Christopher
Reed
Reed’s,
Inc.
13000 South
Spring Street
Los Angeles,
California 90061
Source Capital Group, Inc. Proposed Offering Engagement
Letter
The purpose of this engagement
letter is to set forth the terms pursuant to which Source Capital
Group, Inc. whose address is 276 Post Road West, Westport, CT 06880
(hereinafter referred to as “ Source ” or
“ SCG ” or “ Dealer Manager
”) will act as the sole exclusive placement agent and
financial advisor for a proposed issuance, or series of issuances,
of registered or unregistered equity and/or debt securities
(“ Proposed Offering ”) of Reed’s, Inc.,
13000 South Spring Street, Los Angeles, California 90061
(collectively, with its subsidiaries and affiliates), (hereinafter
referred to as the “ Issuer ” or the “
Company ”), in connection with a “ Registered
Direct Offering ” and/or sale of up to $1,500,000 from an
effective Form S-3 registration statement.
The terms of our agreement are as
follows:
1. The Issuer hereby
retains and engages Source, for the period beginning on the date
hereof and ending on September 30, 2009 , unless sooner
terminated pursuant to the terms of this engagement letter
agreement (the “ Engagement Period ”), to act as
the Issuer’s sole exclusive placement agent, financial
advisor and/or dealer-manager in connection with the Proposed
Offering. The compensation for acting as the exclusive
sole placement agent to the Issuer and conditions of Source’s
engagement is stated hereunder. During the Engagement
Period and as long as Source is proceeding in good faith with
activities in connection with the Proposed Offering, the Issuer
agrees not to solicit, negotiate with or enter into any agreement
with any other source of financing (whether equity, debt or
otherwise other than bank financings or financings in connection
with strategic alliances), any placement agent, financial advisor,
dealer manager or any other person or entity in connection
with the Proposed Offering, as the case may
be.
2. In consideration
for its services in the Proposed Offering, Source shall be entitled
to a cash fee equal to 8% of the dollar amount received by the
Issuer in connection with a Proposed Offering (the “
Financial Advisory Fee ”).
3. The Issuer shall
be responsible for and pay all expenses relating to the Proposed
Offering, including, without limitation, all filing fees relating
to any registration statement required by be filed as part of the
Proposed Offering of and any filing fees relating to the review of
the Proposed Offering materials by the Financial Industry
Regulatory Authority, Inc. (“ FINRA ”); all fees
and expenses relating to the listing of such Shares on the exchange
where the Common Stock is (or will be) listed; all fees, expenses
and disbursements relating to the registration or qualification of
the Shares under the “blue sky” securities laws of any
states or other jurisdictions; the costs of mailing and
printing all of the Proposed Offering documents, Registration
Statements, Prospectuses and all amendments, supplements and
exhibits thereto and as many preliminary and final Prospectuses as
Source may reasonably deem necessary; the fees and expenses of the
Issuer’s accountants and the fees and expenses of the
Issuer’s legal counsel and other agents and
representatives.
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Members FINRA & SIPC
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276 Post Road West, Westport,
CT 06880
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www.Sourcegrp.com
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4. During the 45-day
period prior to the filing of the Registration Statement, if
applicable, with the Securities and Exchange Commission (“
Commission ”), and at all times thereafter prior and
following the effectiveness of such Registration Statement, the
Issuer and its officers, directors and related parties will abide
by all rules and regulations of the Commission relating to public
Proposed Offerings, including, without limitation, those relating
to public statements (i.e., “gun jumping”) and
disclosures of material non-public information.
5. The Issuer shall
supply Source and its counsel, at the Issuer’s cost, with
bound volumes of the Proposed Offering materials within a
reasonable time after the closing of the Proposed Offering (the
“ Closing ”).
6. The Proposed
Offering shall be conditioned upon, among other things, the
following:
(a) Satisfactory
completion by Source of its due diligence investigation and
analysis of: (i) the Issuer’s arrangements with its officers,
directors, employees, affiliates, customers and suppliers, (ii) the
audited historical financial statements of the Issuer as may be
required by the Act and rules and regulations of the Commission
thereunder for inclusion in the Registration Statement, if
applicable, and (iii) the Issuer’s projected financial
results for the fiscal years ending December 31, 2009 and December
31, 2010;
(b) The continued
listing of the Common Stock on its current exchange or migration to
a higher exchange (“ Trading Market
”);
(c) Source shall have
received from outside counsel to the Issuer such counsel’s
written opinion, addressed to Source, dated as of the Closing, in
customary form and substance reasonably satisfactory to
Source;
(d) FINRA shall have
raised no objection to the fairness and reasonableness of the terms
and arrangements of this Agreement. In addition, the Company shall,
if requested by Source, make or authorize Source’s counsel to
make on the Company’s behalf, an Issuer Filing with the FINRA
Corporate Financing Department pursuant to FINRA Rule 5110 and
pay all filing fees required in connection therewith.
(e) Prior to the
Closing, the Company shall have furnished to Source such further
information, certificates and documents as Source may reasonably
request, including customary audit comfort letters (all opinions,
letters, evidence and certificates mentioned above or elsewhere in
this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for Source);
(f) Any Proposed
Offering shall fund through an escrow account established by Source
and paid for by the Issuer; and
7. Upon consummation
of a Proposed Offering, if any, Source shall not be granted the
right of first refusal (“ Right of First Refusal
”) on any and all subsequent offerings by the
Issuer.
8. The Issuer
represents and warrants to Source as follows:
(a) The Issuer has the
requisite corporate power and authority to enter into and to
consummate the transactions contemplated hereunder and otherwise to
carry out its obligations hereunder. The execution and delivery of
this Agreement by the Issuer and the consummation by it of the
transactions contemplated hereby have been duly authorized by all
necessary action on the part of the Issuer and no further action is
required by the Issuer, its board of directors or its stockholders
in connection herewith. This Agreement has been duly
authorized and executed by the Issuer and, when delivered in
accordance with the terms hereof and thereof, will constitute the
valid and binding obligation of the Issuer enforceable against the
Issuer in accordance with its terms except (i) as limited
b