SECURITIES
PURCHASE AGREEMENT


 


This
Securities Purchase Agreement (this “Agreement”) is dated as of May 26, 2016, between Reeds, Inc., a Delaware
corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser” and collectively the “Purchasers”).


 


WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant to an exemption from the registration requirements
of Section 5 of the Securities Act contained in Section 4(a)(2) thereof and/or Regulation D thereunder, the Company desires to
issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, securities
of the Company as more fully described in this Agreement.


 


NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration
the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:


 


ARTICLE
I.


DEFINITIONS


 


1.1
Definitions. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following
terms have the meanings set forth in this Section 1.1:


 


“Acquiring
Person” shall have the meaning ascribed to such term in Section 4.5.


 


“Action”
shall have the meaning ascribed to such term in Section 3.1(j).


 


“Affiliate”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a Person as such terms are used in and construed under Rule 405 under the Securities Act.


 


“Board
of Directors” means the board of directors of the Company.


 


“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are authorized or required by law or other governmental action
to close.


 


“Closing”
means the closing of the purchase and sale of the Securities pursuant to Section 2.1.


 


“Closing
Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable
parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and (ii)
the Company’s obligations to deliver the Securities, in each case, have been satisfied or waived, but in no event later
than the third Trading Day following the date hereof.


 




    	 	 	 



    	 	 	 



    

 


“Commission”
means the United States Securities and Exchange Commission.


 


“Common
Stock” means the common stock of the Company, par value $0.0001 per share, and any other class of securities into which
such securities may hereafter be reclassified or changed.


 


“Common
Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to
acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument
that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive,
Common Stock.


 


“Company
Counsel” means Libertas Law Group Inc., with offices located at 225 Santa Monica Blvd., 5th Floor, Santa Monica, California
90401.


 


“Disclosure
Schedules” shall have the meaning ascribed to such term in Section 3.1.


 


“Effective
Date” means the earliest of the date that (a) the Resale Registration Statement has been declared effective by the Commission,
(b) all of the Shares and Warrant Shares have been sold pursuant to Rule 144 or may be sold pursuant to Rule 144 without the requirement
for the Company to be in compliance with the current public information required under Rule 144 and without volume or manner-of-sale
restrictions, (c) following the one year anniversary of the Closing Date provided that a holder of Shares and Warrant Shares is
not an Affiliate of the Company, or (d) all of the Shares and Warrant Shares may be sold pursuant to an exemption from registration
under Section 4 of the Securities Act without volume or manner-of-sale restrictions and Company Counsel has delivered to such
holders a standing written unqualified opinion that resales may then be made by such holders of the Shares and Warrant Shares
pursuant to such exemption which opinion shall be in form and substance reasonably acceptable to such holders.


 


“EGS”
means Ellenoff Grossman & Schole LLP, with offices located at 1345 Avenue of the Americas, New York, New York 10105-0302.


 


“Escrow
Agent” means Continental Stock Transfer & Trust Company, with offices at 17 Battery Place, 8th Floor. New York,
New York.


 


“Escrow
Agreement” means the escrow agreement dated May 16, 2016, by and among the Company, the Escrow Agent and the Placement
Agent pursuant to which the Purchasers shall deposit Subscription Amounts with the Escrow Agent to be applied to the transactions
contemplated hereunder.


 


“Evaluation
Date” shall have the meaning ascribed to such term in Section 3.1(s).


 


“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.


 




    	 	 	 



    	 	 	 



    

 


“Exempt
Issuance” means the issuance of (a) shares of Common Stock (or equivalent equity securities of a Subsidiary) or options
to employees, officers or directors of the Company or any Subsidiary pursuant to any stock or option plan duly adopted for such
purpose, by a majority of the non-employee members of the Board of Directors or a majority of the members of a committee of non-employee
directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of any Securities issued
hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding
on the date of this Agreement, provided that such securities have not been amended since the date of this Agreement to increase
the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities, (c) securities
issued to any broker or placement agent in connection with the transactions consummated pursuant to this Agreement, without any
amendments thereto, and (d) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the
disinterested directors of the Company, provided that any such issuance shall only be to a Person (or to the equityholders of
a Person) which is, itself or through its subsidiaries, an operating company or an owner of an asset in a business synergistic
with the business of the Company and/or its Subsidiaries and shall provide to the Company and/or its Subsidiaries additional benefits
in addition to the investment of funds, but shall not include a transaction in which the Company or a Subsidiary is issuing securities
primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.


 


“FCPA”
means the Foreign Corrupt Practices Act of 1977, as amended.


 


“FDA”
shall have the meaning ascribed to such term in Section 3.1(kk).


 


“FDCA”
shall have the meaning ascribed to such term in Section 3.1(kk).


 


“FINRA”
means the Financial Industry Regulatory Authority, Inc.


 


“GAAP”
shall have the meaning ascribed to such term in Section 3.1(h).


 


“Indebtedness”
shall have the meaning ascribed to such term in Section 3.1(bb).


 


“Intellectual
Property Rights” shall have the meaning ascribed to such term in Section 3.1(p).


 


“Legend
Removal Date” shall have the meaning ascribed to such term in Section 4.1(c).


 


“Liens”
means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.


 


“Marketing
Materials” means the Investor Presentation dated May 2016.


 


“Material
Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).


 




    	 	 	 



    	 	 	 



    

 


“Material
Permits” shall have the meaning ascribed to such term in Section 3.1(n).


 


“Per
Share Purchase Price” equals $3.40, subject to adjustment for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.


 


“Person”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.


 


“Pharmaceutical
Product” shall have the meaning ascribed to such term in Section 3.1(kk).


 


“Placement
Agency Agreement” means the placement agency agreement dated May 26, 2016 between the Company and the Placement Agent.


 


“Placement
Agent” means Maxim Group LLC.


 


“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or threatened.


 


“Public
Information Failure” shall have the meaning ascribed to such term in Section 4.17(b).


 


“Purchaser
Party” shall have the meaning ascribed to such term in Section 4.8.


 


“Registration
Rights Agreement” means the Registration Rights Agreement in the form attached hereto as Exhibit B, dated May
26, 2016.


 


“Required
Approvals” shall have the meaning ascribed to such term in Section 3.1(e).


 


“Resale
Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights
Agreement and covering the resale of the Shares and Warrant Shares by each Purchaser as provided for in the Registration Rights
Agreement.


 


“Rule
144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted
from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.


 


“Rule
424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted
from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.


 




    	 	 	 



    	 	 	 



    

 


“SEC
Reports” shall have the meaning ascribed to such term in Section 3.1(h).


 


“Securities”
means the Shares, the Warrants and the Warrant Shares.


 


“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.


 


“Shares”
means 692,412 shares of Common Stock to be sold pursuant to this Agreement.


 


“Short
Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall
not be deemed to include the location and/or reservation of borrowable shares of Common Stock).


 


“Subscription
Amount” means, as to each Purchaser, the aggregate amount to be paid for the Shares and Warrants purchased hereunder
as specified below such Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription
Amount,” in United States dollars and in immediately available funds.


 


“Subsequent
Financing” shall have the meaning ascribed to such term in Section 4.11(a).


 


“Subsequent
Financing Notice” shall have the meaning ascribed to such term in Section 4.11(b).


 


“Subsidiary”
means any subsidiary of the Company as set forth in the SEC Reports, and shall, where applicable, also include any direct or indirect
subsidiary of the Company formed or acquired after the date hereof.


 


“Trading
Day” means a day on which the principal Trading Market is open for trading.


 


“Trading
Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on
the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange, OTCQB or OTCQX (or any successors to any of the foregoing).


 


“Transaction
Documents” means this Agreement, the Placement Agency Agreement, the Warrants, the Registration Rights Agreement, all
exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated
hereunder.


 


“Transfer
Agent” means Transfer Online, the current transfer agent of the Company, with a mailing address of 317 SW Alder St #
200, Portland, Oregon 97204, and any successor transfer agent of the Company.


 




    	 	 	 



    	 	 	 



    

 


“Variable
Rate Transaction” shall have the meaning ascribed to such term in Section 4.12(b).


 


“VWAP”
means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based
on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if the OTCQB or OTCQX is not a Trading
Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTCQB or OTCQX,
(c) if the Common Stock is not then listed or quoted for trading on the OTCQB or OTCQX and if prices for the Common Stock are
then reported in the “Pink Sheets” published by OTC Markets Group, Inc., or its successors (or a similar organization
or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported,
or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected
in good faith by the Purchasers of a majority in interest of the Securities then outstanding and reasonably acceptable to the
Company, the fees and expenses of which shall be paid by the Company.


 


“Warrants”
means, collectively, the Common Stock purchase warrants delivered to the Purchasers at the Closing in accordance with Section
2.2(a) hereof, which Warrants shall be initially exercisable immediately after the date of issuance and have a term of exercise
equal to five (5) years from the initial exercise date, in the form of Exhibit A attached hereto.


 


“Warrant
Shares” means the shares of Common Stock issuable upon exercise of the Warrants.


 


ARTICLE
II.


PURCHASE
AND SALE


 


2.1Closing.
On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution
and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchasers, severally and not jointly,
agree to purchase, up to an aggregate of $2,354,199.60 of Shares and Warrants. Each Purchaser shall deliver to the Escrow Agent,
via wire transfer or a certified check, immediately available funds equal to such Purchaser’s Subscription Amount as set
forth on the signature page hereto executed by such Purchaser, and the Company shall deliver to each Purchaser its respective
Shares and Warrants, as determined pursuant to Section 2.2(a), and the Company and each Purchaser shall deliver the other items
set forth in Section 2.2 deliverable at the Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.2
and 2.3, the Closing shall occur at 11:00 a.m., New York City time, on the Closing Date, at the offices of EGS or such other location
as the parties shall mutually agree.


 




    	 	 	 



    	 	 	 



    

 


2.2Deliveries.


 


(a)On
or prior to the Closing Date, the Company shall deliver or cause to be delivered to each Purchaser the following:


 


(i)this
Agreement duly executed by the Company;


 


(ii)a
legal opinion of Company Counsel, in form acceptable to EGS;


 


(iii)one
or more stock certificates (or copies thereof provided by the Transfer Agent), free and clear of all restrictive and other legends
(except as expressly provided in Section 4.1(b) hereof), evidencing such number of Shares set forth on the signature page hereto
executed by such Purchaser, registered in the name of such Purchaser (or its designee);


 


(iv)a
copy of the irrevocable instructions to the Transfer Agent instructing the Transfer Agent to deliver, on an expedited basis, a
certificate evidencing a number of Shares equal to such Purchaser’s Subscription Amount divided by the Per Share Purchase
Price;


 


(v)a
Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to 50% of such Purchaser’s
Shares, such number of Warrant Shares set forth on the signature page hereto executed by such Purchaser, with an exercise price
equal to $4.25, subject to adjustment therein (such Warrant may be delivered within three Trading Days of the Closing Date); and


 


(vi)the
Registration Rights Agreement, duly executed by the Company.


 


(b)On
or prior to the Closing Date, each Purchaser shall deliver or cause to be delivered to the Escrow Agent, the following:


 


(i)this
Agreement duly executed by such Purchaser;


 


(ii)the
Registration Rights Agreement, duly executed by such Purchaser; and


 


(iii)to
the Escrow Agent, such Purchaser’s Subscription Amount by wire transfer to the account specified in the Escrow Agreement.


 


2.3Closing
Conditions. 


 


(a)The
obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:


 


(i)the
accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse
Effect, in all respects) on the Closing Date of the representations and warranties of the Purchasers contained herein (unless
as of a specific date therein in which case they shall be accurate as of such date);


 




    	 	 	 



    	 	 	 



    

 


(ii)all
obligations, covenants and agreements of each Purchaser required to be performed at or prior to the Closing Date shall have been
performed; and


 


(iii)the
delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.


 


(b)The
respective obligations of the Purchasers hereunder in connection with the Closing are subject to the following conditions being
met:


 


(i)the
accuracy in all material respects (or, to the extent representations or warranties are qualified by materiality or Material Adverse
Effect, in all respects) when made and on the Closing Date of the representations and warranties of the Company contained herein
(unless made as of a different, and specific, date set forth therein, in which case they shall be accurate as of such date);


 


(ii)all
obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been
performed;


 


(iii)the
delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;


 


(iv)there
shall have been no Material Adverse Effect with respect to the Company since the date hereof; and


 


(v)from
the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or the Company’s
principal Trading Market, and, at any time prior to the Closing Date, trading in securities generally as reported by Bloomberg
L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose trades are
reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the United States
or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or other national
or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market which, in
each case, in the reasonable judgment of such Purchaser, makes it impracticable or inadvisable to purchase the Securities at the
Closing.


 




    	 	 	 



    	 	 	 



    

 


ARTICLE
III.


REPRESENTATIONS
AND WARRANTIES


 


3.1Representations
and Warranties of the Company. Except as set forth in the disclosure schedules separately delivered to the Purchasers concurrently
herewith (“Disclosure Schedules”), which Disclosure Schedules shall be deemed a part hereof and shall qualify
any representation or otherwise made herein to the extent of the disclosure contained in the corresponding section of the Disclosure
Schedules, the Company hereby makes the following representations and warranties to each Purchaser:


 


(a)Subsidiaries.
The Company has no subsidiaries. All references to the Subsidiaries or any of them in the Transaction Documents shall be disregarded.


 


(b)Organization
and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power
and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company
nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business
and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not have or reasonably be expected to result in, individually or in the aggregate: (i) a material adverse
effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results
of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as
a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis
its obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse Effect;” provided,
however, that changes in the trading price of the Common Stock shall not, in and of itself, constitute a Material Adverse Effect)
and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.


 


(c)Authorization;
Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder
and thereunder. The execution and delivery of each of this Agreement and the other Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the
part of the Company and no further consent or action is required by the Company, the Board of Directors or the Company’s
stockholders in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each
other Transaction Document to which the Company is a party have been (or upon delivery will have been) duly executed by the Company
and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’
rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.


 




    	 	 	 



    	 	 	 



    

 


(d)No
Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to
which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby
and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate
or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default
(or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon
any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration
or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing
a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which
any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to receipt of the Required Approvals,
conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction
of any court or governmental authority to which the Company or a Subsidiary is subject (including without limitation federal and
state securities laws and regulations and the rules and regulations of any self-regulatory organization to which the Company or
its securities are subject, including all applicable Trading Markets), or by which any property or asset of the Company or a Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to
result in a Material Adverse Effect.


 


(e)Filings,
Consents and Approvals. The Company has received all consents, waivers, authorizations or orders of, has given any notices
to, or made all filings or registrations with, any court or other federal, state, local or other governmental authority, agency
or other Person (collectively, “Consents”), to own, lease and operate its properties and conduct its business
as it is now being conducted, and each such Consent is valid and in full force and effect. Neither the Company nor any of its
Affiliates has received any notice of any investigation or proceedings which, if decided adversely to the Company, could reasonably
be expected to result in the revocation of, or the imposition of a materially burdensome restriction on, any Consent. No Consent
contains a materially burdensome restriction not disclosed in the SEC Reports.


 


The
Company is not required to obtain any Consents in connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than: (i) the filings required pursuant to Section 4.4 of this Agreement, (ii) the notice and/or
application(s) to each applicable Trading Market for the issuance and sale of the Securities and the listing of the Shares and
Warrant Shares for trading thereon in the time and manner required thereby, (iii) the filing of Form D with the Commission, (iv)
such filings as are required to be made under applicable state securities laws, and (v) the filing of the Resale Registration
Statement as required by the Registration Rights Agreement (collectively, the “Required Approvals”).


 




    	 	 	 



    	 	 	 



    

 


(f)Issuance
of the Securities; Registration. The Securities are duly authorized and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the
Company, other than restrictions on transfer provided for in the Transaction Documents. The Warrant Shares, when issued in accordance
with the terms of the Transaction Documents, will be validly issued, fully paid and nonassessable, free and clear of all Liens
imposed by the Company, other than restrictions on transfer provided for in the Transaction Documents. The Company has reserved
from its duly authorized capital stock the maximum number of shares of Common Stock issuable pursuant to this Agreement and the
Warrants restrictions on transfer provided for in the Transaction Documents.


 


(g)Capitalization.
The capitalization of the Company is as set forth in the SEC Reports and Schedule 3.1(g), which Schedule 3.1(g)
includes the number of shares of Common Stock owned beneficially, and of record, by each Affiliate of the Company as of the date
hereof. The Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other
than pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of
Common Stock to employees pursuant to the Company’s employee stock purchase plans and pursuant to the conversion and/or
exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange
Act, except as provided on Schedule 3.1(g). No Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as set forth on Schedule
3.1(g) or as a result of the purchase and sale of the Securities, there are no outstanding options, warrants, scrip rights
to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible
into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock
or the capital stock of any Subsidiary, or contracts, commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents or the capital stock
of any Subsidiary. The issuance and sale of the Securities will not obligate the Company or any Subsidiary to issue shares of
Common Stock or other securities to any Person (other than the Purchasers) and will not result in a right of any holder of Company
securities to adjust the exercise, conversion, exchange or reset price under any of such securities. There are no outstanding
securities or instruments of the Company or any Subsidiary that contain any redemption or similar provisions, and there are no
contracts, commitments, binding understandings or arrangements by which the Company or any Subsidiary is or may become bound to
redeem a security of the Company or such Subsidiary. The Company does not have any stock appreciation rights or “phantom
stock” plans or agreements or any similar plan or agreement. All of the outstanding shares of capital stock of the Company
are duly authorized, validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state securities
laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for
or purchase securities. No further approval or authorization of any stockholder, the Board of Directors or others is required
for the issuance and sale of the Securities. There are no stockholders agreements, voting agreements or other similar agreements
with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between
or among any of the Company’s stockholders. To the knowledge of the Company, except as disclosed in the SEC Reports and
any schedules filed with the Commission pursuant to Rule 13d-1 of the Exchange Act by reporting persons, no Person or group of
related Persons beneficially owns (as determined pursuant to Rule 13d-3 under the Exchange Act), or has the right to acquire,
by agreement with or by obligation binding upon the Company, beneficial ownership in excess of 5% of the outstanding Common Stock.


 




    	 	 	 



    	 	 	 



    

 


(h)SEC
Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required
to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof,
for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such
material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively
referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC
Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and
none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they
were made, not misleading. The Company has never been an issuer subject to Rule 144(i) under the Securities Act. The financial
statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements
and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during
the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all
material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments. All material agreements to which the Company or any Subsidiary is a party or to which
the property or assets of the Company or any Subsidiary are subject are included as part of or identified in the SEC Reports,
to the extent such agreements are required to be included or identified pursuant to the rules and regulations of the Commission.


 


(i)Material
Changes; Undisclosed Events, Liabilities or Developments. Since the date of the latest audited financial statements included
within the SEC Reports, except as specifically disclosed in a subsequent SEC Report filed prior to the date hereof or as disclosed
in Schedule 3.1(i), (i) there has been no event, occurrence or development that has had or that could reasonably be expected
to result, individually or in the aggregate, in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent
or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business consistent with past
practice and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed
in filings made with the Commission, (iii) the Company has not altered its method of accounting or the changed its auditors, (iv)
the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital stock and (v) the Company has not issued any equity
securities to any officer, director or Affiliate, except pursuant to existing Company stock option plans. The Company does not
have pending before the Commission any request for confidential treatment of information. Except for the issuance of the Securities
contemplated by this Agreement, no event, liability, fact, circumstance, occurrence or development has occurred or exists or is
reasonably expected to occur or exist with respect to the Company or its Subsidiaries or their respective businesses, properties,
operations, assets or financial condition that would be required to be disclosed by the Company under applicable securities laws
at the time this representation is made or deemed made that has not been publicly disclosed at least 1 Trading Day prior to the
date that this representation is made.


 




    	 	 	 



    	 	 	 



    

 


(j)Litigation.
There is no action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”)
which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the
Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result, individually or in
the aggregate, in a Material Adverse Effect. Neither the Company nor any Subsidiary any director or officer thereof (in his or
her capacity as such), is or has been the subject of any Action involving a claim of violation of or liability under federal or
state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is
not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer
of the Company (in his or her capacity as such). The Commission has not issued any stop order or other order suspending the effectiveness
of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.


 


(k)Labor
Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of
the Company, which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’
employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither
the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries
believe that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company
or any Subsidiary is, or is now expected to be, in violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and to the Company’s knowledge, the continued employment of each such executive officer
does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters. During
the period covered by the SEC Reports, no executive officer of the Company or any of its Subsidiaries (as defined in Rule 501(f)
of the Securities Act) has notified the Company or any such Subsidiary that such officer intends to leave the Company or any such
Subsidiary or otherwise terminate such officer’s employment with the Company or any such Subsidiary. The Company and its
Subsidiaries are in compliance with all U.S. federal, state, local and foreign laws and regulations relating to employment and
employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance could
not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.


 




    	 	 	 



    	 	 	 



    

 


(l)Compliance.
Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has
the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture,
loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree, or order of any
court, arbitrator or other governmental authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation
of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental
protection, health, occupational health and safety, product quality and safety and employment and labor matters, except in each
case as could not have or reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect.


 


(m)Environmental
Laws.The Company and its Subsidiaries (i) are in compliance with all federal, state, local and foreign laws relating to
pollution or protection of human health or the environment (including ambient air, surface water, groundwater, land surface or
subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”)
into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands, or demand letters, injunctions, judgments,
licenses, notices or notice letters, orders, permits, plans or regulations, issued, entered, promulgated or approved thereunder
(“Environmental Laws”); (ii) have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses; and (iii) are in compliance with all terms and conditions
of any such permit, license or approval where in each clause (i), (ii) and (iii), the failure to so comply could be reasonably
expected to have, individually or in the aggregate, a Material Adverse Effect.


 


(n)Regulatory
Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports,
except where the failure to possess such permits could not reasonably be expected to result in a Material Adverse Effect (“Material
Permits”), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation
or modification of any Material Permit.


 




    	 	 	 



    	 	 	 



    

 


(o)Title
to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them
and good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries,
in each case free and clear of all Liens, except for (i) Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries, or (ii) Liens
for the payment of federal, state or other taxes, for which appropriate reserves have been made therefor in accordance with GAAP
and, the payment of which is neither delinquent nor subject to penalties, or (iv) as disclosed in the SEC Reports. Any real property
and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases
with which the Company and the Subsidiaries are in compliance.


 


(p)Intellectual
Property. The Company and the Subsidiaries own, or have rights to use under license, all patents, patent applications, trademarks
(whether registered or unregistered), trade dress (whether registered or unregistered), trademark applications, service marks
(whether registered or unregistered), trade names (whether registered or unregistered), trade secrets, know-how, inventions, processes,
formulas, recipes, methods of manufacture, data, copyrights, works of authorship, licenses and other intellectual property rights
and similar rights necessary or required for use in connection with their respective businesses as described in the SEC Reports
and which the failure to so have could have a Material Adverse Effect (collectively, the “Intellectual Property Rights”).
None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of, the Intellectual
Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two (2)
years from the date of this Agreement. Neither the Company nor any Subsidiary has received, since the date of the latest audited
financial statements included within the SEC Reports, a written notice of a claim or otherwise has any knowledge that the Intellectual
Property Rights violate or infringe upon the rights of any Person, except as could not have or reasonably be expected to not have
a Material Adverse Effect. To the knowledge of the Company, all such Intellectual Property Rights are valid and enforceable and
there is no existing infringement by another Person of any of the Intellectual Property Rights. There is no claim, action or proceeding
being made or brought, or to the knowledge of the Company, being threatened, against the Company or its Subsidiaries regarding
its Intellectual Property Rights or the Company’s use or exercise thereof. The Company has not received any claim for royalties
or other compensation from individuals, including employees or former employees of the Company who have made or are alleged to
have made inventive contributions to the Company’s technology or products, that are pending or unsettled and, except as
set forth in the SEC Reports, the Company has no obligation to pay royalties or other compensation to any such individuals. The
Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all
of their intellectual properties and the Intellectual Property Rights therein, except where failure to do so could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.


 




    	 	 	 



    	 	 	 



    

 


(q)Insurance.
The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged, including,
but not limited to, directors and officers insurance coverage at least equal to the aggregate Subscription Amount. Neither the
Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and
when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business without
a significant increase in cost.


 


(r)Transactions
With Affiliates and Employees. Except as set forth in the SEC Reports, none of the officers or directors of the Company or
any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party
to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including
any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or
personal property to or from, providing for the borrowing of money from or lending of money to or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case
in excess of the lesser of $120,000 or one percent of the average of the Company’s total assets at year end for the last
two completed fiscal years other than for: (i) payment of salary or consulting fees for services rendered, (ii) reimbursement
for expenses incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any
stock option plan of the Company.


 


(s)Sarbanes-Oxley;
Internal Accounting Controls. The Company and the Subsidiaries are in material compliance with any and all applicable requirements
of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated
by the Commission thereunder that are effective as of the date hereof and as of the Closing Date. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed
in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
The Company and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) for the Company and the Subsidiaries and designed such disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or submits under the Exchange Act complies with the requirements
of the Exchange Act, is recorded, processed, summarized and reported to the Company’s management, including the Company’s
principal executive officer and principal financial officer by others within those entities and is filed or submitted within the
time periods specified in the Commission’s rules and forms. The Company’s certifying officers have evaluated the effectiveness
of the disclosure controls and procedures of the Company and the Subsidiaries as of the end of the period covered by the most
recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”). The Company presented
in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness
of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Such disclosure controls and procedures
are effective. Since the Evaluation Date, there have been no changes in the internal control over financial reporting (as such
term is defined in the Exchange Act) of the Company and its Subsidiaries that have materially affected, or is reasonably likely
to materially affect, the internal control over financial reporting of the Company and its Subsidiaries.


 




    	 	 	 



    	 	 	 



    

 


(t)Certain
Fees. No brokerage or finder’s fees or commissions are or will be payable by the Company or any Subsidiary to any broker,
financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions
contemplated by the Transaction Documents. The Purchasers shall have no obligation with respect to any fees or with respect to
any claims (other than such fees or commissions owed by a Purchaser pursuant to agreements entered into by such Purchaser, which
fees or commission shall be the sole responsibility of such Purchaser) made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the transactions contemplated by the Transaction Documents due
to an arrangement or agreement made by the Company.


 


(u)Private
Placement. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, no registration
under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers as contemplated
hereby. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Trading Market.


 


(v)Investment
Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will
not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that it will not become an “investment company” subject
to registration under the Investment Company Act of 1940, as amended.


 


(w)Registration
Rights. Other than the Purchasers, no Person has any right to cause the Company or any Subsidiary to effect the registration
under the Securities Act or any other governmental authority of any securities of the Company or any Subsidiary.


 




    	 	 	 



    	 	 	 



    

 


(x)Listing
and Maintenance Requirements. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration
of the Common Stock under the Exchange Act nor has the Company received any notification that the Commission is contemplating
terminating such registration. The Company has not, in the 12 months preceding the date hereof, received notice from any Trading
Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the
listing or maintenance requirements of such Trading Market. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and maintenance requirements. The Common Stock is currently
eligible for electronic transfer through the Depository Trust Company or another established clearing corporation and the Company
is current in payment of the fees to the Depository Trust Company (or such other established clearing corporation) in connection
with such electronic transfer.


 


(y)Application
of Takeover Protections. The Company and the Board of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s certificate of incorporation, as amended, (or similar charter
documents) or the laws of its state of incorporation that is or could become applicable to the Purchasers as a result of the Purchasers
and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation
as a result of the Company’s issuance of the Securities and the Purchasers’ ownership of the Securities.


 


(z)Disclosure.
Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company
confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel
with any information that constitutes or might constitute material, non-public information. The Company understands and confirms
that the Purchasers will rely on the foregoing representation in effecting transactions in securities of the Company. All of the
disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company and its Subsidiaries, their respective
businesses and the transactions contemplated hereby, including without limitation the Disclosure Schedules to this Agreement and
the Marketing Materials, is true and correct and does not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made,
not misleading. The press releases disseminated by the Company during the twelve months preceding the date of this Agreement taken
as a whole do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the circumstances under which they were made and when made,
not misleading. The Company acknowledges and agrees that no Purchaser makes or has made any representations or warranties with
respect to the transactions contemplated hereby other than those specifically set forth in the Transaction Documents. To the Company’s
knowledge, except for the transactions contemplated by this Agreement, no event or circumstance has occurred or information exists
with respect to the Company or any of its Subsidiaries or its or their business, properties, operations or financial condition,
which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been
so publicly announced or disclosed. The Company acknowledges and agrees that no Purchaser makes or has made any representations
or warranties with respect to the transactions contemplated hereby other than those specifically set forth in the Transaction
Documents.


 




    	 	 	 



    	 	 	 



    

 


(aa)No
Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2,
neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering
of the Securities to be integrated with prior offerings by the Company for purposes of (i) any applicable law or regulation including
the Securities Act which would require the registration of any such securities under the Securities Act or any applicable law
or regulation, or (ii) any applicable shareholder approval provisions of any Trading Market on which any of the securities of
the Company are listed or designated.


 


(bb)Solvency.
Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the
Company of the proceeds from the sale of the Securities hereunder, (i) the fair saleable value of the Company’s assets exceeds
the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including
known contingent liabilities) as they mature, (ii) the Company’s assets do not constitute unreasonably small capital to
carry on its business as now conducted and as proposed to be conducted including its capital needs taking into account the particular
capital requirements of the business conducted by the Company, consolidated and currently planned capital requirements and capital
availability thereof, and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were
it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all
amounts on or in respect of its liabilities when such amounts are required to be paid. The Company does not intend to incur debts
beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in
respect of its debt). The Company has no knowledge of any facts or circumstances which lead it to believe that it will file for
reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the Closing
Date. All outstanding secured or unsecured Indebtedness of the Company, or for which the Company is contractually obligated to
incur additional Indebtedness is set forth in Schedule 3.1(bb). For the purposes of this Agreement, “Indebtedness”
means (x) any liabilities for borrowed money or amounts owed in excess of $50,000 (other than trade accounts payable incurred
in the ordinary course of business), (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness
for borrowed money of others, whether or not the same are or should be reflected in the Company’s consolidated balance sheet
(or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions
in the ordinary course of business; and (z) the present value of any lease payments in excess of $50,000 due under leases required
to be capitalized in accordance with GAAP. Neither the Company nor any Subsidiary is in default with respect to any Indebtedness.


 




    	 	 	 



    	 	 	 



    

 


(cc)Tax
Status. Except for matters that would not, individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect, the Company and its Subsidiaries each (i) has made or filed all United States federal, state and local
income and all foreign income and franchise tax returns, reports and declarations required by any jurisdiction to which it is
subject, (ii) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined
to be due on such returns, reports and declarations and (iii) has set aside on its books provision reasonably adequate for the
payment of all material taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There
are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of
the Company or of any Subsidiary know of no basis for any such claim.


 


(dd)No
General Solicitation. Neither the Company, any of its Affiliates, nor any person acting on behalf of the Company has offered
or sold any of the Securities by any form of general solicitation or general advertising. The Company has offered the Securities
for sale only to the Purchasers and certain other “accredited investors” within the meaning of Rule 501 under the
Securities Act.


 


(ee)Foreign
Corrupt Practices. Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary, any agent
or other person acting on behalf of the Company or any Subsidiary, has (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any
direct or indirect unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary
(or made by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated or is
in violation of any provision of FCPA or (v) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.


 


(ff)Accountants.
The Company’s accounting firm is Weinberg & Company, PA. To the knowledge and belief of the Company, such accounting
firm, (i) is a registered public accounting firm as required by the Exchange Act and (ii) expressed its opinion with respect to
the financial statements to be included in the Company’s Annual Report on Form 10-K for the fiscal year ending December
31, 2015.


 


(gg)No
Disagreements with Accountants and Lawyers.There are no disagreements of any kind presently existing, or reasonably anticipated
by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company and
the Company is current with respect to any fees owed to its accountants and lawyers which could affect the Company’s ability
to perform any of its obligations under any of the Transaction Documents.


 




    	 	 	 



    	 	 	 



    

 


(hh)Acknowledgment
Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the Purchasers is acting
solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated
thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given
by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions
contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities. The Company further represents
to each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been
based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.


 


(ii)Acknowledgement
Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding (except
for Sections 3.2(f) and 4.14 hereof), it is understood and acknowledged by the Company that: (i) none of the Purchasers has been
asked by the Company to agree, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short, securities
of the Company, or “derivative” securities based on securities issued by the Company or to hold the Securities for
any specified term; (ii) past or future open market or other transactions by any Purchaser, specifically including, without limitation,
Short Sales or “derivative” transactions, before or after the closing of this or future private placement transactions,
may negatively impact the market price of the Company’s publicly-traded securities; (iii) any Purchaser, and counter-parties
in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, may presently have a
“short” position in the Common Stock, and (iv) each Purchaser shall not be deemed to have any affiliation with or
control over any arm’s length counter-party in any “derivative” transaction. The Company further
understands and acknowledges that (y) one or more Purchasers may engage in hedging activities at various times during the period
that the Securities are outstanding, including, without limitation, during the periods that the value of the Warrant Shares deliverable
with respect to Securities are being determined, and (z) such hedging activities (if any) could reduce the value of the existing
stockholders’ equity interests in the Company at and after the time that the hedging activities are being conducted. The
Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.


 


(jj)Regulation
M Compliance. The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) other than the Placement Agent, sold, bid for, purchased, or, paid
any compensation for soliciting purchases of, any of the Securities, or (iii) other than the Placement Agent, paid or agreed to
pay to any Person any compensation for soliciting another to purchase any other securities of the Company, other than, in the
case of clauses (ii) and (iii), compensation paid to the Placement Agent in connection with the placement of the Securities.


 




    	 	 	 



    	 	 	 



    

 


(kk)FDA.
As to each product subject to the jurisdiction of the U.S. Food and Drug Administration (“FDA”) under the Federal
Food, Drug and Cosmetic Act, as amended, and the regulations thereunder (“FDCA”) that is manufactured, packaged,
labeled, tested, distributed, sold, and/or marketed by the Company or any of its Subsidiaries (each such product, a “Pharmaceutical
Product”), such Pharmaceutical Product is being manufactured, packaged, labeled, tested, distributed, sold and/or marketed
by the Company in compliance with all applicable requirements under FDCA and similar laws, rules and regulations relating to registration,
investigational use, premarket clearance, licensure, or application approval, good manufacturing practices, good laboratory practices,
good clinical practices, product listing, quotas, labeling, advertising, record keeping and filing of reports, except where the
failure to be in compliance would not have a Material Adverse Effect. There is no pending, completed or, to the Company’s
knowledge, threatened, action (including any lawsuit, arbitration, or legal or administrative or regulatory proceeding, charge,
complaint, or investigation) against the Company or any of its Subsidiaries, and none of the Company or any of its Subsidiaries
has received any notice, warning letter or other communication from the FDA or any other governmental entity, which (i) contests
the premarket clearance, licensure, registration, or approval of, the uses of, the distribution of, the manufacturing or packaging
of, the testing of, the sale of, or the labeling and promotion of any Pharmaceutical Product, (ii) withdraws its approval of,
requests the recall, suspension, or seizure of, or withdraws or orders the withdrawal of advertising or sales promotional materials
relating to, any Pharmaceutical Product, (iii) imposes a clinical hold on any clinical investigation by the Company or any of
its Subsidiaries, (iv) enjoins production at any facility of the Company or any of its Subsidiaries, (v) enters or proposes to
enter into a consent decree of permanent injunction with the Company or any of its Subsidiaries, or (vi) otherwise alleges any
violation of any laws, rules or regulations by the Company or any of its Subsidiaries, and which, either individually or in the
aggregate, would have a Material Adverse Effect. The properties, business and operations of the Company have been and are being
conducted in all material respects in accordance with all applicable laws, rules and regulations of the FDA. The Company has not
been informed by the FDA that the FDA will prohibit the marketing, sale, license or use in the United States of any product proposed
to be developed, produced or marketed by the Company nor has the FDA expressed any concern as to approving or clearing for marketing
any product being developed or proposed to be developed by the Company. 


 


(ll)Office
of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Company’s knowledge, any director, officer,
agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office
of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).


 


(mm)U.S.
Real Property Holding Corporation. The Company is not and has never been a U.S. real property holding corporation within the
meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon Purchaser’s
request.


 


(nn)Stock
Option Plans. Each stock option granted by the Company under the Company’s stock option plan was granted (i) in accordance
with the terms of the Company’s stock option plan and (ii) with an exercise price at least equal to the fair market value
of the Common Stock on the date such stock option would be considered granted under GAAP and applicable law. No stock option granted
under the Company’s stock option plan has been backdated. The Company has not knowingly granted, and there is no and has
been no Company policy or practice to knowingly grant, stock options prior to, or otherwise knowingly coordinate the grant of
stock options with, the release or other public announcement of material information regarding the Company or its Subsidiaries
or their financial results or prospects.


 




    	 	 	 



    	 	 	 



    

 


(oo)Bank
Holding Company Act. Neither the Company nor any of its Subsidiaries or Affiliates is subject to the Bank Holding Company
Act of 1956, as amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System
(the “Federal Reserve”). Neither the Company nor any of its Subsidiaries or Affiliates owns or controls, directly
or indirectly, five percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent or
more of the total equity of a bank or any entity that is subject to the BHCA and to regulation by the Federal Reserve. Neither
the Company nor any of its Subsidiaries or Affiliates exercises a controlling influence over the management or policies of a bank
or any entity that is subject to the BHCA and to regulation by the Federal Reserve.


 


(pp)Form
S-3 Eligibility.The Company is eligible to register the resale of the Shares and Warrant Shares for resale by the Purchaser
on Form S-3 promulgated under the Securities Act.


 


(qq)Money
Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with
applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970,
as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money
Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body
or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge
of the Company or any Subsidiary, threatened.


 


(rr)No
Disqualification Events. With respect to the Securities to be offered and sold hereunder in reliance on Rule 506 under the
Securities Act, none of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer
of the Company participating in the offering hereunder, any beneficial owner of 20% or more of the Company’s outstanding
voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under
the Securities Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person”
and, together, “Issuer Covered Persons”) is subject to any of the “Bad Actor” disqualifications
described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”), except for
a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any
Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure
obligations under Rule 506(e), and has furnished to the Purchasers a copy of any disclosures provided thereunder.


 




    	 	 	 



    	 	 	 



    

 


(ss)Form
S-3 Eligibility. The Company is eligible to register the resale of the Securities for resale by the Purchaser on Form S-3
promulgated under the Securities Act.


 


(tt)Other
Covered Persons. Other than the Placement Agent, the Company is not aware of any person (other than any Issuer Covered Person)
that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with the sale
of any Securities.


 


(uu)Notice
of Disqualification Events. The Company will notify the Purchasers and the Placement Agent in writing, prior to the Closing
Date of (i) any Disqualification Event relating to any Issuer Covered Person and (ii) any event that would, with the passage of
time, become a Disqualification Event relating to any Issuer Covered Person.


 


3.2Representations
and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants as
of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein, in which case they
shall be accurate as of such date):


 


(a)Organization;
Authority. Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability
company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents
and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and
performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary
corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. Each Transaction
Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with
the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance
with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by
laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.


 


(b)Understandings
or Arrangements. Such Purchaser understands that the Securities are “restricted securities” and have not been
registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its
own account and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities
Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the
Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other
persons to distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state
securities law (this representation and warranty not limiting such Purchaser’s right to sell the Securities pursuant to
the Resale Registration Statement or otherwise in compliance with applicable federal and state securities laws). Such Purchaser
is acquiring the Securities hereunder in the ordinary course of its business.


 




    	 	 	 



    	 	 	 



    

 


(c)Purchaser
Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date on
which it exercises any Warrants, it will be: (i) an “accredited investor” as defined in Rule 501(a) under the Securities
Act and (ii) an “institutional investor” as defined in FINRA Rule 5110(d)(4)(B).


 


(d)Experience
of Such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk
of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.


 


(e)Access
to Information. Such Purchaser acknowledges that it has had the opportunity to review the Transaction Documents (including
all exhibits and schedules thereto) and the SEC Reports and has been afforded, (i) the opportunity to ask such questions as it
has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the Securities; (ii) access to information about the Company,
its Subsidiaries and their respective financial condition, results of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company
possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with
respect to the investment. Such Purchaser acknowledges and agrees that neither the Placement Agent nor any Affiliate of the Placement
Agent has provided such Purchaser with any information or advice with respect to the Securities nor is such information or advice
necessary or desired. Neither the Placement Agent nor any Affiliate has made or makes any representation as to the Company or
the quality of the Securities and the Placement Agent and any Affiliate may have acquired non-public information with respect
to the Company which such Purchaser agrees need not be provided to it. In connection with the issuance of the Securities to such
Purchaser, neither the Placement Agent nor any of its Affiliates has acted as a financial advisor or fiduciary to such Purchaser.


 




    	 	 	 



    	 	 	 



    

 


(f)Certain
Transactions and Confidentiality. Other than consummating the transactions contemplated hereunder, such Purchaser has not
directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, executed
any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that
such Purchaser first received a term sheet (written or oral) from the Company or any other Person representing the Company setting
forth the material terms of the transactions contemplated hereunder and ending immediately prior to the execution hereof. Notwithstanding
the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions
made by the portfolio managers managing other portions of such Purchaser’s assets, the representation set forth above shall
only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase
the Securities covered by this Agreement. Other than to other Persons party to this Agreement or to such Purchaser’s representatives
that are bound by confidentiality restrictions, including, without limitation, its officers, directors, partners, legal and other
advisors, employees, agents and Affiliates, such Purchaser has maintained the confidentiality of all disclosures made to it in
connection with this transaction (including the existence and terms of this transaction). Notwithstanding the foregoing, for avoidance
of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to the
identification of the availability of, or securing of, available shares to borrow in order to effect Short Sales or similar transactions
in the future.


 


(g)General
Solicitation. Such Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other communication
regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented
at any seminar or any other general solicitation or general advertisement.


 


(h)No
Governmental Review. Such Purchaser understands that no United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.


 


(i)No
Conflicts. The execution, delivery and performance by such Purchaser of this Agreement and the consummation by such Purchaser
of the transactions contemplated hereby will not (i) result in a violation of the organizational documents of such Purchaser or
(ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument
to which such Purchaser is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws) applicable to such Purchaser, except in the case of clauses (ii) and (iii) above, for such
that are not material and do not otherwise affect the ability of such Purchaser to consummate the transactions contemplated hereby.


 


(j)Legends.
It is understood that, except as provided in Section 4.1(b) of this Agreement, certificates evidencing such Securities shall bear
the legend set forth in Section 4.1(b).


 




    	 	 	 



    	 	 	 



    

 


(k)No
Legal, Tax or Investment Advice. Such Purchaser understands that nothing in this Agreement or any other materials presented
by or on behalf of the Company to the Purchaser in connection with the purchase of the Securities constitutes legal, tax or investment
advice. Such Purchaser has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary
or appropriate in connection with its purchase of the Securities. Such Purchaser understands that the Placement Agent has acted
solely as the agents of and advisors to the Company in this placement of the Securities and not as agents to or advisors of the
Purchaser, and that the Placement Agent makes no representation or warranty with regard to the merits of this transaction or as
to the accuracy of any information such Purchaser may have received in connection therewith. Such Purchaser acknowledges that
he/she has not relied on any information or advice furnished by or on behalf of the Placement Agent.


 


The
Company acknowledges and agrees that the representations contained in Section 3.2 shall not modify, amend or affect such Purchaser’s
right to rely on the Company’s representations and warranties contained in this Agreement or any representations and warranties
contained in any other Transaction Document or any other document or instrument executed and/or delivered in connection with this
Agreement or the consummation of the transaction contemplated hereby.


 


ARTICLE
IV.


OTHER
AGREEMENTS OF THE PARTIES


 


4.1Transfer
Restrictions.


 


(a)The
Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser or in
connection with a pledge to an accredited investor as contemplated in Section 4.1(b), the Company may require the transferor thereof
to provide to the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form
and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require
registration of such transferred Securities under the Securities Act. As a condition of transfer, in the event that such transfer
is not made (A) in accordance with Rule 144, (B) pursuant to an effective registration statement or (C) in a transfer not involving
a change in beneficial ownership, any such transferee shall (i) agree in writing to be bound by the terms of this Agreement and
the Registration Rights Agreement and (ii), make the representations set forth in Sections 3.2(b) and (c) of this Agreement; provided,
however, that notwithstanding the other provisions of this sentence, if the transfer does not satisfy parts (A) and (B) of this
sentence but satisfies part (C) of this sentence, the transferee shall agree in writing to be bound by the terms of this Agreement
and the Registration Rights Agreement. If such conditions are satisfied, such transferee shall have the rights and obligations
of a Purchaser under this Agreement and the Registration Rights Agreement.


 




    	 	 	 



    	 	 	 



    

 


(b)
The Purchasers agree to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities in the
following form:


 


[NEITHER]
THIS SECURITY [NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE] HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY [AND
THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED
BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a)
UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.


 


The
Company acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited
investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement
and the Registration Rights Agreement and, if required under the terms of such arrangement, such Purchaser may transfer pledged
or secured Securities to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company
and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further,
no notice shall be required of such pledge. At the appropriate Purchaser’s expense, the Company will execute and deliver
such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or
transfer of the Securities, including, if the Securities are subject to registration pursuant to the Registration Rights Agreement,
the preparation and filing of any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of Selling Stockholders (as defined in the Registration Rights
Agreement) thereunder.


 




    	 	 	 



    	 	 	 



    

 


(c)Certificates
evidencing the Shares and Warrant Shares shall not contain any legend (including the legend set forth in Section 4.1(b) hereof),
(i) while a registration statement (including the Registration Statement) covering the resale of such security is effective under
the Securities Act, (ii) in connection with a sale, assignment or other transfer, in which a holder of the Shares or Warrant Shares
provides the Company with an opinion of counsel, the form and substance of which opinion shall be reasonably acceptable to the
Company, that the sale, assignment or transfer of the Shares or Warrant Shares may be made without registration under the applicable
requirements of the Securities Act, (iii) following any sale of such Shares or Warrant Shares pursuant to Rule 144, (iv) if such
Shares or Warrant Shares are eligible for sale under Rule 144, without the requirement for the Company to be in compliance with
the current public information required under Rule 144 as to such Shares and Warrant Shares and without volume or manner-of-sale
restrictions, or (v) if such legend is not required under applicable requirements of the Securities Act (including judicial interpretations
and pronouncements issued by the staff of the Commission). The Company shall cause its counsel to issue a legal opinion to the
Transfer Agent promptly after the Effective Date (but no later than 3 Business Days after the Effective Date) if required by the
Transfer Agent to effect the removal of the legend in accordance with the provisions of this Agreement. If all or any portion
of a Warrant is exercised at a time when there is an effective registration statement to cover the resale of the Shares and Warrant
Shares, or if such Shares or Warrant Shares may be sold under Rule 144 and the Company is then in compliance with the current
public information required under Rule 144, or if the Shares or Warrant Shares may be sold under Rule 144 without the requirement
for the Company to be in compliance with the current public information required under Rule 144 as to such Shares or Warrant Shares
or if such legend is not otherwise required under applicable requirements of the Securities Act (including judicial interpretations
and pronouncements issued by the staff of the Commission) then such Shares and Warrant Shares shall be issued free of all legends.
The Company agrees that following the Effective Date or at such time as such legend is no longer required under this Section 4.1(c),
it will, no later than three Trading Days following the delivery by a Purchaser to the Company or the Transfer Agent of a certificate
representing Shares or Warrant Shares, as the case may be, issued with a restrictive legend (such third Trading Day, the “Legend
Removal Date”), deliver or cause to be delivered to such Purchaser a certificate representing such shares that is free
from all restrictive and other legends. The Company may not make any notation on its records or give instructions to the Transfer
Agent that enlarge the restrictions on transfer set forth in this Section 4. Certificates for Shares or Warrant Shares subject
to legend removal hereunder shall be transmitted by the Transfer Agent to the Purchaser by crediting the account of the Purchaser’s
prime broker with the Depository Trust Company System as directed by such Purchaser..


 


(d)In
addition to such Purchaser’s other available remedies, the Company shall pay to a Purchaser, in cash, (i) as partial liquidated
damages and not as a penalty, for each $1,000 of Shares or Warrant Shares (based on the VWAP of the Common Stock on the date such
Securities are submitted to the Transfer Agent) delivered for removal of the restrictive legend and subject to Section 4.1(c),
$10 per Trading Day (increasing to $20 per Trading Day five (5) Trading Days after such damages have begun to accrue) for each
Trading Day after the Legend Removal Date until such certificate is delivered without a legend (provided, however, that if in
connection with the Legend Removal Request Purchaser is exercising a Warrant pursuant to a Notice of Exercise (as defined in the
Warrants) in order to purchase the Warrant Shares and the Company is accruing a Liquidated Damages Amount on a Trading Day (as
defined in the Warrant) as a result of such Notice of Exercise with respect to the Warrant Shares, the Company shall have no obligation
under part (i) of this Section 4.1(d) with respect to such Notice of Exercise for that same Trading Day) and (ii) if the Company
fails to (a) issue and deliver (or cause to be delivered) to a Purchaser by the Legend Removal Date a certificate representing
the Shares or Warrant Shares so delivered to the Company by such Purchaser that is free from all restrictive and other legends
and (b) if after the Legend Removal Date such Purchaser is required by its broker to purchase (in an open market transaction or
otherwise) or the Purchaser’s brokerage firm otherwise purchases shares of Common Stock to deliver in satisfaction of a
sale by such Purchaser of the Shares or Warrant Shares that such Purchaser anticipated receiving from the Company without any
restrictive legend, then, an amount equal to the excess of such Purchaser’s total purchase price (including brokerage commissions
and other reasonable out-of-pocket expenses, if any) for the shares of Common Stock so purchased (the “Buy-In
Price”) over the product of (A) such number of Shares or Warrant Shares that the Company was required to deliver
to such Purchaser by the Legend Removal Date 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 delivery by such Purchaser to the Company of the applicable Shares or Warrant
Shares (as the case may be) and ending on the date of such delivery; provided, however, that if in connection with the Legend
Removal Request Purchaser is exercising a Warrant pursuant to a Notice of Exercise (as defined in the Warrants) in order to purchase
the Warrant Shares and the Company is accruing Buy-In (as defined in the Warrant) damages as a result of such Notice of Exercise
with respect to the Warrant Shares, the Company shall have no obligation under part (ii) of this Section 4.1(d).


 




    	 	 	 



    	 	 	 



    

 


(e)Each
Purchaser, severally and not jointly with the other Purchasers, agrees with the Company that such Purchaser will sell any Securities
pursuant to either the registration requirements of the Securities Act, including any applicable prospectus delivery requirements,
or an exemption therefrom, and that if Securities are sold pursuant to a registration statement, they will be sold in compliance
with the plan of distribution set forth therein, and acknowledges that the removal of the restrictive legend from certificates
representing Securities as set forth in this Section 4.1 is predicated upon the Company’s reliance upon this understanding.


 


4.2Furnishing
of Information. Until the earliest of the time that (i) no Purchaser owns Securities or (ii) the Warrants have expired, the
Company covenants to maintain the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely
file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements
of the Exchange Act.


 


4.3Integration.
The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined
in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require
the registration under the Securities Act of the sale of the Securities or that would be integrated with the offer or sale of
the Securities for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval
prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.


 




    	 	 	 



    	 	 	 



    

 


4.4Securities
Laws Disclosure; Publicity. The Company shall by 9:00 a.m. (New York City time) on the date hereof, issue a press release
disclosing the material terms of the transactions contemplated hereby and file a Current Report on Form 8-K, including the Transaction
Documents as exhibits thereto, with the Commission within the time required by the Exchange Act. Thereafter, the Company shall
timely file any filings and notices required by the Commission or applicable law with respect to the transactions contemplated
hereby and provide copies thereof to the Purchasers promptly after filing (to the extent that such filing or notice is not available
on EDGAR). From and after the issuance of such press release, the Company represents to the Purchasers that it shall have publicly
disclosed all material, non-public information delivered to any of the Purchasers by the Company or any of its Subsidiaries, or
any of their respective officers, directors, employees or agents in connection with the transactions contemplated by the Transaction
Documents. In addition, effective upon the issuance of such press release, the Company acknowledges and agrees that any and all
confidentiality or similar obligations under any agreement, whether written or oral, between the Company, any of its Subsidiaries
or any of their respective officers, directors, agents, employees or Affiliates on the one hand, and any of the Purchasers or
any of their Affiliates on the other hand, shall terminate. The Company and each Purchaser shall consult with each other in issuing
any other press releases with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall
issue any such press release nor otherwise make any such public statement without the prior consent of the Company, with respect
to any press release of any Purchaser, or without the prior consent of each Purchaser, with respect to any press release of the
Company, which consent shall not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case
the disclosing party shall promptly provide the other party with prior notice of such public statement or communication. Notwithstanding
the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any
filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of such Purchaser, except
(a) as required by federal securities law in connection with any registration statement contemplated by the Registration Rights
Agreement and the filing of final Transaction Documents with the Commission and (b) to the extent such disclosure is required
by law or Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure
permitted under this clause (b).


 


4.5Shareholder
Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that
any Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted
by the Company, or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of
receiving Securities under the Transaction Documents or under any other agreement between the Company and the Purchasers.


 


4.6Non-Public
Information. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction
Documents, which shall be disclosed pursuant to Section 4.4, the Company covenants and agrees that neither it, nor any other Person
acting on its behalf will provide any Purchaser or its agents or counsel with any information that constitutes, or the Company
reasonably believes constitutes, material non-public information, unless prior thereto such Purchaser shall have consented to
the receipt of such information, which consent shall constitute such Purchaser’s agreement to keep such information confidential.
The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting transactions
in securities of the Company. To the extent that the Company delivers any material, non-public information to a Purchaser without
such Purchaser’s consent, the Company hereby covenants and agrees that such Purchaser shall not have any duty of confidentiality
to the Company, any of its Subsidiaries, or any of their respective officers, directors, agents, employees or Affiliates, or a
duty to the Company, any of its Subsidiaries or any of their respective officers, directors, agents, employees or Affiliates not
to trade on the basis of, such material, non-public information, provided that the Purchaser shall remain subject to applicable
law. To the extent that any notice provided pursuant to any Transaction Document constitutes, or contains, material, non-public
information regarding the Company or any Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant
to a Current Report on Form 8-K. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant
in effecting transactions in securities of the Company.


 




    	 	 	 



    	 	 	 



    

 


4.7Use
of Proceeds. The Company shall use the net proceeds from the sale of the Securities hereunder for working capital purposes
and shall not use such proceeds: (a) for the satisfaction of any portion of the Company’s debt (other than payment of trade
payables in the ordinary course of the Company’s business and prior practices), (b) for the redemption of any Common Stock
or Common Stock Equivalents, (c) for the settlement of any outstanding litigation or (d) in violation of FCPA or OFAC regulations.


 


4.8Indemnification
of Purchasers. Subject to the provisions of this Section 4.8, the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent role of
a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser
(within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all
judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such
Purchaser Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants
or agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against
the Purchaser Parties in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is
not an Affiliate of such Purchaser Parties, with respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of such Purchaser Party’s representations, warranties or covenants under the
Transaction Documents or any agreements or understandings such Purchaser Parties may have with any such stockholder or any violations
by such Purchaser Parties of state or federal securities laws or any other conduct by such Purchaser Parties which constitutes
fraud, gross negligence, willful misconduct or malfeasance). If any action shall be brought against any Purchaser Party in respect
of which indemnity may be sought pursuant to this Agreement, such Purchaser Party shall promptly notify the Company in writing,
and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the
Purchaser Party. Any Purchaser Party shall have the right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the expense of such Purchaser Party except to the extent
that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after
a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion
of such separate counsel, a material conflict on any material issue between the position of the Company and the position of such
Purchaser Party, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such
separate counsel. The Company will not be liable to any Purchaser Party under this Agreement (y) for any settlement by a Purchaser
Party effected without the Company’s prior written consent, which shall not be unreasonably withheld or delayed; or (z)
to the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach
of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other
Transaction Documents. The indemnification required by this Section 4.8 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are received or are incurred. The indemnity agreements contained
herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others and any
liabilities the Company may be subject to pursuant to law.


 




    	 	 	 



    	 	 	 



    

 


4.9Reservation
of Common Stock. As of the date hereof, the Company has reserved and the Company shall continue to reserve and keep available
at all times, free of preemptive rights, a sufficient number of shares of Common Stock for the purpose of enabling the Company
to issue the Shares pursuant to this Agreement and Warrant Shares pursuant to any exercise of the Warrants. 


 


4.10Listing
of Common Stock. The Company hereby agrees to use best efforts to maintain the listing or quotation of the Common Stock on
the Trading Market on which it is currently listed, and concurrently with the Closing, the Company shall apply to list or quote
all of the Shares and Warrant Shares on such Trading Market and promptly secure the listing of all of the Shares and Warrant Shares
on such Trading Market. The Company further agrees, if the Company applies to have the Common Stock traded on any other Trading
Market, it will then include in such application all of the Shares and Warrant Shares, and will take such other action as is necessary
to cause all of the Shares and Warrant Shares to be listed or quoted on such other Trading Market as promptly as possible. The
Company will then take all action reasonably necessary to continue the listing or quotation and trading of its Common Stock on
a Trading Market and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws
or rules of the Trading Market. The Company agrees to maintain the eligibility of the Common Stock for electronic transfer through
the Depository Trust Company or another established clearing corporation, including, without limitation, by timely payment of
fees to the Depository Trust Company or such other established clearing corporation in connection with such electronic transfer.


 


4.11Participation
in Future Financing.


 


(a)From
the date hereof until the date that is the 12-month anniversary of the Effective Date, upon any issuance by the Company or any
of its Subsidiaries of Common Stock or Common Stock Equivalents for cash consideration, debt instruments other than those issued
by a commercial bank or a combination of units hereof (a “Subsequent Financing”), each Purchaser whose Subscription
Amount is equal to or more than $500,000 shall have the right to participate in up to an amount of the Subsequent Financing equal
to 50% of the Subsequent Financing (the “Participation Maximum”) on the same terms, conditions and price provided
for in the Subsequent Financing.


 




    	 	 	 



    	 	 	 



    

 


(b)At
least three (3) Trading Days prior to the closing of the Subsequent Financing, the Company shall deliver to each Purchaser a written
notice of its intention to effect a Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask such Purchaser
if it wants to review the details of such financing (such additional notice, a “Subsequent Financing Notice”).
Upon the written request of a Purchaser, and only upon a written request by such Purchaser, for a Subsequent Financing Notice,
the Company shall promptly, but no later than one (1) Trading Day after such request, deliver a Subsequent Financing Notice to
such Purchaser. The Subsequent Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent Financing,
the amount of proceeds intended to be raised thereunder and the nature of Person or Persons through or with whom such Subsequent
Financing is proposed to be effected and shall include a term sheet or similar document relating thereto as an attachment.


 


(c)Any
Purchaser desiring to participate in such Subsequent Financing must provide written notice to the Company by not later than 5:30
p.m. (New York City time) on the second (2nd) Trading Day (provided such Purchaser shall have at least 24 hours inclusive
of a Trading Day to review the Subsequent Financing Notice) after all of the Purchasers have received the Pre-Notice that such
Purchaser is willing to participate in the Subsequent Financing, the amount of such Purchaser’s participation, and representing
and warranting that such Purchaser has such funds ready, willing, and available for investment on the terms set forth in the Subsequent
Financing Notice (each, an “Acceptance Notice”). If the Company receives no Acceptance Notice from a Purchaser
as of such third (3rd) Trading Day (allowing for the 24-hour review referenced above), such Purchaser shall be deemed
to have notified the Company that it does not elect to participate. Any Purchaser that delivers an Acceptance Notice in the time
frames prescribed herein shall be referred to as a “Participating Purchaser”.


 


(d)If
by 5:30 p.m. (New York City time) on the third (3rd) Trading Day after all of the Purchasers have received the Pre-Notice,
Acceptance Notices from the Purchasers of their willingness to participate in the Subsequent Financing is, in the aggregate, less
than the total amount of the Participation Maximum, then the Company may effect the remaining portion of such Subsequent Financing
on the terms and with the class of Persons set forth in the Subsequent Financing Notice.


 


(e)If
by 5:30 p.m. (New York City time) on the third (3rd) Trading Day after all of the Purchasers have received the Pre-Notice,
the Company receives Acceptance Notices from Purchasers seeking to purchase more than the aggregate amount of the Participation
Maximum, each such Participating Purchaser shall have the right to purchase its Pro Rata Portion (as defined below) of the Participation
Maximum. “Pro Rata Portion” means the ratio of (x) the Subscription Amount of Securities purchased on the Closing
Date by a Purchaser participating under this Section 4.11 and (y) the sum of the aggregate Subscription Amounts of Securities
purchased on the Closing Date by all Purchasers participating under this Section 4.11.


 


(f)To
the extent that the Accepting Purchasers do not execute the definitive agreements for the Subsequent Financing and pay the purchase
price for the securities sold in the Subsequent Financing by the later of (i) the date that the non-Purchasers in the Subsequent
Financing do the same or (ii) two Trading Days after the Company has delivered the final definitive agreement for the Subsequent
Financing to the Accepting Purchasers, such unsubscribed portion of the Subsequent Financing will proportionally reduce the Participation
Maximum and the Company may sell such unsubscribed portion, on the terms and with the class of Persons set forth in the Subsequent
Financing Notice, to investors other than the Purchasers.


 




    	 	 	 



    	 	 	 



    

 


(g)The
Company must provide the Purchasers with a second Subsequent Financing Notice, and the Purchasers will again have the right of
participation set forth above in this Section 4.11, if the Subsequent Financing subject to the initial Subsequent Financing Notice
is not consummated for any reason on the terms set forth in such Subsequent Financing Notice within thirty (30) Trading Days after
the date of the initial Subsequent Financing Notice.


 


(h)The
Company and each Purchaser agree that if any Purchaser elects to participate in the Subsequent Financing, the transaction documents
related to the Subsequent Financing shall not include any term or provision whereby such Purchaser shall be required to agree
to any restrictions on trading as to any of the Securities purchased hereunder or be required to consent to any amendment to or
termination of, or grant any waiver, release or the like under or in connection with, this Agreement, without the prior written
consent of such Purchaser.


 


(i)Notwithstanding
anything to the contrary in this Section 4.11 and unless otherwise agreed to by such Purchaser, the Company shall either confirm
in writing to such Purchaser that the transaction with respect to the Subsequent Financing has been abandoned or shall publicly
disclose its intention to issue the securities in the Subsequent Financing, in either case in such a manner such that such Purchaser
will not be in possession of any material, non-public information, by the fifth (5th) Business Day following delivery
of the Subsequent Financing Notice. If by such fifth (5th) Business Day, no public disclosure regarding a transaction
with respect to the Subsequent Financing has been made, and no notice regarding the abandonment of such transaction has been received
by such Purchaser, such transaction shall be deemed to have been abandoned and such Purchaser shall not be deemed to be in possession
of any material, non-public information with respect to the Company or any of its Subsidiaries.


 


(j)Notwithstanding
the foregoing, this Section 4.11 shall not apply in respect of an Exempt Issuance.


 


4.12Subsequent
Equity Sales.


 


(a)From
the date hereof until 90 days after the Effective Date, neither the Company nor any Subsidiary shall issue, enter into any agreement
to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents. For the
purposes of clarification, the filing of a registration statement (excluding registration statements on Form S-8 in connection
with issuances pursuant to clause (a) of the definition of Exempt Issuance) for primary offerings by the Company shall be deemed
to be an announcement of an issuance or proposed issuance of Common Stock or Common Stock Equivalents hereunder and subject to
the restrictions set forth in this Section 4.12(a).


 




    	 	 	 



    	 	 	 



    

 





(b)From
the date hereof until 1 year anniversary of the date hereof, the Company shall be prohibited from effecting or entering into an
agreement to effect any issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents (or a combination
of units thereof) involving a Variable Rate Transaction. “Variable Rate Transaction” means a transaction in
which the Company (i) issues or sells any debt or equity securities that are convertible into, exchangeable or exercisable for,
or include the right to receive additional shares of Common Stock either (A) at a conversion price, exercise price or exchange
rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares of Common Stock at
any time after the initial issuance of such debt or equity securities, or (B) with a conversion, exercise or exchange price that
is subject to being reset at some future date after the initial issuance of such debt or equity security or upon the occurrence
of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Stock
(including a price based anti-dilution provision that resets the conversion, exercise or exchange price due to the pricing of
a financing that occurs after the date of such transaction) or (ii) enters into any agreement, including, but not limited to,
an equity line of credit, whereby the Company may issue securities at a future determined price. Any Purchaser shall be entitled
to obtain injunctive relief against the Company to preclude any such issuance, which remedy shall be in addition to any right
to collect damages.


 


(c)Notwithstanding
the foregoing, this Section 4.12 shall not apply in respect of an Exempt Issuance, except that no Variable Rate Transaction shall
be an Exempt Issuance.


 


4.13Equal
Treatment of Purchasers. No consideration (including any modification of any Transaction Document) shall be offered or paid
to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration
is also offered to all of the parties to this Agreement. For clarification purposes, this provision constitutes a separate right
granted to each Purchaser by the Company and negotiated separately by each Purchaser, and is intended for the Company to treat
the Purchasers as a class and shall not in any way be construed as the Purchasers acting in concert or as a group with respect
to the purchase, disposition or voting of Securities or otherwise.


 


4.14Certain
Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither
it nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any purchases or sales, including
Short Sales of any of the Company’s securities during the period commencing with the execution of this Agreement and ending
at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release
as described in Section 4.4. Each Purchaser, severally and not jointly with the other Purchasers,
covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company pursuant
to the initial press release as described in Section 4.4, such Purchaser will maintain the confidentiality of the existence and
terms of this transaction and the information included in the Transaction Documents and the Disclosure Schedules. Notwithstanding
the foregoing and notwithstanding anything contained in this Agreement to the contrary, the Company expressly acknowledges and
agrees that (i) no Purchaser makes any representation, warranty or covenant hereby that it will not engage in effecting transactions
in any securities of the Company after the time that the transactions contemplated by this Agreement are first publicly announced
pursuant to the initial press release as described in Section 4.4, (ii) no Purchaser shall be restricted or prohibited from effecting
any transactions in any securities of the Company in accordance with applicable securities laws from and after the time that the
transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in
Section 4.4 and (iii) no Purchaser shall have any duty of confidentiality or duty not to trade in the securities of the Company
to the Company or its Subsidiaries after the issuance of the initial press release as described in Section 4.4. Notwithstanding
the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions
made by the portfolio managers managing other portions of such Purchaser’s assets, the covenant set forth above shall only
apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the
Securities covered by this Agreement.


 




    	 	 	 



    	 	 	 



    


 


4.15[Reserved]


 


4.16Exercise
Procedures. The form Notice of Exercise included in the Warrants sets forth the totality of the procedures required of the
Purchasers in order to exercise the Warrants. Without limiting the preceding sentences, no ink-original Notice of Exercise shall
be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be
required in order to exercise the Warrants. No additional legal opinion, other information or instructions shall be required of
the Purchasers to exercise their Warrants. The Company shall honor exercises of the Warrants and shall deliver Warrant Shares
in accordance with the terms, conditions and time periods set forth in the Transaction Documents.


 


4.17Furnishing
of Information; Public Information.


 


(a)Until
the earliest of the time that (i) no Purchaser owns Securities or (ii) the Warrants have expired, the Company covenants to maintain
the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act and to timely file (or obtain extensions
in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date
hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting requirements of the Exchange Act.


 


(b)At
any time during the period commencing from the six (6) month anniversary of the date hereof and ending at such time that all of
the Securities may be sold without the requirement for the Company to be in compliance with Rule 144(c)(1) and otherwise without
restriction or limitation pursuant to Rule 144, if the Company (i) shall fail for any reason to satisfy the current public information
requirement under Rule 144(c), or (ii) has ever been an issuer described in Rule 144(i)(1)(i) or becomes such an issuer in the
future, and the Company shall fail to satisfy any condition set forth in Rule 144(i)(2) (a “Public Information Failure”)
then, in addition to such Purchaser’s other available remedies (provided that such Purchaser is not an Affiliate of the
Company), the Company shall pay to such Purchaser that is not an Affiliate of the Company, in cash, as partial liquidated damages
and not as a penalty, by reason of any such delay in or reduction of its ability to sell the Securities, an amount in cash equal
to two percent (2.0%) of the Subscription Amount of such Purchaser’s Securities on the date of such Public Information failure
and on every thirtieth (30th) day (pro rated for periods totaling less than thirty days) thereafter until the earlier
of (a) the date such Public Information Failure is cured and (b) such time that such public information is no longer required
for the Purchasers to transfer the Securities pursuant to Rule 144. The payments to which a Purchaser shall be entitled pursuant
to this Section 4.17(b) are referred to herein as “Public Information Failure Payments.” Public Information
Failure Payments shall be paid on the earlier of (i) the last day of the calendar month during which such Public Information
Failure Payments are incurred and (ii) the third (3rd) Business Day after the event or failure giving rise to
the Public Information Failure Payments is cured. In the event the Company fails to make Public Information Failure
Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of 1.5% per month
(prorated for partial months) until paid in full. Nothing herein shall limit such Purchaser’s right to pursue actual damages
for the Public Information Failure, and such Purchaser shall have the right to pursue all remedies available to it at law or in
equity including, without limitation, a decree of specific performance and/or injunctive relief.


 




    	 	 	 



    	 	 	 



    


 


4.18
Form D; Blue Sky Filings. The Company agrees to timely file a Form D with respect to the Securities as required under Regulation
D and to provide a copy thereof, promptly upon request of any Purchaser. The Company shall take such action as the Company shall
reasonably determine is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchasers
at the Closing under applicable securities or “Blue Sky” laws of the states of the United States, and shall provide
evidence of such actions promptly upon request of any Purchaser.


 


4.19
Recording of Release of Security Interest on Virgil Trademark. Within 30 days of the Closing Date, the Company agrees
to record with the U.S. Patent & Trademark Office the release of the security interest on the Company’s registered trademark
“VIRGIL’s” held by Gemcap Lending I, LLC based on a Loan and Security Agreement, dated November 18, 2009.


 


ARTICLE
V.

MISCELLANEOUS


 


5.1Termination.
This Agreement may be terminated before the Closing by any Purchaser, as to such Purchaser’s obligations hereunder only
and without any effect whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other
parties, if the Closing has not been consummated on or before February 23, 2017; provided, however, that such termination
will not affect the right of any party to sue for any breach by any other party (or parties).


 




    	 	 	 



    	 	 	 



    


 


5.2Fees
and Expenses. At the Closing, the Company has agreed to reimburse the Placement Agent for all expenses (including, without
limitation, fees and disbursements of the Placement Agent’s counsel and all travel and other out-of-pocket expenses) incurred
by the Placement Agent in connection with the transaction contemplated by the Transaction Documents. Except as expressly set forth
in the prior sentence and in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement. The Company shall pay all Transfer Agent fees (including, without limitation,
any fees required for same-day processing of any instruction letter delivered by the Company and any exercise notice delivered
by a Purchaser), stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchasers
other than income and capital gains taxes of the Purchasers that may be incurred in connection with the transactions contemplated
hereby. Notwithstanding anything to the contrary in this Section 5.2, in the event that this Agreement is terminated pursuant
to Section 5.1 hereof or subsequent to a Material Adverse Change, the Company shall pay all out-of-pocket expenses of the Advisors
(including but not limited to the reasonable fees and disbursements of EGS and reasonable travel costs) actually incurred in connection
with the transactions contemplated hereunder. The Company shall pay all fees and expenses incident to the performance of or compliance
with the issuance of the Securities, including without limitation (a) all registration and filing fees and expenses, including
without limitation those related to filings with the Commission, any Trading Market, any required filing with FINRA by the placement
agent, and in connection with applicable state securities or Blue Sky laws, (b) printing expenses (including without limitation
expenses of printing certificates for Registrable Securities), (c) messenger, telephone and delivery expenses, (d) fees and disbursements
of counsel for the Company, (e) reasonable fees and expenses of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement, and (f) all listing fees to be paid by the Company to the Trading
Market.


 


5.3Entire
Agreement. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of
the parties with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, oral
or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.


 


5.4Notices.
Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and
shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered
via facsimile or e-mail at the facsimile number or e-mail address set forth on the signature pages attached hereto at or prior
to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile or e-mail at the facsimile number or e-mail address set forth on the signature pages
attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second
(2nd) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or
(d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications
shall be as set forth on the signature pages attached hereto. To the extent that any notice provided pursuant to any Transaction
Document constitutes, or contains, material, non-public information regarding the Company or any Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.


 




    	 	 	 



    	 	 	 



    


 


5.5Amendments;
Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed,
in the case of an amendment, by the Company and the Purchasers holding at least 67% or, in the case of a waiver, by the party
against whom enforcement of any such waived provision is sought, provided that if any amendment, modification or waiver disproportionately
and adversely impacts a Purchaser (or group of Purchasers), the consent of such disproportionately impacted Purchaser (or group
of Purchasers) shall also be required. No waiver of any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any
manner impair the exercise of any such right. Any proposed amendment or waiver that disproportionately, materially and adversely
affects the rights and obligations of any Purchaser relative to the comparable rights and obligations of the other Purchasers
shall require the prior written consent of such adversely affected Purchaser, Any amendment effected in accordance with accordance
with this Section 5.5 shall be binding upon each Purchaser and holder of Securities and the Company.


 


5.6Headings.
The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.


 


5.7Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of
each Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this Agreement to any Person to
whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect
to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”


 


5.8No
Third-Party Beneficiaries. The Placement Agent shall be the third party beneficiary of the representations and warranties
of the Company in Section 3.1 and the representations and warranties of the Purchasers in Section 3.2. This Agreement is intended
for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor
may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.8 and this Section 5.8.


 


5.9Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall
be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of New York. Each party 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 (including
with respect to the enforcement of any of the Transaction Documents), 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 improper or is an inconvenient venue for such proceeding. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered
or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under
this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If either
party shall commence an action or proceeding to enforce any provisions of the Transaction Documents, then in addition to the obligations
of the Company under Section 4.8, the prevailing party in such action, suit or proceeding shall be reimbursed by the other party
for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution
of such action or proceeding.


 




    	 	 	 



    	 	 	 



    


 


5.10
Survival. The representations and warranties contained herein shall survive the Closing and the delivery of the Securities.


 


5.11Execution.
This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being
understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission
or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of
the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof.


 


5.12
Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction
to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use
their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result
as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention
of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any
of such that may be hereafter declared invalid, illegal, void or unenforceable.


 


5.13
Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar
provisions of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under
a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then
such Purchaser may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant
notice, demand or election in whole or in part without prejudice to its future actions and rights; provided, however,
that in the case of a rescission of an exercise of a Warrant, the applicable Purchaser shall be required to return any shares
of Common Stock subject to any such rescinded exercise notice concurrently with the return to such Purchaser of the aggregate
exercise price paid to the Company for such shares and the restoration of such Purchaser’s right to acquire such shares
pursuant to such Purchaser’s Warrant (including, issuance of a replacement warrant certificate evidencing such restored
right).


 




    	 	 	 



    	 	 	 



    


 


5.14
Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed,
the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation),
or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory
to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances
shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement
Securities.


 


5.15
Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of
damages, each of the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The
parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations
contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any
such obligation the defense that a remedy at law would be adequate.


 


5.16
Adjustments in Share Numbers and Prices. In the event of any stock split, subdivision, dividend or distribution payable
in shares of Common Stock (or other securities or rights convertible into, or entitling the holder thereof to receive directly
or indirectly shares of Common Stock), combination or other similar recapitalization or event occurring after the date hereof
and prior to the Closing, each reference in any Transaction Document to a number of shares or a price per share shall be amended
to appropriately account for such event.


 


5.17
Payment Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction
Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement
or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other
Person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of
action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.


 


5.18
Independent Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction
Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way
for the performance or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained
herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereof or thereto, shall be deemed
to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption
that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated
by the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary
for any other Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser has been represented
by its own separate legal counsel in its review and negotiation of the Transaction Documents. For reasons of administrative convenience
only, each Purchaser and its respective counsel have chosen to communicate with the Company through EGS. EGS does not represent
any of the Purchasers and only represents the Placement Agent. The Company has elected to provide all Purchasers with the same
terms and Transaction Documents for the convenience of the Company and not because it was required or requested to do so by any
of the Purchasers. It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction
Document is between the Company and a Purchaser, solely, and not between the Company and the Purchasers collectively and not between
and among the Purchasers.


 




    	 	 	 



    	 	 	 



    


 


5.19Indemnity
of Placement Agent. Each party hereto agrees for the express benefit of the Placement Agent, its affiliates and representatives
that:


 


(a)Neither
the Placement Agent nor any of its affiliates or representatives (i) have any duties or obligations other than those specifically
set forth herein or in the engagement letter, dated April 28, 2016 between the Company and the Placement Agent (the “Engagement
Letter”) or (ii) shall be liable (x) for any action taken, suffered or omitted by the Placement Agent in good faith
and reasonably believed to be authorized or within the discretion or rights or powers conferred upon it by the Transaction Documents
or (y) for anything with the Placement Agent may do or refrain from doing in connection with any Transaction Document, except
for the Placement Agent’s own willful misconduct or bad faith or that of its affiliates or representatives.


 


The
Placement Agent and any of its affiliates or representatives shall be entitled to (i) rely on, and shall be protected in acting
upon any certificate, instrument, opinion, notice, letter or any other document or security delivered to any of them by or on
behalf of the Company and (ii) be indemnified by the Company for acting as Placement Agent hereunder pursuant to the indemnification
provisions set forth in the Engagement Letter, which are hereby incorporated by reference herein.


 


5.20Liquidated
Damages. The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction
Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other
amounts have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated damages
or other amounts are due and payable shall have been canceled.


 


5.21Saturdays,
Sundays, Holidays, etc.If the last or appointed day for the taking of any action or the expiration of any right required
or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised on the next succeeding
Business Day.


 


5.22Construction.
The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and
every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after
the date of this Agreement.


 


5.23WAIVER
OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE
PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY,
IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY. 


 


(Signature
Pages Follow)


 




    	 	 	 



    	 	 	 



    


 


IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.


 


 


	Reeds,
    Inc.	 	Address
    for Notice:
	 	 	 	 
	By:	/s/
    Christopher J. Reed	 	Fax:
	Name:	Christopher
    J. Reed	 	
	Title:	Chief
    Executive Officer	 	E-mail:
	With a copy to (which shall not constitute notice):	 	 


 


[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK





SIGNATURE
PAGE FOR PURCHASER FOLLOWS]


 




    	 	 	 



    	 	 	 



    


 


[PURCHASER
SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]


 


IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.


 


Name
of Purchaser: ________________________________________________________


 


Signature
of Authorized Signatory of Purchaser: _________________________________


 


Name
of Authorized Signatory: _______________________________________________


 


Title
of Authorized Signatory: ________________________________________________


 


Email
Address of Authorized Signatory:_________________________________________


 


Facsimile
Number of Authorized Signatory: __________________________________________


 


Address
for Notice to Purchaser:


 


Fax:


E-mail:


Address
for Delivery of Securities to Purchaser (if not same as address for notice):


 


Subscription
Amount: $_________________


 


Shares:
_________________


 


Warrant
Shares: __________________


 


EIN
Number: _______________________


 


[SIGNATURE
PAGES CONTINUE]


 




    	 	 	 



    	 	 	 



    


 


Schedule
3.1(g)


 


CAPITALIZATION


 


Issuances
of Securities:


 


Since
March 31, 2016, the Company has issued the following securities:


 


30,000
shares of restricted common stock to certain executive officers and a director of the Company pursuant to a private transaction
exempt from registration under Section 4(2) of the Securities Act of 1933, as amended. These holdings are included in table below.


 


Security
Ownership of Certain Beneficial Owners and Management:


 


	Named Beneficial Owner	 	Number of Shares	 	 	Percentage of Shares	 
	Directors and Named Executive Officers	 	Beneficially Owned	 	 	Beneficially Owned (1)	 
	Christopher J. Reed (2)	 	 	2,466,690	 	 	 	18.0	%
	Judy Holloway Reed (2)	 	 	2,466,690	 	 	 	18.0	%
	Mark Harris	 	 	9,363	 	 	 	 *	 
	Daniel S.J. Muffoletto, N.D.	 	 	0	 	 	 	 *	 
	Michael Fischman	 	 	2,500	 	 	 	 *	 
	Daniel V. Miles (4)	 	 	43,000	 	 	 	*	 
	Mark Beaton (5)	 	 	66,666	 	 	 	*	 
	Neal Cohane (6)	 	 	158,573	 	 	 	1.1	%
	Directors and executive officers as a group (8 persons)	 	 	2,736,793	 	 	 	19.1	%
	5% or greater stockholders	 	 	 	 	 	 	 	 
	Robert Reed (3)	 	 	910,000	 	 	 	6.1	%
	* Less than 1%.	 	 	 	 	 	 	 	 



 


(1)Beneficial
ownership is determined in accordance with the rules of the SEC.


 


(2)Christopher
J. Reed and Judy Holloway Reed are husband and wife. The same number of shares of common stock is shown for each of them, as they
may each be deemed to be the beneficial owner of all of such shares. Consists of 2,361,690 shares of common stock and options
to purchase 105,000 shares of common stock. Does not include options to purchase up to 40,000 shares of common stock, which vest
over three years. Exercise prices of options held vary from $1.10 to $4.60.


 


(3)Robert
Reed is the trustee of the Reed Family Irrevocable Trust One and the Reed Family Irrevocable Trust Two. Each trust owns 400,000
shares of common stock. As sole Trustee, Robert Reed holds voting and dispositive power over all of these shares. Robert Reed
also owns 110,000 shares of common stock directly.


 




    	 	 	 



    	 	 	 



    


 


(4)
Includes options to purchase 66,500 shares of common stock. Does not include options to purchase 33,500 shares of common stock,
which have not yet vested. Exercise price of options held is $5.01


 


(5)
Includes options to purchase 66,666 shares of common stock, which options have vested. Does not include options to purchase
33,334 shares of common stock, which options have not yet vested. Exercise price of options held is $5.01.


 


(6)
Includes options to purchase 112,500 shares of common stock. Does not include options to purchase 40,000, which options have not
yet vested. Exercise prices of options held vary from $1.14 to $5.01.


 


Outstanding
Potentially Dilutive Securities 


 


	Warrants	 	 	385,000	 
	Series A Preferred Stock	 	 	37,644	 
	Plan Options	 	 	1,039,500	 



 


Breakdown
of Outstanding Options (excluding options held by directors and named executive officers)


 


 


	Exercise Price	 	 	Total Number	 	 	Vested	 	 	Not Vested	 
	$	5.04	 	 	 	10,000	 	 	 	0	 	 	 	10,000	 
	$	5.01	 	 	 	388,000	 	 	 	146,166	 	 	 	241,834	 
	$	4.60	 	 	 	133,000	 	 	 	133,000	 	 	 	0	 
	$	4.40	 	 	 	1,000	 	 	 	1,000	 	 	 	0	 
	$	1.14	 	 	 	10,000	 	 	 	10,000	 	 	 	0	 



 


Breakdown
of Outstanding Warrants


 





	Holder	 	Amount	 	 	Price	 	 	Expiration Date
	525 Douglas St	 	 	200,000	 	 	$	5.60	 	 	  9/30/19 
	PMC amend 10	 	 	125,000	 	 	$	4.50	 	 	  5/8/21 
	PMC amend 11	 	 	10,000	 	 	$	3.90	 	 	  10/25/21 
	PMC amend	 	 	   12 50,000	 	 	$	4.50	 	 	  11/13/21 





  


Outstanding
warrants do not have registration rights or participation rights. They contain customary adjustments for stock divisions, splits,
or subdivision/combination of shares as well as protection in the event of merger/consolidation. No other anti-dilution protective
provisions are included in these warrants.


  




    	 	 	 



    	 	 	 



    


 


Schedule
3.1(i)


 


On
June 1, 2016, Mark Harris resigned from his position as a director of Reed’s, Inc., effective immediately. Per his resignation,
Mr. Harris felt he was no longer able to fulfill the responsibilities of the position due to competing demands on his time.





 




    	 	 	 



    	 	 	 



    


 


Schedule
3.1(bb)


 


DESCRIPTION
OF INDEBTEDNESS


 


Line
of Credit


  


On
November 9, 2011, Reeds Inc. (Company) entered into a Loan and Security Agreement with PMC Financial Services Group, LLC (PMC),
which was amended and restated on December 5, 2014, and amended on September 1, 2015, April 25, 2016 and May 13, 2016 (together,
the LSA). The LSA provides for a Revolving Loan, Term Loan A (as defined below), Term Loan B and Capital Expansion Loan (Capex
Loan).


 


The
maximum aggregate outstanding amount of the Revolving Loan is based the lesser of $6,000,000 or the borrowing based which is based
on 85% of accounts receivable and 60% of eligible inventory and is secured by substantially all of the Company’s assets.
The interest rate on the Revolving Loan is the prime rate plus .35% (9% at March 31, 2016). In September 2015 amendment, the following
changes were made:


 


	 	●	The
    interest rate on the Revolving Loan was modified on September 1, 2015 and is subject to a sliding scale adjustment based on
    the trailing 6 month EBITDA. If the EBITDA measuring point stays below $1,000,000 where it is now, the rate will rise to a
    rate equal to the Prime Rate plus 3.35% from the current rate of 9%. If the EBITDA is between $1,000,000 and $1,250,000, the
    rate will equal the Prime Rate plus 2.35%. If the EBITDA is between $1,250,000 and $1,500,000, then the rate will equal the
    Prime Rate plus 1.35%. If EBITDA rises to or above $1,500,000 then the rate will be the Prime Rate plus 0.35%.
	 	 	 
	 	●	if
    Excess Borrowing Availability under the Revolving Loan remains more than $1,500,000 at all times during the preceding month
    (currently Reed’s Borrowing Availability is zero) the Interest Rate shall remain unchanged for the asset based lending
    that includes the Revolving Loan, Capex Loan and Term Loan A.


 


The
monthly management fee is .45% of the average monthly loan balance payable each month in arrears. As of March 31, 2016, the Company
had a maximum borrowing availability of $1,750,000 under the Amended and Restated LSA.


 


The
Revolving Loan is subject to a 1% prepayment penalty for prepayment prior to the first anniversary of the effective date.


 


On
April 25, 2016, the Company entered into Amendment Number Eleven to the Amended and Restated LSA changed the definition of ‘inventory”
to include prepayments for glass subject to non-cancelable purchase orders that were previously excluded from the lending base
of the revolver and was entered into in the ordinary course of business. In consideration, the Company granted PMC warrants to
purchase 10,000 shares of common stock with an exercise price of $3.90 per share and an expiration date of October 25, 2021.


 






    	 	 	 



    	 	 	 



    

 


On
May 13, 2016, Company entered into Amendment Number Twelve to the Amended and Restated LSA (Amendment No. 12) pursuant to which,
among other amendments as described below, the Company and PMC extended the date of the Revolving Loan from December 2016 to October
1, 2017. In consideration, the Company agreed to provide proof of a capital raise in the amount of at least $1,500,000 by July
31, 2016 and issued to PMC warrants to purchase 50,000 shares of common stock with an exercise price of $4.50 and an expiration
date of November 13, 2021.








 


Term
Loans outstanding with PMC


 


The
Company also entered into a term loan (Term Loan A) under the LSA. The loan was originally $750,000, and was secured by all of
the unencumbered assets of the Company. Effective December 5, 2014, the Term Loan A’s outstanding principal balance was
increased to $1,500,000 and the annual interest rate was revised to prime plus 5.75% (currently 9%) subject to adjustment as described
below.


 


Effective
September 1, 2015 the Company entered into an additional term loan (Term Loan B, and together with Term Loan A, the Term Loans)
with a principal balance of $1,500,000 at prime plus 11.60% (currently 14.85%) with PMC. As of March 31, 2016 and December 31,
2015, the aggregate amount under the Term Loans outstanding was $3,000,000.


 


The
interest rate on the Term Loan A was modified on September 1, 2015 and, along with the Term Loan B, is subject to the following:


 


	 	●	A
    sliding scale based on the trailing 6 month EBITDA as follows: If the EBITDA measuring point stays below $1,000,000, the rate
    will rise to the Prime Rate plus 8.75%. If the EBITDA is between $1,000,000 and $1,500,000, then the rate will equal the Prime
    Rate plus 7.75%. If EBITDA rises to $1,500,000 then the rate will be reduced to 9%.
	 	 	 
	 	●	If
    Excess Borrowing Availability under the $6 million Revolving Loan remains more than $1,500,000 at all times during the preceding
    month (currently Reed’s Borrowing Availability is zero) the Interest Rate shall remain unchanged for the asset based
    lending that includes the Revolving Loan, Capex Loan and Term Loan A. The Term Loan B rates will remain at Prime Rate plus
    11.60%.


 


On
November 9, 2015, the Company completed a restructuring of Term Loans with PMC. The aggregated amount of the principal for affected
Term Loans is $3,000,000. Under the new agreement, the maturity of both loans was originally April 1, 2017 and due in lump sum
under the same rates and conditions as before. On May 13, 2016, pursuant to Amendment No. 12, the Company and PMC extended the
maturity dates of the Term Loans to October 1, 2107. In connection with the agreement, the Company granted PMC 125,000 warrants
at an exercise price of $4.50 per share with a term of five years and six months. The 125,000 warrants were valued at $141,000
using the Black Scholes Merton option pricing model and were recorded as a valuation discount. The following assumptions were
made in valuing the 125,000 warrants; term of 5.5 years, volatility of 56.04%, expected dividends 0% and discount rate of 0.68%.
The warrants value of $141,000 is being amortized over the remaining 16 months of the term loans.


 




    	 	 	 



    	 	 	 



    


 


Capex
Loan


 


Under
the LSA in December 2014, the Company entered into a Capex Loan in the aggregate outstanding amount not to exceed $3,000,000.
The Capex Loan finances new asset purchases for modernization and improvement of the beverage bottling equipment in the Los Angeles
plant. Interest only on the Capex Loan is paid from time to time until the end of each fiscal quarter, at which time the principal
amounts of each outstanding Capex Loan will be aggregated and repaid in 48 equal monthly installments of principal plus accrued
but unpaid interest. Upon the maturity date of the Capex Loan, the entire unpaid principal balance of the loan is due and payable.
The interest rate on the Capex Loan is the prime rate plus 5.75% (9.25% at March 31, 2016). On June 30, 2016, the loan funding
will close and the Company will begin repayments in July, 2016. On May 13, 2016, pursuant to Amendment No. 12 the Company and
PMC extended the maturity date of the Capex Loan to October 1, 2107 and PMC agreed to add $210,000 to the Capex Loan for a total
borrowing cap of $3,210,000.


 


In
conjunction with this loan the Company has placed equipment with a cost of $341,000 at a co-packing facility to enable the co-packer
to manufacture our products. Should the Company be unable to secure access to the equipment in the event of failure of the co-packer,
the amount will become due and payable by the Company immediately.


 


Obligations
under Capital Leases


 


The
Company leases equipment for its brewery operations with an aggregate value of $944,000 under six non-cancelable capital leases.
Most of the leases are personally guaranteed by the Company’s Chief Executive Officer, Christopher J. Reed (CEO). Monthly
payments range from $341 to $10,441 per month, including interest, at interest rates ranging from 6.51% to 17.31% per annum. At
March 31, 2016, monthly payments under these leases aggregated $16,000. The leases expire at various dates through 2020.


 


Long-term
Financing Obligation


 


On
June 15, 2009, the Company closed escrow on the sale of its two buildings and its brewery equipment and concurrently entered into
a long-term lease agreement for the same property and equipment (Long-term Financing Obligation). In connection with the lease
the Company has the option to repurchase the buildings and brewery equipment from 12 months after the commencement date to the
end of the lease term at the greater of the fair market value or an agreed upon amount. Since the lease contains a buyback provision
and other related terms, the Company determined it had continuing involvement that did not warrant the recognition of a sale;
therefore, the transaction has been accounted for as a long-term financing. The proceeds from the sale, net of transaction costs,
have been recorded as a financing obligation in the amount of $3,056,000. Monthly payments under the financing agreement are recorded
as interest expense and a reduction in the financing obligation at an implicit rate of 9.9%. The financing obligation was personally
guaranteed up to a limit of $150,000 by the principal shareholder and the Company’s CEO.


  




    	 	 	 



    	 	 	 



    


 


In
connection with the financing obligation, the Company issued an aggregate of 400,000 warrants to purchase its common stock at
$1.20 per share for five years. The 400,000 warrants were valued at $752,000 and reflected as a debt discount, using the Black
Scholes Merton option pricing model. The following assumptions were utilized in valuing the 400,000 warrants: strike price of
$2.10 to $2.25; term of 5 years; volatility of 91.36% to 110.9%; expected dividends 0%; and discount rate of 2.15% to 2.20%. The
400,000 warrants were recorded as valuation discount and are being amortized over 15 years, the term of the purchase option.


 


Effective
October 1, 2014, the Company executed Amendment #1 to the Long-term Financing Obligation. In exchange for a release from the $150,000
personal guarantee by the principal shareholder and CEO, and a release of the brewery equipment which was collateral for the lease
agreement, the Company issued 200,000 warrants to purchase its common stock for $5.60 per share with a term of five years. The
200,000 warrants were valued at $584,000 using the Black Scholes Merton option pricing model and were recorded as a valuation
discount. The following assumptions were made in valuing the 200,000 warrants; term of 5 years, volatility of 59.53%, expected
dividends 0% and discount rate of 1.25%. The warrants value of $584,000 is being amortized over the remaining term of the purchase
option.


 


A
current summary of indebtedness is included in the table attached.