Document:

javo_8k-ex1001.htm

    Exhibit
10.1

    

    JAVO
BEVERAGE COMPANY, INC.

    SECURITIES
PURCHASE AGREEMENT

     

     

    This
Securities Purchase Agreement (this “Agreement”) is made
as of this 6th day of April, 2009, by and between Javo Beverage Company, Inc., a
Delaware corporation (the “Company”) and Coffee
Holdings LLC, a Delaware limited liability company (the “Investor”).

     

    RECITALS

     

    WHEREAS,
the Company has authorized the issuance and sale to the Investor, in accordance
with the terms hereof, of (i) one or more senior subordinated promissory notes
in the aggregate original principal amount of $12,000,000, in the form set forth
as Exhibit A
hereto (together the “Notes” and each a
“Note”), and
(ii) an aggregate of 50,000,000 shares (the “Shares”) of the
Company’s Common Stock, par value $0.001 per share (the “Common
Stock”);

     

    WHEREAS,
the Company desires to issue and sell, and the Investor desires to purchase, the
Notes and the Shares on the terms and subject to the conditions set forth
herein; and

     

    WHEREAS,
the Notes and the Shares are collectively referred to herein as the “Securities.”

     

    AGREEMENT

     

    NOW,
THEREFORE, in consideration of the foregoing recitals and mutual promises,
representations, warranties and covenants hereinafter set forth and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:

     

    
      
        	
              	
                1. 

              	
                Transaction.

              

      

    

     

    1.1           Sale and Issuance of
the
Securities.  Subject to the terms and conditions of this
Agreement, the Investor agrees to purchase at the closing (the “Closing”), and the
Company agrees to issue and sell to the Investor at the Closing, the Securities
for an aggregate purchase price of $12,500,000 (the “Purchase
Price”).

     

    1.2           Closing Date.  The
purchase and sale of the Securities to the Investor shall take place at the
offices of the Company located at 1311 Specialty Drive, Vista, California at
10:00 a.m. (local time), on the date of this Agreement, or at such other time
and place as the Company and the Investor mutually agree upon in writing (such
date, the “Closing
Date”).

     

    1.3           Payment;
Delivery.  On the Closing Date, the Company shall deliver to
the Investor the Notes and certificates representing the Shares against payment
of the Purchase Price by the Investor by wire transfer of immediately available
funds to an account designated by the Company.  Such respective Notes
and certificates shall be in the denominations directed by the
Investor.

     

    1.4           Allocation of Purchase
Price.  For federal income tax purposes, the Purchase Price,
net of the transaction fee payable pursuant to Professional Services Agreement
(which shall reduce the “issue price”) shall be allocated $500,000 to the Shares
and $12,000,000 to the Notes, and the parties hereto agree to report consistent
with such allocation.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	
            	
              2. 

            	
              Certain Defined
      Terms.  As used in this Agreement, the following terms
      shall have the meanings specified
below:

            

    

     

    “2006 Notes” means
those certain Senior Convertible Notes in an original aggregate principal amount
of $21,000,000 issued by the Company on December 15, 2006 pursuant to the 2006
Purchase Agreement.

     

    “2006 Purchase
Agreement” means that certain Securities Purchase Agreement dated
December 14, 2006, by and among the Company and parties identified therein, as
amended by the Amendment Agreement.

     

    “2006 Warrants” means
(i) those certain Series A Warrants to purchase Common Stock dated December 15,
2006, (ii) those certain Series B Warrants to purchase Common Stock dated
December 15, 2006 and (iii) those certain Series C Warrants to purchase Common
Stock dated December 15, 2006, in each case, issued by the Company pursuant to
the 2006 Purchase Agreement.

     

    “8-K Filing” shall
have the meaning assigned to such term in Section 5.5.

     

    “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 Investor, 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.

     

    “Amendment Agreement”
means that certain Amendment Agreement dated December 17, 2008, by and among the
Company and certain holders of the 2006 Notes and 2006 Warrants, as amended by
those certain Letter Agreements, dated as of February 25, 2009, by and between
the Company and such holders.

     

    “Beneficial Owner”
shall have the meaning ascribed to such term in the Exchange Act and the rules
and regulations promulgated thereunder, but without regard to the 60-day time
limit on the right to acquire shares (e.g., a Person who shall have the right to
acquire shares no sooner than 61 days from a given time shall be deemed the
Beneficial Owner of such shares for purposes of this Agreement).

     

    “Board of Directors”
means the Company’s board of directors, as constituted from time to
time.

     

    “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.

     

    “Bylaws” means the
Company’s bylaws, as amended and as in effect on the date hereof.

     

    
      
         

      

      
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    “Cause” means cause as
defined in any written agreement with any applicable officer or employee of the
Company, as determined in good faith by a majority of the disinterested members
of the Board of Directors, or any failure by the Company to renew any such
agreement upon the expiration thereof.

     

    “Certificate of
Incorporation” means the Company’s certificate of incorporation, as
amended and as in effect on the date hereof.

     

    “Closing” shall have
the meaning assigned to such term in Section 1.1.

     

    “Closing Date” shall
have the meaning assigned to such term in Section 1.2.

     

    “Common Stock” shall
have the meaning assigned to such term in the recitals to this
Agreement.

     

    “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.

     

    “Debt Termination
Date” means the first date upon which the Investor holds less than
$6,000,000 of aggregate principal amount outstanding under the
Notes.

     

    “Environmental Laws”
means all federal, state, local or foreign laws relating to pollution or
protection of human health and safety or the environment (including, without
limitation, ambient air, surface water, groundwater, stream sediments, land
surface or subsurface strata or natural resources), including, without
limitation, laws relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants, contaminants, toxic or hazardous substances
or wastes or terms of similar import (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.

     

    “Equity Termination
Date” means the first date upon which the Investor beneficially owns less
than 25,000,000 of the Shares (as adjusted for stock splits, combinations,
reorganizations and the like) issued pursuant to this Agreement.

     

    “Exchange Act” means
the Securities Exchange Act of 1934, as amended.

     

    “Executive Officer”
means any officer the hiring of which would result in a disclosure obligation
for the Company pursuant to Item 5.02(c) of Form 8-K under the Exchange
Act.

     

    
      
         

      

      
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    “GAAP” means United
States generally accepted accounting principles, consistently
applied.

     

    “Governance Period”
means the period from the Closing Date to the Governance Termination
Date.

     

    “Governance Termination
Date” means the earlier of (i) the tenth anniversary of the Closing Date
and (ii) the first date upon which both of the following have occurred: (A) the
Debt Termination Date and (B) the Equity Termination Date.

     

    “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 GAAP) (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.

     

    “Intellectual Property
Rights” shall have the meaning assigned to such term in Section
3.22.

     

    “Investor Nominee”
shall have the meaning assigned to such term in Section 5.6.

     

    “Investor Observer”
shall have the meaning assigned to such term in Section 5.7.

     

    “Investor Registration
Statement” shall have the meaning assigned to such term in Section
7.1.

     

    “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.

     

    “New Debt Securities”
means any indebtedness for borrowed money of the Company (including any notes,
bonds, debentures or similar instruments) in excess of $500,000 as a single
issuance or a series of related issuances that is not a New Equity
Security.

     

    
      
         

      

      
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    “New Equity
Securities” means any equity securities of the Company, whether or not
currently authorized, and any securities convertible into or exercisable or
exchangeable for equity securities of the Company, provided, however, that “New
Equity Securities” shall not include, in each case to the extent such issuances
(other than as described clause (vii)) are not for capital raising purposes, (i)
securities issued upon conversion, exercise or exchange of any securities of the
Company outstanding as of the date hereof; (ii) securities issued upon
conversion or exercise of any New Equity Securities issued in compliance with
this Agreement, (iii) securities issued to employees or directors of, or
consultants or advisors to, the Company or any of its Subsidiaries pursuant to
any equity compensation plans or any other similar arrangement; (iv) securities
issued pursuant to the acquisition by the Company of another corporation or
entity by consolidation, reorganization, merger or purchase of all or
substantially all of the assets of such corporation; (v) securities issued to
equipment lessors or other financial institutions, or to real property lessors,
pursuant to an equipment leasing or real property leasing transaction; (vi)
securities issued in connection with license, development, marketing or similar
agreements or strategic partnerships; (vii) securities offered to the public
pursuant to a registration statement filed under the Securities Act; and (viii)
securities issued pursuant to a stock dividend, stock split, split up or similar
transaction.

     

    “New Securities” means
any New Debt Securities and/or any New Equity Securities.

     

    “Note” and “Notes” shall have the
meaning assigned to such term in the recitals to this Agreement.

     

    “Offer Notice” shall
have the meaning assigned to such term in Section 8.1(a).

     

    “Permitted
Indebtedness” shall have the meaning assigned to such term in the Notes
as in effect immediately following the Closing.

     

    “Permitted Transferee”
shall have the meaning assigned to such term in Section 9.

     

     “Person” means any
natural person, corporation, business trust, joint venture, association,
company, limited liability company, partnership, governmental authority or other
entity.

     

    “Preemptive Period”
means (i) with respect to any offering of New Debt Securities, the period from
the Closing Date to the earlier of (A) the Debt Termination Date and (B) the
seventh anniversary of the Closing Date and (ii) with respect to any offering of
New Equity Securities, the period from the Closing Date to the earlier of (X)
the Equity Termination Date and (Y) the seventh anniversary of the Closing
Date.

     

    “Principal Market”
means the NASDAQ Over-the-Counter Bulletin Board.

     

    “Professional Services
Agreement” means the Professional Services Agreement by and between the
Company and Falconhead Capital, LLC, dated as of the date hereof.

     

    
      
         

      

      
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    “Purchase Price” shall
have the meaning assigned to such term in Section 1.1.

     

    “Reporting Period”
shall have the meaning assigned to such term in Section 5.1.

     

    “Rights Period” means
the period from the Closing Date to the Rights Termination Date.

     

    “Rights Termination
Date” means the earliest of (i) the eighth anniversary of the Closing
Date, (ii) the first date upon which both of the following have occurred: (A)
the Debt Termination Date and (B) the Equity Termination Date and (iii) the
repayment in full of all amounts outstanding under the Notes, including all
principal and any accrued and unpaid interest thereon.

     

    “Rule 144” shall have
the meaning assigned to such term in Section 4.6.

     

    “SEC” means the
Securities and Exchange Commission.

     

    “SEC Documents” shall
have the meaning assigned to such term in Section 3.9.

     

    “Securities” shall
have the meaning assigned to such term in the recitals to this
Agreement.

     

    “Securities Act” means
the Securities Act of 1933, as amended.

     

    “Shares” shall have
the meaning assigned to such term in the recitals to this
Agreement.

     

    “Short Sales” means
all “short sales” as defined in Rule 200 promulgated under Regulation SHO under
the Exchange Act, whether or not against the box, and all types of direct and
indirect stock pledges, forward sale contracts, options, puts, calls, short
sales, swaps, “put equivalent positions” (as defined in Rule 16a-1(h) under the
Exchange Act) and similar arrangements (including on a total return basis),
whether effected through domestic or non-U.S. broker dealers or foreign
regulated brokers, with respect to any securities not owned by the party
undertaking any such arrangement.

     

    “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.

     

    “Termination Event”
shall have the meaning assigned to such term in Section 5.8.

     

    “Trading Affiliates”
shall have the meaning assigned to such term in Section 4.11(a).

     

    “Transaction
Documents” means, collectively, this Agreement, the Notes, the
Professional Services Agreement and each of the other agreements entered into by
the parties hereto in connection with the transactions contemplated by this
Agreement.

     

    
      
         

      

      
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                3. 

              	
                Representations and
      Warranties of the Company.  The Company hereby represents
      and warrants to the Investor as of the date of this Agreement as
      follows.

              

      

    

     

    3.1           Organization and
Qualification.  The Company and each of its Subsidiaries 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.

     

    3.2           Authorization; Enforcement;
Validity.  The Company has the requisite power and authority to
enter into and perform its obligations under 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
Securities, have been duly authorized by the Board of Directors and no further
filing, consent, or authorization is required by the Company, the Board of
Directors or the Company’s 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, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors’ rights and remedies.

     

    3.3           Issuance of Equity
Securities.  The issuance of the Shares has been duly
authorized and, when issued and delivered against consideration therefor as
provided herein, the Shares 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 Investor being entitled to all rights
accorded to a holder of Common Stock.  Assuming the accuracy of each
of the representations and warranties of the Investor set forth in Section 4 of
this Agreement, the offer and issuance by the Company of the Securities is
exempt from registration under the Securities Act and any applicable state
securities laws.

     

    3.4           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 the 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, (ii) 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
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), or (iii) 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 material agreement, indenture or instrument to which the Company or any of
its Subsidiaries is a party.

     

    
      
         

      

      
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    3.5           Consents.  Neither
the Company nor any of its Subsidiaries is required to obtain any consent,
authorization or order of, make any filing or registration with, or provide any
notice to, any court, governmental agency or any regulatory or self-regulatory
agency (including the Principal Market) 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 8-K Filing.

     

    3.6           No General Solicitation;
Broker
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 under the Securities Act) 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 the Investor or its investment advisor)
relating to or arising out of the transactions contemplated
hereby.  The Company shall pay, and hold the Investor 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.

     

    3.7           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 Securities Act or cause this offering of the Securities to
be integrated with prior offerings by the Company for purposes of the Securities
Act where such integration would cause the loss of the availability of an
offering exemption under the Securities Act.  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 Securities Act or cause the
offering of the Securities to be integrated with other offerings where such
integration would cause the loss of the availability of an offering exemption
under the Securities Act.

     

    3.8           Application of Takeover
Protections; Rights Agreement.  The Company and its Board of
Directors have taken all necessary action in order to render inapplicable any
control share acquisition, business combination, poison pill (including any
distribution under the Shareholder Rights Agreement, dated July 1, 2002, by and
between the Company and Corporate Stock Transfer, Inc.) or other similar
anti-takeover provision under the Certificate of Incorporation or the laws of
the state of its incorporation which is or could become applicable to the
Investor as a result of the transactions contemplated by this Agreement,
including, without limitation, the Company’s issuance of the Securities and the
Investor’s ownership of the Securities.  The Company and the 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.

     

    
      
         

      

      
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    3.9           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 Exchange 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”).  Except as set forth on Schedule 3.9, the
Company has no SEC Documents that are not available on the EDGAR
system.  Except as set forth on Schedule 3.9, as of
their respective filing dates, the SEC Documents complied in all material
respects with the requirements of the Exchange 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 GAAP, 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 documents or information provided in writing by or on
behalf of the Company to the Investor which are not included in the SEC
Documents, including, without limitation, information referred to in Section 4.4
of this Agreement or in any disclosure schedules, contains 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; provided, however, that the
Company makes no representations or warranties with respect to any projections,
forecasts or other forward-looking information.

     

    3.10          Absence of Certain
Changes.  Since December 31, 2008, except as specifically
disclosed in the SEC Documents, there has been no Material Adverse
Effect.  Except as disclosed in Schedule 3.10, since
December 31, 2008, 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, (iii) had capital expenditures, individually
or in the aggregate, in excess of $500,000, (iv) made or suffered any amendment
to any material contract or cancelled, modified or waived any material debts or
claims held by it or waived any rights, or (v) entered into any material
transaction other than in the ordinary course of business consistent with past
practice.

     

    3.11          No Undisclosed Events,
Liabilities, Developments or Circumstances.  No event,
liability, development or circumstance has occurred or exists 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 the Exchange Act and which has not been publicly
announced.

     

    
      
         

      

      
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    3.12          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.  During the two (2) years prior to the date hereof,
(i) the Common Stock has been 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.

     

    3.13          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.

     

    3.14          Sarbanes-Oxley
Act.  The Company is in compliance with any and all applicable
requirements of the Sarbanes-Oxley Act of 2002, as amended, 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.

     

    3.15          Transactions With
Affiliates.  Except as set forth in the SEC Documents and other
than the grant of stock options disclosed on Schedule 3.16, 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 compensation for 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 Person in which any such officer,
director, or employee has a substantial interest or is an officer, director,
trustee or partner.

     

    
      
         

      

      
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    3.16          Equity
Capitalization.  As March 13, 2009, the authorized capital
stock of the Company consists of (a) 300,000,000 shares of Common Stock, of
which as of the date hereof, 193,753,343 are issued and outstanding, 14,100,000
shares are reserved for issuance pursuant to the Company’s stock option and
purchase plans and 12,373,598 shares are reserved for issuance pursuant to
securities (other than the aforementioned options) exercisable or exchangeable
for, or convertible into, shares of Common Stock, (b) 5,850,000 shares of
undesignated preferred stock, of which as of the date hereof, none are issued
and outstanding, (c) 150,000 shares of Series A Junior Participating Preferred
Stock, par value $0.001 per share, of which as of the date hereof, none are
issued and outstanding, and (d) 4,000,000 shares of Series B Preferred Stock,
par value $0.001 per share, of which as of the date hereof, 2,147,952 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 and
were not issued in violation of any preemptive rights.  Except as
disclosed in Schedule
3.16 or pursuant to this Agreement: (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 Securities Act; (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, with respect to this clause (ix), 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 Investor
true, correct and complete copies of the Certificate of Incorporation and 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.

     

    3.17          Indebtedness and Other
Contracts.  Except for Permitted Indebtedness and as disclosed
in Schedule
3.17, neither the Company nor any of its Subsidiaries (i) has any
outstanding Indebtedness, (ii) is in default under any contract, agreement or
instrument, except where such defaults would not reasonably result, individually
or in the aggregate, 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 a Material Adverse Effect.

     

    
      
         

      

      
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    3.18           Absence of
Litigation.  Except as set forth in Schedule 3.18, 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 or any of the
Company’s or its Subsidiaries’ officers or directors except where such would not
be, individually or in the aggregate, material to the Company or any of its
Subsidiaries.

     

    3.19          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.

     

    3.20          Employee
Relations.

     

    
       (a)           Neither
the Company nor any of its Subsidiaries is a party to any collective bargaining
agreement or employs any member of a union, and the Company is not aware of any
activities involving the organization of a collective bargaining agreement or a
union by employees of the Company or any of its Subsidiaries.  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 Securities 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.

       

       (b)           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.

       

    

    3.21          Property.  The
Company and its Subsidiaries (i) own or have valid leasehold interests in all of
their leased real property and (ii) have title to, or valid leasehold interests
in, all of their personal property and assets that are material to its
business.  As of the Closing Date, none of the real property or assets
of the Company or any of its Subsidiaries are subject to any liens other than
liens arising from Permitted Indebtedness, except, in each case, such liens or
encumbrances that 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.  The leased real property and
personal property and assets used in the business of the Company and its
Subsidiaries are in good operating condition, ordinary wear and tear excepted,
and constitute all assets, properties, interests in properties and rights
necessary to permit the Company and its Subsidiaries to carry on their business
consistent with past practice.  Neither the Company nor any of its
Subsidiaries owns or has ever owned any real property.

     

    
      
         

      

      
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    3.22          Intellectual Property
Rights.  The Company and its Subsidiaries own, is licensed to
use or otherwise has the valid and enforceable right 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 for the conduct of its business as currently conducted
that is material to the condition (financial or other), business or operations
of such Person and all such Intellectual Property is fully protected and/or duly
and properly registered, filed or issued in the appropriate office and
jurisdictions for such registrations, filings or issuances.  Except as
set forth on Schedule
3.22, the use of such Intellectual Property by the Company and its
Subsidiaries and the conduct of their businesses does not and has not been
alleged by any Person to infringe on the material rights of any
Person.  The Company and its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their Intellectual Property Rights.

     

    3.23          Environmental
Laws.  The Company and its Subsidiaries (i) are in compliance
with any and all Environmental Laws, (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 except where, in each of the
foregoing clauses (i), (ii) and (iii), the failure to so comply would be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect.

     

    3.24          Subsidiaries.  The
Company has no Subsidiaries except as set forth on Schedule
3.24.  Schedule 3.24 sets
forth the authorized and outstanding capital stock of each Subsidiary of the
Company.  All the outstanding shares of capital stock of, or other
equity interests in, each Subsidiary of the Company have been duly authorized
and validly issued and are fully paid and nonassessable and are owned directly
or indirectly by the Company free and clear of all liens, pledges, charges,
mortgages, encumbrances, adverse rights or claims and security interests of any
kind or nature whatsoever (including any restriction on the right to vote or
transfer the same, except for such transfer restrictions of general
applicability as may be provided under the Securities Act, and the “blue sky”
laws of the various States of the United States).  The Company or one
of its Subsidiaries has the unrestricted right to receive dividends and
distributions on, all capital securities of its Subsidiaries.

     

    3.25          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.

     

    
      
         

      

      
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    3.26          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 Exchange 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
Exchange Act 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 Exchange 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.  Other than as disclosed in
the SEC Documents, 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.

     

    3.27          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 the SEC
Documents and is not so disclosed or that otherwise would be reasonably likely
to have a Material Adverse Effect.

     

    3.28          Investment Company
Status.  The Company is not, and upon consummation of the sale
of the Securities will not be, an “investment company” as such term is defined
in the Investment Company Act of 1940, as amended.

     

    3.29          Transfer
Taxes.  On the Closing Date, all stock transfer or other taxes
(other than income or similar taxes) that are required to be paid in connection
with the sale and transfer of the Securities to be sold to the Investor
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.

     

    3.30          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) 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.

     

    3.31          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.

     

    3.32          Disclosure.  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.

     

    
      
         

      

      
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    3.33          Material Customers,
Distributors and Suppliers.  Since December 31, 2008, no
material customer, distributor or supplier of the Company or its Subsidiaries
has given the Company or its Subsidiaries any notice terminating, suspending, or
reducing in any material respect, or specifying an intention to terminate,
suspend, or reduce in any material respect in the future, or otherwise
reflecting an adverse change in, the business relationship between such
customer, distributor or supplier and the Company or its Subsidiaries, there has
not been any materially adverse change in the business relationship of the
Company or its Subsidiaries with any such customer, distributor or supplier, and
the Company has no reason to believe that there will be any such adverse change
in the future either as a result of the consummation of the transactions
contemplated hereby or otherwise.

     

    
      	
            	
              4. 

            	
              Representations and
      Warranties of the Investor.  The Investor hereby
      represents, warrants and covenants to the Company as of the date of this
      Agreement as follows:

            

    

     

    4.1           No Sale or
Distribution.  The Investor is acquiring the Securities for its
own account and not with a view towards, or for resale in connection with, the
public sale or distribution thereof in violation of any securities
laws.  The Investor is acquiring the Securities hereunder in the
ordinary course of its business.  The Investor does not presently have
any agreement or understanding, directly or indirectly, with any Person to
distribute any of the Securities.

     

    4.2           Accredited Investor
Status.  The Investor is an “accredited investor” as that term
is defined in Rule 501(a) of Regulation D under the Securities Act.

     

    4.3           Reliance on
Exemptions.  The Investor 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 the
Investor’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Investor set forth herein in order to
determine the availability of such exemptions and the eligibility of the
Investor to acquire the Securities.

     

    4.4           Information.  The
Investor 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 the
Investor.  The Investor 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 the Investor
or its advisors, if any, or its representatives shall modify, amend or affect
the Investor’s right to rely on the Company’s representations and warranties
contained herein.  The Investor understands that its investment in the
Securities involves a high degree of risk and is able to afford a complete loss
of such investment.  The Investor understands that nothing in this
Agreement or any other materials presented to the Investor in connection with
the purchase and sale of the Securities constitutes legal, tax or investment
advice.  The Investor 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.

     

    
      
         

      

      
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    4.5           No Governmental
Review.  The Investor 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.

     

    4.6           Transfer or
Resale.  The Investor understands that except as provided
herein: (i) the Securities have not been and are not being registered under the
Securities Act or any state securities laws, and may not be offered for sale,
sold, assigned or transferred unless (A) subsequently registered thereunder, (B)
the Investor shall have delivered to the Company an opinion of counsel, in a
form reasonably acceptable to the Company, 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) the Investor provides the Company
with reasonable assurance that such Securities can be sold, assigned or
transferred pursuant to Rule 144 promulgated under the Securities Act, as
amended (or a successor rule thereto) (collectively, “Rule 144”) (provided, however, that in the
event any transfer agent or similar third party shall require an opinion of
counsel in connection with a transfer made pursuant to Rule 144, the Company’s
counsel shall be asked to issue such opinion, at the Company’s expense and the
Investor making such transfer shall provide any and all documentation and/or
back-up certificates reasonably necessary for such counsel to issue such
opinion); (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 through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities 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 Securities
Act or any state securities laws or to comply with the terms and conditions of
any exemption thereunder.

     

    4.7           Legends.  The
Investor understands that the certificates or other instruments representing the
Shares shall bear any legend as required by the “blue sky” laws of any state and
one or more restrictive legends in substantially the following form (and a
stop-transfer order may be placed against transfer of such stock
certificates):

     

    THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THESE SECURITIES 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
legend set forth above shall be removed and the Company shall issue certificates
without such legend to the holder of the Shares upon which it is stamped, if,
unless otherwise required by state securities laws, (i) such Shares are
registered for resale under the Securities 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, in form reasonably
acceptable to the Company, to the effect that such sale, assignment or transfer
of the Shares may be made without registration under the applicable requirements
of the Securities Act, or (iii) such holder provides the Company with reasonable
assurance that the Shares can be sold, assigned or transferred pursuant to Rule
144.

     

    
      
         

      

      
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    4.8           Validity;
Enforcement.  The Investor has full power and authority and has
taken all required action necessary to permit it to execute and deliver and to
carry out the terms of each of the Transaction Documents to which it is a
party.  The Transaction Documents to which the Investor is a party
have been duly authorized, executed and delivered on behalf of the Investor and
constitute the legal, valid and binding obligations of the Investor enforceable
against the Investor 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.

     

    4.9           No
Conflicts.  The execution, delivery and performance by the
Investor of the Transaction Documents to which the Investor is a party and the
consummation by the Investor of the transactions contemplated hereby and thereby
will not (i) result in a violation of the organizational documents of the
Investor 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
material agreement, indenture or instrument to which the Investor 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 the Investor,
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 the Investor to perform its obligations hereunder.

     

    4.10          Residency.  The
Investor’s principal place of business is that jurisdiction specified below its
signature on the signature pages to this Agreement.

     

    4.11          Certain Trading
Activities.

     

    
       (a)           Other
than with respect to the transactions contemplated herein, since the time that
the Investor was first contacted by the Company or any other Person regarding
the transactions contemplated hereby, neither the Investor nor any Affiliate of
the Investor which (x) had knowledge of the transactions contemplated hereby,
(y) has or shares discretion relating to the Investor’s investments or trading
or information concerning the Investor’s investments, including in respect of
the Shares and (z) is subject to the Investor’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 the Investor or Trading Affiliate, effected or agreed
to effect any transactions in the securities of the Company (including without
limitation, any Short Sales involving the Company’s securities).

       

       (b)           The
Investor shall not, and shall cause its Trading Affiliates not to, engage,
directly or indirectly, in any Short Sales involving the Company’s securities at
any time during the period from the Closing Date to the eighth anniversary of
the Closing Date.

       

    

    
      
         

      

      
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       (c)           The
Investor hereby covenants and agrees that, unless the Company shall otherwise
expressly consent in writing, it will not, and it will cause its Trading
Affiliates not to, directly or indirectly, offer, sell, contract to sell or
otherwise dispose of any of the Shares to any Person that the Investors actually
knows to be a direct competitor of the Company, provided, however, that the
foregoing restriction shall not apply in connection with any underwritten public
offering of Shares in which the Investor participates pursuant to the rights set
forth in Section 7 below or otherwise.

       

       (d)           The
Investor hereby covenants and agrees that, in the event that an Investor
Registration Statement filed pursuant to Section 7.1 below is declared effective
by the SEC, the Investor will not, pursuant to such Investor Registration
Statement, sell or otherwise dispose of Shares that in the aggregate constitute
more than fifty percent (50%) of the total number of Shares registered under the
Investor Registration Statement during the six (6) month period following the
date such Investor Registration Statement is declared effective by the
SEC.

       

       (e)           Except
as set forth on Schedule 4.11(e), the Investor is not the Beneficial Owner of
any shares of the Company’s Common Stock, including securities exercisable for
or convertible into shares of Common Stock.

       

       (f)           The
Investor agrees that for so long as the Investor Nominee serves on the Board of
Directors or the Investor Observer exercises his/her rights under Section 5.7,
the Investor will be bound by the terms of the Company’s insider trading policy
and that any transactions effected in the Company’s securities will be made in
compliance with this policy.

       

    4.12          Confidentiality.  The
Investor covenants that until such time as the transactions contemplated by this
Agreement are publicly disclosed by the Company as described in Section 5.5, the
Investor will maintain the confidentiality of the existence and terms of this
transaction and the information included in the Transaction Documents except to
the extent the Investor is required by law or legal or regulatory process to
make a disclosure with respect to such matters.

     

    
      	
            	
              5. 

            	
              Affirmative
      Covenants.  The Company covenants and agrees with the
      Investor that it will take the following
  actions:

            

    

     

    5.1           Reporting
Status.  Until the earlier of (i) the date on which the
Investor shall have sold all the Shares, or (ii) the Investor is eligible to
sell all of the Shares without any limitation or restriction under Rule 144 and
the Investor owns less than 2% of the issued and outstanding Common
Stock  (the “Reporting Period”),
the Company shall timely file all reports required to be filed with the SEC
pursuant to the Exchange Act, and the Company shall not terminate its status as
an issuer required to file reports under the Exchange Act even if the Exchange
Act or the rules and regulations thereunder would no longer require or otherwise
permit such termination.

     

    5.2           Use of
Proceeds.  The proceeds from transactions contemplated by this
Agreement (net of the expenses directly incurred in connection with the
transactions contemplated by this Agreement) shall be used exclusively (a) for
general corporate uses, including working capital and capital expenditures for
dispensing equipment and other capital items, (b) to redeem the 2006 Notes and
the 2006 Warrants in accordance with Section 5.10 and (c) to repay and
extinguish the working capital loan in the amount of $5,000,000 with Wells Fargo
Bank, N.A. in accordance with Section 5.10.

     

    
      
         

      

      
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    5.3           Information
Rights.  The Company will send the following to the Investor
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 and 10-Q, 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 Securities Act, (ii) unless the following are
publicly released via a newswire service, within one (1) Business Day after 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.  For so long as the Investor holds any Note, within
thirty (30) days after the end of each month, the Company shall provide the
Investor with an unaudited consolidated balance sheet, statement of operations
and statement of cash flow of the Company and its Subsidiaries for such month
ended.  At any time, and from time to time, the Investor may, at its
sole election, notify the Company that it does not desire to receive any or some
of the information referenced in the immediately preceding sentence, and in such
event, the Company shall not provide the Investor such information during the
period specified by the Investor.  

     

    5.4           Fees.  Each
of the Company and the Investor shall indemnify the other against all
liabilities incurred by the indemnified party with respect to claims related to
any placement agent’s fees, financial advisory fees, or broker’s commissions
relating to or arising out of the transactions contemplated hereby, arising out
of arrangements between the party asserting such claims and the indemnifying
party, and all costs and expenses (including without limitation reasonable fees
of counsel) of investigating and defending such claims.

     

    5.5           Disclosure of Transactions
and Other Material Information.  On or before 5:30 p.m., New
York City time, on the fourth 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 Exchange Act (the “8-K Filing”); provided that the
Company shall provide a copy of the proposed 8-K Filing (including the press
release) to the Investor as promptly as practicable in advance, and in any event
at least forty-eight (48) hours in advance, of the release or filing the 8-K
Filing and shall not include any items in such 8-K Filing (including the press
release) to which the Investor or its counsel reasonably object.  In
the event the Investor or the Company proposes to issue any future press release
referencing the other party by name, the party proposing to make issue such
press release shall provide a copy of the proposed press release to the other
party as promptly as practicable in advance of the issuance of such press
release and shall not include any items in such press release to which the other
party or its counsel reasonably object.

     

    5.6           Board
Nominee.  The Company covenants and agrees to take any and all
actions as may be required to nominate one representative designated by the
Investor (the “Investor Nominee”) to
be elected to the Board of Directors at each annual meeting of the Company’s
stockholders occurring during the Governance Period.  As compensation
for service on the Company’s Board of Directors, the Investor Nominee shall be
entitled to receive (and direct payment if requested) the same amount and type
of compensation as may be paid by the Company to other non-employee directors,
as well as reimbursement for his or her reasonable out-of-pocket expenses
(including travel expenses) incurred in attending in-person board meetings,
subject to reimbursement policies generally applicable to the Board of
Directors.  Prior to the first meeting of the Board of Directors
following the Closing, Scott Dickey shall be appointed to the Board of Directors
as the Investor Nominee, and the Company shall enter into a director and officer
indemnification agreement with such Investor Nominee, which shall be
substantially in the same form that the Company provides to its current
directors.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    5.7           Board
Observer.  During the Governance Period, the Company will
permit one observer selected by the Investor (the “Investor Observer”)
to attend all meetings of the Board of Directors of the Company held during the
Governance Period in a nonvoting capacity.  The Company shall give the
Investor Observer copies of all notices, minutes, consents and other materials
that it provides to its directors at the same time as such materials are
provided to the directors of the Company, except that the Investor Observer may
be excluded from access to any material or meeting or portion thereof if the
Board of Directors determines in good faith, upon advice of counsel, that such
exclusion is reasonably necessary to preserve the attorney-client
privilege.  The Company shall reimburse the Investor Observer for his
or her reasonable out-of-pocket expenses (including reasonable travel expenses)
incurred in connection with attending any meeting of the Board of Directors in
accordance with Company policy.  The Investor covenants and agrees,
and by exercising any of the rights contained in this Section 5.7 the Investor
Observer will be deemed to covenant and agree, that it will not use or disclose
any confidential information made known solely pursuant to the operation of this
Section 5.7 except to the extent disclosure of such information is required by
law or legal or regulatory process.

     

    5.8           Chief Executive
Officer.  The Company covenants and agrees that in the event
that the Board of Directors terminates the employment of Cody C. Ashwell after
the date hereof and prior to the Rights Termination Date (a “Termination Event”),
and such termination is either (i) without Cause, or (ii) without obtaining the
Investor’s prior written consent, then the Company, at its sole discretion upon
action of the Board of Directors shall either (X) take any and all actions as
may be required to nominate a second representative designated by the Investor
(in addition to the Investor Nominee) to be elected to the Board of Directors at
each annual meeting of the Company’s stockholders occurring during the
Governance Period (with such additional Investor Nominee being elected to the
Board of Directors prior to the first meeting of the Board of Directors after
the occurrence of a Termination Event and with such Investor Nominee having the
same rights under this Agreement as the Investor Nominee appointed pursuant to
Section 5.6) or (Y) within 180 days of the effective date of the Termination
Event, prepay the Investor’s Notes in an amount equal to the lesser of (1) the
aggregate principal amounts then outstanding under such Notes and (2)
$6,000,000.

     

    5.9           Executive
Officers.  The Company covenants and agrees that it will
consult with and allow the Investor Nominee the opportunity to participate in
the interviewing and the hiring of any Executive Officer of the Company during
the Rights Period.

     

    5.10          Repayment of Existing
Indebtedness.  TheCompany will take all actions necessary to
fully redeem and extinguish the 2006 Notes and the 2006 Warrants on or prior to
April 8, 2009 on the terms set forth in the Amendment
Agreement.  Within (5) five Business Days following the Closing Date,
the Company shall repay and extinguish the working capital loan in the amount of
$5,000,000 with Wells Fargo Bank, N.A., and obtain a release of any remaining
restricted cash on the Company’s balance sheet that secures such working capital
loan, except to the extent necessary to collateralize the Company’s credit card
line, not to exceed $150,000.

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    
      	
            	
              6. 

            	
              Negative
      Covenants.

            

    

     

    6.1           Approval
Rights.  The Company covenants and agrees with the Investor
that from and after the Closing Date, unless the Investor shall otherwise
expressly consent in writing, the Company will not, or permit any of its
Subsidiaries to, as applicable, take any of the following actions:

     

    
       (a)           declare
or pay any dividend or other distribution on its capital stock (except as
required on the Company’s existing Series B Preferred Stock); or

       

       (b)           authorize
or issue, by reclassification or otherwise, any capital stock of the Company
that has any rights, preferences or privileges senior to the Common Stock (or in
the case of any Subsidiary, issue any capital stock to any Person other than the
Company or another Subsidiary); or

       

       (c)           incur
any Indebtedness (other than Permitted Indebtedness); or

       

       (d)           sell
all or substantially all its assets; or

       

       (e)           amend
or modify the Certificate of Incorporation or Bylaws in a manner that is adverse
to the Investor; or

       

       (f)           
liquidate, dissolve or wind up; or

       

       (g)           make
any material change in its line of business or enter into any new line of
business outside of the manufacturing and marketing of beverage and ingredient
systems; or

       

       (h)           increase
the size of the Board of Directors to more than nine (9) directors;
or

       

       (i)         
  enter into any agreement with any Affiliate other than agreements
entered into on commercially reasonable, arms-length terms and
conditions.

       

    

    6.2           Stock Splits and Changes in
Authorized Shares.  Notwithstanding anything to the contrary
contained in Section 6.1, the Investor’s prior written consent pursuant to this
Agreement shall not be required in connection with the effectuation by the
Company of any stock split, reverse stock split or other change in the Company’s
authorized capital stock, including an increase in the authorized capital
stock.

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

    6.3           Termination of Approval
Rights.  The negative covenants contained in Section 6.1 above,
and the obligation of the Company to obtain the prior written approval of the
Investor in connection therewith, shall terminate and be of no further force and
effect as of the Rights Termination Date.

     

    
      	
            	
              7. 

            	
              Registration
      Rights.

            

    

     

    7.1           Piggy-Back
Registrations.  If at any time the Company shall determine to
prepare and file with the SEC a registration statement relating to an offering,
either for the Company’s own account or the account of others, under the
Securities Act of any of its equity securities, other than on Form S-4 or Form
S-8 (each as promulgated under the Securities Act) or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then the Company
shall promptly send to the Investor written notice of such determination and, if
within ten (10) Business Days after receipt of such notice, the Investor shall
so request in writing, the Company shall include in such registration statement
all or any part of the Shares the Investor requests to be registered, subject to
(i) any limitations that may be imposed by the SEC regarding the number of
Shares that may be included in the registration statement and (ii) customary
underwriter or placement agent pro-rata cutbacks applicable to all Persons
registering shares pursuant to such registration statement, if any, due to a
reasonable objection from the underwriters or placement agents that the
inclusion of such Shares would materially adversely affect the contemplated
offering; provided, however, that if,
after the application of any such limitations or cutbacks (but excluding
cutbacks made pursuant to SEC rules, regulations or policies), the number of
Shares requested to be registered on behalf of the Investor constitutes less
than 25% of the aggregate amount of the securities to be registered on such
registration statement, and if the Investor so requests, then the Company shall,
within 180 days following the effective date of the registration statement to
which cutback applied, prepare and file an additional registration statement
(the “Investor
Registration Statement”) covering the resale by the Investor of all of
the Shares then held by the Investor, subject to any limitations that may be
imposed by the SEC regarding the number of Shares that may be included in such
Investor Registration Statement, and use reasonable best efforts to have such
Investor Registration Statement declared effective within such 180 day period
and kept effective until the earlier of (i) such time as when all of the Shares
are sold thereunder, or (ii) the end of the Reporting Period.  If the
Company becomes obligated to prepare and file an Investor Registration
Statement, the Company and the Investor shall enter into a customary
registration rights agreement covering the obligations of the Company and the
Investor in connection therewith.

     

    7.2           Notice of Underwriting in
Piggy-Back Registration.  If the registration of which the
Company gives notice pursuant to Section 7.1 is for a registered public offering
involving an underwriting or a placement by a placement agent, the Company shall
so advise the Investor as part of the written notice given pursuant to Section
7.1.  In such event, the right of the Investor to include any Shares
in such registration statement shall be conditioned upon the Investor (together
with the Company and any other holders registering their securities through such
offering) entering into an underwriting agreement or placement agent agreement,
as applicable, with the underwriters or placement agents for such
offering.  The Investor shall have no right to participate in the
selection of the underwriters for an offering pursuant to this Section
7.

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

    7.3           Information Furnished by
Investor.  It shall be a condition precedent of the Company’s
obligations to include any Shares in a registration statement under this Section
7 that the Investor furnish to the Company such information regarding the
Investor and the distribution proposed by the Investor as the Company may
reasonably request.

     

    7.4           Expenses.  All
expenses incurred by the Company in complying with this Section 7, including
without limitation, all federal and state registration, qualification and filing
fees, printing expenses, fees and disbursements of counsel for the Company,
“blue sky” fees, fees of transfer agents and registrars, expenses and the
expenses of special audits incident to or required by any such registration and
the fees and disbursements of counsel to the Investor (not to exceed $25,000)
shall be borne by the Company.  Any underwriting discounts and selling
commissions applicable to the sale of the Shares pursuant to a registration
statement under this Section 7 shall be borne by the Investor.

     

    7.5           Termination of Registration
Rights.  The rights contained in this Section 7 shall terminate
at the end of the Reporting Period; provided, however, that the rights in
Section 7.1 with respect to an Investor Registration Statement shall terminate
upon such time as the Investor is eligible to sell all of the Shares held by the
Investor under Rule 144 without any restriction or limitation and the Shares
held by the Investor represent less than five percent (5%) of the Company’s
outstanding Common Stock at such time.

     

    
      	
            	
              8. 

            	
              Preemptive
      Rights.

            

    

     

    8.1           Right of First
Offer.  Subject to the terms and conditions of this Section 8.1
and applicable securities laws, if at any time during the Preemptive Period the
Company proposes to offer, sell or issue any New Securities, the Company shall
first offer such New Securities to the Investor.

     

    
       (a)           The
Company shall give the Investor notice that has a bona fide intention to offer
New Securities (the “Offer Notice”) and
that the Investor may, within five (5) Business Days following the delivery of
the Offer Notice, request additional written information relating to the
proposed offering, including the number of New Securities to be offered and the
price and terms on which it proposes to offer such New Securities. If the
Investor requests such additional information, the Company shall provide that
information promptly, and in any event, within 24 hours.

       

       (b)           By
notification to the Company within ten (10) Business Days after the Offer Notice
is given, the Investor may elect to purchase or otherwise acquire, at the price
and on the terms specified in the Offer Notice, up to that portion of such New
Securities which equals (i) in the case of an offer of New Equity Securities,
the proportion that the Shares held by the Investor bears to the total Common
Stock of the Company then outstanding or (ii) in the case of an offer of New
Debt Securities, the proportion that the aggregate unpaid principal amount,
accrued interest and other amounts (if any) owing to the Investor under the
Notes or any other Indebtedness held by the Investor bears to the total
outstanding Indebtedness of the Company, in each case measured as of the date
the Offer Notice is given.  The closing of any sale pursuant to this
Section 8.1(b) shall occur within the later of twenty (20) Business Days of the
date that the Offer Notice is given and the date of initial sale of New
Securities pursuant to Section 8.1(c); provided that such closing may be delayed
with respect to the Investor pending receipt of any necessary government
approvals.

       

    

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

    
       (c)           At
the expiration of the ten (10) Business Day period following the giving of the
Offer Notice, the Company may, during the ninety (90) day period thereafter,
offer and sell the remaining unsubscribed portion of such New Securities to any
Person or Persons at a price not less than, and upon terms no more favorable to
the offeree than, those specified in the Offer Notice.  If the Company
does not enter into an agreement for the sale of the New Securities within such
period, the right provided hereunder shall be deemed to be revived and such New
Securities shall not be offered unless first reoffered to the Investor in
accordance with this Section 8.1.

       

    

    8.2           Alternative
Procedure.  Notwithstanding any provision hereof to the
contrary, if the Board of Directors determines in good faith that complying with
the time periods required by Section 8.1 would materially and adversely impact
the Company’s liquidity or immediate cash needs, then in lieu of complying with
the provisions of Section 8.1, the Company may elect to give notice to the
Investor within five (5) Business Days after the issuance of New
Securities.  Such notice shall describe the type, price, and terms of
the New Securities.  The Investor shall have ten (10) Business Days
from the date notice is given to elect to purchase up to the number of New
Securities that would, if purchased by the Investor, maintain the Investor’s
percentage-ownership position, calculated as set forth in Section 8.1(b) before
giving effect to the issuance of such New Securities.  The closing of
such sale shall occur within twenty (20) Business Days of the date notice is
given to the Investor; provided that such closing may be delayed with respect to
the Investor pending receipt of any necessary government
approvals.  Notwithstanding the foregoing, in no event shall the
Company issue New Securities without complying with Section 8.1 if the terms of
such New Securities do not expressly permit application of this Section
8.2.

     

    9.           Non-Transferability of
Rights.  Notwithstanding anything to the contrary contained in
this Agreement or any other Transaction Document, the rights granted to the
Investor pursuant to this Agreement, including without limitation, the rights
contained in Sections 5, 6, 7 and 8 hereof, may not be assigned, transferred,
delegated or otherwise disposed of by the Investor to any other Person in
connection with any sale, pledge, transfer or other disposition of the
Securities or otherwise without the prior written consent of the Company;
provided, however, that the Investor may (without such prior written consent but
with notice to the Company) assign or transfer any of the Shares or Notes and
the rights under this Agreement or any other Transaction Document (including,
without limitation, the rights contained in Section 5, 6, 7 and 8 hereof) to any
Affiliate of the Investor (each, a “Permitted Transferee”).  Upon any
such assignment or transfer, the Permitted Transferee shall agree in writing to
be bound by terms and conditions of this Agreement, and the Company shall issue
(upon exchange of the Note and/or certificate representing the Shares held by
the assigning or transferring Investor) a Note and/or certificate representing
the Shares in the amounts assigned or transferred to such Permitted Transferee
and a replacement Note and/or certificate representing the Shares to the
assigning or transferring Investor for the balance not so assigned or
transferred.  As used herein, “Investor” shall include the Investor
and any and all Permitted Transferees, and all Notes and Shares held or acquired
by any Investor and any and all Permitted Transferees shall be aggregated
together for the purpose of implementing or determining the availability of any
rights under this Agreement.

     

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    
      	
            	
              10. 

            	
              Investor Deliveries on
      the Closing Date.  At the Closing, the Investor shall
      make the following deliveries to the
Company:

            

    

     

    10.1          Transaction
Documents.  The Investor shall have executed each of the
Transaction Documents to which it is a party and shall deliver the same to the
Company.

     

    10.2          Purchase
Price.  The Investor shall deliver to the Company the Purchase
Price for the Securities being purchased by the Investor at the Closing by wire
transfer of immediately available funds pursuant to the wire instructions
provided by the Company.

     

    
      	
            	
              11. 

            	
              Company Deliveries on
      the Closing Date.  At the Closing, the Company shall make
      the following deliveries to the
Investor:

            

    

     

    11.1          Transaction
Documents.  The Company shall have duly executed and shall
deliver to the Investor each of the Transaction Documents (including the Notes)
and certificates representing the Shares being purchased by the Investor at the
Closing.

     

    11.2          Good
Standings.  The Company shall deliver to the Investor 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 ten (10) days of the Closing Date.

     

    11.3          Certified
Charter.  The Company shall deliver to the Investor 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.

     

    11.4          Secretary’s
Certificate.  The Company shall deliver to the Investor a
certificate, executed by the Secretary of the Company and dated as of the
Closing Date, as to (i) the resolutions consistent with Section 3.2 as adopted
by the Company’s Board of Directors, (ii) the Certificate of Incorporation and
(iii) the Bylaws, each as in effect at the Closing.

     

    11.5          Opinion of
Counsel.  The Company shall deliver to the Investor an opinion
letter, dated as of the Closing Date, from Goodwin Procter LLP, counsel to the
Company, in the form attached as Exhibit
B.

     

    11.6          Fees.  The
Company shall pay to Falconhead Capital, LLC the fees required to be paid by the
Professional Services Agreement.

     

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    
      	
            	
              12. 

            	
              Miscellaneous.

            

    

     

    12.1          Survival of
Warranties.  The representations, warranties and covenants of
the Company and the Investor contained in or made pursuant to this Agreement
shall survive the execution and delivery hereof or thereof.

     

    12.2          Successors and
Assigns.  Except as set forth in Section 9, neither party may
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the other party hereto.  The terms and provisions
of this Agreement shall be binding upon and inure to the benefit of, and be
enforceable by, the respective successors and permitted assigns of the parties
hereto.  This Agreement shall not run to the benefit of or be
enforceable by any person other than a party to this Agreement and its
successors and permitted assigns.

     

    12.3          Expenses.  The
Company shall reimburse the Investor for (a) fifty percent (50%) of all
reasonable and documented fees and expenses of the Investor’s accountants and
legal counsel in connection with the transactions contemplated by the
Transaction Documents, subject to a maximum aggregate reimbursement under this
clause (a) of $100,000; and (b) all reasonable and documented fees and expenses
of Kurt Salmon Associates in connection with the transactions contemplated by
the Transaction Documents; provided that the
maximum aggregate reimbursement under this Section 12.3 shall not exceed
$400,000.

     

    12.4          Choice of Law and Venue;
Jury Trial Waiver.  The provisions of this Agreement 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 Agreement or the negotiation, execution
or performance of this Agreement (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.  All actions and proceedings arising out of or relating
to this Agreement shall be heard and determined in the state or federal courts
of the State of New York, and each of the Company and the Investor 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.  THE INVESTOR 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 AGREEMENT OR ANY
RELATED INSTRUMENT OR TRANSACTION DOCUMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT 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 INVESTOR OR THE COMPANY, EXCEPT
BY A WRITTEN INSTRUMENT EXECUTED BY EACH OF THEM.

     

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

    12.5          Counterparts.  This
Agreement may be executed in two or more counterparts (including by facsimile or
other electronic transmission), each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.

     

    12.6          Titles and
Subtitles.  The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.

     

    12.7          Notices.  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
12.7).

     

    12.8          Amendments and
Waivers.  This Agreement and the Notes issued pursuant to this
Agreement may be amended and any provision hereof or thereof may be waived
(either generally or in a particular instance and either retroactive or
prospectively) only with the written consent of both the Company and the
Investor (or other holder as the case may be).  Any waiver or
amendment effected in accordance with this Section 12.8 shall be binding upon
any holder of the Notes.

     

    12.9          Severability.  If
one or more provisions of this Agreement are held to be unenforceable under
applicable law, such provision shall be excluded from this Agreement and the
balance of the Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.

     

    12.10        Entire
Agreement.  This Agreement and the other Transaction Documents
supersede all other prior oral or written agreements (including any term sheets
or letters of intent) between the Investor, 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 the Investor makes any
representation, warranty, covenant or undertaking with respect to such matters.

     

    12.11        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.

     

    

     

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Blank]

     

    
      
         

      

      
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    IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
set forth above.

     

    
      
        	 
      	
                JAVO
      BEVERAGE COMPANY, INC.

              
	 	 
	 	 
	 
      	
                By:

              	
                /s/ Cody
      C. Ashwell

                
                  
      

              
	 
      	 
      	
                Cody
      C. Ashwell

              
	 
      	 
      	
                Chairman
      and Chief Executive Officer

              

      

    

    

    
      
        	 
      	
                Address:

              	
                1311
      Specialty Drive

              
	 
      	 
      	
                Vista,
      CA  92081

              

      

    

    

     

    
      
        	 
      	
                COFFEE
      HOLDINGS LLC

              
	 
      	 
      	 
      
	 	 	 
	 
      	
                By:

              	/s/ David
      Gubbay

                
    
	 
      	
                Name:

              	David
    Gubbay
	 
      	
                Title:

              	General
      Partner

      

    

    

    

    
      
        	 
      	
                Address:

              	
                c/o
      Falconhead Capital, LLC

              
	 
      	 
      	
                450
      Park Avenue, 3rd Floor

              
	 
      	 
      	
                New
      York, NY  10022

              
	 
      	 
      	
                Attention:  Dave
      Gubbay and Zuher Ladak

              

      

    

    

     

    

     

    Signature
Page to Securities Purchase Agreement

     

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

    EXHIBIT
A

     

    Form of Senior Subordinated
Promissory Note

     

    

    
       

      
        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.

       

      THESE
NOTES HAVE 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 10% NOTE

       

      
        
          	
                  Original
      Principal Amount:  U.S. $______________

                	
                  Issuance
      Date:  April 6,
2009

                

        

      

       

      FOR VALUE
RECEIVED, Javo Beverage Company, Inc., a Delaware corporation (the “Company”), hereby
promises to pay to the order of ___________________, 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, the “Principal Amount”)
when due, whether upon the Maturity Date (as defined below), on any amortization
with respect to required repayments, acceleration, redemption or otherwise (in
each case in accordance with the terms hereof) and to pay simple interest
(“Interest”) on
any outstanding Principal Amount at the rate of ten percent (10%) 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 April
6, 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.

       

      
        
           

        

        
          A-1

          
            

          

        

        
           

        

      

      
        	
              	
                1. 

              	
                Payments of Interest
      and Principal.

              

      

       

      (a)           Accrued
and unpaid Interest shall be payable quarterly in arrears on the first Business
Day of each calendar quarter until such entire Principal Amount outstanding
shall be paid in full (whether upon maturity, acceleration or otherwise), with
the first such payment due on July 1, 2009.  Interest shall be
calculated on the basis of a 365 day year for the actual number of days
elapsed.

       

      (b)           The
Principal Amount shall amortize and be payable in nineteen (19) consecutive
quarterly installments of $[___] Hundred Thousand Dollars ($___,000) beginning
on April 2, 2012, and continuing thereafter on the first Business Day of each
calendar quarter, with any outstanding balance of this not due and payable, in
full, on the January 1, 2017 (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 quarterly installments of Principal Amount, pro rata across all such
remaining installments.

       

      (d)           All
payments (whether of Principal Amount, Interest or otherwise) 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 payments shall be
applied first to accrued and unpaid Interest and then to quarterly installments
of 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 and (ii) pari passu with the 2008 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.

       

      (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.

       

      
        
           

        

        
          A-2

          
            

          

        

        
           

        

      

      (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)           2008
Notes.  The Company shall not and shall cause its Subsidiaries
and any other obligor not to pay cash interest or principal in respect of 2008
Notes except a Pro Rata Payment.  The Company shall not amend or
modify the terms of the 2008 Notes in any manner adverse to the interests of the
Holder without the prior written consent of the Holder.

       

      (h)           Indebtedness.  The
Company will not and will cause its Subsidiaries not to create, incur, assume or
suffer to exist any Indebtedness except Permitted Indebtedness.

       

      (i)            Restricted
Payments.  The Company shall not make any Restricted
Payment.

       

      (j)           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 (i) for general corporate
uses, including working capital and capital expenditures for dispensing
equipment and other capital items, (ii) to redeem the 2006 Notes and the 2006
Warrants (as defined in the Purchase Agreement) in accordance with Section 5.10
of the Purchase Agreement and (iii) to repay and extinguish the working capital
loan in the amount of $5,000,000 with Wells Fargo Bank, N.A. in accordance with
Section 5.10 of the Purchase Agreement.

       

      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.

       

      
        
           

        

        
          A-3

          
            

          

        

        
           

        

      

      
        	
              	
                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), (h), (i) or
(j)(ii);

       

      (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;

       

      
        
           

        

        
          A-4

          
            

          

        

        
           

        

      

      (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.

       

      
        
           

        

        
          A-5

          
            

          

        

        
           

        

      

      8.           Certain Defined
Terms.  As used in this Note, the following terms shall have
the meanings specified below:

       

      “2006 Notes” means
those certain Senior Convertible Notes in an original aggregate principal amount
of $21,000,000 issued by the Company on December 15, 2006 pursuant to the 2006
Purchase Agreement.

       

      “2006 Purchase
Agreement” means that certain Securities Purchase Agreement dated
December 14, 2006, by and among the Company and parties identified therein, as
amended by the Amendment Agreement.

       

      “2006 Warrants” means
(i) those certain Series A Warrants to purchase Common Stock dated December 15,
2006, (ii) those certain Series B Warrants to purchase Common Stock dated
December 15, 2006 and (iii) those certain Series C Warrants to purchase Common
Stock dated December 15, 2006, in each case, issued by the Company pursuant to
the 2006 Purchase Agreement.

       

      “2008 Notes” means
those certain Senior Subordinated Notes in the aggregate principal amount of up
to $11,000,000 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.

       

      “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.

       

      “Amendment Agreement”
means that certain Amendment Agreement dated December 17, 2008, by and among the
Company and certain holders of the 2006 Notes and 2006 Warrants, as amended by
those certain Letter Agreements, dated as of February 25, 2009, by and between
the Company and such holders.

       

      “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.

       

      
        
           

        

        
          A-6

          
            

          

        

        
           

        

      

      “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.

       

      
        
           

        

        
          A-7

          
            

          

        

        
           

        

      

      “Group Senior Subordinated
Note” means this Note, all other Senior Subordinated Notes issued under
the Purchase Agreement and all 2008 Notes.

       

      “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.

       

      “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.

       

      
        
           

        

        
          A-8

          
            

          

        

        
           

        

      

      “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.

       

      “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; (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 not to exceed $5,000,000 outstanding at any time,
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 shall not exceed
$30,000,000 outstanding at any one time.

       

      “Person” any natural
person, corporation, business trust, joint venture, association, company,
limited liability company, partnership, governmental authority or other
entity.

       

      “Principal Market”
means the NASDAQ Over-the-Counter Bulletin Board.

       

      
        
           

        

        
          A-9

          
            

          

        

        
           

        

      

      “Pro Rata Payment”
means, with respect to any Group Senior Subordinated Note, any payment (whether
principal, interest or otherwise) made in respect of such Group Senior
Subordinated Note that is: (i) made substantially simultaneously with a payment
on each other Group Senior Subordinated Note and (ii) is in an amount that
represents such Group Senior Subordinated Note’s Pro Rata Share of the aggregate
of such payment and all such substantially simultaneous payments.

       

      “Pro Rata Share”
means, with respect to any Group Senior Subordinated Note and as of any date of
determination, a fraction, expressed as a percentage, the numerator of which is
the then outstanding principal amount of such Group Senior Subordinated Note and
the denominator of which is the then aggregate outstanding principal amount of
all Group Senior Subordinated Notes.

       

      “Professional Services
Agreement” means the Professional Services Agreement by and between the
Company and Falconhead Capital, LLC, dated as of the date hereof.

       

      “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 (x) payments made with respect to the
2006 Notes or the 2006 Warrants pursuant to and in accordance with Section 5.10
of the Purchase Agreement, (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.

       

      “Shares” means the
50,000,000 shares of Common Stock issued to the Holder pursuant to the Purchase
Agreement.

       

      “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.

       

      
        
           

        

        
          A-10

          
            

          

        

        
           

        

      

      “Transaction
Documents” means, collectively, the Purchase Agreement, this Note, the
other Notes issued pursuant to the Purchase Agreement, the Professional Services
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).

       

      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 constitutes 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.

       

      
        
           

        

        
          A-11

          
            

          

        

        
           

        

      

      
        	
              	
                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.

      

      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.

       

      
        
           

        

        
          A-12

          
            

          

        

        
           

        

      

      
        	
              	
                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.

       

      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]

       

      
        
           

        

        
          A-13

          
            

          

        

        
           

        

      

      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:

                	 
      

                  
    

        

      

       

    

     

    
      
         

      

      
        A-14

        
          

        

      

      
         

      

    

    EXHIBIT
B

     

    Form of Opinion of
Counsel

     

    

    

      
        
           

        

        
           

          
            

          

        

        
           

          
            
              	
                       

                    	
                      
                      

                      Goodwin
      Procter LLP

                      Counselors
      at Law

                      4365
      Executive Drive

                      San
      Diego, CA 92121

                    	
                       

                      T:
      858.202.2700

                      F:
      858.457.1255

                      
                      

                    

            

            

          

        

      

      

      

      April 6,
2009

       

      Coffee
Holdings LLC

      c/o
Falconhead Capital, LLC

      450 Park
Avenue, 3rd Floor

      New York,
NY  10022

       

      Re:           Javo Beverage Company,
Inc.

       

      Ladies
and Gentlemen:

       

      We have
acted as counsel for Javo Beverage Company, Inc., a Delaware corporation (the
“Company”), in
connection with the sale to you today of (i) 50,000,000 shares (the “Shares”) of Common
Stock of the Company, $0.001 par value per share (the “Common Stock”) and
(ii) one or more senior subordinated promissory notes in the aggregate original
principal amount of $12,000,000 (the “Notes,” and together
with the Shares, the “Securities”).  We
are furnishing this opinion letter to you pursuant to Section 11.5 of that
certain Securities Purchase Agreement, dated as of April 6, 2009 (the “Purchase Agreement”),
by and among the Company and you (the “Investor”).  Capitalized
terms used, but not otherwise defined herein, shall have the meanings given to
them in the Purchase Agreement.

       

      We have
reviewed such documents and made such examination of law as we have deemed
appropriate to give the opinions expressed below.  We have relied,
without independent verification, on certificates of public officials and, as to
matters of fact material to the opinions set forth below, on representations in
the Purchase Agreement and certificates and other inquiries of officers of the
Company and, with respect to our opinion in numbered paragraph 5, a certificate
from the transfer agent and registrar of the Company’s common
stock.

       

      Our
opinion regarding valid existence and good standing in numbered
paragraph 1 is based solely on a certificate of the Secretary of State of
Delaware and, in the case of valid existence, a review of the Company’s
certificate of incorporation and an officer’s certificate confirming that the
Company has taken no action looking to its dissolution.  Our opinion
in numbered paragraph 3 regarding the due qualification and good standing of the
Company as a foreign corporation is based solely on a certificate of the
Secretary of State of California.  We express no opinion as to the tax
good standing of the Company in any jurisdiction.

       

      Our
opinion in numbered paragraph 6 is based on (i) the assumption that the Company
and any person acting on its behalf have complied and will comply with the
limitations on manner of offering and sale set forth in Rule 502(c) under the
Securities Act of 1933, as amended (the “Securities Act”),
with respect to all offers and sales of the Company’s securities, including the
Securities, and (ii) certain factual representations made by the Company with
respect to offers and sales of the Company’s securities in the past six
months.

       

      
        
          
             

          

           

        

        
          B-1

          
            

          

        

        
           

          
            Coffee
Holdings LLC

            April 6,
2009

            Page
2

          

        

      

      Our
opinions set forth below are limited to the laws of the State of California, the
Delaware General Corporation Law and the federal law of the United
States.  Our opinion in numbered paragraph 6 is the only opinion in
this opinion letter that addresses securities laws.  Without limiting
the generality of the foregoing, we express no opinion with respect to (i) state
securities or “Blue Sky” laws, or (ii) state or federal antifraud
laws.

       

      Based
upon the foregoing, and subject to the additional qualifications set forth
below, we are of the opinion that:

       

      1. The
Company is validly existing as a corporation in good standing under
Delaware law.

       

      2. The
Company has the corporate power to execute and deliver the Purchase Agreement,
the Note and the Professional Services Agreement and perform its obligations
thereunder.

       

      3. The
Company is duly qualified to do business and is in good standing as a foreign
corporation in California.

       

      4. The
Purchase Agreement, the Note and the Professional Services Agreement have been
duly authorized, executed and delivered by the Company.

       

      5. The
Shares have been duly authorized and, when issued, delivered and paid for in
accordance with the Purchase Agreement, will be validly issued, fully paid and
nonassessable.

       

      6. Based in
part on, and assuming the accuracy of, the representations of the Investor in
the Purchase Agreement, the sale of the Securities pursuant to the Purchase
Agreement does not require registration under the Securities Act.

       

      7. The
execution and delivery by the Company of the Purchase Agreement, the Note and
the Professional Services Agreement and the performance by the Company of its
obligations thereunder do not and will not violate the Company’s certificate of
incorporation or by-laws.

       

      This
opinion letter and the opinions it contains shall be interpreted in accordance
with the Legal Opinion Principles issued by the Committee on Legal Opinions of
the American Bar Association’s Business Law Section as published in 53 Business
Lawyer 831 (May 1998).

       

      This
opinion letter is being furnished only to you for your use in connection with
the Purchase Agreement and the transactions contemplated thereby, and neither it
nor the opinions it contains may be relied on for any other purpose or by anyone
else.

       

      Very
truly yours,

      

       

      GOODWIN
PROCTER LLP

       

    

     

    
B-2javo_8k-ex1003.htm

Exhibit 10.3

    PROFESSIONAL SERVICES
AGREEMENT

     

    THIS PROFESSIONAL SERVICES AGREEMENT (this “Agreement”), dated as
of April 6, 2009, is entered into by and among Javo Beverage Company, Inc., a
Delaware corporation (the “Company”), and
Falconhead Capital, LLC, a Delaware limited liability company (“Falconhead”).

     

    WHEREAS,
the Company has entered into that certain Securities Purchase Agreement, dated
as of the date hereof, by and between the Company and Coffee Holdings LLC, a
Delaware limited liability company (“Holdings”), pursuant
to which Holdings has acquired notes and common stock of the Company and other
rights with respect thereto (the “Investment”);

     

    WHEREAS,
in connection with the Investment, Falconhead has provided and will continue to
provide financial and management consulting services and the Company has
received, and desires to continue to receive, such services and to obtain the
benefit of the experience of Falconhead in business and financial management
generally and its knowledge of the Company and its financial affairs;
and

     

    WHEREAS,
Falconhead has provided and is willing to provide financial and management
consulting services to the Company for the compensation arrangements set forth
in this Agreement.

     

    NOW,
THEREFORE, in consideration of the foregoing premises and the respective
agreements hereinafter set forth and the mutual benefits to be derived herefrom,
Falconhead and the Company hereby agree as follows:

     

    1.      Engagement.  The
Company hereby engages Falconhead as a financial and management consultant, and
Falconhead hereby agrees to provide financial and management consulting services
to the Company, all on the terms and subject to the conditions set forth
herein.

     

    2.      Services of
Falconhead.  Falconhead hereby agrees during the term of this
engagement to consult with the board of directors of the Company (the “Board of Directors”)
and management of the Company on such business and financial matters as may be
reasonably requested from time to time by the Board of Directors or the
Company’s management team, in each case with reasonable advance
notice.  Such consultation services shall primarily include assisting
the Company in analyzing its operations and historical performance and assisting
the Company with respect to its corporate strategy and any future acquisitions,
divestitures, financings or other similar transactions.  The Company
understands and agrees that if Falconhead is asked to furnish the Company a
financial opinion letter or act for the Company in any other formal capacity,
such further action shall be at the sole option of Falconhead and may be subject
to a separate agreement containing provisions and terms to be mutually agreed
upon.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.      Standard of
Performance.  Falconhead shall devote such time and efforts to
provide the consultation services hereunder as it deems necessary or appropriate
(including by making the management professionals employed or engaged by it
available in connection therewith); provided, however, that no minimum
number of hours shall be required to be devoted by Falconhead (or any such
management professionals) on a weekly, monthly, annual or other
basis.  Falconhead does not make any representations or warranties,
express or implied, in respect of the consultation services provided hereunder
and in no event shall Falconhead or any of its affiliates or any of their
respective directors, managers, partners, controlling persons (within the
meaning of Section 15 of the Securities Act of 1933, as amended, or Section
20(a) of the Securities Exchange Act of 1934, as amended), if any, officers,
employees, consultants, advisors or agents (collectively, the “Falconhead Parties”)
be liable to the Company for any act, alleged act, omission or alleged omission
or any loss, liability, damage or expense arising out of or in connection with
the performance of services contemplated by this Agreement, except to the extent
the same is determined by a court of competent jurisdiction by final and
non-appealable judgment to have rsulted primarily from the gross negligence or
willful misconduct of Falconhead.

     

    4.      Fees.  In
consideration of the consulting services provided by Falconhead prior to the
date hereof in connection with the Investment, the Company agrees to pay to
Falconhead upon execution of this Agreement a one-time transaction fee in an
amount equal to $500,000.  In consideration of the consulting services
to be provided by Falconhead after the date hereof, the Company shall pay to
Falconhead an annual management fee equal to $100,000, payable in advance in
equal quarterly installments on each January 1, April 1, July 1 and October 1
during the term of this Agreement (with $25,000 payable to Falconhead upon
execution of this Agreement with respect to the period between the date hereof
and June 30, 2009).

     

    5.      Expenses.  In
addition to the fees payable hereunder, the Company shall promptly, but in no
event less than thirty (30) days following presentment, reimburse Falconhead for
such reasonable travel expenses and other reasonable out-of-pocket fees and
expenses (including reasonable attorneys fees and expenses) as may be incurred
by any Falconhead Party in connection with the rendering of services hereunder
(including fees and expenses incurred in attending any Company or industry
related meetings), provided that Falconhead shall obtain the Company’s prior
approval before incurring any expenses in excess of $2,500 or $10,000
individually or in the aggregate, respectively.

     

    6.      Payments.  All
payments or reimbursements to be made to Falconhead pursuant to this Agreement
will be paid by wire transfer of immediately available funds to account(s)
specified by Falconhead in writing to the Company.

     

    7.      Term.  This
Agreement will continue from the date hereof until March 31, 2014.  No
termination of this Agreement, whether pursuant to this paragraph or otherwise,
shall affect the Company’s obligations with respect to the fees, costs and
expenses due to or incurred by Falconhead in rendering services hereunder and
not paid or reimbursed by the Company as of the effective date of such
termination or with respect to any fees due to Falconhead as of the date of
termination.  In addition, if this Agreement shall be terminated by
the Company prior to the end of the term, the Company shall also be required to
pay to Falconhead all fees payable under Section 4 through the remainder of the
term in a lump sum payment on the date of such termination.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    8.      Indemnification.

     

    (a)           The
Company shall indemnify and hold harmless each Falconhead Party (collectively
referred to as “Indemnified Persons”
and individually as an “Indemnified Person”)
from and against any and all claims, liabilities, losses, damages and expenses
incurred by any Indemnified Person (including those arising out of an
Indemnified Person’s negligence) which (A) are related to or arise out of
(i) actions taken or omitted to be taken (including any untrue statements
made or any statements omitted to be made) by the Company or (ii) actions
taken or omitted to be taken by an Indemnified Person with the Company’s consent
or in conformity with any Company instructions or any actions or omissions by
the Company or (B) are otherwise related to or arise out of Falconhead’s
engagement or its performance of services hereunder, and will reimburse each
Indemnified Person for all costs and expenses, including fees and disbursements
of any Indemnified Person’s counsel, as they are incurred, in connection with
investigating, preparing for, defending or appealing any action, formal or
informal claim, investigation, inquiry or other proceeding, whether or not in
connection with pending or threatened litigation, related to, arising out of or
in connection with Falconhead’s engagement or performance of services hereunder,
whether or not any Indemnified Person is named as a party thereto and whether or
not any liability results therefrom.  The Company will not, however,
be responsible to any Indemnified Person for any claims, liabilities, losses,
damages or expenses pursuant to clause (B) of the preceding sentence that to the
extent that the same is determined by a court of competent jurisdiction by final
and non-appealable judgment to have resulted primarily from the gross negligence
or willful misconduct of Falconhead.  The Company further agrees that
it will not, without the prior written consent of Falconhead, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which indemnification may be
sought hereunder (whether or not any Indemnified Person is an actual or
potential party to such claim, action, suit or proceeding) unless such
settlement, compromise or consent includes an unconditional release of
Falconhead and each other Indemnified Person hereunder from all liability
arising out of such claim, action, suit or proceeding.

     

    (b)           The
Company further agrees that with respect to any Indemnified Person who is
employed, retained or otherwise associated with, or appointed or nominated by,
Falconhead or any of its affiliates and who acts or serves as a director,
officer, manager, fiduciary, employee, consultant, advisor or agent of, for or
to the Company or any of its subsidiaries, that the Company or such
subsidiaries, as applicable, shall be primarily liable for all indemnification,
reimbursements, advancements or similar payments (the “Indemnity
Obligations”) afforded to such Indemnified Person acting in such capacity
or capacities on behalf or at the request of the Company or such subsidiary,
whether the Indemnity Obligations are created by law, organizational or
constituent documents, contract (including this Agreement) or
otherwise.  Notwithstanding the fact that any Falconhead Party, may
have concurrent liability to an Indemnified Person with respect to the Indemnity
Obligations, the Company hereby agrees that in no event shall the Company or any
of its subsidiaries have any right or claim against any of the Falconhead
Parties for contribution or have rights of subrogation against any Falconhead
Parties through an Indemnified Person for any payment made by the Company or any
of their subsidiaries with respect to any Indemnity Obligation.  In
addition, the Company hereby agrees that in the event that any Falconhead
Parties pay or advance an Indemnified Person any amount with respect to an
Indemnity Obligation, the Company will, or will cause its subsidiaries to, as
applicable, promptly reimburse any such Falconhead Parties for such payment or
advance upon request.

     

    (c)           The
foregoing right to indemnity shall be in addition to any rights that Falconhead
and/or any other Indemnified Person may have at common law or otherwise and
shall remain in full force and effect following the completion or any
termination of the engagement or this Agreement.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    9.      Falconhead an Independent
Contractor.  Falconhead and the Company agree that Falconhead
shall perform services hereunder as an independent contractor, retaining control
over and responsibility for its own operations and personnel.  No
Falconhead Party shall be considered employees or agents of the Company as a
result of this Agreement nor shall any of them have authority to contract in the
name of or bind the Company, except as expressly agreed to in writing by the
Company.

     

    10.           Confidentiality.  No
advice or confidential information rendered or provided by Falconhead pursuant
to or in connection with the services provided hereunder, whether formal or
informal, may be disclosed, in whole or in part, or summarized, excerpted from
or otherwise referred to without Falconhead’s prior written
consent.

     

    11.           No Exclusive Duty to the
Company.

     

    (a)           In
recognition that (i) Falconhead currently has, and will in the future have or
will consider acquiring, investments in numerous entities with respect to which
Falconhead may serve as an advisor, a director or in some other capacity; (ii)
Falconhead may have duties to various investors, stockholders and partners;
(iii) Falconhead (or one or more affiliates, associated investment funds or
portfolio companies) may engage in the same or similar activities or lines of
business as the Company and may have an interest in the same areas of corporate
opportunities; (iv) the Company will derive certain benefits hereunder; and
(v) Falconhead, in desiring and endeavoring to satisfy its duties, may
confront difficulties in determining the full scope of such duties in any
particular situation, the provisions of this Section 11 are
set forth to regulate, define and guide the conduct of certain affairs of the
Company as they may involve Falconhead.

     

    (b)           Notwithstanding
anything to the contrary contained herein, (i) Falconhead and its affiliates
shall not be required to manage the Company as their sole and exclusive
function; (ii) Falconhead and its affiliates may have other business interests
and may engage in other activities in addition to those relating to the Company,
and such other business interests or activities may be of any nature or
description, may be competitive with the Company and may be engaged in
independently or with others; and (iii) the Company shall not have any right in
or to such other ventures or activities of Falconhead or its affiliates or to
the income or proceeds derived therefrom, and the pursuit of such ventures or
activities, even if competitive with the Company, shall not be deemed wrongful
or improper.

     

    (c)           No
Falconhead Party shall have any duty (contractual or otherwise) to communicate
or present any corporate opportunities to the Company or any of its affiliates
or to refrain from any actions specified in Section 11(a), and
the Company, on its own behalf and on behalf of its affiliates, hereby renounces
and waives any right to require Falconhead or any of its affiliates to act in a
manner inconsistent with the provisions of Section
11(a).

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    (d)           No
Falconhead Party shall be liable to the Company or any of its respective
affiliates for breach of any duty (contractual or otherwise) by reason of any
actions or omissions of the types referred to in Section 11(a) or its
or its affiliates’ participation therein.

     

    (e)           For
the avoidance of doubt, nothing in this Section 11 shall
limit the duties of any Investor Nominee (as defined in the Purchase Agreement)
arising in, and as a result of, his or her capacity as a member of the Company’s
Board of Directors.

     

    12.           Notices.  Any
notice required or permitted to be given or made under this Agreement by one
party to the other shall be deemed to have been duly given or made if personally
delivered, sent by reputable express courier service (charges prepaid), sent by
telecopy or facsimile or, if mailed, when mailed by registered or certified
mail, return receipt requested and postage prepaid, to the other party at the
following addresses (or at such other address as shall be given in writing by
one party to the other):

     

    If to
Falconhead:

     

    Falconhead
Capital, LLC

    450 Park
Avenue, 3rd Floor

    New York,
NY  10022

    Telecopy:  (212)
634-3304

    Attention:  Dave
Gubbay and Zuher Ladak

    

    with a
copy to:

    

    Weil,
Gotshal & Manges LLP

    767 Fifth
Avenue

    New York,
NY  10153

    Telecopy:  (212)
310-8007

    Attention:  S.
Scott Parel

    

    If to the
Company:

     

    Javo
Beverage Company, Inc.

    1311
Specialty Drive

    Vista,
CA  92081

    Telecopy:
(760) 560-5287

    Attention:
William E. Marshall

    

    13.           Entire Agreement;
Modification.  This Agreement (a) contains the complete
and entire understanding and agreement of Falconhead and the Company with
respect to the subject matter hereof; and (b) supersedes all prior and
contemporaneous understandings, conditions and agreements (including any term
sheets or letters of intent) oral or written, express or implied, respecting the
engagement of Falconhead in connection with the subject matter
hereof.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    14.           Amendments and
Waivers.  Except as otherwise provided herein, the provisions
of this Agreement may only be amended or waived upon prior written agreement
between Falconhead and the Company.

     

    15.           Waiver of
Breach.  The waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach of that provision or any other provision
hereof.

     

    16.           Assignment.  Neither
Falconhead nor the Company may assign its rights or obligations under this
Agreement without the express written consent of the other. Notwithstanding the
foregoing, Falconhead shall be entitled to assign its rights and obligations
under this Agreement without obtaining the Company’s consent to any
successor-in-interest (“Permitted Assignee”)
to all or substantially all of Falconhead’s business and assets; provided the Permitted
Assignee shall execute and deliver to the Company an assumption agreement, in
form and substance reasonably satisfactory to the Company, whereby such
Permitted Assignee assumes all of the obligations of Falconhead under this
Agreement.

     

    17.           Successors.  This
Agreement and all the obligations and benefits hereunder shall inure to the
successors and permitted assigns of the parties.

     

    18.           Counterparts.  This
Agreement may be executed and delivered by each party hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original and both of which taken together shall constitute one and the same
agreement.

     

    19.           Governing
Law.  THE PROVISIONS OF THIS AGREEMENT, ITS EXECUTION,
PERFORMANCE OR NONPERFORMANCE, INTERPRETATION, TERMINATION, CONSTRUCTION AND ALL
MATTERS BASED UPON, ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
NEGOTIATION, EXECUTION OR PERFORMANCE OF THIS AGREEMENT (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
CONFLICT OF LAWS PROVISIONS THAT IF APPLIED MIGHT REQUIRE THE APPLICATION OF THE
LAWS OF ANOTHER JURISDICTION.

     

    20.           Submission to Jurisdiction;
Consent to Service of Process.

     

    (a)  The
parties hereto hereby irrevocably submit to the exclusive jurisdiction of any
federal or state court located within the borough of Manhattan of the City,
County and State of New York over any dispute arising out of or relating to this
Agreement or any of the transactions contemplated hereby and each party hereby
irrevocably agrees that all claims in respect of such dispute or any suit,
action or proceeding related thereto may be heard and determined in such
courts.  The parties hereby irrevocably waive, to the fullest extent
permitted by applicable law, any objection which they may now or hereafter have
to the laying of venue of any such dispute brought in such court or any defense
of inconvenient forum for the maintenance of such dispute.  Each of
the parties hereto agrees that a judgment in any such dispute may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    (b)  Each
of the parties hereto hereby consents to process being served by any party to
this Agreement in any suit, action or proceeding by delivery of a copy thereof
in accordance with the provisions of Section 12 of this
Agreement.

     

    21.           WAIVER OF JURY
TRIAL.  TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH
CANNOT BE WAIVED, EACH PARTY HERETO HEREBY WAIVES AND COVENANTS THAT IT WILL NOT
ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY
IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF ACTION OR SUIT
(IN CONTRACT, TORT OR OTHERWISE) INQUIRY, PROCEEDING OR INVESTIGATION ARISING
OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY,
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING.

     

    22.           No Strict
Construction.  The parties hereto have participated jointly in
the negotiation and drafting of this Agreement.  In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.

     

    23.           Descriptive Headings;
Interpretation.  The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this
Agreement.  The use of the word “including” in this Agreement shall be
by way of example rather than by limitation.

     

    24.           Severability.  Whenever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or any other jurisdiction,
but this Agreement shall be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision had never
been contained herein.

     

    *   *   *   *   *

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and
delivered on the date and year first above written.

     

    

    
      	 
      	
              FALCONHEAD
      CAPITAL, LLC

            
	 
      	 
      	 
      
	 
      	
              By:

            	 
      /s/ David Gubbay

              
    
	 
      	
              Name:

            	David
      Gubbay
	 
      	
              Title:

            	General
      Partner
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              JAVO
      BEVERAGE COMPANY, INC.

            
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/
      Cody C. Ashwell 

                
      

            
	 
      	
              Name:

            	
              Cody
      C. Ashwell

            
	 
      	
              Title:

            	
              Chairman
      and CEO

            
	 
      	 
      	 
      

    

    

     

    

    [Signature
Page to Javo Beverage Company, Inc. Professional Services
Agreement]

    
 

     

     

     

     

     

     

    
8

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