Exhibit 10.1

EXECUTION COPY

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this “Agreement”) is dated as of June 1,
2006, by and among Jones Soda Co., a Washington corporation (the “Company”), and
each purchaser identified on the signature pages hereto (each, a “Purchaser” and
collectively, the “Purchasers”).

RECITALS

A. The Company and each Purchaser are executing and delivering this agreement in
reliance upon the exemption from securities registration afforded by
Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”),
and Rule 506 of Regulation D (“Regulation D”) as promulgated by the United
States Securities and Exchange Commission under the Securities Act.

B. Each Purchaser, severally and not jointly, wishes to purchase, and the
Company wishes to sell, upon the terms and conditions stated in this Agreement,
that aggregate number of shares of the Common Stock, no par value per share (the
“Common Stock”), of the Company, set forth below such Purchaser’s name on the
signature page of this Agreement (which aggregate amount for all Purchasers
together shall be 2,920,895 shares of Common Stock and shall be collectively
referred to herein as the “Shares”).

C. The Company has engaged Piper Jaffray & Co. as its placement agent (the
“Placement Agent”) for the offering of the Shares on a “best efforts” basis.

D. Contemporaneously with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
the form attached hereto as Exhibit A (the “Registration Rights Agreement”),
pursuant to which, among other things, the Company will agree to provide certain
registration rights with respect to the Shares under the Securities Act and
applicable state securities laws.

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers hereby
agree as follows:

ARTICLE I.

DEFINITIONS

1.1 Definitions. In addition to the terms defined elsewhere in this Agreement,
for all purposes of this Agreement, the following terms shall have the meanings
indicated in this Section 1.1:

“Action” means any action, suit, inquiry, notice of violation, proceeding
(including any partial proceeding such as a deposition) or investigation pending
or threatened in writing against or affecting the Company, any Subsidiary or any
of their respective properties before or by any court, arbitrator, governmental
or administrative agency, regulatory authority (federal, state, county, local or
foreign), stock market, stock exchange or trading facility.

“Affiliate” means, with respect to any Person, any other Person that, directly
or indirectly through one or more intermediaries, Controls, is controlled by or
is under common control with such Person, as such terms are used in and
construed under Rule 144. With respect to a Purchaser, any investment fund or
managed account that is managed on a discretionary basis by the same investment
manager as such Purchaser will be deemed to be an Affiliate of such Purchaser.

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“Business Day” means a day, other than a Saturday or Sunday, on which banks in
New York City are open for the general transaction of business.

“Buy-In” has the meaning set forth in Section 4.1(f).

“Buy-In Price” has the meaning set forth in Section 4.1(f).

“Cash Placement Agent Fee” means the cash fee to be paid to the Placement Agent
for services rendered to the Company in connection with the offering of the
Shares.

“Closing” means the closing of the purchase and sale of the Shares pursuant to
this Agreement.

“Closing Date” means the Business Day on which all of the conditions set forth
in Sections 2.1 and 2.2 hereof are satisfied, or such other date as the parties
may agree.

“Commission” means the United States Securities and Exchange Commission.

“Common Stock” has the meaning set forth in the Recitals, and also includes any
securities into which the Common Stock may hereafter be reclassified.

“Common Stock Equivalents” means any securities of the Company or any Subsidiary
which would entitle the holder thereof to acquire at any time Common Stock,
including without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock or other securities that entitle the holder to receive, directly or
indirectly, Common Stock.

“Company Counsel” means Preston Gates & Ellis LLP.

“Company Deliverables” has the meaning set forth in Section 2.2(a).

“Company’s Knowledge” means with respect to any statement made to the knowledge
of a party, that the statement is based upon the actual knowledge of the
officers of such party having responsibility for the matter or matters that are
the subject of the statement.

“Control” (including the terms “controlling”, “controlled by” or “under common
control with”) means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.

“Disclosure Materials” has the meaning set forth in Section 3.1(h).

“Effective Date” means the date on which the initial Registration Statement
required by Section 2(a) of the Registration Rights Agreement is first declared
effective by the Commission.

“Effectiveness Deadline” means the date on which the initial Registration
Statement is required to be declared effective by the Commission under the terms
of the Registration Rights Agreement.

“Environmental Laws” has the meaning set forth in Section 3.1(l).

“Evaluation Date” has the meaning set forth in Section 3.1(v).

 

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“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any
successor statute, and the rules and regulations promulgated thereunder.

“GAAP” means U.S. generally accepted accounting principles, as applied by the
Company.

“Indemnified Person” has the meaning set forth in Section 4.7(b).

“Intellectual Property” has the meaning set forth in Section 3.1(r).

“Irrevocable Transfer Agent Instructions” means, with respect to the Company,
the Irrevocable Transfer Agent Instructions, in the form of Exhibit D, executed
by the Company and delivered to and acknowledged in writing by the Transfer
Agent.

“Lien” means any lien, charge, claim, encumbrance, security interest, right of
first refusal, preemptive right or other restrictions of any kind.

“Losses” has the meaning set forth in Section 4.7(a).

“Material Adverse Effect” means any of (i) a material and adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a
material and adverse effect on the results of operations, assets, business or
financial condition of the Company and the Subsidiaries, taken as a whole, or
(iii) any material adverse impairment to the Company’s ability to perform in any
material respect on a timely basis its obligations under any Transaction
Document.

“Material Contract” means any contract of the Company that was filed as an
exhibit to the SEC Filings pursuant to Item 601(b)(4) or Item 601(b)(10) of
Regulation S-K.

“New York Courts” means the state and federal courts sitting in the City of New
York, Borough of Manhattan.

“Outside Date” means June 16, 2006.

“Person” means an individual, corporation, partnership, limited liability
company, trust, business trust, association, joint stock company, joint venture,
sole proprietorship, unincorporated organization, governmental authority or any
other form of entity not specifically listed herein.

“Principal Trading Market” means the Trading Market on which the Common Stock is
primarily listed on and quoted for trading, which, as of the Closing Date, shall
be the Nasdaq Capital Market.

“Proceeding” means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.

“Purchaser Deliverables” has the meaning set forth in Section 2.2(b).

“Purchaser Party” has the meaning set forth in Section 4.7(a).

“Registration Rights Agreement” has the meaning set forth in the Recitals.

“Registration Statement” means a registration statement meeting the requirements
set forth in the Registration Rights Agreement and covering the resale by the
Purchasers of the Registrable Securities (as defined in the Registration Rights
Agreement).

 

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“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

“SEC Reports” has the meaning set forth in Section 3.1(h).

“Secretary’s Certificate” has the meaning set forth in Section 2.2(a)(vi).

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

“Short Sales” include, without limitation, 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), and sales and other
transactions through non-US broker dealers or foreign regulated brokers.

“Subscription Amount” means with respect to each Purchaser, the Subscription
Amount indicated on such Purchaser’s signature page to this Agreement.

“Subsidiary” means any “significant subsidiary” as defined in Rule 1-02(w) of
the Regulation S-X promulgated by the Commission under the Exchange Act and any
other entity required to be disclosed in the SEC Reports pursuant to
Item 601(b)(21) of Regulation S-K.

“Trading Affiliate” has the meaning set forth in Section 3.2(h).

“Trading Day” means (i) a day on which the Common Stock is listed or quoted and
traded on its primary Trading Market (other than the OTC Bulletin Board), or
(ii) if the Common Stock is not listed on a Trading Market (other than the OTC
Bulletin Board), a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the
Common Stock is not quoted on any Trading Market, a day on which the Common
Stock is quoted in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding
to its functions of reporting prices); provided, that in the event that the
Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof,
then Trading Day shall mean a Business Day.

“Trading Market” means whichever of the New York Stock Exchange, the American
Stock Exchange, the NASDAQ National Market, the NASDAQ Capital Market, the OTC
Bulletin Board or the TSX Venture Exchange on which the Common Stock is listed
or quoted for trading on the date in question.

“Transaction Documents” means this Agreement, the schedules and exhibits
attached hereto, the Registration Rights Agreement, the Irrevocable Transfer
Agent Instructions and any other documents or agreements executed in connection
with the transactions contemplated hereunder.

“Transfer Agent” means Pacific Corporate Trust, or any successor transfer agent
for the Company.

ARTICLE II.

PURCHASE AND SALE

2.1 Closing. Subject to the terms and conditions set forth in this Agreement, at
the Closing, the Company shall issue and sell to each Purchaser, and each
Purchaser shall, severally and not jointly, purchase from the Company, such
number of shares of Common Stock as indicated below such Purchaser’s name on

 

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the signature page of this Agreement, for an aggregate purchase price for such
Purchaser as indicated below such Purchaser’s name on the signature page of this
Agreement Upon confirmation that the other conditions to closing specified
herein have been satisfied or duly waived by the Purchasers, the Company shall
deliver to Lowenstein Sandler PC (“Placement Agent Counsel”), in trust, a
certificate or certificates, registered in such name or names as the Purchasers
may designate, representing the Shares, with instructions that such certificates
are to be held for release to the Purchasers only upon payment in full of the
Subscription Amount to the Company by all the Purchasers. Unless otherwise
agreed to by the Company and any Purchaser, upon such receipt by Placement Agent
Counsel of the certificates, each Purchaser shall promptly, but no more than one
Business Day thereafter, cause a wire transfer in same day funds to be sent to
the account of the Company as instructed in writing by the Company, in an amount
representing the purchase price for such Purchaser as indicated below such
Purchaser’s name on the signature page of this Agreement. On the date (the
“Closing Date”) the Company receives the aggregate Subscription Amounts, the
certificates evidencing the Shares shall be released to the Purchasers (the
“Closing”). The Closing of the purchase and sale of the Shares shall take place
at the offices of Lowenstein Sandler PC, 1251 Avenue of the Americas, New York,
New York on the Closing Date or at such other locations or remotely by facsimile
transmission or other electronic means as the parties may mutually agree.

2.2 Closing Deliveries. (a) On or prior to the Closing, the Company shall issue,
deliver or cause to be delivered to each Purchaser the following (the “Company
Deliverables”):

(i) This Agreement, duly executed by the Company;

(ii) One or more stock certificates, free and clear of all restrictive and other
legends (except as provided in Section 4.1(b) hereof), evidencing a number of
Shares indicated below such Purchaser’s name on the signature page of this
Agreement, registered in the name of such Purchaser;

(iii) a legal opinion of Company Counsel, in the form attached hereto as Exhibit
C, executed by such counsel and addressed to the Purchasers and the Placement
Agent;

(iv) the Registration Rights Agreement, duly executed by the Company;

(v) duly executed Irrevocable Transfer Agent Instructions acknowledged in
writing by the Transfer Agent;

(vi) a certificate of the Secretary of the Company (the “Secretary’s
Certificate”), dated as of the Closing Date, certifying the resolutions adopted
by the Board of Directors of the Company approving the transactions contemplated
by this Agreement and the other Transaction Documents and the issuance of the
Shares, certifying the current versions of the articles of incorporation, as
amended and by-laws of the Company and certifying as to the signatures and
authority of persons signing the Transaction Documents and related documents on
behalf of the Company; and

(vii) the Compliance Certificate referred to in Section 5.1(h).

(b) On or prior to the Closing, each Purchaser shall deliver or cause to be
delivered to the Company the following (the “Purchaser Deliverables”):

(i) This Agreement, duly executed by such Purchaser;

(ii) Its Subscription Amount, in United States dollars and in immediately
available funds, in the amount set forth as the “Purchase Price” indicated below
such Purchaser’s name on

 

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the applicable signature page hereto by wire transfer to an account designated
in writing by the Company for such purpose, as set forth on Exhibit E attached
hereto;

(iii) the Registration Rights Agreement, duly executed by such Purchaser;

(iv) a fully completed and duly executed Selling Shareholder Questionnaire in
the form attached as Annex B to the Registration Rights Agreement; and

(v) a fully completed and duly executed Accredited Investor Questionnaire and
Stock Certificate Questionnaire in the forms attached hereto as Exhibits B-1 and
B-2 respectively.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Company. The Company hereby represents
and warrants to the Purchasers and to the Placement Agent that, except as set
forth in the Schedules delivered herewith:

(a) Subsidiaries. The Company has no direct or indirect Subsidiaries other than
those listed in the SEC Reports. Except as disclosed in the SEC Reports, the
Company owns, directly or indirectly, all of the capital stock or comparable
equity interests of each Subsidiary free and clear of any and all Liens, and all
the issued and outstanding shares of capital stock or comparable equity interest
of each Subsidiary are validly issued and are fully paid, non-assessable and
free of preemptive and similar rights.

(b) Organization and Qualification. The Company and each Subsidiary is an entity
duly incorporated or otherwise organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite power and authority to own or lease and use its
properties and assets and to carry on its business as currently conducted.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. Each of the Company and the Subsidiaries is
duly qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case may
be, could not reasonably be expected to, individually or in the aggregate,
result in a Material Adverse Effect.

(c) Authorization; Enforcement; Validity. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents to which it is a party and
otherwise to carry out its obligations hereunder and thereunder. The execution
and delivery of each of the Transaction Documents to which it is a party by the
Company and the consummation by it of the transactions contemplated hereby and
thereby (including, but not limited to, the sale and delivery of the Shares)
have been duly authorized by all necessary corporate action on the part of the
Company and no further corporate action is required by the Company, its Board of
Directors or its shareholders. Each of the Transaction Documents to which it is
a party has been (or upon delivery will have been) duly executed by the Company
and is, or when delivered in accordance with the terms hereof, will constitute
the valid and binding obligation of the Company enforceable against the Company
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies or by other equitable principles of general application.
Except as set forth in the SEC Reports, there are no shareholder agreements,
voting agreements, or other similar arrangements with respect to the Company’s
capital stock to which the Company is a party or, to the Company’s Knowledge,
between or among any of the Company’s shareholders.

 

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(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents to which it is a party by the Company and the consummation by the
Company of the transactions contemplated hereby or thereby (including, without
limitation, the issuance of the Shares) do not and will not (i) conflict with or
violate any provision of the Company’s or any Subsidiary’s certificate or
articles of incorporation, bylaws or other organizational or charter documents,
(ii) conflict with, or constitute a default (or an event that 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 (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound, or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations and the rules and regulations, assuming the
correctness of the representations and warranties made by the Purchasers herein,
of any self-regulatory organization to which the Company or its securities are
subject, including all applicable Trading Markets), or by which any property or
asset of the Company or a Subsidiary is bound or affected, except in the case of
clauses (ii) and (iii) such as would not, individually or in the aggregate, have
or reasonably be expected to result in a Material Adverse Effect.

(e) Filings, Consents and Approvals. Neither the Company nor any Subsidiary is
required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in connection with
the execution, delivery and performance by the Company of the Transaction
Documents (including the issuance of the Shares), other than (i) the filing with
the Commission of one or more Registration Statements in accordance with the
requirements of the Registration Rights Agreement, (ii) filings required by
applicable state securities laws, (iii) the filing of a Notice of Sale of
Securities on Form D with the Commission under Regulation D of the Securities
Act, (iv) the filing of any requisite notices and/or application(s) to the
Principal Trading Market for the issuance and sale of the Common Stock and the
listing of the Common Stock for trading or quotation, as the case may be,
thereon in the time and manner required thereby, (v) the filings required in
accordance with Section 4.6 and (vi) those that have been made or obtained prior
to the date of this Agreement.

(f) Issuance of the Shares. The Shares have been duly authorized and, when
issued and paid for in accordance with the terms of the Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens other than restrictions on transfer provided for in the Transaction
Documents or imposed by applicable securities laws and shall not be subject to
preemptive or similar rights of shareholders. Assuming the accuracy of the
representations and warranties of the Purchasers in this Agreement and the
accuracy of those representations and warranties made by the Placement Agent to
the Company, the Shares will be issued in compliance with all applicable federal
and state securities laws.

(g) Capitalization. The number of shares and type of all authorized, issued and
outstanding capital stock, options and other securities of the Company (whether
or not presently convertible into or exercisable or exchangeable for shares of
capital stock of the Company) is set forth in the SEC Reports, which includes
the amendment to the Company’s 2002 Stock Option Plan to increase the maximum
number of shares available under the 2002 Stock Option Plan to 4,500,000 shares
of Common Stock, which amendment was approved at the Company’s Annual Meeting of
Shareholders on May 18, 2006 and the text of such amendment is more fully
described in the Company’s definitive proxy statement on Schedule 14A filed with
the Securities and Exchange Commission on April 7, 2006. All of the outstanding
shares of capital stock of the Company are duly authorized, validly issued,
fully paid and non-assessable, have been issued in compliance in all material
respects with all applicable federal and state securities laws, and none of such
outstanding shares was issued in violation of any preemptive rights or similar
rights to subscribe for or

 

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purchase any capital stock of the Company. Except as specified in the SEC
Reports, there are no outstanding options, warrants or scrip rights to subscribe
to, calls or commitments of any character whatsoever relating to, or securities,
rights or obligations convertible into or exchangeable for, or giving any Person
any right to subscribe for or acquire, any shares of the Company’s capital
stock, or contracts, commitments, understandings or arrangements by which the
Company or any Subsidiary is or may become bound to issue additional shares of
capital stock of the Company, or options, securities or rights convertible or
exchangeable into shares of capital stock of the Company. Except for customary
adjustments as a result of stock dividends, stock splits, combination of shares,
reorganizations, recapitalizations, reclassifications or other similar events,
or as disclosed in any Schedule 13D or Schedule 13G or Company report on file
with the Commission, there are no anti-dilution or price adjustment provisions
contained in any security issued by the Company (or in any agreement providing
rights to security holders) and the issuance and sale of the Shares will not,
immediately or with the passage of time, obligate the Company to issue shares of
Common Stock or other securities to any Person (other than the Purchasers) and
will not, result in a right of any holder of securities to adjust the exercise,
conversion, exchange or reset price under such securities.

(h) SEC Reports. The Company has filed all reports required to be filed by it
under the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the two years preceding the date hereof (the foregoing materials being
collectively referred to herein as the “SEC Reports” and together with this
Agreement and the Schedules to this Agreement (if any), the “Disclosure
Materials”) on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such
extension. As of the date hereof, the Company is not aware of any event
occurring on or prior to the Closing Date (other than the transactions
contemplated by the Transaction Documents) that requires the filing of a Form
8-K after the Closing. As of their respective dates, or to the extent corrected
by a subsequent restatement, the SEC Reports complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, 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 light of the circumstances under which
they were made, not misleading.

(i) Financial Statements. The financial statements of the Company included in
the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing (or to the extent corrected by a
subsequent restatement). Such financial statements have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved,
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries taken as a
whole as of and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of unaudited statements,
to normal, year-end audit adjustments.

(j) Tax Matters. Each of the Company and its Subsidiaries (i) has accurately and
timely prepared and 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,
with respect to which adequate reserves have been set aside on the books of the
Company 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, except, in the case of clauses (i) and
(ii) above, where the failure to so pay or file any such tax, assessment, charge
or return would not result in a Material Adverse Effect. There are no unpaid
taxes in any material amount claimed to be due by the taxing authority of any
jurisdiction.

 

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(k) Material Changes. Since the date of the latest audited financial statements
included within the SEC Reports, except as specifically disclosed in the SEC
Reports, (i) other than things affecting the beverage industry generally and
other than as a result of disclosure of the transactions contemplated by the
Transaction Documents, there have been no events, occurrences or developments
that have had or that could reasonably be expected to result, either
individually or in the aggregate, in a Material Adverse Effect, (ii) the Company
has not incurred any liabilities (contingent or otherwise) other than (A) trade
payables, accrued expenses and other liabilities incurred in the ordinary course
of business consistent with past practice and (B) liabilities not required to be
reflected in the Company’s financial statements pursuant to GAAP or required to
be disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting or the manner in which it keeps its accounting
books and records, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its shareholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock (other than in connection with repurchases of unvested stock issued to
employees of the Company) and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except Common Stock issued in
the ordinary course as dividends on outstanding preferred stock and pursuant to
existing Company stock option or stock purchase plans or executive and director
corporate arrangements disclosed in the SEC Reports and (vi) there has not been
any material change or amendment to, or any waiver of any material right under,
any contract under which the Company, any subsidiary thereof, or any of their
assets is bound or subject.

(l) Environmental Matters. To the Company’s Knowledge, neither the Company nor
any Subsidiary (i) is in violation of any statute, rule, regulation, decision or
order of any governmental agency or body or any court, domestic or foreign,
relating to the use, disposal or release of hazardous or toxic substances or
relating to the protection or restoration of the environment or human exposure
to hazardous or toxic substances (collectively, “Environmental Laws”), (ii) owns
or operates any real property contaminated with any substance that is in
violation of any Environmental Laws, (iii) is liable for any off-site disposal
or contamination pursuant to any Environmental Laws, and (iv) is subject to any
claim relating to any Environmental Laws; which violation, contamination,
liability or claim has had or could reasonably be expected to have a Material
Adverse Effect, individually or in the aggregate; and there is no pending or, to
the Company’s Knowledge, threatened investigation that might lead to such a
claim.

(m) Litigation. Other than things affecting the beverage industry generally,
there is no Action which (i) adversely affects or challenges the legality,
validity or enforceability of any of the Transaction Documents or the Shares or
(ii) except as specifically disclosed in the SEC Reports and other than as a
result of disclosure of the transactions contemplated by the Transaction
Documents, could, if there were an unfavorable decision, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any Subsidiary, nor, to the Company’s Knowledge,
any current director or officer thereof (in his or her capacity thereof), is or
has been during the five-year period prior to the Closing Date the subject of
any Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. There has not been and
to the Company’s Knowledge, there is not pending or contemplated, any
investigation by the Commission involving the Company or, to the Company’s
Knowledge any current or former director or officer of the Company (in his or
her capacity as such). The Commission has not issued any stop order or other
order suspending the effectiveness of any registration statement filed by the
Company or any subsidiary under the Exchange Act or the Securities Act.

(n) Employment Matters. The Company and its Subsidiaries are in compliance with
all material 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 the failure to be in compliance
would not, either individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement. No executive
officer of the Company or any of its Subsidiaries (as defined in Rule

 

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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.

(o) Compliance. Neither the Company nor any Subsidiary, except in each case as
could not, individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect (i) is in default under or in violation of
(and no event has occurred that has not been waived that, with notice or lapse
of time or both, would result in a default by the Company or any Subsidiary
under), nor has the Company or any Subsidiary received notice of a claim that it
is in default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court,
arbitrator or governmental body having jurisdiction over the Company or its
properties or assets, or (iii) is or has been in violation of, or in receipt of
notice that it is in violation of, any statute, rule or regulation of any
governmental authority applicable to the Company.

(p) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits, individually or in the aggregate, has not and could not
reasonably be expected to result in a Material Adverse Effect, and neither the
Company nor any Subsidiary has received any notice of proceedings relating to
the revocation or modification of any such permits.

(q) Title to Assets. Except for property that is specifically the subject of,
and covered by, other representations and warranties as to ownership or title
contained herein, the Company and the Subsidiaries have good and marketable
title in fee simple to all real property owned by them that is material to their
respective businesses and good and marketable title in all personal property
owned by them that is material to their respective businesses, in each case free
and clear of all Liens, except for Liens that do not, individually or in the
aggregate, have or result in a Material Adverse Effect. Any real property and
facilities held under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases of which the Company and the
Subsidiaries are in material compliance.

(r) Patents and Trademarks. The Company and its Subsidiaries own, possess,
license or have other rights to use all foreign and domestic patents, patent
applications, trade and service marks, trade and service mark registrations,
trade names, copyrights, licenses, inventions, trade secrets, technology,
Internet domain names, know-how and other intellectual property (collectively,
the “Intellectual Property”) necessary for the conduct of their respective
businesses as now conducted or as proposed to be conducted. Except as set forth
in the SEC Reports and except where such violations or infringements would not
reasonably be expected to result, either individually or in the aggregate, in a
Material Adverse Effect, (a) to the Company’s Knowledge, there are no rights of
third parties to any such Intellectual Property; (b) to the Company’s Knowledge,
there is no infringement by third parties of any such Intellectual Property;
(c) there is no pending or, to the Company’s Knowledge, threatened action, suit,
proceeding or claim by others challenging the Company’s and its Subsidiaries’
rights in or to any such Intellectual Property, and the Company is unaware of
any facts which would form a reasonable basis for any such claim; (d) there is
no pending or, to the Company’s Knowledge, threatened action, suit, proceeding
or claim by others challenging the validity or scope of any such Intellectual
Property; and (e) there is no pending or, to the Company’s Knowledge, threatened
action, suit, proceeding or claim by others that the Company and/or any of its
Subsidiaries infringe or otherwise violate any patent, trademark, copyright,
trade secret or other proprietary rights of others, and the Company is unaware
of any other fact which would form a reasonable basis for any such claim.

 

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(s) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses and location in which the
Company and the Subsidiaries are engaged. Neither the Company nor any Subsidiary
has any knowledge that it will be unable to renew its existing insurance
coverage for the Company and the Subsidiaries as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business without a significant increase in cost.

(t) Transactions With Affiliates and Employees. Except as set forth in the SEC
Reports made on or prior to the date hereof, none of the officers or directors
of the Company and, to the Company’s Knowledge, none of the employees of the
Company is presently a party to any transaction with the Company or any
Subsidiary or to a presently contemplated transaction (other than for services
as employees, officers and directors) that would be required to be disclosed
pursuant to Item 404 of Regulation S-K promulgated under the Securities Act.

(u) Internal Accounting Controls. The Company and the 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 accountability,
(iii) access to assets is permitted only in accordance with management’s general
or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.

(v) Sarbanes-Oxley; Disclosure Controls. The Company is in compliance in all
material respects with all of the provisions of the Sarbanes-Oxley Act of 2002
applicable to it as of the Closing Date. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and designed such disclosure controls and procedures
to ensure that material information relating to the Company is made known to the
certifying officers by others within those entities, particularly during the
period in which the Company’s most recently filed periodic report under the
Exchange Act, as the case may be, is being prepared. The Company’s certifying
officers have evaluated the effectiveness of the Company’s disclosure controls
and procedures as of the end of the most recent periodic reporting period under
the Exchange Act (the “Evaluation Date”). The Company presented in its most
recently filed periodic report under the Exchange Act the conclusions of the
certifying officers about the effectiveness of the disclosure controls and
procedures based on their evaluations as of the Evaluation Date. Since the
Evaluation Date, except with respect to the remediation of the material weakness
in internal control over financial reporting and the ineffectiveness of
disclosure controls and procedures as described in the SEC Filings, there have
been no significant changes in the Company’s internal controls over financial
reporting (as such term is defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) or, to the Company’s Knowledge, in other factors that could
reasonably be expected to significantly affect the Company’s internal controls
over financial reporting.

(w) Certain Fees. Except as set forth on Schedule 3.1(w), no person or entity
will have, as a result of the transactions contemplated by this Agreement, any
valid right, interest or claim against or upon the Company or a Purchaser for
any commission, fee or other compensation pursuant to any agreement, arrangement
or understanding entered into by or on behalf of the Company, other than Piper
Jaffray & Co. as placement agent with respect to the offer and sale of the
Shares (which placement agent fees are being paid by the Company). The Company
shall pay, and hold each Purchaser harmless against, any liability, loss or
expense (including, without limitation, attorney’s fees and out-of-pocket
expenses) arising in connection with any such right, interest or claim.

(x) Private Placement. Assuming the accuracy of the Purchasers’ representations
and warranties set forth in Section 3.2 of this Agreement and the accuracy of
those representations and warranties

 

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made by the Placement Agent to the Company, no registration under the Securities
Act is required for the offer and sale of the Shares by the Company to the
Purchasers under the Transaction Documents. The Company is eligible to register
the Shares for resale by the Purchasers using Form S-3 promulgated under the
Securities Act. The Company has not granted or agreed to grant to any Person any
rights (including “piggy-back” registration rights) to have any securities of
the Company registered with the Commission or any other governmental authority
that have not been satisfied or waived.

(y) No Directed Selling Efforts or General Solicitation. Neither the Company,
nor any of its Affiliates, nor any Person acting on its or their behalf has
conducted any “general solicitation” or “general advertising” (as those terms
are used in Regulation D) in connection with the offer or sale of any of the
Shares.

(z) No Integrated Offering. Neither the Company, its Subsidiaries nor any of
their Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, at any time within the past six months made any offers or sales of
any Company security or solicited any offers to buy any security, under
circumstances that would (i) eliminate the availability of the exemption from
registration under Regulation D under the Securities Act in connection with the
offer and sale by the Company of the Shares as contemplated hereby or (ii) cause
the offering of the Shares pursuant to the Transaction Documents to be
integrated with prior offerings by the Company for purposes of any applicable
law, regulation or shareholder approval provisions, including, without
limitation, under the rules and regulations of any Trading Market.

(aa) Listing and Maintenance Requirements. The Company’s Common Stock is
registered pursuant to Section 12(g) of the Exchange Act, and the Company has
taken no action designed to terminate the registration of the Common Stock under
the Exchange Act nor has the Company received any notification that the
Commission is contemplating terminating such registration. Except as specified
in the SEC Reports, the Company has not, in the two years preceding the date
hereof, received written notice from any Trading Market on which the Common
Stock has been listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements of such Trading Market.
The Company is, and has no reason to believe that it will not in the foreseeable
future continue to be in compliance in all material respects with the listing
and maintenance requirements for continued trading of the Common Stock on the
Principal Trading Market.

(bb) Investment Company. Neither the Company nor any of its Subsidiaries is
required to be registered as, and is not an Affiliate of, and immediately
following the Closing will not be required to register as, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.

(cc) Questionable Payments. Neither the Company nor any of its Subsidiaries,
nor, to the Company’s Knowledge, any directors, officers, employees, agents or
other Persons 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: (a) used any
corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to foreign or domestic political activity; (b) made
any direct or indirect unlawful payments to any foreign or domestic governmental
officials or employees from corporate funds; (c) violated in any material
respect any provision of the Foreign Corrupt Practices Act of 1977, as amended
or (d) made any other unlawful bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government
official or employee.

(dd) Application of Takeover Protections. The Company and its board of directors
have taken all necessary action, if any, in order to render inapplicable any
control share acquisition, business combination, poison pill (including any
distribution under a rights agreement) or other similar anti-takeover provision
under the Company’s charter documents or the laws of its state of incorporation
that is or could

 

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reasonably be expected to become applicable to any of the Purchasers as a result
of the Purchasers and the Company fulfilling their obligations or exercising
their rights under the Transaction Documents, including without limitation the
Company’s issuance of the Shares and the Purchasers’ ownership of the Shares.

(ee) Disclosure. The Company confirms that it and its officers and directors
have not provided, and it has not authorized the Placement Agent to provide, any
Purchaser with any information that constitutes or could reasonably be expected
to constitute material, non-public information except insofar as the existence,
provisions and terms of the Transaction Documents and the proposed transactions
hereunder may constitute such information, all of which will be disclosed by the
Company in the Press Release as contemplated by Section 4.6 hereof. The Company
understands and confirms that the Purchasers will rely on the foregoing
representations in effecting transactions in securities of the Company. All
disclosure provided to the Purchasers regarding the Company, its business and
the transactions contemplated hereby, furnished by the Company or authorized by
the Company and furnished by the Placement Agent on behalf of the Company
(including the Company’s representations and warranties set forth in this
Agreement) are true and correct in all material respects and do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading. No event or circumstance has
occurred or information exists with respect to the Company nor any of its
Subsidiaries or its or their business, properties, 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, except for the announcement of this Agreement and
related transactions.

(ff) 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 its
Exchange Act filings and is not so disclosed or that otherwise would be
reasonably likely to have a Material Adverse Effect.

(gg) Consultation with Auditors. The Company has consulted its independent
auditors concerning the accounting treatment of the transactions contemplated by
the Transaction Documents, and in connection therewith has furnished such
auditors complete copies of the Transaction Documents. The Company intends to
account for the gross proceeds raised from the financing which is the subject of
this Agreement as equity in its financial statements.

(hh) No Additional Agreements. The Company does not have any agreement or
understanding with any Purchaser with respect to the transactions contemplated
by the Transaction Documents other than as specified in the Transaction
Documents.

(ii) Use of Form S-3. The Company meets the registration and transaction
requirements for use of Form S-3 for the registration of the Shares.

3.2 Representations and Warranties of the Purchasers. Each Purchaser hereby, for
itself and for no other Purchaser, represents and warrants to the Company and
the Placement Agent as follows:

(a) Organization; Authority. Such Purchaser is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by the applicable
Transaction Documents and otherwise to carry out its obligations hereunder and
thereunder. The execution, delivery and performance by such Purchaser of the
transactions contemplated by this Agreement have been duly authorized by all
necessary corporate or, if such Purchaser is not a corporation, such
partnership, limited liability company or other applicable like action, on the
part of such Purchaser. Each of this Agreement and the Registration Rights
Agreement has been duly executed by such

 

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Purchaser, and when delivered by such Purchaser in accordance with terms hereof,
will constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.

(b) Investment Intent. Such Purchaser understands that the Shares are
“restricted securities” and have not been registered under the Securities Act or
any applicable state securities law and is acquiring the Shares as principal for
its own account and not with a view towards, or for resale in connection with,
the public sale or distribution thereof, without prejudice, however, to such
Purchaser’s right, subject to the provisions of this Agreement and the
Registration Rights Agreement, at all times to sell or otherwise dispose of all
or any part of such Shares pursuant to an effective registration statement under
the Securities Act or under an exemption from such registration and in
compliance with applicable federal and state securities laws. Such Purchaser is
acquiring the Shares hereunder in the ordinary course of its business. Such
Purchaser does not presently have any agreement, plan or understanding, directly
or indirectly, with any Person to distribute or effect any distribution of any
of the Shares (or any securities which are derivatives thereof) to or through
any person or entity; provided, however, that by making the representations
herein, such Purchaser does not agree to hold any of the Shares for any minimum
period of time.

(c) Purchaser Status. At the time such Purchaser was offered the Shares, it was,
and at the date hereof it is, an “accredited investor” as defined in Rule 501(a)
under the Securities Act. Such Purchaser is not a registered broker-dealer under
Section 15 of the Exchange Act.

(d) General Solicitation. Such Purchaser is not purchasing the Shares as a
result of any advertisement, article, notice or other communication regarding
the Shares published in any newspaper, magazine or similar media or broadcast
over television or radio or presented at any seminar or any other general
solicitation or general advertisement.

(e) Experience of Such Purchaser. Such Purchaser, either alone or together with
its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Shares, and has so evaluated the
merits and risks of such investment. Such Purchaser is able to bear the economic
risk of an investment in the Shares and, at the present time, is able to afford
a complete loss of such investment.

(f) Access to Information. Such Purchaser acknowledges that it reviewed the
Disclosure Materials and has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Shares and the merits and risks of investing in the Shares;
(ii) access to information (other than material non-public information) about
the Company and the Subsidiaries and their respective financial condition,
results of operations, business, properties, management and prospects sufficient
to enable it to evaluate its investment; and (iii) the opportunity to obtain
such additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment. Neither such inquiries nor any other
investigation conducted by or on behalf of such Purchaser or its representatives
or counsel shall modify, amend or affect such Purchaser’s right to rely on the
truth, accuracy and completeness of the Disclosure Materials and the Company’s
representations and warranties contained in the Transaction Documents.

(g) Residency. Such Purchaser has, if an entity, its principal place of business
or, if an individual, its primary residence in the jurisdiction set forth
immediately below such Purchaser’s name on the signature pages hereto.

 

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(h) Certain Trading Activities. Other than with respect to the transactions
contemplated herein, since the earlier to occur of (1) the time that such
Purchaser was first contacted by the Company, the Placement Agent or any other
Person regarding this investment in the Company and (2) the tenth (10th) day
prior to the date of this Agreement, neither the Purchaser nor any Affiliate of
such Purchaser which (x) had knowledge of the transactions contemplated hereby,
(y) has or shares discretion relating to such Purchaser’s investments or trading
or information concerning such Purchaser’s investments, including in respect of
the Shares, or (z) is subject to such Purchaser’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 such Purchaser 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). Such Purchaser
shall not, and shall cause its Trading Affiliates not to, engage, directly or
indirectly, in any transactions in the securities of the Company (including,
without limitation, any Short Sales involving the Company’s securities) during
the period from the date hereof until such time as (i) the transactions
contemplated by this Agreement are first publicly announced as described in
Section 4.6 or (ii) this Agreement is terminated in full pursuant to
Section 6.18. Each Purchaser understands and acknowledges, severally and not
jointly with any other Purchaser, that the Commission currently takes the
position that covering a short position established prior to effectiveness of a
resale registration statement with shares included in such registration
statement would be a violation of Section 5 of the Securities Act, as set forth
in Item 65, Section 5 under Section A, of the Manual of Publicly Available
Telephone Interpretations, dated July 1997, compiled by the Office of Chief
Counsel, Division of Corporation Finance. Notwithstanding the foregoing, no
Purchaser makes any representation, warranty or covenant hereby that it will not
engage in Short Sales in the securities of the Company after the time that the
transactions contemplated by this Agreement are first publicly announced as
described in Section 4.6.

(i) Brokers and Finders. No Person will have, as a result of the transactions
contemplated by this Agreement, any valid right, interest or claim against or
upon the Company, or any Purchaser for any commission, fee or other compensation
pursuant to any agreement, arrangement or understanding entered into by or on
behalf of the Purchaser.

(j) Limited Ownership. The purchase by such Purchaser of the Shares issuable to
it at the Closing will not result in such Purchaser (individually or together
with other Person with whom such Purchaser has identified, or will have
identified, itself as part of a “group” in a public filing made with the
Commission involving the Company’s securities) acquiring, or obtaining the right
to acquire, in excess of 19.99% of the outstanding shares of Common Stock or the
voting power of the Company on a post transaction basis that assumes that the
Closing shall have occurred. Such Purchaser does not presently intend to, alone
or together with others, make a public filing with the Commission to disclose
that it has (or that it together with such other Persons have) acquired, or
obtained the right to acquire, as a result of the Closing (when added to any
other securities of the Company that it or they then own or have the right to
acquire), in excess of 19.99% of the outstanding shares of Common Stock or the
voting power of the Company on a post transaction basis that assumes that the
Closing shall have occurred.

(k) Independent Investment Decision. Such Purchaser has independently evaluated
the merits of its decision to purchase Shares pursuant to the Transaction
Documents, and such Purchaser confirms that it has not relied on the advice of
any other Purchaser’s business and/or legal counsel in making such decision.
Such Purchaser understands that nothing in this Agreement or any other materials
presented by or on behalf of the Company to the Purchaser in connection with the
purchase of the Shares constitutes legal, tax or investment advice. Such
Purchaser 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 the Shares. Such Purchaser understands that the Placement Agent has
acted solely as the agent of the Company in this placement of the Shares and
such Purchaser has not relied on the business or legal advice of the Placement
Agent or any of its agents, counsel or Affiliates in making its investment
decision hereunder, and confirms

 

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that none of such Persons has made any representations or warranties to such
Purchaser in connection with the transactions contemplated by the Transaction
Documents.

(l) Reliance on Exemptions. Such Purchaser understands that the Shares 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 such Purchaser’s
compliance with, the representations, warranties, agreements, acknowledgements
and understandings of such Purchaser set forth herein in order to determine the
availability of such exemptions and the eligibility of such Purchaser to acquire
the Shares.

(m) No Governmental Review. Such Purchaser 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 Shares or the
fairness or suitability of the investment in the Shares nor have such
authorities passed upon or endorsed the merits of the offering of the Shares.

The Company acknowledges and agrees that no Purchaser has made or makes any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.

ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES

4.1 (a) Compliance with Laws. Notwithstanding any other provision of this
Article IV, each Purchaser covenants that the securities may only be disposed of
pursuant to an effective registration statement under, and in compliance with
the requirements of, the Securities Act, or pursuant to an available exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act, and in compliance with any applicable state and federal
securities laws. In connection with any transfer of the Shares other than
(i) pursuant to an effective registration statement, (ii) to the Company,
(iii) to an Affiliate of a Purchaser, (iv) pursuant to Rule 144(k) or (v) in
connection with a bona fide pledge as contemplated in Section 4.1(b), except as
otherwise provided herein, the Company may require the transferor thereof to
provide to the Company a representation letter in customary form.

(b) Legends. Certificates evidencing the Shares shall bear any legend as
required by the “blue sky” laws of any state and a restrictive legend in
substantially the following form, until such time as they are not required under
Section 4.1(c):

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY.

The Company acknowledges and agrees that a Purchaser may from time to time
pledge, and/or grant a security interest in some or all of the legended Shares,
in connection with applicable securities laws, pursuant to a bona fide margin
agreement in compliance with a bona fide margin loan. Such a pledge

 

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would not be subject to approval or consent of the Company and no legal opinion
of legal counsel to the pledgee, secured party or pledgor shall be required in
connection with the pledge, but such legal opinion shall be required in
connection with a subsequent transfer or foreclosure following default by the
Purchaser transferee of the pledge. No notice shall be required of such pledge
but Purchaser’s transferee shall promptly notify the Company of any such
subsequent transfer or foreclosure. Each Purchaser acknowledges that the Company
shall not be responsible for any pledges relating to, or the grant of any
security interest in, any of the Shares or for any agreement, understanding or
arrangement between any Purchaser and its pledgee or secured party. The
Company’s indemnification obligations pursuant to this Agreement shall not
extend to any Proceeding or Losses arising out of or related to this
Section 4.1(b). At the appropriate Purchaser’s expense, the Company will execute
and deliver such reasonable documentation as a pledgee or secured party of
Shares may reasonably request in connection with a pledge or transfer of the
Shares including the preparation and filing of any required prospectus
supplement under Rule 423(b)(3) of the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of Selling
Shareholders thereunder. Each Purchaser acknowledges and agrees that, except as
otherwise provided in Section 4.1(c), any Shares subject to a pledge or security
interest as contemplated by this Section 4.1(b) shall continue to bear the
legend set forth in this Section 4.1(b) and be subject to the restrictions on
transfer set forth in Section 4.1(a).

(c) Removal of Legends. The legend set forth in Section 4.1(b) above shall be
removed and the Company shall issue a certificate without such legend to the
holder of the Shares upon which it is stamped or issue to such holder by
electronic delivery at the applicable balance account at DTC, if (i) such Shares
are registered for resale under the Securities Act, (ii) such Shares are sold or
transferred pursuant to Rule 144 (assuming the transferor is not an Affiliate of
the Company), or (iii) such Shares are eligible for sale under Rule 144(k). The
Company shall cause its counsel to issue the legal opinion referred to in the
Irrevocable Transfer Agent Instructions to the Company’s transfer agent on the
Effective Date. Any fees (with respect to the Transfer Agent, counsel to the
Company or otherwise) associated with the issuance of such opinion or the
removal of such legend shall be borne by the Company. Following the Effective
Date or at such earlier time as a legend is no longer required for certain
Shares, the Company will no later than three (3) Trading Days following the
delivery by a Purchaser to the Company or the Transfer Agent (with notice to the
Company) of a legended certificate representing such Shares (endorsed or with
stock powers attached, signatures guaranteed, and otherwise in form necessary to
affect the reissuance and/or transfer and an opinion of counsel to the extent
required by Section 4.1(a)), deliver or cause to be delivered to such Purchaser
a certificate representing such Shares that is free from all restrictive and
other legends. The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on transfer set
forth in this Section.

(d) Irrevocable Transfer Agent Instructions. The Company shall issue irrevocable
instructions to its transfer agent, and any subsequent transfer agent, to issue
certificates or credit shares to the applicable balance accounts at The
Depository Trust Company (“DTC”), registered in the name of each Purchaser or
its respective nominee(s), for the Shares in such amounts as specified from time
to time by each Purchaser to the Company in the form of Exhibit D attached
hereto (the “Irrevocable Transfer Agent Instructions”). The Company warrants
that no instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section 4(d) will be given by the Company to its transfer
agent in connection with this Agreement, and that the Shares shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement and the other Transaction Documents. The Company
acknowledges that a breach by it of its obligations under this Section 4(d) will
cause irreparable harm to a Purchaser. Accordingly, the Company acknowledges
that the remedy at law for a breach of its obligations under this Section 4(d)
will be inadequate and agrees, in the event of a breach or threatened breach by
the Company of the provisions of this Section 4(d), that a Purchaser shall be
entitled, in addition to all other available remedies, to an order and/or
injunction restraining any breach and requiring immediate

 

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issuance and transfer, without the necessity of showing economic loss and
without any bond or other security being required.

(e) Acknowledgement. Each Purchaser hereunder acknowledges its primary
responsibilities under the Securities Act and accordingly will not sell the
Shares or any interest therein without complying with the requirements of the
Securities Act. While the above-referenced registration statement remains
effective, each Purchaser hereunder may sell the shares in accordance with the
plan of distribution contained in the registration statement and if it does so
it will comply therewith and with the related prospectus delivery requirements
unless an exemption therefrom is available. To provide further assurance in
connection with de-legending, each Purchaser hereunder commits that it will
continue to hold the shares in its own name, and not in the name of a nominee,
until such time as the shares are duly and properly sold in compliance with all
relevant securities laws.

(f) Buy-In. If the Company shall fail for any reason or for no reason to issue
to the holder of the Shares within three (3) Trading Days after the occurrence
of any of (c)(i) through (c)(iii) above, a certificate without such legend to
the holder or to issue such Shares to such holder by electronic delivery at the
applicable balance account at DTC, and if on or after such Trading Date the
Purchaser purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the Purchaser of shares of
Common Stock that the Purchaser anticipated receiving from the Company without
any restrictive legend (a “Buy-In”), then the Company shall, within three
(3) Trading Days after the Purchaser’s request and in the Purchaser’s sole
discretion, either (i) pay cash to the Purchaser in an amount equal to the
Purchaser’s total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased (the “Buy-In Price”), at which point the
Company’s obligation to deliver such certificate shall terminate and such shares
shall be cancelled, or (ii) promptly honor its obligation to deliver to the
Purchaser a certificate or certificates representing such number of shares of
Common Stock that would have been issued if the Company timely complied with its
obligations hereunder and pay cash to the Purchaser in an amount equal to the
excess (if any) of the Buy-In Price over the product of (a) such number of
shares of Common Stock that the Company was required to deliver to the Purchaser
on the Delivery Date, times (b) the closing bid price of the Common Stock on the
date of exercise.

4.2 Reservation of Common Stock. The Company shall maintain a reserve from its
duly authorized shares of Common Stock for issuance pursuant to the Transaction
Documents in such amount as may be required to fulfill its obligations in full
under the Transaction Documents. In the event that at any time the then
authorized shares of Common Stock are insufficient for the Company to satisfy
its obligations in full under the Transaction Documents, the Company shall
promptly take such actions as may be required to increase the number of
authorized shares.

4.3 Furnishing of Information. As long as any Purchaser owns the Shares, the
Company covenants to use commercially reasonable efforts to timely file (or
obtain extensions in respect thereof and file within the applicable grace
period) all reports required to be filed by the Company after the date hereof
pursuant to the Exchange Act. As long as any Purchaser owns Shares, if the
Company is not required to file reports pursuant to such laws, it will prepare
and furnish to the Purchasers and make publicly available in accordance with
Rule 144(c) such information as is required for the Purchasers to sell the
Shares under Rule 144. The Company further covenants that it will take such
further action as any holder of Shares may reasonably request, all to the extent
required from time to time to enable such Person to sell the Shares without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.

4.4 No Integration. The Company shall not, and shall use its commercially
reasonable efforts to ensure that no Affiliate of the Company shall, sell, offer
for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in Section 2 of the Securities Act) that will be integrated
with the offer or sale of the Shares in a manner that would require the
registration under the Securities Act of the

 

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sale of the Shares to the Purchasers, or that will be integrated with the offer
or sale of the Shares for purposes of the rules and regulations of any Trading
Market.

4.5 Subsequent Registrations. Other than pursuant to the Registration Statement,
prior to the date occurring sixty (60) days after the Effective Date, the
Company shall not file any registration statement (other than on Form S-8 or, in
connection with an acquisition, on Form S-4) with the Commission with respect to
any securities of the Company.

4.6 Securities Laws Disclosure; Publicity. By 9:00 a.m. (New York City time) on
the Trading Day immediately following the execution of this Agreement, the
Company shall issue a press release (the “Press Release”) reasonably acceptable
to the Placement Agent disclosing all material terms of the transactions
contemplated hereby. On or before 9:00 a.m. (New York City time) on the Trading
Day following the Closing Date, the Company will file a Current Report on Form
8-K with the Commission describing the terms of the Transaction Documents (and
including as exhibits to such Current Report on Form 8-K the material
Transaction Documents (including, without limitation, this Agreement and the
Registration Rights Agreement)). Notwithstanding the foregoing, the Company
shall not publicly disclose the name of any Purchaser or an Affiliate of any
Purchaser, or include the name of any Purchaser or an Affiliate of any Purchaser
in any press release or filing with the Commission (other than the Registration
Statement) or any regulatory agency or Trading Market, without the prior written
consent of such Purchaser, except to the extent such disclosure is required by
law, request of the Staff of the Commission or Trading Market regulations. The
Company shall not, and shall cause each of its Subsidiaries and each of their
respective officers, directors, employees and agents, not to, provide any
Purchaser with any material, non-public information regarding the Company or any
of its Subsidiaries from and after the filing of the Press Release without the
express written consent of such Purchaser. In the event of a breach of the
foregoing covenant by the Company, and provided that the Company shall have
failed (following proper written request therefore) to make an appropriate
public disclosure promptly following such written request consistent with the
requirements of Regulation FD, any Subsidiary, or each of their respective
officers, directors, employees and agents, in addition to any other remedy
provided herein or in the Transaction Documents, a Purchaser shall have the
right to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material non-public information without the
prior approval by the Company, its Subsidiaries, or any of its or their
respective officers, directors, employees or agents. No Purchaser shall have any
liability to the Company, its Subsidiaries, or any of their respective officers,
directors, employees or agents for any such disclosure.

4.7 Indemnification.

(a) Indemnification of Purchasers. In addition to the indemnity provided in the
Registration Rights Agreement, the Company will indemnify and hold the
Purchasers and their directors, officers, shareholders, partners, members,
managers, employees and agents (each, a “Purchaser Party”) harmless from any and
all losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys’ fees and costs of investigation (collectively, “Losses”)
that any such Purchaser Party may suffer or incur as a result of or relating to
any misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company in any Transaction Document. In
addition to the indemnity contained herein, the Company will reimburse each
Purchaser Party for its reasonable legal and other expenses (including the cost
of any investigation, preparation and travel in connection therewith) incurred
in connection therewith, as such expenses are incurred. If and to the extent
that such indemnification is unenforceable for any reason, the Company shall
make the maximum contribution to the payment and satisfaction of such losses
permissible under applicable law.

 

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(b) Conduct of Indemnification Proceedings. Promptly after receipt by any Person
(the “Indemnified Person”) of notice of any demand, claim or circumstances which
would or might give rise to a claim or the commencement of any action,
proceeding or investigation in respect of which indemnity may be sought pursuant
to Section 4.7(a), such Indemnified Person shall promptly notify the Company in
writing and the Company shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified Person, and
shall assume the payment of all fees and expenses; provided, however, that the
failure of any Indemnified Person so to notify the Company shall not relieve the
Company of its obligations hereunder except to the extent that the Company is
actually and materially prejudiced by such failure to notify. In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless: (i) the Company and the Indemnified Person shall
have mutually agreed to the retention of such counsel; or (ii) in the reasonable
judgment of counsel to such Indemnified Person representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. The Company shall not be liable for any settlement of
any proceeding effected without its written consent, which consent shall not be
unreasonably withheld, delayed or conditioned. Without the prior written consent
of the Indemnified Person, which consent shall not be unreasonably withheld,
delayed or conditioned, the Company shall not effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Person is
or could have been a party and indemnity could have been sought hereunder by
such Indemnified Party, unless such settlement includes an unconditional release
of such Indemnified Person from all liability arising out of such proceeding.

4.8 Listing of Securities. Promptly following the date hereof, the Company shall
take all necessary action to cause the Shares to be listed upon the Principal
Trading Market, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing. Further, if the
Company applies to have its Common Stock or other securities listed on any other
Trading Market it shall include in such application the Shares and will take
such other action as is necessary to cause the Shares to be listed on such other
Trading Market as promptly as practicable.

4.9 Use of Proceeds. The Company intends to use the net proceeds from the sale
of the Shares hereunder for working capital and general corporate purposes and
not to redeem any Common Stock or Common Stock Equivalents or to settle any
outstanding Action.

ARTICLE V.

CONDITIONS PRECEDENT TO CLOSING

5.1 Conditions Precedent to the Obligations of the Purchasers to Purchase
Shares. The obligation of each Purchaser to acquire Shares at the Closing is
subject to the fulfillment to such Purchase’s satisfaction, on or prior to the
Closing Date, of each of the following conditions, any of which may be waived by
such Purchaser (as to itself only):

(a) Representations and Warranties. The representations and warranties of the
Company contained herein shall be true and correct in all material respects
(except to the extent that any such representation or warranty is already
qualified by materiality, in which case it shall be true and correct in all
respects) as of the date when made and as of the Closing Date, as though made on
and as of such date.

(b) Performance. The Company and each other Purchaser shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by it at or prior to the Closing;

 

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(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents;

(d) Consents. The Company shall have obtained in a timely fashion any and all
consents, permits, approvals, registrations and waivers necessary or appropriate
for consummation of the purchase and sale of the Shares, all of which shall be
and remain so long as necessary in full force and effect;

(e) Adverse Changes. Since the date of execution of this Agreement, other than
things affecting the beverage industry generally and other than as a result of
disclosure of the transactions contemplated by the Transaction Documents, no
event or series of events shall have occurred that reasonably could have or
result in a Material Adverse Effect;

(f) No Suspensions of Trading in Common Stock; Listing. Trading in the Common
Stock shall not have been suspended by the Commission or any Trading Market
(except for any suspensions of trading of not more than one Trading Day solely
to permit dissemination of material information regarding the Company) at any
time since the date of execution of this Agreement, and the Common Stock shall
have been at all times since such date listed for trading on a Trading Market;

(g) Company Deliverables. The Company shall have delivered the Company
Deliverables in accordance with Section 2.2(a);

(h) Compliance Certificate. The Company shall have delivered to each Purchaser a
certificate, dated as of the Closing Date and signed by its Chief Executive
Officer or its Chief Financial Officer, dated as of the Closing Date, certifying
to the fulfillment of the conditions specified in Sections 5.1(a), (b), (c),
(d) and (f);

(i) Nasdaq Listing. If applicable, the Nasdaq Capital Market shall have
(i) waived application of the 15 day prior notice contained in NASD Marketplace
Rule 4310(c)(17)(D) or such timeframe shall have expired without objection,
(ii) confirmed to the Company that the issuance and sale of the Shares as
contemplated hereby will not require approval by the shareholders of the Company
pursuant to the requirements of Nasdaq Marketplace Rule 4350(i); and

(j) Termination. This Agreement shall not have been terminated as to such
Purchaser in accordance with Section 6.18 herein.

(k) Minimum Condition. The Company shall obtain commitments for an aggregate of
at least $10,000,000 in Shares pursuant to this Agreement.

5.2 Conditions Precedent to the Obligations of the Company to Sell Shares. The
Company’s obligation to sell and issue the Shares at the Closing is subject to
the fulfillment to the satisfaction of the Company on or prior to the Closing
Date of the following conditions, any of which may be waived by the Company:

(a) Representations and Warranties. The representations and warranties made by
the Purchasers in Section 3.2 hereof shall be true and correct in all material
respects as of the date when made, and as of the Closing Date as though made on
and as of such date;

 

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(b) Performance. The Purchasers shall have performed, satisfied and complied in
all material respects with all covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by the
Purchasers at or prior to the Closing;

(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents;

(d) Purchasers Deliverables. Each Purchaser shall have delivered its Purchaser
Deliverables in accordance with Section 2.2(b); and

(e) Nasdaq Listing. If applicable, the Nasdaq Capital Market shall have
(i) waived application of the 15 day prior notice contained in NASD Marketplace
Rule 4310(c)(17)(D) or such timeframe shall have expired without objection,
(ii) confirmed to the Company that the issuance and sale of the Shares as
contemplated hereby will not require approval by the shareholders of the Company
pursuant to the requirements of Nasdaq Marketplace Rule 4350(i).

(f) Termination. This Agreement shall not have been terminated as to such
Purchaser in accordance with Section 6.18 herein.

ARTICLE VI.

MISCELLANEOUS

6.1 Fees and Expenses. At Closing, the Company shall reimburse the Placement
Agent for the reasonable fees and expenses in connection with the transactions
contemplated by this Agreement, which the Company agrees shall include the
reasonable fees and expenses of the Placement Agent Counsel (which fees shall
include, without limitation, the fees and expenses associated with the
negotiation, preparation and execution and delivery of this Agreement and the
other Transaction Documents and any amendments, modifications or waivers
thereto), subject to the consent of the Company for fees and expenses in excess
of $50,000. The Company and the Purchasers shall each pay the fees and expenses
of their respective advisers, counsel, accountants and other experts, if any and
all other expenses incurred by such party in connection with the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied
in connection with the sale and issuance of the Shares. Each party acknowledges
that Lowenstein Sandler PC has rendered legal advice to the Placement Agent, and
not to such party in connection with the transactions contemplated hereby, and
that such party has relied for such matters on the advice of its own respective
counsel.

6.2 Entire Agreement. The Transaction Documents, together with the Exhibits and
Schedules thereto, contain the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior agreements, understandings,
discussions and representations, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents, exhibits and
schedules. At or after the Closing, and without further consideration, the
Company and the Purchasers will execute and deliver to the other such further
documents as may be reasonably requested in order to give practical effect to
the intention of the parties under the Transaction Documents.

6.3 Notices. Any and all notices or other communications or deliveries required
or permitted to be provided hereunder shall be in writing and shall be deemed
given and effective on the earliest of (a) the date of transmission, if such
notice or communication is delivered via facsimile (provided the sender receives
a machine-generated confirmation of successful transmission) at the facsimile
number specified in this

 

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Section prior to 5:00 p.m. (New York City time) on a Trading Day, (b) the next
Trading Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number specified in this Section on a
day that is not a Trading Day or later than 5:00 p.m. (New York City time) on
any Trading Day, (c) the Trading Day following the date of mailing, if sent by
U.S. nationally recognized overnight courier service with next day delivery
specified, or (d) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be
as follows:

 

If to the Company:

  

Jones Soda Co.

  

234 Ninth Avenue North

  

Seattle, Washington 98109

  

Telephone No.: (206) 624-3357

  

Facsimile No.: (206) 624-6857

  

Attention: Hassan N. Natha

With a copy to:

  

Preston Gates & Ellis LLP

  

925 Fourth Avenue

  

Suite 2900

  

Seattle, Washington 98104

  

Telephone No.: (206) 370-7809

  

Facsimile No.: (206) 370-6105

  

Attention: Gary J. Kocher

If to a Purchaser:

  

To the address set forth under such Purchaser’s name on the signature page
hereof;

or such other address as may be designated in writing hereafter, in the same
manner, by such Person.

6.4 Amendments; Waivers; No Additional Consideration. No provision of this
Agreement may be waived or amended except in a written instrument signed, in the
case of an amendment, by the Company and each of the Purchasers or, in the case
of a waiver, by the party against whom enforcement of any such waiver is sought.
No waiver of any default with respect to any provision, condition or requirement
of this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of either party to
exercise any right hereunder in any manner impair the exercise of any such
right. No consideration shall be offered or paid to any Purchaser to amend or
consent to a waiver or modification of any provision of any Transaction Document
unless the same consideration is also offered to all Purchasers who then hold
Shares.

6.5 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. This Agreement
shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement or any of the Transaction
Documents.

6.6 Successors and Assigns. The provisions of this Agreement shall inure to the
benefit of and be binding upon the parties and their successors and permitted
assigns. This Agreement, or any rights or obligations hereunder, may not be
assigned by the Company without the prior written consent of the Purchasers. Any
Purchaser may assign its rights hereunder in whole or in part to any Person to
whom such Purchaser assigns or transfers any Shares in compliance with this
agreement and applicable law, provided

 

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such transferee shall agree in writing to be bound, with respect to the
transferred Shares, by the terms and conditions of this Agreement that apply to
the “Purchasers”.

6.7 No Third-Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except (i) each Purchaser Party is an intended third party beneficiary
of Section 4.7, and (ii) Placement Agent is an intended third party beneficiary
of Article III hereof, and each Purchaser Party or the Placement Agent, as the
case may be, may enforce the provisions of such Sections directly against the
parties with obligations thereunder .

6.8 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all Proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, employees or agents) shall be commenced exclusively in the New York
Courts. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of the any of the
Transaction Documents), 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 New York Court, or that such Proceeding has been
commenced in an improper or inconvenient forum. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such 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 legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby.

6.9 Survival. Subject to applicable statute of limitations, the representations,
warranties, agreements and covenants contained herein shall survive the Closing
and the delivery of the Shares.

6.10 Execution. This Agreement may be executed in two or more counterparts, all
of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.

6.11 Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

6.12 Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever any Purchaser exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then such Purchaser may rescind

 

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or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights

6.13 Replacement of Shares. If any certificate or instrument evidencing any
Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause
to be issued in exchange and substitution for and upon cancellation thereof, or
in lieu of and substitution therefor, a new certificate or instrument, but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction and the execution by the holder thereof of a customary lost
certificate affidavit of that fact and an agreement to indemnify and hold
harmless the Company for any losses in connection therewith. The applicants for
a new certificate or instrument under such circumstances shall also pay any
reasonable third-party costs associated with the issuance of such replacement
Shares. If a replacement certificate or instrument evidencing any Shares is
requested due to a mutilation thereof, the Company may require delivery of such
mutilated certificate or instrument as a condition precedent to any issuance of
a replacement.

6.14 Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the Purchasers
and the Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation (other than in connection with any
action for a temporary restraining order) the defense that a remedy at law would
be adequate.

6.15 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

6.16 Adjustments in Share Numbers and Prices. In the event of any stock split,
subdivision, dividend or distribution payable in shares of Common Stock (or
other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof, each
reference in any Transaction Document to a number of shares or a price per share
shall be amended to appropriately account for such event.

6.17 Independent Nature of Purchasers’ Obligations and Rights. The obligations
of each Purchaser under any Transaction Document are several and not joint with
the obligations of any other Purchaser, and no Purchaser shall be responsible in
any way for the performance of the obligations of any other Purchaser under any
Transaction Document. The decision of each Purchaser to purchase Shares pursuant
to the Transaction Documents has been made by such Purchaser independently of
any other Purchaser and independently of any information, materials, statements
or opinions as to the business, affairs, operations, assets, properties,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company or any Subsidiary which may have been made or given by
any other Purchaser or by any agent or employee of any other Purchaser, and no
Purchaser and any of its agents or employees shall have any liability to any
other Purchaser (or any other Person) relating to or arising from any such
information, materials, statement or opinions. Nothing contained herein or in
any Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any

 

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way acting in concert or as a group with respect to such obligations or the
transactions contemplated by the Transaction Documents. Each Purchaser
acknowledges that no other Purchaser has acted as agent for such Purchaser in
connection with making its investment hereunder and that no Purchaser will be
acting as agent of such Purchaser in connection with monitoring its investment
in the Shares or enforcing its rights under the Transaction Documents. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. The Company acknowledges that each of the Purchasers has been provided
with the same Transaction Documents for the purpose of closing a transaction
with multiple Purchasers and not because it was required or requested to do so
by any Purchaser. The Company’s obligations to each Purchaser under this
Agreement are identical to its obligations to each other Purchaser other than
such differences resulting solely from the number of Shares purchased by such
Purchaser, but regardless of whether such obligations are memorialized herein or
in another agreement between the Company and a Purchaser.

6.18 Termination. This Agreement may be terminated and the sale and purchase of
the Shares abandoned at any time prior to the Closing by either the Company or
any Purchaser (with respect to itself only) upon written notice to the other, if
the Closing has not been consummated on or prior to 5:00 p.m. (New York City
time) on the Outside Date; provided, however, that the right to terminate this
Agreement under this Section 6.18 shall not be available to any Person whose
failure to comply with its obligations under this Agreement has been the cause
of or resulted in the failure of the Closing to occur on or before such time.
Nothing in this Section 6.18 shall be deemed to release any party from any
liability for any breach by such party of the terms and provisions of this
Agreement or the other Transaction Documents or to impair the right of any party
to compel specific performance by any other party of its obligations under this
Agreement or the other Transaction Documents. In the event of a termination
pursuant to this Section, the Company shall promptly notify all non-terminating
Purchasers. Upon a termination in accordance with this Section, the Company and
the terminating Purchaser(s) shall not have any further obligation or liability
(including arising from such termination) to the other and no Purchaser will
have any liability to any other Purchaser under the Transaction Documents as a
result therefrom.

 

26

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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.

 

JONES SODA CO.

By:

      

Name:

 

Peter van Stolk

 

Title:

 

Chairman, Chief Executive Officer and

President

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

[SIGNATURE PAGES FOR PURCHASERS FOLLOW]

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NAME OF PURCHASER:     

By:     

Name:

 

Title:

 

Purchase Price (Subscription Amount):

 

$

    

Number of Shares to be acquired:

    

Tax ID No.:

    

Address for Notice:         

Telephone No.:

    

Facsimile No.:     

Attention:

    

 

Delivery Instructions:

(if different than above)

c/o     

Street:     

City/State/Zip:     

Attention:     

Telephone No.:     

--------------------------------------------------------------------------------

EXHIBITS:

 

A:    Form of Registration Rights Agreement B-1:    Accredited Investor
Questionnaire B-2:    Stock Certificate Questionnaire C:    Form of Opinion of
Company Counsel D:    Irrevocable Transfer Agent Instructions E:    Wire
Instructions

SCHEDULES:

3.1(w) Certain Fees

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EXHIBIT A

Form of Registration Rights Agreement

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Instruction Sheet for Exhibits B thru E

(to be read in conjunction with the entire Securities Purchase Agreement and
Registration Rights Agreement)

A. Complete the following items in the Securities Purchase Agreement and/or
Registration Rights Agreement:

 

  1. Provide the information regarding the Purchaser requested on the signature
page. The Securities Purchase Agreement must be executed by an individual
authorized to bind the Purchaser.

 

  2. Exhibit B-1 – Accredited Investor Questionnaire:

Provide the information requested by Exhibit B-1 (the Certificate for
Corporations, Partnerships, Trusts, Foundations, Joint Purchasers (other than
married couples) and Other Entities)

 

  3. Exhibit B-2 – Stock Certificate Questionnaire:

Provide the information requested by the Stock Certificate Questionnaire.

 

  4. Annex B to the Registration Rights Agreement-Selling Securityholder Notice
and Questionnaire

Provide the information requested by the Selling Securityholder Notice and
Questionnaire

 

  5. Return the signed Securities Purchase Agreement and Registration Rights
Agreement to:

David W. Stadinski

Piper Jaffray & Co.

The Chrysler Building

405 Lexington Avenue, 58th Floor

New York, New York 10174

Tel: (212) 284-9572

Fax: (212) 284-9579

Email: david.w.stadinski@pjc.com

 

B. Instructions regarding the transfer of funds for the purchase of Shares is
set forth on Exhibit E to the Securities Purchase Agreement.

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EXHIBIT B-1

Accredited Investor Questionnaire

Corporations, Partnerships, Trusts, Foundations,

Joint Purchasers (other than married couples) and Other Entities

If the Purchaser is a corporation, partnership, trust, pension plan, foundation,
joint purchaser (other than a married couple) or other entity, an authorized
officer, partner, or trustee must complete, date and sign this Certificate.

CERTIFICATE

The undersigned certifies that the representations and responses below are true
and accurate:

(a) The Purchaser has been duly formed and is validly existing and has full
power and authority to invest in the Company. The person signing on behalf of
the undersigned has the authority to execute and deliver the Securities Purchase
Agreement on behalf of the Purchaser and to take other actions with respect
thereto.

(b) Indicate the form of entity of the undersigned:

 

  ¨ Limited Partnership

 

  ¨ General Partnership

 

  ¨ Corporation

 

  ¨ Revocable Trust (identify each grantor and indicate under what circumstances
the trust is revocable by the grantor:

(Continue on a separate piece of paper, if necessary.)

 

  ¨ Other Type of Trust (indicate type of trust and, for trusts other than
pension trusts, name the grantors and beneficiaries:

(Continue on a separate piece of paper, if necessary.)

 

  ¨ Other form of organization (indicate form of organization (            )).

(c) Indicate the approximate date the undersigned entity was formed:

(d) In order for the Company to offer and sell the Shares in conformance with
state and federal securities laws, the following information must be obtained
regarding your investor status. Please initial each category applicable to you
as a Purchaser of Shares of the Company.

 

  ¨ (1) A bank as defined in Section 3(a)(2) of the Securities Act, or any
savings and loan association or other institution as defined in
Section 3(a)(5)(A) of the Securities Act whether acting in its individual or
fiduciary capacity;

 

  ¨ (2) A broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934;

 

  ¨ (3) An insurance company as defined in Section 2(13) of the Securities Act;

--------------------------------------------------------------------------------

  ¨ (4) An 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;

 

  ¨ (5) A 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;

 

  ¨ (6) A 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;

 

  ¨ (7) An 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;

 

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

 

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

 

  ¨ (10) A trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the Shares, whose purchase is directed by a
sophisticated person who has such knowledge and experience in financial and
business matters that such person is capable of evaluating the merits and risks
of investing in the Company;

 

  ¨ (11) An entity in which all of the equity owners qualify under any of the
above subparagraphs. If the undersigned belongs to this investor category only,
list the equity owners of the undersigned, and the investor category which each
such equity owner satisfies:

(Continue on a separate piece of paper, if necessary.)

Dated:                     , 2006

 

   

Name of Purchaser

    Signature and title of authorized officer, partner or trustee

 

--------------------------------------------------------------------------------

EXHIBIT B-2

Stock Certificate Questionnaire

Pursuant to Section 2.2(b) of the Agreement, please provide us with the
following information:

 

1.    The exact name that the Shares are to be registered in (this is the name
that will appear on the stock certificate(s)). You may use a nominee name if
appropriate:       2.    The relationship between the Purchaser of the Shares
and the Registered Holder listed in response to Item 1 above:       3.    The
mailing address, telephone and telecopy number of the Registered Holder listed
in response to Item 1 above:                                           4.   

The Tax Identification Number of the Registered Holder listed in response to

Item 1 above:

     

--------------------------------------------------------------------------------

EXHIBIT C

Form of Opinion of Company Counsel

 

1. The Company is a corporation duly incorporated and validly existing under,
and by virtue of, the laws of the State of Washington. The Company has requisite
corporate power to own and operate its properties and assets, and to carry on
its business as presently conducted. The Company is qualified to do business as
a foreign corporation in the states of             ,              and
            .

 

2. The Company has all requisite legal and corporate power to execute and
deliver the Agreement, to sell and issue the Shares under the Agreement and to
carry out and perform its obligations under the terms of the Agreement.

 

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

 

4. All corporate action on the part of the Company necessary for the
authorization, execution and delivery of the Agreement and the Registration
Rights Agreement by the Company, the authorization, sale, issuance and delivery
of the Shares and the performance by the Company of its obligations under such
agreements has been taken. Such agreements have been duly and validly executed
and delivered by the Company and each of them constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
their respective terms.

 

5. The execution and delivery by the Company of the Agreement, the performance
by the Company of its obligations under the Agreement and the Registration
Rights Agreement, and the issuance of the Shares does not violate any provision
of the Articles of Incorporation or Bylaws, or any provision of any applicable
federal or state law, rule or regulation known to us to be customarily
applicable to transactions of this nature. The execution and delivery by the
Company of such agreements, the performance by the Company of its obligations
under such agreements, and the issuance of the Shares does not violate, or
constitute a default under, any contract or agreement to which the Company is a
party or by which the Company is bound filed as an exhibit to the Company’s Form
10-K for the fiscal year ended December 31, 2005 or any filing thereafter with
the Securities and Exchange Commission pursuant to Item 601(b)(4) or
Item 601(b)(10) of Regulation S-K.

 

6. Except as identified in the Agreement, to our knowledge, there are no
actions, suits, proceedings or investigations pending against the Company or its
properties before any court or governmental agency nor, to our knowledge, has
the Company received any written threat thereof.

 

7. No consent, approval or authorization of or designation, declaration or
filing with any federal governmental authority on the part of the Company is
required in connection with the valid execution and delivery of the Agreement
and the Registration Rights Agreement, the offer, sale or issuance of the Shares
or the consummation by the Company of any other transaction contemplated by the
Agreement except the filing of a Form D pursuant to Regulation D under the
Securities Act of 1933, as amended.

 

8. Subject to the accuracy of the Purchasers’ representations in Section 3.2 of
the Agreement and the accuracy of those representations and warranties made by
the Placement Agent to the Company, the offer, sale and issuance of the Shares
in conformity with the terms of the Agreement constitute transactions exempt
from the registration requirements of Section 5 of the Securities Act of 1933,
as amended.

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EXHIBIT D

Form of Irrevocable Transfer Agent Instructions

As of                         ,             

Pacific Corporate Trust

510 Burrard Street

2nd Floor

Vancouver, BC

V6C 3B9

Attn:                                 

Ladies and Gentlemen:

Reference is made to that certain Securities Purchase Agreement, dated as of
June 1, 2006 (the “Agreement”), by and among Jones Soda Co. a Washington
corporation (the “Company”), and the purchasers named on the signature pages
thereto (collectively, the “Holders”), pursuant to which the Company is issuing
to the Holders shares (the “Shares”) of Common Stock of the Company, no par
value per share (the “Common Stock”).

This letter shall serve as our irrevocable authorization and direction to you
(provided that you are the transfer agent of the Company at such time) to issue
shares of Common Stock upon transfer or resale of the Shares if the conditions
set forth in this letter are satisfied.

You acknowledge and agree that so long as you have previously received
(a) written confirmation from the Company’s legal counsel that either (1) a
registration statement covering resales of the Shares has been declared
effective by the Securities and Exchange Commission (the “Commission”) under the
Securities Act of 1933, as amended (the “Securities Act”), or (2) the Shares are
eligible for sale in conformity with Rule 144 under the Securities Act
(“Rule 144”) and (b) if applicable, a copy of such registration statement, then,
unless otherwise required by law, within three (3) business days of your receipt
of Shares, you shall issue the certificates representing the Shares so sold to
the transferees registered in the names of such transferees, and such
certificates shall not bear any legend restricting transfer of the Shares
thereby and should not be subject to any stop-transfer restriction.

A form of written confirmation (to be used in connection with any sale) from the
Company’s outside legal counsel that a registration statement covering resales
of the Shares has been declared effective by the Commission under the Securities
Act is attached hereto as Annex I.

Please be advised that the Holders are relying upon this letter as an inducement
to enter into the Agreement and, accordingly, each Holder is a third party
beneficiary to these instructions.

Please execute this letter in the space indicated to acknowledge your agreement
to act in accordance with these instructions.

 

Very truly yours,

JONES SODA CO.

By:

    

Name:

 

Hassan N. Natha

Title:

 

Chief Financial Officer

--------------------------------------------------------------------------------

Acknowledged and Agreed:

PACIFIC CORPORATE TRUST

By:

    

Name:

    

Title:

    

Date:                     , 2006

--------------------------------------------------------------------------------

Annex I

Form of Notice of Effectiveness of Registration Statement

Pacific Corporate Trust

510 Burrard Street

2nd Floor

Vancouver, BC

V6C 3B9

Attn:                                 

 

  Re: Jones Soda Co.

Ladies and Gentlemen:

We are counsel to Jones Soda Co., a Washington corporation (the “Company”), and
have represented the Company in connection with that certain Securities Purchase
Agreement, dated as of June 1, 2006, entered into by and among the Company and
the buyers named therein (collectively, the “Purchasers”) pursuant to which the
Company issued to the Purchasers shares of the Company’s Common Stock, no par
value per share (the “Common Stock”). Pursuant to that certain Registration
Rights Agreement of even date, the Company agreed to register the resale of the
Common Stock (collectively, the “Registrable Securities”) under the Securities
Act of 1933, as amended (the “Securities Act”). In connection with the Company’s
obligations under the Registration Rights Agreement, on                     ,
2006, the Company filed a Registration Statement on Form S-3 (File
No. 333-                    ) (the “Registration Statement”) with the Securities
and Exchange Commission (the “Commission”) relating to the Registrable
Securities which names each of the Purchasers as a selling shareholder
thereunder.

In connection with the foregoing, we advise you that a member of the
Commission’s staff has advised us by telephone that the Commission has entered
an order declaring the Registration Statement effective under the Securities Act
at              [a.m.][p.m.] on                     , 2006, and we have no
knowledge, after telephonic inquiry of a member of the staff, that any stop
order suspending its effectiveness has been issued or that any proceedings for
that purpose are pending before, or threatened by, the Commission and the
Registrable Securities are available for resale under the Securities Act
pursuant to the Registration Statement.

This letter shall serve as our standing notice to you that the Common Stock may
be freely transferred by the Purchasers pursuant to the Registration Statement
so long as the Holders certify they have complied with the plan of distribution
description in connection with their sales or transfer of the Common Stock set
forth in the Registration Statement and with the prospectus delivery
requirements of the Securities Act, to the extent such delivery requirement are
applicable. You need not require further letters from us to effect any future
legend-free issuance or reissuance of shares of Common Stock to the transferees
of the Purchasers as contemplated by the Company’s Irrevocable Transfer Agent
Instructions dated                     , 2006. This letter shall serve as our
standing instructions with regard to this matter.

 

Very truly yours,

[NAME OF COMPANY COUNSEL]

By:

    

 

CC: Purchasers

Piper Jaffray & Co.

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EXHIBIT E

Wire Instructions

TBD

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Schedule 3.1(w)

Certain Fees

ThinkEquity Partners LLC, which has acted as financial advisor to the Company in
connection with, among other things, the offering of the Shares shall be
entitled to a fee upon the Closing. This fee shall reduce (and not be in
addition to) the Cash Placement Fee being paid to the Placement Agent pursuant
hereto.