Document:

javo_8k-ex0401.htm

    
      
        

      

    

    EXHIBIT
4.1

    JAVO
BEVERAGE COMPANY, INC.

    AMENDMENT
NO. 1 TO RIGHTS AGREEMENT

     
 

                   This
Amendment No. 1, effective as of November 17, 2009 (the “Amendment”), amends
the Rights Agreement, dated as of July 1, 2002 (the “Rights Agreement”),
by and between Javo Beverage Company, Inc., a Delaware corporation (the “Company”), and
Corporate Stock Transfer, Inc., a Colorado corporation (the “Rights Agent”).
Capitalized terms used herein but not defined herein shall have their defined
meanings set forth in the Rights Agreement.

    

    WHEREAS,
on November 17 2009, the Company entered into a Securities Purchase Agreement
(the “Securities
Purchase Agreement”) with Coffee Holdings LLC, a Delaware limited
liability company (“CHLLC”);

    

    WHEREAS,
pursuant to the Securities Purchase Agreement, the Company is selling on the
date hereof 15,000,000 shares of Common Stock to CHLLC and may, at a future date
and in its sole discretion, sell up to an aggregate of 13,125,000 additional
shares of Common Stock to CHLLC;

    

    WHEREAS,
pursuant to Section 27 of the Rights Agreement, the Company may, from time to
time, supplement or amend any provision of the Rights Agreement without the
approval of any holders of certificates representing shares of Common Stock in
order to make any changes or provisions in regard to matters or questions
arising under the Rights Agreement that the Company may deem necessary or
desirable; and

    

    WHEREAS,
the Company and Rights Agent are entering into this Amendment to permit CHLLC to
acquire shares of Common Stock from the Company as contemplated under the
Securities Purchase Agreement without thereby making CHLLC an Acquiring Person
or resulting in a Stock Acquisition Date, Distribution Date, Section 11(a)(ii)
Event or Section 13 Event.

    

    NOW,
THEREFORE, in consideration of the promises and the mutual agreements herein set
forth, the parties hereby agree as follows:

    

    1.            
Section 1(a) of the Rights Agreement is hereby deleted in its entirety and the
following is inserted in lieu thereof:

    

    “(a)   “Acquiring Person”
shall mean any Person who or which, together with all Affiliates and Associates
of such Person, shall be the Beneficial Owner of 20% or more of the shares of
Common Stock then outstanding or a Person who would be deemed to beneficially
own twenty percent (20%) or more of the shares of the Common Stock of the
Company upon completion of any offer to acquire beneficial ownership of Common
Stock, but shall not include:

    

    (i)           the
Company, any Subsidiary of the Company, any employee benefit plan of the Company
or of any Subsidiary of the Company, or any Person or entity organized,
appointed or established by the Company for or pursuant to the terms of any such
plan,

    

    (ii)           any
Person who shall be the Beneficial Owner of 15% or more of the outstanding
shares of Common Stock as of the consummation of a merger of the Company with La
Jolla Fresh Squeezed Coffee, Inc., a Washington corporation, until such time as
such Person has acquired, or obtained the right to acquire, 30% or more of the
outstanding shares of Common Stock, or

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (iii)           any
Person who shall become the Beneficial Owner of 20% or more of the outstanding
shares of Common Stock solely as a result of an acquisition by the Company of
shares of Common Stock until such time thereafter as such Person shall become
the Beneficial Owner (other than by means of a stock dividend or stock split) of
any additional shares of Common Stock;

    

    PROVIDED,
however, that the term “Acquiring Person” shall not include CHLLC, to the extent
CHLLC becomes the Beneficial Owner of 20% or more of the shares of Common Stock
of the Company then outstanding solely due to CHLLC’s Beneficial Ownership of
the CHLLC Shares and the CHLLC Additional Shares, if any.  For the
avoidance of doubt, if CHLLC becomes or is the Beneficial Owner of 20% or more
of the shares of Common Stock of the Company then outstanding (including the
CHLLC Shares and the CHLLC Additional Shares, if any) and at such time CHLLC is
deemed to be the Beneficial Owner of any shares of Common Stock of the Company
other than the CHLLC Shares and the CHLLC Additional Shares, if any, then CHLLC
shall be deemed an Acquiring Person hereunder.

    

    In
addition, notwithstanding the foregoing, no Person shall be deemed to be an
Acquiring Person either (i) if the Board of Directors of the Company determines
at any time that a Person who would otherwise be an “Acquiring Person,” has
become such without intending to become an “Acquiring Person,” and such Person
divests as promptly as practicable (or within such period of time as the Board
of Directors of the Company determines is reasonable) a sufficient number of
shares of Common Stock of the Company so that such Person would no longer be an
“Acquiring Person,” as defined pursuant to the foregoing provisions of this
Section 1(a), or (ii) as the result of an acquisition of shares of Common Stock
by the Company which, by reducing the number of shares outstanding, increases
the proportionate number of shares beneficially owned by such Person to 20% or
more of the Common Stock of the Company then outstanding; PROVIDED, however,
that if a Person shall become the Beneficial Owner of 20% or more of the Common
Stock of the Company then outstanding by reason of share purchases by the
Company and shall, after such share purchases by the Company, become the
Beneficial Owner of any additional Common Stock of the Company, then such Person
shall be deemed to be an Acquiring Person.”

    

    2.     Section 1 of
the Rights Agreement is amended by adding at the end of said section the
following definitions:

    

    “(t)  “CHLLC” shall mean
Coffee Holdings LLC and its Affiliates and Associates.

    

     (u)  “CHLLC Shares” shall
mean (A) the 15,000,000 shares of Common Stock acquired by CHLLC from the
Company pursuant to that certain Securities Purchase Agreement dated as of
November 17, 2009 by and between the Company and CHLLC (“Securities Purchase
Agreement”), and (B) the shares of Common Stock of the Company
Beneficially Owned by CHLLC as of the date hereof.

    

     (v)  “CHLLC Additional
Shares” shall mean any of the up to 13,125,000 shares of Common Stock
that may be acquired by CHLLC from the Company pursuant to the Securities
Purchase Agreement.”

    

    
      
        
        

      

      
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    3.            
Section 3(a) of the Rights Agreement is hereby deleted in its entirety and the
following is inserted in lieu thereof:

    

    “(a)   Until
the earlier of (i) the Close of Business on the twentieth day after the Stock
Acquisition Date (or, if the twentieth day after the Stock Acquisition Date
occurs before the Record Date, the Close of Business on the Record Date), or
(ii) the Close of Business on the twentieth day (or such later date as may be
determined by action of a majority of Directors then in office) after the date
that a tender or exchange offer by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan) is
first published or sent or given within the meaning of Rule 14d-2(a) of the
General Rules and Regulations under the Exchange Act, if upon consummation
thereof, such Person would be the Beneficial Owner of 20% or more of the shares
of Common Stock then outstanding (the earlier of (i) and (ii) being herein
referred to as the “Distribution Date”),
(x) the Rights will be evidenced (subject to the provisions of paragraph (b) of
this Section 3) by the certificates for the Common Stock registered in the names
of the holders of the Common Stock (which certificates for Common Stock shall be
deemed also to be certificates for Rights) and not by separate certificates, and
(y) the Rights will be transferable only in connection with the transfer of the
underlying shares of Common Stock (including a transfer to the Company). As soon
as practicable after the Distribution Date, the Company shall promptly notify in
writing the Rights Agent thereof and provide the Rights Agent with the names and
addresses of all record holders of Common Shares (together with all other
necessary information), and the Rights Agent will send by first-class, insured,
postage prepaid mail, to each record holder of the Common Stock as of the Close
of Business on the Distribution Date, at the address of such holder shown on the
records of the Company, one or more rights certificates, in substantially the
form of Exhibit B hereto (the “Rights
Certificates”), evidencing one Right for each share of Common Stock so
held, subject to adjustment as provided herein. In the event that an adjustment
in the number of Rights per share of Common Stock has been made pursuant to
Section 11(p) hereof, at the time of distribution of the Rights Certificates,
the Company shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Rights Certificates representing
only whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates and may be transferred by the
transfer of the Rights Certificates as permitted hereby, separately and apart
from any transfer of one or more Common Stock, and the holders of such Rights
Certificates as listed in the records of the Company or any transfer agent or
registrar for the Rights shall be the record holders thereof.”

    

    4.            
Section 23(a) of the Rights Agreement is hereby deleted in its entirety and the
following is inserted in lieu thereof:

    

    “(a)   The
Board of Directors of the Company may, at its option, at any time prior to the
earlier of (i) the Close of Business on the twentieth day following the Stock
Acquisition Date (or, if the Stock Acquisition Date shall have occurred prior to
the Record Date, the Close of Business on the twentieth day following the Record
Date), or (ii) the Final Expiration Date, redeem all but not less than all the
then outstanding Rights at a redemption price of $.00001 per Right, as such
amount may be appropriately adjusted to reflect any stock split, stock dividend
or similar transaction occurring after the date hereof (such redemption
price being hereinafter referred to as the “Redemption Price”);
PROVIDED, however, if the Board of Directors of the Company authorizes
redemption of the Rights in either of the circumstances set forth in clauses (x)
and (y) below, such authorization shall require the concurrence of a majority of
the Directors that such redemption is, as of such time the redemption is
approved, not void or voidable on account of Section 144 of the Delaware General
Corporation Law or other applicable law: (x) such authorization occurs on or
after the time a Person becomes an Acquiring Person, or (y) such authorization
occurs on or after the date of a change (resulting from a proxy or consent
solicitation) in a majority of the directors in office at the commencement of
such solicitation if any Person who is a participant in such solicitation has
stated (or, if upon the commencement of such solicitation, a majority of the
Board of Directors of the Company has determined in good faith) that such Person
(or any of its Affiliates or Associates) intends to take, or may consider
taking, any action which would result in such Person becoming an Acquiring
Person or which would cause 

     

    
      
        
        

      

      
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    the
occurrence of a Triggering Event unless, concurrent with such solicitation, such
Person (or one or more of its Affiliates or Associates) is making a cash tender
offer pursuant to a Schedule 14D-1 (or any successor form) filed with the
Securities and Exchange Commission for all outstanding shares of Common Stock
not beneficially owned by such Person (or by its Affiliates or Associates);
PROVIDED FURTHER, however, that if, following the occurrence of a Stock
Acquisition Date and following the expiration of the right of redemption
hereunder but prior to any Triggering Event, (i) a Person who is an Acquiring
Person shall have transferred or otherwise disposed of a number of shares of
Common Stock in one transaction or series of transactions, not directly or
indirectly involving the Company, or any of its Subsidiaries, which did not
result in the occurrence of a Triggering Event such that such Person is
thereafter a Beneficial Owner of 20% or less of the outstanding shares of Common
Stock, and (ii) there are no other Persons, immediately following the occurrence
of the event described in clause (i), who are Acquiring Persons, then the right
of redemption herein shall be reinstated and thereafter be subject to the
provisions of this Section 23. Notwithstanding anything contained in this
Agreement to the contrary, a Distribution Date shall not occur and the Rights
shall not be exercisable until such time as the Company's right of redemption
hereunder has expired. The Company may, at its option, pay the Redemption Price
in cash, shares of Common Stock (based on the “current market price,” as defined
in Section 11(d)(i) hereof, of the Common Stock at the time of redemption) or
any other form of consideration deemed appropriate by the Board of
Directors.”

    

    5.            
Except as expressly set forth in this Amendment all other terms of the Rights
Agreement shall remain in full force and effect.

    

    6.           
This Amendment shall be governed by and construed in accordance with the laws of
the State of Delaware applicable to contracts made and to be performed entirely
within such State, without regard to conflict-of-law principles.

    

    7.           
This Amendment may be executed in any number of counterparts and each of such
counterparts shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute one and the same instrument.

    

    [The remainder of this page has been
intentionally left blank; signature page follows]

     

     

     

    
      
        
        

      

      
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    IN WITNESS WHEREOF, the parties hereto
have caused this Amendment to be duly executed as of the day and year first
above written.

    

    

    JAVO
BEVERAGE COMPANY

    

    

    By: /s/ William E.
Marshall                                                      

    Name:  William
E. Marshall

    Title:   
General Counsel, Sr. Executive Vice
President and Secretary

    

    

    CORPORATE
STOCK TRANSFER, INC., as Rights Agent

    

    

    By: /s/ Carylyn
Bell            

    Name:
Carylyn Bell

    Title:  President

    

    

     

    
 

    
      Signature
Page to Amendment No. 1 to Rights Agreement

    

    
      
        
        

      

      
        5javo_8k-ex1001.htm

    
      
        

      

    

    EXHIBIT
10.1

     

    JAVO
BEVERAGE COMPANY, INC.

    SECURITIES
PURCHASE AGREEMENT

     

     

    This
Securities Purchase Agreement (this “Agreement”) is made
as of this 17th day of November, 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 (A) $4,000,000 in the form set
forth as Exhibit
A hereto (the “Initial Notes”) and
(B) up to $3,500,000, in the form set forth as Exhibit B hereto (the
“Additional
Notes” and together with the Initial Notes, the “Notes” and each a
“Note”), and
(ii) (A) an aggregate of 15,000,000 shares (the “Initial Shares”) of
the Company’s Common Stock, par value $0.001 per share (the “Common Stock”) and
(B) an aggregate of up to 13,125,000 of the Company’s Common Stock (the “Additional Shares”
and together with the Initial Shares, the “Shares” and each a
“Share”);

     

    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 Initial Notes and the Initial Shares are collectively referred to herein as
the “Initial
Securities”, the Additional Notes and the Additional Shares are
collectively referred to herein as the “Additional
Securities” and together with the Initial Securities, 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.

     

    (a)  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 Initial Securities for an aggregate purchase price
of $4,100,000 (the “Purchase
Price”).

     

    (b)  Subject
to the terms and conditions of this Agreement and if all Additional Issuance
Conditions are satisfied as of the applicable 2009 Notes Payment Date (as
defined below), on each date on which principal and/or interest on the 2009
Notes is payable (a “2009 Notes Payment
Date”) the Investor agrees to purchase Additional Units with a purchase
price equal to the principal and/or interest payable with respect to the 2009
Notes on such 2009 Notes Payment Date; provided, however, that the aggregate
purchase price of Additional Units issued pursuant to this Section 1.1(b) shall
not exceed $3,500,000.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    1.2            Closing Date.  The
purchase and sale of the Initial Securities to the Investor shall take place at
the offices of the Company located at 1311 Specialty Drive, Vista, California
(the “Company’s
Location”), 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”).  Any purchase and sale of the Additional Securities
(each an “Additional
Closing”) shall take place at the Company’s Location or at such other
place and on the applicable 2009 Notes Payment Date or at such time as the
Company and the Investor mutually agree upon in writing (each an “Additional Closing
Date”).

     

    1.3            Payment;
Delivery.

     

    (a)  On the
Closing Date, the Company shall deliver to the Investor the Initial Notes and
certificates representing the Initial 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 Initial Notes and
certificates shall be in the denominations directed by the
Investor.

     

    (b)  At each
Additional Closing, the Company shall deliver to the Investor such Additional
Notes and certificates representing such Additional Shares against payment of a
purchase price equal to the face amount of the Additional Notes issued by the
Company at such Additional Closing.  Such respective Additional Notes
and Additional Shares shall be purchased in Unit increments and shall be in
denominations as directed by the Investor.

     

    1.4            Allocation of Purchase
Price.  For federal income tax purposes, the Purchase Price for
the Initial Securities, net of the transaction fee payable pursuant to the
Professional Services Letter (which shall reduce the “issue price”), shall be
allocated $100,000 to the Initial Shares and $4,000,000 to the Initial Notes,
and the parties hereto agree to report consistent with such
allocation.  For federal income tax purposes, all of the purchase
price of Additional Units shall be allocated to the Additional 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:

     

    “2009 Notes” means
those certain senior subordinated notes in an original aggregate principal
amount of $12,000,000 issued by the Company to the Investor on April 6, 2009
pursuant to the 2009 Purchase Agreement.

     

    “2009 Purchase
Agreement” means that certain Securities Purchase Agreement dated April
6, 2009, by and among the Company and the Investor.

     

    “2008 Notes” means
those certain senior subordinated notes in an original aggregate principal
amount of $10,500,000 issued by the Company to various investors up to and
including April 6, 2009 pursuant to the 2008 Purchase Agreements.

     

    
      
        
        

      

      
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    “2008 Purchase
Agreement” means those certain Securities Purchase Agreements dated
January 20, 2009 and April 6, 2009, by and among the Company and parties
identified therein.

     

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

     

    “Additional Issuance
Conditions” means that, as of the applicable Additional Closing Date (i)
no default or Event of Default (as defined in the 2009 Notes and the Notes) has
occurred and is continuing, (ii) the representations and warranties of the
Company set forth in this Agreement which are qualified as to materiality shall
be true and correct, and those not so qualified shall be true and correct in all
material respects, in each case, as though made at and as of the applicable
Additional Closing Date, or with respect to representations and warranties made
as of an earlier date, as of such earlier date, (iii) the Company shall have
performed and complied in all material respects with all obligations and
agreements required under this Agreement to be performed or complied with, (iv)
there shall not have been or occurred any event, change, occurrence or
circumstance that, individually or in the aggregate with any such events,
changes, occurrences or circumstances, has had or could reasonably be expected
to have a Material Adverse Effect, (v) at least five Business Days prior to the
applicable Additional Closing Date, the Company has notified the Investor in
writing that the Company intends to issue Additional Units to the Investor
pursuant to Section 11.(b) hereof, which such notice shall specify the number of
Additional Units that the Company proposes be issued, and (vi) the Company
delivers all of the items deliverable pursuant to Section 11.2.

     

    “Additional Units”
means Additional Securities in multiple principal amounts of $1.00 in Additional
Notes and 3.75 Additional Shares.

     

    “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.

     

    “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 Notes with an
aggregate principal amount of less than 50% of the aggregate original principal
of all Notes issued pursuant to this Agreement.

     

    “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 15% of the issued and outstanding Common Stock of the Company.

     

    “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 date upon which repayment has been
made in full of all amounts outstanding under the Notes, including all principal
and any accrued and unpaid interest thereon 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.  Indebtedness shall include all obligations under
the 2008 Notes, the 2009 Notes and the Additional Notes.

     

    “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 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 the earlier of (A) the sixty-sixth month following the Closing Date,
provided that the Notes are paid in full, and (B) (i) with respect to any
offering of New Debt Securities, the period from the Closing Date to the Debt
Termination Date and (ii) with respect to any offering of New Equity Securities,
the period from the Closing Date to the Equity Termination Date.

     

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

     

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

     

    
      
        
        

      

      
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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 earlier of (i) the first date upon which both of the
following have occurred: (A) the Debt Termination Date and (B) the Equity
Termination Date and (ii) 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 5.7.

     

    “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 Letter 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.

     

    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

     

    
      
        
        

      

      
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    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 September 30, 2009, except as specifically
disclosed in the SEC Documents, there has been no Material Adverse
Effect.  Except as disclosed in Schedule 3.10, since
September 30, 2009, 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.

     

    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.

     

    
      
        
        

      

      
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    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.

     

    3.16            Equity
Capitalization.  As November 16, 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, 283,803,343 are issued and outstanding, 288,081
shares are reserved and available for issuance pursuant to the Company’s stock
option and purchase plans and 862,965 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, 2,362,745
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.

     

    
      
        
        

      

      
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    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. 

     

    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.

     

    
      
        
        

      

      
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    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.

     

    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.

     

    
      
        
        

      

      
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    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.

     

    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.

     

    
      
        
        

      

      
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    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.

     

    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)  Except
for the transactions contemplated by the 2009 Purchase Agreement and 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).

     

    
      
        
        

      

      
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    (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 sixty-six (66) month
anniversary of the Closing Date.

     

    (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)  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, other than the Common Stock acquired pursuant to the 2009 Purchase
Agreement.

     

    (f)  The
Investor agrees that for so long as the Investor Nominee serves on the Board of
Directors, 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.

     

    
      
        
        

      

      
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    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 the Initial Securities
contemplated by this Agreement (net of the expenses directly incurred in
connection with the transactions contemplated by this Agreement) shall be used
exclusively for general corporate uses, including working capital and capital
expenditures for dispensing equipment and other capital items and for the
payment of principal and interest on existing Indebtedness.  The
proceeds from the Additional Securities contemplated by this Agreement shall be
used exclusively to pay any accrued interest and principal amounts on the 2009
Notes if and when due on the 2009 Notes Payment Dates.

     

    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.

     

    
      
        
        

      

      
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    5.5            Disclosure of Transactions
and Other Material Information.  On or before 5:30 p.m., New
York City time, on the second Business Day following the date of this Agreement,
the Company shall issue a press release and file a Current Report on Form 8-K
describing the terms of the transactions contemplated by the Transaction
Documents in the form required by the 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.  Until the Governance Termination Date, 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.  To the extent the Investor has identified the Investor
Nominee prior to the first meeting of the Board of Directors following the
Closing (and if no such Investor Nominee has then been named, prior to the next
meeting of the Board of Directors after such Investor Nominee has been named),
such person 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 in a form reasonably
acceptable to the Investor that the Company provides to its current
directors.  For so long as the Investor has the right to nominate a
representative to be elected to the Board of Directors (whether pursuant to this
Agreement or the 2009 Purchase Agreement), at least one of the Investor’s
nominees on the Board of Directors shall be a member of the Company’s Governance
and Nominating Committee (or similar Committee) if such Committee exists and
provided that such director is “independent” (as defined in and to the extent
required by any applicable SEC rules and regulations and any applicable rules
and regulations of any securities exchange on which the Common Stock is then
listed).

     

    5.7            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) 50% of the
original principal amount of all the Notes issued pursuant to this
Agreement.

     

    
      
        
        

      

      
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    5.8            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.

     

    5.9            Rights Granted to Third
Parties in Additional Financings.  If the Company consummates
any Subsequent Financing (as defined below) after the Closing Date and grants
the lenders, investors or other parties to any such financings any Rights (as
defined below) more favorable in any material respect than those held by the
Investor or not then held by the Investor, then the Investor shall be granted
equivalent Rights (on a pari passu or pro rata basis, as applicable)
concurrently with the closing of such Subsequent Financing. For purposes hereof,
“Rights” shall mean any of the following contractual or similar rights: (1)
rights to unilaterally approve, consent to or veto any actions of the Company or
its subsidiaries, whether or not within the power of the Board of Directors or
management or the stockholders or any group of stockholders of the Company, (2)
disproportionately increased rights of participation in future debt or equity
financings or a sale of the Company (or substantially equivalent rights), (3)
stock registration rights, and (4) extraordinary or disproportionate
indemnification rights.  For the avoidance of doubt, Rights shall not
include (1) the right to any Board of Directors seat(s) so long as no single
person or group is granted the right to nominate more than three members to the
Board of Directors, (2) any customary terms and conditions and other agreements
granted to any financial institutions in connection with any senior secured
financing or credit facility (3) any agreements entered into with investment
banks or financial advisors regarding any potential financings, acquisition,
disposition, public offering or pursuit of strategic alternatives or (4) rights
held by statute (including the Delaware General Corporation Law) or pursuant to
the Company’s Certificate of Incorporation or Bylaws (each as in effect as of
the date hereof), in each case, as a result of being the owner of a majority of
the Company’s Common Stock.  This provision shall terminate upon the
earlier of (1) the Governance Termination Date and (2) the Company achieving
Consolidated EBITDA (as defined in the Notes) of $7.5 million.  For
purposes of this Section 5.9, the term “Subsequent Financing”
shall mean the offering and sale of any debt or equity security by the Company,
specifically excluding any issuances under the Company’s equity compensation
plan.

     

    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

     

    
      
        
        

      

      
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    (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.

     

    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 

     

    
      
        
        

      

      
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    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.

     

    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.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    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.

     

    (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.

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    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, neither the Shares and Notes
nor any rights granted to the Investor pursuant to this Agreement, including
without limitation, the rights contained in Sections 5, 6, 7 and 8 hereof, may
be assigned, transferred, delegated or otherwise disposed of by the Investor to
any other Person 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 such Affiliate and any other Person consented to
in writing by the Company, 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.

     

    10.            Investor Deliveries on the
Closing Date and the Additional Closing Dates.

     

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

     

    (a)  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.

     

    (b)  Purchase
Price.  The Investor shall deliver to the Company the Purchase Price
for the Initial Securities by wire transfer of immediately available funds
pursuant to the wire instructions provided by the Company.

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    10.2            Additional Closing
Dates.  At each Additional Closing, the Investor shall deliver
to the Company the purchase price for the Additional Units being purchased by
the Investor on such Additional Closing Date by wire transfer of immediately
available funds pursuant to the wire instructions provided by the
Company.

     

    11.            Company Deliveries on the
Closing Date and the Additional Closing Dates.

     

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

     

    (a)  Transaction
Documents.  The Company shall have duly executed and shall deliver to
the Investor each of the Transaction Documents (including the Initial Notes) and
certificates representing the Initial Shares.

     

    (b)  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.

     

    (c)  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.

     

    (d)  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.

     

    (e)  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
C-1.

     

    (f)  Fees.  The
Company shall pay to Falconhead Capital, LLC the fee required to be paid by the
Professional Services Letter.

     

    11.2            Additional Closing
Dates.  At each Additional Closing, the Company shall make the
following deliveries to the Investor:

     

    (a)  Notes and
Share Certificates.  The Company shall have duly executed and shall
deliver to the Investor each of the Additional Notes being purchased by the
Investor at such Additional Closing and certificates representing the Additional
Shares being purchased by the Investor at such Additional Closing.

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    (b)  Officer’s
Certificate.  The Company shall deliver to the Investor a certificate,
executed by a responsible officer of the Company and dated as of such Additional
Closing Date, (i) certifying that as of such Additional Closing Date all of the
Additional Issuance Conditions have been satisfied and (ii) (x) providing
certified copies of the Certificate of Incorporation and the Bylaws, each as in
effect at such Additional Closing Date or (y) certifying that the Certificate of
Incorporation and the Bylaws have not been amended or modified since the Closing
Date .

     

    (c)  Opinion
of Counsel.  The Company shall deliver to the Investor an opinion
letter, dated as of such Additional Closing Date, from Goodwin Procter LLP,
counsel to the Company, in the form attached as Exhibit C-2 or from such
other law firm and in such other form as are reasonably acceptable to the
Investor.

     

    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 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 of $20,000.

     

    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.

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    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;
provided, however, that this
Agreement does not amend, modify, limit or otherwise affect in any manner the
2009 Purchase Agreement or the 2009 Notes.

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    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.

     

    

     

    [Remainder of Page Intentionally Left
Blank]

     

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    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/ Dave
      Gubbay                                        
      
	 	Name:  Dave
      Gubbay                                         
      
	 	Title:
      _____________________________
	 	 
	 	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

    

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
A

     

    Form of Initial
Note

     

    

     

    [See
Attached]

     

     

     

     

    
      
        
        

      

      
        A-1

        
          

        

      

      
        
        

      

    

     

    
      EXHIBIT
B

    

     

    Form of Additional
Note

     

     

     

    [See
Attached]

     

     

     

     

    
      
        
        

      

      
        B-1

        
          

        

      

      
        
        

      

    

     

    
      EXHIBIT
C-1

    

     

    Form of Closing Date Opinion
of Counsel

     

    

    November
17, 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) 15,000,000 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 dated as of November 17,
2009 in the aggregate original principal amount of $4,000,000 (the “Notes,” and together
with the Shares, the “Securities”).  We
are furnishing this opinion letter to you pursuant to Section 11.1(e) of that
certain Securities Purchase Agreement, dated as of November 17, 2009 (the “Purchase Agreement”),
by and between 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 and an
Officer’s Certificate from the Company as to the number of shares issued and
outstanding and reserved for future issuance.

     

    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.

     

    
      
        
        

      

      
        C-1

        
          

        

      

      
        
        

      

    

     

    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
and the Notes 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 and the Notes 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
non-assessable.

     

    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 and the Notes
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.

     

    
      
        
        

      

      
        C-2

        
          

        

      

      
        
        

      

    

     

     

    
      EXHIBIT
C-2

    

     

    Form of Additional Closing
Date Opinion of Counsel

     

     

    _____________,
_______

     

    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) __________ 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 dated as of ___________,
_____ in the aggregate original principal amount of $__________ (the “Notes,” and together
with the Shares, the “Securities”).  We
are furnishing this opinion letter to you pursuant to Section 11.2(c) of that
certain Securities Purchase Agreement, dated as of November 17, 2009 (the “Purchase Agreement”),
by and between 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 and an
Officer’s Certificate from the Company as to the number of shares issued and
outstanding and reserved for future issuance.

     

    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
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.  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.

     

    
      
        
        

      

      
        C-3

        
          

        

      

      
        
        

      

    

     

    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 Notes 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 Notes
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
non-assessable.

     

    6.   The
execution and delivery by the Company of the Notes 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).

     

    8. 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.

     

    

    

    
      
        
        

      

      
        C-4

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00165-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00165-of-00352.parquet"}]]