AMENDED
AND RESTATED 


SUBORDINATED
CONVERTIBLE NON-REDEEMABLE SECURED NOTE


 


THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND MAY NOT BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS REGISTERED
UNDER THE SECURITIES ACT, OR IN A TRANSACTION WHICH IS EXEMPT FROM OR NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. ADDITIONALLY, THE TRANSFER OF THIS NOTE IS SUBJECT TO THE CONDITIONS SPECIFIED IN THIS NOTE, AND MAKER HEREOF RESERVES THE
RIGHT TO REFUSE THE TRANSFER OF THIS NOTE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER.


 


THIS
NOTE IS SUBJECT TO THE TERMS OF THAT CERTAIN SUBORDINATION AGREEMENT, DATED AS OF THE DATE HEREOF, BY AND BETWEEN RAPTOR/HARBOR
REEDS SPV LLC AND ROSENTHAL & ROSENTHAL, INC. AND PAYMENT HEREUNDER IS SUBORDINATE TO THE PAYMENT OF ALL SENIOR LENDER INDEBTEDNESS
(AS DEFINED IN THE SUBORDINATION AGREEMENT) AS SET FORTH IN SUCH SUBORDINATION AGREEMENT.


 


REED’S,
Inc.


 


Amended
and Restated Subordinated Convertible Non-Redeemable Secured Note


 


	Issuance
    Date: October 4, 2018	Maximum
    Principal Amount: U.S. $7,400,000


 


FOR
VALUE RECEIVED, Reed’s, Inc., a Delaware corporation (the “Company”), hereby promises to pay to Raptor/Harbor
Reeds SPV LLC, a Delaware limited liability company, or its registered assigns (“Holder”) (i) the Subscription
Amount (as defined in the Securities Purchase Agreement) (as reduced pursuant to the terms hereof pursuant to redemption, conversion
or otherwise) plus (ii) any additional amounts advanced by Holder as a Credit Support Advance (as defined in the Securities Purchase
Agreement) up to an aggregate principal amount not to exceed Maximum Principal Amount (all such amounts, collectively, the “Principal”)
when due, whether upon the Maturity Date, or upon acceleration or otherwise (in each case in accordance with the terms hereof)
and to pay interest (“Interest”) on any outstanding Principal at the applicable Interest Rate (as defined below)
from the date set out above as the Issuance Date (the “Issuance Date”) until the same becomes due and payable,
whether upon the Maturity Date, conversion, redemption or otherwise (in each case in accordance with the terms hereof). This Amended
and Restated Subordinated Convertible Non-Redeemable Secured Note (including all Subordinated Convertible Non-Redeemable Secured
Notes issued in exchange, transfer or replacement hereof, this “Note”) is issued on the First Amendment Closing
Date pursuant to (i) the Securities Purchase Agreement, (ii) the Security Agreement and (iii) the Registration Rights Agreement.
Certain capitalized terms used herein are defined in Section 31.


 






    	 



    	 



    




 


1.
MATURITY. The Principal, accrued unpaid Interest and accrued and unpaid Late Charges are due and payable to Holder on the
earlier of (i) April 21, 2021 and (ii) the date that all of the outstanding Principal shall become due and payable in full, whether
by acceleration or otherwise (“Maturity Date”). Other than as specifically permitted by this Note, the Company
may not prepay any portion of the outstanding Principal, accrued and unpaid Interest or accrued or unpaid Late Charges.


 


2.
INTEREST; INTEREST RATE. Interest on this Note shall (i) accrue at the Interest Rate, (ii) commence accruing on the Issuance
Date, (iii) be computed on the basis of a 360-day year and twelve 30-day months, (iv) shall compound on the first calendar day
of each calendar month and (v) shall be payable on the Maturity Date or the Conversion Date, as applicable, in cash only, in accordance
with the terms of this Note.


 


3.
CONVERSION OF NOTES. This Subscription Amount portion of the Principal of this Note is convertible into validly issued,
fully paid and non-assessable shares of Common Stock (as defined below), on the terms and conditions set forth in this Section
3.


 


(a)
Conversion Right. Subject to the provisions of Section 3(d), at any time or times on or after the date hereof, the Holder
shall be entitled to convert any portion of the outstanding Conversion Amount (as defined below) into validly issued, fully paid
and non-assessable shares of Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined below). The Company
shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a
fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole
share. The Company shall pay any and all transfer, stamp, issuance and similar taxes that may be payable with respect to the issuance
and delivery of Common Stock upon conversion of any Conversion Amount.


 


(b)
Conversion Rate. The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to Section
3(a) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price (the “Conversion Rate”).


 


(i)
“Conversion Amount” means the portion of the Subscription Amount to be converted with respect to which this
determination is being made.


 


(ii)
“Conversion Price” means, as of any Conversion Date (as defined below) or other date of determination, $1.50
per share, subject to adjustment as provided herein.


 






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(c)
Mechanics of Conversion.


 


(i)
Optional Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a “Conversion Date”),
the Holder shall (A) deliver (whether via facsimile or otherwise), for receipt on or prior to 11:59 p.m., New York time, on such
date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the “Conversion Notice”)
to the Company and (B) if required by Section 3(c)(iii), surrender this Note to a nationally recognized overnight delivery service
for delivery to the Company (or an indemnification undertaking with respect to this Note in the case of its loss, theft or destruction
as contemplated by Section 19(b)). On or before the first (1st) Trading Day following the date of receipt of a Conversion
Notice, the Company shall transmit by facsimile an acknowledgment of confirmation, in the form attached hereto as Exhibit II,
of receipt of such Conversion Notice to the Holder, and the Company’s transfer agent (the “Transfer Agent”).
On or before the third (3rd) Trading Day following the date of receipt of a Conversion Notice, the Company shall (1)
provided that the Transfer Agent is participating in The Depository Trust Company’s (“DTC”) Fast Automated
Securities Transfer Program and (A) there is an effective registration statement permitting the issuance of the Conversion Shares
to or resale of the Warrant Shares by the Holder or (B) the Conversion Shares are eligible for resale by the Holder without volume
or manner-of-sale limitations pursuant to Rule 144, credit such aggregate number of shares of Common Stock to which the Holder
shall be entitled to the Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian
system or (2) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program or the shares are
restricted, issue and deliver (via reputable overnight courier) to the address as specified in the Conversion Notice, a certificate,
registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled.
If this Note is physically surrendered for conversion as required by Section 3(c)(iii) and the outstanding Principal of this Note
is greater than the Principal portion of the Conversion Amount being converted, then the Company shall as soon as practicable
and in no event later than three (3) Trading Days after receipt of this Note and at its own expense, issue and, following authentication
of such new Note, deliver to the Holder (or its designee) a new Note (in accordance with Section 19(d)) representing the outstanding
Principal not converted. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of this
Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date.


 


(ii)
Company’s Failure to Timely Convert. If the Company shall fail, for any reason or for no reason, to issue to the
Holder within three (3) Trading Days after the Company’s receipt of a Conversion Notice (whether via facsimile or otherwise)
(the “Share Delivery Deadline”), a certificate for the number of shares of Common Stock to which the Holder
is entitled and register such shares of Common Stock on the Company’s share register or to credit the Holder’s or
its designee’s balance account with DTC for such number of shares of Common Stock to which the Holder is entitled upon the
Holder’s conversion of any Conversion Amount (as the case may be) (a “Conversion Failure”) and if on
or after such Share Delivery Deadline the Holder (or any other Person in respect, or on behalf, of the Holder) purchases (in an
open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of all or any
portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of
the number of shares of Common Stock, issuable upon such conversion that the Holder so anticipated receiving from the Company,
then, in addition to all other remedies available to the Holder, the Company shall, within three (3) Business Days after receipt
of the Holder’s written request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal
to the Holder’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the
shares of Common Stock so purchased (including, without limitation, by any other Person in respect, or on behalf, of the Holder)
(the “Buy-In Price”), at which point the Company’s obligation to so issue and deliver such certificate
or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled
upon the Holder’s conversion hereunder (as the case may be) (and to issue such shares of Common Stock) shall terminate,
or (ii) promptly honor its obligation to so issue and deliver to the Holder a certificate or certificates representing such shares
of Common Stock or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder
is entitled upon the Holder’s conversion hereunder (as the case may be) and pay cash to the Holder in an amount equal to
the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock multiplied by (B) the lowest
Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date of the applicable Conversion
Notice and ending on the date of such issuance and payment under this clause (ii).


 






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(iii)
Records; Physical Surrender of Note Not Required. Notwithstanding anything to the contrary set forth in this Section 3,
following conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically
surrender this Note to the Company unless the Holder has provided the Company with prior written notice (which notice may be included
in a Conversion Notice) requesting reissuance of this Note upon physical surrender of this Note for all such amounts not converted.
The Holder and the Company shall maintain records showing the Principal, if any, converted and/or paid (as the case may be) and
the dates of such conversions and/or payments (as the case may be) or shall use such other method, reasonably satisfactory to
the Holder and the Company, so as not to require physical surrender of this Note upon conversion.


 


4.
RIGHTS UPON EVENT OF DEFAULT.


 


(a)
Event of Default. Each of the following events shall constitute an “Event of Default”:


 


(i)
the Company’s notice, written or oral, to any holder of the Notes or Warrants, including, without limitation, by way of
public announcement or through any of its agents, at any time, of its intention not to comply, as required, with a request for
conversion of any Notes into shares of Common Stock that is requested in accordance with the provisions of the Notes, other than
pursuant to Section 3(d), or a request for exercise of any Warrants for shares of Common Stock in accordance with the provisions
of the Warrants;


 


(ii)
the Company’s failure to pay to the Holder any amount of Principal, Interest, Late Charges or other amounts when and as
due under this Note or any other Transaction Document (as defined in the Securities Purchase Agreement) or any other agreement,
document, certificate or other instrument delivered in connection with the transactions contemplated hereby and thereby;


 


(iii)
the occurrence of any default under, redemption of or acceleration prior to maturity of Indebtedness (as defined in the Securities
Purchase Agreement) of the Company in an individual or aggregate principal amount of $300,000 or more;


 


(iv)
bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the relief of debtors shall be instituted
by or against the Company and, if instituted against the Company by a third party, shall not be dismissed within thirty (30) days
of their initiation;


 






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(v)
the commencement by the Company or of a voluntary case or proceeding under any applicable federal, state or foreign bankruptcy,
insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent,
or the consent by it to the entry of a decree, order, judgment or other similar document in respect of the Company in an involuntary
case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law
or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under any applicable federal, state or foreign law, or the consent by it to the filing
of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator
or other similar official of the Company or of any substantial part of its property, or the making by it of an assignment for
the benefit of creditors, or the execution of a composition of debts, or the occurrence of any other similar federal, state or
foreign proceeding, or the admission by it in writing of its inability to pay its debts generally as they become due, the taking
of corporate action by the Company in furtherance of any such action or the taking of any action by any Person to commence a Uniform
Commercial Code foreclosure sale or any other similar action under federal, state or foreign law;


 


(vi)
the entry by a court of (i) a decree, order, judgment or other similar document in respect of the Company of a voluntary or involuntary
case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law
or (ii) a decree, order, judgment or other similar document adjudging the Company as bankrupt or insolvent, or approving as properly
filed a petition seeking liquidation, reorganization, arrangement, adjustment or composition of or in respect of the Company under
any applicable federal, state or foreign law or (iii) a decree, order, judgment or other similar document appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its
property, or ordering the winding up or liquidation of its affairs, and, the continuance of any such decree, order, judgment or
other similar document or any such other decree, order, judgment or other similar document unstayed and in effect for a period
of thirty (30) consecutive days;


 


(vii)
a final judgment, judgments, any arbitration or mediation award or any settlement of any litigation or any other satisfaction
of any claim made by any Person pursuant to any litigation, as applicable, (each a “Judgment”, and collectively,
the “Judgments”) with respect to the payment of cash, securities and/or other assets with an aggregate fair
value in excess of $300,000 are rendered against, agreed to or otherwise accepted by, the Company and which Judgments are not,
within thirty (30) days after the entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within thirty
(30) days after the expiration of such stay; provided, however, any Judgment which is covered by insurance or an indemnity from
a credit worthy party shall not be included in calculating the amount set forth above so long as the Company provides the Holder
a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to the Holder)
to the effect that such Judgment is covered by insurance or an indemnity and the Company will receive the proceeds of such insurance
or indemnity within thirty (30) days of the issuance of such Judgment;





 



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(viii)
the Company either (i) fails to pay, when due, or within any applicable grace period, any payment with respect to any Indebtedness
in excess of $300,000 due to any third party (other than, with respect to unsecured Indebtedness only, payments contested by the
Company in good faith by proper proceedings and with respect to which adequate reserves have been set aside for the payment thereof
in accordance with GAAP) or is otherwise in breach or violation of any agreement for monies owed or owing in an amount in excess
of $300,000, which breach or violation permits the other party thereto to declare a default or otherwise accelerate amounts due
thereunder, or (ii) suffer to exist any other circumstance or event that would, with or without the passage of time or the giving
of notice, result in a default or event of default under any agreement binding the Company, which default or event of default
would or is likely to have a Material Adverse Change on the business, assets, operations (including results thereof), liabilities,
properties, condition (including financial condition) or prospects of the Company;


 


(ix)
other than as specifically set forth in another clause of this Section 4(a), the Company breaches any representation, warranty,
covenant or other term or condition of any Transaction Document (as defined in the Securities Purchase Agreement);


 


(x)
any breach or failure in any respect by the Company to comply with any provisions of Section 11 or 14 of this Note;


 


(xi)
a Change of Control shall occur;


 


(xii)
the Company shall contest the validity or perfection of any lien in any collateral purported to be covered in the Security Agreement;
or


 


(xi)
any provision of any Transaction Document (shall at any time for any reason (other than pursuant to the express terms thereof)
cease to be valid and binding on or enforceable against the parties thereto, or the validity or enforceability thereof shall be
contested by any party thereto, or a proceeding shall be commenced by the Company or any governmental authority having jurisdiction
over any of them, seeking to establish the invalidity or unenforceability thereof, or the Company shall deny in writing that it
has any liability or obligation purported to be created under any Transaction Document to which it is a party.


 


(b)
Acceleration. (i) Upon the occurrence of any Event of Default (other than any Event of Default described in Section 4(a)(iv),
4(a)(v) and 4(a)(vi)), upon notice to the Company by the Holder and (ii) upon the occurrence of any Event of Default described
in Section 4(a)(iv), 4(a)(v) and 4(a)(vi)), automatically:


 


(A)
all obligations under this Note, including the Principal, accrued unpaid Interest and accrued and unpaid Late Charges, shall become
due and payable immediately, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Company; and


 






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(B)
subject to the terms of the Subordination Agreement, the Holder may exercise any and all of its other rights and remedies under
applicable law or at equity, hereunder and under the other Transaction Documents.


 


5.
RIGHTS UPON FUNDAMENTAL TRANSACTION.


 


(a)
Assumption. The Company shall not consummate a Fundamental Transaction unless the Successor Entity (if different than the
Company) assumes in writing all of the obligations of the Company under this Note and the other Transaction Documents in accordance
with the provisions of this Section 5(a), including agreements to deliver to each holder of Notes in exchange for such Notes a
security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to the Notes, including,
without limitation, having a principal amount and interest rate equal to the principal amounts then outstanding and the interest
rates of the Notes held by such holder, having similar conversion rights as the Notes and having similar ranking to the Notes.
Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from
and after the date of such Fundamental Transaction, the provisions of this Note and the other Transaction Documents referring
to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company
and shall assume all of the obligations of the Company under this Note and the other Transaction Documents with the same effect
as if such Successor Entity had been named as the Company herein. Upon consummation of a Fundamental Transaction, the Successor
Entity (if different than the Company) shall deliver to the Holder confirmation that there shall be issued upon conversion of
this Note at any time after the consummation of such Fundamental Transaction, in lieu of the shares of the Company’s Common
Stock (or other securities, cash, assets or other property (except such items still issuable under Sections 66, which shall continue
to be receivable thereafter) issuable upon the conversion of the Notes prior to such Fundamental Transaction, such shares of the
common stock (or their equivalent) of the Successor Entity (including its Parent Entity) which the Holder would have been entitled
to receive upon the happening of such Fundamental Transaction had this Note been converted immediately prior to such Fundamental
Transaction (without regard to any limitations on the conversion of this Note, except to the extent prohibited by the rules and
regulations of the Trading Market), as adjusted in accordance with the provisions of this Note. Notwithstanding the foregoing,
the Holder may elect, at its sole option, by delivery of written notice to the Company to waive this Section 5(a) to permit the
Fundamental Transaction without the assumption of this Note. The provisions of this Section 5 shall apply similarly and equally
to successive Fundamental Transactions and shall be applied without regard to any limitations on the conversion of this Note.


 


6.
RIGHTS UPON OTHER CORPORATE EVENTS. In addition to and not in substitution for any other rights hereunder, prior to the
consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities
or other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company
shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon a conversion of this
Note in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received
by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder
would have been entitled to receive had this Note initially been issued with conversion rights for the form of such consideration
(as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. Provision
made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Required Holders. The provisions
of this Section 6 shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any
limitations on the conversion or redemption of this Note.


 






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7.
RIGHTS UPON ISSUANCE OF OTHER SECURITIES.


 


(a)
Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. Without limiting any provision of Section
5, if the Company at any time on or after the Subscription Date subdivides (by any stock split, stock dividend, recapitalization
or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price
in effect immediately prior to such subdivision will be proportionately reduced. Without limiting any provision of Section 5,
if the Company at any time on or after the Subscription Date combines (by combination, reverse stock split or otherwise) one or
more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately
prior to such combination will be proportionately increased. Any adjustment pursuant to this Section 7(a) shall become effective
immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this Section
7(a) occurs during the period that a Conversion Price is calculated hereunder, then the calculation of such Conversion Price shall
be adjusted appropriately to reflect such event.


 


(b)
Other Events. In the event that the Company shall take any action to which the provisions hereof are not strictly applicable,
or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplated by the
provisions of this Section 7 but not expressly provided for by such provisions (including, without limitation, the granting of
stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s board of directors
shall in good faith determine and implement an appropriate adjustment in the Conversion Price so as to protect the rights of the
Holder, provided that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against
such dilution (subject to compliance with New York Stock Exchange Rule 312.03), then the Company’s board of directors and
the Holder shall agree, in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate
adjustments, whose determination shall be final and binding and whose fees and expenses shall be borne by the Company.


 


(c)
Calculations. All calculations under this Section 7 shall be made by rounding to the nearest cent or the nearest 1/100th
of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned
or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common
Stock.


 


8.
SECURITY. The Company hereby grants to Holder a continuing second priority security interest in and Lien on, second only to the
Liens of Senior Lender, all of the properties, assets, and rights of the Company, wherever located and whether now owned or hereafter
acquired or arising, and all proceeds and products thereof (all such properties, assets, rights, proceeds and products hereinafter
sometimes called, collectively, the “Collateral”). This security interest and Lien shall be evidenced by the Security
Agreement and the Subordination Agreement, the terms of which are incorporated herein by reference. Upon the request of Holder,
the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper
to carry out and perfect the security interest granted hereby.


 






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9.
SUBORDINATION.


 


(a)
Subordination of this Note. Holder agrees that, until such time as all amounts owing by the Company under the Senior Debt
have been converted into equity of the Company or paid in full in cash, any Lien it may acquire against any assets or property
of the Company to secure any obligations of the Company to Holder in connection herewith shall be subordinate and inferior to
the Liens of Senior Lender under the Senior Debt Documents. The priorities set forth in this section are applicable irrespective
of the order or time of attachment, or the order, time or manner of perfection, or the order or time of filing or recordation
of any document or instrument, or other method of perfecting the Lien.


 


(b)
Subordination of Other Indebtedness. The Company agree that until such time as all amounts owing by the Company under this
Note have been indefeasibly converted into equity of the Company or paid in full in cash, the Junior Debt will subordinate in
priority and subject in right and priority of payment to the prior performance of any and all obligations of the Company to Holder
or its successor or assignee, pursuant to this Note.


 


10.
NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not, by amendment of its certificate of
incorporation, bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution,
issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the
terms of this Note, and will at all times in good faith carry out all of the provisions of this Note and take all action as may
be required to protect the rights of the Holder of this Note. Without limiting the generality of the foregoing, the Company (i)
shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the conversion of this Note, and (ii) shall, so long as any of the Notes are outstanding,
take all action reasonably necessary to reserve and keep available out of its authorized and unissued shares of Common Stock,
solely for the purpose of effecting the conversion of the Notes, the maximum number of shares of Common Stock as shall from time
to time be necessary to effect the conversion of the Notes then outstanding (without regard to any limitations on conversion).


 


11.
RESERVATION OF AUTHORIZED SHARES.


 


(a)
Reservation. The Company shall initially reserve out of its authorized and unissued Common Stock and for so long as any
of the Notes are outstanding, the Company shall take all action necessary to reserve and keep available out of its authorized
and unissued Common Stock, such number of shares of Common Stock for the Notes equal to 100% of the maximum number of Conversion
Shares issued and issuable pursuant to the Notes


 






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(b)
Insufficient Authorized Shares. If, notwithstanding Section 11(a), and not in limitation thereof, at any time while any
of the Notes remain outstanding the Company does not have a sufficient number of authorized and otherwise unreserved shares of
Common Stock to satisfy its obligation to reserve for issuance upon conversion of the Notes at least a number of shares of Common
Stock equal to the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall immediately
take all action reasonably necessary to increase the Company’s authorized shares of Common Stock to an amount sufficient
to allow the Company to reserve the Required Reserve Amount for the Notes then outstanding. Without limiting the generality of
the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event
later than 120 days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders
for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company
shall provide each stockholder with a proxy statement and shall use its reasonable best efforts to solicit its stockholders’
approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders
that they approve such proposal. In the event that the Company is prohibited from issuing shares of Common Stock upon any conversion
due to the failure by the Company to have sufficient shares of Common Stock available out of the authorized but unissued shares
of Common Stock (such unavailable number of shares of Common Stock, the “Authorization Failure Shares”), in
lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash (each, an “Authorized
Failure Share Cancellation Amount”) in exchange for the redemption of such portion of the Conversion Amount convertible
into such Authorized Failure Shares at an amount equal to the sum of (i) the product of (x) such number of Authorization Failure
Shares and (y) the greatest Closing Sale Price of the Common Stock on any Trading Day during the period commencing on the date
the Holder delivers the applicable Conversion Notice with respect to such Authorization Failure Shares to the Company and ending
on the date of such issuance and payment under this Section 11(b) and (ii) to the extent the Holder purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares,
any brokerage commissions and other out-of-pocket expenses, if any, of the Holder incurred in connection therewith. Nothing contained
in Section 10(a) or this Section 11(b) shall limit any obligations of the Company under any provision of the Securities Purchase
Agreement.


 


12.
RESTRICTIONS. The Holder acknowledges that the Conversion Shares acquired upon the conversion of this Note, if not registered,
will have transferability restrictions imposed by state and federal securities laws as set forth in Section 4.1 of the Securities
Purchase Agreement.


 


13.
VOTING RIGHTS. The Holder shall have no voting rights as the holder of this Note, except as required by law (including,
but not limited to, the Delaware General Corporation Law), and as expressly provided in this Note.


 


14.
COVENANTS. Until all of the Notes have been converted or otherwise satisfied in accordance with their terms:


 


(a)
Change in Nature of Business. The Company shall not directly or indirectly, engage in any material line of business substantially
different from those lines of business conducted by the Company on the First Amendment Closing Date or any business substantially
related or incidental thereto.


 






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(b)
Preservation of Existence, Etc. The Company shall maintain and preserve its existence, rights and privileges, and become
or remain, duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by
it or in which the transaction of its business makes such qualification necessary.


 


(c)
Maintenance of Properties, Etc. The Company shall maintain and preserve all of its properties which are necessary or useful
in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted, and comply at all
times with the provisions of all leases to which it is a party as lessee or under which it occupies property, so as to prevent
any loss or forfeiture thereof or thereunder.


 


(d)
Maintenance of Insurance. The Company shall maintain insurance with responsible and reputable insurance companies or associations
(including, without limitation, comprehensive general liability, hazard, rent and business interruption insurance) with respect
to its properties (including all real properties leased or owned by it) and business, in such amounts and covering such risks
as is required by any governmental authority having jurisdiction with respect thereto and as is carried generally in accordance
with sound business practice by companies in similar businesses similarly situated.


 


(e)
Books and Records. The Company will keep proper books of record and accounts in which full, true and correct entries in
conformity in all material respects with GAAP shall be made of all dealings and transactions in relation to its business and activities.


 


(f)
Compliance with Laws. The Company will comply with the requirements of all applicable federal, state, local and foreign
statutes, laws, judicial decisions, regulations, guidances, guidelines, ordinances, rules, judgments, orders, decrees, codes,
plans, injunctions, permits, concessions, grants, franchises, governmental agreements and governmental restrictions, whether now
or hereafter in effect (including all environmental laws).


 


(g)
Financial Statements and Other Reports. The Company will deliver to the Holder: (i) within 30 days after the end of each
month, beginning with the first month ending after the First Amendment Closing Date, the consolidated balance sheet of the Company
and its subsidiaries as at the end of such month and the related consolidated (and with respect to statements of income, consolidating)
statements of income, stockholders’ equity and cash flows of the Company and its subsidiaries for such month, all in reasonable
detail, together with a certification by the chief financial officer of the Company with respect thereto; (ii) as soon as available,
and in any event within 120 days after the end of each fiscal year of the Company, (A) the consolidated balance sheets of the
Company and its subsidiaries as at the end of such fiscal year and the related consolidated (and with respect to statements of
income, consolidating) statements of income, stockholders’ equity and cash flows of the Company and its subsidiaries for
such fiscal year, in reasonable detail, together with a certification by the chief financial officer of the Company with respect
thereto; and (B) with respect to quarterly consolidated financial statements a report thereon of an independent certified public
accountants of recognized regional or national standing selected by the Company and reasonably satisfactory to the Holder, which
report shall be unqualified as to going concern and scope of audit, and shall state that such consolidated financial statements
fairly present, in all material respects, the consolidated financial position of the Company and its subsidiaries as at the dates
indicated and the results of their operations and their cash flows for the periods indicated in conformity with GAAP applied on
a basis consistent with prior years (except as otherwise disclosed in such financial statements); provided, the filing
by the Company of a Form 10-K (or any successor or comparable form) with the Securities and Exchange Commission as at the end
of and for any applicable fiscal year shall be deemed to satisfy the obligations under this Section 15(g) to deliver financial
statements with respect to such fiscal year; (iii) promptly upon receipt thereof, copies of all final management letters submitted
by the independent certified public accountants referred to in sub-clause (ii) above in connection with each annual, interim or
special audit or review of any type of the financial statements or related internal control systems of the Company or its subsidiaries
made by such accountants; and (iv) promptly upon their becoming available, copies of such other information and data with respect
to the Company or any of its subsidiaries as from time to time may be reasonably requested by the Holder.


 






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(h)
Payment of Taxes and Claims. The Company will, and will cause each of its subsidiaries to, pay all applicable taxes imposed
upon it or any of its properties or assets or in respect of any of its income, businesses or franchises before any penalty or
fine accrues thereon, and all claims (including claims for labor, services, materials and supplies) for sums that have become
due and payable and that by applicable law have or may become a lien upon any of its properties or assets, prior to the time when
any penalty or fine shall be incurred with respect thereto; provided, no such tax or claim need be paid if it is being
contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as adequate reserve or
other appropriate provision, as shall be required in conformity with GAAP shall have been made therefor.


 


(i)
Inspections. The Company will, and will cause each of its subsidiaries to, permit the Holder and any authorized representatives
designated by the Holder to visit and inspect any of the properties of the Company and any of its subsidiaries, to inspect, copy
and take extracts from its and their financial and accounting records, and to discuss its and their affairs, finances and accounts
with its and their officers and independent public accountants, all upon reasonable notice and at such reasonable times during
normal business hours and as often as may reasonably be requested at the Company’s expense; provided, so long as
no Event of Default has occurred and is continuing, the Company shall only be obligated to reimburse the Holder and any such authorized
representative for the expenses of two such visit and inspection per calendar year.


 


(j)
Further Assurances. At any time or from time to time upon the request of the Holder, the Company will, at its expense,
promptly execute, acknowledge and deliver such further documents and do such other acts and things as the Holder may reasonably
request in order to effect fully the purposes of the Transaction Documents.


 


(k)
Indebtedness. The Company shall not, nor shall it permit any of its subsidiaries to, directly or indirectly, create, incur,
assume or guaranty, or otherwise become or remain directly or indirectly liable with respect to any Indebtedness, except as permitted
under the Senior Debt Document in effect on the First Amendment Closing Date.


 






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(l)
Liens. The Company shall not, nor shall it permit any of its subsidiaries to, directly or indirectly, create, incur, assume
or permit to exist any Lien on or with respect to any property or asset of any kind (including any document or instrument in respect
of goods or accounts receivable) of the Company or any of its subsidiaries, whether now owned or hereafter acquired, or any income
or profits therefrom, or file or permit the filing of, or permit to remain in effect, any financing statement or other similar
notice of any Lien with respect to any such property, asset, income or profits under the Uniform Commercial Code of any state
or under any similar recording or notice statute, except as permitted under the Senior Debt Document in effect on the First Amendment
Closing Date.


 


(m)
Restricted Payments. The Company shall not, nor shall it permit any of its subsidiaries to, directly or indirectly, declare,
order, pay, make or set apart, or agree to declare, order, pay, make or set apart, any sum for any Restricted Payment except as
permitted under the Senior Debt Document in effect on the First Amendment Closing Date.


 


(n)
Investments. The Company shall not, nor shall it permit any of its subsidiaries to, directly or indirectly, make or own
any Investment in any Person except Investments permitted under the Senior Debt Document in effect on the First Amendment Closing
Date.


 


(o)
Fundamental Changes; Disposition of Assets; Acquisitions. The Company shall not, nor shall it permit any of its subsidiaries
to, enter into any transaction of merger or consolidation, or liquidate, wind-up or dissolve itself (or suffer any liquidation
or dissolution), or convey, sell, lease, license, exchange, transfer or otherwise dispose of, in one transaction or a series of
transactions, all or any part of its business, assets or property of any kind whatsoever, whether real, personal or mixed and
whether tangible or intangible, whether now owned or hereafter acquired, leased or licensed or acquire by purchase or otherwise
(other than purchases or other acquisitions of inventory, materials and equipment and the licensing of intellectual property,
in each case, in the ordinary course of business) the business, property or fixed assets of, or equity interests in, any Person
or any division or line of business or other business unit of any Person, except as permitted under the Senior Debt Document in
effect on the First Amendment Closing Date.


 


(p)
Sales and Lease-Backs. The Company shall not, nor shall it permit any of its subsidiaries to, directly or indirectly, become
or remain liable as lessee or as a guarantor or other surety with respect to any lease of any property (whether real, personal
or mixed), whether now owned or hereafter acquired, which the Company (a) has sold or transferred or is to sell or to transfer
to any other Person, or (b) intends to use for substantially the same purpose as any other property which has been or is to be
sold or transferred by the Company to any Person in connection with such lease.


 


(q)
Transactions with Affiliates. The Company shall not, nor shall it permit any of its subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering
of any service) with any Affiliate of the Company, on terms that are less favorable to the Company or that subsidiary, as the
case may be, than those that might be obtained at the time from a Person who is not such an Affiliate, except as permitted under
the Senior Debt Document in effect on the First Amendment Closing Date.


 






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(r)
Amendments or Waivers of Certain Documents. The Company shall not, nor shall it permit any of its subsidiaries to, agree
to any material amendment, restatement, supplement or other modification to, or waiver of, any of its Organizational Documents
to which it is a party, in each case, in a manner materially adverse to the Holder.


 


(s)
Amendments or Waivers of Certain Indebtedness. The Company shall not, nor shall it permit any of its subsidiaries to, agree
to any amendment, restatement, supplement or other modification to, or waiver of, any of the terms of the Senior Debt Document,
or make any payment consistent with such amendment, restatement, supplement or other modification to, or waiver of, in each case,
other than as permitted under the Subordination Agreement.


 


16.
The Note and the Warrants (as both terms are defined in the Securities Purchase Agreement) shall not be convertible or exercisable,
as appropriate, into more than 2,794,660 shares of the Company’s Common Stock (as the same may be adjusted on a pro rate
basis to take into account stock splits, stock dividends recapitalizations and similar events) in the aggregate. The Company covenants
that the Company has at least 13,974,000 shares of Common Stock outstanding on the First Amendment Date.





 


17.
AMENDING THE TERMS OF THIS NOTE. The prior written consent of the Holder shall be required for any change or amendment
to this Note.


 


18.
WAIVER OF USURY, STAY OR EXTENSION LAWS. The Company covenants (to the extent that it may lawfully do so) that it will
not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury, stay
or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of
this Note; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any
such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Company, but
will suffer and permit the execution of every such power as though no such law had been enacted.


 





19.
REISSUANCE OF THIS NOTE.


 


(a)
Transfer. If this Note is to be transferred, the Holder shall surrender this Note to the Company along with a duly executed
copy of the transfer instrument attached hereto as Exhibit III, whereupon the Company will forthwith issue and, following authentication
of such new Note, deliver upon the order of the Holder a new Note (in accordance with Section 19(c)), registered as the Holder
may request, representing the outstanding Principal being transferred by the Holder and, if less than the entire outstanding Principal
is being transferred, a new, duly authenticated Note (in accordance with Section 19(c)) to the Holder representing the outstanding
Principal not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason
of the provisions of Section 3(c)(iii) following conversion or redemption of any portion of this Note, the outstanding Principal
represented by this Note may be less than the Principal stated on the face of this Note.


 






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(b)
Lost, Stolen or Mutilated Note. Upon receipt of an executed lost note affidavit in form and substance satisfactory to the
Company regarding the loss, theft, destruction, or mutilation of this Note or, in the case of any such mutilation, upon surrender
and cancellation of this Note, the Company will issue a new Note in accordance with Section 19(c), of like tenor, in the amount
of unpaid principal of this Note, in lieu of such lost, stolen, destroyed or mutilated Note.


 


(c)
Issuance of New Notes. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new
Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal
remaining outstanding (or in the case of a new Note being issued pursuant to Section 19(a), the Principal designated by the Holder
which, when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed
the Principal remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance
date, as indicated on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same
rights and conditions as this Note, (v) shall represent accrued and unpaid Interest and Late Charges on the Principal and Interest
of this Note, from the Issuance Date.


 


20.
REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Note shall
be cumulative and in addition to all other remedies available under this Note and any of the other Transaction Documents at law
or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder’s
right to pursue actual damages for any failure by the Company to comply with the terms of this Note. The Company covenants to
the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts
set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the
amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of
the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees
that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies,
to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security
being required. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable
the Holder to confirm the Company’s compliance with the terms and conditions of this Note (including, without limitation,
compliance with Section 7).


 


21.
PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the hands of an attorney for collection
or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts
due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership
of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the
Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy,
reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements.


 






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22.
CONSTRUCTION; HEADINGS. This Note shall be deemed to be jointly drafted by the Company and the Holder and shall not be
construed against any Person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form
part of, or affect the interpretation of, this Note.


 


23.
FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder in the exercise of any power, right or
privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or privilege. No waiver shall be effective unless it is
in writing and signed by an authorized representative of the waiving party.


 


24.
DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Conversion Price, the Closing Bid Price, the
Closing Sale Price or fair market value (as the case may be) or the arithmetic calculation of the Conversion Rate or the applicable
Redemption Price (as the case may be), the Company or the Holder (as the case may be) shall submit the disputed determinations
or arithmetic calculations (as the case may be) via facsimile (i) within two (2) Business Days after receipt of the applicable
notice giving rise to such dispute to the Company or the Holder (as the case may be) or (ii) if no notice gave rise to such dispute,
at any time after the Holder learned of the circumstances giving rise to such dispute (including, without limitation, as to whether
any issuance or sale or deemed issuance or sale was an issuance or sale or deemed issuance or sale of Excluded Securities). If
the Holder and the Company are unable to agree upon such determination or calculation within two (2) Business Days of such disputed
determination or arithmetic calculation (as the case may be) being submitted to the Company or the Holder (as the case may be),
then the Company shall, within two (2) Business Days, submit via facsimile (a) the disputed determination of the Conversion Price,
the Closing Bid Price, the Closing Sale Price or fair market value (as the case may be) to an independent, reputable investment
bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the Conversion Rate or any
Redemption Price (as the case may be) to the Company’s independent, outside accountant. The Company shall cause at its expense
the investment bank or the accountant (as the case may be) to perform the determinations or calculations (as the case may be)
and notify the Company and the Holder of the results no later than ten (10) Business Days from the time it receives such disputed
determinations or calculations (as the case may be). Such investment bank’s or accountant’s determination or calculation
(as the case may be) shall be binding upon all parties absent demonstrable error.


 


25.
NOTICES; CURRENCY; PAYMENTS.


 


(a)
Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be
given in accordance with Section 5.4 of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written
notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason
therefore. Without limiting the generality of the foregoing, the Company will give written notice to the Holder (i) promptly upon
any adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment
and (ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record with respect to
any determination of rights to vote with respect to any Fundamental Transaction, dissolution or liquidation; provided that in
each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to
the Holder.


 






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(b)
Currency. All principal, interest and other amounts owing under this Note or any Transaction Document that, in accordance
with their terms, are paid in cash, shall be paid in United States Dollars (“U.S. Dollars”). All amounts denominated
in other currencies shall be converted to the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date of
calculation. “Exchange Rate” means, in relation to any amount of currency to be converted into U.S. Dollars
pursuant to this Note, the U.S. Dollar exchange rate as published in the Wall Street Journal on the relevant date of calculation
(it being understood and agreed that where an amount is calculated with reference to, or over, a period of time, the date of calculation
shall be the final date of such period of time).


 


(c)
Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, unless otherwise
expressly set forth herein, such payment shall be made in lawful money of the United States of America by a certified check drawn
on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to
the Company in writing (which address, in the case of each of the Buyers (as defined in the Securities Purchase Agreement), shall
initially be as set forth on the Schedule of Buyers attached to the Securities Purchase Agreement), provided that the Holder may
elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written
notice setting out such request and the Holder’s wire transfer instructions. Whenever any amount expressed to be due by
the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day
which is a Business Day. Any amount of Principal or other amounts due under the Transaction Documents which is not paid when due
(other than any amounts due hereunder that are otherwise accruing interest at the Default Rate) shall result in a late charges
being incurred and payable by the Company in an amount equal to interest on such amount at the rate of sixteen percent (16%) per
annum from the date such amount was due until the same is paid in full (“Late Charge”).


 


26.
CANCELLATION. After all Principal, accrued Interest, Late Charges and other amounts at any time owed on this Note have
been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and
shall not be reissued.


 


27.
WAIVER OF NOTICE. To the extent permitted by law, the Company hereby irrevocably waives demand, notice, presentment, protest
and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note
and the Securities Purchase Agreement.


 


28.
GOVERNING LAW. This Note shall be construed and enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Note 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 Note 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 Note. Nothing contained herein shall
be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction
to collect on the Company’s obligations to the Holder 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 Holder. 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 NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.


 






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29.
AMENDMENT AND RESTATEMENT. This Note is issued in replacement of that certain Subordinated Convertible Non-Redeemable Secured
Note issued as of April 21, 2017 in the principal amount of $3,400,000.00 executed by the Company in favor of the Holder (the
“Prior Note”). This Note is not a repayment or novation of the Prior Note. Nothing in this Note shall
be construed to release, cancel, terminate or otherwise adversely affect all or any part of any lien, assignment, security interest
or other encumbrance heretofore granted to or for the benefit of the payee of the Prior Note which has not otherwise been expressly
released.





 


30.
DISCLOSURE. Upon receipt or delivery by the Company of any notice in accordance with the terms of this Note, unless the
Company has in good faith determined that the matters relating to such notice do not constitute material, non-public information
relating to the Company, the Company shall within one (1) Business Day after any such receipt or delivery publicly disclose such
material, non-public information on a Current Report on Form 8-K or otherwise. In the event that the Company believes that a notice
contains material, non-public information relating to the Company, the Company so shall indicate to such Holder contemporaneously
with delivery of such notice, and in the absence of any such indication, the Holder shall be allowed to presume that all matters
relating to such notice do not constitute material, non-public information relating to the Company. Nothing contained in this
Section 30 shall limit any obligations of the Company, or any rights of the Holder, under Section 4(i) of the Securities Purchase
Agreement.


 


31.
CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings:


 


“Bloomberg”
means Bloomberg, L.P.


 






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“Business
Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized
or required by law to remain closed.


 


“Change
of Control” means any Fundamental Transaction other than (i) a strategic merger or acquisition transaction approved
by the majority of independent directors of the Company (ii) any merger, reorganization, recapitalization or reclassification
of the shares of Common Stock in which holders of the Company’s voting power immediately prior to such reorganization, recapitalization
or reclassification continue after such reorganization, recapitalization or reclassification to hold publicly traded securities
and, directly or indirectly, are, in all material respects, the holders of the voting power of the surviving entity (or entities
with the authority or voting power to elect the members of the board of directors (or their equivalent if other than a corporation)
of such entity or entities) after such reorganization, recapitalization or reclassification, (iii) pursuant to a migratory merger
effected solely for the purpose of changing the jurisdiction of incorporation of the Company or (iv) any sale (whether by merger,
asset sale or otherwise) which does not constitute all or substantially all of the assets of the Company.


 


“Closing
Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid
price and last closing trade price, respectively, for such security on the Trading Market, as reported by Bloomberg, or, if the
Trading Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade
price (as the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m.,
New York time, as reported by Bloomberg, or, if the Trading Market is not the principal securities exchange or trading market
for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities
exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply,
the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported
for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such
security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the Closing Bid
Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing
Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutually
determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved in accordance with the procedures in Section 22. All such determinations shall be
appropriately adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transaction
during such period.


 


“Common
Stock” means (i) the Company’s shares of common stock, $0.0001 par value per share, and (ii) any capital stock
into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.


 


“Convertible
Securities” means any capital stock or securities (other than Options) directly or indirectly, convertible into, or
exercisable or exchangeable for, shares of Common Stock.


 






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“Eligible
Market” means The New York Stock Exchange, the NYSE MKT, the Nasdaq Global Select Market, the Nasdaq Global Market or
the Trading Market.


 


“First
Amendment Closing Date” has the meaning set forth in the Securities Purchase Agreement.


 


“Fundamental
Transaction” means that (i) the Company, directly or indirectly, in one or more related transactions, (1) consolidate
or merge with or into (whether or not the Company is the surviving corporation) any other Person, or (2) sell, assign, transfer,
convey or otherwise dispose of all or substantially all of its respective properties or assets to any other Person, or (3) allow
any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 20% of the outstanding
shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the Person or Persons making
or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4)
consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of
the outstanding shares of Voting Stock of the Company (not including any shares of Voting Stock of the Company held by the other
Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock
or share purchase agreement or other business combination), or (ii) any “person” or “group” (as these
terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder),
other than Christopher J. Reed and Judy Holloway Reed, is or shall become the “beneficial owner” (as defined in Rule
13d-3 under the 1934 Act), directly or indirectly, of 20% of the aggregate ordinary voting power represented by issued and outstanding
Voting Stock of the Company.


 


“GAAP”
means United States generally accepted accounting principles, consistently applied.


 


“Interest
Rate” means twelve percent (12%) per annum.


 


“Investment”
means (i) any direct or indirect purchase or other acquisition by the Company or any of its subsidiaries of, or of a beneficial
interest in, any of the securities of any other Person; (ii) any direct or indirect redemption, retirement, purchase or other
acquisition for value, by the Company or any of its subsidiaries from any Person, of any equity interests of such Person; and
(iii) any direct or indirect loan, advance or capital contribution by the Company or any of its subsidiaries to any other Person,
including all indebtedness and accounts receivable from that other Person that are not current assets or did not arise from sales
to that other Person in the ordinary course of business.


 


“Junior
Debt” means any obligations of the Company under the Junior Debt Documents.


 


“Junior
Debt Documents” means any and all other documents or instruments evidencing or further guarantying or securing, directly
or indirectly, any of the Junior Debt, whether now existing or hereafter amended or created.


 






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“Lien”
means a mortgage, deed of trust, pledge, hypothecation, assignment, security interest, encumbrance, lien or other security interest
or security agreement of any kind or nature whatsoever.


 


“Material
Adverse Change” shall mean any set of circumstances or events which occur, arise or otherwise take place from and after
the Issuance Date which (a) has or could reasonably be expected to have any material adverse effect whatsoever upon the validity
or enforceability of this Note or any other Transaction Document, (b) is or could reasonably be expected to be material and adverse
to the business properties, assets, financial condition, results of operations or prospects of the Company on a collective basis,
(c) impairs materially or could reasonably be expected to impair materially the ability of the Company to duly and punctually
pay or perform any its obligations under this Note or any other Transaction Document, or (d) materially impairs or could reasonably
be expected to materially impair the ability of Holder, to the extent permitted, to enforce its legal rights and remedies pursuant
to this Note or any other Transaction Document.


 


“Options”
means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.


 


“Organizational
Documents” means (i) with respect to any corporation, its certificate or articles of incorporation or organization and
its by-laws; (ii) with respect to any limited partnership, its certificate of limited partnership and its partnership agreement;
(iii) with respect to any general partnership, its partnership agreement; and (iv) with respect to any limited liability company,
its articles of organization and its operating agreement.


 


“Parent
Entity” of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock
or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one such Person or Parent Entity,
the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.


 


“Person”
means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization,
any other entity or a government or any department or agency thereof.


 


“Restricted
Payment” means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of
equity interests of the Company or any of its subsidiaries now or hereafter outstanding, except a dividend payable solely in shares
of that class of equity interests to the holders of that class, (ii) any redemption, retirement, sinking fund or similar payment,
purchase or other acquisition for value, direct or indirect, of any shares of any class of equity interests of the Company or
any of its subsidiaries now or hereafter outstanding, (iii) any payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class of equity interests of the Company or any of its subsidiaries
now or hereafter outstanding and (iv) management, consulting, monitoring, advisory, transactional or similar fees and expense
payable to any Affiliate of the Company.


 






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“Senior
Debt Document” means the Financing Agreement dated as of the First Amendment Date, by and between the Company and Senior
Lender, as amended from time to time.


 


“Senior
Lender” means Rosenthal and Rosenthal, Inc., a New York corporation.


 


“Securities
Purchase Agreement” means that certain securities purchase agreement, dated as of April 21, 2017, by and among the Company
and the initial holder of the Note pursuant to which the Company issued the Notes and the Warrants, as amended by that certain
First Amendment to Securities Purchase Agreement and Other Transaction Documents dated as of the First Amendment Date, as the
same may be further amended, modified or supplemented from time to time.


 


“Security
Agreement” means that certain Second Lien Security Agreement, dated as of April 21, 2017, by and among the Company and
the Holder, as amended by that certain First Amendment to Securities Purchase Agreement and Other Transaction Documents dated
as of the First Amendment Date.


 


“Subordination
Agreement” means that certain subordination agreement, dated as of the First Amendment Date, by and between the Senior
Lender and the Holder, as may be amended, modified or supplemented from time to time.


 





“Successor
Entity” means the Person (or, if so elected by the Holder, the Parent Entity) formed by, resulting from or surviving
any Fundamental Transaction or the Person (or, if so elected by the Holder, the Parent Entity) with which such Fundamental Transaction
shall have been entered into.


 


“Trading
Day” means any day on which the Common Stock is traded on the Trading Market, or, if the Trading Market is not the principal
trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock
is then traded, provided that “Trading Day” shall not include any day on which the Common Stock is scheduled to trade
on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final
hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading
on such exchange or market, then during the hour ending at 4:00:00 p.m., New York City time) unless such day is otherwise designated
as a Trading Day in writing by the Holder.


 


“Trading
Market” means the NYSE MKT.


 


“Voting
Stock” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof
have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers,
trustees or other similar governing body of such Person (irrespective of whether or not at the time capital stock of any other
class or classes shall have or might have voting power by reason of the happening of any contingency).


 


“Warrants”
has the meaning ascribed to such term in the Securities Purchase Agreement, and shall include all warrants issued in exchange
therefor or replacement thereof.


 


“Warrant
Shares” has the meaning ascribed to such term in the Securities Purchase Agreement.





 


[signature
page follows]





 






    	 	 	22



    	 



    

 


IN
WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the Issuance Date set out above.


 


	 	REEDS, INC.
	 	 	 
	 	By:	/s/
    Valentin Stalowir
	 	Name:	Valentin Stalowir
	 	Title:	Chief Executive Officer



 


	Attest:	 
	 	 	 
	By:		 
	Name:	 	 
	Title:	 	 


 






    	 	 	23



    	 



    




 





EXHIBIT
I


 


REED’S,
Inc.

CONVERSION NOTICE


 


Reference
is made to the Amended and Restated Subordinated Convertible Note (the “Note”) issued to the undersigned by
Reed’s, Inc. (the “Company”). In accordance with and pursuant to the Note, the undersigned hereby elects
to convert the Conversion Amount (as defined in the Note) of the Note indicated below into shares of Common Stock, $0.0001 par
value per share (the “Common Stock”), of the Company, as of the date specified below.


 






	 	Date of
    Conversion:	 
	 	 	 
	 	Aggregate
    Principal to be converted:	 
	 	 	 
	 	AGGREGATE
    CONVERSION AMOUNT TO BE CONVERTED:	 
	 	 	 
	 	Please confirm the
    following information:	 
	 	 	 
	 	Conversion
    Price:	 
	 	 	 
	 	Number
    of shares of Common Stock to be issued:	 



 





Please issue the Common Stock into which the Note is being converted in the following name and to the following address:




 


	 	Issue
    to:	 
	 	 	 
	 	 	 
	 	 	 
	 	Facsimile Number:	 
	 	 	 
	 	Holder:	 
	 	 	 
	 	By:	 
	 	 	 
	 	Title:	 
	 	 	 
	 	Dated:	 




 






    	 	 	24



    	 



    




 


EXHIBIT
II


 


ACKNOWLEDGMENT


 


The
Company hereby acknowledges this Conversion Notice and hereby directs _________________ to issue the above indicated number of
shares of Common Stock.


 





	 	REEDS, INC.
	 	 	 
	 	By:	 
	 	Name:	 
	 	Title:	   


 






    	 	 	25



    	 



    




 





EXHIBIT
III


 


FOR
VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto [NAME OF ASSIGNEE] the within instrument
of REED’S, INC. and does hereby irrevocably constitute and appoint [_________] Attorney to transfer said instrument on the
books of the within-named Company, with full power of substitution in the premises.


 


Please
Insert Social Security or Other Identifying Number of Assignee: ________________________


 


Dated:
______________ ____, ___


 








	By:	 	
	Name:	 	 
	Title:	 	 


 


NOTICE:
The signature to this assignment must correspond with the name as written upon the face of the within instrument in every particular,
without alteration or enlargement or any change whatever.


 






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