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EXHIBIT 10.3
 
THIS SENIOR SUBORDINATED NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THIS SENIOR
SUBORDINATED NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
 
THE INDEBTEDNESS EVIDENCED BY THIS SENIOR SUBORDINATED NOTE IS SUBORDINATED TO
THE PRIOR PAYMENT AND SATISFACTION OF CERTAIN SENIOR INDEBTEDNESS AS DESCRIBED
MORE FULLY HEREIN.
 
THIS SENIOR SUBORDINATED NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT
(“OID”) FOR UNITED STATES FEDERAL INCOME TAX PURPOSES.  THE ISSUE PRICE, AMOUNT
OF OID, ISSUE DATE AND YIELD TO MATURITY OF THIS NOTE MAY BE OBTAINED BY WRITING
TO JAVO BEVERAGE COMPANY, INC. AT 1311 SPECIALTY DRIVE, VISTA, CA 92081.

JAVO BEVERAGE COMPANY, INC.
_______________
 
SENIOR SUBORDINATED 12% NOTE
 
Original Principal Amount:  U.S. $[______________]
 
 Issuance Date:  [____________, __ ____]
 
FOR VALUE RECEIVED, Javo Beverage Company, Inc., a Delaware corporation
(the “Company”), hereby promises to pay to the order of COFFEE HOLDINGS LLC, and
its successors and assigns (the “Holder”) the amount set forth above as the
Original Principal Amount (as reduced pursuant to the terms hereof pursuant to
redemption, repayment or otherwise, and together with the aggregate PIK Interest
Amount, the “Principal Amount”) when due, whether upon the Maturity Date (as
defined below), acceleration, redemption or otherwise (in each case in
accordance with the terms hereof) and to pay interest (“Interest”) on any
outstanding Principal Amount at the rate of twelve percent (12%) per annum (the
“Interest Rate”) from the date set out above as the Issuance Date (“Issuance
Date”) until the same is repaid.
 
This Senior Subordinated Note (this “Note”) has been issued by the Company
pursuant to the Securities Purchase Agreement dated November 17, 2009 by and
between the Company and Coffee Holdings LLC (as the same may be amended,
supplemented or otherwise modified from time to time, the “Purchase
Agreement”).  Certain capitalized terms used herein are defined in Section 8
below.
 

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1.   Payments of Interest and Principal.
 
(a) Accrued and unpaid Interest shall be payable in kind annually in arrears on
each anniversary of the Issuance Date by adding the amount of such Interest due
to the then outstanding Principal Amount (such capitalized interest, a “PIK
Interest Amount”) until the entire Principal Amount outstanding shall be paid in
full (whether upon maturity, acceleration or otherwise).  Interest shall be
calculated on the Principal Amount outstanding as of each interest payment date
and on the basis of a 365 day year for the actual number of days elapsed.
 
(b) The Principal Amount, together with all accrued and unpaid interest thereon
and any other amounts which are then owing by the Company to the Holder under
this Note, shall be payable in full on April 17, 2015 (the “Maturity Date”).
 
(c) This Note may be prepaid in whole or in part from time to time and at any
time prior to the Maturity Date without penalty or premium; provided, however,
that any partial prepayment shall be applied first to accrued but unpaid
Interest and then to Principal Amount.
 
(d) All cash payments under this Note shall be made in lawful money of the
United States and in immediately available funds by wire transfer pursuant to
instructions provided by the Holder in writing from time to time to the
Company.  All cash payments shall be applied first to accrued and unpaid
Interest and then to Principal Amount.  All payments of Principal Amount shall
be accompanied by accrued and unpaid Interest thereon.  All payments of
Principal Amount and Interest shall be due on or before 2:00 p.m., New York City
time and if received later will be deemed to have been received on the next
calendar day.  If a payment of Principal Amount or Interest is due on a day that
is not a Business Day, such due date shall be deemed to be extended to the next
Business Day, but Interest shall accrue until such payment is made.
 
2.   Covenants.  So long as this Note is outstanding:
 
(a) Operating Covenant.  The Company shall have, on each Dispenser Base
Measurement Date occurring during the Operating Covenant Period, a Dispenser
Base of at least seven thousand five hundred (7,500).
 
(b) Rank.  The Company shall cause the Principal Amount, Interest and all other
obligations under this Note to rank (i) senior to all Indebtedness of the
Company incurred after the Issuance Date, (ii) senior to the 2008 Notes and the
2009 Notes and (iii) pari passu with the Initial Note and any other Additional
Notes.  The Principal Amount, Interest and all other obligations under this Note
shall be subordinated to any Permitted Senior Indebtedness as set forth in
Section 4 below.  This Note is (i) Permitted Senior Indebtedness under and as
defined in the 2009 Notes and (ii) Senior Debt as defined in the 2008 Notes.
 
(c) Insurance.  The Company shall obtain and maintain, and cause each of its
Subsidiaries to obtain and maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such risks as
are usually carried by companies engaged in similar businesses and owning
similar properties in the same general area in which the Company and such
Subsidiary operate.
 
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(d) Taxes.  The Company shall pay, and cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments and governmental levies
except those contested in good faith and by appropriate proceedings.
 
(e) Corporate Existence, Etc.  The Company shall do or cause to be done, and
cause each Subsidiary of the Company to do or cause to be done, all things
necessary to preserve and keep in full force and effect its corporate existence
in accordance with its organizational documents and the rights (charter and
statutory), licenses and franchises of the Company and such Subsidiary;
provided, however, that Subsidiaries of the Company shall not be required to
preserve any such right, license or franchise if its Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the such Subsidiary and that the loss thereof is not adverse in
any material respect to the Holder.
 
(f) Compliance with Laws, etc.  The Company shall, and shall cause each of its
Subsidiaries to, comply (i) in all material respects with all applicable laws,
rules, regulations and orders and (ii) with all indentures, or loan or credit
agreements or any other agreement, lease or instrument to which it is a party or
by which it or its properties may be bound or affected, except, in each case,
where the failure to so comply would not have a Material Adverse Effect.
 
(g) Indebtedness.  The Company will not and will cause its Subsidiaries not to
create, incur, assume or suffer to exist any Indebtedness except Permitted
Indebtedness.
 
(h) Restricted Payments.  The Company shall not make any Restricted Payment.
 
(i) Use of Proceeds.  The Company will use the proceeds of this Note (net of the
expenses directly incurred in connection with the transactions contemplated by
the Purchase Agreement) exclusively to pay any accrued interest and principal
amounts when due under the 2009 Notes held by Coffee Holdings LLC.
 
3.   Representations and Warranties.  The Company represents and warrants to the
Holder that each of the representations and warranties of the Company set forth
in the Purchase Agreement, are true and correct, as of the date hereof (unless
such representation or warranty speaks as of an earlier date, in which case it
is true and correct as of such earlier date).
 
4.   Subordination.  The Holder hereby agrees in the event of any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property, or securities in any Insolvency Proceeding:  (i) the Permitted Senior
Indebtedness shall first be paid in full before any payment is made in respect
of this Note; and (ii) any payment in respect of this Note to which the Holder
would be entitled except for the provisions hereof, shall be paid or delivered
by the trustee in bankruptcy, receiver, assignee for the benefit of creditors,
or other liquidating lender making such payment or distribution directly to
holders of the Permitted Senior Indebtedness for application to the payment of
the Permitted Senior Indebtedness in accordance with the terms thereof, giving
effect to any concurrent payment or distribution to lender in respect of such
Senior Permitted Indebtedness.
 
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5.   Events of Default; Remedies.
 
(a) Events of Default. The occurrence or existence of any one or more of the
following events (regardless of the reason therefor) shall constitute an “Event
of Default” hereunder:
 
(i) failure to pay any Principal Amount when due (whether by reason of
amortization, redemption, maturity, acceleration or otherwise) within five (5)
Business Days after it is due;
 
(ii) failure to pay any Interest or other amount due under this Note within five
(5) Business Days after it is due;
 
(iii) a breach of any obligation under Section 2 (a), (g), or (h);
 
(iv) a material breach of any representation, warranty, covenant or other term
or condition of the this Note (other than those described in clause (iii) above)
by the Company or any of its Subsidiaries, except, in the case of a breach or
failure to perform which is curable, only if such breach or failure continues
for a period of at least ten (10) consecutive Business Days;
 
(v) a material breach of or failure by the Company or any of its Subsidiaries to
perform in any material respect any covenant or other term or condition of any
other Transaction Document and such default is not remedied or waived within ten
(10) Business Days (or such longer cure period as provided in such Transaction
Document);
 
(vi) a default or event of default under any Indebtedness of the Company or any
Subsidiary of the Company (other than this Note) occurs and as a result thereof
the holder or holders of Indebtedness of the Company or its Subsidiaries in a
principal amount, individually or collectively, in excess of One Million Dollars
($1,000,000) have declared, or have the right to declare, the principal thereof
due and payable prior to its scheduled maturity or the Company or any Subsidiary
of the Company fails to fully pay Indebtedness in a principal amount,
individually or collectively, in excess of One Million Dollars ($1,000,000) at
its maturity;
 
(vii) a final judgment or judgments for the payment of money in an amount
(individually or collectively) that exceeds One Million Dollars ($1,000,000)
(exclusive of amount covered by insurance from a credit worthy insurer that has
admitted in writing its obligation to pay such excluded amounts) is rendered,
entered or filed against the Company or any of its Subsidiaries and remains
undischarged, unvacated, unbonded or unstayed for a period of thirty (30) days
or any action is taken to execute on or enforce the same.
 
(viii) the suspension of trading of the Common Stock on the Principal Market
resulting from any action or omission by the Company or any of its Subsidiaries;
 
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(ix) the Company or any of its Subsidiaries shall commence or acquiesce in the
commencement of any Insolvency Proceeding; or
 
(x) a court of competent jurisdiction shall enter a decree or order for relief
with respect to the Company or any Subsidiary in any Insolvency Proceeding,
which decree or order is not stayed or other similar relief is not granted under
any applicable law or the continuance of any of the following events for sixty
(60) days unless dismissed, bonded or discharged.
 
(b) Default Rate of Interest.  From the date of such Event of Default occurs
until the date such Event of Default is cured or waived in writing by the
Holder, the Principal Amount shall bear interest at a rate two percent (2%) in
excess of the Interest Rate.
 
(c) Acceleration.  Upon the occurrence of any Event of Default described in
Section 5(a)(ix) and 5(a)(x) the Principal Amount and all accrued and unpaid
Interest and all other amounts due in respect of this Note shall automatically
become immediately due and payable and upon the occurrence and continuance of
any other Event of Default,  the Holder may declare the Principal Amount and all
accrued and unpaid Interest and all other amounts due in respect of this Note
immediately due and payable and in such event the same shall immediately be due
and payable, in each case without presentment, demand, protest or other
requirements of any kind, all of which are hereby expressly waived by the
Company. The Holder may also exercise any rights and remedies provided to
hereunder or at law or equity.
 
6.   Fundamental Transaction.  The Company shall promptly, but in no event later
than ten (10) Business Days prior to the expected closing date thereof, upon
entering into a binding agreement to engage in a Fundamental Transaction,
deliver a written redemption offer to Holder setting forth the details of such
Fundamental Transaction, including the expected closing date and offering to
redeem this Note (the “Redemption Offer”).  If the Holder accepts the Redemption
Offer by delivering a written notice to the Company not later than five (5)
Business Days prior to the expected closing date set forth in the Redemption
Offer, then the entire outstanding Principal Amount, all accrued and unpaid
Interest and all other amount owing in respect of this Note shall become due and
payable on the date such Fundamental Transaction is consummated.
 
7.   Highest Lawful Rate.  Notwithstanding any other provisions herein, if
during any period for which interest is computed hereunder, the amount of
interest computed on the basis provided for in this Note, together with all
fees, charges and other payments or rights which are treated as interest under
applicable law, as provided for herein or in any other document executed in
connection herewith, would exceed the Highest Lawful Rate, the Company shall not
be obligated to pay, and the Holder shall not be entitled to charge, collect,
receive, reserve or take, interest in excess of the Highest Lawful Rate, and
during any such period the obligations hereunder shall bear interest at the
Highest Lawful Rate.  In accordance with this Section 7, any amounts received in
excess of the Highest Lawful Rate shall be applied towards the prepayment of
Principal Amount then outstanding until fully paid with any remaining balance to
be returned to the Company.
 
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8.   Certain Defined Terms.  As used in this Note, the following terms shall
have the meanings specified below:
 
“2008 Notes” means those certain Senior Subordinated Notes in the aggregate
principal amount of $10,500,000 issued by the Company in accordance with the
Company’s confidential private placement memorandum dated December 9, 2008 and
pursuant to the terms and conditions of related Securities Purchase Agreements
previously provided to the Holder.
 
“2009 Notes” means those certain Senior Subordinated Notes in an original
aggregate principal amount of $12,000,000 issued by the Company to Holder on
April 6, 2009 pursuant to the 2009 Purchase Agreement.
 
“2009 Purchase Agreement” means that certain Securities Purchase Agreement dated
April 6, 2009 by and between the Company and Holder.
 
“Additional Notes” means any Senior Subordinated Notes (including this Note),
other than the Initial Note, in the aggregate original principal amount of up to
$3,500,000 issued by Company to Holder pursuant to the Purchase Agreement.
 
“Affiliate” means, with respect to any Person, another Person that directly or
indirectly, through one or more intermediaries, controls or is controlled by or
is under common control with the Person specified.  With respect to the Holder,
the term Affiliate shall not include the Company or any of its Subsidiaries or
any portfolio company of Falconhead Capital, LLC or any of their respective
Subsidiaries.
 
“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.
 
“Certificate of Incorporation” means the Company’s certificate of incorporation,
as amended and as in effect on the date hereof.
 
“Common Stock” means the Company’s Common Stock, par value $0.001 per share.
 
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“Consolidated EBITDA” means as of any date of determination and with respect to
the Company and its Subsidiaries, the (a) consolidated net income of the Company
and its Subsidiaries for the twelve full calendar month period immediately
preceding such date plus (b) the sum of, in each case to the extent included in
the calculation of such consolidated net income but without duplication, (i) any
provision for income taxes, (ii) interest expense, (iii) loss from extraordinary
items, (iv) any aggregate net loss from the sale, exchange or other disposition
of capital assets by the Company or any Subsidiary, (v) depreciation, depletion
and amortization expenses and (vi) all other non-cash charges and non-cash
losses for such period, minus (c) the sum of, in each case to the extent
included in the calculation of such consolidated net income but without
duplication, (i) any credit for income tax, (ii) interest income, (iii) gains
from extraordinary items for such period, (iv) any aggregate net gain (but not
any aggregate net loss) from the sale, exchange or other disposition of capital
assets by the Company or any Subsidiary and (v) any other non-cash gains or
other items which have been added in determining consolidated net income,
including any reversal of a charge referred to in clause (b)(vi) above.  To the
extent any items set forth in this definition of Consolidated EBITDA are defined
under GAAP, such items shall be calculated in accordance with GAAP consistently
applied using the accounting principles, polices, procedures, practices,
applications and methodologies used in preparing the Company’s financial
statements and the Company shall not take any actions that do or would
artificially reduce EBITDA for any measurement period.
 
“Contingent Obligation” means, as to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to any
Indebtedness, lease, agreement 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.
 
“Dispenser Base” means, as of any Dispenser Base Measurement Date, the aggregate
number of beverage dispensers installed and operating in customer locations on
behalf of the Company, whether or not owned by the Company.
 
“Dispenser Base Measurement Date” means July 1, 2010, and each January 1st and
July 1st of each calendar year thereafter.
 
“Event of Default” shall have the meaning assigned to such term in Section 5(a).
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
“Fundamental Transaction” means that the Company shall, directly or indirectly,
in one or more related transactions (i) consolidate or merge with or into
(whether of not the Company is the surviving corporation) another person or
persons or (ii) sell, assign, transfer, convey or otherwise dispose of all or
substantially all of the properties or assets of the Company to another Person
or Persons or (iii) allow another Person to make a purchase, tender or exchange
offer that is accepted by the holders of more than 50% of the outstanding Voting
Stock (not including any shares of Voting stock held by the Person or Persons
making or party to, or associated or affiliated with any of the Persons making
or party to, such purchase, tender or exchange offer), or (iv) consummate a
stock purchase agreement or other business combination (including without
limitation, a reorganization, recapitalization, spin off or scheme or
arrangement) with another Person whereby such other Person acquires more than
50% of the outstanding shares of Voting Stock (not including any shares of
Voting Stock held by the Person or Person making or party to, or associated or
affiliated with the Persons, making or party to such stock purchase or business
combination), or (v) any “person” or ‘group” (as these terms are used for
purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall become the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of 50% or more of the aggregate Voting Stock of the Company.
 
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“Highest Lawful Rate” means the maximum non-usurious rate of interest, as in
effect from time to time, which may be charged, contracted for, reserved,
received or collected by the Holder in connection with this Note under
applicable law.
 
“Holder” has the meaning ascribed to it in the first paragraph of this Note.
 
“Indebtedness” of any Person means, without duplication (i) all indebtedness for
borrowed money, (ii) 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 on
customary terms), (iii) all reimbursement or payment obligations with respect to
letters of credit, surety bonds and other similar instruments, (iv) 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, (v) 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), (vi) all indebtedness referred to in
clauses (i) through (v) 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 (vii) all
Contingent Obligations in respect of indebtedness or obligations of others of
the kinds referred to in clauses (i) through (vi) above.  Indebtedness shall
include all obligations under the 2008 Notes, the 2009 Notes, the Initial Note
and any Additional Notes.
 
“Initial Note” means the Senior Subordinated Note in an original principal
amount of $4,000,000 issued by Company to Holder on November 17, 2009 pursuant
to the Purchase Agreement.
 
“Insolvency Proceeding” means, with respect to any Person, the dissolution,
winding up, or total or partial liquidation or reorganization, readjustment,
arrangement, or similar proceeding relating to such Person or its property,
whether voluntary or involuntary, or in bankruptcy, insolvency, receivership,
arrangement, or similar proceedings or upon an assignment for the benefit of
creditors, or upon any other marshaling or composition of the assets and
liabilities of such Person.
 
“Interest Rate” shall have the meaning assigned to such term in first paragraph
of this Note.
 
“Material Adverse Effect” means any material adverse effect on the business,
properties, assets, results of operations, condition (financial or otherwise) of
the Company and its Subsidiaries, taken as a whole.
 
“Maturity Date” shall have the meaning assigned to such term in Section 1.
 
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“Operating Covenant Period” means the period commencing on the Issuance Date and
ending on the first date Consolidated EBITDA is equal to or greater than
$15,000,000.
 
“Permitted Indebtedness” means, without duplication (i) any Indebtedness arising
under the Notes issued pursuant to the Purchase Agreement; (ii) any Indebtedness
outstanding as of the Issuance Date that is described in the SEC Documents and
any extension, renewal or refinancing thereof, provided that the amount of such
Indebtedness (including the maximum commitments thereunder) is not increased at
the time of such refinancing, refunding, renewal or extension except by the sum
of (A) the amount of unpaid accrued interest and premiums, penalties and fees
required by the terms thereof to be paid and (B) reasonable and documented fees
and expenses incurred in connection therewith and not paid to an Affiliate,
(iii) the 2008 Notes and the 2009 Notes; (iv) any Permitted Senior Indebtedness;
(v) Indebtedness arising in connection with endorsement of checks, drafts or
similar instruments of payment for deposit in the ordinary course of business;
(vi) Indebtedness incurred in the ordinary course of business owed to any Person
providing workers’ compensation, health disability or other employee benefits or
property, casualty or liability insurance, pursuant to reimbursement or
indemnification obligations to such Person, (vii) Indebtedness incurred in the
ordinary course of business in the form of bids, tenders, statutory obligations,
customary reimbursement obligations for surety bonds, performance bonds and
appeal and other similar bonds which are not overdue and not involving borrowed
money; (viii) Indebtedness owing to insurance carriers or finance companies and
incurred to finance insurance premiums in an aggregate amount outstanding at any
time not exceeding $300,000; and (ix) any other Indebtedness incurred after the
Issuance Date in the original principal amount not exceeding $300,000
individually or in the aggregate.
 
“Permitted Senior Indebtedness” means, without duplication (i) any Indebtedness
incurred prior to or following the Issuance Date hereof for the purpose of
funding the purchase and placement of beverage dispensing equipment and
accessories thereto, (ii) any Indebtedness incurred prior to or following the
date hereof for the purpose of funding the addition of facility equipment or
infrastructure and (iii) any other Indebtedness incurred prior to or following
the date hereof in an aggregate principal amount outstanding at any time not to
exceed an amount (not less than $0) equal to (A) $5,000,000 plus (B) any amount
owed by the Company to Accord Financial, Inc. pursuant to that certain Master
Purchase and Sale Agreement by and among the Company and Accord Financial, Inc.,
Promissory Note and other related documents each dated October 6, 2008 minus (C)
the sum of (up to a maximum of $4,000,000) (1) the aggregate principal amount of
the Initial Note and (2) the aggregate principal amount of any Additional Notes;
provided, however, prior to the date that Consolidated EBITDA is equal to or
greater than $7,500,000, the aggregate principal amount of all Permitted Senior
Indebtedness outstanding at any one time shall not exceed $30,000,000 minus the
sum of (A) the aggregate principal amount of the Initial Note and (B) the
aggregate principal amount of any Additional Notes.  The 2008 Notes and the 2009
Notes are not Permitted Senior Indebtedness.
 
“Person” any natural person, corporation, business trust, joint venture,
association, company, limited liability company, partnership, governmental
authority or other entity.
 
“PIK Interest Amount” shall have the meaning ascribed to it in Section 1(a).
 
“Principal Market” means the NASDAQ Over-the-Counter Bulletin Board.
 
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“Restricted Payment” means (i) any dividend or other distribution, direct or
indirect, on account of any class of equity securities or equivalent, now or
hereafter outstanding; (ii) any redemption, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect, of any
class of equity securities or equivalent, now or hereafter outstanding from the
holders thereof; and (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire any
class of equity securities or equivalent, now or hereafter outstanding;
provided, however, that Restricted Payment shall not include (y) payments
required to be made to the holders of the Company’s Series B Preferred Stock
pursuant to the Certificate of Designation for such Series B Preferred Stock in
effect as of the Issuance Date (provided that the Company agrees that if any
such payments may be made in cash or in additional shares of Series B Preferred
Stock, then such payments shall be made in additional shares of Series B
Preferred Stock) or (z) any other payments referred to in clauses (ii) or (iii)
above not exceeding $300,000 individually or in the aggregate.
 
“SEC” means the Securities and Exchange Commission.
 
“SEC Documents” means all reports, schedules, forms, statements and other
documents required to be filed by the Company with the SEC pursuant to the
reporting requirements of the Exchange Act filed prior to the date hereof and
all exhibits included therein and financial statements, notes and schedules
thereto and documents incorporated by reference therein.
 
“Securities Act” means the Securities Act of 1933, as amended.
 
“Subsidiary” means, with respect to any Person, any corporation, partnership,
association or other business entity in which securities or other ownership
interests representing more than 50% of the equity or more than 50% of the
ordinary voting power or more than 50% of the general partnership interests are,
at the time any determination is being made, owned, controlled or held by such
Person.
 
“Transaction Documents” means, collectively, the Purchase Agreement, this Note,
the other Notes issued pursuant to the Purchase Agreement, and each of the other
agreements entered into by the parties hereto in connection with the
transactions contemplated by the Purchase Agreement.
 
“Voting Stock” of a Person means capital stock of, or other equity interest in,
such Person of the class or classes pursuant to which the holders thereof have
the general voting power to elect, or the general power to appoint, at least a
majority of the board of directors, managers or trustees of such Person
(irrespective of whether or not at the time capital stock of any other class or
classes shall have or might have voting power by reason of the happening of any
contingency).
 
9.   Notice.  All notices and other communications given or made pursuant hereto
shall be in writing and shall be deemed effectively given:  (i) upon personal
delivery to the party to be notified, (ii) when sent by confirmed electronic
mail or facsimile if sent during normal business hours of the recipient; if not,
then on the next Business Day, (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or
(iv) one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt.  All
communications shall be sent to the party at the address set forth on the
signature pages attached hereto (or at such other addresses as shall be
specified by notice given in accordance with this Section 9).
 
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If to the Company, at
 
Javo Beverage Company, Inc.
Attn:  William Marshall
1311 Specialty Drive
Vista, CA 92081
Fax: (760) 597-9793
email address: wmarshall@javobeverage.com
 
If to the Holder, at the most recent address provided to the Company by the
Holder for such purpose; or, in each case, to the most recent address, specified
by written notice, given to the sender pursuant to this paragraph.
 
10.   Entire Agreement; Waiver; Amendment.  This Note and the Purchase Agreement
constitute the full and entire understanding and agreement between the parties
with regard to the Indebtedness evidenced hereby.  This Note may be amended and
the observance of any term of this Note may be waived (either generally or in a
particular instance and either retroactively or prospectively) only with the
written consent of both the Company and the Holder.  Any waiver or amendment
effected in accordance with this Section 10 shall be binding upon any Holder of
this Note.
 
11.   Successors and Assigns.  This Note applies to, inures to the benefit of,
and binds the successors and assigns of the parties hereto.
 
12.   Governing Law; Jurisdiction, Waiver of Jury.
 
(a) The provisions of this Note and all of the documents delivered pursuant
hereto, their execution, performance or nonperformance, interpretation,
termination, construction and all matters based upon, arising out of or related
to this Note or the negotiation, execution or performance of this Note (whether
in equity, law or statute) shall be governed by, and construed in accordance
with, the laws, both procedural and substantive, of the State of New York
without regard to its conflicts of laws provisions that if applied might require
the application of the laws of another jurisdiction.
 
(b) All actions and proceedings arising out of or relating to this Note shall be
heard and determined in the state or federal courts of the State of New York,
and the Company hereby irrevocably submits to the exclusive jurisdiction of such
courts (and, in the case of appeals, appropriate appellate courts therefrom) in
any such action or proceeding and irrevocably waive the defense of an
inconvenient forum to the maintenance of any such action or proceeding.

(c) THE HOLDER AND THE COMPANY EACH ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY
IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED.  EACH OF THEM, AFTER
CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL OF THEIR
CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT ANY OF THEM
MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS
NOTE OR ANY RELATED INSTRUMENT OR TRANSACTION DOCUMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS NOTE OR ANY OF THE OTHER TRANSACTION DOCUMENTS
OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR
ACTION OF ANY OF THEM.  THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN
MODIFIED IN ANY RESPECT OR RELINQUISHED BY THE HOLDER OR THE COMPANY, EXCEPT BY
A WRITTEN INSTRUMENT EXECUTED BY EACH OF THEM.
 
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13.   Replacement Note.  Upon receipt of a lost note affidavit containing
indemnity provisions reasonably satisfactory to the Company indicating the loss,
theft, destruction or mutilation of this Note, the Company shall issue a
replacement Note, of like tenor and amount,
 
14.   Severability; Reinstatement.
 
(a) If any one or more of the provisions of this Note is unenforceable, in whole
or in part or in any respect it shall not affect any other provision of this
Note and the remaining provisions of this Note shall remain operative and in
full force and effect and in no way shall be affected, prejudiced, or disturbed
thereby.
 
(b) If any payment in respect of this Note or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, receiver or any other party, then to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied and
all right and remedies in respect thereof, shall be revived and continued in
full force and effect as if such payment had not been made.
 
15.   Waivers.
 
(a) No failure on the part of the Holder to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right.  The remedies herein
provided are cumulative and not exclusive of any remedies provided by law, in
equity or otherwise.
 
(b) Presentment, demand, protest or notice of any kind are hereby expressly
waived by the Company.
 
16.   Costs and Expenses.  The Company agrees upon demand to pay, or reimburse
the Holder for all of the Holder’s reasonable and documented out-of-pocket costs
and expenses of every type and nature (including the reasonable fees, expenses
and disbursements of counsel) incurred by the Holder in connection with any
collection or enforcement of any obligation in respect of this Note or any
exercising or enforcing any right or remedy available by reason of an Event of
Default.
 
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17.   Limitation of Liability.  The Company agrees that the Holder and each of
its Affiliates, and each of the directors, officers, employees, agents,
trustees, representatives, attorneys, consultants and advisors of or to any of
the foregoing (collectively, the “Released Parties”) shall not have any
liability (whether in contract, tort or otherwise) to any the Company or any of
its Subsidiaries or any of its equity holders or creditors for or in connection
with this Note, except to the extent such liability is determined in a final
non-appealable judgment by a court of competent jurisdiction to have resulted
primarily from such Released Party’s gross negligence or willful misconduct.  In
no event, however, shall any of the Released Parties be liable on any theory of
liability for any special, indirect, consequential or punitive damages
(including, without limitation, any loss of profits, business or anticipated
savings) for or in connection with this Note.  The Company hereby waives,
releases and agrees (each for itself and on behalf of its Subsidiaries) not to
sue upon any such claim for any special, indirect, consequential or punitive
damages, whether or not accrued and whether or not known or suspected to exist
in its favor for or in connection with this Note.
 
18.   Section Titles.  The section titles contained in this Note are and shall
be without substantive meaning or content of any kind whatsoever and are not a
part of the agreement between the parties hereto, except when used to reference
a section.
 
[Remainder of Page Intentionally Left Blank]
 
 
 
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IN WITNESS WHEREOF, the undersigned have caused this Note to be executed by its
duly authorized officers as of the date first above written.
 
 

  JAVO BEVERAGE COMPANY, INC.       By: _______________________________   Name:
_____________________________   Title: ______________________________

 
 
 
 
 
 
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