SECOND LIEN SECURITY AGREEMENT

 

This SECOND LIEN SECURITY AGREEMENT, dated as of April 21, 2017 (as amended,
supplemented or otherwise modified from time to time in accordance with the
provisions hereof, this “Agreement”), made by Reed’s Inc., a Delaware
corporation (the “Grantor”), in favor of Raptor/Harbor Reeds SPV LLC, a Delaware
limited liability company (the “Secured Party”).

 

WHEREAS, the Grantor and Secured Party are parties to that certain Securities
Purchase Agreement, dated April 21, 2017 (as amended, restated, supplemented or
otherwise modified from time to time, the “Purchase Agreement”), pursuant to
which the Grantor shall issue a subordinated convertible non-redeemable secured
note (as amended, restated, supplemented or otherwise modified from time to
time, the “Note”) to Secured Party and certain warrants;

 

WHEREAS, the Grantor has entered into that certain Amended and Restated Loan and
Security Agreement, dated April 25, 2016, as amended, with PMC Financial
Services Group, LLC, a Delaware limited liability company (“PMC”) under which
PMC has extended certain financial accommodations to the Grantor secured by a
security interest in the Collateral (as defined below);

 

WHEREAS, PMC and Secured Party are parties to that Subordination Agreement,
dated April 21, 2017 (as amended, restated, supplemented or otherwise modified
from time to time, the “Subordination Agreement”), which sets forth the Secured
Party’s and PMC’s respective rights and remedies with respect to the Collateral;
and

 

WHEREAS, this Agreement is executed and delivered by the Grantor in favor of the
Secured Party to secure the payment and performance of all of the Secured
Obligations (defined below), which security interest of Secured Party is
subordinated to the security interest of PMC as provided in the Subordination
Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants, terms and conditions
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1.       Definitions.

 

(a)       Unless otherwise specified herein, all references to Sections and
Schedules herein are to Sections and Schedules of this Agreement.

 

(b)       Unless otherwise defined herein, terms used herein that are defined in
the UCC shall have the meanings assigned to them in the UCC. However, if a term
is defined in Article 9 of the UCC differently than in another Article of the
UCC, the term has the meaning specified in Article 9.

 

(c)       For purposes of this Agreement, the following terms shall have the
following meanings:

 

1

 

 

“Collateral” has the meaning set forth in Section 2.

 

“Event of Default” has the meaning set forth in the Note.

 

“Perfection Certificate” has the meaning set forth in Section 5.

 

“Proceeds” means “proceeds” as such term is defined in section 9-102 of the UCC
and, in any event, shall include, without limitation, all dividends or other
income from the Collateral, collections thereon or distributions with respect
thereto.

 

“Second Priority” means, with respect to any lien and security interest
purported to be created in any Collateral pursuant to this Agreement, such lien
and security interest is the most senior lien to which such Collateral is
subject (subject to the subordination of Secured Party’s lien and security
interest only to PMC’s lien and security interest under the Loan Agreement as
provided in the Subordination Agreement (“PMC’s First Priority”)).

 

“Secured Obligations” has the meaning set forth in Section 3.

 

“UCC” means the Uniform Commercial Code as in effect from time to time in the
State of New York or, when the laws of any other state govern the method or
manner of the perfection or enforcement of any security interest in any of the
Collateral, the Uniform Commercial Code as in effect from time to time in such
state.

 

2.       Grant of Security Interest. The Grantor hereby pledges and grants to
the Secured Party, and hereby creates a continuing Second Priority lien and
security interest in favor of the Secured Party in and to all of its right,
title and interest in and to the following, wherever located, whether now
existing or hereafter from time to time arising or acquired (collectively, the
“Collateral”):

 

(a)       all fixtures and personal property of every kind and nature including
all accounts (including health-care-insurance receivables), goods (including
inventory and equipment), documents (including, if applicable, electronic
documents), instruments, promissory notes, chattel paper (whether tangible or
electronic), commercial tort claims described on Schedule 1 hereof, letters of
credit, letter-of-credit rights (whether or not the letter of credit is
evidenced by a writing), securities and all other investment property, general
intangibles (including all payment intangibles), money, deposit accounts, and
any other contract rights or rights to the payment of money; and

 

(b)       all Proceeds and products of each of the foregoing, all books and
records relating to the foregoing, all supporting obligations related thereto,
and all accessions to, substitutions and replacements for, and rents, profits
and products of, each of the foregoing, and any and all Proceeds of any
insurance, indemnity, warranty or guaranty payable to the Grantor from time to
time with respect to any of the foregoing.

 

2

 

 

3.       Secured Obligations. Subject to PMC’s First Priority, the Collateral
secures the due and prompt payment and performance of:

 

(a)       the obligations of the Grantor from time to time arising under the
Purchase Agreement, Note, this Agreement or otherwise with respect to the due
and prompt payment of (i) the principal of and premium, if any, and interest on
the Note (including interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding), when and as due, whether
at maturity, by acceleration, upon one or more dates set for prepayment or
otherwise and (ii) all other monetary obligations, including fees, costs,
attorneys’ fees and disbursements, reimbursement obligations, contract causes of
action, expenses and indemnities, whether primary, secondary, direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, fixed or otherwise (including monetary obligations incurred
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding), of the Grantor under or in respect of the Purchase Agreement, Note
and this Agreement; and

 

(b)       all other covenants, duties, debts, obligations and liabilities of any
kind of the Grantor under or in respect of the Purchase Agreement, Note and this
Agreement or any other document made, delivered or given in connection with any
of the foregoing, in each case whether evidenced by a note or other writing,
whether arising from an extension of credit, issuance of a letter of credit,
acceptance, loan, guaranty, indemnification or otherwise, and whether primary,
secondary, direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, fixed or otherwise (all such obligations,
covenants, duties, debts, liabilities, sums and expenses set forth in Section 3
being herein collectively called the “Secured Obligations”).

 

4.       Perfection of Security Interest and Further Assurances.

 

(a)       The Grantor shall, from time to time, as may be required by the
Secured Party with respect to all Collateral, take all actions as may be
requested by the Secured Party to perfect the security interest of the Secured
Party in the Collateral, including, without limitation, with respect to all
Collateral over which control may be obtained within the meaning of sections
8-106, 9-104, 9-105, 9-106 and 9-107 of the UCC, as applicable, the Grantor
shall take all actions as may be requested from time to time by the Secured
Party so that control of such Collateral is obtained and at all times held by
the Secured Party. All of the foregoing shall be at the sole cost and expense of
the Grantor.

 

(b)       The Grantor hereby irrevocably authorizes the Secured Party at any
time and from time to time to file in any relevant jurisdiction any financing
statements and amendments thereto that contain the information required by
Article 9 of the UCC of each applicable jurisdiction for the filing of any
financing statement or amendment relating to the Collateral, including any
financing or continuation statements or other documents for the purpose of
perfecting, confirming, continuing, enforcing or protecting the security
interest granted by the Grantor hereunder, without the signature of the Grantor
where permitted by law, including the filing of a financing statement describing
the Collateral as all assets now owned or hereafter acquired by the Grantor, or
words of similar effect. The Grantor agrees to provide all information required
by the Secured Party pursuant to this Section promptly to the Secured Party upon
request.

 

3

 

 

(c)       The Grantor hereby further authorizes the Secured Party to file with
the United States Patent and Trademark Office and the United States Copyright
Office (and any successor office and any similar office in any state of the
United States or in any other country) this Agreement and other documents for
the purpose of perfecting, confirming, continuing, enforcing or protecting the
security interest granted by the Grantor hereunder, without the signature of the
Grantor where permitted by law and subject to PMC’S First Priority.

 

(d)       The Grantor agrees that at any time and from time to time, at the
expense of the Grantor, the Grantor will promptly execute and deliver all
further instruments and documents, obtain such agreements from third parties,
and take all further action, that may be necessary or desirable, or that the
Secured Party may request, in order to create and/or maintain the validity,
perfection or priority of and protect any security interest granted or purported
to be granted hereby or to enable the Secured Party to exercise and enforce its
rights and remedies hereunder or under any other agreement with respect to any
Collateral.

 

(e)       If the Grantor shall at any time hold or acquire a commercial tort
claim, the Grantor shall (i) notify the Secured Party in a writing signed by the
Grantor of the particulars thereof and grant to the Secured Party in such
writing a security interest therein and in the proceeds thereof, all upon the
terms of this Agreement, with such writing to be in form and substance
satisfactory to the Secured Party and (ii) deliver to the Secured Party an
updated Schedule 1.

 

(f)       If any Collateral is at any time in the possession of a bailee, the
Grantor shall promptly notify the Secured Party thereof and, at the Secured
Party’s request and option, shall promptly obtain an acknowledgment from the
bailee, in form and substance satisfactory to the Secured Party, that the bailee
holds such Collateral for the benefit of the Secured Party and the bailee agrees
to comply, without further consent of the Grantor, at any time with instructions
of the Secured Party as to such Collateral.

 

(g)       The Grantor agrees that at any time and from time to time, at the
expense of the Grantor, the Grantor will promptly execute and deliver all
further instruments and documents, obtain such agreements from third parties,
and take all further action, that may be necessary or desirable, or that the
Secured Party may request, in order to create and/or maintain the validity,
perfection or priority of and protect any security interest granted or purported
to be granted hereby or to enable the Secured Party to exercise and enforce its
rights and remedies hereunder or under any other agreement with respect to any
Collateral.

 

Notwithstanding anything herein to the contrary, the obligations of the Grantor
under this Section 4 shall be subject to the terms and conditions set forth in
the Subordination Agreement.

 

4

 

 

5.       Representations and Warranties. The Grantor represents and warrants as
follows:

 

(a)       It has delivered to the Secured Party a certificate signed by the
Grantor and entitled “Perfection Certificate” (“Perfection Certificate”), and
that: (i) the Grantor’s exact legal name is that indicated on the Perfection
Certificate and on the signature page hereof, (ii) the Grantor is an
organization of the type, and is organized in the jurisdiction, set forth in the
Perfection Certificate, (iii) the Perfection Certificate accurately sets forth
the Grantor’s organizational identification number (or accurately states that
the Grantor has none), the Grantor’s place of business (or, if more than one,
its chief executive office), and its mailing address, (iv) all other information
set forth on the Perfection Certificate relating to the Grantor is accurate and
complete and (v) there has been no change in any such information since the date
on which the Perfection Certificate was signed by the Grantor.

 

(b)       All information set forth on the Perfection Certificate relating to
the Collateral is accurate and complete and there has been no change in any such
information since the date on which the Perfection Certificate was signed by the
Grantor.

 

(c)       Except as set forth in Schedule 1, the Collateral consisting of
securities have been duly authorized and validly issued, and are fully paid and
non-assessable and subject to no options to purchase or similar rights. The
Grantor holds no commercial tort claims except as indicated on Schedule 1. None
of the Collateral constitutes, or is the proceeds of, (i) farm products, (ii)
as-extracted collateral, (iii) manufactured homes, (iv) health-care-insurance
receivables, (v) timber to be cut, (vi) aircraft, aircraft engines, satellites,
ships or railroad rolling stock. None of the account debtors or other persons
obligated on any of the Collateral is a governmental authority covered by the
Federal Assignment of Claims Act or like federal, state or local statute or rule
in respect of such Collateral.

 

(d)       At the time the Collateral becomes subject to the lien and security
interest created by this Agreement, the Grantor will be the sole, direct, legal
and beneficial owner thereof, free and clear of any lien, security interest,
encumbrance, claim, option or right of others except for PMC’s First Priority
and security interest created by this Agreement.

 

(e)       The pledge of the Collateral pursuant to this Agreement creates a
valid and perfected Second Priority security interest in the Collateral,
securing the payment and performance when due of the Secured Obligations.

 

(f)       It has full power, authority and legal right to issue the Note and
pledge the Collateral pursuant to this Agreement.

 

(g)       Each of this Agreement, the Purchase Agreement and Note has been duly
authorized, executed and delivered by the Grantor and constitutes a legal, valid
and binding obligation of the Grantor enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors’ rights generally and subject to
equitable principles (regardless of whether enforcement is sought in equity or
at law).

 

5

 

 

(h)       No authorization, approval, or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required with
respect to the issuance of the Note and the pledge by the Grantor of the
Collateral pursuant to this Agreement or for the execution and delivery of the
Purchase Agreement, Note and this Agreement by the Grantor or the performance by
the Grantor of its obligations thereunder.

 

(i)       The execution and delivery of the Purchase Agreement, Note and this
Agreement by the Grantor and the performance by the Grantor of its obligations
thereunder, will not violate any provision of any applicable law or regulation
or any order, judgment, writ, award or decree of any court, arbitrator or
governmental authority, domestic or foreign, applicable to the Grantor or any of
its property, or the organizational or governing documents of the Grantor or any
agreement or instrument to which the Grantor is party or by which it or its
property is bound.

 

(j)       Subject to the terms and conditions of the Subordination Agreement,
the Grantor has taken all action required on its part for control (as defined in
sections 8-106, 9-104, 9-105, 9-106 and 9-107 of the UCC, as applicable) to have
been obtained by the Secured Party over all Collateral with respect to which
such control may be obtained pursuant to the UCC.

 

6.       Voting, Distributions and Receivables.

 

(a)       The Secured Party agrees that unless an Event of Default shall have
occurred and be continuing, the Grantor may, to the extent the Grantor has such
right as a holder of the Collateral consisting of securities, other Equity
Interests or indebtedness owed by any obligor, vote and give consents,
ratifications and waivers with respect thereto, except to the extent that, in
the Secured Party’s reasonable judgment, any such vote, consent, ratification or
waiver could detract from the value thereof as Collateral or which could be
inconsistent with or result in any violation of any provision of the Purchase
Agreement, the Note or this Agreement.

 

(b)       The Secured Party agrees that the Grantor may, unless an Event of
Default shall have occurred and be continuing, receive and retain all dividends
and other distributions with respect to the Collateral consisting of securities,
other Equity Interests or indebtedness owed by any obligor.

 

(c)       If any Event of Default shall have occurred and be continuing, the
Secured Party may, or at the request and option of the Secured Party the Grantor
shall, notify account debtors and other persons obligated on any of the
Collateral of the security interest of the Secured Party in any account, chattel
paper, general intangible, instrument or other Collateral and that payment
thereof is to be made directly to the Secured Party.

 

6

 

 

7.       Covenants. The Grantor covenants as follows:

 

(a)       The Grantor will not, without providing at least 30 days’ prior
written notice to the Secured Party, change its legal name, identity, type of
organization, jurisdiction of organization, corporate structure, location of its
chief executive office or its principal place of business or its organizational
identification number. The Grantor will, prior to any change described in the
preceding sentence, take all actions reasonably requested by the Secured Party
to maintain the perfection and priority of the Secured Party’s security interest
in the Collateral.

 

(b)       The Collateral will be kept at those locations listed on the
Perfection Certificate and the Grantor will not remove the Collateral from such
locations without providing at least 30 days’ prior written notice to the
Secured Party. The Grantor will, prior to any change described in the preceding
sentence, take all actions reasonably required by the Secured Party to maintain
the perfection and priority of the Secured Party’s security interest in the
Collateral.

 

(c)       The Grantor shall, at its own cost and expense, defend title to the
Collateral and the Second Priority lien and security interest of the Secured
Party therein against the claim of any person claiming against or through the
Grantor and shall maintain and preserve such perfected Second Priority security
interest for so long as this Agreement shall remain in effect.

 

(d)       From the date hereof until termination of this Agreement, the Grantor
will not sell, offer to sell, dispose of, convey, assign or otherwise transfer,
grant any option with respect to, restrict, or grant, create, permit or suffer
to exist any mortgage, pledge, lien, security interest, option, right of first
offer, encumbrance or other restriction or limitation of any nature whatsoever
on, any of the Collateral or any interest therein.

 

(e)       The Grantor will keep the Collateral in good order and repair and will
not use the same in violation of law or any policy of insurance thereon. The
Grantor will permit the Secured Party, or its designee, to inspect the
Collateral at any reasonable time, wherever located.

(f)       The Grantor will pay promptly when due all taxes, assessments,
governmental charges, and levies upon the Collateral or incurred in connection
with the use or operation of the Collateral or incurred in connection with this
Agreement.

 

8.       Secured Party Appointed Attorney-in-Fact. The Grantor hereby appoints
the Secured Party the Grantor’s attorney-in-fact, with full authority in the
place and stead of the Grantor and in the name of the Grantor or otherwise, from
time to time in the Secured Party’s discretion to take any action and to execute
any instrument which the Secured Party may deem necessary or advisable to
accomplish the purposes of this Agreement (but the Secured Party shall not be
obligated to and shall have no liability to the Grantor or any third party for
failure to do so or take action). This appointment, being coupled with an
interest, shall be irrevocable. The Grantor hereby ratifies all that said
attorneys shall lawfully do or cause to be done by virtue hereof.

 

7

 

 

9.       Secured Party May Perform. If the Grantor fails to perform any
obligation contained in this Agreement, the Secured Party may itself perform, or
cause performance of, such obligation, and the expenses of the Secured Party
incurred in connection therewith shall be payable by the Grantor; provided that
the Secured Party shall not be required to perform or discharge any obligation
of the Grantor.

 

10.       Reasonable Care. The Secured Party shall have no duty with respect to
the care and preservation of the Collateral beyond the exercise of reasonable
care. The Secured Party shall be deemed to have exercised reasonable care in the
custody and preservation of the Collateral in its possession if the Collateral
is accorded treatment substantially equal to that which the Secured Party
accords its own property, it being understood that the Secured Party shall not
have any responsibility for (a) ascertaining or taking action with respect to
any claims, the nature or sufficiency of any payment or performance by any party
under or pursuant to any agreement relating to the Collateral or other matters
relative to any Collateral, whether or not the Secured Party has or is deemed to
have knowledge of such matters, or (b) taking any necessary steps to preserve
rights against any parties with respect to any Collateral. Nothing set forth in
this Agreement, nor the exercise by the Secured Party of any of the rights and
remedies hereunder, shall relieve the Grantor from the performance of any
obligation on the Grantor’s part to be performed or observed in respect of any
of the Collateral.

 

11.       Remedies Upon Default.

 

(a)       If any Event of Default shall have occurred and be continuing, the
Secured Party, without any other notice to or demand upon the Grantor, may
assert all rights and remedies of a secured party under the UCC or other
applicable law, including, without limitation, the right to take possession of,
hold, collect, sell, lease, deliver, grant options to purchase or otherwise
retain, liquidate or dispose of all or any portion of the Collateral, at all
times subject to the terms set forth in the Subordination Agreement. If notice
prior to disposition of the Collateral or any portion thereof is necessary under
applicable law, written notice mailed to the Grantor at its notice address as
provided in Section 15 hereof ten days prior to the date of such disposition
shall constitute reasonable notice, but notice given in any other reasonable
manner shall be sufficient. So long as the sale of the Collateral is made in a
commercially reasonable manner, the Secured Party may sell such Collateral on
such terms and to such purchaser(s) as the Secured Party in its absolute
discretion may choose, without assuming any credit risk and without any
obligation to advertise or give notice of any kind other than that necessary
under applicable law. Without precluding any other methods of sale, the sale of
the Collateral or any portion thereof shall have been made in a commercially
reasonable manner if conducted in conformity with reasonable commercial
practices of creditors disposing of similar property. At any sale of the
Collateral, if permitted by applicable law, the Secured Party may be the
purchaser, licensee, assignee or recipient of the Collateral or any part thereof
and shall be entitled, for the purpose of bidding and making settlement or
payment of the purchase price for all or any portion of the Collateral sold,
assigned or licensed at such sale, to use and apply any of the Secured
Obligations as a credit on account of the purchase price of the Collateral or
any part thereof payable at such sale. To the extent permitted by applicable
law, the Grantor waives all claims, damages and demands it may acquire against
the Secured Party arising out of the exercise by it of any rights hereunder. The
Grantor hereby waives and releases to the fullest extent permitted by law any
right or equity of redemption with respect to the Collateral, whether before or
after sale hereunder, and all rights, if any, of marshalling the Collateral and
any other security for the Secured Obligations or otherwise. At any such sale,
unless prohibited by applicable law, the Secured Party or any custodian may bid
for and purchase all or any part of the Collateral so sold free from any such
right or equity of redemption. Neither the Secured Party nor any custodian shall
be liable for failure to collect or realize upon any or all of the Collateral or
for any delay in so doing, nor shall it be under any obligation to take any
action whatsoever with regard thereto. The Grantor agrees that it would not be
commercially unreasonable for the Secured Party to dispose of the Collateral or
any portion thereof by utilizing internet sites that provide for the auction of
assets of the type included in the Collateral or that have the reasonable
capability of doing so, or that match buyers and sellers of assets. The Secured
Party shall not be obligated to clean-up or otherwise prepare the Collateral for
sale.

 

8

 

 

(b)       If any Event of Default shall have occurred and be continuing, all
rights of the Grantor to (i) exercise the voting and other consensual rights it
would otherwise be entitled to exercise pursuant to Section 6(a) and (ii)
receive the dividends and other distributions which it would otherwise be
entitled to receive and retain pursuant to Section 6(b), shall immediately
cease, and all such rights shall thereupon become vested in the Secured Party,
which shall have the sole right to exercise such voting and other consensual
rights and receive and hold such dividends and other distributions as
Collateral.

 

(c)       If any Event of Default shall have occurred and be continuing, any
cash held by the Secured Party as Collateral and all cash Proceeds received by
the Secured Party in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral shall be applied in whole or
in part by the Secured Party to the payment of expenses incurred by the Secured
Party in connection with the foregoing or incidental to the care or safekeeping
of any of the Collateral or in any way relating to the Collateral or the rights
of the Secured Party hereunder, including reasonable attorneys’ fees, and the
balance of such proceeds shall be applied or set off against all or any part of
the Secured Obligations in such order as the Secured Party shall elect. Any
surplus of such cash or cash Proceeds held by the Secured Party and remaining
after payment in full of all the Secured Obligations shall be paid over to the
Grantor or to whomsoever may be lawfully entitled to receive such surplus. The
Grantor shall remain liable for any deficiency if such cash and the cash
Proceeds of any sale or other realization of the Collateral are insufficient to
pay the Secured Obligations and the fees and other charges of any attorneys
employed by the Secured Party to collect such deficiency.

 

(d)       If the Secured Party shall determine to exercise its rights to sell
all or any of the Collateral pursuant to this Section, the Grantor agrees that,
upon request of the Secured Party, the Grantor will, at its own expense, do or
cause to be done all such acts and things as may be necessary to make such sale
of the Collateral or any part thereof valid and binding and in compliance with
applicable law.

 

9

 

 

12.       No Waiver and Cumulative Remedies. The Secured Party shall not by any
act (except by a written instrument pursuant to Section 14), delay, indulgence,
omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any Default or Event of Default. All rights and remedies
herein provided are cumulative and are not exclusive of any rights or remedies
provided by law.

 

13.       Security Interest Absolute. The Grantor hereby waives demand, notice,
protest, notice of acceptance of this Agreement, notice of loans made, credit
extended, Collateral received or delivered or other action taken in reliance
hereon and all other demands and notices of any description. All rights of the
Secured Party and liens and security interests hereunder, and all Secured
Obligations of the Grantor hereunder, shall be absolute and unconditional
irrespective of:

 

(a)       any illegality or lack of validity or enforceability of any Secured
Obligation or any related agreement or instrument;

 

(b)       any change in the time, place or manner of payment of, or in any other
term of, the Secured Obligations, or any rescission, waiver, amendment or other
modification of the Purchase Agreement, the Note, this Agreement or any other
agreement, including any increase in the Secured Obligations resulting from any
extension of additional credit or otherwise;

 

(c)       any taking, exchange, substitution, release, impairment or
non-perfection of any Collateral or any other collateral, or any taking,
release, impairment, amendment, waiver or other modification of any guaranty,
for all or any of the Secured Obligations;

 

(d)       any manner of sale, disposition or application of proceeds of any
Collateral or any other collateral or other assets to all or part of the Secured
Obligations;

 

(e)       any default, failure or delay, willful or otherwise, in the
performance of the Secured Obligations;

 

(f)       any defense, set-off or counterclaim (other than a defense of payment
or performance) that may at any time be available to, or be asserted by, the
Grantor against the Secured Party; or

 

(g)       any other circumstance (including, without limitation, any statute of
limitations) or manner of administering the obligation under the Note or any
existence of or reliance on any representation by the Secured Party that might
vary the risk of the Grantor or otherwise operate as a defense available to, or
a legal or equitable discharge of, the Grantor or any other grantor, guarantor
or surety.

 

10

 

 

14.       Amendments. None of the terms or provisions of this Agreement may be
amended, modified, supplemented, terminated or waived, and no consent to any
departure by the Grantor therefrom shall be effective unless the same shall be
in writing and signed by the Secured Party and the Grantor, and then such
amendment, modification, supplement, waiver or consent shall be effective only
in the specific instance and for the specific purpose for which made or given.

 

15.       Notices. All notices and other communications provided for in this
Agreement shall be in writing and shall be given in the manner and become
effective as set forth in the Purchase Agreement.

 

16.       Continuing Security Interest; Further Actions. This Agreement shall
create a continuing Second Priority lien and security interest in the Collateral
and shall (a) subject to Section 17, remain in full force and effect until
payment and performance in full of the Secured Obligations, (b) be binding upon
the Grantor, its successors and assigns, and (c) inure to the benefit of the
Secured Party and its successors, transferees and assigns; provided that the
Grantor may not assign or otherwise transfer any of its rights or obligations
under this Agreement without the prior written consent of the Secured Party.

17.       Termination; Release. On the date on which all Secured Obligations
have been paid and performed in full, the Secured Party will, at the request and
sole expense of the Grantor, (a) duly assign, transfer and deliver to or at the
direction of the Grantor (without recourse and without any representation or
warranty) such of the Collateral as may then remain in the possession of the
Secured Party, together with any monies at the time held by the Secured Party
hereunder, and (b) execute and deliver to the Grantor a proper instrument or
instruments acknowledging the satisfaction and termination of this Agreement.

 

18.       Governing Law. This Agreement shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Agreement shall be governed by, the
internal laws of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. The Company hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
The City of New York, Borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any manner permitted by law. In the event that
any provision of this Agreement 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 this Agreement. Nothing contained herein shall be deemed
or operate to preclude the Secured Party from bringing suit or taking other
legal action against the Company in any other jurisdiction to collect on the
Company’s obligations to the Secured Party to realize on any Collateral or any
other security for such obligations or to enforce a judgment or other court
ruling in favor of the Secured Party. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

11

 

 

19.       Counterparts. This Agreement and any amendments, waivers, consents or
supplements hereto may be executed in counterparts (and by different parties
hereto in different counterparts), each of which shall constitute an original,
but all taken together shall constitute a single contract. Delivery of an
executed counterpart of a signature page to this Agreement by facsimile or in
electronic (i.e., “pdf” or “tif”) format shall be effective as delivery of a
manually executed counterpart of this Agreement.

 

20.       Entire Agreement. This Agreement, the Purchase Agreement, the Note and
the Subordination Agreement constitute the entire contract among the parties
with respect to the subject matter hereof and supersede all previous agreements
and understandings, oral or written, with respect thereto.

 

21.       Subordination. The obligations of the Grantor pursuant to this
Agreement are subject to PMC’s First Priority. If any conflict or inconsistency
exists between this Agreement and the Subordination Agreement, the Subordination
Agreement shall govern. Notwithstanding anything to the contrary contained
herein, the Liens and security interests granted to the Secured Party pursuant
to this Agreement and the exercise of any right or remedy by the Secured Party
hereunder are subject in all respects to the provisions of the Subordination
Agreement.

 

[signature page follows]

 

12

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.

 

  REED’S INC., as Grantor         By: /s/ Stephan Freeman   Name: Stephan
Freeman   Title: Interim Chief Executive Officer         RAPTOR/HARBOR REEDS SPV
LLC, as Secured Party      

Raptor Holdco GPP LLC, Its Manager

      By: /s/ Robert Needham   Name: Robert Needham   Title: Chief Financial
Officer

 

[Signature Page to Security Agreement]

 

13