JAVO BEVERAGE COMPANY, INC. SECURITIES PURCHASE AGREEMENT

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

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

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

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

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:

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

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

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

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

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

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

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

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

“ Affiliate ” means, with respect to any Person, another Person that directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with the Person specified.  With respect to the Investor, the term Affiliate shall not include the Company or any of its Subsidiaries or any portfolio company of Falconhead Capital, LLC or any of their respective Subsidiaries.

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

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

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

“ Business Day ” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

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

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

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

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

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

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

“ Contingent Obligation ” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any Indebtedness, lease, agreement or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.

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

“ Environmental Laws ” means all federal, state, local or foreign laws relating to pollution or protection of human health and safety or the environment (including, without limitation, ambient air, surface water, groundwater, stream sediments, land surface or subsurface strata or natural resources), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, toxic or hazardous substances or wastes or terms of similar import (collectively, “ Hazardous Materials ”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.

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

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

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

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

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

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

“ Indebtedness ” of any Person means, without duplication (i) all indebtedness for borrowed money, (ii) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (including, without limitation, “capital leases” in accordance with GAAP) (other than trade payables entered into in the ordinary course of business on customary terms), (iii) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (iv) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (v) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (vi) all indebtedness referred to in clauses (i) through (v) above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (vii) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (i) through (vi) above.

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

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

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

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

“ Material Adverse Effect ” means any material adverse effect on the business, properties, assets, results of operations, condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

“ SEC ” means the Securities and Exchange Commission.

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

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

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

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

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

“ Subsidiary ” means, with respect to any Person, any corporation, partnership, association or other business entity in which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or more than 50% of the general partnership interests are, at the time any determination is being made, owned, controlled or held by such Person.

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

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

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

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.

3.5            Consents .  Neither the Company nor any of its Subsidiaries is required to obtain any consent, authorization or order of, make any filing or registration with, or provide any notice to, any court, governmental agency or any regulatory or self-regulatory agency (including the Principal Market) in order for it to execute, deliver or perform any of its obligations under or contemplated by the Transaction Documents, in each case in accordance with the terms hereof or thereof, except for the 8-K Filing.

3.6            No General Solicitation; Broker Fees .  Neither the Company, nor any of its Subsidiaries or affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of the Securities.  The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or brokers’ commissions (other than for persons engaged by the Investor or its investment advisor) relating to or arising out of the transactions contemplated hereby.  The Company shall pay, and hold the Investor harmless against, any liability, loss or expense (including, without limitation, attorney’s fees and out-of-pocket expenses) arising in connection with any such claim.

3.7            No Integrated Offering .  None of the Company, its Subsidiaries, any of their affiliates, and any Person acting on their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of any of the Securities under the Securities Act or cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of the Securities Act where such integration would cause the loss of the availability of an offering exemption under the Securities Act.  None of the Company, its Subsidiaries, their affiliates and any Person acting on their behalf will take any action or steps referred to in the preceding sentence that would require registration of any of the Securities under the Securities Act or cause the offering of the Securities to be integrated with other offerings where such integration would cause the loss of the availability of an offering exemption under the Securities Act.

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

3.9            SEC Documents; Financial Statements .  During the two (2) years prior to the date hereof, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Exchange Act (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements, notes and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “ SEC Documents ”).  Except as set forth on Schedule 3.9 , the Company has no SEC Documents that are not available on the EDGAR system.  Except as set forth on Schedule 3.9 , as of their respective filing dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.  As of their respective filing dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto.  Such financial statements have been prepared in accordance with GAAP, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).  No other documents or information provided in writing by or on behalf of the Company to the Investor which are not included in the SEC Documents, including, without limitation, information referred to in Section 4.4 of this Agreement or in any disclosure schedules, contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are or were made, not misleading; provided , however , that the Company makes no representations or warranties with respect to any projections, forecasts or other forward-looking information.

3.10           Absence of Certain Changes .  Since December 31, 2008, except as specifically disclosed in the SEC Documents, there has been no Material Adverse Effect.  Except as disclosed in Schedule 3.10 , since December 31, 2008, the Company has not (i) declared or paid any dividends, (ii) sold any assets, individually or in the aggregate, in excess of $100,000 outside of the ordinary course of business, (iii) had capital expenditures, individually or in the aggregate, in excess of $500,000, (iv) made or suffered any amendment to any material contract or cancelled, modified or waived any material debts or claims held by it or waived any rights, or (v) entered into any material transaction other than in the ordinary course of business consistent with past practice.

3.11           No Undisclosed Events, Liabilities, Developments or Circumstances .  No event, liability, development or circumstance has occurred or exists with respect to the Company, its Subsidiaries or their respective business, properties, prospects, operations or financial condition, that would be required to be disclosed by the Company under the Exchange Act and which has not been publicly announced.

3.12           Conduct of Business; Regulatory Permits .  Neither the Company nor any of its Subsidiaries is in violation of any term of or in default under its certificate of incorporation, any certificate of designations of any outstanding series of preferred stock of the Company or the bylaws or their organizational charter or bylaws, respectively.  Neither the Company nor any of its Subsidiaries is in violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable to the Company or its Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct its business in violation of any of the foregoing, except for possible violations which could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  During the two (2) years prior to the date hereof, (i) the Common Stock has been designated for quotation on the Principal Market, (ii) trading in the Common Stock has not been suspended by the SEC or the Principal Market and (iii) the Company has received no communication, written or oral, from the SEC or the Principal Market regarding the suspension or delisting of the Common Stock from the Principal Market.  The Company and its Subsidiaries possess all certificates, authorizations and permits issued by the appropriate regulatory authorities necessary to conduct their respective businesses, except where the failure to possess such certificates, authorizations or permits would not have, individually or in the aggregate, a Material Adverse Effect, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit.

3.13           Foreign Corrupt Practices .  Neither the Company nor any of its Subsidiaries nor any director, officer, agent, employee or other Person acting on behalf of the Company or any of its Subsidiaries has, in the course of its actions for, or on behalf of, the Company or any of its Subsidiaries (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

3.14           Sarbanes-Oxley Act .  The Company is in compliance with any and all applicable requirements of the Sarbanes-Oxley Act of 2002, as amended, that are effective as of the date hereof, and any and all applicable rules and regulations promulgated by the SEC thereunder that are effective as of the date hereof.

3.15           Transactions With Affiliates .  Except as set forth in the SEC Documents and other than the grant of stock options disclosed on Schedule 3.16 , none of the officers, directors or employees of the Company or any of its Subsidiaries is presently a party to any transaction with the Company or any of its Subsidiaries (other than for ordinary course compensation for services as employees, officers or directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any such officer, director or employee or, to the knowledge of the Company or any of its Subsidiaries, any Person in which any such officer, director, or employee has a substantial interest or is an officer, director, trustee or partner.

3.16           Equity Capitalization .  As March 13, 2009, the authorized capital stock of the Company consists of (a) 300,000,000 shares of Common Stock, of which as of the date hereof, 193,753,343 are issued and outstanding, 14,100,000 shares are reserved for issuance pursuant to the Company’s stock option and purchase plans and 12,373,598 shares are reserved for issuance pursuant to securities (other than the aforementioned options) exercisable or exchangeable for, or convertible into, shares of Common Stock, (b) 5,850,000 shares of undesignated preferred stock, of which as of the date hereof, none are issued and outstanding, (c) 150,000 shares of Series A Junior Participating Preferred Stock, par value $0.001 per share, of which as of the date hereof, none are issued and outstanding, and (d) 4,000,000 shares of Series B Preferred Stock, par value $0.001 per share, of which as of the date hereof, 2,147,952 shares are issued and outstanding.  All of such outstanding shares have been, or upon issuance will be, validly issued and are fully paid and nonassessable and were not issued in violation of any preemptive rights.  Except as disclosed in Schedule 3.16 or pursuant to this Agreement: (i) none of the Company’s capital stock is subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company; (ii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the Company or any of its Subsidiaries; (iii) there are no outstanding debt securities, notes, credit agreements, credit facilities or other agreements, documents or instruments evidencing Indebtedness of the Company or any of its Subsidiaries or by which the Company or any of its Subsidiaries is or may become bound; (iv) there are no financing statements securing obligations in any material amounts, either singly or in the aggregate, filed in connection with the Company or any of its Subsidiaries; (v) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the Securities Act; (vi) there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries; (vii) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities; (viii) the Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement; and (ix) the Company and its Subsidiaries have no liabilities or obligations required to be disclosed in the SEC Documents but not so disclosed in the SEC Documents, other than, with respect to this clause (ix), those incurred in the ordinary course of the Company’s or its Subsidiaries’ respective businesses and which, individually or in the aggregate, do not or would not have a Material Adverse Effect.  The Company has furnished to the Investor true, correct and complete copies of the Certificate of Incorporation and the Bylaws, and the terms of all securities convertible into, or exercisable or exchangeable for, shares of Common Stock and the material rights of the holders thereof in respect thereto.

3.17           Indebtedness and Other Contracts .  Except for Permitted Indebtedness and as disclosed in Schedule 3.17 , neither the Company nor any of its Subsidiaries (i) has any outstanding Indebtedness, (ii) is in default under any contract, agreement or instrument, except where such defaults would not reasonably result, individually or in the aggregate, in a Material Adverse Effect, (iii) is in violation of any term of or in default under any contract, agreement or instrument relating to any Indebtedness, except where such violations and defaults would not result, individually or in the aggregate, in a Material Adverse Effect, or (iv) is a party to any contract, agreement or instrument relating to any Indebtedness, the performance of which, in the judgment of the Company’s officers, has or is expected to have a Material Adverse Effect.

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 .

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.

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.

3.26           Internal Accounting and Disclosure Controls .  The Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset and liability accountability, (iii) access to assets or incurrence of liabilities is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with respect to any difference.  The Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-14 under the Exchange Act) that are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC, including, without limitation, controls and procedures designed in to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer or officers and its principal financial officer or officers, as appropriate, to allow timely decisions regarding required disclosure.  Other than as disclosed in the SEC Documents, during the twelve months prior to the date hereof neither the Company nor any of its Subsidiaries have received any notice or correspondence from any accountant relating to any potential material weakness in any part of the system of internal accounting controls of the Company or any of its Subsidiaries.

3.27           Off Balance Sheet Arrangements .  There is no transaction, arrangement, or other relationship between the Company and an unconsolidated or other off balance sheet entity that is required to be disclosed by the Company in the SEC Documents and is not so disclosed or that otherwise would be reasonably likely to have a Material Adverse Effect.

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

3.29           Transfer Taxes .  On the Closing Date, all stock transfer or other taxes (other than income or similar taxes) that are required to be paid in connection with the sale and transfer of the Securities to be sold to the Investor hereunder will be, or will have been, fully paid or provided for by the Company, and all laws imposing such taxes will be or will have been complied with.

3.30           Manipulation of Price .  The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result, or that could reasonably be expected to cause or result, in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities or (iii) paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities of the Company.

3.31           U.S. Real Property Holding Corporation .  The Company is not, nor has ever been, a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended.

3.32           Disclosure .  No event or circumstance has occurred or information exists with respect to the Company or any of its Subsidiaries or its or their business, properties, prospects, operations or financial conditions, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed.

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.

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

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

4.3            Reliance on Exemptions .  The Investor understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and the Investor’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Investor set forth herein in order to determine the availability of such exemptions and the eligibility of the Investor to acquire the Securities.

4.4            Information .  The Investor and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities that have been requested by the Investor.  The Investor and its advisors, if any, have been afforded the opportunity to ask questions of the Company.  Neither such inquiries nor any other due diligence investigations conducted by the Investor or its advisors, if any, or its representatives shall modify, amend or affect the Investor’s right to rely on the Company’s representations and warranties contained herein.  The Investor understands that its investment in the Securities involves a high degree of risk and is able to afford a complete loss of such investment.  The Investor understands that nothing in this Agreement or any other materials presented to the Investor in connection with the purchase and sale of the Securities constitutes legal, tax or investment advice.  The Investor has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities.

4.5            No Governmental Review .  The Investor understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.

4.6            Transfer or Resale .  The Investor understands that except as provided herein: (i) the Securities have not been and are not being registered under the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) the Investor shall have delivered to the Company an opinion of counsel, in a form reasonably acceptable to the Company, to the effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) the Investor provides the Company with reasonable assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144 promulgated under the Securities Act, as amended (or a successor rule thereto) (collectively, “ Rule 144 ”) ( provided , however , that in the event any transfer agent or similar third party shall require an opinion of counsel in connection with a transfer made pursuant to Rule 144, the Company’s counsel shall be asked to issue such opinion, at the Company’s expense and the Investor making such transfer shall provide any and all documentation and/or back-up certificates reasonably necessary for such counsel to issue such opinion); (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or the Person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other Person is under any obligation to register the Securities under the Securities Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder.

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

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THESE SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

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

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 T