JAVOBEVERAGE COMPANY, INC. FORMOF SECURITIES PURCHASE AGREEMENT

Exhibit 10.4

 

 

 

This Securities Purchase Agreement (this “Agreement”) is made as of the effective date set forth on the signature page, by and among Javo Beverage Company, a Delaware corporation (the “Company”), and each of the parties listed on Schedule I attached hereto (the parties listed on Schedule I being referred to individually as an “Investor” and collectively as the “Investors”).

 

 

WHEREAS, the Company in connection with the Company’s confidential private placement memorandum dated December 9, 2008, (the “Offering”) has authorized the issuance and sale to the Investors, in accordance with the terms hereof, of units (“Units”), with each Unit consisting of (i) a promissory note in the principal amount of $100,000, to be issued in substantially the form set forth as Exhibit A hereto (each a “Note” and collectively, the “Notes”), and (ii) 500,000 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 Investors desire to purchase, the Units on the terms and subject to the conditions set forth herein;

 

 

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 Units.  Subject to the terms and conditions of this Agreement, each Investor agrees, severally and not jointly, to purchase at the closing (the “Closing”), and the Company agrees to issue and sell to each Investor at the Closing, that number of Units set forth on Schedule I, at a purchase price of $100,000 per full Unit (the “Purchase Price”).  The Company may sell partial Units.

 

1.2           Closing Date.  The purchase and sale of the Units to the Investors shall take place at the offices of the Company at 1311 Specialty Drive, Vista, California at 10:00 a.m. (local time), on the fifth business day following the date of this Agreement (the “Closing Date”), or at such other time and place as the Company and the Investors mutually agree upon, orally or in writing.  The Closing need not occur at the same time with respect to all Investors participating in the Offering of the Units by the Company and references in this Agreement to the Closing Date shall refer to the date of Closing for each particular Investor, as determined pursuant to this Section 1.2.

 

1.3           Payment; Delivery.  On or about the Closing Date, the Company shall deliver to each Investor a Note and a certificate or certificates representing that number of Shares being purchased by such Investor at the Closing, against payment of the Purchase Price by check payable to the Company or wire transfer of immediately available funds.  The Company shall send such Note and certificate or certificates to such Investor at the address furnished to the Company for that purpose.

 

2.           Representations, Warranties, and Covenants of the Investors.  Each Investor, severally and not jointly, hereby represents, warrants, covenants with respect to its purchase of Units at the Closing that:

 

2.1           Validity; Enforcement.  Such 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 this Agreement, the Note and all other documents or instruments required hereby and thereby, and each Agreement and Note, assuming due execution and delivery thereof by the Company, constitutes a valid and legally binding obligation of such Investor, enforceable against such Investor in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors’ rights generally and (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.

 

2.2           Purchase Entirely for Own Account.  This Agreement is made with such Investor in reliance upon such Investor’s representation to the Company, which by such Investor’s execution of this Agreement such Investor hereby confirms, that the Note and Shares to be received by such Investor will be acquired for investment for such Investor’s own account, not as a nominee or agent, and not with a view to the distribution of any part thereof, and that such Investor has no present intention of selling, granting any participation in, or otherwise distributing the same.  By executing this Agreement, such Investor further represents that such Investor does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to the Note or any of the Shares.

 

2.3           Residency.  Such Investor, if a natural person, is a resident of that state or country specified in its address on Schedule I attached hereto.

 

2.4           Disclosure of Information.  Such Investor believes it has received all the information it considers necessary or appropriate for deciding whether to purchase the Units.  Such Investor further represents that it has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the Offering of the Units and the business, properties, prospects and financial condition of the Company and to obtain any additional information of the same kind that is specified in Rule 502 of Regulation D of the Securities Act, or that is necessary to verify the accuracy of the other information obtained. The Investor acknowledges that it has received such information as it deems necessary to enable it to make its investment decision.

 

2.5           No Governmental Review.  Such 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 Units or the fairness or suitability of the investment in the Units nor have such authorities passed upon or endorsed the merits of the offering of the Units.

 

2.6           Legal, Tax or Investment Advice.  Such Investor understands that nothing in this Agreement or any other materials presented to such Investor in connection with the purchase and sale of the Units constitutes legal, tax or investment advice.  Such Investor has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of Units.

 

2.7           Investment Experience.  Such Investor acknowledges that it currently has, and had immediately prior to its receipt of the offer of sale from the Company, such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of this investment and further acknowledges that it is able to bear the economic risk of this investment.

 

2.8           Accredited Investor.  Such Investor is an “accredited investor” as defined by the rules and regulations of the Securities and Exchange Commission (the “SEC”) pursuant to the Securities Act of 1933, as amended (the “Securities Act”).  The “accredited investor” standards are attached hereto as Annex A.

 

2.9           Restricted Securities.  Such Investor understands that the Notes and the Shares will be characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Act, only in certain limited circumstances.  Such Investor represents that it is familiar with SEC Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Act.

 

2.10         Legends.  It is understood that the Notes and the certificates evidencing the Shares may bear one or all of the following legends:

 

(a)             “THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT.”

 

“THE INDEBTEDNESS EVIDENCED BY THIS SENIOR SUBORDINATED NOTE IS SUBORDINATED TO THE PRIOR PAYMENT AND SATISFACTION OF ALL SENIOR DEBT, EXISTING PROMISSORY NOTES AND CERTAIN OTHER PERMITTED INDEBTEDNESS AS DESCRIBED MORE FULLY IN THE SECURITIES PURCHASE AGREEMENT DATED [DECEMBER __, 2008,] AS THE SAME MAY BE AMENDED, MODIFIED, RESTATED OR SUPPLEMENTED FROM TIME TO TIME TO THE EXTENT, AND IN THE MANNER PROVIDED THEREIN.”

  (b)             Any legend required by the securities laws of the State of California or by any other securities laws of other states in which the Company and Investor must comply in order to distribute the Units pursuant to this Agreement.

 

2.11           Exculpation Among Investors.  Each Investor acknowledges that it is not relying upon any person, firm or corporation, other than the Company and its officers and directors, in making its investment or decision to invest in the Company.  Each Investor agrees that no Investor nor the respective controlling persons, officers, directors, partners, agents, or employees of any Investor shall be liable to any other Investor for any action heretofore or hereafter taken or omitted to be taken by any of them in connection with the purchase of the Units.

 

2.12           Senior Subordinated Notes Subordinate to Senior Indebtedness.  The holder of the Senior Subordinated Note, by its acceptance of a Senior Subordinated Note, covenants and agrees (i) that the obligations represented by the Senior Subordinated Notes and the payment of the principal of and interest on the Senior Subordinated Notes are hereby expressly made subordinate and subject to Existing Promissory Notes, capital leases, Senior Debt and other customary permitted indebtedness and (ii) to the extent required by any such senior lender, shall enter into an intercreditor or subordination agreement on such terms and conditions that would be reasonably acceptable to a senior subordinated lender.

Senior Debt means (i) an unsecured credit facility or a series of related credit facilities or other unsecured financing entered into following the issuance of the Senior Subordinated Notes in the minimum original principal amount (including commitments to lend, whether or not funded) of $500,000 or more that by its terms is senior in payment to the Senior Subordinated Notes and (ii) a secured credit facility or a series of related secured credit facilities entered into prior to or following the issuance of the Senior Subordinated Notes that by its terms is senior in payment to the Senior Subordinated Notes and that, in each case, is incurred in connection with any (a) capital expenditures and related expenses, including without limitation those relating to the purchase and installation of beverage dispensing equipment or plant infrastructure, (b) refinancing of indebtedness, (c) revolving line of credit or (d) strategic acquisition or transaction approved by the Company’s board of directors.

Existing Promissory Notes means those certain five-year promissory notes that were entered into by the Company from 2002 to 2005 pursuant to private placement offerings and that have currently outstanding principal that does not exceed $400,000 in the aggregate.

 

3.           Further Limitations on Disposition.  Without in any way limiting the representations set forth in Section 2 above, each Investor further agrees not to make any disposition of all or any portion of the Notes or the Shares unless and until the transferee has agreed in writing for the benefit of the Company and the other Investors to be bound by this Agreement and the terms of the Notes and the Shares to be transferred to such transferee and:

 

(a)           There is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or

 

(b)           Such Investor shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and if reasonably requested by the Company, such Investor shall have furnished the Company with an opinion of counsel reasonably satisfactory to the Company that such disposition will not require registration of such securities under the Act.  It is agreed that the Company will not require opinions of counsel for transactions made pursuant to Rule 144 or Rule 144A, except in unusual circumstances.  In the event that any transfer agent or similar third party shall require an opinion of counsel in connection with a transfer made pursuant to Rule 144 or Rule 144A, the Company’s counsel will issue such opinion, at the Company’s expense; provided that 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.

 

Notwithstanding the provisions of paragraphs (a) and (b) above, no such registration statement or opinion of counsel shall be necessary for a transfer for no new consideration by any Investor to an affiliate of such Investor (including entities controlled by such affiliates and employees, advisors and/or respective family members of such affiliates), to a parent or a subsidiary corporation, or, in the case of an Investor that is a partnership, to a partner of the partnership or a retired partner of such partnership who retires after the date hereof, or to the estate of any such partner or retired partner or the transfer by gift, will or intestate succession of any partner to his spouse or to the siblings, lineal descendants or ancestors of such partner or spouse, if the transferee agrees in writing to be subject to the terms hereof and if the Note or the Shares are so transferred to the same extent as if he were an original Investor hereunder and the original holder thereof.

Unless and until the Notes have been repaid in full and subject to applicable securities laws, the Investors agree to not engage in short sales of the Company’s Common Stock.

4.           Representations and Warranties of the Company.  The Company hereby represents and warrants to each Investor that:

 

4.1           Organization, Good Standing and Qualification.  The Company is duly organized and validly existing in good standing under the laws of the State of Delaware and has full power and authority to conduct its business as presently conducted and as described in the documents filed by the Company under the Securities Exchange Act of 1934 (the “Exchange Act”), since January 1, 2008 through the date hereof, including, without limitation, its most recent Annual Report on Form 10-K (as amended) and subsequent quarterly reports on Form 10-Q, each as filed with the SEC (the “Exchange Act Documents”).  The Company is registered or qualified to do business and in good standing in each jurisdiction in which the nature of the business conducted by it or the location of the properties owned or leased by it requires such qualification and where the failure to be so qualified would have a material adverse effect upon the condition (financial or otherwise), earnings, or business (such business being as described in the Exchange Act Documents), properties or operations of the Company and its subsidiaries, considered as one enterprise, or impair the Company’s ability to perform on a timely basis its obligations under this Agreement (any of the foregoing, a “Material Adverse Effect”).  No proceeding has been instituted in any such jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such power and authority or qualification.

 

4.2           Due Authorization and Valid Issuance.  The Company has all requisite power and authority to execute, deliver and perform its obligations under this Agreement and the Notes, and this Agreement and the Notes have been duly authorized and validly executed and delivered by the Company and, assuming due execution and delivery hereof by the Investors, shall constitute the legal, valid and binding agreements of the Company enforceable against the Company in accordance with their terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies.  The Notes and the Shares being purchased by the Investors hereunder will, upon issuance and payment therefore pursuant to the terms hereof, be duly authorized, validly issued, fully-paid and nonassessable.

 

4.3           Non-Contravention.  The execution and delivery of this Agreement and the Notes, the sale of the Units, the fulfillment of the terms of this Agreement and the Notes, and the consummation of the transactions contemplated hereby will not conflict with or constitute a violation of (i) the charter, by-laws or other organizational documents of the Company or (ii) assuming the correctness of the representations and warranties of the Investors set forth herein, any law, administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority applicable to the Company or its properties, except in the case of clause (ii) for any such conflicts, violations or defaults which do not have or would be reasonably likely to result in a Material Adverse Effect.

 

5.           Miscellaneous.

 

5.1           Survival of Warranties.  The warranties, representations and covenants of the Company and Investors contained in or made pursuant to this Agreement, the Notes or any other instrument or document delivered in connection herewith or therewith, shall survive the execution and delivery hereof or thereof.

 

5.2           Successors and Assigns.  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 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 assigns.

 

5.3           Governing Law; Jurisdiction; Jury Trial.  This Agreement shall be governed by and construed under the internal laws of the State of Delaware without regard to the principles of conflicts of law thereof.  Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding arising under or relating to this Agreement (a “Proceeding”) by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any Proceeding.  If either party shall commence a Proceeding to enforce any provisions of this Agreement, then the prevailing party in such Proceeding shall be reimbursed by the other party for its reasonable attorney’s fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Proceeding.  Each party agrees that all Proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement (whether brought against a party hereto or its respective affiliates, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City and County of San Diego (the “Courts”).  Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim that it is not personally subject to the jurisdiction of any such Court, or that such Proceeding has been commenced in an improper or inconvenient forum.

 

 

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

 

5.5           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.

 

5.6           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 Schedule attached hereto (or at such other addresses as shall be specified by notice given in accordance with this Section 5.6).

 

5.9           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.

 

5.10          Entire Agreement.  This Agreement and the documents referred to herein constitute the entire agreement among the parties and no party shall be liable or bound to any other party in any manner by any warranties, representations, or covenants except as specifically set forth herein or therein.

 

5.11          Obligations of Investors Several and Not Joint.  The obligations of each Investor hereunder are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under any Agreement.  Nothing contained herein, and no action taken by any Investor hereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated hereby; provided that such obligations or the transactions contemplated hereby may be modified, amended or waived in accordance with Section 5.7 of this Agreement.  Each Investor shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement (provided, that such rights may be modified, amended or waived in accordance with Section 5.7), and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose.

 

 

[Remainder of Page Intentionally Left Blank]

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the dates set forth below. This Agreement shall be effective upon the countersignature and acceptance by the Company.

 

 

 

 

 

Contact Name
SSN or Tax ID
Address
(no P.O. Boxes please)
Contact Numbers		(office/home)
		(mobile)
		(fax)
		(email)
Number of Units Purchased	($100,000 per unit)

 

 

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Rule 501.                      Definitions and Terms Used in Regulation D.

 

(a)           Accredited Investor.  “Accredited investor” shall mean any person who comes within any of the following categories, or who the issuer reasonably believes comes within any of the following categories, at the time of the sale of the securities to that person:

 

(1)

Any bank as defined in section 3(a)(2) of the Act or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; any broker dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; any insurance company as defined in Section 2(13) of the Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000; or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors;

 

(2)	Any private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940;

 

(3)	Any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000;

 

(4)	Any director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer, or general partner of a general partner of that issuer;

 

(5)	Any natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his purchase exceeds $1,000,000;

 

(6)	Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;

 

(7)	Any trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii); and

 

(8)	Any entity in which all of the equity owners are accredited investors.