reeds_8k-ex1001.htm

 

    
      

    

    Exhibit
10.1

     

    
      Source

      Capital
Group, Inc,

       

      


       

      September
11, 2009

       

      Christopher
Reed

      Reed's,
inc.

      13000
South Spring Street 

      Los
Angeles, California 90061

       

      Source
Capital Group, Inc, Proposed Offering Engagement Letter

       

      To Mr.
Reed:

       

      The
purpose of this engagement letter is to set forth the terms pursuant to which
Source Capital Group, Inc. whose address is 276 Post Road West, Westport, CT
06880 (hereinafter referred to as "Source" or "SCG" or "Dealer Manager") will act as the sole
exclusive placement agent and financial advisor for a proposed issuance, or
series of issuances, of registered or unregistered equity and/or debt securities
("Proposed Offering") of
Reed's, Inc., 13000 South Spring Street, Los Angeles, California 90061
(collectively, with its subsidiaries and affiliates), (hereinafter referred to
as the "Issuer" or the "Company"), in connection with
a "Registered Direct Offering"
and/or sale of up to $1,500,000 from an effective Form 8-3 registration
statement.

       

      The terms
of our agreement are as follows:

       

      1.           The
Issuer hereby retains and engages Source, for the period beginning on the date
hereof and ending on September 30, 2009, unless sooner terminated pursuant to
the terms of this engagement letter agreement (the "Engagement Period"), to act
as the Issuer's sole exclusive placement agent, financial advisor and/or
dealer-manager in connection with the Proposed Offering. The compensation for
acting as the exclusive sole placement agent to the Issuer and conditions of
Source's engagement is stated hereunder. During the Engagement Period and as
long as Source is proceeding in good faith with activities in connection with
the Proposed Offering, the Issuer agrees not to solicit, negotiate with or enter
into any agreement with any other source of financing (whether equity, debt or
otherwise other than bank financings or financings in connection with strategic
alliances), any placement agent, financial advisor, dealer manager or any other
person or entity in connection with the Proposed Offering, as the case may
be.

       

      2.           In
consideration for its services in the Proposed Offering, Source shall be
entitled to the following payments:

       

      (a)A cash
fee equal to 8% of the dollar amount received by the Issuer, in connection with
a

      Proposed
Offering, including any proceeds received by the Issuer from any cash exercise
of warrants, options or rights issued to investors in the Proposed Offering (the
"Financial Advisory
Fee").

       

      3.           The Issuer shall be responsible for and
pay all expenses relating to the Proposed Offering, including, without limitation, all filing fees
relating to any registration statement required by be filed as part of the
Proposed Offering of and any filing fees relating to the review of the Proposed
Offering materials by the Financial Industry Regulatory Authority, Inc. ("PIMA"); all fees and
expenses relating to the listing of such Shares on the exchange where the
Common Stock is (or will
be) listed; all fees, expenses and disbursements relating to the registration or
qualification of the
Shares under the "blue sky" securities laws of any states or other
jurisdictions; the costs of mailing and printing all of the Proposed Offering documents,
Registration Statements, Prospectuses and all amendments, supplements and
exhibits thereto and as
many preliminary and final Prospectuses as Source may reasonably deem necessary;
the fees

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      Page
2

      Source

      Capital
Group, Inc.

       

      and
expenses of the Issuer's accountants and the fees and expenses of the Issuers
legal counsel and other agents and representatives.

       

      4.         
During the 45-day period prior to the filing of the Registration Statement, if
applicable, with the Securities
and Exchange Commission ("Commission"), and at all times thereafter prior and
following the effectiveness of such Registration Statement, the Issuer and its
officers, directors and related parties will abide by all rules and regulations
of the Commission relating to public Proposed Offerings, including, without
limitation, those relating to public statements (i.e., "gun jumping") and
disclosures of material non-public information.

       

      5.         
The Issuer shall supply Source and its counsel, at the Issuer's cost, with bound
volumes of the Proposed
Offering materials within a reasonable time after the closing of the Proposed
Offering (the "Closing).

       

      6.         
The Proposed Offering shall be conditioned upon, among other things, the
following:

       

      (a)          Satisfactory
completion by Source of its due diligence investigation and analysis of: (i) the
Issuer's arrangements with its officers, directors, employees, affiliates,
customers and suppliers, (ii) the audited historical financial statements of the
Issuer as may be required by the Act and rules and regulations of the Commission
thereunder for inclusion in the Registration Statement, if applicable, and (iii)
the Issuer's projected financial results for the fiscal years ending December
31, 2009 and December 31, 2010;

       

      (b)          The
continued listing of the Common Stock on its current exchange or migration to a
higher exchange ("Trading Market");

       

      (c)          Source
shall have received from outside counsel to the Issuer such counsel's written
opinion, addressed to Source, dated as of the Closing, in customary form and
substance reasonably satisfactory to Source;

       

      (d)          FINRA
shall have raised no objection to the fairness and reasonableness of the terms
and arrangements
of this Agreement. In addition, the Company shall, if requested by Source, make
or authorize Source's counsel to make on the Company's behalf, an Issuer Filing
with the FINRA Corporate Financing Department pursuant to FINRA Rule 5110 and
pay all filing fees required in connection therewith.

       

      (e)          Prior
to the Closing, the Company shall have furnished to Source such further
information, certificates
and documents as Source may reasonably request, including customary audit
comfort letters (all opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for Source);

       

      (f)          Any
Proposed Offering shall fund through an escrow account established by Source and
paid for by
the Issuer; and

       

      7.         
Upon consummation of a Proposed Offering, if any, Source shall not be granted
the right of first refusal ("Right
of First Refusal') on any and all subsequent offerings by the
Issuer.

       

      8.         
The Issuer represents and warrants to Source as follows:

       

      (a)         
The Issuer has the requisite corporate power and authority to enter into and to
consummate the
transactions contemplated hereunder and otherwise to carry out its obligations
hereunder. The execution and delivery of this Agreement by the Issuer and the
consummation by it of the transactions contemplated

       

      
 

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Page
3

      Source

      Capital
Group, Inc.

       

       

      hereby
have been duly authorized by all
necessary action on the part of the Issuer and no further action is
required by the Issuer, its board of directors or its stockholders in connection
herewith. This Agreement has been duly authorized and executed by the Issuer
and, when delivered in accordance with the terms hereof and thereof, will
constitute the valid and binding obligation of the Issuer enforceable against
the Issuer in accordance with its terms except (i) as limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies, and (iii) that rights to indemnification and contribution thereunder
may be limited by federal or state securities laws or public policy relating
thereto.

       

      (b)           The
execution, delivery and performance of this Agreement by the Issuer do not and
will not (i) conflict with or violate any provision of the Issuer's or any
subsidiary's certificate or articles of incorporation, bylaws or other
organizational or charter documents, or (ii) conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, result in the creation of any Lien upon any of the properties or
assets of the Issuer or any subsidiary,
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 Issuer or subsidiary debt or
otherwise) or other understanding to which the Issuer or any subsidiary is a
party or by which any property or asset of the Issuer or any subsidiary is bound
or affected (except as may have been consented to or waived), or (iii) conflict
with or 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 Issuer or a Subsidiary is subject (including
federal and state securities laws and regulations), or by which any property or
asset of the issuer or a Subsidiary is bound or affected.

       

      (c)           The
Issuer is not 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"
(defined as an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
Issuer, joint stock Issuer, government (or an agency or subdivision thereof) or
other entity of any kind) in connection with the execution, delivery and
performance by the Issuer of this Agreement, other than such filings as are
required to be made under applicable Federal and state securities laws, by the
Trading Market.

       

      (d)           Except
as otherwise provided in this Agreement, no brokerage or finder's fees or
commissions are or will be payable by the Issuer to any broker, financial
advisor or consultant, finder, placement agent, investment banker, bank or other
Person with respect to the transactions contemplated by the this Agreement.
Source shall have no obligation with respect to any fees or with respect to any
claims made by or on behalf of other Persons for fees of a type contemplated in
this Section that may be due in connection with the offer and sale of the
Securities contemplated by the this Agreement.

       

      (e)           The
Issuer has not, and to its knowledge none of its officers or directors have, (I)
taken, directly or indirectly, any action designed to cause or to result in the
stabilization or manipulation of the price of any security of the Issuer to
facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
purchased, or, paid any compensation for soliciting purchases of, any of the
Securities (other than Source's placement of the
Securities), or (iii) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities of the
Issuer other than pursuant to this Agreement.

       

      (f)          To
the knowledge of the Issuer, there are no affiliations with any FINRA member
firm among the
Issuer's officers, directors or any five percent (5%) or greater stockholder of
the Issuer.

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      


       

      Page
4

      Source

      Capital
Group, Inc.

       

      (g)         
Source shall be a third party beneficiary of any representations and warranties
given to any investors
in the Proposed Offering, which representation and warranties shall be
reasonably acceptable to Source,

       

      9.          
 Source reserves the right to reduce any item of its compensation or adjust
the terms thereof as specified herein in the event that a determination and/or
suggestion shall be made by FINRA to the effect that Source's aggregate
compensation is in excess of FINRA rules or that the terms thereof require
adjustment; provided, however,
the aggregate compensation otherwise to be paid to Source by the Issuer
may not be increased above the amounts stated herein without the approval of the
Issuer.

       

      10.          The
Issuer agrees that no solicitation material apart from, if applicable, the
Registration Statement will be used by it in connection with the Proposed
Offering or filed with the Commission or any federal, state or local
governmental or regulatory authority by or on behalf of the Issuer without
Source's prior approval, which approval may not be unreasonably delayed,
withheld or denied.

       

      11.         
The Issuer agrees that it will not issue press releases or engage in any other
publicity, without Source's prior
written consent, commencing on the date hereof and continuing for a period of
forty (40) days from the Closing of the Proposed
Offering, other than normal and customary releases issued in the ordinary course
of the Issuers business. The Issuer
covenants to adhere to all "gun jumping" and "quiet period" rules and
regulations of the Commission prior to, during
and following the filing of the Registration Statement, if applicable, and the
consummation of the Proposed Offering.

       

      12.         
During the Engagement Period or until the Closing, the Issuer agrees to
cooperate with Source and to furnish,
or cause to be furnished, to Source, any and all information and data concerning
the Issuer, its subsidiaries and the Proposed Offering that Source deems
appropriate, including, without limitation, the Issuer's acquisition plans and
plans for raising capital or additional financing (the "Information"). The
Issuer shall provide Source reasonable access during normal business hours from
and after the date of execution of this Agreement until the date of the Closing
to all of the Issuers and its subsidiaries assets, properties, books, contracts,
commitments and records and to the Issuers and its subsidiaries officers,
directors, employees, appraisers, independent accountants, legal counsel and
other consultants and advisors. The Issuer represents and warrants to Source
that all Information: (i) made available by the Issuer to Source or its agents
and representatives, (ii) contained in any preliminary or final Prospectus
prepared by the Issuer in connection with the Proposed Offering, and (iii)
contained in any filing by the Issuer with any court or governmental regulatory
agency, commission or instrumentality, will be complete and correct in all
material respects and will not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein not
misleading in light of the circumstances under which such statements are made.
The Issuer further represents and warrants to Source that all such Information
will have been prepared by the Issuer in good faith and will be based upon
assumptions which, in light of the circumstances under which they were made, are
reasonable. The Issuer acknowledges and agrees that in rendering its services
hereunder, Source will be using and relying on such information (and information
available from public sources and other sources deemed reliable by Source)
without independent verification thereof by Source or independent appraisal by
Source of any of the Issuers assets. The Issuer acknowledges and agrees that
this engagement letter and the terms hereof are confidential and will not be
disclosed to anyone other than the officers and directors of the Issuer and the
issuers accountants, advisors and legal counsel. Except as contemplated by the
terms hereof or as required by applicable law, Source shall keep strictly
confidential all non-public Information concerning the Issuer provided to
Source. No obligation of confidentiality shall apply to Information that: (a) is
in the public domain as of the date hereof or hereafter enters the public domain
without a breach by Source, (b)
was known or became known by Source prior to the Issuer's disclosure
thereof to Source, (c) becomes known to Source from a source other than the
Issuer, and other than by the breach of an obligation of confidentiality owed to
the Issuer, (d) is disclosed by the Issuer to a third party without restrictions
on its disclosure or (e) is independently developed by Source. Source's
obligations of confidentiality hereunder shall extend to its
employees.

      


      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Page 5

      Source

      Capital
Group, Inc.

       

      13.          This
engagement letter shall be deemed to have been made and delivered in New York
City and both this engagement letter and the transactions contemplated hereby
shall be governed as to validity, interpretation, construction, effect and in
all other respects by the internal laws of the State of New York, without regard
to the conflict of laws principles thereof.

       

      14.          Each
of Source and the Issuer: (i) agrees that any legal suit, action or proceeding
arising out of or relating to this engagement letter and/or the transactions
contemplated hereby shall be instituted exclusively in New York Supreme Court,
County of New York, or in the United States District Court for the Southern
District of New York, (ii) waives any objection which it may have or hereafter
to the venue of any such suit, action or proceeding, and (iii) irrevocably
consents to the jurisdiction of the New York Supreme Court, County of New York,
and the United States District Court for the Southern District of New York in
any such suit, action or proceeding. Each of Source and the Issuer further
agrees to accept and acknowledge service of any and all process which may be
served in any such suit, action or proceeding in the New York Supreme Court,
County of New York, or in the United States District Court for the Southern
District of New York and agrees that service of process upon the Issuer mailed
by certified mail to the Issuer's address shall be deemed in every respect
effective service of process upon the Issuer, in any such suit, action or
proceeding, and service of process upon Source mailed by certified mail to
Source's address shall be deemed in every respect effective service process upon
Source, in any such suit, action or proceeding. Notwithstanding any provision of
this engagement letter to the contrary, the Issuer agrees that neither Source
nor its affiliates, and the respective officers, directors, employees, agents
and representatives of Source, its affiliates and each other person, if any,
controlling Source or any of its affiliates, shall have any liability (whether
direct or indirect, in contract or tort or otherwise) to the Issuer for or in
connection with the engagement and transaction described herein except for any
such liability for losses, claims, damages or liabilities incurred by us that
are finally judicially determined to have resulted from the bad faith or gross
negligence of such individuals or entities. Source will act under this
engagement letter as an independent contractor with duties to the Issuer.
Because Source will be acting on the Issuer's behalf in this capacity, it is
Source's practice to receive indemnification. A copy of Source's standard
indemnification form is attached to this engagement letter as Exhibit
A.

       

      [Signature
Page Follows]

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      Page
6

      Source

      Capital
Group, Inc.

       

      We are
delighted at the prospect of working with you and look forward to a successful
Proposed Offering. If you are in agreement with the foregoing, please execute
and return two copies of this engagement letter to the undersigned. This
engagement letter may be executed in counterparts and by facsimile
transmission.

       

       

      Regards,

       

      SOURCE
CAPITAL GROUP, INC.

       

       

      By:  /s/ Richard Kreger      

      Name:
Richard Kreger

      Title:
Senior Managing Director

       

       

      By: /s/ Russ Newton      

      Name:
Russ Newton

      Title:
Chief Financial Officer

       

       

      ACCEPTED
AND AGREED TO AS OF THE DATE FIRSTABOVE WRITTEN:

       

      


      REED'S,
INC.

       

      


       

      By: /s/ Christopher
Reed      

      Name:
Christopher Reed

      Title:
Chief Executive Officer

       

      


       

      


      [Signature
Page to Engagement Letter]

       

      [Exhibit
A, Indemnification Letter Begins on Next Page]

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      Page
7

       

      Source

      Capital
Group, Inc.

       

      This
Exhibit A is a part of and is incorporated into the Proposed Offering Engagement
Letter dated September 11, 2009 between the Issuer and Source Capital Group,
Inc. ("Source"). Capitalized terms used herein and not otherwise defined shall
have the respective meanings provided in the Agreement.

       

      The Issuer agrees to indemnify and
hold harmless Source, its affiliates and each person controlling Source
(within the meaning of Section 15 of the Securities Act), and the
directors, officers, agents and employees of Source, its affiliates and each
such controlling person (Source, and each such entity or person. an "Indemnified
Person") from and against any losses, claims, damages, judgments, assessments,
costs and other liabilities (collectively, the "Liabilities"), and shall
reimburse each Indemnified Person for all fees and expenses (including the
reasonable fees and expenses of one counsel for all Indemnified Persons, except
as otherwise expressly provided herein) (collectively, the "Expenses") as they
are incurred by an Indemnified Person in investigating, preparing, pursuing or
defending any claim, action, proceeding or investigation, whether or not any
Indemnified Person is a party thereto (collectively, the "Actions"), (1) caused
by, or arising out of or in connection with, any untrue statement or alleged
untrue statement of a material fact contained in any offering documents prepared
by the Issuer (including any amendments thereof and supplements thereto) (the
"Offer Documents") or by any omission or alleged omission to state therein a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (other than untrue
statements or alleged untrue statements in, or omissions or alleged omissions
from, information relating to an Indemnified Person furnished in writing by or
on behalf of such Indemnified Person expressly for use in the Offer Documents)
or (ii) otherwise arising out of or in connection with
advice or services rendered or to be rendered by any Indemnified Person pursuant
to the Agreement, the transactions contemplated thereby or any Indemnified
Person's actions or inactions in connection with any such advice, services or
transactions; provided, however,
that, in the case of clause (ii) only, the Issuer shall not be responsible for
any Liabilities or Expenses of any Indemnified Person that have resulted
primarily from such indemnified Person's (x) gross negligence, bad faith or
willful misconduct in connection with any of the advice, actions, inactions or
services referred to above or (y) use of any offering materials or information
concerning the Issuer in connection with the offer or sale of the Securities in
the Transaction which were not authorized for such use by the Issuer and which
use constitutes negligence, bad faith or willful misconduct. The Issuer also
agrees to reimburse each Indemnified Person for all Expenses as they are
incurred in connection with enforcing such Indemnified Person's rights under the
Agreement, which includes this Exhibit A.

       

      Upon
receipt by an Indemnified Person of actual notice of an Action against such
Indemnified Person with respect to which indemnity may be sought under the
Agreement, such Indemnified Person shall promptly notify the Issuer in writing;
provided that failure by any Indemnified Person so to notify the Issuer shall
not relieve the Issuer from any liability which the Issuer may have on account
of this indemnity or otherwise to such Indemnified Person, except to the extent
the Issuer shall have been prejudiced by such failure. The Issuer shall, if
requested by Source, assume the defense of any such Action including the
employment of counsel reasonably satisfactory to Source, which counsel may also
be counsel to the Issuer. Any Indemnified Person 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
Indemnified Person unless: (i) the Issuer has failed promptly to assume the
defense and employ counsel or (ii) the named parties to any such Action
(including any impeded parties) include such Indemnified Person and the Issuer,
and such Indemnified Person shall have been advised in the reasonable opinion of
counsel that there is an actual conflict of interest that prevents the counsel
selected by the Issuer from representing both the Issuer (or another client of
such counsel) and any Indemnified Person; provided that the Issuer shall not in
such event be responsible hereunder for the fees and expenses of more than one
firm of separate counsel for all Indemnified Persons in connection with any
Action or related Actions, in addition to any local counsel. The Issuer shall
not be liable for any settlement of any Action effected without its written
consent (which shall not be unreasonably withheld). In addition, the Issuer
shall not, without the prior written consent of Source (which shall not be
unreasonably withheld), settle, compromise or consent to the entry of any
judgment in or otherwise seek to terminate any pending or threatened
Action in respect of which indemnification or contribution may be sought
hereunder (whether or not such Indemnified Person is a party thereto) unless
such settlement, compromise, consent or termination includes an

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       
 

      Page
8

      Source

      Capital
Group, Enc.

       

      unconditional
release of each Indemnified Person from all Liabilities arising out of such
Action for which indemnification or contribution may be sought hereunder. The
indemnification required hereby shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as such expense,
loss, damage or liability is incurred and is due and payable.

       

      In the
event that the foregoing indemnity is unavailable to an Indemnified Person other
than in accordance with the Agreement, the Issuer shall contribute to the
Liabilities and Expenses paid or payable by such Indemnified Person in such
proportion as is appropriate to reflect (I) the relative benefits to the Issuer,
on the one hand, and to Source and any other Indemnified Person, on the other
hand, of the matters contemplated by the Agreement or (ii) if the allocation
provided by the immediately preceding clause is not permitted by
applicable law, not only such relative benefits but also the relative
fault of the Issuer, on the one hand, and Source and any other Indemnified
Person, on the other hand, in connection with the matters as to which such
Liabilities or Expenses relate, as well as any other relevant equitable
considerations; provided that in no event shall the Issuer contribute less than
the amount necessary to ensure that all Indemnified Persons, in the aggregate,
are not liable for any Liabilities and Expenses in excess of the amount of fees
actually received by Source pursuant to the Agreement. For purposes of this
paragraph, the relative benefits to the Issuer, on the one hand, and to Source
on the other hand, of the matters contemplated by the Agreement shall be deemed
to be in the same proportion as (a) the total value paid or contemplated to be
paid to or received or contemplated to be received by the Issuer in the
transaction or transactions that are within the scope of the Agreement, whether
or not any such transaction is consummated, bears to (b) the fees paid to Source
under the Agreement. Notwithstanding the above, no person guilty of fraudulent
misrepresentation within the meaning of Section 11(f) of the Securities Act of
1933, as amended, shall be entitled to contribution from a party who was not
guilty of fraudulent misrepresentation.

       

      The
Issuer also agrees that no Indemnified Person shall have any liability (whether
direct or indirect, in
contract or tort or otherwise) to the Issuer for or in connection with
advice or services rendered or to be rendered by any Indemnified Person pursuant
to the Agreement, the transactions contemplated thereby or any Indemnified
Person's actions or inactions in connection with any such advice, services or
transactions except for Liabilities (and related Expenses) of the Issuer that
have resulted primarily from such Indemnified Person's gross negligence, bad
faith or willful misconduct in connection with any such advice, actions,
inactions or services.

       

      The
reimbursement, indemnity and contribution obligations of the Issuer set forth
herein shall apply to any modification of the Agreement and shall remain in full
force and effect regardless of any termination of, or the completion of any
Indemnified Person's services under or in connection with, the
Agreement.

       

      ACCEPTED
AND AGREED TO AS OF THE DATE FIRSTABOVE WRITTEN:

       

      


      
        	
                Reed's,
      Inc

                 

                By:
      /s/
      Christopher Reed      

                Name:
      Christopher Reed

                Title:
      Chief Executive Officer

              	
                Source
      Capital Group, Inc.

                 

                By:
      /s/ Richard
      Kreger      

                Name:
      Richard Kreger

                Title:
      Senior Managing Director