exv10w1





Exhibit 10.1



COMMON STOCK PURCHASE AGREEMENT




Dated
as of  June 11, 2010



by and between



JONES SODA CO.



and



GLENGROVE SMALL CAP VALUE, LTD.



 









 





TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	ARTICLE I PURCHASE AND SALE OF COMMON STOCK	 	 	1	 
	Section 1.1
	 	Purchase and Sale of Stock	 	 	1	 
	Section 1.2
	 	Effective Date; Settlement Dates	 	 	1	 
	Section 1.3
	 	Reservation of Common Stock	 	 	2	 
	Section 1.4
	 	Current Report; Prospectus Supplement	 	 	2	 
	 
	 	 	 	 	 	 
	ARTICLE II FIXED REQUEST TERMS; OPTIONAL AMOUNT	 	 	3	 
	Section 2.1
	 	Fixed Request Notice	 	 	3	 
	Section 2.2
	 	Fixed Requests	 	 	3	 
	Section 2.3
	 	Share Calculation	 	 	4	 
	Section 2.4
	 	Limitation of Fixed Requests	 	 	4	 
	Section 2.5
	 	Reduction of Commitment	 	 	5	 
	Section 2.6
	 	Below Threshold Price	 	 	5	 
	Section 2.7
	 	Settlement	 	 	5	 
	Section 2.8
	 	Reduction of Pricing Period	 	 	5	 
	Section 2.9
	 	Optional Amount	 	 	7	 
	Section 2.10
	 	Calculation of Optional Amount Shares	 	 	7	 
	Section 2.11
	 	Exercise of Optional Amount	 	 	7	 
	Section 2.12
	 	Aggregate Limit	 	 	7	 
	Section 2.13
	 	Commitment Shares	 	 	8	 
	 
	 	 	 	 	 	 
	ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE INVESTOR	 	 	9	 
	Section 3.1
	 	Organization and Standing of the Investor	 	 	9	 
	Section 3.2
	 	Authorization and Power	 	 	9	 
	Section 3.3
	 	No Conflicts	 	 	9	 
	Section 3.4
	 	Information	 	 	10	 
	 
	 	 	 	 	 	 
	ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY	 	 	10	 
	Section 4.1
	 	Organization, Good Standing and Power	 	 	10	 
	Section 4.2
	 	Authorization, Enforcement	 	 	10	 
	Section 4.3
	 	Capitalization	 	 	11	 
	Section 4.4
	 	Issuance of Securities	 	 	11	 
	Section 4.5
	 	No Conflicts	 	 	11	 
	Section 4.6
	 	Commission Documents, Financial Statements	 	 	12	 
	Section 4.7
	 	Subsidiaries	 	 	13	 
	Section 4.8
	 	No Material Adverse Effect	 	 	13	 
	Section 4.9
	 	Indebtedness	 	 	14	 
	Section 4.10
	 	Title To Assets	 	 	14	 
	Section 4.11
	 	Actions Pending	 	 	14	 
	Section 4.12
	 	Compliance With Law	 	 	14	 
	Section 4.13
	 	Certain Fees	 	 	15	 
	Section 4.14
	 	Operation of Business	 	 	15	 
	Section 4.15
	 	Environmental Compliance	 	 	16	 






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	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	Section 4.16
	 	Material Agreements	 	 	17	 
	Section 4.17
	 	Transactions With Affiliates	 	 	17	 
	Section 4.18
	 	Securities Act	 	 	17	 
	Section 4.19
	 	Employees	 	 	19	 
	Section 4.20
	 	Use of Proceeds	 	 	19	 
	Section 4.21
	 	Investment Company Act Status	 	 	19	 
	Section 4.22
	 	ERISA	 	 	19	 
	Section 4.23
	 	Taxes	 	 	20	 
	Section 4.24
	 	Insurance	 	 	20	 
	Section 4.25
	 	Acknowledgement Regarding Investor’s Acquisition of Securities	 	 	20	 
	 
	 	 	 	 	 	 
	ARTICLE V COVENANTS	 	 	20	 
	Section 5.1
	 	Securities Compliance; FINRA Filing	 	 	20	 
	Section 5.2
	 	Registration and Listing	 	 	22	 
	Section 5.3
	 	Compliance with Laws	 	 	22	 
	Section 5.4
	 	Keeping of Records and Books of Account; Foreign Corrupt Practices Act	 	 	22	 
	Section 5.5
	 	Limitations on Holdings and Issuances	 	 	23	 
	Section 5.6
	 	Other Agreements and Other Financings	 	 	23	 
	Section 5.7
	 	Stop Orders	 	 	25	 
	Section 5.8
	 	Amendments to the Registration Statement; Prospectus Supplements; Free	 	 	 	 
	 
	 	Writing Prospectuses	 	 	26	 
	Section 5.9
	 	Prospectus Delivery	 	 	26	 
	Section 5.10
	 	Selling Restrictions	 	 	27	 
	Section 5.11
	 	Effective Registration Statement	 	 	28	 
	Section 5.12
	 	Non-Public Information	 	 	28	 
	Section 5.13
	 	Broker/Dealer	 	 	28	 
	Section 5.14
	 	Disclosure Schedule	 	 	28	 
	 
	 	 	 	 	 	 
	ARTICLE VI OPINION OF COUNSEL AND CERTIFICATE; CONDITIONS TO THE SALE AND PURCHASE OF THE SHARES	 	 	29	 
	Section 6.1
	 	Issuance of Commitment Shares; Opinion of Counsel; Certificate	 	 	29	 
	Section 6.2
	 	Conditions Precedent to the Obligation of the Company	 	 	29	 
	Section 6.3
	 	Conditions Precedent to the Obligation of the Investor	 	 	31	 
	 
	 	 	 	 	 	 
	ARTICLE VII TERMINATION	 	 	33	 
	Section 7.1
	 	Term, Termination by Mutual Consent	 	 	33	 
	Section 7.2
	 	Other Termination	 	 	34	 
	Section 7.3
	 	Effect of Termination	 	 	35	 
	 
	 	 	 	 	 	 
	ARTICLE VIII INDEMNIFICATION	 	 	35	 
	Section 8.1
	 	General Indemnity	 	 	35	 
	Section 8.2
	 	Indemnification Procedures	 	 	37	 
	 
	 	 	 	 	 	 
	ARTICLE IX MISCELLANEOUS	 	 	38	 
	Section 9.1
	 	Fees and Expenses	 	 	38	 
	Section 9.2
	 	Specific Enforcement, Consent to Jurisdiction, Waiver of Jury Trial	 	 	39	 
	Section 9.3
	 	Entire Agreement; Amendment	 	 	40	 






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	 	 	 	 	Page	 
	 
	 	 	 	 	 	 
	Section 9.4
	 	Notices	 	 	40	 
	Section 9.5
	 	Waivers	 	 	41	 
	Section 9.6
	 	Headings	 	 	41	 
	Section 9.7
	 	Successors and Assigns	 	 	41	 
	Section 9.8
	 	Governing Law	 	 	42	 
	Section 9.9
	 	Survival	 	 	42	 
	Section 9.10
	 	Counterparts	 	 	42	 
	Section 9.11
	 	Publicity	 	 	42	 
	Section 9.12
	 	Severability	 	 	42	 
	Section 9.13
	 	Further Assurances	 	 	43	 
	 
	 	 	 	 	 	 
	Annex A. Definitions	 	 	 	 






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COMMON STOCK PURCHASE AGREEMENT




     This
COMMON STOCK PURCHASE AGREEMENT, made and entered into on this
11th day of June, 2010
(this “Agreement”), by and between Glengrove Small Cap Value, Ltd., a business company
incorporated under the laws of the British Virgin Islands (the “Investor”), and Jones Soda
Co., a corporation organized and existing under the laws of the State of Washington (the
“Company”). Capitalized terms used but not defined herein shall have the meanings ascribed
to such terms in Annex A hereto.



RECITALS




     WHEREAS, the parties desire that, upon the terms and subject to the conditions contained
herein, the Company may issue and sell to the Investor and the Investor shall thereupon purchase
from the Company up to $10,000,000 of newly issued shares of the Company’s common stock, no par
value (“Common Stock”), subject, in all cases, to the Trading Market Limit;



     WHEREAS, in consideration for the Investor’s execution and delivery of this Agreement, the
Company is concurrently causing its transfer agent to issue to the Investor the Commitment Shares
in accordance with the terms and subject to the conditions of this Agreement; and



     WHEREAS, the issuance of the Commitment Shares and the offer and sale of the Shares hereunder
have been registered by the Company in the Registration Statement, which has been declared
effective by order of the Commission under the Securities Act;



     NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:



ARTICLE I

PURCHASE AND SALE OF COMMON STOCK




     Section 1.1 Purchase and Sale of Stock. Upon the terms and subject to the conditions of this Agreement, during the Investment Period the
Company in its discretion may issue and sell to the Investor up to $10,000,000 (the “Total
Commitment”) of duly authorized, validly issued, fully paid and non-assessable shares of Common
Stock (subject in all cases to the Trading Market Limit, the “Aggregate Limit”), by (i) the
delivery to the Investor of not more than 24 separate Fixed Request Notices (unless the Investor
and the Company mutually agree that a different number of Fixed Request Notices may be delivered)
as provided in Article II hereof and (ii) the exercise by the Investor of Optional Amounts, which
the Company may in its discretion grant to the Investor and which may be exercised by the Investor,
in whole or in part, as provided in Article II hereof. The aggregate of all Fixed Request Amounts
and Optional Amount Dollar Amounts shall not exceed the Aggregate Limit.



     Section 1.2 Effective Date; Settlement Dates. This Agreement shall become effective and binding upon the payment of the fees required to be
paid on or prior to the Effective Date pursuant to Section 9.1, the delivery of irrevocable
instructions to issue the Commitment Shares to the Investor or its designees as provided in Section
2.13 and 6.1, the



 









 







delivery of counterpart signature pages of this Agreement executed by each of the
parties hereto, and the delivery of all other documents, instruments and writings required to be
delivered on the Effective Date, in each case as provided in Section 6.1 hereof, to the offices of
Greenberg Traurig, LLP, 200 Park Avenue, New York, New York 10166, at 5:00 p.m., New York time, on
the Effective Date. In consideration of and in express reliance upon the representations,
warranties and covenants, and otherwise upon the terms and subject to the conditions, of this
Agreement, from and after the Effective Date and during the Investment Period (i) the Company shall
issue and sell to the Investor, and the Investor agrees to purchase from the Company, the Shares in
respect of each Fixed Request and (ii) the Investor may in its discretion elect to purchase Shares
in respect of each Optional Amount. The issuance and sale of Shares to the Investor pursuant to
any Fixed Request or Optional Amount shall occur on the applicable Settlement Date in accordance
with Sections 2.7 and 2.9 (or on such Trading Day in accordance with Section 2.8, as applicable),
provided in each case that all of the conditions precedent thereto set forth in Article VI
theretofore shall have been fulfilled or (to the extent permitted by applicable law) waived.



     Section 1.3 Reservation of Common Stock. The Company has or will have duly authorized and reserved for issuance, and covenants to
continue to so reserve once reserved for issuance, free of all preemptive and other similar rights,
at all times during the Investment Period, the requisite aggregate number of authorized but
unissued shares of its Common Stock to timely effect the issuance, sale and delivery in full to the
Investor of all Shares to be issued in respect of all Fixed Requests and Optional Amounts under
this Agreement, in any case prior to the issuance to the Investor of such Shares.



     Section 1.4 Current Report; Prospectus Supplement. As soon as practicable, but in any event not later than 5:30 p.m. (New York time) on the first
Trading Day immediately following the Effective Date, the Company shall file with the Commission a
report on Form 8-K relating to the transactions contemplated by, and describing the material terms
and conditions of, this Agreement and disclosing all information relating to the transactions
contemplated hereby required to be disclosed in the Registration Statement and the Base Prospectus
(but which permissibly has been omitted therefrom in accordance with the Securities Act),
including, without limitation, information required to be disclosed in the section captioned “Plan
of Distribution” in the Base Prospectus (the “Current Report”). The Current Report shall
include a copy of this Agreement as an exhibit. To the extent applicable, the Current Report shall
be incorporated by reference in the Registration Statement in accordance with the provisions of
Rule 430B under the Securities Act. The Company heretofore has provided the Investor a reasonable
opportunity to comment on a draft of such Current Report and has given due consideration to such
comments. The Company shall file a final Base Prospectus pursuant to Rule 424(b) under the
Securities Act on or prior to the second Trading Day immediately following the Effective Date.
Pursuant to Section 5.9 and subject to the provisions of Section 5.8, on the first Trading Day
immediately following the last Trading Day of each Pricing Period, the Company shall file with the
Commission a Prospectus Supplement pursuant
to Rule 424(b) under the Securities Act disclosing the number of Shares to be issued and sold to
the Investor thereunder, the total purchase price therefor and the net proceeds to be received by
the Company therefrom and, to the extent required by the Securities Act, identifying the Current
Report.



2









 





ARTICLE II

FIXED REQUEST TERMS; OPTIONAL AMOUNT




     Subject to the satisfaction of the conditions set forth in this Agreement, the parties agree
(unless otherwise mutually agreed upon by the parties in writing) as follows:



     Section 2.1 Fixed Request Notice. The Company may, from time to time in its sole discretion, no later than 9:30 a.m. (New York
time) on the second Trading Day immediately preceding the first Trading Day of the Pricing Period,
provide to the Investor a Fixed Request notice, substantially in the form attached hereto as
Exhibit A (the “Fixed Request Notice”), which Fixed Request Notice shall become
effective at 9:30 a.m. (New York time) on the first Trading Day of the Pricing Period specified in
the Fixed Request Notice. The Fixed Request Notice shall specify the Fixed Amount Requested,
establish the Threshold Price for such Fixed Request, designate the first and last Trading Day of
the Pricing Period and specify the Optional Amount, if any, that the Company elects to grant to the
Investor during the Pricing Period and the applicable Threshold Price for such Optional Amount (the
“Optional Amount Threshold Price”). The Threshold Price and the Optional Amount Threshold
Price established by the Company in a Fixed Request Notice may be the same or different, in the
Company’s sole discretion. Upon the terms and subject to the conditions of this Agreement, the
Investor is obligated to accept each Fixed Request Notice prepared and delivered in accordance with
the provisions of this Agreement.



     Section 2.2 Fixed Requests. From time to time during the Investment Period, the Company may in its sole discretion deliver
to the Investor a Fixed Request Notice for a specified Fixed Amount Requested, and the applicable
discount price (the “Discount Price”) shall be determined, in accordance with the price and
share amount parameters as set forth below or such other parameters mutually agreed upon by the
Investor and the Company, and upon the terms and subject to the conditions of this Agreement, the
Investor shall purchase from the Company the Shares subject to such Fixed Request Notice at the
Discount Price; provided, however, that (i) if an ex-dividend date is established
by the Trading Market in respect of the Common Stock on or between the first Trading Day of the
applicable Pricing Period and the applicable Settlement Date, the Discount Price shall be reduced
by the per share dividend amount and (ii) unless the parties otherwise mutually agree, the Company
may not deliver any single Fixed Request Notice for a Fixed Amount Requested in excess of the
lesser of (a) the amount in the applicable Fixed Amount Requested column below and (b) 2.5% of the
Market Capitalization:



	 	 	 	 	 
	Threshold Price	 	Fixed Amount Requested	 	Discount Price
	 
	Equal to or greater than $5.00

	 	Not to exceed $2,500,000
	 	94.00% of the VWAP
	Equal to or greater than $4.50 and less than $5.00

	 	Not to exceed $2,250,000
	 	94.00% of the VWAP
	Equal to or greater than $4.00 and less than $4.50

	 	Not to exceed $2,000,000
	 	94.00% of the VWAP
	Equal to or greater than $3.50 and less than $4.00

	 	Not to exceed $1,750,000
	 	94.00% of the VWAP
	Equal to or greater than $3.00 and less than $3.50

	 	Not to exceed $1,500,000
	 	94.00% of the VWAP
	Equal to or greater than $2.50 and less than $3.00

	 	Not to exceed $1,250,000
	 	94.00% of the VWAP






3









 






	 	 	 	 	 
	Threshold Price	 	Fixed Amount Requested	 	Discount Price
	 
	Equal to or greater than $2.00 and less than $2.50

	 	Not to exceed $1,000,000
	 	94.00% of the VWAP
	Equal to or greater than $1.75 and less than $2.00

	 	Not to exceed $875,000
	 	94.00% of the VWAP
	Equal to or greater than $1.50 and less than $1.75

	 	Not to exceed $750,000
	 	94.00% of the VWAP
	Equal to or greater than $1.25 and less than $1.50

	 	Not to exceed $625,000
	 	94.00% of the VWAP
	Equal to or greater than $1.00 and less than $1.25

	 	Not to exceed $500,000
	 	94.00% of the VWAP
	Equal to or greater than $0.75 and less than $1.00

	 	Not to exceed $375,000
	 	94.00% of the VWAP
	Equal to or greater than $0.50 and less than $0.75

	 	Not to exceed $250,000
	 	94.00% of the VWAP






     Anything to the contrary in this Agreement notwithstanding, at no time shall the Investor
be required to purchase more than $2,500,000 worth of Common Stock in respect of any Pricing Period
(not including Common Stock subject to any Optional Amount). The date on which the Company
delivers any Fixed Request Notice in accordance with this Section 2.2 hereinafter shall be referred
to as a “Fixed Request Exercise Date”.



     Section 2.3 Share Calculation. With respect to the Trading Days during the applicable Pricing Period for which the VWAP equals
or exceeds the Threshold Price, the number of Shares to be issued by the Company to the Investor
pursuant to a Fixed Request shall equal the aggregate sum of each quotient (calculated for each
Trading Day during the applicable Pricing Period for which the VWAP equals or exceeds the Threshold
Price) determined pursuant to the following equation (rounded to the nearest whole Share):




	N = 	 	(A x B)/C, where:
	 
	N = 	 	the number of Shares to be issued by the Company to the Investor in
respect of a Trading Day during the applicable Pricing Period for
which the VWAP equals or exceeds the Threshold Price,
	 
	A = 	 	0.10 (the “Multiplier”), provided, however, that if the Company and
the Investor mutually agree prior to the commencement of a Pricing
Period that the number of consecutive Trading Days constituting a
Pricing Period shall be less than 10, then the Multiplier
correspondingly shall be increased to equal the decimal equivalent (in
10-millionths) of a
fraction, the numerator of which is one and the denominator of which equals
the number of Trading Days in the reduced Pricing Period (it being hereby
acknowledged and agreed that this proviso shall not apply to any unilateral
determination by the Company to reduce a Pricing Period, but rather, Section
2.8 hereof shall apply),
	 
	B = 	 	the total Fixed Amount Requested, and
	 
	C = 	 	the applicable Discount Price.





     Section 2.4 Limitation of Fixed Requests. The Company shall not make more than one Fixed Request in each Pricing Period. Not less than
five Trading Days shall elapse between



4









 







the end of one Pricing Period and the commencement of any
other Pricing Period during the Investment Period. There shall be permitted a maximum of 24 Fixed
Requests during the Investment Period. Each Fixed Request automatically shall expire immediately
following the last Trading Day of each Pricing Period.



     Section 2.5 Reduction of Commitment. On the Settlement Date with respect to a Pricing Period, the Investor’s Total Commitment under
this Agreement automatically (and without the need for any amendment to this Agreement) shall be
reduced, on a dollar-for-dollar basis, by the total amount of the Fixed Request Amount and the
Optional Amount Dollar Amount, if any, for such Pricing Period paid to the Company at such
Settlement Date.



     Section 2.6 Below Threshold Price. If the VWAP on any Trading Day in a Pricing Period is lower than the Threshold Price, then for
each such Trading Day the Fixed Amount Requested shall be reduced, on a dollar-for-dollar basis, by
an amount equal to the product of (x) the Multiplier and (y) the total Fixed Amount Requested, and
no Shares shall be purchased or sold with respect to such Trading Day, except as provided below. If
trading in the Common Stock on NASDAQ (or any other U.S. national securities exchange on which the
Common Stock is then listed) is suspended for any reason for more than three hours on any Trading
Day, the Investor may at its option deem the price of the Common Stock to be lower than the
Threshold Price for such Trading Day and, for each such Trading Day, the total amount of the Fixed
Amount Requested shall be reduced as provided in the immediately preceding sentence, and no Shares
shall be purchased or sold with respect to such Trading Day, except as provided below. For each
Trading Day during a Pricing Period on which the VWAP is lower (or is deemed to be lower as
provided in the immediately preceding sentence) than the Threshold Price, the Investor may in its
sole discretion elect to purchase such U.S. dollar amount of Shares equal to the amount by which
the Fixed Amount Requested has been reduced in accordance with this Section 2.6, at the Threshold
Price multiplied by 0.94. The Investor shall inform the Company via facsimile transmission not
later than 8:00 p.m. (New York time) on the last Trading Day of such Pricing Period as to the
number of Shares, if any, the Investor elects to purchase as provided in this Section 2.6.



     Section 2.7 Settlement. The payment for, against simultaneous delivery of, Shares in respect of each Fixed Request shall
be settled on the second Trading Day next following the last Trading Day of each Pricing Period, or
on such earlier date as the parties may mutually agree (the “Settlement Date”). On each
Settlement Date, the Company shall, or shall cause its transfer agent to, electronically transfer
the Shares purchased by the Investor by crediting the Investor’s or its designees’ account at DTC
through its Deposit/Withdrawal at Custodian (DWAC) system, which Shares shall be freely tradable
and transferable and without restriction on resale, against simultaneous payment therefor to the
Company’s designated account by wire transfer of immediately available funds; provided that
if the Shares are received by the Investor later than 1:00 p.m. (New York time), payment therefor
shall be made with next day funds. As set forth in Section 9.1(ii), a failure by the Company to
deliver such Shares shall result in the payment of liquidated damages by the Company to the
Investor.



     Section 2.8 Reduction of Pricing Period. If during a Pricing Period the Company elects to reduce the number of Trading Days in such
Pricing Period (and thereby amend its previously delivered Fixed Request Notice), the Company shall
so notify the Investor before



5









 







9:00 a.m. (New York time) on any Trading Day during a Pricing Period
(a “Reduction Notice”) and the last Trading Day of such Pricing Period shall be the Trading
Day immediately preceding the Trading Day on which the Investor received such Reduction Notice;
provided, however, that if the Company delivers the Reduction Notice later than
9:00 a.m. (New York time) on a Trading Day during a Pricing Period, then the last Trading Day of
such Pricing Period instead shall be the Trading Day on which the Investor received such Reduction
Notice.



     Upon receipt of a Reduction Notice, the Investor (i) shall purchase the Shares in respect of
each Trading Day in such reduced Pricing Period for which the VWAP equals or exceeds the Threshold
Price in accordance with Section 2.3 hereof; (ii) may elect to purchase the Shares in respect of
any Trading Day in such reduced Pricing Period for which the VWAP is (or is deemed to be) lower
than the Threshold Price in accordance with Section 2.6 hereof; and (iii) may elect to exercise all
or any portion of an Optional Amount on any Trading Day during such reduced Pricing Period in
accordance with Sections 2.10 and 2.11 hereof.



     In addition, upon receipt of a Reduction Notice, the Investor may elect to purchase such U.S.
dollar amount of additional Shares equal to the product determined pursuant to the following
equation:




	D = 	 	(A/B) x (B – C), where:
	 
	D = 	 	the U.S. dollar amount of additional Shares to be purchased,
	 
	A = 	 	the Fixed Amount Requested,
	 
	B = 	 	10 or, for purposes of this Section 2.8, such lesser number of Trading
Days as the parties may mutually agree to, and
	 
	C = 	 	the number of Trading Days in the reduced Pricing Period,




at a per Share price equal to (x) the Fixed Amount Requested attributable to the reduced Pricing
Period divided by (y) the number of Shares to be purchased during such reduced Pricing Period
pursuant to clauses (i) and (ii) (as applicable) of the immediately preceding paragraph.




     The Investor may also elect to exercise any portion of the applicable Optional Amount which
was unexercised during the reduced Pricing Period by issuing an Optional Amount Notice to the
Company not later than 10:00 a.m. (New York time) on the first Trading Day next following the last
Trading Day of the reduced Pricing Period. The number of Shares to be issued upon exercise of such
Optional Amount shall be calculated pursuant to the equation set forth in Section 2.10 hereof,
except that “C” shall equal the greater of (i) the VWAP for the Common Stock on the last Trading
Day of the reduced Pricing Period or (ii) the Optional Amount Threshold Price.



     The payment for, against simultaneous delivery of, Shares to be purchased and sold in
accordance with this Section 2.8 shall be settled on the second Trading Day next following the
Trading Day on which the Investor receives a Reduction Notice.



6









 





     Section 2.9 Optional Amount. With respect to any Pricing Period, the Company may in its sole discretion grant to the Investor
the right to exercise, from time to time during the Pricing Period (but not more than once on any
Trading Day), all or any portion of an Optional Amount. The maximum Optional Amount Dollar Amount
and the Optional Amount Threshold Price shall be set forth in the Fixed Request Notice. If an
ex-dividend date is established by the Trading Market in respect of the Common Stock on or between
the first Trading Day of the applicable Pricing Period and the applicable Settlement Date, the
applicable exercise price in respect of the Optional Amount shall be reduced by the per share
dividend amount. Each daily Optional Amount exercise shall be aggregated during the Pricing Period
and settled on the next Settlement Date. The Optional Amount Threshold Price designated by the
Company in its Fixed Request Notice shall apply to each Optional Amount exercised during the
applicable Pricing Period.



     Section 2.10 Calculation of Optional Amount Shares. The number of shares of Common Stock to be issued in connection with the exercise of an Optional
Amount shall be the quotient determined pursuant to the following equation (rounded to the nearest
whole Share):




	O = 	 	A/(B x C), where:
	 
	O = 	 	the number of shares of Common Stock to be issued in connection with such Optional Amount
exercise,
	 
	A = 	 	the Optional Amount Dollar Amount with respect to which the Investor has delivered an
Optional Amount Notice,
	 
	B = 	 	0.94, and
	 
	C = 	 	the greater of (i) the VWAP for the Common Stock
on the day the Investor delivers the Optional Amount
Notice or (ii) the Optional Amount Threshold Price.





     Section 2.11 Exercise of Optional Amount. If granted by the Company to the Investor with respect to a Pricing Period, all or any portion
of the Optional Amount may be exercised by the Investor on any Trading Day during the Pricing
Period, subject to the limitations set forth in Section 2.9. As a condition to each exercise of an
Optional Amount pursuant to this Section 2.11, the Investor shall issue an Optional Amount Notice
to the Company no later than 8:00 p.m. (New York time) on the day of such Optional Amount exercise.
If the Investor does not exercise an Optional Amount in full by 8:00 p.m. (New York time) on the
last Trading Day of the applicable Pricing Period, such unexercised portion of the Investor’s
Optional Amount with respect to that Pricing Period automatically shall lapse and terminate.



     Section 2.12 Aggregate Limit. Notwithstanding anything to the contrary contained in this Agreement, in no event may the
Company issue a Fixed Request Notice or grant an Optional Amount to the extent that the sale of
Shares pursuant thereto and pursuant to all prior Fixed Request Notices and Optional Amounts issued
hereunder, and as liquidated damages pursuant to Section 9.1(ii), would cause the Company to sell
or the Investor to purchase Shares which in the aggregate are in excess of the Aggregate Limit. If
the Company issues a Fixed Request Notice or Optional Amount that otherwise would permit the
Investor to purchase shares of Common Stock which would cause the aggregate purchases by Investor
hereunder to exceed the Aggregate



7









 







Limit, such Fixed Request Notice or Optional Amount shall be void
ab initio to the extent of the amount by which the dollar value of shares or number of shares, as
the case may be, of Common Stock otherwise issuable pursuant to such Fixed Request Notice or
Optional Amount together with the dollar value of shares or number of shares, as the case may be,
of all other Common Stock purchased by the Investor pursuant hereto, or issued as liquidated
damages pursuant to Section 9.1(ii), would exceed the Aggregate Limit. The Company hereby
represents, warrants and covenants that neither it nor any of its Subsidiaries (i) has effected any
transaction or series of transactions, (ii) is a party to any pending transaction or series of
transactions or (iii) shall enter into any contract, agreement, agreement-in-principle, arrangement
or understanding with respect to, or shall effect, any Other Financing which, in any of such cases,
may be aggregated with the transactions contemplated by this Agreement for purposes of determining
whether approval of the Company’s stockholders is required under any bylaw, listed securities
maintenance standards or other rules of the Trading Market; provided, however, that
the Company shall be permitted to take any action referred to in clause (iii) above if (a) the
Company has timely provided the Investor with an Integration Notice as provided in Section 5.6(ii)
hereof and (b) unless the Investor has previously terminated this Agreement pursuant to Section
7.2, the Company obtains any requisite stockholder approval which may be required for the Company
to consummate such Other Financing described in such Integration Notice.



     At the Company’s sole discretion, and effective automatically upon receipt by the Investor of
notice thereof from the Company, this Agreement may be amended by the Company from time to time to
reduce the Aggregate Limit by a specified dollar amount of Common Stock
as shall be determined by the Company in its sole discretion; provided,
however, that any such amendment of this Agreement (and any such purported amendment) shall
be void and of no force and effect if the effect thereof would restrict, materially delay, conflict
with or impair the ability or right of the Company to perform its obligations under this Agreement,
including, without limitation, the obligation of the Company to deliver the Commitment Shares to
the Investor in accordance with the terms of Section 2.13 and Section 6.1 of this Agreement, the
obligation of the Company to deliver the Shares to the Investor in respect of a previously
delivered Fixed Request Notice or Optional Amount on the applicable Settlement Date. In the event
the Company shall have elected to reduce the Aggregate Limit as provided in the immediately
preceding sentence, at the Company’s sole discretion, and effective automatically upon receipt by
the Investor of notice thereof from the Company, the Company may subsequently amend this Agreement
to increase the Aggregate Limit up to $10,000,000; provided, however, that in no
event shall the Company be entitled to issue Fixed Requests and grant Optional Amounts during the
remainder of the Investment Period for an aggregate amount greater than the amount obtained by
subtracting (x) the aggregate of all Fixed Request Amounts and Optional Amount Dollar Amounts
(including any amounts paid as liquidated damages pursuant to Section 9.1(ii) hereunder) covered by
all Fixed Requests and Optional Amounts theretofore issued or granted by the Company in respect of
which a settlement has occurred pursuant to Section 2.7 from (y) $10,000,000, subject in all cases
to the Trading Market Limit.



     Section 2.13 Commitment Shares . In consideration for the Investor’s execution and delivery of this Agreement, concurrently
with the execution and delivery of this Agreement on the Effective Date, the Company shall deliver
irrevocable instructions to its transfer agent to electronically transfer the Commitment Shares to
the Investor, not later than 4:00 p.m. (New York time) on the seventh Trading Day immediately
following the Effective Date, by crediting



8









 







the Investor’s or its designees’ account at DTC through
its Deposit/Withdrawal at Custodian (DWAC) system, which Commitment Shares shall be issued pursuant
to the Registration Statement and without any restriction on resale; provided that the
Investor hereby agrees that it shall not resell or transfer the Commitment Shares for a period of
90 days immediately following the Effective Date, except for any transfer to an Affiliate of the
Investor. For the avoidance of doubt, all of the Commitment Shares shall be fully earned as of the
Effective Date, regardless of whether any Fixed Requests are issued by the Company or settled
hereunder.



ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE INVESTOR




     The Investor hereby makes the following representations and warranties to the Company:



     Section 3.1 Organization and Standing of the Investor. The Investor is a business
company duly organized, validly existing and in good standing under
the laws of the British Virgin Islands.



     Section 3.2 Authorization and Power. The Investor has the requisite corporate power and authority to enter into and perform its
obligations under this Agreement and to purchase the Shares in accordance with the terms hereof.
The execution, delivery and performance of this Agreement by the Investor and the consummation by
it of the transactions contemplated hereby have been duly authorized by all necessary corporate
action, and no further consent or authorization of the Investor, its Board of Directors or
stockholders is required. This Agreement has been duly executed and delivered by the Investor.
This Agreement constitutes a valid and binding obligation of the Investor enforceable against it in
accordance with its terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship, receivership, or similar laws
relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other
equitable principles of general application.



     Section 3.3 No Conflicts. The execution, delivery and performance by the Investor of this Agreement and the consummation
by the Investor of the transactions contemplated herein do not and shall not (i) result in a
violation of such Investor’s charter documents, bylaws or other applicable organizational
instruments, (ii) conflict with, constitute a default (or an event which, with notice or lapse of
time or both, would become a default) under, or give rise to any rights of termination, amendment,
acceleration or cancellation of, any material agreement, mortgage, deed of trust, indenture, note,
bond, license, lease agreement, instrument or obligation to which the Investor is a party or is
bound, (iii) create or impose any lien, charge or encumbrance on any property of the Investor under
any agreement or any commitment to which the Investor is party or under which the Investor is bound
or under which any of its properties or assets are bound, or (iv) result in a violation of any
federal, state, local or foreign statute, rule, or regulation, or any order, judgment or decree of
any court or governmental agency applicable to the Investor or by which any of its properties or
assets are bound or affected, except, in the case of clauses (ii), (iii) and (iv), for such
conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would
not, individually or in the aggregate, prohibit or otherwise interfere with the ability of the
Investor to enter into and perform its obligations under this Agreement in any material respect.
The Investor is not required under federal, state, local or foreign law, rule or



9









 







regulation to
obtain any consent, authorization or order of, or make any filing or registration with, any court
or governmental agency in order for it to execute, deliver or perform any of its obligations under
this Agreement or to purchase the Shares in accordance with the terms hereof.



     Section 3.4 Information. All materials relating to the business, financial condition, management and operations of the
Company and materials relating to the offer and sale of the Securities which have been requested by
the Investor have been furnished or otherwise made available to the Investor or its advisors
(subject to Section 5.12 of this Agreement). The Investor and its advisors have been afforded the
opportunity to ask questions of representatives of the Company. The Investor has sought such
accounting, legal and tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities. The Investor understands that it (and
not the Company) shall be responsible for its own tax liabilities that may arise as a result of
this investment or the transactions contemplated by this Agreement. The Investor shall comply in
all material respects with its obligations under U.S. federal and applicable state securities laws
and
all rules and regulations promulgated thereunder in connection with this Agreement and the
transactions contemplated hereby and the purchase and sale of the Shares.



ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY




     Except as set forth in the disclosure schedule delivered by the Company to the Investor (which
is hereby incorporated by reference in, and constitutes an integral part of, this Agreement) (the
“Disclosure Schedule”), the Company hereby makes the following representations and
warranties to the Investor:



     Section 4.1 Organization, Good Standing and Power. The Company is a corporation duly
organized, validly existing and in good standing under the
laws of the State of Washington and has the requisite corporate power and authority to own, lease
and operate its properties and assets and to conduct its business as it is now being conducted.
The Company and each Subsidiary is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the business conducted or property owned
by it makes such qualification necessary, except for any jurisdiction in which the failure to be so
qualified would not have a Material Adverse Effect.



     Section 4.2 Authorization, Enforcement. The Company has the requisite corporate power and authority to enter into and perform this
Agreement and to issue and sell the Securities in accordance with the terms hereof. Except for
approvals of the Company’s Board of Directors or a committee thereof as may be required in
connection with any issuance and sale of Shares to the Investor hereunder (which approvals shall be
obtained prior to the delivery of any Fixed Request Notice), the execution, delivery and
performance by the Company of this Agreement and the consummation by it of the transactions
contemplated hereby have been duly and validly authorized by all necessary corporate action and no
further consent or authorization of the Company or its Board of Directors or stockholders is
required. This Agreement has been duly executed and delivered by the Company and constitutes a
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,



10









 







liquidation, conservatorship, receivership or similar laws relating to,
or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable
principles of general application.



     Section 4.3 Capitalization. The authorized capital stock of the Company and the shares thereof issued and outstanding are as
set forth in the Commission Documents as of the dates reflected therein. All of the outstanding
shares of Common Stock have been duly authorized and validly issued, and are fully paid and
nonassessable. Except as set forth in the Commission Documents, as of the Effective Date, no
shares of Common Stock were entitled to preemptive rights or registration rights and there were no
outstanding options, warrants, scrip, rights to subscribe to, call or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable for, any shares of
capital stock of the Company, other than those issued or granted in the ordinary
course of business. Except as set forth in the Commission Documents, as of the Effective Date,
there were no contracts, commitments, understandings, or arrangements by which the Company is or
may become bound to issue additional shares of the capital stock of the Company or options,
securities or rights convertible into or exchangeable for any shares of capital stock of the
Company. Except for customary transfer restrictions contained in agreements entered into by the
Company to sell restricted securities or as set forth in the Commission Documents, as of the
Effective Date, the Company was not a party to, and it had no knowledge of, any agreement
restricting the voting or transfer of any shares of the capital stock of the Company. Except as
set forth in the Commission Documents, the offer and sale of all capital stock, convertible or
exchangeable securities, rights, warrants or options of the Company issued prior to the Effective
Date complied in all material respects with all applicable federal and state securities laws, and
no stockholder has any right of rescission or damages or any “put” or similar right with respect
thereto that would have a Material Adverse Effect. The Company has furnished or made available to
the Investor via the Commission’s Electronic Data Gathering, Analysis and Retrieval System
(“EDGAR”) true and correct copies of the Company’s Articles of Incorporation as in effect
on the Effective Date (the “Charter”), and the Company’s Bylaws as in effect on the
Effective Date (the “Bylaws”).



     Section 4.4 Issuance of Securities. The Commitment Shares have been, and the Shares to be issued under this Agreement have been or
will be (prior to the delivery of any Fixed Request Notice to the Investor hereunder), duly
authorized by all necessary corporate action on the part of the Company. The Commitment Shares,
when issued in accordance with the terms of this Agreement, and the Shares, when paid for in
accordance with the terms of this Agreement, shall be validly issued and outstanding, fully paid
and nonassessable and free from all liens, charges, taxes, security interests, encumbrances, rights
of first refusal, preemptive or similar rights and other encumbrances with respect to the issue
thereof.



     Section 4.5 No Conflicts. The execution, delivery and performance by the Company of this Agreement and the consummation by
the Company of the transactions contemplated hereby do not and shall not (i) result in a violation
of any provision of the Company’s Charter or Bylaws, (ii) conflict with, constitute a default (or
an event which, with notice or lapse of time or both, would become a default) under, or give rise
to any rights of termination, amendment, acceleration or cancellation of, any material agreement,
mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation
to which the Company or any of its Significant Subsidiaries is a party or is bound (including,
without limitation, any listing



11









 







agreement with the Trading Market), (iii) create or impose a lien,
charge or encumbrance on any property of the Company or any of its Significant Subsidiaries under
any agreement or any commitment to which the Company or any of its Significant Subsidiaries is a
party or under which the Company or any of its Significant Subsidiaries is bound or under which any
of their respective properties or assets are bound, or (iv) result in a violation of any federal,
state, local or foreign statute, rule, regulation, order, judgment or decree applicable to the
Company or any of its Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries are bound or affected, except, in the case of clauses (ii), (iii) and (iv), for such
conflicts, defaults, terminations,
amendments, acceleration, cancellations, liens, charges, encumbrances and violations as would not,
individually or in the aggregate, have a Material Adverse Effect. The Company is not required
under federal, state, local or foreign law, rule or regulation to obtain any consent, authorization
or order of, or make any filing or registration with, any court or governmental agency in order for
it to execute, deliver or perform any of its obligations under this Agreement, or to issue and sell
the Securities to the Investor in accordance with the terms hereof (other than any filings which
may be required to be made by the Company with the Commission, the Financial Industry Regulatory
Authority (the “FINRA”) or the Trading Market subsequent to the Effective Date, including
but not limited to a Prospectus Supplement under Sections 1.4 and 5.9 of this Agreement, and any
registration statement, prospectus or prospectus supplement which has been or may be filed pursuant
to this Agreement).



     Section 4.6 Commission Documents, Financial Statements. (a) The Common Stock is registered
pursuant to Section 12(b) or 12(g) of the Exchange Act and,
except as disclosed in the Commission Documents, as of the Effective Date the Company had timely
filed (giving effect to permissible extensions in accordance with Rule 12b-25 under the Exchange
Act) all Commission Documents. The Company has delivered or made available to the Investor via
EDGAR or otherwise true and complete copies of the Commission Documents filed with the Commission
prior to the Effective Date (including, without limitation, the 2009 Form 10-K) and has delivered
or made available to the Investor via EDGAR or otherwise true and complete copies of all of the
Commission Documents heretofore incorporated by reference in the Registration Statement and the
Prospectus. The Company has not provided to the Investor any information which, according to
applicable law, rule or regulation, should have been disclosed publicly by the Company but which
has not been so disclosed, other than with respect to the transactions contemplated by this
Agreement. As of its filing date, each Commission Document filed with the Commission and
incorporated by reference in the Registration Statement and the Prospectus (including, without
limitation, the 2009 Form 10-K) complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as applicable, and other federal, state and local laws, rules
and regulations applicable to it, and, as of its filing date (or, if amended or superseded by a
filing prior to the Effective Date, on the date of such amended or superseded filing), such
Commission Document did 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 light of the circumstances under which they were made, not misleading. Each Commission Document
to be filed with the Commission after the Effective Date and incorporated by reference in the
Registration Statement, the Prospectus and any Prospectus Supplement required to be filed pursuant
to Sections 1.4 and 5.9 hereof during the Investment Period (including, without limitation, the
Current Report), when such document becomes effective or is filed with the Commission, as the case
may be, shall comply in all material respects with the requirements of the Securities Act or the
Exchange Act, as applicable,



12









 







and other federal, state and local laws, rules and regulations
applicable to it, and shall 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 light of the circumstances under which they were made, not misleading.



          (b) The financial statements, together with the related notes and schedules, of the Company
included in the Commission Documents comply as to form in all material respects
with all applicable accounting requirements and the published rules and regulations of the
Commission and all other applicable rules and regulations with respect thereto. Such financial
statements, together with the related notes and schedules, have been prepared in accordance with
GAAP applied on a consistent basis during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be condensed or summary
statements), and fairly present in all material respects the financial condition of the Company and
its consolidated Subsidiaries as of 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).



          (c) The Company has timely filed with the Commission and made available to the Investor via
EDGAR or otherwise all certifications and statements required by (x) Rule 13a-14 or Rule 15d-14
under the Exchange Act or (y) 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002
(“SOXA”)) with respect to all relevant Commission Documents. The Company is in compliance
in all material respects with the provisions of SOXA applicable to it as of the date hereof. The
Company maintains disclosure controls and procedures required by Rule 13a-15 or Rule 15d-15 under
the Exchange Act; such controls and procedures are effective to ensure that all material
information concerning the Company and its Subsidiaries is made known on a timely basis to the
individuals responsible for the timely and accurate preparation of the Company’s Commission filings
and other public disclosure documents. As used in this Section 4.6(c), the term “file” shall be
broadly construed to include any manner in which a document or information is furnished, supplied
or otherwise made available to the Commission.



          (d) Deloitte & Touche LLP, who have expressed their opinions on the audited financial
statements and related schedules included or incorporated by reference in the Registration
Statement and the Base Prospectus are, with respect to the Company, independent public accountants
as required by the Securities Act and is an independent registered public accounting firm within
the meaning of SOXA as required by the rules of the Public Company Accounting Oversight Board.



     Section 4.7 Subsidiaries. The 2009 Form 10-K sets forth each Subsidiary of the Company as of the Effective Date, showing
its jurisdiction of incorporation or organization and the percentage of the Company’s ownership of
the outstanding capital stock or other ownership interests of such Subsidiary, and the Company does
not have any other Subsidiaries as of the Effective Date.



     Section 4.8 No Material Adverse Effect. Since December 31, 2009, the Company has not experienced or suffered any Material Adverse
Effect, and there exists no current state of



13









 







facts, condition or event which would have a Material
Adverse Effect, except (i) as disclosed in any Commission Documents filed since December 31, 2009
or (ii) continued losses from operations.



     Section 4.9 Indebtedness. The Company’s Quarterly Report on Form 10-Q for its fiscal quarter ended March 31, 2010 sets
forth, as of March 31, 2010, all outstanding secured and unsecured Indebtedness of the Company or
any Subsidiary, or for which the Company or any Subsidiary has commitments through such date. For
the purposes of this Agreement, “Indebtedness” shall mean (a) any liabilities for borrowed
money or amounts owed in excess of $10,000,000 (other than trade accounts payable incurred in the
ordinary course of business), (b) all guaranties, endorsements, indemnities and other contingent
obligations in respect of Indebtedness of others in excess of $10,000,000, whether or not the same
are or should be reflected in the Company’s balance sheet (or the notes thereto), except guaranties
by endorsement of negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business; and (c) the present value of any lease payments in excess of
$10,000,000 due under leases required to be capitalized in accordance with GAAP. There is no
existing or continuing default or event of default in respect of any Indebtedness of the Company or
any of its Subsidiaries.



     Section 4.10 Title To Assets. Each of the Company and its Subsidiaries has good and marketable title to all of their
respective real and personal property reflected in the Commission Documents, free of mortgages,
pledges, charges, liens, security interests or other encumbrances, except for those indicated in
the Commission Documents or those that would not have a Material Adverse Effect. To the Company’s
knowledge, all real property leases of the Company are valid and subsisting and in full force and
effect in all material respects.



     Section 4.11 Actions Pending. There is no action, suit, claim, investigation or proceeding pending, or to the knowledge of the
Company threatened, against the Company or any Subsidiary which questions the validity of this
Agreement or the transactions contemplated hereby or any action taken or to be taken pursuant
hereto or thereto. Except as set forth in the Commission Documents, there is no action, suit,
claim, investigation or proceeding pending, or to the knowledge of the Company threatened, against
or involving the Company, any Subsidiary or any of their respective properties or assets, or
involving any officers or directors of the Company or any of its Subsidiaries, including, without
limitation, any securities class action lawsuit or stockholder derivative lawsuit, in each case
which, if determined adversely to the Company, its Subsidiary or any officer or director of the
Company or its Subsidiaries, would have a Material Adverse Effect. With respect to each of those
certain claims, disputes, investigations, arbitrations, actions or proceedings under the caption
“Item 1. Legal Proceedings” in Part II of the Company’s Quarterly Report on Form 10-Q for its
fiscal quarter ended March 31, 2010, there has been no event or change required to be disclosed in
a filing under the Exchange Act that has not been so disclosed.



     Section 4.12 Compliance With Law. The business of the Company and the Subsidiaries has been and is presently being conducted in
compliance with all applicable federal, state, local and foreign governmental laws, rules,
regulations and ordinances, except as set forth in the Commission Documents and except for such
non-compliance which, individually or in the aggregate, would not have a Material Adverse Effect.




14











 





     Section 4.13 Certain Fees. Except for the placement fee payable by the Company to Reedland Capital Partners, an
Institutional Division of Financial West Group, Member FINRA/SIPC (“Reedland”), which shall
be set forth in a separate engagement letter between the Company and Reedland (a true and complete
fully executed copy of which has heretofore been provided to the Investor), no brokers, finders or
financial advisory fees or commissions shall be payable by the Company or any Subsidiary (or any of
their respective affiliates) with respect to the transactions contemplated by this Agreement.
Except as set forth in this Section 4.13 or as disclosed in Section 4.13 of the Disclosure Schedule
or in the Registration Statement, the Prospectus or the Current Report, there are no contracts,
agreements or understandings between the Company and any person that would give rise to a valid
claim against the Company, the Investor or the Broker-Dealer for a brokerage commission, finder’s
fee or other like payment in connection with the transactions contemplated by this Agreement or, to
the Company’s knowledge, any arrangements, agreements, understandings, payments or issuance with
respect to the Company or any of its officers, directors, stockholders, partners, employees,
Subsidiaries or Affiliates that may affect the FINRA’s determination of the amount of compensation
to be received by any FINRA member (including, without limitation, those FINRA members set forth on
Schedule 4.13 of the Disclosure Schedule) or person associated with any FINRA member in connection
with the transactions contemplated by this Agreement. Except as set forth in this Section 4.13 or
as disclosed in Section 4.13 of the Disclosure Schedule or in the Registration Statement, the
Prospectus or the Current Report, no “items of value” (within the meaning of FINRA Rule 5110) have
been received, and no arrangements have been entered into for the future receipt of any items of
value, from the Company or any of its officers, directors, stockholders, partners, employees,
Subsidiaries or Affiliates by any FINRA member (including, without limitation, those FINRA members
set forth on Schedule 4.13 of the Disclosure Schedule) or person associated with any FINRA member,
during the period commencing 180 days immediately preceding the Effective Date and ending on the
date this Agreement is terminated in accordance with Article VII, that may affect the FINRA’s
determination of the amount of compensation to be received by any FINRA member or person associated
with any FINRA member in connection with the transactions contemplated by this Agreement.



     Section 4.14 Operation of Business. (a) The Company or one or more of its Subsidiaries possesses such permits, licenses, approvals,
consents and other authorizations (including licenses, accreditation and other similar
documentation or approvals of any local health departments) (collectively, “Governmental
Licenses”) issued by the appropriate federal, state, local or foreign regulatory agencies or
bodies necessary to conduct the business now operated by it, except where the failure to possess
such Governmental Licenses, individually or in the aggregate, would not have a Material Adverse
Effect. The Company and its Subsidiaries are in compliance with the terms and conditions of all
such Governmental Licenses, except where the failure to so comply, individually or in the
aggregate, would not have a Material Adverse Effect. All of the Governmental Licenses are valid
and in full force and effect, except where the invalidity of such Governmental Licenses or the
failure of such Governmental Licenses to be in full force and effect, individually or in the
aggregate, would not have a Material Adverse Effect. Except as set forth in the Commission
Documents or the Registration Statement, neither the Company nor any of its Subsidiaries has
received any notice of proceedings relating to the revocation or modification of any such
Governmental Licenses which, if the subject of any unfavorable decision, ruling or finding,
individually or in the aggregate, would have a Material



15









 




Adverse Effect. This Section 4.14 does not
relate to environmental matters, such items being the subject of Section 4.15.




          (b) Except as set forth in the Commission Documents, the Company or one or more of its
Subsidiaries owns or possesses adequate patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks, trade names, trade
dress, logos, copyrights and other intellectual property, including, without limitation, all of the
intellectual property described in the Commission Documents as being owned or licensed by the
Company (collectively, “Intellectual Property”), necessary to carry on the business now
operated by it. Except as set forth in the Commission Documents, there are no actions, suits or
judicial proceedings pending, or to the Company’s knowledge threatened, relating to patents or
proprietary information to which the Company or any of its Subsidiaries is a party or of which any
property of the Company or any of its Subsidiaries is subject, and neither the Company nor any of
its Subsidiaries has received any notice or is otherwise aware of any infringement of or conflict
with asserted rights of others with respect to any Intellectual Property or of any facts or
circumstances which could render any Intellectual Property invalid or inadequate to protect the
interest of the Company and its Subsidiaries therein, and which infringement or conflict (if the
subject of any unfavorable decision, ruling or finding) or invalidity or inadequacy, individually
or in the aggregate, would have a Material Adverse Effect.




     Section 4.15 Environmental Compliance. Except as disclosed in the Commission Documents, the Company and each of its Subsidiaries have
obtained all material approvals, authorization, certificates, consents, licenses, orders and
permits or other similar authorizations of all governmental authorities, or from any other person,
that are required under any Environmental Laws, except for any approvals, authorization,
certificates, consents, licenses, orders and permits or other similar authorizations the failure of
which to obtain does not or would not have a Material Adverse Effect. “Environmental Laws”
shall mean all applicable laws relating to the protection of the environment including, without
limitation, all requirements pertaining to reporting, licensing, permitting, controlling,
investigating or remediating emissions, discharges, releases or threatened releases of hazardous
substances, chemical substances, pollutants, contaminants or toxic substances, materials or wastes,
whether solid, liquid or gaseous in nature, into the air, surface water, groundwater or land, or
relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport
or handling of hazardous substances, chemical substances, pollutants, contaminants or toxic
substances, material or wastes, whether solid, liquid or gaseous in nature. Except for such
instances as would not, individually or in the aggregate, have a Material Adverse Effect, to the
Company’s knowledge, there are no past or present events, conditions, circumstances, incidents,
actions or omissions relating to or in any way affecting the Company or its Subsidiaries that
violate or would reasonably be expected to violate any Environmental Law after the Effective Date
or that would reasonably be expected to give rise to any environmental liability, or otherwise form
the basis of any claim, action, demand, suit, proceeding, hearing, study or investigation (i) under
any Environmental Law, or (ii) based on or related to the manufacture, processing, distribution,
use, treatment, storage (including without limitation underground
storage tanks), disposal, transport or handling, or the emission, discharge, release or threatened
release of any hazardous substance.



16









 





     Section 4.16 Material Agreements. Except as set forth in the Commission Documents, neither the Company nor any Subsidiary of the
Company is a party to any written or oral contract, instrument, agreement commitment, obligation,
plan or arrangement, a copy of which would be required to be filed with the Commission as an
exhibit to an annual report on Form 10-K (collectively, “Material Agreements”). Except as
set forth in the Commission Documents, the Company and each of its Subsidiaries have performed in
all material respects all the obligations required to be performed by them under the Material
Agreements, have received no notice of default or an event of default by the Company or any of its
Subsidiaries thereunder and are not aware of any basis for the assertion thereof, and neither the
Company or any of its Subsidiaries nor, to the knowledge of the Company, any other contracting
party thereto are in default under any Material Agreement now in effect, the result of which would
have a Material Adverse Effect. Each of the Material Agreements is in full force and effect, and
constitutes a legal, valid and binding obligation enforceable in accordance with its terms against
the Company and/or any of its Subsidiaries and, to the knowledge of the Company, each other
contracting party thereto, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws
relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other
equitable principles of general application.



     Section 4.17 Transactions With Affiliates. Except as set forth in the Commission Documents, there are no loans, leases, agreements,
contracts, royalty agreements, management contracts, service arrangements or other continuing
transactions exceeding $120,000 between (a) the Company or any Subsidiary, on the one hand, and (b)
any person or entity who would be covered by Item 404(a) of Regulation S-K, on the other hand.
Except as disclosed in the Commission Documents, there are no outstanding amounts payable to or
receivable from, or advances by the Company or any of its Subsidiaries to, and neither the Company
nor any of its Subsidiaries is otherwise a creditor of or debtor to, any beneficial owner of more
than 5% of the outstanding shares of Common Stock, or any director, employee or Affiliate of the
Company or any of its Subsidiaries, other than (i) reimbursement for reasonable expenses incurred
on behalf of the Company or any of its Subsidiaries or (ii) as part of the normal and customary
terms of such persons’ employment or service as a director with the Company or any of its
Subsidiaries.



     Section 4.18 Securities Act. The Company has complied with all applicable federal and state securities laws in connection
with the offer, issuance and sale of the Securities contemplated by this Agreement.



          (i) The Company has prepared and filed with the Commission in accordance with the provisions
of the Securities Act the Registration Statement, including a base prospectus relating to the
Securities. The Registration Statement was declared effective by order of the
Commission on May 18, 2010. As of the date hereof, no stop order suspending the effectiveness
of the Registration Statement has been issued by the Commission or is continuing in effect under
the Securities Act and no proceedings therefor are pending before or, to the Company’s knowledge,
threatened by the Commission. No order preventing or suspending the use of the Prospectus or any
Permitted Free Writing Prospectus has been issued by the Commission.




          (ii) The Company satisfies all of the requirements for the use of Form S-3 under the
Securities Act for the offering and sale of the Securities contemplated by this




17









 







Agreement. The
Commission has not notified the Company of any objection to the use of the form of the Registration
Statement pursuant to Rule 401(g)(1) under the Securities Act. The Registration Statement complied
in all material respects on the date on which it was declared effective by the Commission, and will
comply in all material respects at each deemed effective date with respect to the Investor pursuant
to Rule 430B(f)(2) of the Securities Act, with the requirements of the Securities Act, and the
Registration Statement (including the documents incorporated by reference therein) did not on the
date it was declared effective by the Commission, and shall not at each deemed effective date with
respect to the Investor pursuant to Rule 430B(f)(2) of the Securities Act, contain an untrue
statement of a material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided that this representation
and warranty does not apply to statements in or omissions from the Registration Statement made in
reliance upon and in conformity with information relating to the Investor furnished to the Company
in writing by or on behalf of the Investor expressly for use therein. The Registration Statement,
as of the Effective Date, meets the requirements set forth in Rule 415(a)(1)(x) under the
Securities Act. The Base Prospectus complied in all material respects on its date and on the
Effective Date, and will comply in all material respects on each applicable Fixed Request Exercise
Date and, when taken together with the applicable Prospectus Supplement and any applicable
Permitted Free Writing Prospectus, on each applicable Settlement Date, with the requirements of the
Securities Act and did not on its date and on the Effective Date and shall not on each applicable
Fixed Request Exercise Date and, when taken together with the applicable Prospectus Supplement and
any applicable Permitted Free Writing Prospectus, on each applicable Settlement Date contain an
untrue statement of a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided that this representation and warranty does not apply to
statements in or omissions from the Base Prospectus made in reliance upon and in conformity with
information relating to the Investor furnished to the Company in writing by or on behalf of the
Investor expressly for use therein.




          (iii) Each Prospectus Supplement required to be filed pursuant to Sections 1.4 and 5.9 hereof,
when taken together with the Base Prospectus and any applicable Permitted Free Writing Prospectus,
on its date and on the applicable Settlement Date, shall comply in all material respects with the
provisions of the Securities Act and shall not on its date and on the applicable Settlement Date
contain an untrue statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of the circumstances under
which they are made, not misleading, except that this representation and warranty does not apply to
statements in or omissions from any Prospectus Supplement made in reliance upon and in conformity
with information relating to the Investor furnished to the Company in writing by or on behalf of
the Investor expressly for use therein.




          (iv) At the earliest time after the filing of the Registration Statement that the Company or
another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) under the
Securities Act) relating to the Securities, the Company was not and is not an “ineligible issuer”
(as defined in Rule 405 under the Securities Act). Each Permitted Free Writing Prospectus (a)
shall conform in all material respects to the requirements of the Securities Act on the date of its
first use, (b) when considered together with the Prospectus on each applicable Fixed Request
Exercise Date and on each applicable Settlement Date, shall not




18









 







contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they are made, not
misleading, and (c) shall not include any information that conflicts with the information contained
in the Registration Statement, including any document incorporated by reference therein and any
Prospectus Supplement deemed to be a part thereof that has not been superseded or modified. The
immediately preceding sentence does not apply to statements in or omissions from any Permitted Free
Writing Prospectus made in reliance upon and in conformity with information relating to the
Investor furnished to the Company in writing by or on behalf of the Investor expressly for use
therein.




          (v) Prior to the Effective Date, the Company has not distributed any offering material in
connection with the offering and sale of the Securities. From and after the Effective Date and
prior to the completion of the distribution of the Securities, the Company shall not distribute any
offering material in connection with the offering and sale of the Securities, other than the
Registration Statement, the Base Prospectus as supplemented by any Prospectus Supplement or a
Permitted Free Writing Prospectus.




     Section 4.19 Employees. As of the Effective Date, neither the Company nor any Subsidiary of the Company has any
collective bargaining arrangements or agreements covering any of its employees, except as set forth
in the Commission Documents. As of the Effective Date, except as disclosed in the Registration
Statement or the Commission Documents, no officer, consultant or key employee of the Company or any
Subsidiary whose termination, either individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect, has terminated or, to the knowledge of the Company, has any
present intention of terminating his or her employment or engagement with the Company or any
Subsidiary.



     Section 4.20 Use of Proceeds. The proceeds from the sale of the Shares shall be used by the Company and its Subsidiaries as set
forth in the Base Prospectus and any Prospectus Supplement filed pursuant to Sections 1.4 and 5.9.



     Section 4.21 Investment Company Act Status. The Company is not, and as a result of the consummation of the transactions contemplated by this
Agreement and the application of the proceeds from the sale of the Shares as set forth in the Base
Prospectus and any Prospectus Supplement shall not be, an “investment company” or a
company “controlled” by an “investment company,” within the meaning of the Investment Company Act
of 1940, as amended.



     Section 4.22 ERISA. No liability to the Pension Benefit Guaranty Corporation has been incurred with respect to any
Plan by the Company or any of its Subsidiaries which has had or would have a Material Adverse
Effect. No “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the
Code) or “accumulated funding deficiency” (as defined in Section 302 of ERISA) or any of the events
set forth in Section 4043(b) of ERISA has occurred with respect to any Plan which has had or would
have a Material Adverse Effect, and the execution and delivery of this Agreement and the issuance
and sale of the Shares hereunder shall not result in any of the foregoing events. Each Plan is in
compliance in all material respects with applicable law, including ERISA and the Code; the Company
has not incurred and does not expect to incur liability under Title IV of ERISA with respect to the
termination of, or withdrawal from, any Plan; and each Plan for which the Company would have any
liability that



19









 







is intended to be qualified under Section 401(a) of the Code is so qualified in all
material respects and nothing has occurred, whether by action or failure to act, which would cause
the loss of such qualifications. As used in this Section 4.22, the term “Plan” shall mean
an “employee pension benefit plan” (as defined in Section 3 of ERISA) which is or has been
established or maintained, or to which contributions are or have been made, by the Company or any
Subsidiary or by any trade or business, whether or not incorporated, which, together with the
Company or any Subsidiary, is under common control, as described in Section 414(b) or (c) of the
Code.



     Section 4.23 Taxes. The Company (i) has filed all necessary federal, state and foreign income and franchise tax
returns or has duly requested extensions thereof, except for those the failure of which to file
would not have a Material Adverse Effect, (ii) has paid all federal, state, local and foreign taxes
due and payable for which it is liable, except to the extent that any such taxes are being
contested in good faith and by appropriate proceedings, except for such taxes the failure of which
to pay would not have a Material Adverse Effect, and (iii) does not have any tax deficiency or
claims outstanding or assessed or, to the Company’s knowledge, proposed against it which would have
a Material Adverse Effect.



     Section 4.24 Insurance. The Company carries, or is covered by, insurance in such amounts and covering such risks as the
Company deems adequate for the conduct of its and its Subsidiaries’ businesses and the value of
their respective properties and as is customary for companies engaged in similar businesses in
similar industries.



     Section 4.25 Acknowledgement Regarding Investor’s Acquisition of Securities. The
Company acknowledges and agrees that the Investor is acting solely in the capacity of an
arm’s length purchaser with respect to this Agreement and the transactions contemplated hereby. The
Company further acknowledges that the Investor is not acting as a financial advisor or fiduciary of
the Company (or in any similar capacity) with respect to this Agreement or the
transactions contemplated hereby, and any advice given by the Investor or any of its
representatives or agents in connection with this Agreement or the transactions contemplated hereby
is merely incidental to the Investor’s acquisition of the Securities.



ARTICLE V

COVENANTS




     The Company covenants with the Investor, and the Investor covenants with the Company, as
follows, which covenants of one party are for the benefit of the other party, during the Investment
Period:



     Section 5.1 Securities Compliance; FINRA Filing.



          (i) The Company shall notify the Trading Market, as necessary, in accordance with its rules
and regulations, of the transactions contemplated by this Agreement, and shall take all necessary
action, undertake all proceedings and obtain all registrations, permits, consents and approvals for
the legal and valid issuance of the Securities to the Investor in accordance with the terms of this
Agreement.




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          (ii) The Company shall (with the Investor’s assistance) assist Reedland with the preparation
and filing with the FINRA’s Corporate Financing Department via CobraDesk (not later than 24 hours
after the Effective Date) of all documents and information required to be filed with the FINRA
pursuant to FINRA Rule 5110 with regard to the transactions contemplated by this Agreement (the
“FINRA Filing”). In connection therewith, on the Effective Date, the Company shall pay to
the FINRA by wire transfer of immediately available funds the applicable filing fee with respect to
the FINRA Filing, and the Company shall be solely responsible for payment of such fee. The parties
hereby agree to provide each other and Reedland all requisite information and otherwise to assist
each other and Reedland in a timely fashion in order for Reedland to complete the preparation and
submission of the FINRA Filing in accordance with this Section 5.1(ii) and to assist Reedland in
promptly responding to any inquiries or requests from FINRA or its staff. Each party hereto shall
(A) promptly notify the other party and Reedland of any communication to that party or its
affiliates from the FINRA, including, without limitation, any request from the FINRA or its staff
for amendments or supplements to or additional information in respect of the FINRA Filing and
permit the other party and Reedland to review in advance any proposed written communication to the
FINRA and (B) furnish the other party and Reedland with copies of all written correspondence,
filings and communications between them and their affiliates and their respective representatives
and advisors, on the one hand, and the FINRA or members of its staff, on the other hand, with
respect to this Agreement or the transactions contemplated hereby. Each of the parties hereto
agrees to use its commercially reasonable efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, and to assist and cooperate with the other party and Reedland in doing,
all things necessary, proper or advisable to obtain as promptly as practicable (but in no event
later than 60 days after the Effective Date) written confirmation from the FINRA to the effect that
the FINRA’s Corporate Financing Department has determined not to raise any objection with respect
to the fairness and reasonableness of the terms of the transactions contemplated by this
Agreement; provided, however, that, except as contemplated by this Agreement,
neither the Investor nor the Company shall have responsibility for the compliance or non-compliance
of any Broker-Dealer with FINRA Rule 5110 and shall not be required to (x) disclose to the FINRA or
to any other governmental agency, person or entity any business, financial or other information
that the Investor or the Company, as the case may be, deems, in its sole and absolute discretion,
to be proprietary, confidential or otherwise sensitive information, (y) amend, modify or change any
of the terms or conditions of this Agreement or (z) otherwise take any other action, including,
without limitation, modifying the Discount Price thresholds referred to in Section 2.2, the number
of Commitment Shares or the amount of fees and commissions to be paid to the Broker-Dealer in
connection with the transactions contemplated by this Agreement, in each case, in such a manner
that would, in the Investor’s or the Company’s sole and absolute discretion, as the case may be,
render the terms and conditions of this Agreement or the transactions contemplated hereby to be no
longer advisable to the Investor or the Company, respectively. Notwithstanding anything to the
contrary contained in this Agreement, the Company shall not be permitted to deliver any Fixed
Request Notice to the Investor, and the Investor shall not be obligated to purchase any Shares
pursuant to a Fixed Request Notice, unless and until the parties hereto and Reedland shall have
received written confirmation from the FINRA to the effect that the FINRA’s Corporate Financing
Department has determined not to raise any objection with respect to the fairness and
reasonableness of the terms of the transactions contemplated by this Agreement.




21









 








     Section 5.2 Registration and Listing. The Company shall take all action necessary to cause the Common Stock to continue to be
registered as a class of securities under Sections 12(b) or 12(g) of the Exchange Act, shall comply
with its reporting and filing obligations under the Exchange Act, and shall not take any action or
file any document (whether or not permitted by the Securities Act) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations under the Exchange Act
or Securities Act, except as permitted herein. The Company shall take all action necessary to
continue the listing and trading of its Common Stock and the listing of the Commitment Shares and
the Shares acquired or purchased by the Investor hereunder on the Trading Market (including,
without limitation, maintaining sufficient tangible net assets), and shall comply with the
Company’s reporting, filing and other obligations under the bylaws, listed securities maintenance
standards and other rules and regulations of the FINRA and the Trading Market. The Company shall
not take any action which could reasonably be expected to result in the delisting or suspension of
the Common Stock on the Trading Market.



     Section 5.3 Compliance with Laws.



          (i) The Company shall comply, and cause each Subsidiary to comply, (a) with all laws, rules,
regulations and orders applicable to the business and operations of the Company and its
Subsidiaries except as would not, individually or in the aggregate, have a Material Adverse Effect
and (b) with all applicable provisions of the Securities Act, the Exchange Act, the rules and
regulations of the FINRA and the listing standards of the Trading Market. Without limiting the
generality of the foregoing, neither the Company nor any of its officers, directors or Affiliates
has taken or will take, directly or indirectly, any action designed or intended to stabilize or
manipulate the price of any security of the Company, or which caused
or resulted in, or which would in the future reasonably be expected to cause or result in,
stabilization or manipulation of the price of any security of the Company.




          (ii) The Investor shall comply with all laws, rules, regulations and orders applicable to the
performance by it of its obligations under this Agreement and its investment in the Securities,
except as would not, individually or in the aggregate, prohibit or otherwise interfere with the
ability of the Investor to enter into and perform its obligations under this Agreement in any
material respect. Without limiting the foregoing, the Investor shall comply with all applicable
provisions of the Securities Act and the Exchange Act and any applicable securities laws of any
non-U.S. jurisdictions.




     Section 5.4 Keeping of Records and Books of Account; Foreign Corrupt Practices Act.



          (i) The Company shall keep and cause each Subsidiary to keep adequate records and books of
account, in which complete entries shall be made in accordance with GAAP consistently applied,
reflecting all financial transactions of the Company and its Subsidiaries, and in which, for each
fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes,
bad debts and other purposes in connection with its business shall be made. The Company shall
maintain a system of internal accounting controls that (a) pertain to the maintenance of records
that in reasonable detail accurately and fairly reflect the transactions and dispositions of the
assets of the Company; (b) provide reasonable assurance that




22









 







transactions are recorded as necessary
to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the Company are being made only in accordance
with authorizations of management and directors of the Company; and (c) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition
of the Company’s assets that reasonably could have a material effect on the Company’s financial
statements.




          (ii) Neither the Company, nor any of its Subsidiaries, nor to the knowledge of the Company,
any of their respective directors, officers, agents, employees or any other persons acting on their
behalf shall, in connection with the operation of the Company’s and its Subsidiaries’ respective
businesses, (a) use any corporate funds for unlawful contributions, payments, gifts or
entertainment or to make any unlawful expenditures relating to political activity to government
officials, candidates or members of political parties or organizations, (b) pay, accept or receive
any unlawful contributions, payments, expenditures or gifts, or (c) violate or operate in
noncompliance with any export restrictions, anti-boycott regulations, embargo regulations or other
similar domestic or foreign laws and regulations.




          (iii) Subject to the requirements of Section 5.12 of this Agreement, from time to time from
and after the period beginning with the third Trading Day immediately preceding each Fixed Request
Exercise Date through and including the applicable Settlement Date, the Company shall make
available for inspection and review by the Investor, customary documentation allowing the Investor
and/or its appointed counsel or advisors to conduct due diligence.




     Section 5.5 Limitations on Holdings and Issuances. Notwithstanding any
other provision of this Agreement, the Company shall not issue and the
Investor shall not purchase any shares of Common Stock which, (i) when aggregated with all other
shares of Common Stock then beneficially owned (as calculated pursuant to Section 13(d) of the
Exchange Act and Rule 13d-3 promulgated thereunder) by the Investor and its Affiliates, would
result in the beneficial ownership by the Investor of more than 9.9% of the then issued and
outstanding shares of Common Stock or (ii) when aggregated with all other shares of Common Stock
offered pursuant to the Registration Statement would exceed the maximum amount permissible under
General Instruction I.B.6. of Form S-3 (to the extent applicable).



     Section 5.6 Other Agreements and Other Financings.



          (i) The Company shall not enter into, announce or recommend to its stockholders any agreement,
plan, arrangement or transaction in or of which the terms thereof would restrict, materially delay,
conflict with or impair the ability or right of the Company or any Subsidiary to perform its
obligations under this Agreement, including, without limitation, the obligation of the Company to
deliver the Commitment Shares to the Investor not later than 4:00 p.m. (New York time) on the
second Trading Day immediately following the Effective Date, and the obligation of the Company to
deliver the Shares to the Investor in respect of a previously provided Fixed Request Notice or
Optional Amount on the applicable Settlement Date.




          (ii) The Company shall notify the Investor, within 48 hours, if it enters into any agreement,
plan, arrangement or transaction with a third party, the principal purpose of




23









 







which is to obtain
during a Pricing Period an Other Financing not constituting an Acceptable Financing (an “Other
Financing Notice”); provided, however, that the Company shall notify the
Investor promptly (but in no event later than 24 hours) (an “Integration Notice”) if it
enters into any agreement, plan, arrangement or transaction with a third party, the principal
purpose of which is to obtain at any time during the Investment Period an Other Financing that may
be aggregated with the transactions contemplated by this Agreement for purposes of determining
whether approval of the Company’s stockholders is required under any bylaw, listed securities
maintenance standards or other rules of the Trading Market and, if required under applicable law,
including, without limitation, Regulation FD promulgated by the Commission, or under the applicable
rules and regulations of the Trading Market, the Company shall publicly disclose such information
in accordance with Regulation FD and the applicable rules and regulations of the Trading Market.
For purposes of this Section 5.6(ii), any press release issued by, or Commission Document filed by,
the Company shall constitute sufficient notice, provided that it is issued or filed, as the case
may be, within the time requirements set forth in the first sentence of this Section 5.6(ii) for an
Other Financing Notice or an Integration Notice, as applicable. For greater certainty, the entry
by the Company into any agreement, plan, arrangement or transaction with a third party to obtain an
Other Financing (or any other financing) outside of a Pricing Period shall not trigger any
requirement for the Company to deliver an Other Financing Notice (it being acknowledged and agreed
that nothing contained in this Section 5.6(ii) shall limit or modify in any respect the Company’s
obligations in Section 7.2). During any Pricing Period in which the Company is required to provide
an Other Financing Notice pursuant to the first sentence of this Section 5.6(ii), the Investor
shall (i) have the option to purchase the Shares subject to the Fixed Request at (x) the price
therefor in accordance with the terms of this Agreement or (y) the third party’s per share purchase
price in connection with the Other Financing, net of such third party’s discounts, Warrant Value
and fees, or (ii) the Investor may elect to not purchase any Shares
subject to the Fixed Request for that Pricing Period. An “Other Financing” shall mean
(x) the issuance of Common Stock for a purchase price less than, or the issuance of securities
convertible into or exchangeable for Common Stock at an exercise or conversion price (as the case
may be) less than, the then Current Market Price of the Common Stock (in each case, after all fees,
discounts, Warrant Value and commissions associated with the transaction) (a “Below Market
Offering”); (y) the implementation by the Company of any mechanism in respect of any securities
convertible into or exchangeable for Common Stock for the reset of the purchase price of the Common
Stock to below the then Current Market Price of the Common Stock (including, without limitation,
any antidilution or similar adjustment provisions in respect of any Company securities, but
specifically excluding customary adjustments for stock splits, stock dividends, stock combinations
and similar events); or (z) the issuance of options, warrants or similar rights of subscription in
each case not constituting an Acceptable Financing. “Acceptable Financing” shall mean the
issuance by the Company of: (1) debt securities or any class or series of preferred stock of the
Company, in each case that are not convertible into or exchangeable for Common Stock or securities
convertible into or exchangeable for Common Stock; (2) shares of Common Stock or securities
convertible into or exchangeable for Common Stock (including, without limitation, convertible debt
securities) other than in connection with a Below Market Offering; (3) shares of Common Stock or
securities convertible into or exchangeable for Common Stock (including, without limitation,
convertible debt securities) in connection with an underwritten public offering of securities of
the Company or a registered direct public offering of securities of the Company, in each case where
the price per share of such Common Stock (or the conversion


24









 






or exercise price of such securities,
as applicable) is fixed concurrently with the execution of definitive documentation relating to
such offering, and the issuance of shares of Common Stock upon the conversion, exercise or exchange
thereof; (4) shares of Common Stock or securities convertible into or exchangeable for Common Stock
in connection with awards under the Company’s benefit and equity plans and arrangements and the
issuance of shares of Common Stock upon the conversion, exercise or exchange thereof; (5) shares of
Common Stock issuable upon the conversion or exchange of equity awards or convertible or
exchangeable securities (including, without limitation, convertible debt securities) outstanding as
of the Effective Date; (6) shares of Common Stock or securities convertible into or exchangeable
for Common Stock (including, without limitation, convertible debt securities) issued in connection
with the acquisition, license or sale of one or more other companies, equipment, technologies or
lines of business, and the issuance of shares of Common Stock upon the conversion, exercise or
exchange thereof; (7) shares of Common Stock or securities convertible into or exchangeable for
Common Stock (including, without limitation, convertible debt securities) or similar rights to
subscribe for the purchase of shares of Common Stock in connection with technology sharing,
licensing, research and joint development agreements (or amendments thereto) with third parties,
and the issuance of shares of Common Stock upon the conversion, exercise or exchange thereof; and
(8) shares of Common Stock and/or warrants or similar rights to subscribe for the purchase of
shares of Common Stock issued in connection with equipment financings and/or real property leases
(or amendments thereto) and the issuance of shares of Common Stock upon the exercise thereof.




     Section 5.7 Stop Orders. The Company shall advise the Investor promptly (but in no event later than 24 hours) and shall
confirm such advice in writing: (i) of the Company’s receipt of notice of any request by the
Commission for amendment of or a supplement to the Registration Statement, the Prospectus, any
Permitted Free Writing Prospectus or for any additional information; (ii) of the Company’s receipt
of notice of the issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or prohibiting or suspending the use of the Prospectus or any Prospectus
Supplement, or of the suspension of qualification of the Securities for offering or sale in any
jurisdiction, or the initiation or contemplated initiation of any proceeding for such purpose; and
(iii) of the Company becoming aware of the happening of any event, which makes any statement of a
material fact made in the Registration Statement, the Prospectus or any Permitted Free Writing
Prospectus untrue or which requires the making of any additions to or changes to the statements
then made in the Registration Statement, the Prospectus or any Permitted Free Writing Prospectus in
order to state a material fact required by the Securities Act to be stated therein or necessary in
order to make the statements then made therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading, or of the necessity to amend the
Registration Statement or supplement the Prospectus or any Permitted Free Writing Prospectus to
comply with the Securities Act or any other law. The Company shall not be required to disclose to
the Investor the substance or specific reasons of any of the events set forth in clauses (i)
through (iii) of the immediately preceding sentence, but rather, shall only be required to disclose
that the event has occurred. The Company shall not issue any Fixed Request during the continuation
of any of the foregoing events. If at any time the Commission shall issue any stop order suspending
the effectiveness of the Registration Statement or prohibiting or suspending the use of the
Prospectus or any Prospectus Supplement, the Company shall use commercially reasonable efforts to
obtain the withdrawal of such order at the earliest possible time. The



25









 







Company shall also advise
the Investor promptly (but in no event later than 24 hours) and shall confirm such advice in
writing of the Company becoming aware of the happening of any event, which makes any statement made
in the FINRA Filing untrue or which requires the making of any additions to or changes to the
statements then made in the FINRA Filing in order to comply with FINRA Rule 5110.



     Section 5.8 Amendments to the Registration Statement; Prospectus Supplements; Free Writing
Prospectuses.



          (i) Except as provided in this Agreement and other than periodic reports required to be filed
pursuant to the Exchange Act, the Company shall not file with the Commission any amendment to the
Registration Statement that relates to the Investor, this Agreement or the transactions
contemplated hereby or file with the Commission any Prospectus Supplement that relates to the
Investor, this Agreement or the transactions contemplated hereby with respect to which (a) the
Investor shall not previously have been advised, (b) the Company shall not have given due
consideration to any comments thereon received from the Investor or its counsel, or (c) the
Investor shall reasonably object after being so advised, unless the Company reasonably has
determined that it is necessary to amend the Registration Statement or make any supplement to the
Prospectus to comply with the Securities Act or any other applicable law or regulation, in which
case the Company shall promptly (but in no event later than 24 hours) so inform the Investor, the
Investor shall be provided with a reasonable opportunity to review and comment upon any disclosure
relating to the Investor and the Company shall expeditiously furnish to the Investor an electronic
copy thereof. In addition, for so long as, in the reasonable opinion of counsel for the Investor,
the Prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the Securities Act)
is required to be delivered in connection with any
acquisition or sale of Securities by the Investor, the Company shall not file any Prospectus
Supplement with respect to the Securities without delivering or making available a copy of such
Prospectus Supplement, together with the Base Prospectus, to the Investor promptly.




          (ii) The Company has not made, and agrees that unless it obtains the prior written consent of
the Investor it will not make, an offer relating to the Securities that would constitute an Issuer
Free Writing Prospectus or that would otherwise constitute a Free Writing Prospectus required to be
filed by the Company or the Investor with the Commission or retained by the Company or the Investor
under Rule 433 under the Securities Act. The Investor has not made, and agrees that unless it
obtains the prior written consent of the Company it will not make, an offer relating to the
Securities that would constitute a Free Writing Prospectus required to be filed by the Company with
the Commission or retained by the Company under Rule 433 under the Securities Act. Any such Issuer
Free Writing Prospectus or other Free Writing Prospectus consented to by the Investor or the
Company is referred to in this Agreement as a “Permitted Free Writing Prospectus.” The
Company agrees that (x) it has treated and will treat, as the case may be, each Permitted Free
Writing Prospectus as an Issuer Free Writing Prospectus and (y) it has complied and will comply, as
the case may be, with the requirements of Rules 164 and 433 under the Securities Act applicable to
any Permitted Free Writing Prospectus, including in respect of timely filing with the Commission,
legending and record keeping.




     Section 5.9 Prospectus Delivery. The Company shall file with the Commission a Prospectus Supplement pursuant to Rule 424(b)
under the Securities Act on the first Trading Day



26









 







immediately following the last Trading Day of
each Pricing Period. The Company shall provide the Investor a reasonable opportunity to comment on
a draft of each such Prospectus Supplement and any Issuer Free Writing Prospectus, shall give due
consideration to all such comments and, subject to the provisions of Section 5.8 hereof, shall
deliver or make available to the Investor, without charge, an electronic copy of each form of
Prospectus Supplement, together with the Base Prospectus, and any Permitted Free Writing Prospectus
on each applicable Settlement Date. The Company consents to the use of the Prospectus (and of any
Prospectus Supplement thereto) in accordance with the provisions of the Securities Act and with the
securities or “blue sky” laws of the jurisdictions in which the Securities may be sold by the
Investor, in connection with the offering and sale of the Securities and for such period of time
thereafter as the Prospectus (or in lieu thereof, the notice referred to in Rule 173(a) under the
Securities Act) is required by the Securities Act to be delivered in connection with sales of the
Securities. If during such period of time any event shall occur that in the judgment of the Company
and its counsel is required to be set forth in the Registration Statement or the Prospectus or any
Permitted Free Writing Prospectus or should be set forth therein in order to make the statements
made therein (in the case of the Prospectus, in light of the circumstances under which they were
made) not misleading, or if it is necessary to amend the Registration Statement or supplement or
amend the Prospectus or any Permitted Free Writing Prospectus to comply with the Securities Act or
any other applicable law or regulation, the Company shall forthwith prepare and, subject to Section
5.8 above, file with the Commission an appropriate amendment to the Registration Statement or
Prospectus Supplement to the Prospectus (or supplement to the Permitted Free Writing Prospectus)
and shall expeditiously furnish or make available to the Investor an electronic copy thereof. The
Investor shall comply with any Prospectus delivery requirements under the
Securities Act applicable to it. The Investor acknowledges and agrees that it is not
authorized to give any information or to make any representation not contained in the Prospectus or
the documents incorporated by reference or specifically referred to therein in connection with the
offer and sale of the Securities.



     Section 5.10 Selling Restrictions.



          (i) Except as expressly set forth below, the Investor covenants that from and after the date
hereof through and including the 90th day next following the termination of this
Agreement (the “Restricted Period”), neither the Investor nor any of its Affiliates nor any
entity managed or controlled by the Investor (collectively, the “Restricted Persons” and
each of the foregoing is referred to herein as a “Restricted Person”) shall, directly or
indirectly, (i) intentionally engage in any Short Sales involving the Company’s securities or (ii)
grant any option to purchase, or acquire any right to dispose of or otherwise dispose for value of,
any shares of Common Stock or any securities convertible into or exercisable or exchangeable for
any shares of Common Stock, or enter into any swap, hedge or other similar agreement that
transfers, in whole or in part, the economic risk of ownership of the Common Stock. Notwithstanding
the foregoing, it is expressly understood and agreed that nothing contained herein shall (without
implication that the contrary would otherwise be true) prohibit any Restricted Person during the
Restricted Period from: (1) selling “long” (as defined under Rule 200 promulgated under Regulation
SHO) the Commitment Shares or the Shares; or (2) selling a number of shares of Common Stock equal
to the number of Shares that such Restricted Person is or may be obligated to purchase under a
pending Fixed Request Notice but has not yet taken possession of so long as such Restricted Person
(or the Broker-Dealer, as applicable) delivers the



27









 






Shares purchased pursuant to such Fixed Request
Notice to the purchaser thereof or the applicable Broker-Dealer; provided, however,
such Restricted Person (or the applicable Broker-Dealer, as applicable) shall not be required to so
deliver any such Shares subject to such Fixed Request Notice if (a) such Fixed Request is
terminated by mutual agreement of the Company and the Investor and, as a result of such
termination, no such Shares are delivered to the Investor under this Agreement or (b) the Company
otherwise fails to deliver such Shares to the Investor on the applicable Settlement Date upon the
terms and subject to the provisions of this Agreement.




          (ii) In addition to the foregoing, in connection with any sale of Securities (including any
sale permitted by paragraph (i) above), the Investor shall comply in all respects with all
applicable laws, rules, regulations and orders, including, without limitation, the requirements of
the Securities Act and the Exchange Act.




     Section 5.11 Effective Registration Statement. During the Investment Period, the
Company shall use its best efforts to maintain the continuous
effectiveness of the Registration Statement under the Securities Act.



     Section 5.12 Non-Public Information. Neither the Company nor any of its directors,
officers or agents shall disclose any material
non-public information about the Company to the Investor, unless a timely public announcement
thereof is made by the Company in the manner contemplated by Regulation FD.



     Section 5.13 Broker/Dealer. The Investor shall use one or more broker-dealers to
effectuate all sales, if any, of the
Securities that it may acquire or purchase from the Company pursuant to this Agreement, which (or
whom) shall be unaffiliated with the Investor and not then currently engaged or used by the Company
(collectively, the “Broker-Dealer”). The Investor shall provide the Company with all
information regarding the Broker-Dealer reasonably requested by the Company. The Investor shall be
solely responsible for all fees and commissions of the Broker-Dealer, which shall not exceed
customary brokerage fees and commissions.



     Section 5.14 Disclosure Schedule.



          (i) During the Investment Period, the Company shall from time to time update the Disclosure
Schedule as may be required to satisfy the condition set forth in Section 6.3(i). For purposes of
this Section 5.14, any disclosure made in a schedule to the Compliance Certificate substantially in
the form attached hereto as Exhibit D shall be deemed to be an update of the Disclosure
Schedule. Notwithstanding anything in this Agreement to the contrary, no update to the Disclosure
Schedule pursuant to this Section 5.14 shall cure any breach of a representation or warranty of the
Company contained in this Agreement and shall not affect any of the Investor’s rights or remedies
with respect thereto.




          (ii) Notwithstanding anything to the contrary contained in the Disclosure Schedules or in this
Agreement, the information and disclosure contained in any Schedule of the Disclosure Schedules
shall be deemed to be disclosed and incorporated by reference in any other Schedule of the
Disclosure Schedules as though fully set forth in such Schedule for which applicability of such
information and disclosure is readily apparent on its face. The fact that any



28









 






item of information
is disclosed in the Disclosure Schedules shall not be construed to mean that such information is
required to be disclosed by this Agreement. Except as expressly set forth in this Agreement, such
information and the thresholds (whether based on quantity, qualitative characterization, dollar
amounts or otherwise) set forth herein shall not be used as a basis for interpreting the terms
“material” or “Material Adverse Effect” or other similar terms in this Agreement.




ARTICLE VI

OPINION OF COUNSEL AND CERTIFICATE;

CONDITIONS TO THE SALE AND PURCHASE OF THE SHARES




     Section 6.1 Issuance of Commitment Shares; Opinion of Counsel; Certificate. On
the Effective Date, the Company shall deliver irrevocable instructions to its transfer agent
to electronically transfer the Commitment Shares to the Investor, not later than 4:00 p.m. (New
York time) on the seventh Trading Day immediately following the Effective Date, by crediting
the Investor’s or its designees’ account at DTC through its Deposit/Withdrawal at Custodian (DWAC)
system, which Commitment Shares shall be issued pursuant to the Registration Statement and without
any restriction on resale (except as expressly provided in Section 2.13). For the avoidance of
doubt, all of the Commitment Shares shall be fully earned as of the Effective Date, regardless of
whether any Fixed Requests are issued by the Company or settled hereunder. Simultaneously with the
execution and delivery of this Agreement, the Investor’s counsel has received (a) an opinion of
outside counsel to the Company, dated the Effective Date, in the form mutually agreed to by the
parties hereto, (b) a certificate from the Company, dated the Effective Date, in the form of
Exhibit C hereto, and (c) a copy of the irrevocable instructions to the transfer agent
regarding the Commitment Shares.



     Section 6.2 Conditions Precedent to the Obligation of the Company. The
obligation hereunder of the Company to issue and sell the Shares to the Investor under any
Fixed Request or Optional Amount is subject to the satisfaction or (to the extent permitted by
applicable law) waiver of each of the conditions set forth below. These conditions are for the
Company’s sole benefit and (to the extent permitted by applicable law) may be waived by the Company
at any time in its sole discretion.



          (i) Accuracy of the Investor’s Representations and Warranties. The representations
and warranties of the Investor contained in this Agreement (a) that are not qualified by
“materiality” shall have been true and correct in all material respects when made and shall be true
and correct in all material respects as of the applicable Fixed Request Exercise Date and the
applicable Settlement Date with the same force and effect as if made on such dates, except to the
extent such representations and warranties are as of another date, in which case, such
representations and warranties shall be true and correct in all material respects as of such other
date and (b) that are qualified by “materiality” shall have been true and correct when made and
shall be true and correct as of the applicable Fixed Request Exercise Date and the applicable
Settlement Date with the same force and effect as if made on such dates, except to the extent such
representations and warranties are as of another date, in which case, such representations and
warranties shall be true and correct as of such other date.




29









 








          (ii) Registration Statement. The Registration Statement is effective and neither the
Company nor the Investor shall have received notice that the Commission has issued or intends to
issue a stop order with respect to the Registration Statement. The Company shall have a maximum
dollar amount certain of Common Stock registered under the Registration Statement which (A) as of
the Effective Date, is sufficient to issue to the Investor not less than (1) the Total Commitment
plus (2) the Commitment Shares and (B) as of the applicable Fixed Request Exercise Date and the
applicable Settlement Date, is sufficient to issue to the Investor not less than the maximum dollar
amount worth of Shares issuable pursuant to the applicable Fixed Request Notice and applicable
Optional Amount, if any. The Current Report shall have been filed with the Commission, as required
pursuant to Section 1.4, and all Prospectus Supplements shall have been filed with the Commission,
as required pursuant to Sections 1.4 and 5.9 hereof, to disclose the sale of the Shares prior to
each Settlement Date, as applicable. Any other material required to be filed by the Company or any
other offering participant pursuant to Rule 433(d) under the Securities Act shall have been filed
with the Commission within the applicable time periods prescribed for such filings by Rule 433
under the Securities Act.




          (iii) Performance by the Investor. The Investor shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Investor at or prior to the applicable
Fixed Request Exercise Date and the applicable Settlement Date.




          (iv) No Injunction. No statute, regulation, order, decree, writ, ruling or injunction
shall have been enacted, entered, promulgated, threatened or endorsed by any court or governmental
authority of competent jurisdiction which prohibits the consummation of or which would materially
modify or delay any of the transactions contemplated by this Agreement.




          (v) No Suspension, Etc. Trading in the Common Stock shall not have been suspended by
the Commission or the Trading Market (except for any suspension of trading of limited duration
agreed to by the Company, which suspension shall be terminated prior to the applicable Fixed
Request Exercise Date and applicable Settlement Date), and, at any time prior to the applicable
Fixed Request Exercise Date and applicable Settlement Date, none of the events described in clauses
(i), (ii) and (iii) or the last sentence of Section 5.7 shall have occurred, trading in securities
generally as reported on the Trading Market shall not have been suspended or limited, 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 or crisis of such magnitude in its effect on, or any material adverse
change in, any financial, credit or securities market which, in each case, in the reasonable
judgment of the Company, makes it impracticable or inadvisable to issue the Shares.




          (vi) No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any court or governmental authority shall have been commenced or threatened, and no
inquiry or investigation by any governmental authority shall have been commenced or threatened,
against the Company or any Subsidiary, or any of the officers, directors or Affiliates of the
Company or any Subsidiary, seeking to restrain, prevent or change the transactions contemplated by
this Agreement, or seeking damages in connection with such transactions.




30









 








          (vii) Aggregate Limit. The issuance and sale of the Shares issuable pursuant to such
Fixed Request Notice or Optional Amount shall not violate Sections 2.2, 2.12 and 5.5 hereof.




          (viii) No Unresolved FINRA Objection. There shall not exist any unresolved objection
raised by the FINRA’s Corporate Financing Department with respect to the fairness and
reasonableness of the terms of the transactions contemplated by this Agreement, and the parties
hereto and Reedland shall have obtained written confirmation thereof from the FINRA.




     Section 6.3 Conditions Precedent to the Obligation of the Investor. The obligation
hereunder of the Investor to accept a Fixed Request Notice or Optional Amount
grant and to acquire and pay for the Shares is subject to the satisfaction or (to the extent
permitted by applicable law) waiver, at or before each Fixed Request Exercise Date and each
Settlement Date, of each of the conditions set forth below. These conditions are for the Investor’s
sole benefit and (to the extent permitted by applicable law) may be waived by the Investor at any
time in its sole discretion.



          (i) Accuracy of the Company’s Representations and Warranties. The representations and
warranties of the Company contained in this Agreement, as modified by the Disclosure Schedule (a)
that are not qualified by “materiality” or “Material Adverse Effect” shall have been true and
correct in all material respects when made and shall be true and correct in all material respects
as of the applicable Fixed Request Exercise Date and the applicable Settlement Date with the same
force and effect as if made on such dates, except to the extent such representations and warranties
are as of another date, in which case, such representations and warranties shall be true and
correct in all material respects as of such other date and (b) that are qualified by “materiality”
or “Material Adverse Effect” shall have been true and correct when made and shall be true and
correct as of the applicable Fixed Request Exercise Date and the applicable Settlement Date with
the same force and effect as if made on such dates, except to the extent such representations and
warranties are as of another date, in which case, such representations and warranties shall be true
and correct as of such other date.




          (ii) Registration Statement. The Registration Statement is effective and neither the
Company nor the Investor shall have received notice that the Commission has issued or intends to
issue a stop order with respect to the Registration Statement. The Company shall have a maximum
dollar amount certain of Common Stock registered under the Registration Statement which (A) as of
the Effective Date, is sufficient to issue to the Investor not less than (1) the Total Commitment
plus (2) the Commitment Shares and (B) as of the applicable Fixed Request Exercise Date and the
applicable Settlement Date, is sufficient to issue to the Investor not less than the maximum dollar
amount worth of Shares issuable pursuant to the applicable Fixed Request Notice and applicable
Optional Amount, if any. As of the Effective Date, the applicable Fixed Request Exercise Date and
the applicable Settlement Date, the Investor shall be permitted to utilize the Prospectus to resell
all of the Securities it then owns or has the right to acquire pursuant to all Fixed Request
Notices issued pursuant to this Agreement (subject, in the case of the Commitment Shares, to the
proviso in Section 2.13). The Current Report shall have been filed with the Commission, as required
pursuant to Section 1.4, and all Prospectus Supplements shall have been filed with the Commission,
as required pursuant to Sections 1.4 and 5.9 hereof, to disclose the sale of the Shares prior to
each Settlement Date, as applicable, and an



31









 






electronic copy of each such Prospectus Supplement
together with the Base Prospectus shall have been delivered or made available to the Investor in
accordance with Section 5.9 hereof. Any other material required to be filed by the Company or any
other offering participant pursuant to Rule 433(d) under the Securities Act shall have been filed
with the Commission within the applicable time periods prescribed for such filings by Rule 433
under the Securities Act.




          (iii) No Suspension. Trading in the Common Stock shall not have been suspended by the
Commission or the Trading Market (except for any suspension of trading of limited duration agreed
to by the Company, which suspension shall be terminated prior to the applicable Fixed Request
Exercise Date and applicable Settlement Date), and the Company shall not have received any notice
that the listing or quotation of the Common Stock on the Trading Market shall be terminated on a
date certain (which termination shall be final and non-appealable). At any time prior to the
applicable Fixed Request Exercise Date and applicable Settlement Date, none of the events described
in clauses (i), (ii) and (iii) or the last sentence of
Section 5.7 shall have occurred, trading in securities generally as reported on the Trading
Market shall not have been suspended or limited, 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 or
crisis of such magnitude in its effect on, or any material adverse change in, any financial, credit
or securities market which, in each case, in the reasonable judgment of the Investor, makes it
impracticable or inadvisable to purchase the Shares.




          (iv) Performance of the Company. The Company shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or prior to the applicable
Fixed Request Exercise Date and the applicable Settlement Date. The Company shall have delivered to
the Investor on the applicable Settlement Date the Compliance Certificate substantially in the form
attached hereto as Exhibit D.




          (v) No Injunction. No statute, rule, regulation, order, decree, writ, ruling or
injunction shall have been enacted, entered, promulgated, threatened or endorsed by any court or
governmental authority of competent jurisdiction which prohibits the consummation of or which would
materially modify or delay any of the transactions contemplated by this Agreement.




          (vi) No Proceedings or Litigation. No action, suit or proceeding before any
arbitrator or any court or governmental authority shall have been commenced or threatened, and no
inquiry or investigation by any governmental authority shall have been commenced or threatened,
against the Company or any Subsidiary, or any of the officers, directors or Affiliates of the
Company or any Subsidiary, seeking to restrain, prevent or change the transactions contemplated by
this Agreement, or seeking damages in connection with such transactions.




          (vii) Aggregate Limit. The issuance and sale of the Shares issuable pursuant to such
Fixed Request Notice or Optional Amount shall not violate Sections 2.2, 2.12 and 5.5 hereof.




          (viii) Shares Authorized and Delivered. The Shares issuable pursuant to such Fixed
Request Notice or Optional Amount shall have been duly authorized by all necessary




32









 







corporate action
of the Company. The Company shall have delivered all Shares relating to all prior Fixed Request
Notices and Optional Amounts, as applicable.




          (ix) Listing of Shares and Commitment Shares. All Commitment Shares shall have been
approved for listing or quotation on the Trading Market as of the Effective Date (if such approval
is required for the listing or quotation thereof on the Trading Market). The Company shall have
submitted to the Trading Market, at or prior to the applicable Fixed Request Exercise Date, a
notification form of listing of additional shares related to the Shares issuable pursuant to such
Fixed Request and Optional Amount, in accordance with the bylaws, listed securities maintenance
standards and other rules of the Trading Market and, prior to the applicable Settlement Date, such
Shares shall have been approved for listing or quotation on the Trading Market (if such approval is
required for the listing or quotation thereof on the Trading Market), subject only to notice of
issuance.




          (x) Opinions of Counsel; Bring-Down. Subsequent to the filing of the Current Report
pursuant to Section 1.4 and prior to the first Fixed Request Exercise Date, the Investor shall have
received an opinion from outside counsel to the Company in the form mutually agreed to by the
parties hereto. On each Settlement Date, the Investor shall have received an opinion “bring down”
from outside counsel to the Company in the form mutually agreed to by the parties hereto.




          (xi) No Unresolved FINRA Objection. There shall not exist any unresolved objection
raised by the FINRA’s Corporate Financing Department with respect to the fairness and
reasonableness of the terms of the transactions contemplated by this Agreement, and the parties
hereto and Reedland shall have obtained written confirmation thereof from the FINRA.




          (xii) Payment of Investor’s Counsel Fees; Due Diligence Expenses. On the Effective
Date, the Company shall have paid by wire transfer of immediately available funds to an account
designated by the Investor’s counsel, the fees and expenses of the Investor’s counsel in accordance
with clause (B) of the proviso to the first sentence of Section 9.1(i) of this Agreement. The
Company shall have paid by wire transfer of immediately available funds to an account designated by
the Investor, the due diligence expenses incurred by the Investor in accordance with the provisions
of the second sentence of Section 9.1(i) of this Agreement, to the extent such fees are due and
payable by the Company under Section 9.1(i).




ARTICLE VII

TERMINATION




     Section 7.1 Term, Termination by Mutual Consent. Unless
earlier terminated as provided hereunder, this Agreement shall terminate automatically on
the earliest of (i) the first day of the month next following the 24-month anniversary of the
Effective Date (the “Investment Period”), (ii) the date that the entire dollar amount of
Common Stock registered under the Registration Statement have been issued and sold and (iii) the
date the Investor shall have purchased the Total Commitment of shares of Common Stock (subject in
all cases to the Trading Market Limit). Subject to Section 7.3, this Agreement may be terminated at
any time (A) by the mutual written consent of the parties, effective as of the date of such mutual
written consent unless otherwise provided in such written consent, it being hereby acknowledged and
agreed that



33









 







the Investor may not consent to such termination during a Pricing Period or prior to a
Settlement Date in the event the Investor has instructed the Broker-Dealer to effect an open-market
sale of Shares which are subject to a pending Fixed Request Notice but which have not yet been
physically delivered by the Company (and/or credited by book-entry) to the Investor in accordance
with the terms and subject to the conditions of this Agreement, or (B) by either the Company or the
Investor effective upon written notice to the other party under Section 9.4, if the FINRA’s
Corporate Financing Department has raised any objection with respect to the fairness and
reasonableness of the terms of the transactions contemplated by this Agreement, or has otherwise
failed to confirm in writing that it has determined not to raise any such objection, and such
objection shall not have been resolved, or such confirmation of no objection shall not have been
obtained, prior to (1) the 60th day immediately following the Effective Date, in the case of an
objection raised or confirmation failure occurring prior to the first Fixed Request Exercise Date,
or (2) prior to the 60th day immediately following the receipt by the Company or the
Investor of notice of such objection, in the case of an objection raised after the first Fixed
Request Exercise Date; provided however, that (x) the party seeking to terminate
this Agreement pursuant to this clause (B) of Section 7.1 shall have used its commercially
reasonable efforts to resolve such objection and/or to obtain such confirmation of no objection in
accordance with and subject to the provisions of Section 5.1(ii) of this Agreement and (y) the
right to terminate this Agreement pursuant to this clause (B) of Section 7.1 shall not be available
to any party whose action or failure to act has been a principal cause of, or has resulted in, such
objection or confirmation failure and such action or failure to act constitutes a breach of this
Agreement. Subject to Section 7.3, the Company may terminate this Agreement effective upon three
Trading Days’ prior written notice to the Investor delivered in accordance with Section 9.4;
provided, however, that (i) such termination shall not occur during a Pricing
Period or, subsequent to the issuance of a Fixed Request Notice, prior to the Settlement Date
related to such Fixed Request Notice, and (ii) prior to issuing any press release, or making any
public statement or announcement, with respect to such termination, the Company shall consult with
the Investor and shall obtain the Investor’s consent to the form and substance of such press
release or other disclosure, which consent shall not be unreasonably delayed or withheld.



     Section 7.2 Other Termination. If the
Company provides the Investor with an Other Financing Notice or an Integration Notice, in
each case pursuant to Section 5.6(ii) of this Agreement, or if the Company otherwise enters into
any agreement, plan, arrangement or transaction with a third party, the principal purpose of which
is to obtain outside a Pricing Period, but otherwise during the Investment Period, an Other
Financing not constituting an Acceptable Financing, in which latter case the Company shall so
notify the Investor within 48 hours thereof, then in all such cases, subject to Section 7.3, the
Investor shall have the right to terminate this Agreement within the subsequent 30-day period (the
“Event Period”), effective upon one Trading Day’s prior written notice delivered to the
Company in accordance with Section 9.4 at any time during the Event Period. The Company shall
promptly (but in no event later than 24 hours) notify the Investor (and, if required under
applicable law, including, without limitation, Regulation FD promulgated by the Commission, or
under the applicable rules and regulations of the Trading Market, the Company shall publicly
disclose such information in accordance with Regulation FD and the applicable rules and regulations
of the Trading Market), and, subject to Section 7.3, the Investor shall have the right to terminate
this Agreement at any time after receipt of such notification, if: (i) any condition, occurrence,
state of facts or event constituting a Material Adverse Effect has occurred; (ii) a Fundamental
Transaction has occurred



34









 







or the Company enters into a definitive agreement providing for a
Fundamental Transaction; or (iii) a default or event of default has occurred and is continuing
under the terms of any agreement, contract, note or other instrument to which the Company or any of
its Subsidiaries is a party with respect to any indebtedness for borrowed money representing more
than 10% of the Company’s consolidated assets, in any such case, upon one Trading Day’s prior
written notice delivered to the Company in accordance with Section 9.4 hereof.



     Section 7.3 Effect of Termination. In the event
of termination by the Company or the Investor pursuant to Section 7.1 or 7.2, as
applicable, written notice thereof shall forthwith be given to the other party as provided in
Section 9.4 and the transactions contemplated by this Agreement shall be terminated without further
action by either party. If this Agreement is terminated as provided in Section 7.1 or 7.2 herein,
this Agreement shall become void and of no further force and effect, except that (i) the provisions
of Article VIII (Indemnification), Section 9.1 (Fees and Expenses), Section 9.2 (Specific
Enforcement, Consent to Jurisdiction, Waiver of Jury Trial), Section 9.4 (Notices), Section 9.8
(Governing Law), Section 9.9 (Survival), Section 9.11 (Publicity), Section 9.12 (Severability) and
this Article VII (Termination) shall remain in full force and effect indefinitely notwithstanding
such termination, (ii) the covenants and agreements contained in Section 5.1(i) (Securities
Compliance; FINRA Filing), Section 5.3 (Compliance with Laws), Section 5.7 (Stop Orders), Section
5.8 (Amendments to the Registration Statement; Prospectus Supplements; Free Writing Prospectuses),
Section 5.9 (Prospectus Delivery), Section 5.11 (Effective Registration Statement), Section 5.12
(Non-Public Information) and 5.13 (Broker/Dealer) shall remain in full force and effect
notwithstanding such termination for a period of six months following such termination, (iii) the
covenants and agreements of the Investor contained in Section 5.10 (Selling Restrictions) shall
remain in full force and effect notwithstanding such termination for a period of 90 days following
such termination, and (iv) the covenants and agreements of the Company contained in Section 5.2
(Registration and Listing) shall remain in full force and effect notwithstanding such termination
for a period of 30 days following such termination. Notwithstanding anything in this Agreement to
the contrary, no termination of this Agreement by any party shall (a) affect any Commitment Shares,
or any rights of any holder thereof (it being hereby acknowledged and agreed that all of the
Commitment Shares shall be fully earned as of the Effective Date, regardless of whether any Fixed
Requests are issued by the Company or settled hereunder), or (b) affect any cash fees paid to the
Investor or its counsel pursuant to Section 9.1, in each case all of which fees shall be
non-refundable, regardless of whether any Fixed Requests are issued by the Company or settled
hereunder. Nothing in this Section 7.3 shall be deemed to release the Company or the Investor from
any liability for any breach under this Agreement or to impair the rights of the Company and the
Investor to compel specific performance by the other party of its obligations under this Agreement.



ARTICLE VIII

INDEMNIFICATION




     Section 8.1 General Indemnity.



          (i) Indemnification by the Company. The Company shall indemnify and hold harmless the
Investor, each Affiliate, employee, representative and advisor of and to the Investor, and each
person, if any, who controls the Investor within the meaning of Section 15 of





35









 







the Securities Act or
Section 20(a) of the Exchange Act from and against all losses, claims, damages, liabilities and
expenses (including reasonable costs of defense and investigation and all attorneys’ fees) to which
the Investor and each such other person may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages, liabilities and expenses (or actions in respect thereof)
arise out of or are based upon (a) any violation of United States federal or state securities laws
or the rules and regulations of the Trading Market in connection with the transactions contemplated
by this Agreement by the Company or any of its Subsidiaries, affiliates, officers, directors or
employees, (b) any untrue statement or alleged untrue statement of a material fact contained, or
incorporated by reference, in the Registration Statement or any amendment thereto or any omission
or alleged omission to state therein, or in any document
incorporated by reference therein, a material fact required to be stated therein or necessary
to make the statements therein not misleading, or (c) any untrue statement or alleged untrue
statement of a material fact contained, or incorporated by reference, in the Prospectus, any Issuer
Free Writing Prospectus, or in any amendment thereof or supplement thereto, or in any “issuer
information” (as defined in Rule 433 under the Securities Act) of the Company, which “issuer
information” is required to be, or is, filed with the Commission or otherwise contained in any Free
Writing Prospectus, or any amendment or supplement thereto, or any omission or alleged omission to
state therein, or in any document incorporated by reference therein, a material fact required to be
stated therein or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that (A) the Company shall
not be liable under this Section 8.1(i) to the extent that a court of competent jurisdiction shall
have determined by a final judgment (from which no further appeals are available) that such loss,
claim, damage, liability or expense resulted directly and solely from any such acts or failures to
act, undertaken or omitted to be taken by the Investor or such person through its bad faith or
willful misconduct, (B) the foregoing indemnity shall not apply to any loss, claim, damage,
liability or expense to the extent, but only to the extent, arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of the Investor
expressly for use in the Current Report or any Prospectus Supplement or Permitted Free Writing
Prospectus, or any amendment thereof or supplement thereto, and (C) with respect to the Prospectus,
the foregoing indemnity shall not inure to the benefit of the Investor or any such person from whom
the person asserting any loss, claim, damage, liability or expense purchased Common Stock, if
copies of all Prospectus Supplements required to be filed pursuant to Section 1.4 and 5.9, together
with the Base Prospectus, were timely delivered or made available to the Investor pursuant hereto
and a copy of the Base Prospectus, together with a Prospectus Supplement (as applicable), was not
sent or given by or on behalf of the Investor or any such person to such person, if required by law
to have been delivered, at or prior to the written confirmation of the sale of the Common Stock to
such person, and if delivery of the Base Prospectus, together with a Prospectus Supplement (as
applicable), would have cured the defect giving rise to such loss, claim, damage, liability or
expense.




     The Company shall reimburse the Investor and each such controlling person promptly upon demand
(with accompanying presentation of documentary evidence) for all legal and other costs and expenses
reasonably incurred by the Investor or such indemnified persons in investigating, defending
against, or preparing to defend against any such claim, action, suit or proceeding with respect to
which it is entitled to indemnification.



36









 





          (ii) Indemnification by the Investor. The Investor shall indemnify and hold harmless
the Company, each of its directors and officers, and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act from
and against all losses, claims, damages, liabilities and expenses (including reasonable costs of
defense and investigation and all attorneys fees) to which the Company and each such other person
may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities and expenses (or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the Current Report or any
Prospectus Supplement or Permitted Free Writing Prospectus, or in any amendment thereof or
supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading, in each case, to
the extent, but only to the extent, the untrue statement, alleged untrue statement, omission or
alleged omission was made in reliance upon, and in conformity with, written information furnished
by the Investor to the Company expressly for inclusion in the Current Report or such Prospectus
Supplement or Permitted Free Writing Prospectus, or any amendment thereof or supplement thereto.




          The Investor shall reimburse the Company and each such director, officer or controlling person
promptly upon demand for all legal and other costs and expenses reasonably incurred by the Company
or such indemnified persons in investigating, defending against, or preparing to defend against any
such claim, action, suit or proceeding with respect to which it is entitled to indemnification.




     Section 8.2 Indemnification Procedures. Promptly after
a person receives notice of a claim or the commencement of an action for which
the person intends to seek indemnification under Section 8.1, the person will notify the
indemnifying party in writing of the claim or commencement of the action, suit or proceeding;
provided, however, that failure to notify the indemnifying party will not relieve
the indemnifying party from liability under Section 8.1, except to the extent it has been
materially prejudiced by the failure to give notice. The indemnifying party will be entitled to
participate in the defense of any claim, action, suit or proceeding as to which indemnification is
being sought, and if the indemnifying party acknowledges in writing the obligation to indemnify the
party against whom the claim or action is brought, the indemnifying party may (but will not be
required to) assume the defense against the claim, action, suit or proceeding with counsel
satisfactory to it. After an indemnifying party notifies an indemnified party that the
indemnifying party wishes to assume the defense of a claim, action, suit or proceeding, the
indemnifying party will not be liable for any legal or other expenses incurred by the indemnified
party in connection with the defense against the claim, action, suit or proceeding except that if,
in the opinion of counsel to the indemnifying party, one or more of the indemnified parties should
be separately represented in connection with a claim, action, suit or proceeding, the indemnifying
party will pay the reasonable fees and expenses of one separate counsel for the indemnified
parties. Each indemnified party, as a condition to receiving indemnification as provided in
Section 8.1, will cooperate in all reasonable respects with the indemnifying party in the defense
of any action or claim as to which indemnification is sought. No indemnifying party will be liable
for any settlement of any action effected without its prior written consent. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested (by written notice
provided in accordance with Section 9.4) an



37









 







indemnifying party to reimburse the indemnified party
for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated hereby effected without its written consent if (i) such
settlement is entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received written notice of the terms of
such settlement at least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party will, without the prior written
consent of the indemnified party, effect any settlement of a pending or threatened action
with respect to which an indemnified party is, or is informed that it may be, made a party and for
which it would be entitled to indemnification, unless the settlement includes an unconditional
release of the indemnified party from all liability and claims which are the subject matter of the
pending or threatened action.



     If for any reason the indemnification provided for in this Agreement is not available to, or
is not sufficient to hold harmless, an indemnified party in respect of any loss or liability
referred to in Section 8.1 as to which such indemnified party is entitled to indemnification
thereunder, each indemnifying party shall, in lieu of indemnifying the indemnified party,
contribute to the amount paid or payable by the indemnified party as a result of such loss or
liability, (i) in the proportion which is appropriate to reflect the relative benefits received by
the indemnifying party, on the one hand, and by the indemnified party, on the other hand, from the
sale of Shares which is the subject of the claim, action, suit or proceeding which resulted in the
loss or liability or (ii) if the allocation provided by clause (i) is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative benefits referred to in
clause (i) above, but also the relative fault of the indemnifying party, on the one hand, and the
indemnified party, on the other hand, with respect to the statements or omissions which are the
subject of the claim, action, suit or proceeding that resulted in the loss or liability, as well as
any other relevant equitable considerations.



     The remedies provided for in Section 8.1 and this Section 8.2 are not exclusive and shall not
limit any rights or remedies which may otherwise be available to any indemnified person at law or
in equity.



ARTICLE IX

MISCELLANEOUS




     Section 9.1 Fees and Expenses.



          (i) Each party shall bear its own fees and expenses related to the transactions contemplated
by this Agreement; provided, however, that the Company shall pay, on the Effective
Date, by wire transfer of immediately available funds (A) to the FINRA, the applicable filing fee
with respect to the FINRA Filing and (B) to an account designated by the Investor’s counsel,
promptly following the receipt of an invoice therefor, all reasonable attorneys’ fees and expenses
(exclusive of disbursements and out-of-pocket expenses) incurred by the Investor, up to $35,000, in
connection with the preparation, negotiation, execution and delivery of this Agreement, legal due
diligence of the Company and review of the Registration Statement, the Base Prospectus, the Current
Report, any Permitted Free Writing Prospectus and all other related transaction documentation. In
addition, during any full calendar quarter that falls within the




38









 







Investment Period when no Shares
have been purchased or sold because the Company did not deliver a Fixed Request Notice, the Company
shall pay following the end of such calendar quarter, promptly upon receipt of an invoice therefor
(however, the Investor shall not be required to provide detailed time sheets), all reasonable
attorneys’ fees and expenses, up to $5,000, representing the due diligence expenses incurred by the
Investor during such calendar quarter. The Company shall pay all U.S. federal, state and local
stamp and other similar transfer and other taxes and duties levied in connection with issuance of
the Securities pursuant hereto. For the avoidance of doubt, all of the fees payable to the Investor
or its counsel pursuant to this
Section 9.1 shall be non-refundable, regardless of whether any Fixed Requests are issued by
the Company or settled hereunder.




          (ii) If the Company issues a Fixed Request Notice and fails to deliver the Shares (which have
been approved for listing or quotation on the Trading Market, if such an approval is required for
the listing or quotation thereof on the Trading Market) to the Investor on the applicable
Settlement Date and such failure continues for 10 Trading Days, the Company shall pay the Investor,
in cash (or, at the option of the Investor, in shares of Common Stock which have not been
registered under the Securities Act valued at the applicable Discount Price of the Shares failed to
be delivered; provided that the issuance thereof by the Company would not violate the
Securities Act or any applicable U.S. federal or state securities laws), as liquidated damages for
such failure and not as a penalty, an amount equal to 2.0% of the payment required to be paid by
the Investor on such Settlement Date (i.e., the sum of the Fixed Amount Requested and the Optional
Amount Dollar Amount) for the initial 30 days following such Settlement Date until the Shares
(which have been approved for listing or quotation on the Trading Market, if such an approval is
required for the listing or quotation thereof on the Trading Market) have been delivered, and an
additional 2.0% for each additional 30-day period thereafter until the Shares (which have been
approved for listing or quotation on the Trading Market, if such an approval is required for the
listing or quotation thereof on the Trading Market) have been delivered, which amount shall be
prorated for such periods less than 30 days (subject in all cases to the Trading Market Limit).




     Section 9.2 Specific Enforcement, Consent to Jurisdiction, Waiver of Jury Trial.



          (i) The Company and the Investor acknowledge and agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that either party shall be
entitled to an injunction or injunctions to prevent or cure breaches of the provisions of this
Agreement by the other party and to enforce specifically the terms and provisions hereof this being
in addition to any other remedy to which either party may be entitled by law or equity.




          (ii) Each of the Company and the Investor (a) hereby irrevocably submits to the jurisdiction
of the United States District Court and other courts of the United States sitting in the City and
State of New York, Borough of Manhattan, for the purposes of any suit, action or proceeding arising
out of or relating to this Agreement, and (b) hereby waives, and agrees not to assert in any such
suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such
court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. Each of the Company and the




39









 







Investor consents to
process being served in any such suit, action or proceeding by mailing a copy thereof 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 in this Section 9.2
shall affect or limit any right to serve process in any other manner permitted by law.




          (iii) Each of the Company and the Investor hereby waives to the fullest extent permitted by
applicable law, any right it may have to a trial by jury in respect to any litigation directly or
indirectly arising out of, under or in connection with this Agreement or the transactions
contemplated hereby or disputes relating hereto. Each of the Company and the Investor (a) certifies
that no representative, agent or attorney of any other party has represented, expressly or
otherwise, that such other party would not, in the event of litigation, seek to enforce the
foregoing waiver and (b) acknowledges that it and the other parties hereto have been induced to
enter into this Agreement by, among other things, the mutual waivers and certifications in this
Section 9.2.




     Section 9.3 Entire Agreement; Amendment. This Agreement, together with the exhibits referred to herein and the Disclosure Schedule,
represents the entire agreement of the parties with respect to the subject matter hereof, and there
are no promises, undertakings, representations or warranties by either party relative to subject
matter hereof not expressly set forth herein. No provision of this Agreement may be amended other
than by a written instrument signed by both parties hereto. The Disclosure Schedule and all
exhibits to this Agreement are hereby incorporated by reference in, and made a part of, this
Agreement as if set forth in full herein.



     Section 9.4 Notices. Any notice, demand, request, waiver or other communication required or permitted to be given
hereunder shall be in writing and shall be effective (a) upon hand delivery or facsimile (with
facsimile machine confirmation of delivery received) at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to be received), or
the first business day following such delivery (if delivered other than on a business day during
normal business hours where such notice is to be received) or (b) on the second business day
following the date of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The address for such
communications shall be:



	 	 	 

	If to the Company:

	 	Jones Soda Co.
	 

	 	234 Ninth Avenue North
	 

	 	Seattle, Washington 98109
	 

	 	Telephone Number: (206) 624-3357
	 

	 	Fax: (206) 624-6857
	 

	 	Attention: Michael R. O’Brien
	 

	 	Chief Financial Officer







40









 






	 	 	 

	With copies to:

	 	Perkins Coie LLP
	 

	 	1201 Third Avenue, Suite 4800
	 

	 	Seattle, Washington 98101-3099
	 

	 	Telephone Number: (206) 359-8000
	 

	 	Fax: (206) 359-9000
	 

	 	Attention: Andrew B. Moore, Esq.
	 

	 	Faith M. Wilson, Esq.

	 
	 	 
	If to the Investor:

	 	Glengrove Small Cap Value, Ltd.
	 

	 	Fiduciary Services (BVI) Limited
	 

	 	Qwomar Complex, 4th Floor
	 

	 	P.O. Box 3170
	 

	 	Road Town, Tortola
	 

	 	British Virgin Islands
	 

	 	Telephone Number: (284) 494-8086
	 

	 	Fax: (284) 494-9474
	 

	 	Attention: Peter W. Poole
	 
	 	 
	With copies to:

	 	Greenberg Traurig, LLP
	 

	 	The MetLife Building
	 

	 	200 Park Avenue
	 

	 	New York, NY 10166
	 

	 	Telephone Number: (212) 801-9200
	 

	 	Fax: (212) 801-6400
	 

	 	Attention: Anthony J. Marsico, Esq.





Either party hereto may from time to time change its address for notices by giving at least 10 days
advance written notice of such changed address to the other party hereto.




     Section 9.5 Waivers. No waiver by either party 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 other
provisions, condition or requirement hereof nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such right accruing to it
thereafter. No provision of this Agreement may be waived other than in a written instrument signed
by the party against whom enforcement of such waiver is sought.



     Section 9.6 Headings. The article, section and subsection headings in this Agreement are for convenience only and
shall not constitute a part of this Agreement for any other purpose and shall not be deemed to
limit or affect any of the provisions hereof.



     Section 9.7 Successors and Assigns. The Investor may not assign this Agreement to any person without the prior consent of the
Company, in the Company’s sole discretion. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and assigns. The assignment by a party to this
Agreement of any rights hereunder shall not affect the obligations of such party under this
Agreement.



41









 





     Section 9.8 Governing Law. This
Agreement shall be governed by and construed in accordance with the internal procedural and
substantive laws of the State of New York, without giving effect to the choice of law provisions of
such state that would cause the application of the laws of any other jurisdiction.



     Section 9.9 Survival. The representations,
warranties, covenants and agreements of the Company and the Investor
contained in this Agreement shall survive the execution and delivery hereof until the termination
of this Agreement; provided, however, that (i) the provisions of Article VII
(Termination), Article VIII (Indemnification), Section 9.1 (Fees and Expenses), Section 9.2
(Specific Enforcement, Consent to Jurisdiction, Waiver of Jury Trial), Section 9.4 (Notices),
Section 9.8 (Governing Law), Section 9.11 (Publicity), Section 9.12 (Severability) and this Section
9.9 (Survival) shall remain in full force and effect indefinitely notwithstanding such termination,
(ii) the covenants and agreements contained in Section 5.1(i) (Securities Compliance; FINRA
Filing), Section 5.3 (Compliance with Laws), Section 5.7 (Stop Orders), Section 5.8 (Amendments to
the Registration Statement; Prospectus Supplements; Free Writing Prospectuses), Section 5.9
(Prospectus Delivery), Section 5.11 (Effective Registration Statement), Section 5.12 (Non-Public
Information) and 5.13 (Broker/Dealer) shall remain in full force and effect notwithstanding such
termination for a period of six months following such termination, (iii) the covenants and
agreements of the Investor contained in Section 5.10 (Selling Restrictions) shall remain in full
force and effect notwithstanding such termination for a period of 90 days following such
termination, and (iv) the covenants and agreements of the Company contained in Section 5.2
(Registration and Listing) shall remain in full force and effect notwithstanding such termination
for a period of 30 days following such termination.



     Section 9.10 Counterparts. This Agreement may be
executed in counterparts, all of which taken together shall constitute one
and the same original and binding instrument and shall become effective when all counterparts have
been signed by each party and delivered to the other parties hereto, it being understood that all
parties hereto need not sign the same counterpart. In the event any signature is delivered by
facsimile, digital or electronic transmission, such transmission shall constitute delivery of the
manually executed original and the party using such means of delivery shall thereafter cause four
additional executed signature pages to be physically delivered to the other parties within five
days of the execution and delivery hereof. Failure to provide or delay in the delivery of such
additional executed signature pages shall not adversely affect the efficacy of the original
delivery.



     Section 9.11 Publicity. On or after the
Effective Date, the Company may issue a press release or otherwise make a public
statement or announcement with respect to this Agreement and the transactions contemplated hereby
or the existence of this Agreement (including, without limitation, by filing a copy of this
Agreement with the Commission); provided, however, that prior to issuing any such
press release, or making any such public statement or announcement, the Company shall consult with
the Investor on the form and substance of such press release or other disclosure (unless the
disclosure has been previously reviewed and approved by the Investor).



     Section 9.12 Severability. The provisions of
this Agreement are severable and, in the event that any court of competent
jurisdiction shall determine that any one or more of the provisions or part of the provisions
contained in this Agreement shall, for any reason, be held to



42









 







be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect any other
provision or part of a provision of this Agreement, and this Agreement shall be reformed and
construed as if such invalid or illegal or unenforceable provision, or part of such provision, had
never been contained herein, so that such provisions would be valid, legal and enforceable to the
maximum extent possible.



     Section 9.13 Further Assurances. From and
after the date of this Agreement, upon the request of the Investor or the Company, each
of the Company and the Investor shall execute and deliver such instrument, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.



[Signature Page Follows]





43









 








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



	 	 	 	 	 
	 	JONES SODA CO.:

 	 
	 	By:  	/s/
 Michael R. O’Brien  	 
	 	 	Name: Michael R. O’Brien 
	 	 	Title: Chief Financial Officer  
	 
	 	GLENGROVE SMALL CAP VALUE, LTD.:

 	 
	 	By:  	/s/
Peter W. Poole
 	 
	 	 	Name: Peter W. Poole  
	 	 	Title: Director  



44









 






	 	 	 	 	 



ANNEX A TO THE

COMMON STOCK PURCHASE AGREEMENT

DEFINITIONS





     “Acceptable Financing” shall have the meaning assigned to such term in Section 5.6(ii)
hereof.



     “Affiliate” shall have the meaning assigned to such term in Rule 12b-2 under the
Exchange Act.



     “Aggregate Limit” shall have the meaning assigned to such term in Section 1.1 hereof.



     “Base
Prospectus” shall mean the Company’s prospectus, dated
June 11, 2010 a
preliminary form of which is included in the Registration Statement, including the documents
incorporated by reference therein.



     “Below Market Offering” shall have the meaning assigned to such term in Section
5.6(ii) hereof.



     “Broker-Dealer” shall have the meaning assigned to such term in Section 5.13 hereof.



     “Bylaws” shall have the meaning assigned to such term in Section 4.3 hereof.



     “Charter” shall have the meaning assigned to such term in Section 4.3 hereof.



     “Code” shall mean the Internal Revenue Code of 1986, as amended.



     “Commission” shall mean the Securities and Exchange Commission or any successor
entity.



     “Commission Documents” shall mean (1) all reports, schedules, registrations, forms,
statements, information and other documents filed by the Company with the Commission pursuant to
the reporting requirements of the Exchange Act, including all material filed pursuant to Section
13(a) or 15(d) of the Exchange Act, which have been filed by the Company since December 31, 2009
and which hereafter shall be filed by the Company during the Investment Period, including, without
limitation, the Current Report and the Form 10-K filed by the Company for its fiscal year ended
December 31, 2009 (the “2009 Form 10-K”), (2) the Registration Statement, as the same may
be amended from time to time, the Prospectus and each Prospectus Supplement, and each Permitted
Free Writing Prospectus and (3) all information contained in such filings and all documents and
disclosures that have been and heretofore shall be incorporated by reference therein.



     “Commitment Shares” means 70,053 shares of duly authorized,
validly issued, fully paid and non-assessable shares of Common Stock which, concurrently with the
execution





 









 









and delivery of this Agreement on the Effective Date, the Company has caused its transfer
agent to electronically transfer to the Investor not later than 4:00 p.m. (New York time) on the
seventh Trading Day immediately following the Effective Date.




     “Common Stock” shall have the meaning assigned to such term in the Recitals.



     “Current Market Price” means, with respect to any particular measurement date, the
closing price of a share of Common Stock as reported on the Trading Market for the Trading Day
immediately preceding such measurement date.



     “Current Report” shall have the meaning assigned to such term in Section 1.4 hereof.



     “Discount Price” shall have the meaning assigned to such term in Section 2.2 hereof.



     “EDGAR” shall have the meaning assigned to such term in Section 4.3 hereof.



     “Effective Date” shall mean the date of this Agreement.



     “Environmental Laws” shall have the meaning assigned to such term in Section 4.15
hereof.



     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.



     “Event Period” shall have the meaning assigned to such term in Section 7.2 hereof.



     “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission thereunder.



     “FINRA” shall have the meaning assigned to such term in Section 4.5 hereof.



     “FINRA Filing” shall have the meaning assigned to such term in Section 5.1 hereof.



     “Fixed Amount Requested” shall mean the amount of a Fixed Request requested by the
Company in a Fixed Request Notice delivered pursuant to Section 2.1 hereof.



     “Fixed Request” means the transactions contemplated under Sections 2.1 through 2.8 of
this Agreement.



     “Fixed Request Amount” means the actual amount of proceeds received by the Company
pursuant to a Fixed Request under this Agreement.



     “Fixed Request Exercise Date” shall have the meaning assigned to such term in Section
2.2 hereof.



     “Fixed Request Notice” shall have the meaning assigned to such term in Section 2.1
hereof.



 









 





     “Free Writing Prospectus” shall mean a “free writing prospectus” as defined in Rule
405 promulgated under the Securities Act.



     “Fundamental Transaction” means any one or more of the following: (i) the Company
shall, directly or indirectly, in one or more related transactions, (1) consolidate or merge with
or into (whether or not the Company is the surviving corporation) another Person, with the result
that the holders of the Company’s capital stock immediately prior to such consolidation or merger
together beneficially own less than 50% of the outstanding voting power of the surviving or
resulting corporation, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose
of all or substantially all of the assets of the Company to another Person, or (3) allow another
Person to make a purchase, tender or exchange offer that is accepted by the holders of more than
50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the
Person or Persons making or party to, or associated or affiliated with the Persons making or party
to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement
or other business combination (including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than
50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the
other Person or other Persons making or party to, or associated or affiliated with the other
Persons making or party to, such stock or share purchase agreement or other business combination),
or (5) reorganize, recapitalize or reclassify its Common Stock, or (ii) any “person” or “group” (as
these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act) is or shall
become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding
Common Stock.



     “GAAP” shall mean generally accepted accounting principles in the United States of
America as applied by the Company.



     “Governmental Licenses” shall have the meaning assigned to such term in Section
4.14(a) hereof.



     “Indebtedness” shall have the meaning assigned to such term in Section 4.9 hereof.



     “Integration Notice” shall have the meaning assigned to such term in Section 5.6(ii)
hereof.



     “Intellectual Property” shall have the meaning assigned to such term in Section
4.14(b) hereof.



     “Investment Period” shall have the meaning assigned to such term in Section 7.1
hereof.



     “Issuer Free Writing Prospectus” shall mean an “issuer free writing prospectus” as
defined in Rule 433 promulgated under the Securities Act.



     “Market Capitalization” shall be calculated on the Trading Day preceding the
applicable Pricing Period and shall be the product of (x) the number of shares of Common Stock
outstanding and (y) the closing bid price of the Common Stock, both as determined by Bloomberg
Financial LP using the DES and HP functions.



 









 





     “Material Adverse Effect” shall mean any condition, occurrence, state of facts or
event having, or insofar as reasonably can be foreseen would reasonably be expected to have, any
effect on the business, operations, properties or condition (financial or otherwise) of the Company
that is material and adverse to the Company and its Subsidiaries, taken as a whole, and/or any
condition, occurrence, state of facts or event that would reasonably be expected to prohibit or
materially interfere with or delay the ability of the Company to perform any of its obligations
under this Agreement; provided, however, that none of the following, individually
or in the aggregate, shall be taken into account in determining whether a Material Adverse Effect
has occurred or insofar as reasonably can be foreseen would reasonably be expected to occur: (i)
changes in conditions in the U.S. or global capital, credit or financial markets generally,
including changes in the availability of capital or currency exchange rates, provided such changes
shall not have affected the Company in a materially disproportionate manner as compared to other
similarly situated companies; (ii) changes generally affecting the carbonated soft drink, New Age,
alternative or premium beverage industries, provided such changes shall not have affected the
Company in a materially disproportionate manner as compared to other similarly situated companies;
and (iii) any effect of the announcement of this Agreement or the consummation of the transactions
contemplated by this Agreement on the Company’s relationships, contractual or otherwise, with
customers, suppliers, vendors, distributors, retailers, banks or commercial lenders, lessors,
collaboration partners, employees or consultants.



     “Material Agreements” shall have the meaning assigned to such term in Section 4.16
hereof.



     “Multiplier” shall have the meaning assigned to such term in Section 2.3 hereof.



     “NASDAQ” means the NASDAQ Capital Market or any successor thereto.



     “Optional Amount” means the transactions contemplated under Sections 2.9 through 2.11
of this Agreement.



     “Optional Amount Dollar Amount” shall mean the actual amount of proceeds received by
the Company pursuant to the exercise of an Optional Amount under this Agreement.



     “Optional Amount Notice” shall mean a notice sent to the Company with regard to the
Investor’s election to exercise all or any portion of an Optional Amount, as provided in Section
2.11 hereof and substantially in the form attached hereto as Exhibit B.



     “Optional Amount Threshold Price” shall have the meaning assigned to such term in
Section 2.1 hereof.



     “Other Financing” shall have the meaning assigned to such term in Section 5.6(ii)
hereof.



     “Other Financing Notice” shall have the meaning assigned to such term in Section
5.6(ii) hereof.



     “Permitted Free Writing Prospectus” shall have the meaning assigned to such term in
Section 5.8(ii) hereof.



 









 





     “Plan” shall have the meaning assigned to such term in Section 4.22 hereof.



     “Pricing Period” shall mean a period of 10 consecutive Trading Days commencing on the
Pricing Period start date set forth in the Fixed Request Notice, or such other period mutually
agreed upon by the Investor and the Company.



     “Prospectus” shall mean the Base Prospectus, together with any final prospectus filed
with the Commission pursuant to Rule 424(b), as supplemented by any Prospectus Supplement,
including the documents incorporated by reference therein.



     “Prospectus Supplement” shall mean any prospectus supplement to the Base Prospectus
filed with the Commission pursuant to Rule 424(b) under the Securities Act, including the documents
incorporated by reference therein.



     “Reduction Notice” shall have the meaning assigned to such term in Section 2.8 hereof.



     “Reedland” shall have the meaning assigned to such term in Section 4.13 hereof.



     “Registration Statement” shall mean the registration statement on Form S 3, Commission
File Number 333-166556, filed by the Company with the Commission under the Securities Act for the
registration of the Shares, as such Registration Statement may be amended and supplemented from
time to time (including pursuant to Rule 462(b) under the Securities Act), including all documents
filed as part thereof or incorporated by reference therein, and including all information deemed to
be a part thereof at the time of effectiveness pursuant to Rule 430A or Rule 430B under the
Securities Act.



     “Restricted Period” shall have the meaning assigned to such term in Section 5.10(i)
hereof.



     “Restricted Person” shall have the meaning assigned to such term in Section 5.10(i)
hereof.



     “Restricted Persons” shall have the meaning assigned to such term in Section 5.10(i)
hereof.



     “Securities” shall mean, collectively, the Shares and the Commitment Shares.



     “Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and
regulations of the Commission thereunder.



     “Settlement Date” shall have the meaning assigned to such term in Section 2.7 hereof.



     “Shares” shall mean shares of Common Stock issuable to the Investor upon exercise of a
Fixed Request and shares of Common Stock issuable to the Investor upon exercise of an Optional
Amount.



     “Short Sales” means “short sales” as defined in Rule 200 promulgated under Regulation
SHO under the Exchange Act.



 









 





     “Significant Subsidiary” means any Subsidiary of the Company that would constitute a
Significant Subsidiary of the Company within the meaning of Rule 1-02 of Regulation S-X of the
Commission.



     “SOXA” shall have the meaning assigned to such term in Section 4.6(c) hereof.



     “Subsidiary” shall mean any corporation or other entity of which at least a majority
of the securities or other ownership interest having ordinary voting power (absolutely or
contingently) for the election of directors or other persons performing similar functions are at
the time owned directly or indirectly by the Company and/or any of its other Subsidiaries.



     “Threshold Price” is the lowest price (except to the extent otherwise provided in
Section 2.6) at which the Company may sell Shares during the applicable Pricing Period as set forth
in a Fixed Request Notice (not taking into account the applicable percentage discount during such
Pricing Period determined in accordance with Section 2.2); provided, however, that
at no time shall the Threshold Price be lower than $0.50 per share unless the Company and the
Investor shall mutually agree.



     “Total Commitment” shall have the meaning assigned to such term in Section 1.1 hereof.



     “Trading Day” shall mean a full trading day (beginning at 9:30 a.m., New York City
time, and ending at 4:00 p.m., New York City time) on the NASDAQ.



     “Trading Market” means the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the NYSE Amex Equities, the NASDAQ, the
Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange (or any
successors to any of the foregoing), whichever is at the time the principal trading exchange or
market for the Common Stock.



     “Trading
Market Limit” means, at any time 5,228,893,  shares of duly
authorized, validly issued, fully paid and non-assessable shares of Common Stock (as adjusted for
any stock splits, stock combinations, stock dividends, recapitalizations and other similar
transactions that occur on or after the date of this Agreement); provided, however,
that the Trading Market Limit shall not exceed under any circumstances that number of shares of
Common Stock that the Company may issue pursuant to this Agreement and the transactions
contemplated hereby without (a) breaching the Company’s obligations under the rules and regulations
of the Trading Market or (b) obtaining stockholder approval under the applicable rules and
regulations of the Trading Market.



     “VWAP” shall mean the daily volume weighted average price (based on a Trading Day from
9:30 a.m. to 4:00 p.m. (New York time)) of the Company on the NASDAQ as reported by Bloomberg
Financial L.P. using the AQR function.



     “Warrant Value” shall mean the fair value of all warrants, options and other similar
rights issued to a third party in connection with an Other Financing, determined by using a
standard



 









 









Black-Scholes option-pricing model using an expected volatility percentage as shall be
mutually agreed by the Investor and the Company. In the case of a dispute relating to such
expected volatility assumption, the Investor shall obtain applicable volatility data from three
investment banking firms of nationally recognized reputation, and the parties hereto shall use the
average thereof for purposes of determining the expected volatility percentage in connection with
the Black-Scholes calculation referred to in the immediately preceding sentence.





 











 





EXHIBIT A TO THE

COMMON STOCK PURCHASE AGREEMENT

FORM OF FIXED REQUEST NOTICE




     Reference
is made to the Common Stock Purchase Agreement dated as of June 11, 2010,
(the “Purchase Agreement”) between Jones Soda Co., a corporation organized and existing
under the laws of the State of Washington (the “Company”), and Glengrove Small Cap Value,
Ltd., a business company incorporated under the laws of the British Virgin Islands. Capitalized
terms used and not otherwise defined herein shall have the meanings given such terms in the
Purchase Agreement.



     In accordance with and pursuant to Section 2.1 of the Purchase Agreement, the Company hereby
issues this Fixed Request Notice to exercise a Fixed Request for the Fixed Amount Requested
indicated below.



	 	 	 

	Fixed Amount Requested:
	 	 
	 

	 	 
	 
	 	 
	Optional Amount Dollar Amount:
	 	 
	 

	 	 
	 
	 	 
	Pricing Period start date:
	 	 
	 

	 	 
	 
	 	 
	Pricing Period end date:
	 	 
	 

	 	 
	 
	 	 
	Settlement Date:
	 	 
	 

	 	 
	 
	 	 
	Fixed Request Threshold Price:
	 	 
	 

	 	 
	 
	 	 
	Optional Amount Threshold Price:
	 	 
	 

	 	 
	 
	 	 
	Dollar Amount of Common Stock Currently Unissued
under the Registration Statement
	 	 
	 

	 	 
	 
	 	 
	Dollar Amount of Common Stock Currently Available
under the Aggregate Limit:
	 	 
	 

	 	 





	 	 	 	 	 
	 	 	 
	Dated:                                          	  By:  	 
	 	 	Name:  	 	 
	 	 	Title:  	
 	 
	 
	 	 	Address:  	 
	 	 	Facsimile No.:  	
 
	 



	 	 	 	 	 
	AGREED AND ACCEPTED

 	 	 
	By:  	 	 	 
	 	Name:  	 	 	 
	 	Title:  	 	 	 



 









 





EXHIBIT B TO THE

COMMON STOCK PURCHASE AGREEMENT

FORM OF OPTIONAL AMOUNT NOTICE




	 	 	 

	To:
	 	 
	 

	 	 
	Fax#:
	 	 
	 

	 	 





     Reference
is made to the Common Stock Purchase Agreement dated as of June 11, 2010 (the
“Purchase Agreement”) between Jones Soda Co., a corporation organized and existing under
the laws of the State of Washington (the “Company”), and Glengrove Small Cap Value, Ltd., a
business company incorporated under the laws of the British Virgin Islands (the
“Investor”). Capitalized terms used and not otherwise defined herein shall have the
meanings given such terms in the Purchase Agreement.



     In accordance with and pursuant to Section 2.1 of the Purchase Agreement, the Investor hereby
issues this Optional Amount Notice to exercise an Optional Amount for the Optional Amount Dollar
Amount indicated below.



	 	 	 

	Optional Amount Dollar Amount Exercised
	 	 
	 

	 	 
	 
	 	 
	Number of Shares to be purchased
	 	 
	 

	 	 
	 
	 	 
	VWAP on the date hereof:
	 	 
	 

	 	 
	 
	 	 
	Discount Price:
	 	 
	 

	 	 
	 
	 	 
	Settlement Date:
	 	 
	 

	 	 
	 
	 	 
	Threshold Price:
	 	 
	 

	 	 





	 	 	 	 	 
	 	 	 
	Dated:                                          	  By:  	 
	 	 	Name:  	 	 
	 	 	Title:  	
 	 
	 
	 	 	Address:  	 
	 	 	Facsimile No.:  	
 



 









 







EXHIBIT C TO THE

COMMON STOCK PURCHASE AGREEMENT

CERTIFICATE OF THE COMPANY




CLOSING CERTIFICATE

________200__




     The undersigned, the [____________] of Jones Soda Co., a corporation organized and existing
under the laws of the State of Washington (the “Company”), delivers this certificate in
connection with the Common Stock Purchase Agreement, dated as of June
11, 2010 (the
“Agreement”), by and between the Company and Glengrove Small Cap Value, Ltd., a business
company incorporated under the laws of the British Virgin Islands (the “Investor”), and
hereby certifies on the date hereof that (capitalized terms used herein without definition have the
meanings assigned to them in the Agreement):



     1. Attached hereto as Exhibit A is a true, complete and correct copy of the Articles of
Incorporation of the Company as filed with the Secretary of State of the State of Washington. The
Articles of Incorporation of the Company has not been further amended or restated, and no document
with respect to any amendment to the Articles of Incorporation of the Company has been filed in the
office of the Secretary of State of the State of Washington since the date shown on the face of the
state certification relating to the Company’s Articles of Incorporation, which is in full force and
effect on the date hereof, and no action has been taken by the Company in contemplation of any such
amendment or the dissolution, merger or consolidation of the Company.



     2. Attached hereto as Exhibit B is a true and complete copy of the Bylaws of the Company, as
amended and restated through, and as in full force and effect on, the date hereof, and no proposal
for any amendment, repeal or other modification to the Bylaws of the Company has been taken or is
currently pending before the Board of Directors or shareholders of the Company.



     3. The Board of Directors of the Company has approved the transactions contemplated by the
Agreement; said approval has not been amended, rescinded or modified and remains in full force and
effect as of the date hereof.



     4. Each person who, as an officer of the Company, or as attorney-in-fact of an officer of the
Company, signed (i) the Agreement and (ii) any other document delivered prior hereto or on the date
hereof in connection with the transactions contemplated by the Agreement, was duly elected,
qualified and acting as such officer or duly appointed and acting as such attorney-in-fact, and the
signature of each such person appearing on any such document is his genuine signature.



     IN WITNESS WHEREOF, I have signed my name as of the date first above written.



	 	 	 	 	 
	 	 	 
	 	By:  	 	 
	 	 	Title: 	 
	 	 	 	 



 









 







EXHIBIT D TO THE

COMMON STOCK PURCHASE AGREEMENT

COMPLIANCE CERTIFICATE





     In connection with the issuance of shares of common stock of Jones Soda Co., a corporation
organized and existing under the laws of the State of Washington (the “Company”), pursuant
to the Fixed Request Notice, dated [____________], delivered by the Company to Glengrove Small Cap
Value, Ltd. (the “Investor”) pursuant to Article II of the Common Stock Purchase Agreement,
dated as of June 11, 2010, by and between the Company and the Investor (the
“Agreement”), the undersigned hereby certifies as follows:



     1. The undersigned is the duly elected [____________] of the Company.



     2. Except as set forth in the attached Disclosure Schedule, the representations and warranties
of the Company set forth in Article IV of the Agreement (i) that are not qualified by “materiality”
or “Material Adverse Effect” are true and correct in all material respects as of [insert Fixed
Request Exercise Date] and as of the date hereof with the same force and effect as if made on such
dates, except to the extent such representations and warranties are as of another date, in which
case, such representations and warranties are true and correct in all material respects as of such
other date and (ii) that are qualified by “materiality” or “Material Adverse Effect” are true and
correct as of [insert Fixed Request Exercise Date] and as of the date hereof with the same force
and effect as if made on such dates, except to the extent such representations and warranties are
as of another date, in which case, such representations and warranties are true and correct as of
such other date.



     3. The Company has performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by the Agreement to be performed, satisfied or
complied with by the Company at or prior to [insert Fixed Request Exercise Date] and the date
hereof.



     Capitalized terms used but not otherwise defined herein shall have the meanings assigned to
them in the Agreement.



     The undersigned has executed this Certificate this [___] day of [____________], 200[___].



	 	 	 	 	 
	 	 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title: