Unassociated Document


    AMENDMENT
      NUMBER ONE TO

    LOAN
      AND SECURITY AGREEMENT

     

    THIS
      AMENDMENT NUMBER ONE TO LOAN AND SECURITY AGREEMENT
      (this
“Amendment”), dated as of July 16, 2008, is entered into between FIRST
      CAPITAL WESTERN REGION, LLC
      (“Lender”), and REED’S,
      INC.,
      a
      Delaware corporation (“Borrower”), in light of the following facts:

     

    RECITALS

     

    WHEREAS,
      Borrower and Lender have previously entered into certain Loan and Security
      Agreement, dated as of May 30, 2008 (the “Agreement”).

     

    WHEREAS,
      Borrower has requested that Lender (i) increase advance rate for Eligible
      Inventory for the purposes of calculating the Borrowing Base, and (ii) increase
      the Maximum Credit Limit.

     

    WHEREAS,
      Lender has agreed to Borrower's request subject to the terms and conditions
      contained in this Amendment.

     

    WHEREAS,
      Borrower and Lender wish to amend the Agreement as set forth in this
      Amendment.

     

    NOW,
      THEREFORE, the parties agree as follows:

     

    1. DEFINITIONS.
      All
      terms which are defined in the Agreement shall have the same definition when
      used herein unless a different definition is ascribed to such term under this
      Amendment, in which case, the definition contained herein shall
      govern.

     

    2. AMENDMENTS.
      The
      Agreement is amended in the following respect:

     

    (a) Change
      in Maximum Credit Limit.
      The
      definition of “Maximum
      Credit Limit”
in
      Section
      1
      of the
      Agreement is deleted in its entirety and is replaced with a new definition
      as
      follows:

     

    “Maximum
      Credit Limit”
means
      $3,000,000.

     

    (b) Weekly
      Inventory Reports.
      Section
      9(b)
      of the
      Agreement is deleted in its entirety and is replaced with a new Section
      9(b)
      as
      follows:

     


    
      
         

      

      
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    (b) Collateral
      Reports.
      Concurrent with the execution of this Agreement by Borrower and concurrent
      with
      each request for a loan pursuant to Section 2(a),
      but no
      less frequently than as required by Item 26
      of the Schedule,
      Borrower shall deliver to Lender a fully completed Borrowing Base Certificate
      certified by the Chief Executive Officer or Chief Financial Officer of Borrower
      as being true and correct. Concurrent with the delivery of each such Borrowing
      Base Certificate, Borrower shall provide a written report to Lender of all
      materially significant returns, disputes and claims, together with sales and
      other reports relating to the Accounts and Inventory as required by Lender.
      Borrower shall deliver to Lender on the first day of each week a detailed report
      of Borrower’s Inventory, setting forth the quantity, type, cost and location
      thereof, all of which shall be set forth in a form and shall contain such
      information as is acceptable to Lender. Borrower shall deliver to Lender within
      ten (10) days after the end of each month a report, reflecting the status as
      of
      the end of each month and certified by the Chief Executive Officer or Chief
      Financial Officer of Borrower as being true and correct, containing (i) a
      current detailed aging, by total and by Customer, of Borrower’s Accounts, and
      (ii) a current detailed aging, by total and by vendor, of Borrower’s accounts
      payable. Borrower will also conduct a physical inventory count no less
      frequently than annually, adjust Borrower’s records to reflect the results of
      the count and deliver to Lender monthly a list of locations of Inventory and
      the
      types and values of Inventory at each such location, in such form as Lender
      may
      require. At Lender’s request, Borrower shall conduct such physical inventory
      counts and deliver such information more or less often than described above
      and
      such other information with respect to the Collateral, Borrower or Borrower’s
      business or financial condition as Lender may reasonably request.

     

    (c) Increase
      in Advance Rate for Eligible Inventory.
      Item
      1(a)(ii)(B)
      of the
Schedule
      to the
      Agreement is deleted in its entirety and is replaced with a new Item
      1(a)(ii)(B)
      as
      follows:

     

    (B) An
      amount
      equal to the lesser of:

     

    1. $1,000,000,
      and

     

    2. An
      amount
      equal to (y) 50% of the dollar value (determined at the lower of cost or market
      value) of Eligible Inventory located at Borrower’s premises located at 12930 and
      13000 South Spring Street, Los Angeles, California 90061, plus,
      (z) 50%
      of the dollar value (determined at the lower of cost or market value) of
      Eligible Inventory consisting of finished goods (and not raw materials) located
      at Valley Distributing & Storage Company’s warehouse in Wilkes-Barre,
      Pennsylvania; provided, however, that the inclusion of qualifying Eligible
      Inventory located at Valley Distributing & Storage Company is subject to the
      condition subsequent that Lender shall have received an executed warehouseman’s
      letter agreement containing terms and conditions satisfactory to Lender by
      no
      later than August 15, 2008 (failure to satisfy this condition subsequent shall
      cause the qualifying Eligible Inventory at such location to no longer be
      included in the calculation of the Borrowing Base), 

     


    
      
         

      

      
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    3. FEE
      FOR INCREASE IN MAXIMUM CREDIT LIMIT.
      Upon
      execution of this Amendment, in consideration of Lender’s agreeing to increase
      the Maximum Credit Limit to $3,000,000, but without affecting Borrower’s
      obligation to reimburse Lender for costs associated with this Amendment and
      the
      transactions contemplated hereby as provided elsewhere in the Agreement,
      Borrower agrees to pay Lender a fee in the amount of $7,500, which will be
      fully
      earned on the date of this Amendment and shall be non-refundable.

     

    4. REPRESENTATIONS
      AND WARRANTIES.
      Borrower hereby affirms to Lender that all of Borrower's representations and
      warranties set forth in the Agreement are true, complete and accurate in all
      respects as of the date hereof.

     

    5. LIMITED
      EFFECT.
      Except
      for the specific amendment contained in this Amendment, the Agreement shall
      remain unchanged and in full force and effect.

     

    6. COUNTERPARTS;
      EFFECTIVENESS.
      This
      Amendment may be executed in any number of counterparts and by different parties
      on separate counterparts, each of which when so executed and delivered shall
      be
      deemed to be an original. All such counterparts, taken together, shall
      constitute but one and the same Amendment. This Amendment shall become effective
      upon the execution of this Amendment by each of the parties hereto.

     

    [Signatures
      are on the next page]

     


    
      
         

      

      
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    IN
      WITNESS WHEREOF, Lender and Borrower have executed this Amendment.

     

    
      	 	
              REED’S,
                INC.,

            
	 	
              a
                Delaware corporation

               

               

            
	 	
              By:
                /s/ Christopher Reed

            
	 	
              Name:
                Christopher Reed

            
	 	
              Title:
                CEO

               

            
	 	
              FCC,
                LLC,
                a
                Florida limited liability company

            
	 	
              doing
                business as First Capital Western Region, LLC

               

               

            
	 	
              By:
                /s/ John P. Neher

            
	 	
              Name:
                John P. Neher

            
	 	
              Title:
                Vice President

            


    


    
      
         

      

      
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    ACKNOWLEDGMENT
      AND REAFFIRMATION OF GUARANTOR

     

    The
      undersigned hereby acknowledges that he executed a Continuing Guaranty, dated
      on
      or around May 30, 2008 (the “Guaranty”), with respect to the present and future
      obligations of Borrower owing to Lender. The undersigned hereby acknowledges
      the
      foregoing Amendment, consent to its terms, and reaffirms his Guaranty. The
      undersigned further acknowledges that nothing in the Guaranty obligates Lender
      to notify the undersigned of any changes in the financial accommodations made
      available to Borrower or to seek future reaffirmations of the Guaranty, even
      if
      the Agreement is further amended; and no requirement to so notify the
      undersigned or to seek reaffirmations in the future shall be implied by the
      execution of this reaffirmation.

     

    
      	 	
              /s/
                Christopher Reed

            
	 	
              Christopher
                Reed, an individual 

            


    

    


    


    
      
         

      

      
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