFICATE OF INCORPORATION OF THE COMPANY,
TOGETHER WITH ANY AND ALL AMENDMENTS THERETO CURRENTLY IN EFFECT, AND NO ACTION
HAS BEEN TAKEN TO FURTHER AMEND, MODIFY OR REPEAL SUCH CERTIFICATE OF
INCORPORATION, THE SAME BEING IN FULL FORCE AND EFFECT IN THE ATTACHED FORM AS
OF THE DATE HEREOF.

3.                                       ATTACHED HERETO AS EXHIBIT C IS A TRUE,
CORRECT AND COMPLETE COPY OF THE BYLAWS OF THE COMPANY AND ANY AND ALL
AMENDMENTS THERETO CURRENTLY IN EFFECT, AND NO ACTION HAS BEEN TAKEN TO FURTHER
AMEND, MODIFY OR REPEAL SUCH BYLAWS, THE SAME BEING IN FULL FORCE AND EFFECT IN
THE ATTACHED FORM AS OF THE DATE HEREOF.

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4.                                       EACH PERSON LISTED BELOW HAS BEEN DULY
ELECTED OR APPOINTED TO THE POSITION(S) INDICATED OPPOSITE HIS NAME AND IS DULY
AUTHORIZED TO SIGN THE SECURITIES PURCHASE AGREEMENT AND EACH OF THE TRANSACTION
DOCUMENTS ON BEHALF OF THE COMPANY, AND THE SIGNATURE APPEARING OPPOSITE SUCH
PERSON’S NAME BELOW IS SUCH PERSON’S GENUINE SIGNATURE.

Name

 

 

 

 

Position

 

 

 

Signature

 

Cody C. Ashwell

 

Chief Executive Officer

 

 

 

IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this 15th
day of December, 2006.

 

William Marshall

 

Secretary

 

I, Cody C. Ashwell, hereby certify that William Marshall is the duly elected,
qualified and acting Secretary of the Company and that the signature set forth
above is his true signature.

 

Cody C. Ashwell

 

Chief Executive Officer

 

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EXHIBIT A

Resolutions

 

3

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MINUTES OF THE SPECIAL MEETING
OF THE BOARD OF DIRECTORS
OF
JAVO BEVERAGE COMPANY, INC.
November 1, 2006
(9:00 A.M., PACIFIC STANDARD TIME)

A meeting of the Board of Directors of Javo Beverage Company, Inc., a Delaware
corporation (the “Corporation”) was held at the executive office of the
Corporation at 1311 Specialty Drive, Vista, California 92081 and by telephone
conference call on Wednesday, November 1, 2006, commencing at 9:00 a.m.

The following directors were present in person at the meeting:

Cody C. Ashwell, Chair

The following directors were present by telephone at the meeting:

William C. Baker

Ronald S. Beard

Terry C. Hackett

James R. Knapp

Thomas J. Rielly

Stanley A. Solomon

The following directors were absent, and each such director has executed a
waiver of notice that has been attached to these minutes:

Jerry W. Carlton
Richard B. Specter

Also present at the meeting were Gary Lillian, President; Richard Gartrell, CFO;
and William E. Marshall, General Counsel and Secretary.  Mr. Marshall acted as
Secretary of the Meeting and is responsible for these minutes.

It was first confirmed that all of the directors present could hear one another
on the conference call, and then the Chairman of the Board then called the
meeting to order.

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The first and only order of business was a proposal to review and discuss the
Term Sheet attached hereto as Exhibit “A” (“Term Sheet”), which contemplates a
private placement by the Corporation of Senior Convertible Notes and Warrants
(the “Private Placement”).

Mr. Ashwell explained that the principal purpose of the financing was for
expansion and growth, and he described several growth opportunities for the
Corporation.  Mr. Ashwell reiterated his belief that certain of the Company’s
significant sales opportunities have been and will be hindered by the
Corporation’s lack of a strong balance sheet and cash reserves and that a cash
infusion was vital to capturing these larger account opportunities.  Mr. Ashwell
then made a presentation concerning efforts made to seek funding on the most
favorable terms, the negotiation of the Term Sheet, the Term Sheet itself and
the proposed Private Placement.

Mr. Marshall made a presentation concerning the details of the Term Sheet and
the transactions contemplated thereby, including the registration of shares of
Common Stock for resale.

Mr. Gartrell made a presentation concerning the financial impacts of the
proposed transaction and projections concerning the operating cash flow and debt
coverage.

A discussion of the Term Sheet and the Private Placement followed.  The Board of
Directors asked questions of management and discussed the answers.  The Board
also considered and evaluated various factors, including the Corporation’s
financial condition, prospects for growth, the Corporation’s capital structure
and the results of stockholder voting on a proposal to amend the Certificate of
Incorporation to authorize additional shares of Common Stock.  Management noted
its belief and the belief of its placement agent that, as compared to a typical
direct sale of common stock, the structured convertible debt described in the
term sheet would provide the opportunity to achieve significantly higher
valuations in issuing common stock so as to potentially lessen dilution to the
common stockholders.

Upon motion duly made and seconded, the following resolutions were unanimously
approved.

WHEREAS, there has been submitted to and considered by this Board of Directors a
Term Sheet, in the form attached hereto as Exhibit A (“Term Sheet”), and other
information, documents, and drafts, in connection with a proposed agreement for
the purchase and sale of the Corporation’s securities (collectively, the
“Securities”), which would consist of (i) Senior Convertible Notes (“Senior
Convertible Notes”) that shall be convertible into previously authorized but
unissued shares of the Corporation’s Common Stock, par value $0.001 per share
(“Common Stock”), and (ii) Warrants

5

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(“Warrants”) to purchase previously authorized but unissued shares of Common
Stock; and

WHEREAS, it is deemed in the best interests of the Corporation and its
stockholders that this Board of Directors ratify and adopt the terms and
provisions of the Term Sheet and authorize the negotiation, execution, delivery
and performance of definitive agreements; and

WHEREAS, the Term Sheet contemplates that the Corporation shall register shares
of the Corporation’s Common Stock (the “Shares”) for resale by the investors in
the private placement, in an amount sufficient to cover the potential future
conversion of the Senior Convertible Notes and future exercise of the Warrants;

NOW, THEREFORE, BE IT RESOLVED, that the terms and provisions of the Term Sheet
be, and they hereby are, approved, adopted, authorized and ratified, in the form
attached hereto or in substantially such form with such modifications or
supplements as any officer of the Corporation may approve, in the discretion of
the officer acting in the matter; and

RESOLVED FURTHER, that the officers of the Corporation be, and each of them
hereby is, authorized and directed to proceed to negotiate a private placement
of the Securities and to execute, deliver and perform on behalf of the
Corporation or in its name, any and all definitive agreements, certificates,
documents or instruments related thereto, on substantially the terms
contemplated in the Term Sheet; and

RESOLVED FURTHER, that the officers of the Corporation be, and each of them
hereby is, authorized, directed and empowered on behalf of the Corporation and
in its name, to execute any applications, certificates, agreements or any other
instruments or documents or amendments or supplements thereto, or to do and to
cause to be done any and all other acts and things as such

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officers may in their discretion deem necessary or appropriate to conduct the
private placement in accordance with the exemption from registration under the
Securities Act of 1933 for transactions not involving a public offering as
provided by Section 4(2) of the Securities Act and Rule 506 of Regulation D as
promulgated thereunder; and

RESOLVED FURTHER, that this Board of Directors deems it in the best interests of
the Corporation and its stockholders that the Corporation register the Shares
for resale under the Securities Act of 1933, as amended, on Form S-3, or on such
other form or forms as may be required or permitted, and that the Board of
Directors hereby authorizes and approves the registration of the Shares and the
taking of any and all other actions as may be necessary or appropriate to
register the Shares for resale; and

RESOLVED FURTHER, that the officers of the Corporation be, and each of them
hereby is, authorized at any time and from time to time to do and perform any
and all acts or things, including, without limitation, the execution and
delivery of any and all agreements, documents, instruments or papers of whatever
kind or nature, modifications or supplements thereto, all filings necessary or
desirable for obtaining qualifications, permits or licenses, in each case as
such officers or any of them may consider necessary or desirable to effect the
intent of any and all of the foregoing resolutions; and

RESOLVED FURTHER, that the execution and delivery of any documents, or their
filing in the books and records of the Corporation, or the performance of such
other acts and things by any of officer of the Corporation, shall in each case
evidence conclusively and for all purposes that such officer or officers
considered the same to be necessary or desirable as aforesaid and that such act
or thing so done or performed was hereby authorized; and that all such acts or
things heretofore performed by the officers of this Corporation are hereby
authorized, adopted, ratified and approved; and

RESOLVED FURTHER, that this Board of Directors hereby authorizes, ratifies,
approves and adopts such resolutions as may be deemed necessary or

7

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appropriate by the officer acting in the matter in order to satisfy the requests
or requirements of any governmental authorities in connection with the
transactions contemplated by these resolutions, and the Secretary shall attach
any such resolutions hereto and the same shall be deemed incorporated and
approved herein.

There being no further business the meeting was adjourned at approximately 12:00
a.m.

 

William E. Marshall, Secretary

Attest:

 

 

 

Cody A. Ashwell, Chairman

 

 

8

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EXHIBIT “A”

JAVO BEVERAGE COMPANY

Senior Convertible Notes

DRAFT SUMMARY OF TERMS AND CONDITIONS

For Discussion Purposes Only

October 27, 2006

Issuer:

 

Javo Beverage Company (the “Issuer” or the “Company”).

 

 

 

Purchaser:

 

Heights Capital Management, Inc. or an affiliated entity (the “Lead”) and other
investors selected by the Company and Cowen and Company (collectively with the
Lead, the “Purchasers”). The Purchasers and any subsequent transferees are
referred to herein as Holders.

 

The Lead will purchase a minimum of $6,000,000.

 

 

 

Security:

 

Senior Convertible Notes (the “Notes”).

 

 

 

Amount:

 

$22,500,000.00 (the “Amount”).

 

 

 

Additional Notes:

 

The Purchasers would have the right to subscribe for an additional $7,500,000 of
Notes (the “Additional Notes”) until 12 months from closing which will be
convertible at 150% of the 5-day average volume weighted average price (“VWAP”)
prior to the initial closing.

 

 

 

Maturity:

 

5 years from the date of issue (the “Maturity Date”).

 

 

 

Coupon:

 

6.95% per annum in cash or registered shares of common stock, payable quarterly
in arrears and calculated on the basis of a 360-day year consisting of twelve
30-day months.

 

 

 

Conversion Price:

 

The Notes will be convertible at 120% of the VWAP of the Company’s common stock
over the five (5) trading days prior to the announcement of the transaction (the
“Conversion Price”) into a fixed number of shares (the “Conversion Shares”).

 

The Notes and Additional Notes are convertible at the

 

 

 

 

--------------------------------------------------------------------------------

 

 

Holders option, in whole or in part, at any time after Closing. The Conversion
Price will be subject to adjustment for stock dividends, stock splits, dilutive
securities issuances and other customary adjustment events.

 

 

 

Principal
Amortization
Schedule:

 

The Company shall repay the principal amount of the Notes in 57 equal monthly
installments of $394K in cash and/or registered shares of common stock (each, a
“Principal Repayment”) beginning on the four month anniversary of the Closing
(See: Appendix A).

 

The Holders will have the right to convert each Principal Repayment into shares
of common stock at or prior to the payment date in lieu of receiving cash.

 

The Company may, at its sole option, use registered shares of common stock as
consideration for the Principal Repayments only if the stock is trading above
$0.60 per share and the “standard equity conditions” have been met (as defined
in the closing documents).

 

The shares used would be valued at 88% of the average of the VWAPs for the 20
days following the payment date, if such amount is greater than $1.00, and 85%
of the average of the VWAPs for the 20 days following the payment date if such
amount is $1.00 or less (the “Amortization Price”).

 

 

 

Investor Put:

 

The Purchasers may require the Issuer to repurchase the Notes and Additional
Notes for cash at the third anniversary of the Closing at a price equal to their
face amount plus any accrued and unpaid interest. The Company may use registered
shares of common stock to satisfy up to 70% of the redemption.

 

The shares would be valued at 85% of the average VWAP for 60 days following the
redemption. The Company may, at its sole option, use registered shares of common
stock as consideration for this redemption payment only if the stock is trading
above $0.60 per share and the “standard equity conditions” have been met (as
defined in the closing documents).

 

 

 

Conversion

 

The Notes and Additional Notes will include a

 

--------------------------------------------------------------------------------

 

Limitation:

 

conversion limitation providing that the Issuer will not effect any conversion
of the Notes or Additional Notes, and no Holder shall have the right to convert
any portion of the Notes or Additional Notes, to the extent that after giving
effect to such conversion, the Holder (together with the Holder’s affiliates)
would beneficially own in excess of 9.9% of the number of shares of the
Company’s common stock outstanding immediately after giving effect to such
conversion (the “Conversion Limitation”).

 

 

 

Company
Repurchase
Right:

 

The Company may repurchase the Notes and Additional Notes at anytime after
closing at par plus accrued interest, plus: i) a make-whole interest payment
equal to the present value of three years of interest less any interest paid,
plus ii) a number of warrants (the “Series B Warrants”) to purchase the number
of shares that the Notes are convertible into. The Series B Warrants shall have
an exercise price equal to the Conversion Price and an expiration date three
years from the date of issuance.

 

 

 

Warrants:

 

The Company will issue to the Purchasers warrants equal to 30% of the total
number of Conversion Shares (the “Warrants”) for the Notes and Additional Notes
(when and if issued).

 

The Warrants will be exercisable at any time beginning six (6) months from
Closing into common shares of the Company at 125% of the VWAP for the day prior
to announcement of the deal and will expire five (5) years from the applicable
Closing.

 

The Warrants will be documented separately from the Notes and Additional Notes
and may be exercised or sold by the Holders at any time after Closing. The
Warrants may only be exercised on a cashless exercise basis if there is not an
effective registration statement covering the resale of the underlying shares.

 

 

 

Redemption at
Maturity:

 

The Issuer will redeem the Notes and Additional Notes (if issued) at their face
amount plus any accrued and unpaid interest in respect thereof in cash. Under no
circumstances shall the Notes or Additional Notes maturity extend beyond the
Maturity Date.

 

--------------------------------------------------------------------------------

 

Permitted Senior Indebtedness

 

After effectiveness, the Company may incur 1) up to an additional $5 million of
a senior bank debt facility, and 2) may incur additional debt for new customer
equipment purchases of machines.

 

The Company intends and will covenant that it will use the markup on its
dispensed products attributed to amortization of equipment to pay debt and
interest payments for new dispensers financed as Permitted Senior Indebtedness
with the term of the amortization of principal being no more then sixty
(60) months.

 

 

 

Change of
Control:

 

Upon a Change of Control of the Issuer involving the acquisition of voting
control or direction over 50% or more of the Company’s outstanding common stock,
Holders will have the right to cause the Issuer to repurchase the Notes and
Additional Notes in cash or shares for the greater of: A) the equity value or B)
120%, plus accrued but unpaid interest, if any, up to but excluding the date of
the Change of Control date.

 

 

 

Stock Payment
Procedures for
Principal
Repayments:

 

The Company must notify the investors of its intention to make each applicable
Principal Repayment in cash or common stock or any combination thereof on the
third (3rd) trading day prior to the date of the Principal Repayment. On the
trading day prior to the applicable Principal Repayment date, the Company will
deliver to the Holders via DTC an amount of shares equal to the stock portion of
the applicable Principal Repayment divided by 90% of the lowest VWAP of the
common stock during the ten trading days ending on the trading day prior to such
delivery date (the “Stock Calculation Price”).

 

Immediately following the calculation of the Amortization Price on the 21st day
following the payment date, the Company will deliver an amount of shares on that
day to the Holders (“Net Share Settlement Amount”) equal to the stock portion of
the applicable Principal Repayment, divided by the Amortization Price, less any
shares previously delivered. If the Amortization Price is greater than the Stock
Calculation Price, the Net Share Settlement Amount will be zero and any excess
over the principal due shall be offset against the remaining principal.

 

--------------------------------------------------------------------------------

 

Anti-Dilution
Protection:

 

There shall be weighted-average anti-dilution protection on the Notes,
Additional Notes and the Warrants. Any anti-dilution adjustment(s) shall not be
triggered by any issuances by the Company of any equity or equity-linked
securities in connection with: (i) strategic transactions or acquisitions, (ii)
board approved stock or option plans, (iii) issuances of any securities having
to do with any exercise/exchange/adjustment/
redemption of the Notes.

 

 

 

Use of Proceeds:

 

Sales and marketing, working capital and general corporate purposes.

 

 

 

Registration:

 

The Company will file a registration statement with the SEC to register the
resale of the shares underlying the Notes and Additional Notes, the Warrants and
Series B Warrants within 30 days of closing.

 

If either the Company does not meet the filing deadline or the SEC does not
declare this effective within 90 days of closing (or 120 days if reviewed) or if
registration lapses then penalties will be paid at the rate of 1.0% per month
with the first such payment due at day 120 and continuing thereafter on a
pro-rated basis for each 30 day period.

 

 

 

Conditions
Precedent:

 

The transaction shall be subject to conditions precedent customary for
agreements of this nature and satisfactory to the Purchasers including:

·     Due diligence satisfactory to the Purchasers in their sole discretion,
based on  publicly available information;

·     Documentation satisfactory to the Purchasers in their sole discretion;

·     Absence of material adverse change;

·     Issuer board approval;

·     Any required securities and stock exchange regulatory approvals; and

·     Documentation satisfactory to Issuer in its sole discretion.

 

 

 

Covenants:

 

Affirmative Covenants — The Notes and Additional Notes will contain affirmative
covenants customary for securities of this nature.

 

--------------------------------------------------------------------------------

 

 

Negative Covenants — Neither the Issuer nor any subsidiary shall incur any debt
that is senior to or pari passu with the Notes or Additional Notes.

 

 

 

Purchaser
Trading
Restriction:

 

The Purchasers will represent that they have not traded in the Company’s
securities or derivatives relating to the Company’s securities or engaged in any
short sales of the Company’s securities since learning of the transaction from
Cowen and Company.

 

 

 

Shareholder
Approval:

 

The Company shall use its reasonable best efforts to obtain shareholder approval
at its next annual meeting to issue over 19.9% of their current shares
outstanding as part of this transaction.

 

 

 

Expenses:

 

The Issuer shall reimburse the Lead for its out-of-pocket diligence and legal
expenses not to exceed $150,000. The Company shall advance $30,000 as a
non-refundable deposit against actual legal expenses upon signing.

 

 

 

 

This term sheet is not binding except as to the provisions above concerning
Expenses.

AGREED TO AND ACCEPTED BY:

JAVO BEVERAGE COMPANY

 

HEIGHTS CAPITAL MANAGEMENT, INC.

 

 

 

 

 

 

 

 

 

Name: Cody Ashwell

 

Name: Martin Kobinger

 

Title: Chief Executive Officer

 

Title: Authorized Signatory

 

--------------------------------------------------------------------------------

Appendix A

Amortization Schedule

Month

 

 

 

Year 1

 

Year 2

 

Year 3

 

Year 4

 

Year 5

 

1

 

$

0

 

$

395

 

$

395

 

$

395

 

$

395

 

2

 

0

 

395

 

395

 

395

 

395

 

3

 

0

 

395

 

395

 

395

 

395

 

4

 

395

 

395

 

395

 

395

 

395

 

5

 

395

 

395

 

395

 

395

 

395

 

6

 

395

 

395

 

395

 

395

 

395

 

7

 

395

 

395

 

395

 

395

 

395

 

8

 

395

 

395

 

395

 

395

 

395

 

9

 

395

 

395

 

395

 

395

 

395

 

10

 

395

 

395

 

395

 

395

 

395

 

11

 

395

 

395

 

395

 

395

 

395

 

12

 

395

 

395

 

395

 

395

 

395

 

Year Total

 

$

3,553

 

$

4,737

 

$

4,737

 

$

4,737

 

$

4,737

 

Cum. Total

 

$

3,553

 

$

8,289

 

$

13,026

 

$

17,763

 

$

22,500

 

 

--------------------------------------------------------------------------------

EXHIBIT B

Certificate of Incorporation

--------------------------------------------------------------------------------

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

JAVO BEVERAGE COMPANY, INC.

Javo Beverage Company, Inc., a corporation organized and existing under the laws
of the State of Delaware (the “Corporation”), certifies that:

A.             The name of the Corporation is Javo Beverage Company, Inc.  The
Corporation’s original Certificate of Incorporation was filed with the Secretary
of State of the State of Delaware on June 21, 2002.

B.            This Amended and Restated Certificate of Incorporation was duly
adopted in accordance with Sections 242 and 245 of the General Corporation Law
of the State of Delaware, and restates, integrates and further amends the
provisions of the Corporation’s Certificate of Incorporation such that the total
number of shares of all classes of capital stock which the Corporation is
authorized to issue shall hereafter be three hundred ten million (310,000,000)
shares and the total number of shares of common stock which the Corporation is
authorized to issue shall hereafter be three hundred million (300,000,000)
shares of common stock with a par value of $0.001 per share designated as the
“Common Stock” of the Corporation.

C.            The text of the Certificate of Incorporation as hereby amended or
supplemented reads as set forth in EXHIBIT A attached hereto.

IN WITNESS WHEREOF, Javo Beverage Company, Inc. has caused this Amended and
Restated Certificate of Incorporation to be signed by William E. Marshall, a
duly authorized officer of the Corporation, on November 3, 2006.

JAVO BEVERAGE COMPANY, INC.

 

 

 

 

 

William E. Marshall

 

General Counsel, Senior Executive Vice

 

President of Operations, and Secretary

 

 

--------------------------------------------------------------------------------

 

EXHIBIT A

ARTICLE 1

The name of this corporation (herein called the “Corporation”) is as follows:

JAVO BEVERAGE COMPANY, INC.

ARTICLE 2

The address of the registered office of the Corporation in the State of Delaware
is 2711 Centerville Rd, Wilmington, County of New Castle, Delaware 19808. The
name of the Corporation’s registered agent at that address is Corporation
Service Company.

ARTICLE 3

The purpose of the Corporation is to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of the
State of Delaware.

ARTICLE 4

SECTION 1. AUTHORIZED SHARES. The total number of shares of all classes of
capital stock which the Corporation is authorized to issue is three hundred ten
million (310,000,000) shares which shall be divided into two classes as follows:

a) three hundred million (300,000,000) shares of Common Stock, with a par value
of $0.001 per share (the “Common Stock”), and

b) ten million (10,000,000) shares of Preferred Stock, with a par value of
$0.001 per share (the “Preferred Stock”).

SECTION 2. COMMON STOCK. The Common Stock shall have one (1) vote per share. The
Common Stock shall not be subject to redemption by the Corporation at its
option, at the option of the holders of Common Stock, or upon the happening of a
specified event.

SECTION 3. PREFERRED STOCK. The Corporation’s Preferred Stock may be issued in
one or more series, any or all of such series may have such voting powers, full
or limited, or no voting powers, and such designations, preferences and
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, which are permitted by Section 151 of the
General Corporation Law of the State of Delaware in respect of such series. This
Certificate of Incorporation, or any amendment hereto, to the extent desired,
may set forth a statement of such powers, designations or rights of any such
series of shares; or, to the extent not fixed by the Certificate of
Incorporation or any amendment hereto, the resolution or resolutions adopted by
the Board of Directors providing for the issue of stock of such series shall set
forth a statement of such powers, designations and rights of any such series of
shares. Any and all voting powers, designations, rights, preferences, powers,
qualifications, limitations or restrictions of such series may be made dependent
upon facts ascertainable outside the Certificate of Incorporation, or any
amendment, or the resolution or resolutions adopted by the Board of Directors
providing for the issue of stock of such series,

--------------------------------------------------------------------------------

provided that the manner in which such facts will operate on the series is
clearly and expressly set forth. For this purpose, the term “facts” is meant to
include, but is not limited to, the occurrence of any event, including a
determination or action by any person or body, including the Corporation.

SECTION 4. AUTHORITY EXPRESSLY VESTED IN BOARD. The Board of Directors of the
Corporation is hereby expressly granted and vested with the fullest possible
authority to fix from time to time by resolution or resolutions any voting
powers, full or limited, or no voting powers, and such designations, preferences
and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, which are permitted by
Section 151 of the General Corporation Law of the State of Delaware in respect
of such series. The authority of the Board with respect to each series shall
include, but not be limited to, determination from time to time of the
following:

(i) The number of shares constituting that series, an increase in such number
(but not above the total number of shares of Preferred Stock), a decrease in
such number (but not below the number of shares of such series then
outstanding), and the distinctive designation of that series;

(ii) The dividend rates, conditions, and times on the shares of that series,
whether dividends shall be cumulative or noncumulative, and, if cumulative, from
which date or dates, and the relative rights of priority, if any, of payment of
dividends on shares of that series;

(iii) Whether that series shall have voting powers, full or limited, and if so,
the terms, qualifications, limitations or restrictions of such voting powers, or
no voting powers;

(iv) Whether that series shall have conversion privileges and/or exchange
privileges, and, if so, the terms and conditions of such conversion or exchange,
including provision for adjustment of the conversion or exchange rate in such
events as the Board of Directors shall state in the resolutions providing for
the issue of the stock of such series;

(v) Whether or not the shares of that series shall be redeemable, and, if so,
the terms and conditions of such redemption, including the date or dates upon or
after which they shall be redeemable, and the amount per share payable in case
of redemption, which amount may vary under different conditions and at different
redemption dates;

(vi) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;

(vii) The rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, and the
relative rights of priority, if any, of payment of shares of that series; and

(viii) Any other relative rights, preferences, powers, qualifications,
limitations or restrictions thereof.

SECTION 5. ADJUSTMENT OF NUMBER CONSTITUTING SERIES. The Board of Directors is
expressly authorized as to any wholly unissued series of Preferred Stock, to

--------------------------------------------------------------------------------

determine the number of shares thereof and the dividend rights, dividend rates,
conversion rights (if any), redemption prices, liquidation preferences, voting
rights (if any), the rights and terms of redemption (including sinking fund
provisions) and all other rights, preferences and privileges thereof. The Board
of Directors may increase or decrease the number of shares of any series
subsequent to the issue of shares of that series, but not below the number of
shares of that series then outstanding. In case the number of shares of any
series shall be so decreased, the shares constituting that decrease shall resume
the status that they had prior to the adoption of the resolution originally
fixing the number of shares of that series.

SECTION 6. NO VOTING RIGHTS BY IMPLICATION. The Common Stock and any series of
Preferred Stock with full voting rights, shall all vote together as one class,
and none of the Common Stock or such series of Preferred Stock shall have any
other or special voting rights except as otherwise required by the laws then
applicable, the Corporation’s Certificate of Incorporation, or any amendments
hereto, or any resolution or resolutions of the Board of Directors providing for
the issue of shares of such series of Preferred Stock.

SECTION 7. NO ACTION BY WRITTEN CONSENT OF STOCKHOLDERS. The holders of Common
Stock shall not have power to authorize by consent in writing, without a meeting
and a vote, any action permitted or required to be taken at an annual or special
meeting of stockholders.

ARTICLE 5

SECTION 1. The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors and elections of directors need
not be by written ballot unless otherwise provided in the Bylaws. The number of
directors of the Corporation shall be fixed from time to time by the Board of
Directors either by a resolution or Bylaw adopted by the affirmative vote of a
majority of the entire Board of Directors.

SECTION 2. Meetings of the stockholders may be held within or without the State
of Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the Delaware Statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the Board of Directors or by the Bylaws of the Corporation.

ARTICLE 6

A director of this Corporation shall not be personally liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that this provision shall not eliminate or limit the
liability of a director (i) for any breach of the director’s duty of loyalty to
the Corporation or its stockholders; (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of the law;
(iii) under Section 174 of the General Corporation Law of the State of Delaware;
or (iv) for any transaction from which the director derived an improper personal
benefit. If from time to time hereafter any provision in the General Corporation
Law of the State of Delaware is amended to authorize corporate action further
limiting or eliminating the personal liability of directors, then the liability
of the directors of the Corporation shall be limited or eliminated to the
fullest additional extent permitted by such provision, as so amended; provided,
however,

--------------------------------------------------------------------------------

no such amendment shall further eliminate or limit liability of a director for
any act before such amendment becomes effective. Any repeal or modification of
this Article 6 by the stockholders of the Corporation shall be prospective only,
and shall not adversely affect any elimination or limitation on the personal
liability of a director of the Corporation for acts prior to the time of such
repeal or modification. The Corporation shall have the authority to indemnify,
by bylaw, agreement or otherwise, any person to the fullest extent permissible
under law and in excess of that which may be expressly authorized.

ARTICLE 7

The Board of Directors of the Corporation shall have the power to make, alter,
amend, change, add to or repeal the Bylaws of the Corporation.

ARTICLE 8

There shall be a series of Preferred Stock, par value $0.001 per share, of the
Corporation, to be designated “Series A Junior Participating Preferred Stock,”
initially consisting of 150,000 shares.

SECTION 1. DESIGNATION AND AMOUNT. The shares of such series shall be designated
as “Series A Junior Participating Preferred Stock,” with a par value $0.001 per
share, and the number of shares constituting such series shall be 150,000.

SECTION 2. DIVIDENDS AND DISTRIBUTIONS.

(a) Subject to the prior and superior right of the holders of any shares of any
series of Preferred Stock ranking prior and superior to the shares of Series A
Junior Participating Preferred Stock with respect to dividends, the holders of
shares of Series A Junior Participating Preferred Stock shall be entitled to
receive when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the last day
of September, December, March and June in each year (each such date being
referred to herein as a “Quarterly Dividend Payment Date”), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Junior Participating Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to, subject to the
provision for adjustment hereinafter set forth, 10,000 times the aggregate per
share amount of all cash dividends, and 10,000 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions other
than a dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock of the Corporation (the “Common Stock”) since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Junior Participating Preferred Stock. In the
event the Corporation shall at any time after the close of business on July 4,
2002 (the “Rights Declaration Date”) (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case, the amount to which holders of shares of Series A Junior
Participating Preferred Stock were entitled immediately prior to such event
under the preceding sentence shall be adjusted by

--------------------------------------------------------------------------------

multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

(b) The Corporation shall declare a dividend or distribution on the Series A
Junior Participating Preferred Stock as provided in paragraph (a) above
immediately after it declares a dividend payable in shares of Common Stock.

(c) Dividends shall begin to accrue and be cumulative on outstanding shares of
Series A Junior Participating Preferred Stock from the Quarterly Dividend
Payment Date preceding the date of issue of such shares of Series A Junior
Participating Preferred Stock, unless the date of issue of such shares is prior
to the record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares of Series
A Participating Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Junior Participating Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Junior Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than thirty (30) days prior
to the date fixed for the payment thereof.

SECTION 3. VOTING RIGHTS. The holders of shares of Series A Junior Participating
Preferred Stock shall have the following voting rights:

(a) Subject to the provision for adjustment hereinafter set forth, each share of
Series A Junior Participating Preferred Stock shall entitle the holder thereof
to 10,000 votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the number of votes per share to which holders of shares of Series A Junior
Participating Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.

(b) Except as otherwise provided herein or by law, the holders of shares of
Series A Junior Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.

(c) Except as required by law, holders of Series A Junior Participating
Preferred Stock shall have no special voting rights and their consent shall not
be required (except to the extent they

--------------------------------------------------------------------------------

are entitled to vote with holders of Common stock as set forth herein) for
taking any corporate action.

SECTION 4. CERTAIN RESTRICTIONS.

 (a) The Corporation shall not declare any dividend on, make any distribution
on, or redeem or purchase or otherwise acquire for consideration any shares of
Common Stock after the first issuance of a share or fraction of a share of
Series A Junior Participating Preferred Stock unless concurrently therewith it
shall declare a dividend on the Series A Junior Participating Preferred Stock as
required by Section 2 hereof.

(b) Whenever quarterly dividends or other dividends or distributions payable on
the Series A Junior Participating Preferred Stock as provided in Section 2 are
in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:

(i) declare or pay dividends on, make any other distributions on, or redeem or
purchase or otherwise acquire for consideration any shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Junior Participating Preferred Stock;

(ii) declare or pay dividends on, make any other distributions on any shares of
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with Series A Junior Participating Preferred Stock,
except dividends paid ratably on the Series A Junior Participating Preferred
stock and all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares are then
entitled;

(iii) redeem or purchase or otherwise acquire for consideration shares of any
stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Junior Participating Preferred
Stock, provided that the Corporation may at any time redeem purchase or
otherwise acquire shares of any such parity stock in exchange for shares of any
stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Junior Participating
Preferred Stock; or

(iv) purchase or otherwise acquire for consideration any shares of Series A
Junior Participating Preferred Stock, or any shares of stock ranking on a parity
with the Series A Junior Participating Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as determined by the
Board of Directors) to all holders of such shares upon such terms as the Board
of Directors, after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series and classes,
shall determine in good faith that such purchase or acquisition will result in
fair and equitable treatment among the respective series or classes.

(c) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (a) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.

--------------------------------------------------------------------------------

SECTION 5. REACQUIRED SHARES. Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.

SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.

(a) Upon any liquidation (voluntary or otherwise), dissolution or winding up of
the Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred Stock
shall have received an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment,
plus an amount equal to the greater of (1) $50,000 per share, provided that in
the event the Corporation does not have sufficient assets, after payment of its
liabilities and distribution to holders of Preferred Stock ranking prior to the
Series A Participating Preferred Stock, available to permit payment in full of
the $50,000 per share amount, the amount required to be paid under this Section
6(a)(1) shall, subject to Section 6(b) hereof, equal the value of the amount of
available assets divided by the number of outstanding shares of Series A
Participating Preferred Stock or (2) subject to the provisions for adjustment
hereinafter set forth, 10,000 times the aggregate per share amount to be
distributed to the holders of Common Stock (the greater of (1) or (2), the
“Series A Liquidation Preference”). In the event the Corporation shall at any
time after the Rights Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the amount to which holders of shares of Series A Junior
Participating Preferred Stock were entitled immediately prior to such event
under clause (2) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock that were outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.

(b) In the event, however, that there are not sufficient assets available to
permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other series of Preferred Stock, if any, which
rank on a parity with the Series A Junior Participant Preferred Stock, then such
remaining assets shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation preferences.

SECTION 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case the shares of Series A
Participating Preferred Stock shall at the same time be similarly exchanged or
changed in amount per share (subject to the provision for adjustment hereinafter
set forth) equal to 10,000 times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be, into

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which or for which each share of Common Stock is changed or exchanged. In the
event the Corporation shall at any time after the Rights Declaration Date (i)
declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of shares
of Series A Junior Participating Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

SECTION 8. NO REDEMPTION. The shares of Series A Junior Participating Preferred
Stock shall not be redeemable.

SECTION 9. RANKING. The Series A Junior Participating Preferred Stock shall rank
junior to all other series of the Corporation’s Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.

SECTION 10. AMENDMENT. The Certificate of Incorporation, as from time to time
amended, of the Corporation shall not be further amended in any manner which
would materially alter or change the powers, preference or special rights of the
Series A Junior Participating Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of a majority or more of the
outstanding shares, if any, of Series A Junior Participating Preferred Stock,
voting separately as a class.

SECTION 11. FRACTIONAL SHARES. Series A Junior Participating Preferred Stock may
be issued in fractions that are integral multiples of one one-millionth of one
share, which shall entitle the holder, in proportion to such holder’s fractional
shares, to exercise voting rights, receive dividends, participate in
distributions and to have the benefit of all other rights of holders of Series A
Junior Participating Preferred Stock.

ARTICLE 9

There shall be a series of the authorized preferred shares of this Corporation
having a par value of $0.001 per share, which series (this “Series”) shall be
designated “Series B Preferred Stock” and shall consist of 4,000,000 shares
having the following rights, preferences and privileges:

(a) Dividend Rights.

(1)  Dividends on shares of this Series shall accrue and be cumulative from and
including the Deemed Initial Issue Date to and including the date on which such
shares shall have been paid the Liquidation Preference pursuant to section (b)
below or been redeemed pursuant to section (c) below. Such dividends shall
accrue whether or not there shall be (at the time such dividend becomes payable
or at any other time) profits, surplus or other funds of the Corporation legally
available for the payment of dividends.  Dividends on shares of this Series
shall be in an amount calculated at a rate per share per annum (the “Dividend
Rate”) equal to 10% of the Liquidation Preference (as defined below, but
including only dividends unpaid on the previous Dividend Payment Dates and
excluding

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dividends payable at that Dividend Payment Date itself) per share of this
Series, which is initially equal to one dollar ($1.00) per share per year. 
Dividends on the shares of this Series shall be paid either (i) in fully paid
and nonassessable shares of this Series valued at the Liquidation Preference per
share (such dividends paid in kind (including any dividends payable in kind
pursuant to this section) being herein called “PIK Dividends”) or (ii) in cash
(such dividends being referred to as the “Cash Dividends”). The PIK Dividends
shall be declared and paid, unless Cash Dividends are declared and paid, to the
extent there is either a surplus or net profits in the current year or preceding
year at least equal to the aggregate par value of the dividend shares, and
whether or not there are profits, surplus or other funds of the Corporation
legally available for payment of cash dividends.  The Cash Dividends shall be
payable only when, as and if declared by the Board of Directors of the
Corporation out of funds legally available for the payment of dividends, and
otherwise the dividends shall be deemed declared and paid as PIK Dividends.  The
amount of PIK Dividends shall be determined by dividing (i) the total amount of
the aggregate dollar amount of dividends accrued and unpaid with respect to such
record holder of shares during the applicable Dividend Period (rounded to the
nearest whole cent) by (ii) the Liquidation Preference.  The Corporation shall
not issue fractional shares of this Series, but in lieu of any fractional shares
to which holders may otherwise become entitled pursuant to any provision hereof,
the Corporation shall from time to time do any of the following, independently
or in any combination:  (i) deliver its check in an amount equal to the
applicable fraction of the Liquidation Preference, (ii) issue script
representing a right to combine script into whole shares that expires at a time
determined by the Board of Directors, or (iii) arrange to sell to third parties
a number of whole shares approximately equal to the combined amount of
fractional shares and divide the proceeds ratably among those otherwise entitled
to fractional shares.  Any additional shares of this Series issued as PIK
Dividends shall be governed by this resolution and shall be subject in all
respects, except as to the date of issuance and the date from which dividends
accrue and cumulate as set forth below, to the same terms as the shares of  this
Series originally issued hereunder.  Dividends shall be payable on shares issued
as PIK Dividends commencing on the first Dividend Payment Date after such shares
are issued.

(2)  If PIK Dividends are paid, the PIK Dividends shall be paid by recording a
book entry of the shares and script for fractional shares of this Series in the
Corporation’s stock ledger for this Series.  From and after the second Dividend
Payment Date, PIK Dividends paid theretofore or thereafter shall, upon written
notice from the record holder of this Series to the Corporation’s Secretary, be
delivered to the record holder as stock certificates.

(3)  Dividends shall be payable for the period from and including the Deemed
Initial Issue Date (as defined below) to and including June 30, 2007 (the
“Initial Dividend Period”), and for each annual dividend period thereafter (the
Initial Dividend Period and each annual dividend period being hereinafter
individually referred to as a “Dividend Period” and collectively referred to as
“Dividend Periods”), which annual Dividend Periods shall commence on and include
July 1 of each year (each, a “Dividend Period Commencement Date”), and shall end
on and include the succeeding June 30.  In the event of a liquidation or
redemption not occurring on a June 30, a Dividend Period shall be from the
Dividend Period Commencement Date to and including the date payment is made. 
All dividends shall be paid on or before the 31st calendar day immediately after
the Dividend Period; provided, that if any such day shall be a Saturday, Sunday,
or a day on which banking institutions in the State

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of New York or the State of California are authorized or obligated by law to
close, or a day which is or is declared a national or a New York or California
state holiday (any of the foregoing a “Non-Business Day”), then the payment date
shall be the next succeeding day which is not a Non-Business Day (“Dividend
Payment Date”). The record date shall be the last day of the Dividend Period. 
Each such dividend shall be paid to the holders of record of shares of this
Series as they appear on the stock register of the Corporation on such record
date.  “Deemed Initial Issue Date” means (a) July 1, 2006 in the case of any
share that is part of any issuance of shares of this Series on or prior to June
30, 2007 and (b) in the case of any share which is part of any issuance of
shares of this Series subsequent to June 30, 2007, the latest Dividend Period
Commencement Date which precedes the date of issuance of such share.

(4)  After dividends on this Series have been paid or declared and funds or
shares therefor set aside for payment, including for the then current Dividend
Period, the holders of shares of this Series will not be entitled to any further
dividends with respect to that Dividend Period.

(5) Dividends payable on shares of this Series for any period greater or less
than a full Dividend Period, including the Initial Dividend Period, shall be
computed on the basis of a 360-day year consisting of twelve 30-day months.

(b) Liquidation.

In the event of any voluntary or involuntary liquidation, dissolution, or
winding up of the Corporation, the holders of shares of this Series are entitled
to receive out of the assets of the Corporation available for distribution to
shareholders, as a preference and before any distribution of assets is made to
holders of Common Shares or any other class or series of shares ranking junior
to the shares of this Series upon liquidation, liquidating distributions in an
amount per share equal to an initial amount of ten dollars  ($10.00) per share
Preference plus an amount equal to all accumulated and unpaid dividends (whether
or not earned or declared) to the date of the distribution (the “Liquidation
Preference”). If, upon any voluntary or involuntary liquidation, dissolution, or
winding up of the Corporation the amounts payable with respect to the shares of
this Series and any other shares of the Corporation ranking as to any such
distribution on a parity with the shares of this Series are not paid in full,
the holders of shares of this Series and of such other shares will share ratably
in any such distribution of assets of the Corporation in proportion to the full
respective preferential amounts to which they are entitled. After payment of the
full amount of the liquidating distribution to which they are entitled, the
holders of shares of this Series will not be entitled to any further
participation in any distribution of assets by the Corporation.  Written notice
of any such liquidation, dissolution or winding up of the Corporation, stating
the payment date or dates when, and the place or places where the amounts
distributable in such circumstances shall be payable, shall be given by first
class mail, postage pre-paid, not less than 30 nor more than 60 days prior to
the payment date stated therein, to each record holder of the shares of this
Series at the respective addresses of such holders as the same shall appear on
the stock transfer records of the Corporation.  For purposes of liquidation
rights, a reorganization or consolidation or merger of the Corporation with or
into any other corporation or corporations or a sale of all or substantially all
of the assets of the Corporation shall be deemed not to be a liquidation,
dissolution or winding up of the Corporation.

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(c) Redemption.

(1) Mandatory Redemption upon Liquidity Event.

(A)  Within 30 days following any Liquidity Event, the Corporation shall mail a
notice to each holder of shares of this Series describing the transaction or
transactions that constitute the Liquidity Event and offering to repurchase the
shares of this Series on the date specified in such notice, which date shall be
no earlier than 30 days and no later than 60 days from the date such notice is
mailed (the “Liquidity Event Payment Date”), pursuant to the procedures required
by this Certificate of Designation and described in such notice. This paragraph
shall be applicable regardless of whether any other provisions of this
Certificate of Designation are applicable.

(B)  Each holder of shares of this Series shall have the right to require the
Corporation to repurchase all or any part of that holder’s shares of this Series
pursuant to the offer described below (the “Liquidity Event Offer”). In the
Liquidity Event Offer, the Corporation shall offer a payment in cash for each
outstanding share of this Series equal to the Liquidation Preference per share
of this Series (the “Liquidity Event Payment”).

(C)  On the Liquidity Event Payment Date, the Corporation shall, to the extent
lawful:

(i) accept for payment all shares of this Series or portions thereof properly
tendered pursuant to the Liquidity Event Offer;

(ii) promptly mail to each holder of shares of this Series so tendered the
Liquidity Event Payment for each share of this Series so tendered and promptly
authenticate and mail to each such holder a new certificate representing the
shares of this Series equal in Liquidation Preference to any unpurchased portion
of the shares of this Series surrendered, if any.

(D)  “Liquidity Event” means the occurrence of any of the following:

(i) the direct or indirect sale, transfer, conveyance or other disposition
(other than by way of merger, consolidation or transfer of the Corporation’s
common stock or other stock with rights to vote for directors (“Voting Stock”)),
in one or a series of related transactions, of all or substantially all of the
properties or assets of the Corporation and its Subsidiaries, taken as a whole,
to any “person” (as that terms is used in Section 13(d)(3) of the Exchange Act)
other than the Corporation or a wholly-owned Subsidiary of the Corporation;

(ii) the consummation of any transaction or series of related transactions
(including, without limitation, any merger or consolidation) the result of which
is that any “person” (as defined above), other than the holders of the shares of
this Series, becomes the Beneficial Owner, directly or indirectly, of more than
fifty percent (50%) of the Voting Stock of the Corporation, measured by voting
power rather than number of shares;

(iii) during any period of twelve (12) consecutive months after the Initial
Issue Date, the individuals who at the beginning of any such 12-month period

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constituted the Board of Directors (the “Incumbent Board”) cease for any reason
to constitute at least a majority of such Board; provided that (i) any
individual becoming a director whose election, or nomination for election by the
Corporation’s stockholders, was approved by a vote of the stockholders having
the specific right to designate such director and (ii) any director whose
election to the Board of Directors or whose nomination for election by the
stockholders of the Corporation was approved by majority vote of the Board of
Directors, shall, in each such case, be considered as though such individual
were a member of the Incumbent Board, but excluding, as a member of the
Incumbent Board, any such individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the directors of the Corporation (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Securities Exchange Act of 1934,
as amended (“Exchange Act”)) and further excluding any person who is an
affiliate or associate (as those terms are defined in the General Rules and
Regulations under the Exchange Act) of any Person having or proposing to acquire
beneficial ownership of fifty percent (50%) or more of the Voting Stock of the
Corporation; or

(iv) the approval by the stockholders of the Corporation of a reorganization,
merger or consolidation, in each case, with respect to which all or
substantially all of the individuals and entities who were the respective
beneficial owners (as defined in the Exchange Act) of the Voting Stock
immediately prior to such reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than fifty percent (50%) of the Voting Stock
resulting from such reorganization, merger or consolidation;

provided that the occurrence of any event identified in subparagraphs (i)
through (iv) above that would otherwise be treated as a Liquidity Event shall
not constitute a Liquidity Event hereunder if and only if (A) the Board of
Directors, by vote duly taken, and (B) the holders of a majority of the
outstanding shares of this Series, by written consent, shall so determine.

(2)  Redemption at the Corporation’s Option.  The shares of this Series are not
redeemable at the Corporation’s option prior to June 30, 2008. On or after such
date, the shares of this Series are redeemable at the option of the Corporation,
in whole or in part, from time to time, by resolution of the Board of Directors,
upon not less than 30 nor more than 60 days’ notice, at a cash redemption price
per share equal to the Liquidation Preference plus an amount equal to all
accumulated and unpaid dividends (whether or not earned or declared) to the date
of redemption. If fewer than all the outstanding shares of this Series are to be
redeemed, the number of shares to be redeemed will be determined by the Board of
Directors, and such shares shall be redeemed pro rata from the holders of record
of such shares in proportion to the number of such shares held by such holders
(with adjustments to avoid redemption of fractional shares) in a manner
determined by the Board of Directors.  Notwithstanding the foregoing, if any
dividends, including any accumulation, on the shares of this Series are in
arrears, no shares of this Series shall be redeemed unless all outstanding
shares of this Series are simultaneously redeemed, and the Corporation shall not
purchase or otherwise acquire, directly or indirectly, any shares of this
Series; provided, however, that the foregoing shall not prevent the purchase or
acquisition of shares of this Series pursuant to a purchase or exchange offer
provided such offer is made on the same terms to all holders of shares of this
Series.

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(3) Terms Applicable to any Redemption.

(A) Immediately prior to any redemption of shares of this Series, the
Corporation shall pay, in cash, any accumulated and unpaid dividends through the
redemption date, unless a redemption date falls after a dividend payment record
date and prior to the corresponding dividend payment date, in which case each
holder of shares of this Series at the close of business on such dividend
payment record date shall be entitled to the dividend payable on such shares on
the corresponding dividend payment date notwithstanding the redemption of such
shares before such dividend payment date. Except as expressly provided herein
above, the Corporation shall make no payment or allowance for unpaid dividends,
whether or not in arrears, on shares of this Series called for redemption.

(B) Notice of redemption shall be mailed by the Company by first class mail,
postage pre-paid, to each record holder of the shares of this Series to be
redeemed, not less than 30 nor more than 60 days prior to such redemption date,
to the respective addresses of such holders as the same shall appear on the
stock transfer records of the Corporation. Each notice shall state: (i) the
redemption date; (ii) the number of shares of this Series to be redeemed;
(iii) the redemption price; (iv) the place or places where certificates for such
shares are to be surrendered for payment of the redemption price; and (v) that
dividends on the shares to be redeemed will cease to accumulate on such
redemption date. If fewer than all the shares of this Series held by any holder
are to be redeemed, the notice mailed to such holder shall also specify the
number of shares of this Series to be redeemed from such holder.

(C) In order to facilitate the redemption of shares of this Series, the Board of
Directors may fix a record date for the determination of the shares to be
redeemed, such record date to be not less than 30 or more than 60 days prior to
the date fixed for such redemption.

(D) Notice having been given as provided above, from and after the date fixed
for the redemption of shares of this Series by the Corporation (unless the
Corporation shall fail to make available the money necessary to effect such
redemption), the holders of shares selected for redemption shall cease to be
shareholders with respect to such shares and shall have no interest in or claim
against the Corporation by virtue thereof and shall have no voting or other
rights with respect to such shares, except the right to receive the moneys
payable upon such redemption from the Corporation, less any required tax
withholding amount, without interest thereon, upon surrender (and endorsement or
assignment of transfer, if required by the Corporation and so stated in the
notice) of their certificates, and the shares represented thereby shall no
longer be deemed to be outstanding. If fewer than all the shares represented by
a certificate are redeemed, a new certificate shall be issued, without cost to
the holder thereof, representing the unredeemed shares. The Corporation may, at
its option, at any time after a notice of redemption has been given, deposit the
redemption price for the shares of this Series designated for redemption and not
yet redeemed, plus any accumulated and unpaid dividends thereon to the date
fixed for redemption, with the transfer agent or agents for this Series, as a
trust fund for the benefit of the holders of the shares of this Series
designated for redemption, together with irrevocable instructions and authority
to such transfer agent or agents that such funds be delivered upon redemption of
such shares and to pay, on and after the date fixed for redemption or prior
thereto, the redemption price of the shares to their respective holders upon the
surrender of

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their share certificates. From and after the making of such deposit, the holders
of the shares designated for redemption shall cease to be shareholders with
respect to such shares and shall have no interest in or claim against the
Corporation by virtue thereof and shall have no voting or other rights with
respect to such shares, except the right to receive from such trust fund the
moneys payable upon such redemption, without interest thereon, upon surrender
(and endorsement, if required by the Corporation) of their certificates, and the
shares represented thereby shall no longer be deemed to be outstanding. Any
balance of such moneys remaining unclaimed at the end of the five-year period
commencing on the date fixed for redemption shall be repaid to the Corporation
upon its request expressed in a resolution of its Board of Directors.

(4)  Status of Redeemed Shares of this Series.  Any shares of this Series that
shall at any time have been redeemed shall, after such redemption, have the
status of authorized but unissued preferred shares, without designation as to
series until such shares are once more designated as part of a particular series
by the Board of Directors.

(d) Voting Rights. The shares of this Series shall not have any voting powers
either general or special, except as required by law.

(e) Ranking and Protective Provisions.  The shares of this Series shall rank
senior to the Common Shares and the Series A Junior Participating Preferred
Stock as to liquidation and as to dividends.  The affirmative vote or consent of
the holders of at least a majority of the outstanding shares of this Series,
voting separately as a class, will be required for any amendment to the
Certificate of Incorporation of the Corporation that will adversely alter or
change the powers, preferences, privileges or rights of the shares of this
Series, except the Corporation may, without the vote of the holders of
outstanding shares of this Series, from time to time merge, reorganize, combine,
or consolidate the Corporation, designate, authorize, issue, or increase the
designated authorized amount of, any class or series of shares of preferred
stock of the Corporation ranking prior, on a parity with or junior to this
Series as to dividends or upon liquidation or otherwise or authorize any
obligation or security convertible into or evidencing a right to purchase any
such security.  The amount of the Corporation’s capital on account of the
outstanding shares of this Series shall equal their aggregate par value.

(f) Conversion. The shares of this Series are not convertible into shares of any
other class or series of the capital stock of the Corporation.

(g) Shareholder Rights Plan.  Notwithstanding the foregoing, the Corporation may
at any time in its discretion redeem the rights to purchase attached to, or in
the future separated from, the Common Shares pursuant to the Corporation’s
Shareholder Rights Plan, as it may be amended from time to time, or any similar
successor plan.

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EXHIBIT C

Bylaws

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BYLAWS

OF

JAVO BEVERAGE COMPANY, INC.
A DELAWARE CORPORATION

AS ADOPTED THE 21ST DAY OF JUNE, 2002

ARTICLE I
---------
OFFICES

SECTION 1. REGISTERED OFFICE. The registered office of the Corporation in the
State of Delaware shall be in the City of Wilmington, County of New Castle.

SECTION 2. OTHER OFFICES. The Corporation may also have offices at such other
places both within and without the State of Delaware as the Board of Directors
may from time to time determine or the business of the Corporation may require.

SECTION 3. BOOKS. The books of the Corporation may be kept within or without the
State of Delaware as the Board of Directors may from time to time determine or
the business of the Corporation may require.

ARTICLE II
----------
MEETINGS OF STOCKHOLDERS

SECTION 1. PLACE OF MEETINGS. All meetings of stockholders for the election of
directors shall be held at such place either within or without the State of
Delaware as may be fixed from time to time by the Board of Directors, or at such
other place either within or without the State of Delaware as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.

SECTION 2. ANNUAL MEETINGS. Annual meetings of stockholders shall be held at a
time and date designated by the Board of Directors for the purpose of electing
directors and transacting such other business as may properly be brought before
the meeting.

SECTION 3. SPECIAL MEETINGS. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called at any time by a majority of the
Board of Directors, the Chairman of the Board or the Chief Executive Officer.

SECTION 4. NOTIFICATION OF BUSINESS TO BE TRANSACTED AT MEETING. To be properly
brought before a meeting, business must be (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors, (b) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (c) otherwise properly brought before
the meeting by a stockholder entitled to vote at the meeting.

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         SECTION 5. NOTICE; WAIVER OF NOTICE. Whenever stockholders are required
or permitted to take any action at a meeting, a written notice of the meeting
shall be given which shall state the place, date and hour of the meeting, and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called. Unless otherwise required by law, such notice shall be given not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the mail, postage prepaid,
directed to the stockholder at his address as it appears on the records of the
Corporation. A written waiver of any such notice signed by the person entitled
thereto, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.

         SECTION 6. QUORUM; ADJOURNMENT. Except as otherwise required by law, or
provided by the Certificate of Incorporation or these Bylaws, the holders of a
majority of the capital stock issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum
for the transaction of business at all meetings of the stockholders. A meeting
at which a quorum is initially present may continue to transact business,
notwithstanding the withdrawal of enough votes to leave less than a quorum, if
any action taken is approved by at least a majority of the required quorum to
conduct that meeting. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the Chairman of the meeting or
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting of the time and place of the adjourned
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed. If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder entitled to vote at the
meeting.

         SECTION 7. VOTING. Except as otherwise required by law, or provided by
the Certificate of Incorporation or these Bylaws, any question brought before
any meeting of stockholders at which a quorum is present shall be decided by the
vote of the holders of a majority in voting interest of the stock represented
and entitled to vote thereat and voting thereon. Unless otherwise provided in
the Certificate of Incorporation, each stockholder represented at a meeting of
stockholders shall be entitled to cast one vote for each share of the capital
stock entitled to vote thereat held by such stockholder. Such votes may be cast
in person or by proxy, but no proxy shall be voted on or after three (3) years
from its date, unless such proxy provides for a longer period. The vote at any
meeting of the stockholders on any question need not be by ballot, unless so
directed by the Chairman of the meeting or required by the certificate of
incorporation. On a vote by ballot, each ballot shall be signed by the
stockholder voting, or by his proxy, if there be such proxy, and shall state the
number of shares voted. Elections of directors need not be by ballot unless the
Chairman of the meeting so directs or unless a stockholder demands election by
ballot at the meeting and before the voting begins.

SECTION 8. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.  Except as
otherwise provided in the Certificate of Incorporation, any action which may be
taken at any annual or special meeting of stockholders, may be taken without a
meeting and without prior notice, if a consent in writing, setting forth the
action so taken, is

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signed by the holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted. All
such consents shall be filed with the Secretary of the Corporation and shall be
maintained in the corporate records. Prompt notice of the taking of corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing.

         SECTION 9. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer who has
charge of the stock ledger of the Corporation shall prepare and make, at least
ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
lace where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder of the Corporation who is present.

         SECTION 10. STOCK LEDGER. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 9 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.

         SECTION 11. INSPECTORS OF ELECTION. In advance of any meeting of
stockholders, the Board of Directors may appoint one or more persons (who shall
not be candidates for office) as inspectors of election to act at the meeting or
any adjournment thereof. If an inspector or inspectors are not so appointed, or
if an appointed inspector fails to appear or fails or refuses to act at a
meeting, the Chairman of any meeting of stockholders may, and on the request of
any stockholder or his proxy shall, appoint an inspector or inspectors of
election at the meeting. The duties of such inspector(s) shall include:
determining the number of shares outstanding and the voting power of each; the
shares represented at the meeting; the existence of a quorum; the authenticity,
validity and effect of proxies; receiving votes, ballots or consents; hearing
and determining all challenges and questions in any way arising in connection
with the right to vote; counting and tabulating all votes or consents;
determining the result; and such acts as may be proper to conduct the election
or vote with fairness to all stockholders. In the event of any dispute between
or among the inspectors, the determination of the majority of the inspectors
shall be binding.

         SECTION 12. ORGANIZATION. At each meeting of stockholders the Chairman
of the Board of Directors, if one shall have been elected, (or in his absence or
if one shall not have been elected, the Chief Executive Officer) shall act as
Chairman of the meeting. The Secretary (or in his absence or inability to act,
the person whom the Chairman of the meeting shall appoint secretary of the
meeting) shall act as secretary of the meeting and keep the minutes thereof.

         SECTION 13. ORDER OF BUSINESS. The order and manner of transacting
business at all meetings of stockholders shall be determined by the Chairman of
the meeting.

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SECTION 14. STOCKHOLDER PROPOSALS AT MEETINGS OF THE STOCKHOLDERS.

         (a) At an annual or special meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before a stockholders’ annual or special
meeting, business must be (i) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board; (ii) otherwise
properly brought before the meeting by or at the direction of the Board; or
(iii) otherwise properly brought before the meeting by a stockholder. In
addition to any other applicable requirements, and subject to any limitations on
business which may be proposed or transacted at such meeting, including the
provisions of Article II, Section 3 of these Bylaws, for business to be properly
brought before an annual or special meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely with respect to an annual meeting, a stockholder’s
notice must be received at the principal executive officer of the Corporation
not less than sixty (60) days nor more than ninety (90) days prior to the date
of such annual meeting; provided, however, that in the event that the first
public disclosure (whether by mailing of a notice to stockholders or by press
release or otherwise) of the date of the annual meeting is made less than
seventy (70) days prior to the date of the meeting, notice by the stockholder
will be timely received not later than the close of business on the tenth (10th)
day following the day on which such public disclosure was first made. To be
timely with respect to a special meeting, a stockholder’s notice must be
received at the principal executive office of the Corporation not later than the
close of business on the tenth (10th ) day following the day on which the first
public disclosure (whether by mailing of a notice to stockholders or by press
release or otherwise) of the date of the special meeting is made.

         (b) A stockholder’s notice to the Secretary shall set forth, as to each
matter the stockholder proposes to bring before the annual or special meeting:
(i) a reasonably detailed description of any proposal to be made at such
meeting; (ii) the name and address, as they appear on the Corporation’s stock
register, of the stockholder proposing such business; (iii) the class and number
of shares of capital stock of the Corporation which are beneficially owned by
the stockholder; (iv) any material interest of the stockholder in such business;
and (v) such other information relating to the stockholder or the proposal as is
required to be disclosed under the rules of the Securities and Exchange
Commission governing the solicitation of proxies whether or not such proxies are
in fact solicited by the stockholder. Notwithstanding anything in these Bylaws
to the contrary, no business shall be conducted at an annual or special
stockholders’ meeting except in accordance with the procedures set forth in this
Section 14; provided, however, that nothing in this Section 14 shall be deemed
to preclude discussion by any stockholder of any business properly brought
before the annual or special meeting in accordance with said procedures. The
chairman of an annual or special meeting shall, if the facts warrant, determine
and declare to the meeting that business was not properly brought before the
meeting in accordance with the provisions of this Section 14, and if he should
so determine any such business not properly brought before the meeting shall not
be transacted.

SECTION 15. NOTICE OF STOCKHOLDER NOMINEES.

         (a) Only persons who are nominated in accordance with the procedures
set forth in this Section 15 shall be eligible for election as Directors.
Nominations of persons for election to the Board of Directors of the Corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors or by any stockholder of the Corporation entitled to vote for the
election of Directors at the meeting who complies with the notice procedures set
forth in this Section 15. Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to timely notice in
writing to the Secretary of the Corporation.

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To be timely, a stockholder’s notice shall be delivered to or mailed and
received at the principal executive offices of the Corporation not less than
sixty (60) days nor more than ninety (90) days prior to the date of the meeting;
provided, however, that in the event that the first public disclosure (whether
by mailing of a notice to stockholders or by press release or otherwise) of the
date of the meeting is made less than seventy (70) days prior to the date of the
meeting, notice by the stockholder will be timely received not later than the
close of business on the tenth (10th) day following the day on which such public
disclosure was first made.

         (b) A stockholder’s notice to the Secretary shall set forth (a) as to
each person whom the stockholder proposes to nominate for election or
re-election as a Director, (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or employment of such
person, (iii) the class and number of shares of the Corporation which are
beneficially owned by such person, and (iv) any other information relating to
such person that is required to be disclosed in solicitations of proxies for
election of Directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
without limitation such persons’ written consent to being named in the proxy
statement as a nominee and to serving as a Director if elected); and (b) as to
the stockholder giving notice, (i) the name and address, as they appear on the
Corporation’s books, of such stockholder, and (ii) the class and number of
shares of the Corporation which are beneficially owned by such stockholder. At
the request of the Board of Directors any person nominated for election as a
Director shall furnish to the Secretary of the Corporation that information
required to be set forth in a stockholder’s notice of nomination which pertains
to the nominee and such other information as may reasonably be required by the
Corporation to determine the eligibility for election as a Director of the
Corporation. No person shall be eligible for election as a Director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 15. The Chairman of the meeting shall, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by the Bylaws, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall be disregarded.

ARTICLE III
-----------
DIRECTORS

         SECTION 1. POWERS. Except as otherwise required by law or provided by
the Certificate of Incorporation, the business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors.

         SECTION 2. NUMBER AND ELECTION OF DIRECTORS. Subject to any limitations
in the Certificate of Incorporation, the Board of Directors shall consist of one
(1) director so long as there is only one stockholder of the Corporation, and
shall thereafter consist of not less than three (3) nor more than nine (9)
members. Immediately after the Corporation first has more than one stockholder,
the number of directors shall initially be three (3) and thereafter shall be
fixed from time to time, within the foregoing limits, by resolution of the Board
of Directors. Directors shall be elected at each annual meeting of stockholders
to replace directors whose terms then expire, and each director elected shall
hold office until his successor is duly elected and qualified, or until his
earlier death, resignation or removal. Any director may resign at any time
effective upon giving written notice to the Board of Directors, unless the
notice specifies a later time for such resignation to become effective. Unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective. If the resignation of a director is

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effective at a future time, the Board of Directors may elect a successor prior
to such effective time to take office when such resignation becomes effective.
Directors need not be stockholders.

         SECTION 3. VACANCIES. Subject to the limitations in the Certificate of
Incorporation, vacancies in the Board of Directors resulting from death,
resignation, removal or otherwise and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, although less than a quorum, or by a sole
remaining director. Each director so selected shall hold office for the
remainder of the full term of office of the former director which such director
replaces and until his successor is duly elected and qualified, or until his
earlier death, resignation or removal. No decrease in the authorized number of
directors constituting the Board of Directors shall shorten the term of any
incumbent directors.

         SECTION 4. TIME AND PLACE OF MEETINGS. The Board of Directors shall
hold its meetings at such place, either within or without the State of Delaware,
and at such time as may be determined from time to time by the Board of
Directors.

         SECTION 5. ANNUAL MEETING. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of other
business, as soon as practicable after each annual meeting of stockholders, on
the same day and at the same place where such annual meeting shall be held.
Notice of such meeting need not be given. In the event such annual meeting is
not so held, the annual meeting of the Board of Directors may be held at such
place, either within or without the State of Delaware, on such date and at such
time as shall be specified in a notice thereof given as hereinafter provided in
Section 7 of this Article III or in a waiver of notice thereof.

         SECTION 6. REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held at such places within or without the State of Delaware at such date
and time as the Board of Directors may from time to time determine and, if so
determined by the Board of Directors, notices thereof need not be given.

         SECTION 7. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the Chairman of the Board, the Chief Executive Officer, the
Secretary or by any director. Notice of the date, time and place of special
meetings shall be delivered personally or by telephone to each director or sent
by first-class mail or telegram, charges prepaid, addressed to each director at
the director’s address as it is shown on the records of the Corporation. In case
the notice is mailed, it shall be deposited in the United States mail at least
four (4) days before the time of the holding of the meeting. In case the notice
is delivered personally or by telephone or telegram, it shall be delivered
personally or by telephone or to the telegraph company at least forty-eight (48)
hours before the time of the holding of the meeting. The notice need not specify
the purpose of the meeting. A written waiver of any such notice signed by the
person entitled thereto, whether before or after the time stated therein, shall
be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends
the meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened.

         SECTION 8. QUORUM; VOTE REQUIRED FOR ACTION; ADJOURNMENT. Except as
otherwise required by law, or provided in the Certificate of Incorporation or
these Bylaws, a majority of the directors shall constitute a quorum for the
transaction of business at all meetings

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of the Board of Directors and the affirmative vote of not less than a majority
of the directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors. If a quorum shall not be present at any meeting
of the Board of Directors, the directors present thereat may adjourn the
meeting, from time to time, without notice other than announcement at the
meeting, until a quorum shall be present. A meeting at which a quorum is
initially present may continue to transact business, notwithstanding the
withdrawal of directors, if any action taken is approved by at least a majority
of the required quorum to conduct that meeting. When a meeting is adjourned to
another time or place (whether or not a quorum is present), notice need not be
given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. At the adjourned meeting, the
Board of Directors may transact any business which might have been transacted at
the original meeting.

         SECTION 9. ACTION BY WRITTEN CONSENT. Unless otherwise restricted by
the Certificate of Incorporation, any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee thereof may be
taken without a meeting if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.

         SECTION 10. TELEPHONE MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, members of the Board of Directors of the
Corporation, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors or such committee, as the
case may be, by conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this Section 10 shall constitute presence
in person at such meeting.

SECTION 11. COMMITTEES. The Board of Directors may, by resolution passed
unanimously by the entire Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board of Directors may designate one or more directors as alternate members of
any such committee, who may replace any absent or disqualified member at any
meeting of the committee. In the event of absence or disqualification of a
member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the committee member or members present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
the absent or disqualified member. Any committee, to the extent allowed by law
and as provided in the resolution establishing such committee, shall have and
may exercise all the power and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it, but no
such committee shall have the power or authority in reference to (i) approving
or adopting, or recommending to the stockholders, any action or matter expressly
required by the Delaware General Corporation Law to be submitted to stockholders
for approval or (ii) adopting, amending or repealing any bylaw of the
Corporation. Each committee shall keep regular minutes of its meetings and
report to the Board of Directors when required.

         SECTION 12. COMPENSATION. The directors may be paid such compensation
for their services as the Board of Directors shall from time to time determine.

         SECTION 13. INTERESTED DIRECTORS. No contract or transaction between

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the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or the committee thereof
which authorizes the contract or transaction, or solely because his of their
votes are counted for such purpose if: (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof, or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.

ARTICLE IV
----------
OFFICERS

         SECTION 1. OFFICERS. The officers of the Corporation shall be a
President, a Secretary and a Chief Financial Officer. The Corporation may also
have, at the discretion of the Board of Directors, a Chairman of the Board, a
Vice Chairman of the Board, a Chief Executive Officer, a Chief Operating
Officer, one or more Vice Presidents, one or more Assistant Financial Officers
and Treasurers, one or more Assistant Secretaries and such other officers as may
be appointed in accordance with the provisions of Section 3 of this Article IV.

         SECTION 2. APPOINTMENT OF OFFICERS. The officers of the Corporation,
except such officers as may be appointed in accordance with the provisions of
Section 3 or Section 5 of this Article IV, shall be appointed by the Board of
Directors, and each shall serve at the pleasure of the Board, subject to the
rights, if any, of an officer under any contract of employment.

         SECTION 3. SUBORDINATE OFFICERS. The Board of Directors may appoint,
and may empower the Chief Executive Officer to appoint such other officers as
the business of the Corporation may require, each of whom shall hold office for
such period, have such authority and perform such duties as are provided in the
Bylaws or as the Board of Directors may from time to time determine.

         SECTION 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights
of an officer under any contract, any officer may be removed at any time, with
or without cause, by the Board of Directors or, except in case of an officer
chosen by the Board of Directors, by any officer upon whom such power of removal
may be conferred by the Board of Directors.

         Any officer may resign at any time by giving written notice to the
Corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation shall be without prejudice to
the rights of the Corporation under any contract to which the officer is a
party.

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         SECTION 5. VACANCIES IN OFFICES. A vacancy in any office because of
death, resignation, removal, disqualification or any other cause shall be filled
in the manner prescribed in these Bylaws for regular appointments to that
office.

         SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such an
officer is elected, shall, if present, preside at meetings of the stockholders
and of the Board of Directors. He shall, in addition, perform such other
functions (if any) as may be prescribed by the Bylaws or the Board of Directors.

         SECTION 7. VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the Board,
if such an officer is elected, shall, in the absence or disability of the
Chairman of the Board, perform all duties of the Chairman of the Board and when
so acting shall have all the powers of and be subject to all of the restrictions
upon the Chairman of the Board. The Vice Chairman of the Board shall have such
other powers and duties as may be prescribed by the Board of Directors or the
Bylaws.

        SECTION 8. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the
Corporation shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and the officers of
the Corporation. He shall exercise the duties usually vested in the chief
executive officer of a corporation and perform such other powers and duties as
may be assigned to him from time to time by the Board of Directors or prescribed
by the Bylaws. In the absence of the Chairman of the Board and any Vice Chairman
of the Board, the Chief Executive Officer shall preside at all meetings of the
stockholders and of the Board of Directors.

         SECTION 9. PRESIDENT. The President of the Corporation shall, subject
to the control of the Board of Directors and the Chief Executive Officer of the
Corporation, if there be such an officer, have general powers and duties of
management usually vested in the office of president of a corporation and shall
have such other powers and duties as may be prescribed by the Board of Directors
or the Bylaws or the Chief Executive Officer of the Corporation.

         SECTION 10. CHIEF OPERATING OFFICER. The Chief Operating Officer of the
Corporation shall, subject to the control of the Board of Directors and the
Chief Executive Officer of the Corporation, if there be such an officer, have
general powers and duties of management usually vested in the office of chief
operating officer of a corporation and shall have such other powers and duties
as may be prescribed by the Board of Directors or the Bylaws or the Chief
Executive Officer of the Corporation.

         SECTION 11. VICE PRESIDENT. In the absence or disability of the
President, the Vice Presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, a Vice President designated by the Board
of Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of, and subject to all the restrictions upon, the
President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors or the Bylaws, and the Chief Executive Officer, or the
Chairman of the Board.

         SECTION 12. SECRETARY. The Secretary shall keep or cause to be kept, at
the principal executive office or such other place as the Board of Directors may
direct, a book of minutes of all meetings and actions of Directors, committees
of Directors, and stockholders, with the time and place of holding, whether
regular or special, and, if special, how authorized, the

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notice given, the names of those present at Directors’ meetings or committee
meetings, the number of shares present or represented at stockholders’ meetings,
and a summary of the proceedings. In the absence of the Chairman of the Board,
Vice Chairman of the Board and Chief Executive Officer, the Secretary shall
preside at all meetings of the Board of Directors and stockholders.

         The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the Corporation’s transfer agent or
registrar, as determined by resolution of the Board of Directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.

        The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors required by the Bylaws or by
law to be given, and he shall keep or cause to be kept the seal of the
Corporation if one be adopted, in safe custody, and shall have such powers and
perform such other duties as may be prescribed by the Board of Directors or by
the Bylaws.

         SECTION 13. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
keep and maintain, or cause to be kept and maintained, adequate and correct
books and records of accounts of the properties and business transactions of the
Corporation. The Chief Financial Officer shall deposit all moneys and other
valuables in the name and to the credit of the Corporation with such
depositories as may be designated by the Board of Directors. He shall make such
disbursements of the funds of the Corporation as are authorized and shall render
from time to time an account of all of his transactions as Chief Financial
Officer and of the financial condition of the Corporation. The Chief Financial
Officer shall also have such other powers and perform such other duties as may
be prescribed by the Board of Directors or the Bylaws.

ARTICLE V
---------
STOCK

         SECTION 1. FORM OF CERTIFICATES. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by, or in the name of
the Corporation (i) by the Chairman or Vice Chairman of the Board of Directors,
or the President or a Vice President and (ii) by the Chief Financial Officer or
the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the Corporation, certifying the number of shares owned by such
stockholder in the Corporation.

         SECTION 2. SIGNATURES. Any or all of the signatures on the certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.

         SECTION 3. LOST CERTIFICATES. The Corporation may issue a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation, alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person

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claiming the certificate to be lost, stolen or destroyed. The Corporation may,
in the discretion of the Board of Directors and as a condition precedent to the
issuance of such new certificate, require the owner of such lost, stolen, or
destroyed certificate, or his legal representative, to give the Corporation a
bond (or other security) sufficient to indemnify it against any claim that may
be made against the Corporation (including any expense or liability) on account
of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.

         SECTION 4. TRANSFERS. Stock of the Corporation shall be transferable in
the manner prescribed by law and in these Bylaws or in any agreement with the
stockholder making the transfer. Transfers of stock shall be made on the books
of the Corporation only by the person named in the certificate or by his
attorney lawfully constituted in writing and upon the surrender of the
certificate therefor, which shall be canceled before a new certificate shall be
issued.

       SECTION 5. RECORD HOLDERS. The Corporation shall be entitled to recognize
the exclusive right of a person registered on its books as the record holder of
shares to receive dividends, and to vote as such record holder, and to hold
liable for calls and assessments a person registered on its books as the record
holder of shares, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise required by law.

ARTICLE VI
----------
INDEMNIFICATION

         SECTION 1. RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a “proceeding”), by reason of the fact that he or she
is or was a director or officer of the Corporation or is or was serving at the
request of the Corporation as a director or officer of another corporation or of
a partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans (hereinafter an “indemnitee”), whether the
basis of such proceeding is alleged action in an official capacity as a director
or officer or in any other capacity while serving as a director or officer,
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than such law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys’ fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in connection
therewith and such indemnification shall continue as to an indemnitee who has
ceased to be a director or officer and shall inure to the benefit of the
indemnitee’s heirs, executors and administrators; provided, however, that,
except as provided in Section 2 of this Article VI with respect to proceedings
to enforce rights to indemnification, the Corporation shall indemnify any such
indemnitee in connection with a proceeding (or part thereof) initiated by such
indemnitee only if such proceeding (or part thereof) was authorized by the Board
of Directors of the Corporation. The right to indemnification conferred in this
Section shall be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in advance of
its final disposition (hereinafter an “advancement of expenses”); provided,
however, that, if the Delaware General Corporation Law requires, an advancement
of expenses incurred by

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an indemnitee in his or her capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such indemnitee, including
without limitation, service to an employee benefit plan) shall be made only upon
delivery to the Corporation of an undertaking, by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal that such indemnitee is not entitled to be indemnified for such expenses
under this Article VI or otherwise (hereinafter an “undertaking”).

         SECTION 2. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under Section
1 of this Article VI is not paid in full by the Corporation within forty-five
(45) days after a written claim has been received by the Corporation, the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or part in any
such suit or in a suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the indemnitee shall be
entitled to be paid also the expense of prosecuting or defending such suit. In
(i) any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the Corporation shall be entitled to recover such expenses upon a
final adjudication that, the indemnitee has not met the applicable standard of
conduct set forth in the Delaware General Corporation Law. Neither the failure
of the Corporation (including its Board of Directors, independent legal counsel,
or its stockholders) to have made a determination prior to the commencement of
such suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right hereunder, or by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the burden of proving that the
indemnitee is not entitled to be indemnified or to such advancement of expenses
under this Article VI or otherwise shall be on the Corporation.

         SECTION 3. NON-EXCLUSIVITY OF RIGHTS. The rights of indemnification and
to the advancement of expenses conferred in this Article VI shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, provision of the Certificate of Incorporation, bylaw,
agreement, vote of stockholders or disinterested directors or otherwise.

         SECTION 4. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.

         SECTION 5. INDEMNIFICATION OF EMPLOYEES OR AGENTS OF THE CORPORATION.
The Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement of expenses,
to any employee or agent of the Corporation to the fullest extent of the
provisions of this Article VI with respect to the indemnification and
advancement of expenses of directors or officers of the Corporation.

--------------------------------------------------------------------------------

         SECTION 6. INDEMNIFICATION CONTRACTS. The Board of Directors is
authorized to enter into a contract with any director, officer, employee or
agent of the Corporation, or any person serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, including employee
benefit plans, providing for indemnification rights equivalent to or, if the
Board of Directors so determines, greater than, those provided for in this
Article VI.

        SECTION 7. EFFECT OF AMENDMENT. Any amendment, repeal or modification of
any provision of this Article VI by the stockholders or the directors of the
Corporation shall not adversely affect any right or protection of a director or
officer of the Corporation existing at the time of such amendment, repeal or
modification.

ARTICLE VII
-----------
GENERAL PROVISIONS

         SECTION 1. DIVIDENDS. Subject to limitations contained in the General
Corporation Law of the State of Delaware and the Certificate of Incorporation,
the Board of Directors may declare and pay dividends upon the shares of capital
stock of the Corporation, which dividends may be paid either in cash, securities
of the Corporation or other property.

         SECTION 2. DISBURSEMENTS. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other person
or persons as the Board of Directors may from time to time designate.

         SECTION 3. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.

         SECTION 4. CORPORATE SEAL. The Corporation shall have a corporate seal
in such form as shall be prescribed by the Board of Directors.

         SECTION 5. RECORD DATE. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty (60) days nor less than ten (10) days
before the date of such meeting, nor more than sixty (60) days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting. Stockholders on the record date are entitled to
notice and to vote or to receive the dividend, distribution or allotment of
rights or to exercise the rights, as the case may be, notwithstanding any
transfer of any shares on the books of the Corporation after the record date,
except as otherwise provided by agreement or by applicable law.

         SECTION 6. VOTING OF STOCK OWNED BY THE CORPORATION. The Chairman of
the Board, the Chief Executive Officer, the Secretary and any other officer of
the Corporation authorized by the Board of Directors shall have power, on behalf
of the Corporation, to attend, vote and grant proxies to be used at any meeting
of stockholders of any corporation (except this Corporation) in which the
Corporation may hold stock.

--------------------------------------------------------------------------------

         SECTION 7. CONSTRUCTION AND DEFINITIONS. Unless the context requires
otherwise, the general provisions, rules of construction and definitions in the
General Corporation Law of the State of Delaware shall govern the construction
of these Bylaws.

         SECTION 8. AMENDMENTS. Subject to the General Corporation Law of the
State of Delaware, the Certificate of Incorporation and these Bylaws, the Board
of Directors may by the affirmative vote of a majority of the entire Board of
Directors amend or repeal these Bylaws, or adopt other Bylaws as in their
judgment may be advisable for the regulation of the conduct of the affairs of
the Corporation. Unless otherwise restricted by the Certificate of
Incorporation, these Bylaws may be altered, amended or repealed, and new Bylaws
may be adopted, at any annual meeting of the stockholders (or at any special
meeting thereof duly called for that purpose) by a majority of the combined
voting power of the then outstanding shares of capital stock of all classes and
series of the Corporation entitled to vote generally in the election of
directors, voting as a single class, provided that, in the notice of any such
special meeting, notice of such purpose shall be given.

--------------------------------------------------------------------------------

Exhibit G

JAVO BEVERAGE COMPANY

OFFICER’S CERTIFICATE

The undersigned, Javo Beverage Company, a Delaware corporation (the “Company”),
pursuant to Section 7(viii) of the Securities Purchase Agreement, dated as of
December 14, 2006, by and among the Company and the investors identified on the
Schedule of Buyers attached thereto (the “Securities Purchase Agreement”),
hereby represents, warrants and certifies to the Buyers as follows (capitalized
terms used but not otherwise defined herein shall have the meaning set forth in
the Securities Purchase Agreement):

1.                                       The representations and warranties made
by the Company as set forth in Section 3 of the Securities Purchase Agreement
are true and correct in all material respects (except for those representations
and warranties that are qualified by materiality or Material Adverse Effect,
which shall be true and correct in all respects) as of the date hereof (except
for representations and warranties that speak as of a specific date, which shall
be true and correct as of such specified date which shall be true and correct as
of such specified date).

2.                                       The Company has, in all respects,
performed or complied with all covenants, agreements and conditions required to
be performed or complied with by it at or prior to the date hereof under the
Transaction Documents.

IN WITNESS WHEREOF, the undersigned has executed this certificate this 15th day
of December 2006.

 

 

 

 

Cody Ashwell

 

Chief Executive Officer

 

--------------------------------------------------------------------------------

 

 

 

 

COMPANY  DISCLOSURE SCHEDULES

pursuant to the

SECURITIES PURCHASE AGREEMENT

by and among

JAVO BEVERAGE COMPANY, INC.
a Delaware Corporation
(“Company”)

and

the INVESTORS party thereto
(collectively, the “Investors”)

December 14, 2006

 

 

 

 

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COMPANY DISCLOSURE SCHEDULES

These Company Disclosure Schedules are made and furnished by Javo Beverage
Company, Inc., a Delaware corporation (the “Company”), pursuant to the
Securities Purchase Agreement (the “Agreement”) dated December 14, 2006, by and
among the Company and the Investors identified therein (each individually, an
“Investor” and collectively, the “Investors”).  These Company Disclosure
Schedules relate to the representations and warranties of the Company as set
forth in Article III of the Agreement (“Article III”).  The Section numbers
contained herein have been organized to correspond with the Section numbers
contained in Article III; however, any information disclosed herein under any
section number shall be deemed to be disclosed and incorporated into any other
Section number under the Agreement where specifically cross-referenced. 
Capitalized terms used herein, unless otherwise defined herein, shall have the
meaning ascribed to them in the Agreement.

Certain matters are listed in these Company Disclosure Schedules for
informational purposes notwithstanding the possibility that, because they do not
rise above applicable materiality or other thresholds, they are not required to
be listed herein by the terms of the Agreement.  In no event shall the inclusion
of any such matters herein be deemed or interpreted to broaden or otherwise
amplify the representations and warranties of the Company contained in the
Agreement or to be an admission of materiality.

The Company does not assume any responsibility to any person that is not a party
to the Agreement for the form or accuracy of any information herein.

2

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Index

1.

 

Schedule 3(a)

 

Organization and Qualification

2.

 

Schedule 3(k)

 

SEC Documents; Financial Statements

3.

 

Schedule 3(l)

 

Absence of Certain Changes

 

 

 

 

Circumstances

4.

 

Schedule 3(q)

 

Transactions With Affiliates

5.

 

Schedule 3(r)

 

Equity Capitalization

6.

 

Schedule 3(s)

 

Indebtedness and Other Contracts

7.

 

Schedule 3(t)

 

Absence of Litigation

8.

 

Schedule 3(z)

 

Subsidiary Rights

9.

 

Schedule 3(cc)

 

Ranking of Notes

10.

 

Schedule 3(kk)

 

Disclosure

11.

 

Schedule 4(d)

 

Use of Proceeds

 

3

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Schedule 3(a)

ORGANIZATION AND QUALIFICATION

Sorisole Acquisition Corporation, organized in Delaware, is a wholly owned,
non-operating, subsidiary of the Company.

Javo Dispenser LLC is not owned by the Company; however; Richard Gartrell, the
Company’s CFO, is the Manager of Javo Dispenser, LLC, a Delaware limited
liability company.

4

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Schedule 3(k)

SEC DOCUMENTS; FINANCIAL STATEMENTS

Please note that the following filings restated previous filings:

1.                                       The Company filed an amended quarterly
report on Form 10-Q/A on April 10, 2006, for the quarterly period ending on
September 30, 2005, which contained restated financial statements.

2.                                       The Company filed an amended quarterly
report on Form 10-Q/A on April 10, 2006, for the quarterly period ending on June
30, 2005, which contained restated financial statements.

3.                                       The Company filed an amended quarterly
report on Form 10-Q/A on April 6, 2006, for the quarterly period ending on March
31, 2005, which contained restated financial statements.

4.                                       The Company filed an amended annual
report on Form 10KSB/A on April 3, 2006, for the fiscal year ending on December
31, 2004, which contained restated financial statements.

5

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Schedule 3(l)

ABSENCE OF CERTAIN CHANGES

During 2006, the Company leased an additional $764,000 in liquid dispensers from
Javo Dispenser LLC.

6

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Schedule 3(q)

TRANSACTIONS WITH AFFILIATES

Javo Dispenser LLC, which leases dispensing equipment to the Company, is owned
by certain directors and stockholders of the Company.  The directors are:
William C. Baker, Terry C. Hackett, James R. Knapp, Thomas J. Rielly, and
Stanley A. Solomon.  There are three other non-affiliate owners who are private
individual investors.

7

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Schedule 3(r)

EQUITY CAPITALIZATION

 

 

Authorized

 

Issued and Outstanding

Common Stock

 

300,000,000

 

149,504,927

Preferred Stock (All Series)

 

10,000,000

 

1,775,166

Series A Junior Participating Preferred Stock(1)

 

150,000

 

None

Series B Preferred Stock(2)

 

4,000,000

 

1,775,166

Common Stock Warrants

 

384,031 shares of Common Stock are reserved for issuance

 

warrant rights exercisable for up to 384,031 shares of Common Stock are
currently outstanding

Unsecured Promissory Notes

 

$950,000 balance as of 11-30-06

Working Capital Line of Credit

 

$513,000 balance as of 11-30-06

Shareholder Rights Plan(3)

 

 

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(1)             See Article 8 the Certificate of Incorporation, which is
incorporated herein by this reference.

(2)             See Article 9 the Certificate of Incorporation, which is
incorporated herein by this reference.  The Company has a redemption obligation
as to the Series B Preferred Stock upon a “Liquidity Event.”

(3)             The Company has adopted a Shareholder Rights Plan which is
incorporated herein by reference to the Shareholder Rights Agreement between the
Company and Corporate Stock Transfer, Inc., as Rights Agent, dated July 1, 2002,
including the exhibits thereto, as filed with Securities and Exchange Commission
as Exhibit 4.2 to the Company’s Current Report on Form 8-K on August 19, 2002.

8

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Schedule 3(s)

INDEBTEDNESS AND OTHER CONTRACTS
JAVO BEVERAGE COMPANY, INC.
Corporate Indebtedness

Revolving Working Capital Line of Credit

The Company entered into a working capital line of credit agreement on
September 26, 2006, with Comerica Bank to provide a loan of up to $3,000,000,
secured by the Company’s accounts receivable and inventory. The term of the loan
is one year and carries an annual interest rate of Comerica prime rate or 8.25%
as of November 30, 2006.

The available working capital loan amount is based on 75% of eligible accounts
receivable and 40% of eligible inventories. Eligible accounts receivables are
generally described as those due within thirty days or less from the date of
invoice for products sales that have been validly assigned to the bank. Eligible
accounts receivable specifically exclude foreign sales, receivables for sales
that are not final and related party receivables. Eligible inventories are
generally described as raw materials in saleable form and finished goods
inventory that have been validly assigned to the bank. Eligible inventory
specifically excludes supplies, packaging and work-in-process.

The bank retains the discretion from time-to-time to define what qualifies as
eligible accounts receivable and inventories. As of December 13, 2006, the
Company had a $713,000 loan balance. The working capital line of credit matures
on September 25, 2007, unless renewed.  The balance of the line of credit will
move up and down a part of normal operations.

9

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JAVO BEVERAGE COMPANY, INC.

Corporate Indebtedness

DETAIL BREAKDOWN OF OTHER INDEBTEDNESS

Long-term debt at November 30, 2006, consisted of the following:

 

 

 

 

 

 

Notes payable, unsecured promissory notes, payable in a balloon payment on
Maturity Date, including interest at 10%. Mature in 2007. These are held by
various private investors.

 

$500,000

 

 

 

Notes payable, unsecured promissory notes, payable in a balloon payment on
Maturity Date, including interest at 10%. Mature in 2008. These are held by
various private investors.

 

225,000

 

 

 

Notes payable, unsecured promissory notes, payable in a balloon payment on
Maturity Date, including interest at 10%. Mature in 2009. These are held by
various private investors.

 

200,000

 

 

 

Lease payable to Ford Financial, secured by equipment (Coffee Granulizer),
payable in monthly installments of $1,460, including interest at 16.642% per
annum. Matures 2011.

 

53,825

 

 

 

Lease payable to Ford Financial, secured by equipment (Puratec Water Softener),
payable in monthly installments of $1,312, including interest at 23.38% per
annum. Matures 2008.

 

24,131

 

 

 

Note payable, unsecured promissory note, payable in a balloon payment on
Maturity Date, including interest at 10%. Matures in 2010.

 

25,000

 

 

 

Lease payable to De Lage Landen Financial, secured by equipment (Great Plains
Accounting Software), payable in monthly installments of $1,174, including
interest at 6.090%. Matures 2008.

 

22,430

 

 

 

Lease payable to Ford Financial, secured by equipment (Agtron) payable in
monthly installments of $498 at an annual interest rate of 10.741%. Matures in
2011.

 

21,575

 

 

 

Lease payable to Parker Industrial Boiler, secured by equipment (Boiler),
payable in monthly installments of $1,150, including interest at 14.677%.
Matures 2007.

 

13,745

 

 

 

Lease payable to Ford Financial, secured by equipment (Vicinity Manufacturing
Software, in monthly installments of $1,701, including interest at 27.663% per
annum. Matures 2007.

 

12,300

 

10

--------------------------------------------------------------------------------

 

 

 

 

Lease payable to Kaeser Leasing, secured by equipment (Air Compressor), payable
in monthly installments of $485, including interest at 6.168%. Matures 2008.

 

9,655

 

 

 

Lease payable to Ford Financial, secured by equipment (Fixed Asset Accounting
Software), payable in monthly installments of $159, including interest at
49.273% per annum. Matures 2007

 

948

 

 

 

 

 

1,108,609

Less current portion

 

563,766

 

 

 

 

 

$544,843

 

Summary of Maturities

 

 

 

 

Amount

 

Year ended November 30,

 

2007

 

$

558,910

 

 

 

2008

 

248,601

 

 

 

2009

 

43,484

 

 

 

2010

 

244,974

 

 

 

2011

 

12,640

 

 

 

 

 

$

1,108,609

 

 

As to the representation in Section 3(s)(ii), if any of the material contracts
were violated in any material respect, the Company could be materially and
adversely affected.

The Series B Preferred Stock becomes an Indebtedness according to its terms upon
a “Liquidity Event”.  See the Certificate of Determination of Series B Preferred
Stock, which is incorporated herein by reference.

11

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Schedule 3(cc)

RANKING OF NOTES

The existing Indebtedness listed in Schedule 3(s) ranks senior to or pari passu
with the Notes.

12

--------------------------------------------------------------------------------

 

Schedule 3(kk)

DISCLOSURE

See Schedule (k).

13

--------------------------------------------------------------------------------

 

Schedule 4(d)

USE OF PROCEEDS

The proceeds may be used to repay existing Indebtedness as is described in
Schedule 3(s) as follows: (1) repayment of the unsecured promissory notes, (2)
to from time to time pay down in whole or in part the Revolving Working Capital
Line of Credit, and (3) to make ordinary installments payments on existing lease
related Indebtedness as is described in Schedule 3(s).

 

14

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