Document:

SECURITIES
PURCHASE AGREEMENT

 

This
Securities Purchase Agreement (this “Agreement”) is dated as of April 21, 2017, between Reeds, Inc., a Delaware
corporation (the “Company”), and the purchaser identified on the signature page hereto (including its successors
and assigns, the “Purchaser”).

 

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 Purchaser, and Purchaser 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 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.

 

“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.

 

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“Conversion
Shares” means shares of Common Stock issued or issuable upon conversion of the Note.

 

“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 Conversion 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 Conversion
Shares and Warrant Shares is not an Affiliate of the Company, or (d) all of the Conversion 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 Conversion Shares and Warrant Shares pursuant to such exemption which opinion shall be in form and substance reasonably
acceptable to such holders.

 

“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 independent directors of the Board of Directors or a majority of the independent members of a committee
of the Board of Directors established for such purpose for an exercise price or other consideration at least equal to the fair
market thereof on the date of grant, (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 previously issued and outstanding
as of 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 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, and (d) securities issued in conjunction with a debt
instrument issued by a commercial bank; notwithstanding clauses (c) and (d) as defined in “Exempt Issuance”, the prior
written consent of the Purchaser shall be required prior to any such issuance of securities contemplated by such clauses while
the Note issued hereunder remains outstanding and unconverted.

 

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“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).

 

“Good
Standing Certificate” means a certificate of the Secretary of State of the applicable jurisdiction as to the good standing
of the Company in such jurisdiction.

 

“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).

 

“Intercreditor
Agreement” means the Subordination Agreement among the Purchaser and PMC to be dated as of the Closing Date which shall
include a waiver and consent of PMC Financial Services Group, LLC (“PMC”) pursuant to its Amended and Restated
Loan and Security Agreement, dated April 25, 2016, as amended (the “PMC Consent”).

 

“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).

 

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“Nixon
Peabody” means Nixon Peabody LLP, with office located at 437 Madison Avenue, New York, New York 10022.

 

“Note”
means the Subordinated Convertible Non-Redeemable Secured Promissory Note in the Form attached hereto as Exhibit A.

 

“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).

 

“PIPE
Participant Consents” means the consents of the 2016 PIPE Participants in the form attached hereto as Exhibit E.

 

“Placement
Agent” means Wunderlich Securities Inc.

 

“PMC”
shall have the meaning ascribed to such term in the definition of Intercreditor Agreement.

 

“PMC
Consent” shall have the meaning ascribed to such term in the definition of Intercreditor Agreement.

 

“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 C, dated the
Closing Date.

 

“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 Conversion Shares and Warrant Shares by 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.

 

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“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” means 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, including the exhibits thereto and documents incorporated by reference therein. For clarity, the Company’s Annual
Report on Form 10-K for the period ended December 31, 2016 which has been provided in advance to purchaser in final form and substance,
is included an SEC Report.

 

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

 

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

 

“Security
Agreement” means the Security Agreement in the form attached hereto as Exhibit D, dated the Closing Date.

 

“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 three million, four hundred thousand dollars ($3,400,000) 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).

 

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“Transaction
Documents” means this Agreement, the Note, Warrant, the Registration Rights Agreement, the Security Agreement, the Intercreditor
Agreement and 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).

 

“Warrants”
means, collectively, the Common Stock purchase warrants delivered to the Purchaser at the Closing in accordance with Section 2.2(a)
hereof, which Warrants shall be initially exercisable 180 days after the date of issuance and will expire on the 5th
anniversary of the date of issuance, in the form of Exhibit B attached hereto.

 

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

 

“2016
PIPE Participants” means three Persons that were each subscribers of $500,000 or more of securities in the Company’s
financing transaction pursuant to that certain Securities Purchase Agreement dated May 26, 2016 that have a right to participate
in this transaction.

 

ARTICLE
II.

PURCHASE AND SALE

 

2.1
Closing. 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 Purchaser agrees
to purchase, in exchange for the Subscription Amount, the Note and Warrants. Purchaser shall deliver to the Company, 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 Purchaser an originally executed Note and
Warrants, as determined pursuant to Section 2.2(a), and the Company and Purchaser shall deliver the other items set forth in Section
2.2 deliverable at the Closing. The Closing shall occur on the date hereof (the “Closing Date”) at or before 5:00
p.m., New York City time, at such location as the parties shall mutually agree. 

 

2.2
Deliveries.

 

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

 

(i)
this Agreement duly executed by the Company;

 

(ii)
a legal opinion of Company Counsel, in form acceptable to Purchaser’s counsel;

 

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(iii)
the Note in the form attached hereto as Exhibit A (such originally executed Note may be delivered within three Trading Days of
the Closing Date, but an electronic signed copy of which shall be delivered prior to or at closing);

 

(iv)
a Warrant registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to 1,416,667 shares
of Common Stock, with an exercise price equal to $4.00 per share, subject to adjustment therein (such originally executed Warrant
may be delivered within three Trading Days of the Closing Date, but an electronic signed copy of which shall be delivered prior
to or at closing);

 

(v)
the Registration Rights Agreement, duly executed by the Company;

 

(vi)
the Security Agreement, duly executed by the Company;

 

(vii)
all PIPE Participants Consents;

 

(viii)
a Good Standing Certificate of domestic and principal place of business jurisdictions;

 

(ix)
a Final, in form and substance, copy of Company’s 10-K for year ended December 31, 2016, with a copy of Auditor opinion
and consent;

 

(x)
the Intercreditor Agreement signed by PMC;

 

(xi)
a certificate of an officer of the Company certifying that the conditions set forth in Section 2.3(b) have been satisfied; and

 

(xii)
a certificate of the Secretary of the Company certifying as to the resolutions of the board of directors of the Company authorizing
this Agreement and the transactions contemplated thereby.

 

(b)
On or prior to the Closing Date, 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;

 

(iii)
Purchaser’s Subscription Amount (less any expenses or other items set forth in an agreed upon funds flow memo) by wire transfer
to the Company’s bank account specified by Company;

 

(iv)
the Intercreditor Agreement signed by Purchaser; and

 

(v)
the Security Agreement, duly executed by the Purchaser.

 

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2.3
Closing 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 Purchaser 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 Purchaser required to be performed at or prior to the Closing Date shall have been
performed; and

 

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

 

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

 

(i)
the accuracy 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;

 

(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; and

 

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(vi)
all Required Approvals (except to the extent such item is required by the recipient thereof to be delivered following the Closing
Date) shall have been obtained by the Company.

 

ARTICLE
III.

REPRESENTATIONS AND WARRANTIES

 

3.1
Representations and Warranties of the Company. Except as set forth in the disclosure schedules separately delivered to
the Purchaser 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, warranties and covenants to 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 a corporation duly incorporated, 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. The Board of Directors
of the Company has taken all necessary action to approve the transactions contemplated hereunder so as to make Section 203 of
the Delaware General Corporation Law not apply to the Purchaser. 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.

 

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(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 (in the Form 10-K for the year ended
December 31, 2015 and thereafter).

 

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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 Conversion
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, (v) the filing of the Resale Registration
Statement as required by the Registration Rights Agreement and (vi) the PIPE Participant Consent and (vii) the PMC Consent (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, other than restrictions on transfer provided for in the Transaction Documents. The Conversion Shares and 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 upon (i)
conversion or exercise of the Note and Warrant pursuant to this Agreement, (ii) conversion or exchange of all other outstanding
securities convertible or exchangeable for any shares of Common Stock and (iii) exercise of all outstanding options, warrants
or rights to subscribe for or purchase Common Stock or securities convertible into or exchangeable for Common Stock.

 

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(g)
Capitalization. The capitalization of the Company is as set forth in 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 Purchaser) 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 on Schedule 3.1(g), 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’s annual report on Form 10-K for the fiscal year ended December 31,
2016 delivered pursuant to Section 2.2(a)(ix) complies in all material respects with the requirements of the Exchange Act and
does 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 the light of the circumstances under which they were made, not misleading. Except
for the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2016, the Company has filed all 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.

 

    	12 

    	 

    

 

(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, (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.

 

    	13 

    	 

    

 

(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.

 

    	14 

    	 

    

 

(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 or valid leasehold interests
in and to all real property owned by them and good and marketable title or valid leasehold interests in and to 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 (in the Form 10-K for the year ended December 31,
2015 and thereafter). Any real property, facilities or personal property 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.

 

    	15 

    	 

    

 

(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 (in the Form 10-K for the year ended December 31, 2015 and thereafter) 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 (in the
Form 10-K for the year ended December 31, 2015 and thereafter), 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 (since the most recently filed Proxy
Statement), 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.

 

    	16 

    	 

    

 

(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. Except for fees payable to the Placement Agent by the Company, 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 Company
has paid all fees payable to the Placement Agent on or prior to the date hereof. The Purchaser 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.

 

    	17 

    	 

    

 

(u)
Private Placement. Assuming the accuracy of the Purchaser’s 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 Purchaser
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 Purchaser, no Person has any right to cause the Company or any Subsidiary to effect
a new 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. Except as set forth in the SEC Reports, 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 shall use its best
efforts to maintain its compliance with the NYSE MKT listing standards and pursuant to its plan of compliance submitted to the
NYSE MKT on July 20, 2016. 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 Purchaser as
a result of the Purchaser 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 Purchaser’s ownership
of the Securities.

 

    	18 

    	 

    

 

(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 the Purchaser or its agents
or counsel with any information that constitutes or might constitute material, non-public information. The Company understands
and confirms that the Purchaser 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 Purchaser 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 the Purchaser has not 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 Purchaser’s 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.

 

    	19 

    	 

    

 

(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 Purchaser and certain other “accredited investors” within the meaning of Rule 501
under the Securities Act.

 

    	20 

    	 

    

 

(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/Auditor. The Company’s accounting firm and auditor, Weinberg & Company, PA, (i) is a certified public
accounting firm and registered with the Public Accounting Oversight Board as required by the Exchange Act and (ii) expressed its
opinion with respect to the financial statements to be included in the Company’s 2016 Form 10-K.

 

(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 Purchaser’s Purchase of Securities. The Company acknowledges and agrees that the Purchaser
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 Purchaser is not 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 Purchaser or any of its respective representatives or agents in connection with the Transaction Documents and
the transactions contemplated thereby is merely incidental to the Purchaser’s purchase of the Securities. The Company further
represents to 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) Purchaser has not been asked by the Company to agree, nor has 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)
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) Purchaser may engage in hedging activities at various
times during the period that the Securities are outstanding, , 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.

 

    	21 

    	 

    

 

(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.

 

    	22 

    	 

    

 

(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)
[RESERVED]

 

(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.

 

    	23 

    	 

    

 

(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 Purchaser a copy of any disclosures provided thereunder.

 

(ss)
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.

 

(tt)
Notice of Disqualification Events. The Company will notify the Purchaser 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.

 

(uu)
Outstanding Common Stock. The Common Stock issuable upon conversion of the Note and the exercise of the Warrants contemplated
hereunder do not equal or exceed 20% of the number of shares of Common Stock outstanding as of the date hereof.

 

3.2
Representations and Warranties of the Purchaser. 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.

 

    	24 

    	 

    

 

(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, individually or together with its parent or affiliate entities an “accredited
investor” as defined in Rule 501(a) under the Securities Act.

 

(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; provided, however,
that the foregoing shall in no way alter, diminish or impair such Purchaser’s right to rely upon the representations and
warranties of the Company contained herein or in any other Transaction Document.

 

(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 and its Subsidiaries 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; provided, however, that the foregoing shall in no way alter, diminish or impair
such Purchaser’s right to rely upon the representations and warranties of the Company contained herein or in any other Transaction
Document.

 

    	25 

    	 

    

 

(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 in this Section 3.2(f) 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)
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.

 

(h)
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,
or which have not been waived or consented to prior to or concurrent with this transaction.

 

    	26 

    	 

    

 

(i)
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).

 

(j)
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.

 

The
Company acknowledges and agrees that the representations contained in Section 3.2 shall not modify, amend, alter, diminish, impair
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

 

4.1
Transfer 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 shall, upon the request
of the transferor and at the expense of the Company, provide an opinion of counsel selected by the transferor and reasonably acceptable
to the Company effect that registration of such Conversion Shares and Warrant Shares shall not be required 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.

 

    	27 

    	 

    

 

(b)
The Purchaser agrees 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.

 

    	28 

    	 

    

 

(c)
Certificates evidencing the Conversion Shares and Warrant Shares shall not contain any legend (including the legend set forth
in Section 4.1(b) hereof), (i) if sold pursuant to a registration statement (including the Registration Statement) covering the
resale of such security that is effective under the Securities Act, (ii) in connection with a sale, assignment or other transfer,
in which a holder of the Conversion 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 Conversion Shares
or Warrant Shares may be made without registration under the applicable requirements of the Securities Act, (iii) following any
sale of such Conversion Shares or Warrant Shares pursuant to Rule 144, (iv) if such Conversion 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 Conversion 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, at Company’s expense. 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 Conversion Shares
and Warrant Shares, or if such Conversion 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 Conversion 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 Conversion 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 Conversion 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 Conversion 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 Conversion 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)
Purchaser 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.

 

4.2
Furnishing of Information. Until the earliest of the time that (i) Purchaser does not own 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.

 

    	29 

    	 

    

 

4.3
Integration. 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.

 

4.4
Securities Laws Disclosure; Publicity. The Company shall by 5:30 p.m.. (New York City time) on the Closing Date, file the
Company’s Form 10-K for the year ended December 31, 2016 and 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 Purchaser 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 Purchaser that it shall have publicly disclosed all material, non-public
information delivered to any of the Purchaser 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 Purchaser or any of their Affiliates on the other hand,
shall terminate. The Company and 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 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 Purchaser with prior notice of such disclosure permitted under this clause (b).

 

4.5
Shareholder Rights Plan. The Company shall not adopt any control share acquisition, business combination, poison pill (including
any distribution under a rights agreement) or similar anti-takeover plan or arrangement that will adversely alter, diminish or
impair the rights of the Purchaser as a stockholder. The Purchaser is not and shall not be deemed to be 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 and the Purchaser shall
not be deemed to trigger the provisions of any such plan or arrangement pursuant to the transactions contemplated by the Transaction
Documents or under any other agreement between the Company and the Purchaser. No claim will be made or enforced by the Company
or, with the consent of the Company, any other Person, that any Purchaser is any such Acquiring Person and the Company shall defend,
indemnify and hold harmless the Purchaser from and against any third party claims related thereto.

 

    	30 

    	 

    

 

4.6
Non-Public Information. Except with respect to the material terms and conditions of the transactions contemplated by the
Transaction Documents and information and disclosures included in the Company’s 2016 Form 10-K, 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 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 Purchaser shall be relying on the foregoing covenant in effecting transactions
in securities of the Company.

 

4.7
Use of Proceeds. The Company shall use the net proceeds from the sale of the Securities hereunder for working capital and
general corporate 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), or (b) for
the redemption of any Common Stock or Common Stock Equivalents or in violation of FCPA or OFAC regulations.

 

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4.8
Indemnification of Purchaser. Subject to the provisions of this Section 4.8, the Company will indemnify and hold 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 or gross negligence). 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.

 

4.9
Reservation 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 Conversion Shares pursuant to conversion of the Note and Warrant Shares pursuant to any exercise of the
Warrants. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion
of the Note and Warrants, the Company shall take such corporate act as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number as shall be sufficient for such purposes.

 

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4.10
Listing 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 Conversion Shares and Warrant Shares on such Trading Market and promptly secure the listing of all of the
Conversion 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 Conversion Shares and Warrant Shares,
and will take such other action as is necessary to cause all of the Conversion 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.

 

4.11
Participation in Future Financing.

 

(a)
From the the Closing Date until the Maturity Date, upon any issuance by the Company or any of its Subsidiaries of Common Stock
or Common Stock Equivalents for cash consideration, preferred stock or debt instruments other than those issued by a commercial
bank or a combination of units hereof (a “Subsequent Financing”), the Purchaser 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 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 Purchaser 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”.

 

    	33 

    	 

    

 

(d)
If by 5:30 p.m. (New York City time) on the third (3rd) Trading Day after all of the Purchaser have received the Pre-Notice,
Acceptance Notices from the Purchaser 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 Purchaser have received the Pre-Notice,
the Company receives Acceptance Notices from Purchaser 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 Purchaser participating under this Section 4.11.

 

(f)
To the extent that the Accepting Purchaser 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-Purchaser 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 Purchaser, 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 Purchaser.

 

(g)
The Company must provide the Purchaser with a second Subsequent Financing Notice, and the Purchaser 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 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.

 

    	34 

    	 

    

 

(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.

 

4.12
Subsequent Equity Sales.

 

(a)
From the Closing Date until the Maturity Date, 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. The 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.

 

(b)
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.

 

4.13
[Reserved]

 

    	35 

    	 

    

 

4.14
Certain Transactions and Confidentiality. The Purchaser 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. Purchaser 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 (x) the transactions contemplated by this Agreement are first publicly announced
pursuant to the initial press release as described in Section 4.4 and (y) the 2016 Form 10-K is filed with the Commission, (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 the 2016 Form 10-K is filed with the Commission
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 and the filing of the 2016 Form
10-K with the Commission. 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
Furnishing of Information; Public Information. 

 

(a)
From the date hereof 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.

 

    	36 

    	 

    

 

(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, the Company shall pay to such Purchaser 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 4.15(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. The parties agree that the maximum aggregate Public Information
Failure Payments payable under this Section 4.15(c) shall be 12% of the aggregate Subscription Amount. The Public Information
Failure Payments shall apply on a daily pro rata basis for any portion of a month prior to the cure of Public Information
Failure.

 

4.16
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 Purchaser
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.

 

4.17
Exercise of Warrants. The form Notice of Exercise included in the Warrants sets forth the totality of the procedures required
of the Purchaser in order to exercise the Warrants. Without limiting the preceding sentence, 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.

 

4.18
Prohibition on Market Discounts. So long as the Note or the Warrants remain outstanding, the Company shall not issue any
Common Stock at a price below $4.00 per share or any Common Stock Equivalents with an exercise, conversion or exchange price or
value, as applicable, below $4.00 per share.

 

4.19
The Note and the Warrants (as both terms are defined in the Securities Purchase Agreement) shall not be convertible or exercisable,
as appropriate, into more than 2,794,660 shares of the Company’s Common Stock (as the same may be adjusted on a pro rate
basis to take into account stock splits, stock dividends recapitalizations and similar events) in the aggregate. The Company covenants
that the Company has at least 13,974,000 shares of Common Stock outstanding on April 21, 2017.

 

    	37 

    	 

    

 

ARTICLE
V.

MISCELLANEOUS

 

5.1
Termination. This Agreement may be terminated by the either party by written notice to the other party, if the Closing
has not been consummated on or before April 21, 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).

 

5.2
Fees and Expenses. At the Closing, the Company has agreed to reimburse the Purchaser for reasonable out of pocket legal
fees and due diligence fees and expenses of Purchaser’s counsel actually incurred in the transaction contemplated by the
Transaction Documents (“Purchaser’s Legal Fees”). 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 Purchaser’s Legal Fees in an amount
not to exceed $50,000. 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 Purchaser other than income and capital gains taxes of the Purchaser
that may be incurred in connection with the transactions contemplated hereby. 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 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.

 

5.3
Entire 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.

 

    	38 

    	 

    

 

5.4
Notices. 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.

 

5.5
Amendments; 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 Purchaser . 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.

 

5.6
Headings. 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.

 

5.7
Successors 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 Purchaser (other than by merger). Purchaser may assign any or all of its rights under this Agreement to any controlled
Affiliate, 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 “Purchaser.”

 

5.8
No Third-Party Beneficiaries. PurchaserThis 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.

 

    	39 

    	 

    

 

5.9
Governing 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.

 

5.11
Execution. 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.

 

    	40 

    	 

    

 

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 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
To the extent that the Company makes a payment or payments to 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
Saturdays, 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.

 

    	41 

    	 

    

 

5.19
Construction. 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.

 

5.20
WAIVER 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)

 

    	42 

    	 

    

 

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:	 	 	Fax:
	Name: 	Stefan Freeman	 	 
	Title: 	Interim 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]

 

    	43 

    	 

    

 

[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: RAPTOR/HARBOR REEDS SPV LLC

 

RAPTOR/HARBOR REEDS SPV LLC, as Secured
Party

Raptor Holdco GPP LLC, Its Manager

 

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

 

    	44SECOND
LIEN SECURITY AGREEMENT

 

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

 

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

 

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

 

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

 

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

 

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

 

1.       Definitions.

 

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

 

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

 

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

 

    	1

    	 

    

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    	2

    	 

    

 

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

 

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

 

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

 

4.       Perfection
of Security Interest and Further Assurances.

 

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

 

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

 

    	3

    	 

    

 

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

 

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

 

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

 

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

 

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

 

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

 

    	4

    	 

    

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    	5

    	 

    

 

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

 

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

 

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

 

6.       Voting,
Distributions and Receivables.

 

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

 

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

 

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

 

    	6

    	 

    

 

7.       Covenants.
The Grantor covenants as follows:

 

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

 

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

 

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

 

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

 

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

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

 

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

 

    	7

    	 

    

 

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

 

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

 

11.       Remedies
Upon Default.

 

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

 

    	8

    	 

    

 

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

 

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

 

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

 

    	9

    	 

    

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    	10

    	 

    

 

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

 

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

 

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

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

 

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

 

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

 

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

 

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

 

[signature
page follows]

 

    	12

    	 

    

 

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

 

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

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

 

[Signature Page to Security Agreement]

 

    	13

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