Document:

Unassociated Document

    Exhibit
10.2

    

    NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY THE SECURITIES.

    

    
      	 
      	
              Right
      to Purchase 24,000 shares of Common Stock of Save the World Air, Inc.
      (subject to adjustment as provided
herein)

            

    

    

    FORM
OF COMMON STOCK PURCHASE WARRANT

    
      
        	
                No. 2009-PA
      001

              	 
      	
                Issue
      Date: November 20, 2009

              

      

    

     

    SAVE THE
WORLD AIR, INC., a corporation organized under the laws of the State of Nevada
(the “Company”), hereby
certifies that, for value received, Sandgrain Securities, Inc., or its assigns
(the “Holder”), is
entitled, subject to the terms set forth below, to purchase from the Company at
any time commencing six months after the Issue Date until 5:00 p.m., E.S.T on
September 28, 2012 (the “Expiration Date”), up to
Twenty Four Thousand (24,000) fully paid and nonassessable shares of Common
Stock at a per share purchase price of $0.30.  The afore described
purchase price per share, as adjusted from time to time as herein provided, is
referred to herein as the "Purchase
Price."  The number and character of such shares of Common
Stock and the Purchase Price are subject to adjustment as provided
herein.  The Company may reduce the Purchase Price for some or all of
the Warrants, temporarily or permanently.  Capitalized terms used and
not otherwise defined herein shall have the meanings set forth in that certain
Securities Purchase Agreement (the “Subscription Agreement”),
accepted as of November 20, 2009, entered into by the Company and the
Holder.

    

    As used
herein the following terms, unless the context otherwise requires, have the
following respective meanings:

     

    (a) The
term “Company” shall
include Save the World Air, Inc. and any corporation which shall succeed or
assume the obligations of Save the World Air, Inc. hereunder.

     

    (b) The
term “Common Stock”
includes (a) the Company's Common Stock, $.001 par value per share, as
authorized on the date of the Subscription Agreement, and (b) any other
securities into which or for which any of the securities described in
(a) may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.

     

    (c)  The
term “Other Securities”
refers to any stock (other than Common Stock) and other securities of the
Company or any other person (corporate or otherwise) which the holder of the
Warrant at any time shall be entitled to receive, or shall have received, on the
exercise of the Warrant, in lieu of or in addition to Common Stock, or which at
any time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 4 or
otherwise.

     

    
      
         

      

      
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    (d)  The
term “Warrant Shares”
shall mean the Common Stock issuable upon exercise of this Warrant.

     

    1.           Exercise of
Warrant.

     

    1.1.           Number of Shares Issuable
upon Exercise.  From and after the Issue Date through and
including the Expiration Date, the Holder hereof shall be entitled to receive,
upon exercise of this Warrant in whole in accordance with the terms of
subsection 1.2 or upon exercise of this Warrant in part in accordance with
subsection 1.3, shares of Common Stock of the Company, subject to
adjustment pursuant to Section 4.

     

    1.2.           Full
Exercise.  This Warrant may be exercised in full by the Holder
hereof by delivery of an original or facsimile copy of the form of subscription
attached as Exhibit A
hereto (the “Subscription
Form”) duly executed by such Holder and delivery within two days
thereafter of payment, in cash, wire transfer or by certified or official bank
check payable to the order of the Company, in the amount obtained by multiplying
the number of shares of Common Stock for which this Warrant is then exercisable
by the Purchase Price then in effect.  The original Warrant is not
required to be surrendered to the Company until it has been fully
exercised.

     

    1.3.           Partial
Exercise.  This Warrant may be exercised in part (but not for a
fractional share) by delivery of a Subscription Form in the manner and at the
place provided in subsection 1.2 except that the amount payable by the
Holder on such partial exercise shall be the amount obtained by multiplying
(a) the number of whole shares of Common Stock designated by the Holder in
the Subscription Form by (b) the Purchase Price then in
effect.  On any such partial exercise provided the Holder has
surrendered the original Warrant, the Company, at its expense, will forthwith
issue and deliver to or upon the order of the Holder hereof a new Warrant of
like tenor, in the name of the Holder hereof or as such Holder (upon payment by
such Holder of any applicable transfer taxes) may request, the whole number of
shares of Common Stock for which such Warrant may still be
exercised.

     

    1.4.           Fair Market Value.
Fair Market Value of a share of Common Stock as of a particular date (the "Determination Date") shall
mean:

     

    (a)           If
the Company's Common Stock is traded on an exchange or is quoted on the NASDAQ
Global Market, Nasdaq Global Select Market, the NASDAQ Capital Market, the New
York Stock Exchange, the American Stock Exchange, LLC, OTC Bulletin Board, or
Pink Sheets LLC, then the average of the closing or last sale prices,
respectively, reported for the ten trading days immediately preceding the
Determination Date;

     

    (b)           If
the Company's Common Stock is not traded on an exchange or on the NASDAQ Global
Market, Nasdaq Global Select Market, the NASDAQ Capital Market, the New York
Stock Exchange, the American Stock Exchange, LLC, OTC Bulletin Board, or Pink
Sheets LLC, but is traded in the over-the-counter market, then the average of
the closing bid and ask prices reported for the ten trading days immediately
preceding the Determination Date;

     

    (c)           Except
as provided in clause (d) below and Section 3.1, if the Company's Common
Stock is not publicly traded, then as the Holder and the Company agree, or in
the absence of such an agreement, by arbitration in accordance with the rules
then standing of the American Arbitration Association, before a single
arbitrator to be chosen from a panel of persons qualified by education and
training to pass on the matter to be decided with such arbitration to be
conducted in New York City, New York; or

     

    (d)           If
the Determination Date is the date of a liquidation, dissolution or winding up,
or any event deemed to be a liquidation, dissolution or winding up pursuant to
the Company's charter, then all amounts to be payable per share to holders of
the Common Stock pursuant to the charter in the event of such liquidation,
dissolution or winding up, plus all other amounts to be payable per share in
respect of the Common Stock in liquidation under the charter, assuming for the
purposes of this clause (d) that all of the shares of Common Stock then
issuable upon exercise of all of the Warrants are outstanding at the
Determination Date.

     

    
      
         

      

      
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    1.5.           Company
Acknowledgment. The Company will, at the time of the exercise of the
Warrant, upon the request of the Holder hereof acknowledge in writing its
continuing obligation to afford to such Holder any rights to which such Holder
shall continue to be entitled after such exercise in accordance with the
provisions of this Warrant. If the Holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to afford
to such Holder any such rights.

     

    1.6.           Trustee for Warrant
Holders. In the event that a bank or trust company shall have been
appointed as trustee for the Holder of the Warrants pursuant to
Subsection 3.2, such bank or trust company shall have all the powers and
duties of a warrant agent (as hereinafter described) and shall accept, in its
own name for the account of the Company or such successor person as may be
entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant to this
Section 1.

     

    1.7           Delivery of Stock
Certificates, etc. on Exercise. The Company agrees that the shares of
Common Stock purchased upon exercise of this Warrant shall be deemed to be
issued to the Holder hereof as the record owner of such shares as of the close
of business on the date on which delivery of a Subscription Form shall have
occurred and payment made for such shares as aforesaid. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within
ten (10) business days thereafter (“Warrant Share Delivery Date”),
the Company at its expense (including the payment by it of any applicable issue
taxes) will cause to be issued in the name of and delivered to the Holder
hereof, or as such Holder (upon payment by such Holder of any applicable
transfer taxes) may direct in compliance with applicable securities laws, a
certificate or certificates for the number of duly and validly issued, fully
paid and non-assessable shares of Common Stock (or Other Securities) to which
such Holder shall be entitled on such exercise, plus, in lieu of any fractional
share to which such Holder would otherwise be entitled, cash equal to such
fraction multiplied by the then Fair Market Value of one full share of Common
Stock, together with any other stock or other securities and property (including
cash, where applicable) to which such Holder is entitled upon such exercise
pursuant to Section 1 or otherwise.  The Company understands that
a delay in the delivery of the Warrant Shares after the Warrant Share Delivery
Date could result in economic loss to the Holder.  The Company shall
not, however, be responsible for any out of pocket or potential lost profits as
a result of a decline in stock price during any delay.  Furthermore,
in addition to any other remedies which may be available to the Holder, in the
event that the Company fails for any reason to effect delivery of the Warrant
Shares by the Warrant Share Delivery Date, the Holder may revoke all or part of
the relevant Warrant exercise by delivery of a notice to such effect to the
Company, whereupon the Company and the Holder shall each be restored to their
respective positions immediately prior to the exercise of the relevant portion
of this Warrant.

     

    2.           Cashless
Exercise.

     

    (a)           This
Warrant may be exercised in whole or in part either in (i) cash, wire
transfer or by certified or official bank check payable to the order of the
Company equal to the applicable aggregate Purchase Price, (ii) by delivery of
Common Stock issuable upon exercise of the Warrants in accordance with
Section (b) below or (iii) by a combination of any of the
foregoing methods, for the number of Common Stock specified in such form (as
such exercise number shall be adjusted to reflect any adjustment in the total
number of shares of Common Stock issuable to the holder per the terms of this
Warrant) and the holder shall thereupon be entitled to receive the number of
duly authorized, validly issued, fully-paid and non-assessable shares of Common
Stock (or Other Securities) determined as provided herein.

     

     

    
      
         

      

      
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    (b)           Subject
to the provisions herein to the contrary, if the Fair Market Value of one share
of Common Stock is greater than the Purchase Price (at the date of calculation
as set forth below), in lieu of exercising this Warrant for cash, the holder may
elect to receive shares equal to the value (as determined below) of this Warrant
(or the portion thereof being cancelled) by surrender of this Warrant at the
principal office of the Company together with the properly endorsed Subscription
Form in which event the Company shall issue to the holder a number of shares of
Common Stock computed using the following formula:

     

    X=Y (A-B)

              A

    

    Where   
X=           the number
of shares of Common Stock to be issued to the holder

    

    
      	
               
      

            	
              Y=

            	
              the
      number of shares of Common Stock purchasable under the Warrant or, if only
      a portion of the Warrant is being exercised, the portion of the Warrant
      being exercised (at the date of such
  calculation)

            

    

     

    
      	
               
      

            	
              A=

            	
              the
      average of the closing sale prices of the Common Stock for the ten (10)
      Trading Days immediately prior to (but not including) the Exercise Date,
      or Fair Market Value, whichever is
less

            

    

     

    
      	
               
      

            	
              B=

            	
              Purchase
      Price (as adjusted to the date of such
  calculation)

            

    

     

    For
purposes of Rule 144 promulgated under the 1933 Act, it is intended, understood
and acknowledged that the Warrant Shares issued in a cashless exercise
transaction shall be deemed to have been acquired by the Holder, and the holding
period for the Warrant Shares shall be deemed to have commenced, on the date
this Warrant was originally issued pursuant to the Subscription
Agreement.

     

    3.           Adjustment for
Reorganization, Consolidation, Merger, Subsequent Share Issuances
etc.

     

    3.1.           Fundamental Transaction. 
If, at any time while this Warrant is outstanding, (A) the Company 
effects any merger or  consolidation  of the Company with or into
another entity, (B) the Company effects any sale of all or
substantially all of its assets in one or
a series of related transactions,  (C)
any tender offer or exchange offer (whether by the
Company or another entity) is completed pursuant to which holders of Common
Stock are permitted to tender or exchange their
shares for other securities, cash or property, (D) the
Company consummates a stock purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) with one or more persons or entities whereby such other
persons or entities acquire more than the 50% of the outstanding shares of
Common Stock (not including any shares of Common Stock held by such other
persons or entities making or party to, or associated or affiliated with the
other persons or entities making or party to, such stock purchase agreement or
other business combination), (E) any "person" or "group" (as these terms are
used for purposes of Sections 13(d) and 14(d) of the 1934 Act) is or shall
become the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act),
directly or indirectly, of 50% of the aggregate Common Stock of the
Company, or (F) the Company effects any reclassification of
the Common Stock or any compulsory share exchange
pursuant to
which the Common Stock is effectively converted into
or exchanged for other securities, cash or property (in any such
case, a "Fundamental 
Transaction"), then, upon any subsequent exercise of this
Warrant, the Holder shall have the right to receive, for each Warrant Share that
would have been issuable upon such exercise immediately prior to the
occurrence of such Fundamental Transaction, at the option of the
Holder, (a) upon exercise of this Warrant, the number of shares of Common
Stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and any additional
consideration (the "Alternate
Consideration") receivable upon or as a result of
such reorganization,
reclassification, merger, consolidation or disposition of assets
by a Holder of the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to such
event or

     

     

    
      
         

      

      
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     (b)
if the Company is acquired in (1) a transaction where the
consideration paid to the holders of the Common Stock consists solely of cash,
(2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the 1934 Act, or
(3) a transaction involving a person or entity not traded on a national
securities exchange, the Nasdaq Global Select Market, the Nasdaq Global Market
or the Nasdaq Capital Market, cash equal to the Black-Scholes
Value.  For purposes of any such exercise, the
determination of the Purchase Price shall
be appropriately adjusted to apply to such Alternate
Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common
Stock in such Fundamental Transaction, and
the Company shall apportion the Purchase Price
among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different
components of the Alternate Consideration.  If holders of Common Stock
are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given
the same choice as to the Alternate Consideration it receives upon any exercise
of this Warrant following such Fundamental Transaction.  To the extent
necessary to effectuate the foregoing provisions, any
successor to the Company or surviving entity in such
Fundamental Transaction shall issue to the Holder a
new warrant consistent with
the foregoing provisions and evidencing the
Holder's right to exercise such warrant into Alternate
Consideration.  The terms of any agreement pursuant to which a
Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of
this Section 3.1 and insuring that this Warrant (or any such
replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a
Fundamental Transaction.  “Black-Scholes Value” shall be determined in
accordance with the Black-Scholes Option Pricing Model obtained from the “OV”
function on Bloomberg L.P. using (i) a price per share of Common Stock equal to
the VWAP of the Common Stock for the Trading Day immediately preceding the date
of  consummation of the applicable Fundamental Transaction, (ii) a
risk-free interest rate corresponding to the U.S. Treasury rate for a period
equal to the remaining term of this Warrant as of the date of such request and
(iii) an expected volatility equal to the 100 day volatility obtained from the
HVT function on Bloomberg L.P. determined as of the Trading Day immediately
following the public announcement of the applicable Fundamental
Transaction.

     

    3.2.           Dissolution.  In
the event of any dissolution of the Company following the transfer of all or
substantially all of its properties or assets, the Company, prior to such
dissolution, shall at its expense deliver or cause to be delivered the stock and
other securities and property (including cash, where applicable) receivable by
the Holder of the Warrants after the effective date of such dissolution pursuant
to this Section 3 to a bank or trust company (a "Trustee") having its
principal office in New York, NY, as trustee for the Holder of the
Warrants.  Such property shall be delivered only upon payment of the
Warrant exercise price.

     

    3.3.           Continuation of
Terms.  Upon any reorganization, consolidation, merger or
transfer (and any dissolution following any transfer) referred to in this
Section 3, this Warrant shall continue in full force and effect and the
terms hereof shall be applicable to the Other Securities and property receivable
on the exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of any Other
Securities, including, in the case of any such transfer, the person acquiring
all or substantially all of the properties or assets of the Company, whether or
not such person shall have expressly assumed the terms of this Warrant as
provided in Section 4.  In the event this Warrant does not
continue in full force and effect after the consummation of the transaction
described in this Section 3, then only in such event will the Company's
securities and property (including cash, where applicable) receivable by the
Holder of the Warrants be delivered to the Trustee as contemplated by
Section 3.2.

     

     

    
      
         

      

      
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    3.4.           Anti-Dilution.

    

    (a)           Anti
Dilution.  Other than in connection with an Excepted Issuance
(as defined below), if at any time while any part of the Warrants are
outstanding, the Company shall agree to or actually issue or grant the right to
receive any Common Stock or securities convertible, exercisable or exchangeable
for shares of Common Stock (or modify any of the foregoing which may be
outstanding)  (“Common Stock Equivalent”) to
any person or entity at a price per share or conversion price or exercise price
per share which shall be less than the Warrant exercise price in respect of the
Warrant Shares then in effect (“Lower Price Issuance”),
without the consent of the Holder of such Warrant, then the Warrant exercise
price shall automatically and without further action be reduced to an amount
equal to the product of the Warrant exercise price then in effect multiplied by
a fraction of which the numerator shall be the number of shares of Common Stock
outstanding prior to such issuance plus the number of shares of Common Stock
which the aggregate purchase price or exercise price for such Common Stock
(plus, if applicable, the aggregate consideration received from the issuance of
the Common Stock Equivalents) would purchase at the then current Warrant
exercise price and the denominator shall be the number of shares of Common Stock
outstanding or deemed to be outstanding immediately after such
issuance.  For so long as a Warrant is outstanding upon the occurrence
of a Lower Price Issuance, the Warrant exercise price shall be reduced to an
amount equal to the product of the Warrant exercise price then in effect
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding prior to such issuance plus the number of shares of
Common Stock which the aggregate purchase price or exercise price for such
Common Stock (plus, if applicable, the aggregate consideration received from the
issuance of the Common Stock Equivalents) would purchase at the then current
Warrant exercise price and the denominator shall be the number of shares of
Common Stock outstanding or deemed to be outstanding immediately after such
issuance; provided, however, that the Warrant exercise price shall not, as a
result of a Lower Price Issuance, be reduced to below $0.10 per share (but may
be reduced below said amount as a result of stock splits, combinations, mergers
or similar organic changes as provided herein).

    

    (b)           Effective
Price.   For purposes of Section 3.4 in connection with
any issuance of any Common Stock Equivalents, (A) the maximum number of shares
of Common Stock potentially issuable at any time upon conversion, exercise or
exchange of such Common Stock Equivalents (the “Deemed Number”) shall be
deemed to be outstanding or subscribed for and required to be issued upon
issuance of such Common Stock Equivalents, (B) the deemed issue price (“Effective Price”) applicable
to such Common Stock shall equal the minimum dollar value of consideration
payable to the Company to purchase such Common Stock Equivalents and to convert,
exercise or exchange them into Common stock (net of any discounts, fees,
commissions and other expenses), divided by the Deemed number, and (C) no
further adjustment shall be made to the Conversion Price upon the actual
issuance of Common Stock upon conversion exercise or exchange of such Common
Stock Equivalents if issued at or higher than the Effective
Price.  Common Stock issued or issuable by the Company for no
consideration will be deemed to have been issued or to be issuable for $0.0001
per share of Common Stock.

    

    (c)           Excepted
Issuances.   The rights of each Warrant Holder set forth
in this Section 3.4 are in addition to any other rights the Holder has pursuant
to this Agreement, any Transaction Document, and any other agreement referred to
or entered into in connection herewith or to which such Holder and Company are
parties.  For purposes of Section 3.4, “Excepted Issuance” shall mean
(i) the Company’s issuance of Common Stock or Common Stock Equivalent described
in Reports filed not later than five business days before the Closing Date, (ii)
as a result of the conversion of any the Notes or  exercise of any of
the Warrants issued pursuant to the Subscription Agreement or any of securities
or warrants issued to the Placement Agent acting in connection with the sale of
these Warrants (including the exercise or conversion of any of the foregoing),
(iii) other notes or convertible indebtedness or convertible securities existing
or otherwise disclosed at or before the issuance hereof, (iv) any securities
issued in connection with a bonafide acquisition of a business, intellectual
property or business assets, or exercise of Warrants or conversion of Notes
which are granted or issued pursuant to this Agreement, or (v) as granted in
connection with any existing board approved stock option, incentive or similar
plan or any stock option plan approved by the Board of Directors of the Company
and the Placement Agent.

     

     

    
      
         

      

      
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    4.           Extraordinary Events
Regarding Common Stock.  In the event that the Company shall
(a) issue additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock, (b) subdivide its outstanding
shares of Common Stock, or (c) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Purchase Price then in effect. The
Purchase Price, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this
Section 4. The number of shares of Common Stock that the Holder of this
Warrant shall thereafter, on the exercise hereof, be entitled to receive shall
be adjusted to a number determined by multiplying the number of shares of Common
Stock that would otherwise (but for the provisions of this Section 4 be issuable
on such exercise by a fraction of which (a) the numerator is the Purchase Price
that would otherwise (but for the provisions of this Section 4 be in effect, and
(b) the denominator is the Purchase Price in effect on the date of such
exercise.

     

    5.           Certificate as to
Adjustments.  In each case of any adjustment or readjustment in
the shares of Common Stock (or Other Securities) issuable on the exercise of the
Warrants, the Company at its expense will promptly cause its Chief Financial
Officer or other appropriate designee to compute such adjustment or readjustment
in accordance with the terms of the Warrant and prepare a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional shares of
Common Stock (or Other Securities) issued or sold or deemed to have been issued
or sold, (b) the number of shares of Common Stock (or Other Securities)
outstanding or deemed to be outstanding, and (c) the Purchase Price and the
number of shares of Common Stock to be received upon exercise of this Warrant,
in effect immediately prior to such adjustment or readjustment and as adjusted
or readjusted as provided in this Warrant. The Company will forthwith mail a
copy of each such certificate to the Holder of the Warrant and any Warrant Agent
of the Company (appointed pursuant to Section 11 hereof).

     

    6.           Reservation of Stock, etc.
Issuable on Exercise of Warrant; Financial
Statements.   The Company will at all times reserve and
keep available, solely for issuance and delivery on the exercise of the
Warrants, all shares of Common Stock (or Other Securities) from time to time
issuable on the exercise of the Warrant.  This Warrant entitles the
Holder hereof to receive copies of all financial and other information
distributed or required to be distributed to the holders of the Company's Common
Stock.

     

    7.           Assignment; Exchange of
Warrant.  Subject to compliance with applicable securities
laws, this Warrant, and the rights evidenced hereby, may be transferred by any
registered holder hereof (a "Transferor"). On the surrender
for exchange of this Warrant, with the Transferor's endorsement in the form of
Exhibit B
attached hereto (the “Transferor Endorsement Form")
and together with an opinion of counsel reasonably satisfactory to the Company
that the transfer of this Warrant will be in compliance with applicable
securities laws, the Company will issue and deliver to or on the order of the
Transferor thereof a new Warrant or Warrants of like tenor, in the name of the
Transferor and/or the transferee(s) specified in such Transferor Endorsement
Form (each a "Transferee"), calling in the
aggregate on the face or faces thereof for the number of shares of Common Stock
called for on the face or faces of the Warrant so surrendered by the
Transferor.

     

    8.           Replacement of
Warrant.  On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction of this Warrant, on delivery of
an indemnity agreement or security reasonably satisfactory in form and amount to
the Company or, in the case of any such mutilation, on surrender and
cancellation of this Warrant, the Company at the Holder’s expense, will execute
and deliver, in lieu thereof, a new Warrant of like tenor.

     

     

    
      
         

      

      
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    9.           Subscription
Agreement.  The terms of the Subscription Agreement are
incorporated herein by this reference.

     

    10.           Maximum
Exercise.  The Holder shall not be entitled to exercise this
Warrant on an exercise date, in connection with that number of shares of Common
Stock which would be in excess of the sum of (i) the number of shares of
Common Stock beneficially owned by the Holder and its affiliates on an exercise
date, and (ii) the number of shares of Common Stock issuable upon the
exercise of this Warrant with respect to which the determination of this
limitation is being made on an exercise date, which would result in beneficial
ownership by the Holder and its affiliates of more than 4.99% of the outstanding
shares of Common Stock on such date.  For the purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities 1934 Act , and Rule
13d-3 thereunder.  Subject to the foregoing, the Holder shall not be
limited to aggregate exercises which would result in the issuance of more than
4.99%.  The restriction described in this paragraph may be
waived, in whole or in part, upon sixty-one (61) days prior notice from the
Holder to the Company to increase such percentage to up to 9.99%, but not in
excess of 9.99%.  The Holder may decide whether to convert a
Convertible Note or exercise this Warrant to achieve an actual 4.99% or up to
9.99% ownership position as described above, but not in excess of
9.99%.

     

    11.           Warrant
Agent.  The Company may, by written notice to the Holder of the
Warrant, appoint an agent (a “Warrant Agent”) for the
purpose of issuing Common Stock (or Other Securities) on the exercise of this
Warrant pursuant to Section 1, exchanging this Warrant pursuant to
Section 7, and replacing this Warrant pursuant to Section 8, or any of
the foregoing, and thereafter any such issuance, exchange or replacement, as the
case may be, shall be made at such office by such Warrant Agent.

     

    12.           Transfer on the Company's
Books.  Until this Warrant is transferred on the books of the
Company, the Company may treat the registered holder hereof as the absolute
owner hereof for all purposes, notwithstanding any notice to the
contrary.

     

    13.           Notices.   All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice.  Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, 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
addresses for such communications shall be:  if to the Company, to:
Save the World Air, Inc. 235 Tennant Avenue, Morgan Hill, California 95037,
Attn:  Cecil Bond Kyte, Tel:  (408)778- 0101 Fax:
(805)845-4377, with a copy by facsimile and return receipt requested or
recognized overnight courier delivery: Hodgson Russ LLP, 1540 Broadway, 24th
Floor, New York, NY 10036, Attn: Ronniel Levy, Esq., fax: (646) 943-7078, and
(ii) if to the Holder, to the address and facsimile number listed on the first
paragraph of this Warrant, with a copy by facsimile only to: the Placement Agent
as set forth in the Subscription Agreement.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    14.           Law Governing This
Warrant.  This Warrant shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of laws.  Any action brought by either party against the
other concerning the transactions contemplated by this Warrant shall be brought
only in the state courts of New York or in the federal courts located in the
state and county of New York.  The parties to this Warrant hereby
irrevocably waive any objection to jurisdiction and venue of any action
instituted hereunder and shall not assert any defense based on lack of
jurisdiction or venue or based upon forum non
conveniens.  The Company and Holder waive trial by
jury.  The prevailing party shall be entitled to recover from the
other party its reasonable attorney's fees and costs.  In the event
that any provision of this Warrant or any other agreement delivered in
connection herewith is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such
statute or rule of law.  Any such provision which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision of any agreement.   Each party hereby
irrevocably waives personal service of process and consents to process being
served in any suit, action or proceeding in connection with this Agreement or
any other Transaction Document by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way
any right to serve process in any other manner permitted by law.

     

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    IN
WITNESS WHEREOF, the Company has executed this Warrant as of the date first
written above.

     

    
      	 
      	
              SAVE
      THE WORLD AIR, INC.

               

               

               

              By: _______________________________

                     Name:
      Cecil Bond Kyte

                     Title:
      CEO

               

               

               

               

            
	 
      	 
      	 
      

    

     

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    
 

    Exhibit A

    

    FORM OF
SUBSCRIPTION

    (to be
signed only on exercise of Warrant)

    TO:  SAVE
THE WORLD AIR, INC.

    The
undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable
box):

    

    ___           ________
shares of the Common Stock covered by such Warrant; or

    ___           the
maximum number of shares of Common Stock covered by such Warrant pursuant to the
cashless exercise procedure set forth in Section 2.

    

    The
undersigned herewith makes payment of the full purchase price for such shares at
the price per share provided for in such Warrant, which is
$___________.  Such payment takes the form of (check applicable box or
boxes):

    

    ___           $__________
in lawful money of the United States; and/or

    ___           the
cancellation of such portion of the attached Warrant as is exercisable for a
total of _______ shares of Common Stock (using a Fair Market Value of $_______
per share for purposes of this calculation); and/or

    

    ___           the
cancellation of such number of shares of Common Stock as is necessary, in
accordance with the formula set forth in Section 2, to exercise this
Warrant with respect to the maximum number of shares of Common Stock purchasable
pursuant to the cashless exercise procedure set forth in
Section 2.

    

    The
undersigned requests that the certificates for such shares be issued in the name
of, and delivered to _____________________________________________________ whose
address is ______________________________________________________________________________________.

    

    The
undersigned represents and warrants that all offers and sales by the undersigned
of the securities issuable upon exercise of the within Warrant shall be made
pursuant to registration of the Common Stock under the Securities Act of 1933,
as amended (the "Securities
Act"), or pursuant to an exemption from registration under the Securities
Act.

    

    
      	
              Dated:___________________

            	
              __________________________________________

              (Signature
      must conform to name of holder as specified on the face of the
      Warrant)

               

              
                __________________________________________

                
                  __________________________________________

                

              

              (Address)

            

    

     

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    Exhibit B

    

    

    FORM OF
TRANSFEROR ENDORSEMENT

    (To be
signed only on transfer of Warrant)

    For value
received, the undersigned hereby sells, assigns, and transfers unto the
person(s) named below under the heading "Transferees" the right represented by
the within Warrant to purchase the percentage and number of shares of Common
Stock of SAVE THE WORLD AIR, INC. to which the within Warrant relates specified
under the headings "Percentage Transferred" and "Number Transferred,"
respectively, opposite the name(s) of such person(s) and appoints each such
person Attorney to transfer its respective right on the books of SAVE THE WORLD
AIR, INC. with full power of substitution in the premises.

     

    

    
      	
              Transferees

            	
              Percentage
      Transferred

            	
              Number
      Transferred

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	 
      	 
      

    

    

    

    
      	
              Dated:  ______________,
      ___________

               

               

               

              Signed
      in the presence of:

               

               

                    
                __________________________________________
(Name)

               

               

              ACCEPTED
      AND AGREED:

              [TRANSFEREE]

               

              
                __________________________________________

              

              (Name)

               

            	
               
      
              __________________________________________

              (Signature must conform to name of holder as specified on the
      face of the warrant)

               

               

              
                 

                 

                __________________________________________

                
                  __________________________________________

                

              

              (address)

               

               

               

               

              
                __________________________________________

                
                  __________________________________________

                

              

              (address)

            

    

    
      	
               

            

    

    
 

     

     

    
      
         

      

      
        12reeds_10qa-ex1001.htm

    
      

    

    Exhibit
10.1

     

     

     

     

     

     

     

     

     

     

     

    ASSET
PURCHASE AGREEMENT

    

    

    between

    

    SONOMA
CIDER MILL, INC.

    

    and

    

    REED’S
INC.

     

    

    

    Dated as
of October 19, 2009

     

     

     

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    ASSET PURCHASE
AGREEMENT

     

    This
ASSET PURCHASE AGREEMENT (this "Agreement")
is entered into as of October 19, 2009 between SONOMA CIDER MILL, INC., a California corporation
("Seller"),
and Reed’s Inc, a Delaware Corporation ("Buyer").  Certain
other capitalized terms used herein are defined in Article IX and
throughout this Agreement.

     

    WHEREAS, Seller owns the
Sonoma Sparkler beverage brand business (the "Business").

     

    WHEREAS, Buyer desires to
purchase from Seller, and Seller desires to sell, the Sonoma Sparkler brand, on
the terms and subject to the conditions set forth in this
Agreement.

     

    NOW, THEREFORE, in
consideration of the mutual covenants contained herein, the parties hereto,
intending to be legally bound, hereby agree as follows.

     

    ARTICLE
I

     

    PURCHASE AND SALE OF
ASSETS

     

    1.1   Acquired
Assets.  On the terms and
subject to the conditions set forth in this Agreement, at the Closing (as
defined in Section
2.1) Seller shall sell, convey, transfer, assign and deliver to Buyer,
all of its right, title and interest in the Sonoma Sparkler brand (the “Acquired
Assets”), free and clear of all mortgages, Liens, pledges, charges or
encumbrances of any nature whatsoever.  Without limiting the
generality of the foregoing, the Acquired Assets shall include (without
limitation) the following assets:

     

    (a)   Sonoma Sparkler
Brand.  The Sonoma Sparkler label, Sonoma Sparkler formulas for
all 6 flavors on the market, including, (i) the right to use, copy, modify,
exploit, license, assign, convey and pledge the Intellectual Property Rights;
(ii) the right to exclude others from using the Intellectual Property
Rights; (iii) the right, where applicable, to create derivatives of the
Intellectual Property Rights and retain full ownership thereof; and
(iv) the right to file and prosecute applications for registration and
renewals thereof, now pending or hereinafter initiated, to protect any rights in
the Intellectual Property Rights;

     

    (b)   Customer list and vendor
contact information;

     

    (c)   Licenses and
Permits.  To the extent assignable, the permits, licenses,
certificates of authority, franchises, accreditations, registrations and other
authorizations issued or used in connection with the Business;

     

    (d)   All
books, files, lists, publications, and other records and data

     

    (e)    All inventory
of Seller relating to the Business.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    1.2   Excluded
Assets.  Buyer is purchasing only those assets described in Section
1.1.  Seller agrees that Buyer shall not be obligated to assume or
perform and is not assuming or performing any liabilities or obligations of
Seller, whether known or unknown, fixed or contingent, certain or uncertain, and
regardless of when such liabilities or obligations may arise or may have arisen
or when they are or were asserted, and Seller shall remain responsible for all
retained liabilities, which shall include, without limitation, any and all of
the following obligations or liabilities of Seller:

     

    (a)    Any
compensation or benefits payable to employees or former employees, arising in
connection with their employment by Seller, including without limitation, any
liabilities arising under any employee pension or profit sharing plan or other
employee benefit plan of Seller, any of Seller’s obligations for vacation,
holiday or paid time-off, or the termination by Seller of any of its
employees;

     

    (b)    All accounts
or notes payable, obligations for borrowed money, all purchase money obligations
and any other indebtedness or payment obligations of Seller. Accounts payables
accruing to the date of October 19, 2009, shall remain the sole responsibility
of the Seller and all Payables initiated in the Buyers purchasing department
will be the sole responsibility of the Buyer;

     

    (c)    Any claims,
demands, actions, suits or legal proceedings that have been asserted or
threatened prior to the Closing Date against Seller, the Business or the
Purchased Assets or which may be threatened hereafter against the Purchased
Assets, the Business or Buyer that arises in any way from or in connection with
(i) Seller’s operation of the Business prior to the Closing Date, or
(ii) Seller’s operation of any other business (excluding the Business) or
non-business activities of Seller conducted by Seller prior hereto or
hereafter;

     

    (d)    All Taxes (i)
that have arisen prior to the Closing Date or may arise thereafter out of
business or other operations conducted by Seller; for which Seller is or, at any
time hereafter, may become liable;

     

    (e)    All
Encumbrances on any of the Purchased Assets and all obligations and liabilities
secured thereby.

     

    (f)    Accounts
Receivable from sales on or prior to May 1, 2009 shall remain the property of
the Seller and are not included as part of this transaction. Accounts
receivables arising from sales made on or after October 19, 2009 shall be the
sole property of the Buyer.

     

    1.3   Purchase
Price.  As consideration
for the Acquired Assets, Buyer shall, on the terms and subject to the conditions
and limitations set forth herein, pay $252,000 (the “Purchase
Price”) The purchase price shall be paid to Seller under the following
terms:

     

    (a)    $36,000 paid
semi-monthly at the rate of $12,000 per month during June, July and August 2009
and

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (b)    $216,000
payable at the rate of $9,000.00 per month for 24 months beginning September
1st 2009
and continuing on until paid in full. Should Sonoma Sparkler product sales drop
below $18,000 in any given month, the monthly payment due on the 1st day
of the following month will, at Reed's option, be reduced to $6,000 for one
month only. The difference of $3,000 will be added to last payment of the
purchase term without interest or penalty.

     

    (c)    Default in
Payments.  In
the event buyer fails to make any installment payment when due, Seller shall
provide Buyer written notice of default, and if Buyer has not fully paid such
past-due payment within thirty (30) days after such default notice Seller shall
have the right to immediately accelerate the unpaid balance due under this
Agreement. Buyer shall be responsible for reasonable attorney’s fees
incurred for collection

     

    ARTICLE
II

     

    CLOSING

     

    2.1   Time and
Place. Subject to
satisfaction of the conditions precedent to closing, the closing of the
transactions provided for in this Agreement shall take place on October 19, 2009
or such other date as the parties agree (such closing, the "Closing"
and the date of the Closing, the “Closing
Date”).

     

    2.2   Procedure
at the Closing.
At the Closing, the following shall occur:

     

    (a)   Seller
shall have deliver to Buyer the documents, formulas, customer lists, and
inventory.

     

    (b)   Seller
shall deliver to Buyer, the (a) Assignment and Bill of Sale, in the form
attached hereto as Exhibit
A and (b) Assignment and Assumption other instruments as shall be
sufficient to vest in Buyer good and marketable title to the Acquired
Assets.  Seller agrees to execute and deliver to Buyer from time to
time such further and particular assignments, consents, or other instruments in
writing as Buyer may request as appropriate or desirable to confirm its title in
and to the Acquired Assets.

     

    ARTICLE
III

     

    REPRESENTATIONS AND
WARRANTIES OF BUYER

     

    Buyer
represents and warrants to Seller that, as of the date hereof and as of the
Closing Date:

     

    3.1   Entity
Status.  Buyer is a
Corporation duly formed, validly existing and in good standing under the laws of
the State of Delaware and is authorized and entitled to carry on its business in
California. It has no subsidiaries or affiliates

     

    3.2   Power and
Authority.  Buyer has the
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated
hereby.  Buyer has taken all action necessary to authorize the
execution and delivery of this Agreement, the performance of its obligations
hereunder and the consummation of the transactions contemplated
hereby.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    3.3   Enforceability.  This Agreement
has been duly executed and delivered by Buyer and constitutes a legal, valid and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms, except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors’ rights generally and general equitable principles regardless of
whether such enforceability is considered in a proceeding at law or in
equity.

     

    3.4   UCC-1
Search. The
parties hereto authorize the conducting of a UCC-1 search by or on behalf of the
Buyer to determine whether any recorded liens, except as set forth herein, are
in existence against Seller or any of the Assets, the cost of which shall be
paid equally by Seller and Buyer.

     

    ARTICLE
IV

     

    CERTAIN AGREEMENTS AND
COVENANTS OF THE PARTIES

     

    4.1   Further
Assurances.  Each party shall
execute and deliver such additional instruments and other documents and shall
take such further actions as may be necessary or appropriate to effectuate,
carry out and comply with all of the terms of this Agreement and the
transactions contemplated hereby.

     

    4.2   Confidentiality;
Publicity.  Neither party
shall disclose the terms of this transaction to any third party nor make any
public announcement related to this Agreement or the transactions contemplated
hereby without the written consent of the other party.

     

    4.3   Agreement to Cooperate;
Tax.

     

    (a)   Subject
to the terms and conditions herein, each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement.  Seller shall execute and deliver to Buyer from time
to time such further and particular assignments, consents, or other instruments
in writing as Buyer (or its assignee) may request as appropriate or desirable to
confirm its title in and to the Acquired Assets.

     

    (b)   In the
event any litigation is commenced against Seller by any person or entity
relating to the transactions contemplated by this Agreement, Buyer shall have
the right, at its own expense, to participate therein, and Seller will not
settle any such litigation without the consent of Buyer, which consent will not
be unreasonably withheld.

     

    (c)   All
sales, use, documentary and/or transfer taxes and other similar taxes, if any,
imposed in connection with the transactions contemplated by this Agreement shall
be borne equally by Buyer and Seller.  Seller shall timely complete
all forms and timely make all filings reasonably requested by Buyer which are
necessary to secure appropriate sale or use tax exemptions with respect to the
Acquired Assets.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    ARTICLE
V

     

    CONDITIONS TO THE
OBLIGATIONS OF BUYER

     

    The
obligations of Buyer to effect the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Closing Date of the following
conditions, any or all of which may be waived in whole or in part in writing by
Seller.

     

    5.1   Corporate
Resolution. Buyer shall, at
Closing deliver to Seller a duly executed copy of its corporate resolution
authorizing the transaction described herein, which said resolution shall form a
part of this agreement, a copy which is attached as Exhibit B.

     

    5.2   No
Adverse Litigation.  There shall not
be pending or threatened any action or proceeding by or before any court or
other governmental body which shall seek to restrain, prohibit, invalidate or
collect damages arising out of the transactions contemplated hereby, and which,
in the judgment of Buyer, makes it inadvisable to proceed with the transactions
contemplated hereby.

     

    5.3   Third
Party Consents.  All governmental
waivers, consents, orders and approvals legally required for the consummation of
the transactions contemplated hereby, and all consents from lenders required to
consummate the transactions contemplated hereby, including (without limitation)
all required consents or approvals of each person that is a party to a contract
or agreement been obtained and be in effect on the Closing Date.

     

    ARTICLE
VI

     

    REPRESENTATIONS
AND WARRANTIES OF SELLER

     

    Seller
makes the representations and warranties set forth hereinafter in this
Article VI to Buyer:

     

    6.1   Organization and
Standing.  Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of California,
and Seller has the requisite corporate power and authority to own the Purchased
Assets, and to use such Purchased Assets in the conduct of the
Business.

     

    6.2   Authority and Binding
Effect.  Seller has the full corporate power and
authority to execute and deliver this Agreement.  This Agreement and
the consummation by Seller of its obligations contained herein and therein have
been duly authorized by all necessary corporate actions of Seller, and such
agreements have been duly executed and delivered by Seller.  This
Agreement is a valid and binding agreement of Seller, enforceable against Seller
in accordance with its terms, and, upon execution and delivery will be valid and
binding agreements of Seller and shall be enforceable against it in accordance
with their terms, except as enforceability of the obligations of Seller under
this Agreement may be limited by (i) bankruptcy, insolvency, moratorium or
other similar laws affecting creditors’ rights generally, and (ii) general
principles of equity relating to the availability of equitable remedies (whether
such agreements are sought to be enforced in a proceeding at law or a proceeding
in equity).

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    6.3   Absence
of Claims.  As of the
purchase date, there are no

     

    (a)    encumbrances
of any kind on or affecting, any of the Purchased Assets;

     

    (b)    Any damage,
destruction or loss, whether or not covered by insurance, of any of the
Purchased Assets;

     

    (c)    The entry or
violation of any judgment, order, writ or decree that affects or could
reasonably be expected to affect the Purchased Assets;

     

    (d)    Any violation
of any Environmental Laws (as hereinafter defined) affecting any of the
Purchased Assets;

     

    (e)    Any actual
or, to the Knowledge of Seller, threatened amendment, termination or revocation
of any license, permit or franchise required for the continued operation of the
Business; or

     

    (f)    The
occurrence of any other event or circumstance which has or is reasonably likely
to have a Material Adverse Effect on Seller, the Purchased Assets or the
Business.

     

    6.4   Title to
Purchased Assets.  Seller has, and on the Closing Date will
convey and transfer to Buyer, good, complete and marketable title to all of the
Purchased Assets, free and clear of all Encumbrances of any nature
whatsoever.  Seller has the unencumbered right to use, and to sell to
Buyer in accordance with the terms and provisions of this Agreement all of the
Purchased Assets possessed by it without interference from and free of the
rights and claims of others.

     

    6.5   Intellectual
Property.  Seller owns all right, title and interest in
and to, or has the right to use all Intellectual Property Rights free and clear
of all Encumbrances (including without limitation any distribution rights and
royalty rights).

     

    Seller
has the exclusive right to sell, license and dispose of all of its Intellectual
Property Rights, and has the right to bring actions for infringement of all
Intellectual Property Rights owned by Seller, including the right to collect
damages for past, present and future infringements.

     

    Seller
has valid and enforceable Copyrights in all copyrightable material owned by
Seller used in connection with the Business, whether or not registered with the
U.S. Copyright Office or any applicable foreign
authorities.  Consummation of the transactions contemplated hereby
will not alter or impair the validity of any such copyrights or copyright
registrations.

     

    Seller
has not misappropriated any Trade Secrets of any other person or
entity.  Seller has taken reasonable precautions to protect the
secrecy, confidentiality and value of all of its Trade Secrets.

     

    No claims
have been asserted against Seller or, to Seller’s Knowledge, threatened against
Seller by any person challenging Seller’s ownership, use or distribution
(including manufacture, marketing, license or sale) of any Intellectual Property
Rights, or challenging or questioning the validity or effectiveness of any
license or agreement relating thereto and Seller has never been a party to any
action or proceeding that involves or involved any claim of infringement,
misappropriation or other wrongful use or exploitation of the intellectual
property or other proprietary rights of any other party.  The
operation by Seller of the Business did not violate and continued operations of
the Business would not violate, and none of the Intellectual Property rights of
Seller violate, any intellectual property rights of any third party, including,
without limitation, infringement, misappropriation or wrongful use or
exploitation of intellectual property or other proprietary rights, and no third
party has provided notice to Seller of a possible such violation.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    The
execution, delivery and performance of this Agreement and the transactions
contemplated hereby will not (i) breach, violate or conflict with any
instrument, agreement or other right governing any of the Intellectual Property
Rights or portion thereof; (ii) cause the forfeiture or termination, or
give rise to a right of forfeiture or termination, of any Intellectual Property
Rights or portion thereof; (iii) in any way impair the right of Buyer to
use (including distribute, manufacture, marketing, license, sale or other
disposition) any Intellectual Property Rights or portion thereof; or
(iv) give rise to any right to bring any action for infringement of any
Intellectual Property Rights or any portion thereof.

     

    To
Seller’s Knowledge, no party to any contract, commitment or restriction relating
to any Intellectual Property Right intends to cancel, withdraw, modify or amend
such contract.

     

    To
Seller’s Knowledge, no third party is violating, infringing, or misappropriating
any Intellectual Property Right.

     

    This
Agreement (including the Exhibits hereto) does not contain any untrue statement
or omission of a material fact upon which the Buyer hereto is
relying.  There is not fact known to Seller which is not disclosed in
this Agreement which is materially adversely related to: (a) the accuracy of the
representations and warranties contained in this Agreement, (b) any and all
marketplace conditions regarding the Assets, or (c) the Seller’s financial
condition of operations, business or prospects.  All representations
and warranties contained therein will be true and correct at
Closing.

     

    ARTICLE
VII

     

    CONDITIONS
TO THE OBLIGATIONS OF
SELLER

    

    The
obligations of Seller to effect the transactions contemplated hereby shall be
subject to the fulfillment at or prior to the Closing Date of the following
conditions, any or all of which may be waived in whole or in part in writing by
Buyer:

     

    7.01   Corporate
Resolution. Seller shall, at
Closing deliver to Seller a duly executed copy of its corporate resolution
authorizing the transaction described herein, which said resolution shall form a
part of this agreement, a copy which is attached as Exhibit
C.

     

    7.02   Delivery
of Acquired Assets.  At the Closing,
Buyer shall duly execute and deliver to Seller, or its assignee, the (a)
Assignment and Bill of Sale in the form attached hereto as Exhibit
A

     

    7.03   Third
Party Consents.
All governmental waivers, consents, orders and approvals legally required
for the consummation of the transactions contemplated hereby, and all consents
from lenders required to consummate the transactions contemplated hereby,
including (without limitation) all required consents or approvals of each person
that is a party to a contract or agreement shall have been obtained and be in
effect on the Closing Date.

     

    ARTICLE VIII

     

    INDEMNIFICATION

     

    8.1   Agreement
by Seller to Indemnify.  Seller shall
protect, defend, indemnify and hold Buyer harmless from and against the
aggregate of all expenses, losses, costs, deficiencies, liabilities and damages
(including, without limitation, related counsel and paralegal fees and expenses)
incurred or suffered by Buyer to the extent resulting from or arising out of (a)
any breach of a representation or warranty made by Seller in or pursuant to this
Agreement, (b) any breach of the covenants or agreements made by Seller in this
Agreement, (c) any inaccuracy in any certificate delivered Seller pursuant to
this Agreement, (d) Seller’s ownership or operation of the Acquired Assets prior
to the Closing, or (e) any Excluded Liability (collectively, “Buyer
Indemnifiable Damages”).  Without limiting the generality of
the foregoing with respect to the measurement of Buyer Indemnifiable Damages,
Buyer shall have the right to be put in the same pre-tax consolidated financial
position as it would have been in had each of the representations and warranties
of Seller hereunder been true and correct and had the agreements and covenants
of Seller been performed in full.  The aggregate liability of Seller
under this Article
VIII shall be limited to the aggregate amount of the Purchase
Price.

     

    8.2   Agreement
by Buyer to Indemnify.  Buyer agrees to
protect, defend, indemnify and hold Seller harmless from and against the
aggregate of all expenses, losses, costs, deficiencies, liabilities and damages
(including, without limitation, related counsel and paralegal fees and expenses)
incurred or suffered by Seller to the extent resulting from or arising out of
(a) any breach of a representation or warranty made by Buyer in or pursuant to
this Agreement, (b) any breach of the covenants or agreements made by Buyer in
this Agreement or (c) any inaccuracy in any certificate delivered by Buyer
pursuant to this Agreement (collectively, “Seller
Indemnifiable Damages”).  Without limiting the generality of
the foregoing with respect to the measurement of Seller Indemnifiable Damages,
Seller shall each have the right to be put in the same pre-tax financial
position as it would have been in had each of the representations and warranties
of Buyer hereunder been true and correct and had the agreements and covenants of
Buyer hereunder been performed in full.  The aggregate liability of
Buyer under this Article VIII shall be
limited to the aggregate amount of the Purchase Price.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    8.3   Third-Party
Claims.  Within ten (10)
business days after receipt by a person entitled or claiming to be entitled to
indemnification pursuant to this Article VIII (each
an, “Indemnitee”)
of written notice of the commencement of any action or the assertion of any
claim, liability or obligation by a third party, against which claim, liability
or obligation a person is, or may be, required under this Article VIII to
indemnify Indemnitee (“Indemnitor”),
Indemnitee will, if a claim thereon is to be made against Indemnitor, notify
Indemnitor in writing of the commencement or assertion thereof (the “Claim
Notice”) and give Indemnitor a copy of such claim, process and all legal
pleadings relating thereto.  Indemnitor shall have the right to
contest and conduct the defense of such action with counsel reasonably
acceptable to Indemnitee by giving written notice to Indemnitee of its election
to do so within ten (10) business days of the receipt of the Claim Notice, and
Indemnitee may participate in such defense by counsel of its own choosing at its
own expense.  If Indemnitee shall be required by final judgment not
subject to appeal or by a settlement agreement to pay any amount in respect of
any obligation or liability against which Indemnitor has agreed to indemnify
Indemnitee under this Agreement, such amount plus all reasonable expenses
incurred by such Indemnitee in accordance with such obligation or liability
(including, without limitation, reasonable attorneys' fees (other than fees
incurred by counsel to Indemnitee employed pursuant to the immediately preceding
sentence) and costs of investigation) shall be promptly paid by Indemnitor to
Indemnitee, subject to reasonable documentation.  Indemnitee shall not
settle or compromise any claim, action or proceeding without the prior written
consent of Indemnitor, which shall not be unreasonably
withheld.  Failure of Indemnitee to give the Claim Notice to
Indemnitor within the ten (10) business-day period required hereunder shall not
affect Indemnitee's rights to indemnification hereunder, except and only to the
extent that Indemnitor incurs additional expenses or Indemnitor's defense of
such claim is actually prejudiced by reason of such failure to give timely
notice.

     

    8.4   Direct
Claims. With
respect to claims other than third-party claims, Indemnitee shall use reasonable
efforts promptly to notify Indemnitor of such claims, but failure of Indemnitee
so to give notice to Indemnitor shall not affect the rights of Indemnitee to
indemnification hereunder, except and only to the extent that Indemnitor incurs
additional expenses or Indemnitor is actually prejudiced by reason of such
failure to give timely notice.

     

    ARTICLE IX

     

    DEFINITIONS

     

    9.1   Defined
Terms.  As used herein,
the following terms shall have the following meanings:

     

    “Code”
means the Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder.

     

    “Contract”
means any indenture, lease, sublease, license, loan agreement, mortgage, note,
indenture, restriction, will, trust, commitment, obligation or other contract,
agreement or instrument, whether written or oral, express or
implied.

     

    “Governmental
Authority” means any nation or government, any state, regional, local or
other political subdivision thereof, and any entity or official exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    “Lien”
means any mortgage, pledge, security interest, encumbrance, lien or charge of
any kind (including, without limitation, any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code or
comparable law or any jurisdiction in connection with such mortgage, pledge,
security interest, encumbrance, lien or charge).

     

    “Person”
means an individual, partnership, corporation, business trust, joint stock
company, estate, trust, unincorporated association, joint venture, Governmental
Authority or other entity, of whatever nature.

     

    “Intellectual
Property” means all Patents, Copyrights, Trademarks, Trade Secrets,
business plans, marketing plans, supplier or customer lists, forecasts,
processes, formulas, data, algorithms, techniques, diagrams, drawings, artwork,
designs, product specifications, engineering, manufacturing and testing
techniques or procedures, inspection procedures, technical developments, ideas
and know-how, whether or not subject to Patent, Trademark, Trade Secret,
Copyright, moral rights or mask work protection and whether or not reduced to
practice, and other intellectual property and proprietary rights of Seller,
developed for or acquired in connection with the Business, and all documentation
and files relating to such intellectual property.

     

    ARTICLE X

     

    TERMINATION

     

    10.1   Termination.  This Agreement
may be terminated at any time prior to the Closing Date:  (a) by
mutual written consent of all of the parties hereto at any time prior to the
Closing; or (b) by Buyer in the event of a material breach by Seller of any
provision of this Agreement; or (c) by Seller in the event of a material breach
by Buyer of any provision of this Agreement; or (d) by either Buyer or Seller if
the Closing shall not have occurred by November 30, 2009.

     

    10.2   Effect of
Termination.  Except for the
provisions of Article
III and Article
VI, which shall survive any termination of this Agreement, in the event
of termination of this Agreement pursuant to Section 10.1, this
Agreement shall forthwith become void and of no further force and effect and the
parties hereto shall be released from any and all obligations hereunder; provided, however, that nothing
herein shall relieve any party from liability for the willful breach of any of
its representations, warranties, covenants or agreements set forth in this
Agreement.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    ARTICLE XI

     

    GENERAL
PROVISIONS

     

    11.01   Notices.  All notices,
requests, demands, claims, and other communications hereunder shall be in
writing and shall be delivered by certified or registered mail (first class
postage pre-paid), guaranteed overnight delivery, or facsimile transmission if
such transmission is confirmed by delivery by certified or registered mail
(first class postage pre-paid) or guaranteed overnight delivery, to the
following addresses and facsimile numbers (or to such other addresses or
facsimile numbers which such party shall designate in writing to the other
party):

     

    if to
Buyer:

     

    Reed’s
Inc.

    13000
South Spring St.

    Los
Angeles, California

    

    if to
Seller:

     

    Sonoma
Cider Mill

    347
A  Healdsburg Avenue,

    Healdsburg,
California 95448

    Attention:
David Cordtz

    Facsimile:  (707)
431-8414

    

    Notice
shall be deemed given on the date sent if sent by facsimile transmission and on
the date delivered (or the date of refusal of delivery) if sent by overnight
delivery or certified or registered mail.

     

    11.02   Entire
Agreement; No Third Party Beneficiaries.  This Agreement
(including the exhibits and schedules attached hereto) and other documents
delivered at the Closing pursuant hereto, contain the entire understanding of
the parties hereto in respect of its subject matter and supersede all prior
agreements and understandings (oral or written) between or among the parties
hereto with respect to such subject matter.  The parties agree that
prior drafts of this Agreement shall not be deemed to provide any evidence as to
the meaning of any provision hereof or the intent of the parties hereto with
respect thereto.  The exhibits and schedules attached hereto
constitute a part hereof as though set forth in full above.  This
Agreement is not intended to confer upon any Person, other than the parties
hereto, any rights or remedies hereunder.

     

    11.03   Expenses.  Except as
otherwise provided herein, the parties shall pay their own fees and expenses,
including their own counsel fees, incurred in connection with this Agreement or
any transaction contemplated hereby.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    11.04   Amendment;
Waiver; Binding Effect; Assignment.  This Agreement
may not be modified, amended, supplemented, canceled or discharged, except by
written instrument executed the parties.  No failure to exercise, and
no delay in exercising, any right, power or privilege under this Agreement shall
operate as a waiver, nor shall any single or partial exercise of any right,
power or privilege hereunder preclude the exercise of any other right, power or
privilege.  The rights and obligations of this Agreement shall bind
and inure to the benefit of the parties and their respective successors and
assigns.  Except as expressly provided herein, the rights and
obligations of this Agreement may not be assigned by Seller without the prior
written consent of Buyer.

     

    11.05   Counterparts.  This Agreement
may be executed in any number of counterparts, each of which shall be an
original but all of which together shall constitute one and the same
instrument.  A facsimile signature of any party shall be considered to
have the same binding legal effect as an original signature.

     

    11.06   Governing
Law; Venue; Waiver of Jury Trial.  ( note
arbitration clause in Los Angeles here)   This Agreement shall be
construed in accordance with and governed for all purposes by the laws of the
State of California applicable to contracts executed and to be wholly performed
within such State.  Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this agreement may be
brought against any of the parties hereto in the courts of the State of
California, or in any United States District Court for the Central District of
California if it has or can acquire jurisdiction, and each of the parties hereto
consents to the jurisdiction of such courts and of the appropriate appellate
courts in any such action or proceeding and waives any objection to venue laid
therein.  Process in any action or proceeding referred to in the
preceding sentence may be served on any party anywhere in the
world.  Each of the parties hereto waives any defense of inconvenient
forum to the maintenance of any action or proceeding so
brought.  Nothing in this Section 11.06
shall affect the right of any party hereto to serve legal process in any other
manner permitted by law or at equity.  A final judgment in any action
or proceeding so brought shall be conclusive and may be enforced by suit on the
judgment or in any other manner provided by law or at equity.  EACH OF
THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.

     

    11.07   Severability.  If any word,
phrase, sentence, clause, section, subsection or provision of this Agreement as
applied to any party or to any circumstance is adjudged by a court to be invalid
or unenforceable, the same will in no way affect any other circumstance or the
validity or enforceability of any other word, phrase, sentence, clause, section,
subsection or provision of this Agreement.  If any provision of this
Agreement, or any part thereof, is held to be unenforceable because of the
duration of such provision or the area covered thereby, the parties hereto agree
that the court making such determination shall have the power to reduce the
duration or area of such provision, or to delete specific words or phrases, and
in its reduced form, such provision shall then be enforceable and shall be
enforced.

     

    11.08   Arm’s
Length Negotiations.  Each party hereto
expressly represents and warrants to all other parties hereto that (a) before
executing this Agreement, said party has fully informed itself of the terms,
contents, conditions and effects of this Agreement; (b) said party has relied
solely and completely upon its own judgment in executing this Agreement; (c)
said party has had the opportunity to seek and has obtained the advice of
counsel before executing this Agreement; (d) said party has acted voluntarily
and of its own free will in executing this Agreement; (e) said party is not
acting under duress, whether economic or physical, in executing this Agreement;
and (f) this Agreement is the result of arm’s length negotiations conducted by
and among the parties and their respective counsel.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    11.09   Construction.  The parties
hereto agree and acknowledge that they have jointly participated in the
negotiation and drafting of this Agreement.  In the event of an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties and no presumptions or burdens
of proof shall arise favoring any party by virtue of the authorship of any of
the provisions of this Agreement.  Any reference to any federal,
state, local, or foreign statute or law shall be deemed also to refer to all
rules and regulations promulgated thereunder, unless the context requires
otherwise.  If any party has breached any representation, warranty, or
covenant contained herein in any respect, the fact that there exists another
representation, warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the party has not
breached shall not detract from or mitigate the fact that the party is in breach
of the first representation, warranty, or covenant.  The mere listing
(or inclusion of copy) of a document or other item shall not be deemed adequate
to disclose an exception to a representation or warranty made herein (unless the
representation or warranty relates solely to the existence of the document or
other items itself).

     

    11.10   Non-Competition. Seller and its
directors, officers, and shareholders, individually at Closing shall agree that
each shall not, and will not, for a period of two (2) consecutive years after
Closing, directly or indirectly, engage in a competitive business with Buyer
regarding the Assets and in the manufacturing, marketing and sale of any 750 ml
celebratory, sparkling fruit juice beverages marketed by Buyer in a worldwide
geographical locale, provided that Buyer is not in default under any terms of
the Agreement; nor aid or assist anyone else, except the Buyer, to do so within
these limits; nor have any interest, directly or indirectly, in such business,
excepting as a employee of Buyer.  The parties shall execute a
Non-Competition Agreement, in the form attached hereto Exhibit
D.

     

    11.11   Operations
Prior to Closing.  Seller hereby agrees, form the date of
execution of this agreement to Closing, to carry its business activities and
operations diligently in substantially the same manner as has been customary in
the past.

     

    11.12   Loss/Damage.  In
the event there is any loss or damage to the Assets at the time prior to
Closing, the risk of loss shall be upon the Seller.  From Closing and
thereafter, all risk of loss or damage shall be upon the Buyer.

     

    11.13   Confidentiality.  Buyer
agrees the Buyer will, and will cause its officers, directors and employees and
other representative to, hold in strict confidence any information obtained in
connection with this Agreement or the transactions contemplated by the Agreement
unless and until that information is or becomes publicly available, except
insofar as this information may be required by law or regulation to be included
in a public report or otherwise disclosed.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    11.14   Standstill
Provision. From date of full
execution hereof through date of Closing(or notification of failure of a
contingency), Seller shall not directly or indirectly offer, solicit or receive
offers, promote or market Company for sale, exchange, acquisition of other
disposition.

     

    11.15   Arbitration.  Any
controversy arising from this agreement or its breach shall be determined by one
arbitrator mutually acceptable to the parties to this agreement or by three
arbitrators appointed as set out below:

     

    A.    Within ten
(10) days after a notice by any party (the “claimant”) to the other requesting
arbitration and stating the basis of the claimant's claim, one arbitrator shall
be appointed by the claimant and one by the other party.  Notices of
the appointment shall be given by each to the other when made.

     

    B.    The two
arbitrators shall immediately and in any event within ten (10) days of their
appointment choose a third arbitrator to act with them.  If a party
fails to select an arbitrator within the time allowed or if the two arbitrators
fail to select a third arbitrator within ten (10) days after their appointment,
on application by any party the additional arbitrator shall be promptly
appointed by the then presiding judge of the Superior Court of the judicial
district in which Corporation has its principal place of business, acting as an
individual.  The party making the application shall give the other
party ten (10) days prior notice of the application.

     

    C.    The
arbitration shall be conducted under Code of Civil Procedure section 1280
through 1294.2.  Hearings shall be held in city of the principal place
of business of the Corporation.

     

    D.    The decision
of the arbitrator(s) shall be final and binding between the parties, and a
judgment containing the decision of the arbitrator(s) may be obtained from a
court having jurisdiction on application by either party hereto.

     

    E.    The losing
party in the arbitration, as determined by the arbitrator(s), shall be
responsible for all costs of arbitration.

    

    [signature
page follows]

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    IN WITNESS HEREOF, the parties
hereto have caused this Asset Purchase Agreement to be duly executed and
delivered as of the day and year first written above.

     

     

    
      	 	
              SONOMA CIDER MILL, INC.

              

              By: 
      /s/ David H.
      Cordtz                                       

              Name:  David
      H. Cordtz

              Title:   
      CEO

              

              REED’S
      INC.

               

              By: 
      /s/ Chris
      Reed                                        

              Name:  Chris
      Reed

              Title:    President

            

    

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    

    LIST OF EXHIBITS AND
SCHEDULES

     

     

    EXHIBIT
A       FORM OF
ASSIGNMENT AND BILL OF SALE

    

    EXHIBIT
B       BUYER
CORPORATE RESOLUTION

    

    EXHIBIT
C       SELLER
CORPORATE RESOLUTION

    

    EXHIBIT
D       NON-COMPETITION
AGREEMENT

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    
EXHIBIT
A TO ASSET PURCHASE AGREEMENT

     

    ASSIGNMENT AND BILL OF
SALE

    

    SONOMA
CIDER MILL, INC., a California corporation (“Seller”), for good
and valuable consideration, the receipt and sufficiency of which is
acknowledged, hereby assigns, delivers and sells to Reed’s Inc. (“Buyer”) all Seller’s
right, interest and title in and to the Acquired Assets as defined in Article I
of the Asset Purchase Agreement dated as of October 19, 2009 between Seller and
Buyer as follows:

     

    (a)   Sonoma Sparkler
Brand.  The Sonoma Sparkler label, Sonoma Sparkler formulas for
all 6 flavors on the market, including, (i) the right to use, copy, modify,
exploit, license, assign, convey and pledge the Intellectual Property Rights;
(ii) the right to exclude others from using the Intellectual Property
Rights; (iii) the right, where applicable, to create derivatives of the
Intellectual Property Rights and retain full ownership thereof; and
(iv) the right to file and prosecute applications for registration and
renewals thereof, now pending or hereinafter initiated, to protect any rights in
the Intellectual Property Rights;

     

    (a)   Customer list and vendor
contact information;

     

    (b)   Licenses and
Permits.  To the extent assignable, the permits, licenses,
certificates of authority, franchises, accreditations, registrations and other
authorizations issued or used in connection with the Business;

     

    (c)   All
books, files, lists, publications, and other records and data

     

    (e)    All inventory
of Seller relating to the Business.

     

    Seller
confirms that, as of the date hereof and after giving effect to this Bill of
Sale, Buyer shall succeed to all of Seller’s right, title and interest in and to
the Acquired Assets.

     

    This
instrument shall be construed as an assignment and a bill of sale.

     

    IN
WITNESS WHEREOF, this Assignment and Bill of Sale is executed on and shall be
effective as of October 19, 2009.

    
    

     

    
      	 	
              Sonoma
      Cider Mill, Inc.

              

              By: 
      /s/ David
      Cordtz                        

              David
      Cordtz, CEO

            
	 	 
	
              AGREED
      AND ACCEPTED:

              Reed’s
      Inc.

              

              

              By: 
      /s/ Chris
      Reed                               

              Chris
      Reed, President

            	 

    

     

    
      
        
        

      

      
        Exhibit A
- 1

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
B    BUYER
CORPORATE RESOLUTION

     

    MINUTES
OF A MEETING OF THE BOARD OF DIRECTORS

     

    OF

     

    REED’S,
INC.

    A
Delaware corporation

    

    A meeting
of the Board of Directors of Reed’s, Inc., a Delaware corporation (the
“Corporation”), was held at telephonically at 4:45 pm. on October 16, 2009,
pursuant to notice duly given in accordance with the Bylaws.

     

    Christopher
J. Reed, Chairman of the Board was present and, Mark Harris, Dr. D.S.J.
Muffoletto, N.D., and Judy Holloway Reed were present telephonically,
constituting a quorum of the Directors of the Corporation. Christopher Reed
presided over the meeting as Chairman and James Linesch, chief financial
officer, was invited to serve as Secretary.

     

    APPROVAL OF ASSET PURCHASE
AGREEMENT

    

    WHEREAS; the President and
Chief Financial Officer believe that it is in the best interests of the
Corporation to purchase certain assets from Sonoma Cider Mill, Inc. relating to
their Sonoma Sparkler brand of products.

     

    RESOLVED, that the form, terms
and conditions of the Asset Purchase Agreement dated as of June 1, 2009 between
Sonoma Cider Mill, Inc. and the Corporation be, and the same hereby are approved
in all respects.

     

    Other
Matters

     

    RESOLVED,
that the Chief Executive Officer of the Corporation be, and each hereby is,
authorized in the name and on behalf of the Corporation, to execute, deliver or
file or cause to be executed, delivered or filed, all such other agreements,
undertakings, certificates, documents or instruments or to perform such other
acts as such officer may deem necessary or appropriate in order to effect the
purpose and intent of the foregoing recitals and resolutions;

     

    FURTHER
RESOLVED, that all actions of the officers of the Corporation previously taken
to effect the purpose and intent of the foregoing recitals and resolutions be,
and they hereby are, ratified and approved as valid corporate
action;

    

    There
being no further business to come before the meeting, upon motion duly made and
unanimously carried, the meeting was adjourned.

     

    /s/ James
Linesch                                 

    James
Linesch, Secretary of Meeting

     

    Attest:

    

    /s/
Christopher J.
Reed                        

    Christopher
J. Reed, Chairman

    

    
      
        
        

      

      
        Exhibit B
- 1

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
C    SELLER
CORPORATE RESOLUTION

     

    Sonoma
Sparkler

    Board
of Directors Meeting

    10/23/09

    Minutes

    

    The
Board of Directors meeting was called ot order at 2:03 pm on October 23,
2009.

    

    Rhe
roll call was taken and the following directors were present via
teleconference:

    

    Bill
Wilber

    Bob
Morgensen

    David
Cordtz

    Ari
Smith Cordtz

    Morgan
Wolaver

    

    The
board reviewed the minutes from the previous meeting of May 12,
2009.  It was moved to approve the minutes as they stand.

    

    Moved
by:    Morgan
Wolaver

    

    Seconded
by:    Bill
Wilber

    

    Passed
unanimously

    

    After
a lengthy discussion, there was a motion to accept the Asset Purchase Agreement
from Reed’s, Inc. dated October 19, 2009.

    

    Moved
by:    Morgan
Wolaver

    

    Seconded
by:    Bob
Morgensen

    

    Passed
unanimously.

    

    A
financial report was given

    

    There
being no further business to come before the meeting, upon duly made, seconded
and unanimously carried, the meeting was declared adjourned at approximately
3:03 pm.

    

    Respectfully
submitted,

    

    /s/
Ari Smith Cordtz      

    Ari
Smith Cordtz

    Corporate
Secretary

     

    
      
        
        

      

      
        Exhibit C
- 1

        
          

        

      

      
        
        

      

    

    
EXHIBIT
D    NON-COMPETITION
AGREEMENT

     

    NON-COMPETITION
AGREEMENT

    

    THIS AGREEMENT, made AS OF
October 19, 2009, between SONOMA CIDER MILL, INC., a California corporation
("Seller"),
and Reed’s Inc, a Delaware Corporation ("Buyer").

     

    NOW THEREFORE, in
consideration of the mutual promises and agreements contained herein, the
receipt and sufficiency of which is hereby acknowledged, it is agreed by the
parties hereto as follows:

     

    1. Seller
this date has sold to Buyer certain assets of Sonoma Cider Mill, Inc.,
(hereinafter “Business”) which is engaged in the manufacture, marketing and sale
of any beverages business.  The purchase price for the Business
includes a substantial amount for the goodwill of such Business, which goodwill
is largely associated with the Seller and which can only be preserved hereafter
by preventing Seller and Individual from engaging in the manufacture, marketing
and sale of any beverages business.  The consideration for the
agreement of Seller hereunder includes a portion for the purchase price for the
Business.  This Non-Competition Agreement is specifically ancillary to
the Asset Purchase Agreement, dated October 19, 2009 (hereinafter “Agreement”),
between the parties herein.

     

    2. As
long as Purchaser is not in default under the Agreement, Seller and Individual
agree not to do any of the following:

     

    (a)
Interfere in any way with any contractual or other business relationships of
Purchaser which exist as of the date hereof;

     

    (b)
Entice or hire the employees hereafter employed by Purchaser; or

     

    (c)
Disclose to any third party or utilize in any way adverse to the Purchaser any
of the proprietary and/or confidential information or any type or nature
included in the Business and transferred to the Purchaser under the Asset
Purchase Agreement between the parties herein.

     

    3. As
long as Purchaser is not in default under the Agreement, for a period of two (2)
years after the date hereof, Seller and Individual agree not to compete with
Purchaser within a worldwide geographical locale of the Business Location or
Purchaser, directly or indirectly, in the manufacture, marketing and sale of
any 750 ml celebratory, sparkling fruit juice beverages or any other
activity competitive with the Business.  For purposes of this
Agreement, direct and indirect competition shall include, but not be limited to,
competition as a sole proprietor, partner, corporate officer, director,
shareholder, employee, agent, independent contractor, trustee, or any other
manner in which the Seller holds any beneficial interest in a competitive
business, derive any income from such business, or provide any service,
including the benefit of its reputation or know-how, to such
business.

     

    
      
        
        

      

      
        Exhibit D
- 1

        
          

        

      

      
        
        

      

    

     

    4. In
the event that any provision of this Agreement is found to be illegal or
unenforceable, such provision shall be severed or modified to the extent
necessary to make it enforceable and as so severed or modified, the remainder of
this Agreement shall remain in full force and effect.

     

    5. The
parties acknowledge that the provisions of this Agreement are essential for the
protection of the Purchaser and that breach or threat of breach of this
Agreement would cause immediate and irreparable damage to Purchaser, for which
monetary relief would be inadequate or impossible to
ascertain.  Accordingly, the parties hereto agree that upon the
existence of any breach or threatened breach hereof, Purchaser may, without
limitation of any other rights, obtain a restraining order, preliminary
injunction or other appropriate form of adequate relief to enforce the
provisions hereof.

     

    6. The
undersigned recognize and agree that this covenant extends in favor of
Purchaser, the Purchaser’s successors and assigns, and in favor of anyone else
to whom Purchaser assigns the rights hereunder.  In such an event the
obligations imposed by this Agreement shall continue in full force and effect
after such assignment in accordance with the terms hereof.

     

    7. All
questions arising hereunder shall be governed by the laws of the State of
California and exclusive jurisdiction shall be in the courts of the State of
California.

     

    
    

     

    
      	
              SELLER:

              Sonoma Cider Mill, Inc. 

               

              By:  /s/ David
      Cordtz                                   

                      David Cordtz, CEO

            	
              PURCHASER:

              Original Beverage Corporation

               

              By:  /s/ Chris
      Reed                                           
      

                      Chris Reed, President
      & CEO

            
	 	 
	
               

               

              /s/ David
      Cordtz                                           

              David
      Cordtz, Individually

            	 

    

     

    
      
        
        

      

      
        Exhibit D
- 2

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