Reeds and Jones Soda Initiate Merger

LOS ANGELES and SEATTLEReed's, Inc. (NASDAQ: REED), and Jones Soda, Inc. (NASDAQ: JSDA) have entered into a Letter of Intent (LOI) for a merger that would bring together some leading premium soda brands, including Reed's Ginger Brew, Virgil's, and Jones Soda. While non-binding, the letters provisions indicate Reeds would acquire Jones Soda for a combination of cash and stock. However, under the binding provisions of the LOI, Reed's and Jones Soda have until April 5, 2010 to negotiate a definitive agreement on an exclusive basis. Any such definitive agreement would also require approval by the shareholders of each company. Until then, Jones can take a better offer over Reeds.

The companies said the proposed merger would provide the two companies with the opportunity to realize the potential benefits of increased size and scale, as well as cost efficiencies in several aspects of the combined business, including administration, operations, and customer interface. Specifically, they noted the strength of the Reed's portfolio in the direct selling coupled with Jones Soda's strong national distributor structure will present future growth opportunities for each company's brands across these channels.

Under terms of the letter, the shareholders of Jones Soda would receive an aggregate of 4.5 million shares of Reed's common stock (or approximately 0.17 of a share of Reed's common stock per share of Jones Soda common stock based on current Jones Soda shares outstanding) and cash of $0.10 per share of Jones Soda common stock (or an aggregate of approximately $2.56 million based on current shares outstanding).

 I am confident that our portfolio of brands will benefit from Jones Soda's marketing savvy, as well as its organization's deep mainstream distribution relationships, said Chris Reed, Founder, chairman and CEO of Reed's. At the same time, we believe our strong infrastructure and operational capabilities will help drive important efficiencies through Jones Soda's supply chain. With minimal customer and demographic overlap between our combined brands, we believe this transaction also provides us with compelling merchandising and growth opportunities in the years ahead."

It appeared the current state of the economy is affecting Jones Sodas ability to operate on its own, according to Rick Eiswirth, chairman of Jones Soda Co. Over the past year we have taken numerous steps to reduce our expenses and reinvigorate our top line in order to return to profitability, he lamented. " Unfortunately, the challenging economic environment combined with our current capitalization has made it extremely difficult to operate on a standalone basis. After evaluating a range of strategies aimed at improving our outlook, our board of directors determined that the proposed merger with Reed's offers our shareholders the most compelling long-term benefits of the available alternatives. He predicted the combination of Jones and Reed's will create a substantially larger beverage business with a more powerful operating platform and a brighter future.

Jones Soda also announced that Joth Ricci will be stepping down as CEO, effective April 2, 2010, in order to pursue other business opportunities.