Exhibit 10.1

 

BACKSTOP COMMITMENT AGREEMENT

 

THIS BACKSTOP COMMITMENT AGREEMENT (this “Agreement”), dated as of December 6,
2017, is by and between Reed’s, Inc., a Delaware corporation (the “Company”) and
Raptor/Harbor Reeds SPV LLC, a Delaware limited liability company (the “Backstop
Investor”).

 

RECITALS 

 

WHEREAS, the Company has agreed to commence a Rights Offering (defined below) of
up to $14 million to its stockholders of record as of December 1, 2017;

 

WHEREAS, the Backstop Investor desires to backstop the Rights Offering on a
standby basis to facilitate the transaction;

 

WHEREAS, the Company obtained shareholder approval for the private offering to
the Backstop Investor contemplated herein at the Company’s 2017 Annual Meeting
of Stockholders on September 29, 2017 in accordance with NYSE American Company
Guide Section 713; and

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to an exemption from the registration requirements of Section 5 of the
Securities Act contained in Section 4(a)(2) thereof and/or Regulation D
thereunder, the Company desires to sell, and the Backstop Investor desires to
purchase, securities of the Company as more fully described in this Agreement.
Capitalized terms used but not defined herein shall have the meaning set forth
in the Registration Statement.

 

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

 

ARTICLE I

DEFINITIONS

 

Section 1.1 Definitions. The following terms shall be defined as set forth
herein:

 

“2016 PIPE Participants” means three Persons that were each subscribers of
$500,000 or more of securities in the Company’s financing transaction pursuant
to that certain Securities Purchase Agreement dated May 26, 2016 that have a
right to participate in this transaction.

 

“Backstop Commitment” means $6 million of Units purchased upon the same terms as
set forth in the Prospectus, reduced (i) to the extent aggregate gross proceeds
to Company from the exercise of Rights by Rights Holders (other than the
Backstop Investor) exceeds $8 million and (ii) to the extent of the Backstop
Investor’s participation in the Rights Offering as a Rights Holder.

 

“Backstop Purchase Price” is defined in Section 2.2(b).

 

“Backstop Shares” means shares of Common Stock underlying the Backstop Units.

 

“Backstop Units” means that number of Units purchased pursuant to the Backstop
Commitment or such additional Units as may be purchased by the Backstop Investor
pursuant to Section 2.2(e) of this Agreement.

 

   

 

 

“Backstop Warrant” means the warrant to purchase Backstop Warrant Shares
included among the Backstop Units.

 

“Backstop Warrant Shares” means shares of Common Stock underlying the Backstop
Warrant.

 

“Contracts” means any contract, arrangement, note, bond, commitment, purchase
order, sales order, franchise, guarantee, indemnity, indenture, instrument,
lease, license or other agreement, understanding, instrument or obligation,
whether written or oral, all amendments, supplements and modifications of or for
any of the foregoing and all rights and interests arising thereunder or in
connection therewith.

 

“Commitment Warrant” is defined in Section 2.3(a).

 

“Commitment Warrant Shares” means shares of Common Stock underlying Commitment
Warrants.

 

“Common Stock” means common stock of the Company, $0.0001 par value.

 

“Dealer-Manager” means Maxim Group LLC, the dealer-manager of the Rights
Offering.

 

“Encumbrance” means any security interest, pledge, mortgage, lien, claim,
option, charge or encumbrance.

 

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

 

“Governmental Authority” means any federal, national, supranational, foreign,
state, provincial, local, county, municipal or other government, any
governmental, regulatory or administrative authority, agency, department,
bureau, board, commission or official or any quasi-governmental or private body
exercising any regulatory, taxing, importing or other governmental or
quasi-governmental authority, or any court, tribunal, judicial or arbitral body.

 

“Material Adverse Effect” means any of the following: (i) any event, state of
facts, circumstance, development, change, effect or occurrence that has a
material adverse effect on the legality, validity or enforceability of this
Agreement, (ii) the existence of any Order that prohibits or renders
unachievable the consummation of the Rights Offering or the transactions
contemplated by this Agreement, (iii) any event, state of facts, circumstance,
development, change, effect or occurrence that has a material adverse effect on
the results of operations, assets, business, prospects or condition (financial
or otherwise) of the Company, taken as a whole, or (iv) any event, state of
facts, circumstance, development, change, effect or occurrence that has a
material adverse effect on the Company’s ability to perform in any material
respect on a timely basis its obligations under this Agreement; provided,
however, that (a) changes in the trading price of the Common Stock shall not, in
and of itself, constitute a Material Adverse Effect, and (b) notice of delisting
of the Company’s Common Stock by the NYSE shall not, in and of itself,
constitute a Material Adverse Effect, provided the decision is subject to appeal
and the Company shall have received subscriptions from Rights Holders other than
the Backstop Investor exercising Rights in the Rights Offering of a minimum of
$4.5 million.

 

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“Order” means any order, writ, judgment, injunction, decree, rule, ruling,
directive, stipulation, determination or award made, issued or entered by or
with any Governmental Authority, whether preliminary, interlocutory or final.

 

“Person” means any individual, partnership, firm, corporation, limited liability
company, association, joint venture, trust, Governmental Authority, first
nation, aboriginal or native group or band, unincorporated organization or other
entity, as well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Exchange Act.

 

“Prospectus” means prospectus included in Registration Statement.

 

“Registrable Securities” means Backstop Shares, Backstop Warrant Shares and
Commitment Warrant Shares.

 

“Registration Statement” means the registration statement on Form S-1, (File No.
333-221059) filed with the SEC October 23, 2017, as amended November 21, 2017,
December 1, 2017, December 4, 2017 and as may be further amended from time to
time.

 

“Rights Holder” means shareholder of record of the Company on December 1, 2017
that has been granted subscription rights pursuant to a basic subscription right
and an over-subscription privilege to purchase Units in the Company’s Rights
Offering.

 

“Rights Offering” means the Company’s public offering of subscription rights to
its Rights Holders as described in the Prospectus.

 

“SEC Reports” means the Company’s (i) annual report on Form 10-K for the fiscal
year ended December 31, 2016, (ii) quarterly reports on Form 10-Q for the
quarters ended March 31, 2017, June 30, 2017 and September 30, 2017 and (iii)
and all other reports, schedules, forms, statements and other documents filed on
or after January 1, 2017 and before the date of this Agreement.

 

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

 

“Subscription Agent” means Continental Stock Transfer & Trust Company, the
subscription agent for the Rights Offering.

 

“Subscription Price” means the price per Unit in the Rights Offering.

 

“Units” means units offered in the Rights Offering.

 

“Warrant Exercise Agreement” means warrant exercise agreement by and between the
Company and Backstop Investor dated July 13, 3017.

 

ARTICLE II

 

RIGHTS OFFERING; BACKSTOP COMMITMENT; COMMITMENT WARRANT

 

Section 2.1 Rights Offering.

 

The Company shall commence the Rights Offering on or before December 5, 2017 (as
such date may be extended by the Company and Dealer-Manager) and the Rights
Offering shall remain open until no later than 5:00 p.m., Eastern time on
December 15, 2017 (as such date may be extended by the Company and
Dealer-Manager)(the “Expiration Date”). The Rights Offering shall be conducted
and consummated on the terms, subject to the conditions and in accordance with
the Prospectus.

 

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Section 2.2. Backstop Commitment.

 

(a) On the terms and subject to the conditions contained herein, and in reliance
on the representations and warranties set forth in this Agreement, the Backstop
Investor hereby agrees to purchase, and the Company hereby agrees to sell and
issue to the Backstop Investor, at the Backstop Purchase Price therefor, the
Backstop Units.

 

(b) No later than (1) Business Day following the Expiration Date, the Company
shall give, or cause to be given, to the Backstop Investor, by e-mail or by
electronic facsimile transmission, a written notification (the “Backstop
Notice”) setting forth the total amount of Units subscribed for in the Rights
Offering by Rights Holders, the number of then unsubscribed Units, and the
purchase price for the Backstop Investor pursuant to the terms of this Agreement
(“Backstop Purchase Price”).

 

(c) The Backstop Investor will remit, via wire transfer of immediately available
funds, the Backstop Purchase Price, directly to the account maintained by the
Subscription Agent, for purposes of accepting subscriptions in the Rights
Offering at JP Morgan Chase, 4 Metrotech Center, Brooklyn NY 11245, SWIFT
CHASUS333, ABA# 021000021, Credit: Continental Stock Transfer & Trust Company as
subscription agent for Reed’s Inc. Rights Offer, Account # 475-471873, for
further credit to Reed’s Inc., and name of the Backstop Investor, no later than
5:00 p.m. EST on the third (3rd) Business Day following receipt of the Backstop
Notice.

 

(d) The Company shall cause its transfer agent to credit the aggregate number of
Backstop Shares and Backstop Warrants to which the Backstop Investor is entitled
to the Backstop Investor’s or its designee’s account in book entry form and
deliver to the Backstop Investor such certificates, documents or instruments
required to be delivered by it to the Backstop Investor pursuant to this
Agreement.

 

(e) Investment of any amount greater than $6 million will be made in the
Backstop Investor’s sole discretion, subject to limitations of NYSE American
Company Guide Section 713 and shareholder approval obtained at the Company’s
2017 Annual Meeting of Stockholders on September 29, 2017.

 

Section 2.3. Commitment Warrant.

 

(a) In consideration for the Backstop Commitment, and contingent upon closing
the Rights Offering (but regardless of whether all or any portion of the
Backstop Commitment is funded), the Company will issue to the Backstop Investor
the right to purchase a minimum of 750,000 shares of Common Stock (the
“Commitment Warrant”). The Commitment Warrant will have an exercise price equal
$1.50, will have a term of five (5) years and will not be exercisable for a
period of 180 days of the date of this Agreement. The Commitment Warrant will
otherwise be substantially in the form of warrants issued by the Company to the
Backstop Investor pursuant to the Warrant Exercise Agreement. The form of
Commitment Warrant is attached hereto as Exhibit A and incorporated herein by
this reference.

 

(b) In the event the Backstop Investor determines, in its sole discretion, to
fund more than $6 million pursuant to this Agreement, as determined by the
Backstop Investor in its sole discretion, the Company will increase the
Commitment Warrant Shares by that number of shares equal to 12.5% of funding
amount in excess of $6 million.

 

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Section 2.4 Board of Directors. The Company will use its best efforts to appoint
up to two individuals designated by the Backstop Investor to serve on the
Company’s Board of Directors, subject to NYSE American rules and regulations
promptly after the Expiration Date.

 

Section 2.5 Registration Rights. On or prior to 45 days following the Expiration
Date, the Company shall prepare and file with the Commission a registration
statement covering the resale of all of Registrable Securities for an offering
to be made on a continuous basis pursuant to Rule 415; provided, however, that
the Backstop Investor shall not be required to be named as an “underwriter”
without the Backstop Investor’s express prior written consent. The Company shall
use commercially reasonable efforts to cause a registration statement filed
under this Agreement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, but in any event no later than 90
days following the Effective Date, and shall use commercially reasonable efforts
to keep such registration statement continuously effective under the Securities
Act until the date that all Registrable Securities covered by such registration
statement (i) have been sold, thereunder or pursuant to Rule 144, or (ii) may be
sold without volume or manner-of-sale restrictions pursuant to Rule 144
(assuming cashless exercise) and without the requirement for the Company to be
in compliance with the current public information requirement under Rule 144, as
determined by the counsel to the Company pursuant to a written opinion letter to
such effect, addressed and acceptable to the Transfer Agent and the Backstop
Investor (the “Effectiveness Period”). Violations by the Company of this Section
2.5 shall result in payment by the Company to the Backstop Investor, as
liquidated damages and not as a penalty, equal to 2.0% of the number of
Commitment Warrant Shares for each month of delay in the violation this Section
2.5. The parties agree that the maximum aggregate liquidated damages payable to
a Backstop Investor under this Agreement shall be 10% of the Commitment Warrant
Shares. The partial liquidated damages pursuant to the terms hereof shall apply
on a daily pro rata basis for any portion of a month prior to the cure of a
violation.

 

Section 2.6 Filing of Form 8-K. On or before 9:00 a.m., Eastern time, on the
first (1st) business day following the execution of this Agreement by the
Company and the Backstop Investor, the Company shall file a Current Report on
Form 8-K, including the form of this Agreement (the “8-K Filing”), with the
Securities and Exchange Commission (“Commission”) in the form required by the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). From and after
the 8-K Filing, the Company represents and warrants to the Backstop Investor
that (a) it shall have publicly disclosed all material, non-public information
previously delivered to the Backstop Investor by the Company, or any of their
respective officers, directors, employees or agents and (ii) the SEC Reports did
not, when filed, and do not contain any untrue statement of a material fact or
omit to state any material fact necessary to prevent the statements contained
therein from being misleading.

 

Section 2.7 Conditions to Backstop Investor’s Obligations. The obligations of
the Backstop Investor hereunder are subject to the following conditions being
met:

 

(a) the Rights Offering shall have been made on terms substantially as stated in
Amendment No. 1 to the Registration Statement, filed with the SEC on December 4,
2017 and the Registration Statement shall remain in full force and effect;

 

(b) the representations and warranties of the Company set forth in Article III
of this Agreement shall have been true and correct when made, shall remain true
and correct as of Closing except to the extent made as of a specific date and
the Company shall deliver a certificate of an officer of the Company certifying
as to the foregoing;

 

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(c) all obligations, covenants and agreements of the Company required to be
performed at or prior to the Expiration Date shall have been performed, and the
Company shall deliver a certificate of an officer of the Company certifying as
to the foregoing;

 

(d) the delivery of a Secretary’s Certificate certifying as to the Board of
Directors resolutions approving the transactions contemplated hereby;

 

(e) there shall have been no Material Adverse Effect since the date hereof;

 

(f) the Company shall have received subscriptions from Rights Holders (other
than the Backstop Investor) exercising Rights in the Rights Offering of a
minimum of $4.5 million;

 

(g) the Expiration Date of the Rights Offering shall have occurred on or prior
to December 28, 2017;

 

(h) from the date hereof to the Expiration Date, trading in the Company’s common
stock shall not have been suspended by the Commission (except for any suspension
of trading of limited duration agreed to by the Company, which suspension shall
be terminated prior to the Expiration Date), and, at any time prior to the
Expiration Date, trading in securities generally as reported by Bloomberg
Financial Markets shall not have been suspended or limited, or minimum prices
shall not have been established on securities whose trades are reported by such
service, or on any Trading Market, nor shall a banking moratorium have been
declared either by the United States or New York State authorities nor shall
there have occurred any material outbreak or escalation of hostilities or other
national or international calamity of such magnitude in its effect on, or any
material adverse change in, any financial market which, in each case, in the
reasonable judgment of the Backstop Investor, makes it impracticable or
inadvisable to consummate the transactions hereunder; and

 

(i) delivery of legal opinion typical for such transactions of Company’s U.S.
securities counsel in form and substance reasonably acceptable to Backstop
Investor’s counsel.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

Section 3.1 Representations and Warranties of the Company. The Company hereby
makes the representations and warranties set forth below to the Backstop
Investor that:

 

(a) Authorization; Enforcement; Validity. The Company has all necessary
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder (including, without limitation the issuance of the Rights
Shares, Rights Warrants and the Commitment Warrants) in accordance with the
terms hereof. The execution and delivery by the Company of this Agreement, the
performance by the Company of its obligations hereunder (including, without
limitation, the issuance of the Rights Shares, Rights Warrants and the
Commitment Warrants), have been duly authorized by all requisite action on the
part of the Company, and no other action on the part of the Company is necessary
to authorize the execution and delivery by the Company of this Agreement or the
consummation of the transactions contemplated by this Agreement. This Agreement
has been duly executed and delivered by the Company, and this Agreement
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to creditors’ rights generally and subject to general principles
of equity.

 

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(b) No Conflicts. Assuming that all consents, approvals, authorizations and
other actions described in Section 3.1(c) have been obtained, the execution,
delivery and performance by the Company of this Agreement and the consummation
of the transactions contemplated hereby (including, without limitation, the
issuance of the Backstop Shares, Backstop Warrant and the Commitment Warrant) do
not and will not: (i) violate, conflict with or result in the breach of the
certificate of incorporation, bylaws, or similar formation or organizational
documents of the Company; (ii) conflict with or violate any Law or Order
applicable to the Company, any of its Subsidiaries or any of their respective
assets or properties; (iii) violate, conflict with, result in any breach of,
constitute a default under, require any consent under, or give to others any
rights of termination, amendment, acceleration, suspension, revocation or
cancellation of, any note, bond, mortgage or indenture, Contract, agreement,
lease, sublease, license, permit, franchise or other instrument or arrangement
to which the Company is a party or to which any of their respective assets or
properties are subject, or result in the creation of any Encumbrance on any of
their respective assets or properties, except, in the case of clauses (ii) and
(iii), for any such conflict, violation, breach or default that would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. 

 

(c) Consents and Approvals. The Company has received all consents, waivers,
authorizations or orders of, has given any notices to, or made all filings or
registrations with, any court or other federal, state, local or other
governmental authority, agency or other Person (collectively, “Consents”), to
own, lease and operate its properties and conduct its business as it is now
being conducted, and each such Consent is valid and in full force and effect.
Neither the Company nor any of its Affiliates has received any notice of any
investigation or proceedings which, if decided adversely to the Company, could
reasonably be expected to result in the revocation of, or the imposition of a
materially burdensome restriction on, any Consent. No Consent contains a
materially burdensome restriction not disclosed in the SEC Reports (in the Form
10-K for the year ended December 31, 2016 and thereafter). Other than 2016 PIPE
Participants’ right of participation, the Company is not required to obtain any
Consents in connection with the execution, delivery and performance by the
Company of this Agreement, other than: (i) the filings required pursuant to this
Agreement, (ii) the notice and/or application(s) to each applicable Trading
Market for the issuance, sale and listing of the securities of the Company
trading thereon in the time and manner required thereby, (iii) the filing of
Form D with the Commission and (iv) such filings as are required to be made
under applicable state securities laws (collectively, the “Required Approvals”).
The 2016 PIPE Participants have been provided with required written notices
pursuant to Section 4.11 of the Securities Purchase Agreement dated May 16, 2016
by and between such Participants and the Company in satisfaction of all
requirements of such section and each Participant has declined to participate as
a backstop investor for the Rights Offering.

 

(d) DGCL Section 203. The Board of Directors of the Company has taken all
necessary action to approve the transactions contemplated hereunder so as to
make Section 203 of the Delaware General Corporation Law not apply to the
Backstop Investor.

 

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(e) Issuance of the Securities; Registration. The Backstop Shares are duly
authorized and, when issued and paid for hereunder, will be duly and validly
issued, fully paid and nonassessable, free and clear of all Liens, other than
restrictions on transfer provided for hereunder. The Backstop Warrant Shares and
Commitment Warrant Shares, when issued in accordance with the Backstop Warrant
and Commitment Warrant, respectively, will be validly issued, fully paid and
nonassessable, free and clear of all Liens imposed by the Company, other than
restrictions on transfer provided for hereunder. The Company has reserved from
its duly authorized capital stock the maximum number of shares of Common Stock
issuable upon (i) exercise of the Backstop Warrant and Commitment Warrant, (ii)
conversion or exchange of all other outstanding securities convertible or
exchangeable for any shares of Common Stock and (iii) exercise of all
outstanding options, warrants or rights to subscribe for or purchase Common
Stock or securities convertible into or exchangeable for Common Stock.

 

(f) SEC Reports; Financial Statements. The Company’s SEC Reports comply in all
material respects with the requirements of the Exchange Act and do not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. Except for the Company’s annual report on Form 10-K for the fiscal
year ended December 31, 2016, the Company has filed all SEC Reports 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 their
respective dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act, as applicable, 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 the light of the
circumstances under which they were made, not misleading. The Company has never
been an issuer subject to Rule 144(i) under the Securities Act. 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. Such
financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved (“GAAP”), 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 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, immaterial, year-end audit adjustments. All material
agreements to which the Company is a party or to which the property or assets of
the Company are subject are included as part of or identified in the SEC
Reports, to the extent such agreements are required to be included or identified
pursuant to the rules and regulations of the Commission.

 

(g) Compliance. The Company: (i) is not 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), nor has the Company
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 not in
violation of any judgment, decree, or order of any court, arbitrator or other
governmental authority or (iii) is not and has not been in violation of any
statute, rule, ordinance or regulation of any governmental authority, including
without limitation all foreign, federal, state and local laws relating to taxes,
environmental protection, health, occupational health and safety, product
quality and safety and employment and labor matters, except in each case as
could not have or reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect.

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(h) Private Placement. Assuming the accuracy of the Backstop Investor’s
representations and warranties set forth in Section 3.2, no registration under
the Securities Act is required for the offer and sale of the Units and
Commitment Warrant by the Company to the Backstop Investor as contemplated
hereby.

 

(i) Investment Company. The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the transactions contemplated hereby,
will not be or be an Affiliate of, an “investment company” within the meaning of
the Investment Company Act of 1940, as amended. The Company shall conduct its
business in a manner so that it will not become an “investment company” subject
to registration under the Investment Company Act of 1940, as amended.

 

(j) Listing and Maintenance Requirements. The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has
taken no action designed to, or which to its knowledge is likely to have the
effect of, terminating 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. The Company shall use its best
efforts to maintain its compliance with the NYSE American listing standards and
pursuant to its plan of compliance submitted to the NYSE American on July 20,
2016. If the Company does not receive gross proceeds of $10.5 million from the
combined exercise of subscription Rights by Rights Holders and the Backstop
Commitment by December 22, 2017, the Company expects to be delisted from the
NYSE American. The Common Stock is currently eligible for electronic transfer
through the Depository Trust Company or another established clearing corporation
and the Company is current in payment of the fees to the Depository Trust
Company (or such other established clearing corporation) in connection with such
electronic transfer.

 

(k) No Integrated Offering. Assuming the accuracy of the Backstop Investor’s
representations and warranties set forth in Section 3.2, neither the Company,
nor any of its Affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would cause the
offering of the Commitment Warrants to be integrated with prior offerings by the
Company for purposes of (i) any applicable law or regulation including the
Securities Act which would require the registration of any such securities under
the Securities Act or any applicable law or regulation, or (ii) any applicable
shareholder approval provisions of any Trading Market on which any of the
securities of the Company are listed or designated.

 

(l) No Disqualification Events. With respect to the Backstop Shares, the
Backstop Warrant Shares and the Commitment Warrant Shares to be offered and sold
hereunder in reliance on Rule 506 under the Securities Act, none of the Company,
any of its predecessors, any affiliated issuer, any director, executive officer,
other officer of the Company participating in the offering hereunder, any
beneficial owner of 20% or more of the Company’s outstanding voting equity
securities, calculated on the basis of voting power, nor any promoter (as that
term is defined in Rule 405 under the Securities Act) connected with the Company
in any capacity at the time of sale (each, an "Issuer Covered Person" and,
together, "Issuer Covered Persons") is subject to any of the "Bad Actor"
disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities
Act (a "Disqualification Event"), except for a Disqualification Event covered by
Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine
whether any Issuer Covered Person is subject to a Disqualification Event. The
Company has complied, to the extent applicable, with its disclosure obligations
under Rule 506(e), and has furnished to the Backstop Investor a copy of any
disclosures provided thereunder.

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(m) The Company and the Board of Directors of the Company 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
certificate of incorporation, as amended (or similar charter documents) or the
laws of its state of incorporation that is or could become applicable to the
Backstop Investor as a result of the Backstop Investor and the Company
fulfilling their obligations or exercising their rights hereunder.

 

Section 3.2 Representations and Warranties of the Backstop Investor. The
Backstop Investor hereby makes the representations and warranties set forth
below to the Company that as of the date of its execution of this Agreement:

 

(a) Due Authorization. The Backstop Investor represents and warrants that (i)
the execution and delivery of this Agreement by it and the consummation by it of
the transactions contemplated hereby have been duly authorized by all necessary
action on its behalf and (ii) this Agreement has been duly executed and
delivered by the Backstop Investor and constitutes the valid and binding
obligation of the Backstop Investor, enforceable against it in accordance with
its terms.

 

(b) No Conflicts. The execution, delivery and performance of this Agreement by
the Backstop Investor and the consummation by the Backstop Investor of the
transactions contemplated hereby do not and will not: (i) conflict with or
violate any provision of the Backstop Investor’s organizational or charter
documents, or (ii) conflict with or result in a violation of any agreement, law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority which would interfere with the ability of
the Backstop Investor to perform its obligations under this Agreement.

 

(c) Access to Information. The Backstop Investor acknowledges that it has had
the opportunity to review this Agreement and the SEC Reports 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 exercise of the Backstop Warrant and the Commitment
Warrant and the merits and risks of investing in the Backstop Warrant Shares and
the Commitment Warrant Shares; (ii) access to information about the Company and
its 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; provided, however,
that such review, opportunity and access shall not alter, diminish or impair the
Backstop Investor’s rights hereunder or under any other agreement, instrument or
indenture.

 

(d) Backstop Investor Status. At the time such Backstop Investor was offered the
Backstop Warrant and the Commitment Warrant, it was, and as of the date hereof
it is, and on each date on which it exercises any the Backstop Warrant or the
Commitment Warrant, it will represent and warrant that it is: (i) an “accredited
investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under
the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule
144A(a) under the Securities Act.

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ARTICLE IV

TERMINATION

 

Section 4.1 Termination.

 

(a) Termination by the Backstop Investor. The Agreement may be terminated at any
time by the Backstop Investor upon the failure of any of the conditions set
forth in Section 2.7.

 

(b) Termination by the Company. The Agreement may be terminated at any time by
the Company if the Backstop Investor takes any action that would be a breach of
this Agreement, and if such breach is not cured within five (5) Business Days
after receipt of written notice from the Company to Backstop Investor.

 

(c) Mutual Termination. This Agreement may be terminated by the mutual written
consent of the Company and the Backstop Investor.

 

(d) Automatic Termination. This Agreement will automatically terminate upon
failure of the Company to receive subscriptions from Rights Holders (other than
the Backstop Investor exercising Rights in the Rights Offering) of a minimum of
$4.5 million or other termination or abandonment of the Rights Offering.

 

ARTICLE V

MISCELLANEOUS

 

Section 5.1 Integration. The Company shall not 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 would be integrated with the sale of the
Backstop Units and Commitment Warrants in a manner that would require the
registration under the Securities Act of the sale of the Backstop Units and
Commitment Warrants or that would be integrated with the offer or sale of the
Backstop Units and Commitment Warrants for purposes of the rules and regulations
of any Trading Market such that it would require shareholder approval prior to
the closing of such other transaction unless shareholder approval is obtained
before the closing of such subsequent transaction.

 

Section 5.2 Non-Public Information. Except with respect to the material terms
and conditions of the transactions contemplated hereunder and information and
disclosures included in the Company’s SEC Reports, the Company covenants and
agrees that neither it, nor any other Person acting on its behalf will provide
the Backstop Investor or its agents or counsel with any information that
constitutes, or the Company reasonably believes constitutes, material non-public
information, unless prior thereto the Backstop Investor shall have consented to
the receipt of such information, which consent shall constitute the Backstop
Investor’s agreement to keep such information confidential. The Company
understands and confirms that the Backstop Investor shall be relying on the
foregoing covenant in effecting transactions in securities of the Company. To
the extent that the Company delivers any material, non-public information to the
Backstop Investor without the Backstop Investor’s consent, the Company hereby
covenants and agrees that the Backstop Investor shall not have any duty of
confidentiality to the Company, or any of its officers, directors, agents,
employees or Affiliates, or a duty to the Company or any of its officers,
directors, agents, employees or Affiliates not to trade on the basis of, such
material, non-public information, provided that the Backstop Investor shall
remain subject to applicable law. To the extent that any notice provided
pursuant to this Agreement constitutes, or contains, material, non-public
information regarding the Company, the Company shall simultaneously file such
notice with the Commission pursuant to a Current Report on Form 8-K. The Company
understands and confirms that the Backstop Investor shall be relying on the
foregoing covenant in effecting transactions in securities of the Company.

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Section 5.3 Indemnification of Backstop Investor. Subject to the provisions of
this Section 5.3, the Company will indemnify and hold Backstop Investor and its
directors, officers, shareholders, members, partners, employees and agents (and
any other Persons with a functionally equivalent role of a Person holding such
titles notwithstanding a lack of such title or any other title), each Person who
controls the Backstop Investor (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act), and the directors, officers,
shareholders, agents, members, partners or employees (and any other Persons with
a functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a
“Backstop Investor 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 that any such Backstop Investor Party may suffer
or incur as a result of or relating to (a) any breach of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or (b) any action instituted against the Backstop Investor Parties in
any capacity, or any of them or their respective Affiliates, by any stockholder
of the Company who is not an Affiliate of such Backstop Investor Parties, with
respect to any of the transactions contemplated hereunder (unless such action is
based upon a breach of such Backstop Investor Party’s representations,
warranties or covenants hereunder or any agreements or understandings such
Backstop Investor Parties may have with any such stockholder or any violations
by such Backstop Investor Parties of state or federal securities laws or any
other conduct by such Backstop Investor Parties which constitutes fraud or gross
negligence). If any action shall be brought against any Backstop Investor Party
in respect of which indemnity may be sought pursuant to this Agreement, such
Backstop Investor Party shall promptly notify the Company in writing, and the
Company shall have the right to assume the defense thereof with counsel of its
own choosing reasonably acceptable to the Backstop Investor Party. Any Backstop
Investor Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Backstop Investor Party except to the
extent that (i) the employment thereof has been specifically authorized by the
Company in writing, (ii) the Company has failed after a reasonable period of
time to assume such defense and to employ counsel or (iii) in such action there
is, in the reasonable opinion of such separate counsel, a material conflict on
any material issue between the position of the Company and the position of such
Backstop Investor Party, in which case the Company shall be responsible for the
reasonable fees and expenses of no more than one such separate counsel. The
Company will not be liable to any Backstop Investor Party under this Agreement
(y) for any settlement by a Backstop Investor Party effected without the
Company’s prior written consent, which shall not be unreasonably withheld or
delayed; or (z) to the extent, but only to the extent that a loss, claim, damage
or liability is attributable to any Backstop Investor Party’s breach of any of
the representations, warranties, covenants or agreements made by such Backstop
Investor Party in this Agreement. The indemnification required by this Section
5.3 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or are incurred.
The indemnity agreements contained herein shall be in addition to any cause of
action or similar right of any Backstop Investor Party against the Company or
others and any liabilities the Company may be subject to pursuant to law.

 

Section 5.4 Reservation of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue the Backstop Warrant Shares and
the Commitment Warrant Shares pursuant to any exercise of the Backstop Warrant
or the Commitment Warrant, as applicable. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the exercise of the Backstop Warrant and the Commitment Warrant, the Company
shall take such corporate act as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to such
number as shall be sufficient for such purposes.

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Section 5.5 Form D; Blue Sky Filings. The Company agrees to timely file a Form D
with respect to the Backstop Committment as required under Regulation D and to
provide a copy thereof, promptly upon request of the Backstop Investor. The
Company shall take such action as the Company shall reasonably determine is
necessary in order to obtain an exemption for, or to qualify the Backstop Units
and Commitment Warrants for, sale to the Backstop Investor at the Expiration
Date under applicable securities or “Blue Sky” laws of the states of the United
States, and shall provide evidence of such actions promptly upon request of the
Backstop Investor.

 

Section 5.6 Exercise of Warrants. The form Notice of Exercise included in the
Commitment Warrant sets forth the totality of the procedures required of the
Backstop Investor in order to exercise the Commitment Warrant. Without limiting
the preceding sentence, no ink-original Notice of Exercise shall be required,
nor shall any medallion guarantee (or other type of guarantee or notarization)
of any Notice of Exercise form be required in order to exercise the Commitment
Warrant. No additional legal opinion, other information or instructions shall be
required of the Backstop Investor to exercise their Commitment Warrant. The
Company shall honor exercises of the Commitment Warrant in accordance with the
terms, conditions and time periods set forth in the Commitment Warrant

 

Section 5.7 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 or e-mail at the
facsimile number or e-mail address set forth on the signature pages attached
hereto at or prior to 5:30 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 or e-mail at the facsimile number or e-mail address
set forth on the signature pages attached hereto on a day that is not a Trading
Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the
second (2nd) Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service 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 set forth on the signature pages attached
hereto. To the extent that any notice provided pursuant to this Agreement
constitutes, or contains, material, non-public information regarding the Company
or any Subsidiaries, the Company shall simultaneously file such notice with the
Commission pursuant to a Current Report on Form 8-K. 

 

Section 5.8 Survival. All warranties and representations (as of the date such
warranties and representations were made) made herein or in any certificate or
other instrument delivered by it or on its behalf under this Agreement shall be
considered to have been relied upon by the parties hereto and shall survive the
issuance of the Backstop Units and Commitment Warrant. This Agreement shall
inure to the benefit of and be binding upon the successors and permitted assigns
of each of the parties; provided however that the Company may not assign this
Agreement or the obligations and rights of the Company hereunder without the
prior written consent of the Backstop Investor.

 

Section 5.9 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.

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Section 5.10 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.

 

Section 5.11 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
Delaware, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, partners, members, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the State of
Delaware. Each party hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in the State of Delaware for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or is an inconvenient venue for such
proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or 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 other
manner permitted by law.

 

Section 5.12 Entire Agreement. This Agreement and the Commitment Warrant
represents the entire understanding and agreement between the parties hereto
with respect to the subject matter hereof.

 

Section 5.13 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.

 

Section 5.14 Fees and Expenses. The Company shall pay the reasonable legal fees
and expenses of Backstop Investor in connection with the transactions
contemplated hereby not to exceed $50,000 in the aggregate.

 

Section 5.15 Brokerage Fees. Maxim Group LLC will receive a commission equal to
2% of the Backstop Purchase Price and 2% of the gross proceeds attributable to
Backstop Investor’s participation in the Rights Offering as a Rights Holder. No
other brokerage or finder’s fees or commissions are or will be payable by the
Company to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Backstop Investor shall have no obligation
with respect to any fees or with respect to any claims (other than such fees or
commissions owed by Backstop Investor pursuant to agreements entered into by the
Backstop Investor, which fees or commission shall be the sole responsibility of
Backstop Investor) made by or on behalf of other Persons for fees of a type
contemplated in this Section 5.15 that may be due in connection with the
transactions contemplated by this Agreement due to an arrangement or agreement
made by the Company.

 

[Signature Pages Follow]

 

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

 

REED’S INC.,

a Delaware corporation

 

  /s/ Valentin Stalowir   By: Valentin Stalowir   Its: Chief Executive Officer  

 

RAPTOR/ HARBOR REED’S SPV, LLC,

a Delaware limited liability company

 

  /s/ Daniel J. Doherty III   By: Daniel J. Doherty III   Its: Authorized
Signatory  

  

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