Document:

First
Reliance Bank

Amended
Salary Continuation Agreement

 

This Amended
Salary Continuation Agreement (this “Agreement”) is entered into as of July 25, 2013, by and between First
Reliance Bank, a South Carolina-chartered bank (the “Bank”), and Paul C. Saunders, its Senior Vice President (the “Executive”).

 

Whereas,
recognizing the Executive’s substantial contribution to the Bank’s success and intending to encourage the Executive
to remain an employee, the Bank entered into a Salary Continuation Agreement dated as of November 24, 2006 with the Executive,
amended on December 3, 2008 by the First Amendment of the Salary Continuation Agreement,

 

Whereas,
as amended the Salary Continuation Agreement promises specified benefits to the Executive after retirement, which benefits are
payable from the Bank’s general assets,

 

Whereas,
the Bank and the Executive intend that this Agreement shall amend and restate in its entirety the November 24, 2006 Salary Continuation
Agreement, as amended,

 

Whereas,
as of the date of this Agreement none of the conditions or events included in the definition of the term “golden parachute
payment” that is set forth in section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)]
and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of
the Bank, is contemplated insofar as the Bank is concerned, and

 

Whereas,
the parties hereto intend that this Agreement shall be considered an unfunded arrangement maintained primarily to provide supplemental
retirement benefits for the Executive, and to be considered a non-qualified benefit plan for purposes of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”). The Executive is fully advised of the Bank’s financial status.

 

Now
Therefore, in consideration of these premises and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Executive and the Bank hereby agree as follows.

 

Article 1

Definitions

 

1.1          “Accrual
Balance” means the liability that should be accrued by the Bank under generally accepted accounting principles (“GAAP”)
for the Bank’s obligation to the Executive under this Agreement, by applying Accounting Principles Board Opinion No. 12,
as amended by Statement of Financial Accounting Standards No. 106. The Accrual Balance shall be calculated using a discount rate
determined by the Plan Administrator, resulting in an Accrual Balance at the Executive’s Normal Retirement Age that is equal
to the present value of the normal retirement benefits. The discount rate means the rate used by the Plan Administrator for determining
the Accrual Balance. In its sole discretion, the Plan Administrator may adjust the discount rate to maintain the rate within reasonable
standards according to GAAP.

 

    	 

    	 

    

 

1.2          “Beneficiary”
means each designated person, or the estate of the deceased Executive, entitled to benefits, if any, upon the death of the Executive,
determined according to Article 4.

 

1.3          “Beneficiary
Designation Form” means the form established from time to time by the Plan Administrator that the Executive completes,
signs, and returns to the Plan Administrator to designate one or more Beneficiaries.

 

1.4          “Change
in Control” shall mean a change in control as defined in Internal Revenue Code section 409A and rules, regulations, and
guidance of general application thereunder issued by the Department of the Treasury, including –

 

(a)          Change
in ownership: a change in ownership of First Reliance Bancshares, Inc., a South Carolina corporation of which the Bank is a
wholly owned subsidiary, occurs on the date any one person or group accumulates ownership of First Reliance Bancshares, Inc. stock
constituting more than 50% of the total fair market value or total voting power of First Reliance Bancshares, Inc. stock, or

 

(b)          Change
in effective control: (x) any one person or more than one person acting as a group acquires within a 12-month period
ownership of First Reliance Bancshares, Inc. stock possessing 30% or more of the total voting power of First Reliance Bancshares,
Inc., or (y) a majority of First Reliance Bancshares, Inc.’s board of directors is replaced during any 12-month period
by directors whose appointment or election is not endorsed in advance by a majority of First Reliance Bancshares, Inc.’s
board of directors, or

 

(c)          Change
in ownership of a substantial portion of assets: a change in ownership of a substantial portion of First Reliance Bancshares,
Inc.’s assets occurs if in a 12-month period any one person or more than one person acting as a group acquires from First
Reliance Bancshares, Inc. assets having a total gross fair market value equal to or exceeding 40% of the total gross fair market
value of all of First Reliance Bancshares, Inc.’s assets immediately before the acquisition or acquisitions. For this purpose,
gross fair market value means the value of First Reliance Bancshares, Inc.’s assets, or the value of the assets being disposed
of, determined without regard to any liabilities associated with the assets.

 

1.5          “Code”
means the Internal Revenue Code of 1986, as amended, and rules, regulations, and guidance of general application issued by the
Department of the Treasury under the Internal Revenue Code of 1986, as amended.

 

1.6          “Disability”
means, because of a medically determinable physical or mental impairment that can be expected to result in death or that can be
expected to last for a continuous period of at least 12 months, (x) the Executive is unable to engage in any substantial
gainful activity, or (y) the Executive is receiving income replacement benefits for a period of at least three months under
an accident and health plan of the employer. Medical determination of disability may be made either by the Social Security Administration
or by the provider of an accident or health plan covering employees of the Bank. Upon request of the Plan Administrator, the Executive
must submit proof to the Plan Administrator of the Social Security Administration’s or provider’s determination.

 

    	 

    	 

    

 

1.7          “Early
Termination” means Separation from Service before Normal Retirement Age for reasons other than death, Disability, Termination
with Cause, or after a Change in Control.

 

1.8          “Effective
Date” means January 1, 2006.

 

1.9          “Intentional,”
for purposes of this Agreement, no act or failure to act on the part of the Executive shall be deemed to have been intentional
if it was due primarily to an error in judgment or negligence. An act or failure to act on the Executive’s part shall be
considered intentional if it is not in good faith and if it is without a reasonable belief that the action or failure to act is
in the best interests of the Bank.

 

1.10        “Normal
Retirement Age” means age 65.

 

1.11        “Plan
Administrator” or “Administrator” means the plan administrator described in Article 8.

 

1.12        “Plan
Year” means a twelve-month period commencing on January 1 and ending on December 31 of each year. The initial Plan Year
shall commence on the effective date of this Agreement.

 

1.13        “Separation
from Service” means separation from service as defined in Internal Revenue Code section 409A and rules, regulations,
and guidance of general application thereunder issued by the Department of the Treasury, including termination for any reason of
the Executive’s service as an executive and independent contractor to the Bank and any member of a controlled group, as defined
in Code section 414, other than because of a leave of absence approved by the Bank or the Executive’s death. For purposes
of this Agreement, if there is a dispute about the employment status of the Executive or the date of the Executive’s Separation
from Service, the Bank shall have the sole and absolute right to decide the dispute unless a Change in Control shall have occurred.

 

1.14        “Termination
with Cause” and “Cause” shall have the same meaning specified in any effective severance or employment
agreement existing on the date hereof or hereafter entered into between the Executive and the Bank or between the Executive and
First Reliance Bancshares, Inc. If the Executive is not a party to a severance or employment agreement containing a definition
of termination for cause, Termination with Cause means the Bank terminates the Executive’s employment for any of the following
reasons –

 

(a)       
   the Executive’s gross negligence or gross neglect of duties or intentional and material failure to
perform stated duties after written notice thereof, or

 

(b)          disloyalty
or dishonesty by the Executive in the performance of the Executive’s duties, or a breach of the Executive’s fiduciary
duties for personal profit, in any case whether in the Executive’s capacity as a director or officer, or

 

(c)       
   intentional wrongful damage by the Executive to the business or property of the Bank or its affiliates,
including without limitation the reputation of the Bank, which in the judgement of the Bank causes material harm to the Bank
or affiliates, or

 

    	 

    	 

    

 

(d)          a
willful violation by the Executive of any applicable law or significant policy of the Bank or an affiliate that, in the Bank’s
judgement, results in an adverse effect on the Bank or the affiliate, regardless of whether the violation leads to criminal prosecution
or conviction. For purposes of this Agreement applicable laws include any statute, rule, regulatory order, statement of policy,
or final cease-and-desist order of any governmental agency or body having regulatory authority over the Bank, or

 

(e)          the
occurrence of any event that results in the Executive being excluded from coverage, or having coverage limited for the Executive
as compared to other executives of the Bank, under the Bank’s blanket bond or other fidelity or insurance policy covering
its directors, officers, or employees, or

 

(f)        
  the Executive is removed from office or permanently prohibited from participating in the Bank’s affairs by
an order issued under section 8(e)(4) or section 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or
(g)(1), or

 

(g)    
     conviction of the Executive for or plea of no contest to a felony or conviction of or plea of
no contest to a misdemeanor involving moral turpitude, or the actual incarceration of the Executive for 45 consecutive days
or more.

 

Article 2

Lifetime Benefits

 

2.1    
     Normal Retirement Benefit. Unless Separation from Service or a Change in Control occurs
before Normal Retirement Age, when the Executive attains Normal Retirement Age the Bank shall pay to the Executive the
benefit described in this section 2.1 instead of any other benefit under this Agreement. If the Executive’s Separation
from Service thereafter is a Termination for Cause or if this Agreement terminates under Article 5, no further benefits shall
be paid.

 

2.1.1       Amount
of benefit. The annual benefit under this section 2.1 is $75,000.

 

2.1.2       Payment
of benefit. The Bank shall pay the annual benefit to the Executive in 12 equal monthly installments payable on the first day
of each month, beginning with the month immediately after the month in which the Executive attains the Normal Retirement Age. The
annual benefit shall be paid to the Executive for 15 years.

 

2.2          Early
Termination Benefit. Unless a Change in Control shall have previously occurred, upon Early Termination the Bank shall pay to
the Executive the benefit described in this section 2.2 instead of any other benefit under this Agreement.

 

2.2.1       Amount
of benefit. The annual benefit under this section 2.2 is calculated as the amount that fully amortizes the Accrual Balance
existing at the end of the month immediately before the month in which Separation from Service occurs, amortizing that Accrual
Balance over the period beginning with the Executive’s Normal Retirement Age and taking into account interest at the discount
rate or rates established by the Plan Administrator.

 

    	 

    	 

    

 

2.2.2       Payment
of benefit. The Bank shall pay the annual benefit to the Executive in 12 equal monthly installments payable on the first day
of each month, beginning with the later of (x) the seventh month after the Executive’s Separation from Service, or
(y) the month immediately after the month in which the Executive attains the Normal Retirement Age. The annual benefit shall
be paid to the Executive for 15 years.

 

2.3       
  Disability Benefit. Unless a Change in Control shall have previously occurred, upon Separation from Service because of
Disability before Normal Retirement Age the Bank shall pay to the Executive the benefit described in this section 2.3 instead
of any other benefit under this Agreement.

 

2.3.1       Amount
of benefit. The annual benefit under this section 2.3 is calculated as the amount that fully amortizes the Accrual Balance
existing at the end of the month immediately before the month in which Separation from Service occurs, amortizing that Accrual
Balance over the period beginning with the Executive’s Normal Retirement Age and taking into account interest at the discount
rate or rates established by the Plan Administrator.

 

2.3.2       Payment
of benefit. Beginning with the later of (x) the seventh month after the Executive’s Separation from Service, or
(y) the month immediately after the month in which the Executive attains the Normal Retirement Age, the Bank shall pay the
Disability benefit to the Executive in 12 equal monthly installments on the first day of each month. The annual benefit shall be
paid to the Executive for 15 years.

 

2.4         
Change-in-Control Benefit. If a Change in Control occurs after the date of this Agreement but before Normal Retirement
Age and before Separation from Service, the Bank shall pay to the Executive the benefit described in this section 2.4 instead
of any other benefit under this Agreement.

 

2.4.1        Amount
of benefit. The benefit under this section 2.4 is the Accrual Balance that would exist on the date that is the earlier to occur
of (x) the date on which the executive attains Normal Retirement Age and (y) the date that is 60 months after the
date on which the Change in Control occurs, with the Accrual Balance calculated in accordance with this Agreement to account for
the Bank’s obligation to the Executive under section 2.1 at the Executive’s Normal Retirement Age, disregarding the
Change in Control occurring before the Executive’s Normal Retirement Age. For example, if the Change in Control occurs when
fewer than 60 months remain before the Executive attains Normal Retirement Age, for example at age 61 or 63, the benefit under
this section 2.4 is the Accrual Balance required by section 2.1 at the Executive’s Normal Retirement Age. If instead the
Change in Control occurs when more than 60 months remain before the Executive attains Normal Retirement Age, for example at age
57 or 59, the benefit under this section 2.4 is the Accrual Balance required by section 2.1 as of the date that is 60 months after
the date of the Change in Control.

 

2.4.2       Payment
of benefit. The Bank shall pay the Change-in-Control benefit under section 2.4 of this Agreement to the Executive in one lump
sum within three days after the Change in Control, without discount for the time value of money. If the Executive receives the
benefit under this section 2.4 because of the occurrence of a Change in Control, the Executive shall not be entitled to claim
additional benefits under section 2.4 if an additional Change in Control occurs thereafter.

 

    	 

    	 

    

 

2.5          Lump-sum
Payment of Normal Retirement Benefit, Early Termination Benefit, or Disability Benefit Being Paid to the Executive when a Change
in Control Occurs. If when a Change in Control occurs the Executive is receiving the benefit under section 2.1, the Bank shall
pay the remaining salary continuation benefits to the Executive in a single lump sum within three days after the Change in Control.
If when a Change in Control occurs the Executive is receiving or is entitled at Normal Retirement Age to receive the benefit under
sections 2.2 or 2.3, the Bank shall pay the remaining salary continuation benefits to the Executive in a single lump sum on the
later of (x) the third day after the Change in Control or (y) the first day of the seventh month after the month
in which the Executive’s Separation from Service occurs. The lump-sum payment due to the Executive as a result of a Change
in Control shall be an amount equal to the Accrual Balance amount corresponding to the particular benefit when the Change in Control
occurs.

 

2.6          Annual
Benefit Statement. Within 120 days after the end of each Plan Year the Plan Administrator shall provide or cause to be provided
to the Executive an annual benefit statement showing benefits payable or potentially payable to the Executive under this Agreement.
Each annual benefit statement shall supersede the previous year’s annual benefit statement. If there is a contradiction between
this Agreement and the annual benefit statement concerning the amount of a particular benefit payable or potentially payable to
the Executive under sections 2.2, 2.3, or 2.4 hereof, the amount of the benefit determined under this Agreement shall control.

 

2.7          Savings
Clause Relating to Compliance with Code Section 409A. Despite any contrary provision of this Agreement, if when the Executive’s
employment terminates the Executive is a specified employee, as defined in Code section 409A, and if any payments under Article
2 of this Agreement will result in additional tax or interest to the Executive because of section 409A, the Executive will not
be entitled to the payments under Article 2 until the earliest of (x) the date that is at least six months after termination
of the Executive’s employment for reasons other than the Executive’s death, (y) the date of the Executive’s
death, or (z) any earlier date that does not result in additional tax or interest to the Executive under section 409A. If
any provision of this Agreement would subject the Executive to additional tax or interest under section 409A, the Bank shall reform
the provision. However, the Bank shall maintain to the maximum extent practicable the original intent of the applicable provision
without subjecting the Executive to additional tax or interest, and the Bank shall not be required to incur any additional compensation
expense as a result of the reformed provision.

 

2.8      
   One Benefit Only. Despite anything to the contrary in this Agreement, the Executive and Beneficiary are
entitled to one benefit only under this Agreement, which shall be determined by the first event to occur that is dealt with
by this Agreement. Except as provided in section 2.5 or Article 3, subsequent occurrence of events dealt with by this
Agreement shall not entitle the Executive or Beneficiary to other or additional benefits under this Agreement.

 

    	 

    	 

    

 

Article
3

Death
Benefits

 

3.1          Death
Before Separation from Service. If the Executive dies before Separation from Service, at the Executive’s death the Executive’s
Beneficiary shall be entitled to an amount in cash equal to the Accrual Balance existing when the Executive’s death occurs,
unless the Change-in-Control benefit shall have been paid to the Executive under section 2.4 or unless a Change-in-Control payout
shall have occurred under section 2.5. No benefit shall be paid under this section 3.1 if the Change-in-Control benefit shall have
been paid to the Executive under section 2.4 or if a Change-in-Control payout shall have occurred under section 2.5. If a benefit
is payable to the Executive’s Beneficiary under this section 3.1, the benefit shall be paid in a single lump sum 90 days
after the Executive’s death. However, no benefits shall be paid or payable under this Agreement to the Executive, the Executive’s
Beneficiary, or the Executive’s estate if this Agreement is terminated under Article 5.

 

3.2          Death
after Separation from Service. If the Executive dies after Separation from Service and if Separation from Service was not a
Termination with Cause, at the Executive’s death the Executive’s Beneficiary shall be entitled to an amount in cash
equal to the Accrual Balance remaining when the Executive’s death occurs, unless the Change-in-Control benefit shall have
been paid to the Executive under section 2.4 or unless a Change-in-Control payout shall have occurred under section 2.5. No benefit
shall be paid under this section 3.2 if the Change-in-Control benefit shall have been paid to the Executive under section 2.4 or
if a Change-in-Control payout shall have occurred under section 2.5. If a benefit is payable to the Executive’s Beneficiary
under this section 3.2, the benefit shall be paid in a single lump sum 90 days after the Executive’s death. However, no benefits
shall be paid or payable under this Agreement to the Executive, the Executive’s Beneficiary, or the Executive’s estate
if this Agreement is terminated under Article 5.

 

Article
4

Beneficiaries

 

4.1         Beneficiary Designations. The
Executive shall have the right to designate at any time a Beneficiary to receive any benefits payable under this Agreement upon
the death of the Executive. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary
designation under any other benefit plan of the Bank in which the Executive participates.

 

4.2          Beneficiary
Designation: Change. The Executive shall designate a Beneficiary by completing and signing the Beneficiary Designation Form
and delivering it to the Plan Administrator or its designated agent. The Executive’s Beneficiary designation shall be deemed
automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as Beneficiary and the marriage
is subsequently dissolved. The Executive shall have the right to change a Beneficiary by completing, signing, and otherwise complying
with the terms of the Beneficiary Designation Form and the Plan Administrator’s rules and procedures, as in effect from time
to time. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously
filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the
Executive and accepted by the Plan Administrator before the Executive’s death.

 

    	 

    	 

    

 

4.3          Acknowledgment.
No designation or change in designation of a Beneficiary shall be effective until received, accepted, and acknowledged in writing
by the Plan Administrator or its designated agent.

 

4.4          No
Beneficiary Designation. If the Executive dies without a valid beneficiary designation, or if all designated Beneficiaries
predecease the Executive, then the Executive’s spouse shall be the designated Beneficiary. If the Executive has no surviving
spouse, the benefits shall be made to the personal representative of the Executive’s estate.

 

4.5          Facility
of Payment. If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the
disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative, or person having the care
or custody of the minor, incapacitated person, or incapable person. The Bank may require proof of incapacity, minority, or guardianship
as it may deem appropriate before distribution of the benefit. Distribution shall completely discharge the Bank from all liability
for the benefit.

 

Article
5

General
Limitations

 

5.1          Termination
with Cause. Despite any contrary provision of this Agreement, the Bank shall not pay any benefit under this Agreement and this
Agreement shall terminate if Separation from Service is the result of Termination with Cause.

 

5.2          Removal.
If the Executive is removed from office or permanently prohibited from participating in the Bank’s affairs by an order issued
under section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1), all obligations of the Bank
under this Agreement shall terminate as of the effective date of the order.

 

5.3          Default.
Despite any contrary provision of this Agreement, if the Bank is in “default” or “in danger of default,”
as those terms are defined in section 3(x) of the Federal Deposit Insurance Act, 12 U.S.C. 1813(x), all obligations under this
Agreement shall terminate.

 

5.4          FDIC
Open-Bank Assistance. All obligations under this Agreement shall terminate, except to the extent determined that continuation
of the contract is necessary for the continued operation of the Bank, when the Federal Deposit Insurance Corporation enters into
an agreement to provide assistance to or on behalf of the Bank under the authority contained in Federal Deposit Insurance Act section
13(c). 12 U.S.C. 1823(c). Rights of the parties that have already vested shall not be affected by such action, however.

 

Article
6

Claims
and Review Procedures

 

6.1          Claims
Procedure. Any person who has not received benefits under this Agreement that he or she believes should be paid (the “claimant”)
shall make a claim for benefits as follows.

 

    	 

    	 

    

 

		6.1.1	Initiation – written claim. The claimant
initiates a claim by submitting to the Administrator a written claim for the benefits. If the claim relates to the contents of
a notice received by the claimant, the claim must be made within 60 days after the notice was received by the claimant. All other
claims must be made within 180 days after the date of the event that caused the claim to arise. The claim must state with particularity
the determination desired by the claimant.

 

		6.1.2	Timing of Administrator response. The Administrator
shall respond to the claimant within 90 days after receiving the claim. If the Administrator determines that special circumstances
require additional time for processing the claim, the Administrator can extend the response period by an additional 90 days by
notifying the claimant in writing, before the end of the initial 90-day period, that an additional period is required. The notice
of extension must set forth the special circumstances and the date by which the Administrator expects to render its decision.

 

		6.1.3	Notice of decision. If the Administrator denies
part or all of the claim, the Administrator shall notify the claimant in writing of the denial. The Administrator shall write
the notification in a manner calculated to be understood by the claimant. The notification shall set forth –

 

		(a)	The specific reasons for the denial,

		(b)	A reference to the specific provisions of this Agreement on which the denial is based,

		(c)	A description of any additional information or material necessary for the claimant to perfect the claim and an explanation
of why it is needed,

		(d)	An explanation of the Agreement’s review procedures and the time limits applicable to such procedures, and

		(e)	A statement of the claimant’s right to bring a civil action under ERISA section 502(a) after an adverse benefit determination
on review.

 

6.2          Review Procedure. If the Administrator
denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Administrator of the
denial, as follows.

 

		6.2.1	Initiation – written request. To initiate
the review, the claimant must file with the Administrator a written request for review within 60 days after receiving the Administrator’s
notice of denial.

 

		6.2.2	Additional submissions – information access.
The claimant shall then have the opportunity to submit written comments, documents, records, and other information relating to
the claim. Upon request and free of charge, the Administrator shall also provide the claimant reasonable access to and copies
of all documents, records, and other information relevant (as defined in applicable ERISA regulations) to the claimant’s
claim for benefits.

 

		6.2.3	Considerations on review. In considering the
review, the Administrator shall take into account all materials and information the claimant submits relating to the claim, without
regard to whether the information was submitted or considered in the initial benefit determination.

 

    	 

    	 

    

 

 

		6.2.4	Timing of Administrator response. The Administrator
shall respond in writing to the claimant within 60 days after receiving the request for review. If the Administrator determines
that special circumstances require additional time for processing the claim, the Administrator can extend the response period
by an additional 60 days by notifying the claimant in writing before the end of the initial 60-day period that an additional period
is required. The notice of extension must set forth the special circumstances and the date by which the Administrator expects
to render its decision.

 

		6.2.5	Notice of decision. The Administrator shall
notify the claimant in writing of its decision on review. The Administrator shall write the notification in a manner calculated
to be understood by the claimant. The notification shall set forth:

 

		(a)	The specific reasons for the denial,

		(b)	A reference to the specific provisions of the Agreement on which the denial is based,

		(c)	A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of all
documents, records, and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for
benefits, and

		(d)	A statement of the claimant’s right to bring a civil action under ERISA section 502(a).

 

Article
7

Miscellaneous

 

7.1          Amendments
and Termination. Subject to section 7.14 of this Agreement, this Agreement may be amended solely by a written agreement signed
by the Bank and by the Executive, and except for termination occurring under Article 5 this Agreement may be terminated solely
by a written agreement signed by the Bank and by the Executive.

 

7.2          Binding
Effect. This Agreement shall bind the Executive, the Bank, and their beneficiaries, survivors, executors, successors, administrators,
and transferees.

 

7.3          No
Guarantee of Employment. This Agreement is not an employment policy or contract. It does not give the Executive the right to
remain an employee of the Bank, nor does it interfere with the Bank’s right to discharge the Executive. It also does not
require the Executive to remain an employee nor interfere with the Executive’s right to terminate employment at any time.

 

7.4          Non-Transferability.
Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached, or encumbered in any manner.

 

7.5          Successors;
Binding Agreement. The Bank will require any successor (whether direct or indirect, by purchase, merger, consolidation, or
otherwise) to all or substantially all of the business or assets of the Bank, by an assumption agreement in form and substance
satisfactory to the Executive, to expressly assume and agree to perform this Agreement in the same manner and to the same extent
that the Bank would be required to perform this Agreement if no such succession had occurred.

 

    	 

    	 

    

 

7.6          Tax
Withholding. The Bank shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement.

 

7.7          Applicable
Law. This Agreement and all rights hereunder shall be governed by the laws of the State of South Carolina, except to the extent
preempted by the laws of the United States of America.

 

7.8          Unfunded
Arrangement. The Executive and Beneficiary are general unsecured creditors of the Bank for the payment of benefits under this
Agreement. The benefits represent the mere promise by the Bank to pay the benefits. Rights to benefits are not subject in any manner
to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance
on the Executive’s life is a general asset of the Bank to which the Executive and Beneficiary have no preferred or secured
claim.

 

7.9          Entire
Agreement. This Agreement constitutes the entire agreement between the Bank and the Executive concerning the subject matter.
No rights are granted to the Executive under this Agreement other than those specifically set forth. This Agreement amends and
restates in its entirety the Salary Continuation Agreement dated as of November 24, 2006 between the Bank and the Executive, as
amended on December 3, 2008 by the First Amendment of the Salary Continuation Agreement. From and after the date of this Agreement
the November 24, 2006 Salary Continuation Agreement, as amended by the December 3, 2008 First Amendment of the Salary Continuation
Agreement, shall be void and of no further force or effect.

 

7.10       Severability.
If any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement not
held invalid, and each such other provision shall continue in full force and effect to the full extent consistent with law. If
any provision of this Agreement is held invalid in part, such invalidity shall not affect the remainder of the provision not held
invalid, and the remainder of such provision together with all other provisions of this Agreement shall continue in full force
and effect to the full extent consistent with law.

 

7.11       Headings.
Caption headings and subheadings herein are included solely for convenience of reference and shall not affect the meaning or interpretation
of any provision of this Agreement.

 

7.12       Notices.
All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given
if delivered by hand or mailed, certified or registered mail, return receipt requested, with postage prepaid, to the following
addresses or to such other address as either party may designate by like notice. If to the Bank, notice shall be given to the board
of directors, First Reliance Bank, 2170 West Palmetto Street, Florence, South Carolina 29501, or to such other or additional person
or persons as the Bank shall have designated to the Executive in writing. If to the Executive, notice shall be given to the Executive
at the Executive’s address appearing on the Bank’s records, or to such other or additional person or persons as the
Executive shall have designated to the Bank in writing.

 

    	 

    	 

    

 

7.13       Payment
of Legal Fees. The Bank is aware that after a Change in Control management of the Bank could cause or attempt to cause the
Bank to refuse to comply with its obligations under this Agreement, or could institute or cause or attempt to cause the Bank to
institute litigation seeking to have this Agreement declared unenforceable, or could take or attempt to take other action to deny
Executive the benefits intended under this Agreement. In these circumstances the purpose of this Agreement would be frustrated.
It is the intention of the Bank that the Executive not be required to incur the expenses associated with the enforcement of rights
under this Agreement, whether by litigation or other legal action, because the cost and expense thereof would substantially detract
from the benefits intended to be granted to the Executive hereunder. It is the intention of the Bank that the Executive not be
forced to negotiate settlement of rights under this Agreement under threat of incurring expenses. Accordingly, if after a Change
in Control occurs it appears to the Executive that (x) the Bank has failed to comply with any of its obligations under this
Agreement, or (y) the Bank or any other person has taken any action to declare this Agreement void or unenforceable, or
instituted any litigation or other legal action designed to deny, diminish, or to recover from the Executive the benefits intended
to be provided to the Executive hereunder, the Bank irrevocably authorizes the Executive from time to time to retain counsel of
the Executive’s choice, at the Bank’s expense as provided in this section 7.13, to represent the Executive in the initiation
or defense of any litigation or other legal action, whether by or against the Bank or any director, officer, stockholder, or other
person affiliated with the Bank, in any jurisdiction. Despite any existing or previous attorney-client relationship between the
Bank and any counsel chosen by the Executive under this section 7.13, the Bank irrevocably consents to the Executive entering into
an attorney-client relationship with that counsel, and the Bank and the Executive agree that a confidential relationship shall
exist between the Executive and that counsel. The fees and expenses of counsel selected from time to time by the Executive as provided
in this section shall be paid or reimbursed to the Executive by the Bank on a regular, periodic basis upon presentation by the
Executive of a statement or statements prepared by such counsel in accordance with such counsel’s customary practices, up
to a maximum aggregate amount of $250,000, whether suit be brought or not, and whether or not incurred in trial, bankruptcy, or
appellate proceedings. The Bank’s obligation to pay the Executive’s legal fees provided by this section 7.13 operates
separately from and in addition to any legal fee reimbursement obligation the Bank may have with the Executive under any separate
employment, severance, or other agreement between the Executive and the Bank. Despite any contrary provision within this Agreement
however, the Bank shall not be required to pay or reimburse the Executive’s legal expenses if doing so would violate section
18(k) of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)] and Rule 359.3 of the Federal Deposit Insurance Corporation [12
CFR 359.3].

 

7.14       Termination
or Modification of Agreement Because of Changes in Law, Rules or Regulations. The Bank is entering into this Agreement on the
assumption that certain existing tax laws, rules, and regulations will continue in effect in their current form. If that assumption
materially changes and the change has a material detrimental effect on this Agreement, then the Bank reserves the right to terminate
or modify this Agreement accordingly, subject to the written consent of the Executive, which shall not be unreasonably withheld.
This section 7.14 shall become null and void effective immediately upon a Change in Control.

 

    	 

    	 

    

 

Article
8

Administration
of Agreement

 

8.1          Plan
Administrator Duties. This Agreement shall be administered by a Plan Administrator consisting of the Bank’s board of
directors or such committee or person(s) as the board shall appoint. The Executive may be a member of the Plan Administrator. The
Plan Administrator shall also have the discretion and authority to (x) make, amend, interpret, and enforce all appropriate
rules and regulations for the administration of this Agreement and (y) decide or resolve any and all questions, including
interpretations of this Agreement, as may arise in connection with the Agreement.

 

8.2          Agents. In the administration
of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit (including
acting through a duly appointed representative) and may from time to time consult with counsel, who may be counsel to the Bank.

 

8.3          Binding
Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection
with the administration, interpretation, and application of the Agreement and the rules and regulations promulgated hereunder shall
be final and conclusive and binding upon all persons having any interest in the Agreement. No Executive or Beneficiary shall be
deemed to have any right, vested or nonvested, regarding the continued use of any previously adopted assumptions, including but
not limited to the discount rate and calculation method described in section 1.1.

 

8.4          Indemnity
of Plan Administrator. The Bank shall indemnify and hold harmless the members of the Plan Administrator against any and all
claims, losses, damages, expenses, or liabilities arising from any action or failure to act with respect to this Agreement, except
in the case of willful misconduct by the Plan Administrator or any of its members.

 

8.5          Bank
Information. To enable the Plan Administrator to perform its functions, the Bank shall supply full and timely information to
the Plan Administrator on all matters relating to the date and circumstances of the retirement, Disability, death, or Separation
from Service of the Executive and such other pertinent information as the Plan Administrator may reasonably require.

 

In
Witness Whereof, the Executive and a duly authorized officer of the Bank have executed this Amended Salary Continuation
Agreement as of the date first written above.

 

	Executive:	 	Bank:
	 	 	First Reliance Bank
	 	 	 	 
	 	 	By:	 
	Paul C. Saunders	 	 	F.R. Saunders Jr.
	 	 	Its:	President and Chief Executive Officer
	 	 	 	 
	 	 	And By:	 
	 	 	 	Leonard A. Hoogenboom
	 	 	Its:	Chairman of the Board

    	 

    	 

    

 

Beneficiary Designation

First Reliance Bank

Amended Salary Continuation
Agreement

 

I, Paul C. Saunders, designate the following
as beneficiary of any death benefits under this Amended Salary Continuation Agreement –

 

Primary:  

	.

 

Contingent:  

	.

 

Note: To name a trust as beneficiary,
please provide the name of the trustee(s) and the exact name and date of the trust agreement.

 

I understand that I may change these beneficiary
designations by filing a new written designation with the Bank. I further understand that the designations will be automatically
revoked if the beneficiary predeceases me, or if I have named my spouse as beneficiary and our marriage is subsequently dissolved.

 

	Signature:	 	 
	 	Paul C. Saunders	 
	 	 	 
	Date:	July 25, 2013	 

 

Accepted by the Bank this _______  day of
 ________________________, 20 _____.

 

	By:	 	 
	 	 	 
	Print Name:	 	 
	 	 	 
	Title:SECURED CONVERTIBLE
NOTE PURCHASE AGREEMENT

 

This SECURED CONVERTIBLE
Note Purchase Agreement (this “Agreement”) is made as
of March 25, 2013 (the “Effective Date”) by and among Penzance, LLC, a California limited liability company
(the “Company”), the initial purchasers of the Notes who are signatory hereto (each, an “Investor”
and collectively, the “Investors”) and Loton, Corp., a Nevada corporation, as an Investor and as collateral
agent for the Investors (the “Collateral Agent”). The Company, the Investors and the Collateral Agent
are from time to time referred to herein as the “parties” and each as a “party.”

 

RECITALS

 

WHEREAS, The Company
wishes to sell up to U.S. $200,000 (two hundred thousand dollars) in the aggregate principal amount of Notes to the Investors,
and each Investor is willing to purchase the principal amount of Notes set forth opposite its name on the signature page hereto
(the “Purchase Price”), on the terms and conditions of this Agreement.

 

NOW THEREFORE, in consideration of the mutual
covenants contained herein and such other consideration, the receipt and adequacy of which is hereby acknowledged, the parties
hereby agree as follows:

 

1.            PURCHASE
AND SALE OF THE NOTES.

 

1.1            Purchase
of the Notes. Subject to the terms and conditions of this Agreement, the Company shall sell to the Investors, and the Investors
shall purchase from the Company, on a joint and several basis, on the Effective Date, in an aggregate principal amount of up to
$200,000, the Secured Convertible Notes in the form attached to this Agreement as Exhibit A (each, a “Note”
and together, the “Notes”)).

 

1.2            Issuance
and Delivery of the Notes. At the Closing, each Investor shall deliver to the Company the Purchase Price by (i) a
check payable to the Company’s order, (ii) wire transfer of funds to the Company, or (iii) any combination of the
foregoing. On or promptly after the Closing, the Company will deliver to each Investors a duly executed Note in the principal amount
of the Purchase Price. The obligation of the Company to sell and issue the Notes to the Investors at the Closing, and the obligation
of the Investors to purchase the Notes, shall be subject to satisfaction or waiver of the applicable conditions set forth in Section
5.

 

1.3            Collateral
Agent. The Collateral Agent shall participate in the purchase of the Notes as an Investor hereunder,
and as such, shall have the same rights and powers in its capacity as an Investor as any other Investor, and may exercise the same
as though it were not the Collateral Agent.

 

2.            THE
CLOSING. Subject to the satisfaction or waiver of the conditions listed in Section 5 below, the purchase
and sale of the Notes shall be for the aggregate principal amount of $200,000 (two hundred thousand dollars) and will take place
at the offices of Manatt Phelps & Phillips LLP, 11355 West Olympic Boulevard, Los Angeles, California, 90064, at 10:00 a.m.
Pacific time on the date of this Agreement, or at such other time and place as the Company and the Investors agree (which time
and place are referred to as the “Closing”).

 

    	 

    	 

    

 

3.            REPRESENTATIONS,
WARRANTIES AND CERTAIN AGREEMENTS OF THE COMPANY. Except as set forth in the Schedule of Exceptions (the “Schedule
of Exceptions”) attached to this Agreement as Exhibit B and expressly stated otherwise in this Agreement,
the Company represents and warrants to the Investors that the statements in the following paragraphs of this Section 3
are all true and complete as of the Closing and makes the following covenants:

 

3.1            Organization,
Good Standing and Qualification. The Company has been duly organized, and is validly existing and in good standing, under
the laws of the State of California. The Company’s Articles of Organization, filed with the Secretary of State of the State
of California on October 28, 2008 and as it is currently in effect (the “Articles of Organization”),
is attached hereto as Exhibit C, and the Company’s current Operating Agreement, dated as of October 29, 2008 and as
it is currently in effect (the “Operating Agreement”), is attached hereto as Exhibit D. The Company
has the corporate power and authority to own and operate its properties and assets and to carry on its business as currently conducted
and as presently proposed to be conducted. The Company is duly qualified to do business as a foreign limited liability company
in good standing in all jurisdictions in which it is required to be qualified to do intrastate business as the Company’s
business is currently conducted and as presently proposed to be conducted by the Company.

 

3.2            Due Authorization.
All corporate action on the part of the Company’s managing member and members necessary for the authorization, execution,
delivery of, and the performance of all obligations of the Company under this Agreement and the Notes has been taken or will be
taken prior to the Closing, and this Agreement constitutes, and the Notes when executed and delivered, will constitute, valid and
legally binding obligations of the Company, enforceable in accordance with their respective terms, except as may be limited by
(i) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement
of creditors’ rights generally and (ii) the effect of rules of law governing the availability of equitable remedies.

 

3.3            Corporate
Power. The Company has the corporate power and authority to execute and deliver this Agreement and the Security Agreement
(as defined herein), to issue the Notes to be purchased by the Investors hereunder, and to carry out and perform all its obligations
under this Agreement, the Notes, the Security Agreement and any and all other agreements and documents to be executed pursuant
to such agreements (together, the “Secured Transaction Documents”).

 

3.4            Valid Issuance.

 

(a)            The Notes and
any securities issuable upon the conversion of the Notes, when issued, sold and delivered in accordance with the terms of this
Agreement and the Notes for the consideration provided for herein and therein, will be duly authorized and validly issued, fully
paid and nonassessable.

 

    	 

    	 

    

 

(b)            Based
in part on the representations made by the Investors in Section 4 hereof, the offer and sale of the Notes (and the
securities of the Company when issued in accordance with the terms of the Notes, as applicable) solely to the Investors in accordance
with this Agreement is exempt from the registration and prospectus delivery requirements of the U.S. Securities Act of 1933, as
amended (the “1933 Act”) and the securities registration and qualification requirements of the currently
effective provisions of the securities laws of the state in which the Investors are residents.

 

3.5            Capitalization.
The percentage interests of the Company (the “Percentage Interests”), immediately prior to the Closing,
consist of (i) a 95% percentage interest vested in Keith Cohn; and (ii) a 5% percentage interest vested in Chris Bollenbach. The
Percentage Interests are issued in compliance with all applicable state and federal laws concerning the issuance of securities.
The rights, preferences, privileges and restrictions of the Percentage Interests are as stated in the Operating Agreement. There
are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal), proxy agreements,
or agreements of any kind for the purchase or acquisition from the Company of any of its securities.

 

3.6            Title to
Properties and Assets. The Company owns its properties and assets free and clear of all mortgages, deeds of trust, liens,
encumbrances and security interests except for Permitted Liens (as defined in the Security Agreement). With respect to the property
and assets it leases, the Company is in material compliance with all such leases.

 

3.7            Patents
and Trademarks. To the Company’s knowledge, it owns or possesses sufficient legal rights to all patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes necessary
for its business as now conducted and as presently proposed to be conducted. The Company has not received any communications alleging
that the Company has violated or, by conducting its business as presently proposed, would violate any of the patents, trademarks,
service marks, trade names, copyrights or trade secrets or other proprietary rights of any other person or entity.

 

3.8            Compliance
with Other Instruments. The Company is not in violation or default of any term of (a) its Articles of Organization or Operating
Agreement, or (b) of any provision of any material mortgage, indenture, contract, agreement or instrument to which it is party
or by which it is bound or of any judgment, decree, order, or writ, except, with respect to the items listed in this clause (b),
as would not have a material adverse effect on the business, assets, financial condition or resulting of operations of the Company.
Subject to the execution, delivery, and performance of and compliance with the Secured Transaction Documents, the issuance and
sale of the Notes and the issuance of securities of the Company pursuant thereto will not result in any such violation or default.

 

3.9            Litigation.
There is no action, suit, proceeding or investigation pending, or, to the Company’s knowledge, currently threatened in writing,
against the Company that (i) questions the validity of this Agreement or the right of the Company to enter into this Agreement
and consummate the transactions contemplated hereby, or (ii) might result, either individually or in the aggregate, in any material
adverse change in the assets, condition, affairs or prospects of the Company.

 

    	 

    	 

    

 

3.10            Financial
Statements. The Company has made available to the Investors its audited consolidated balance sheet and related consolidated
statements of income, members’ equity and cash flow of the Company as of and for the fiscal year ended December 31, 2012
( the “Financial Statements”). The Financial Statements are complete and correct in all material respects,
have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods
indicated and present fairly the financial condition and position of the Company as of the date thereof subject to normal recurring
year-end adjustments (which are not expected to be material either individually or in the aggregate),. Except as set forth in the
Financial Statements, the Company has no material liabilities, contingent or otherwise, other than (i) liabilities incurred in
the ordinary course of business subsequent to December 31, 2012 and (ii) obligations under contracts and commitments incurred in
the ordinary course of business and not required under generally accepted accounting principles to be reflected in the Financial
Statements. Except as disclosed in the Financial Statements, the Company is not a guarantor or indemnitor of any indebtedness of
any other person, firm or corporation.

 

3.11            Amendment
of Operating Agreement. The Company hereby covenants that, within thirty (30) days of the Closing, it will amend the Operating
Agreement in a form reasonably acceptable to the Investors.

 

4.            REPRESENTATIONS,
WARRANTIES AND CERTAIN AGREEMENTS OF THE INVESTORS.

 

The Investors each
hereby, jointly and severally, represent and warrant to, and agree with, the Company, that:

 

4.1            Authorization.
This Agreement constitutes each Investor’s valid and legally binding obligation, enforceable in accordance with its terms
except as may be limited by (i) applicable bankruptcy, insolvency, reorganization or other laws of general application relating
to or affecting the enforcement of creditors’ rights generally and (ii) the effect of rules of law governing the availability
of equitable remedies. Each Investor jointly and severally represents that it has the full power and authority to enter into this
Agreement.

 

4.2            Purchase
for Own Account. The Notes and any securities issuable upon conversion thereof (collectively, the “Securities”)
will be acquired for investment for each Investor’s own account, not as a nominee or agent, and not with a view to the public
resale or distribution thereof within the meaning of the 1933 Act, and each Investor has no present intention of selling, granting
any participation in, or otherwise distributing the same.

 

4.3            Disclosure
of Information. Each Investor has received or has been given full access to all the information it considers necessary
or appropriate to make an informed investment decision with respect to the Securities. Each Investor further has had an opportunity
to ask questions of and receive answers from the Company regarding the terms and conditions of the offering of the Securities and
to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable
effort or expense) necessary to verify any information furnished to such Investor or to which such Investor had access. The foregoing,
however, does not in any way limit or modify the representations and warranties made by the Company in Section 3.

 

    	 

    	 

    

 

4.4            Investment
Experience. Each Investor understands that the purchase of the Securities involves substantial risk. Each Investor (i) has
experience as an investor in securities of companies in the development stage and acknowledges that it is able to fend for itself,
can bear the economic risk of its investment in the Securities and has such knowledge and experience in financial or business matters
that it is capable of evaluating the merits and risks of this investment in the Securities and protecting its own interests in
connection with this investment, and/or (ii) has a preexisting personal or business relationship with the Company and certain
of its officers, managing member or controlling persons of a nature and duration that enables such Investor to be aware of the
character, business acumen and financial circumstances of such persons, and/or (iii) is an existing holder of the Company’s
securities.

 

4.5            Accredited
Investor Status. Each Investor is an “accredited investor” within the meaning of Regulation D promulgated under
the 1933 Act.

 

4.6            Restricted
Securities. Each Investor understands that the Securities are characterized as “restricted securities” under
the 1933 Act and Rule 144 promulgated thereunder inasmuch as they are being acquired from the Company in a transaction not
involving a public offering, and that under the 1933 Act and applicable regulations thereunder such Securities may be resold without
registration under the 1933 Act only in certain limited circumstances. Each Investor is familiar with Rule 144, as presently
in effect, and understands the resale limitations imposed thereby and by the 1933 Act. Each Investor understands the Company is
under no obligation to register any of the Securities sold hereunder. Each Investor understands that no public market now exists
for any of the Securities and that it is uncertain whether a public market will ever exist for the Securities.

 

4.7            No Solicitation.
At no time was any Investor presented with or solicited by any publicly issued or circulated newspaper, mail, radio, television
or other form of general advertising or solicitation in connection with the offer, sale and purchase of the Securities.

 

4.8            Further
Limitations on Disposition. Without in any way limiting the representations set forth above, each Investor further agrees
not to make any disposition of all or any portion of the Securities unless and until:

 

(a)            there is then
in effect a registration statement under the 1933 Act covering such proposed disposition and such disposition is made in accordance
with such registration statement; or

 

(b)            such Investor
shall have notified the Company of the proposed disposition, and shall have furnished the Company with a statement of the circumstances
surrounding the proposed disposition, and, at the expense of such Investor or its transferee, with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require registration of such securities under the 1933 Act.

 

    	 

    	 

    

 

Notwithstanding the
provisions of paragraphs (a) and (b) immediately above, no such registration statement or opinion of counsel shall be required:
for any transfer of the Securities in compliance with Rule 144 or Rule 144A of the 1933 Act.

 

4.9            Legends.
Each Investor understands and agrees that any certificates evidencing the Securities and/or the Notes, as applicable, will bear
legends substantially similar to those set forth below in addition to any other legend that may be required by applicable law,
by the Articles of Organization or the Operating Agreement, or by any agreement between the Company and such Investor:

 

(a)            THE SECURITIES
REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE
SECURITIES LAWS OF APPLICABLE STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. THE INVESTOR SHOULD BE AWARE THAT IT MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

 

(b)            Any legend required
by the laws of the State of California, including any legend required by the California Department of Corporations or any other
state securities laws.

 

The legend set forth
in clause (a) immediately above shall be removed by the Company from any certificate evidencing the Securities upon delivery to
the Company of an opinion of counsel, reasonably satisfactory to the Company, that a registration statement under the 1933 Act
is at that time in effect with respect to the legended security or that such security can be freely transferred in a public sale
(other than pursuant to Rule 144 or Rule 145 under the 1933 Act) without such a registration statement being in effect
and that such transfer will not jeopardize the exemption or exemptions from registration pursuant to which the Company issued the
Securities.

 

5.            CONDITIONS
TO CLOSING.

 

5.1            Conditions
to Investors’ Obligations. The obligations of each Investor under Section 2 of this Agreement are subject
to the fulfillment by the Company or waiver by such Investor, on or before the Closing, of each of the following conditions:

 

(a)            Each of the
representations and warranties of the Company contained in Section 3 shall be true and correct on and as of the Closing
with the same effect as though such representations and warranties had been made on and as of the date of the Closing;

 

(b)            The Company
shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required
to be performed or complied with by it on or before the Closing and shall have obtained all approvals, consents and qualifications
necessary to complete the purchase and sale described herein;

 

    	 

    	 

    

 

(c)            The Company
shall have executed and delivered this Agreement to the Collateral Agent and each of the Investors;

 

(d)            The Company
shall have issued the Notes to each Investor in the amount of the Purchase Price;

 

(e)            The Company
shall have executed and delivered to the Collateral Agent and each Investor the Security Agreement substantially in the form of
Exhibit E attached hereto (the “Security Agreement”); and

 

(f)            The Company
shall have issued to such Investor an Officers’ Compliance Certificate certifying that each of the conditions set forth in
immediately preceding subsections (a) and (b) have been fulfilled.

 

5.2            Condition
to the Company’s Obligations. The obligations of the Company to the Investors under this Agreement are subject to
the fulfillment by each Investor or waiver by the Company on or before the Closing of the following conditions:

 

(a)            Each of the
representations and warranties of the Investors contained in Section 4 shall be true and correct on the date of the
Closing with the same effect as though such representations and warranties had been made on and as of the Closing;

 

(b)            The Investors
shall have performed and complied with all agreements, obligations and conditions contained in this Agreement that are required
to be performed or complied with by it on or before the Closing and shall have obtained all approvals, consents and qualifications
necessary to complete the purchase and sale described herein;

 

(c)            The Collateral
Agent and each Investor shall have executed and delivered this Agreement to the Company; and

 

(d)            The Collateral
Agent and each Investor shall have executed and delivered the Security Agreement to the Company.

 

6.            GENERAL
PROVISIONS.

 

6.1            Survival.
The representations, warranties and covenants of the Company and the Investors contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of any of the Investors or the Company, as the case may be.

 

6.2            Successors
and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties.

 

    	 

    	 

    

 

6.3            Governing
Law. This Agreement shall be governed by and construed under the internal laws of the State of California as applied to
agreements among California residents entered into and to be performed entirely within California, without reference to principles
of conflict of laws or choice of laws.

 

6.4            Counterparts.
This Agreement may be executed in two or more counterparts, including by PDF, facsimile, or other electronic means, each of which
shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

6.5            Headings;
Definitions. The headings and captions in this Agreement are used only for convenience and are not to be considered in
construing or interpreting this Agreement. All references in this Agreement to sections, paragraphs, Exhibits and schedules shall,
unless otherwise provided, refer to sections and paragraphs hereof and Exhibits and schedules attached hereto, all of which Exhibits
and schedules are incorporated by this reference.

 

6.6            Notices.
All notices and other communications given or made pursuant hereto shall be shall be given or made in accordance with the terms
and conditions of the Security Agreement.

 

6.7            No Finder’s
Fees. Each party represents that it neither is nor will be obligated for any finder’s or broker’s fee or commission
in connection with this transaction. The Investors each, jointly and severally, agree to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a finders’ or broker’s fee (and any asserted
liability) for which such Investor or any of its officers, partners, employees, or representatives is responsible. The Company
agrees to indemnify and hold harmless the Investors, jointly and severally, from any liability for any commission or compensation
in the nature of a finder’s or broker’s fee (and any asserted liability) for which the Company or any of its officers,
employees or representatives is responsible.

 

6.8            Amendments
and Waivers. Any term of this Agreement may be amended either retroactively or prospectively with the written consent of
the Company and the holders of than a majority of the aggregate principal amount of the Notes then outstanding, and the Company’s
obligations under any term of this Agreement may be waived (either generally or in a particular instance) only by the holders of
a majority of the aggregate principal amount of the Notes then outstanding. All waivers shall be effective only when given in a
writing signed by the persons charged with making such waiver.

 

6.9            Severability.
If one or more provisions of this Agreement is (are) held to be unenforceable under applicable law, such provision(s) shall be
excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision(s) were so excluded and
shall be enforceable in accordance with its terms.

 

6.10            Entire
Agreement. This Agreement, together with all Exhibits and Schedules hereto, and the Notes entered into pursuant hereto,
constitutes the entire agreement and understanding of the parties with respect to the subject matter hereof and supersedes, merges,
and voids any and all prior negotiations, correspondence, agreements, understandings duties or obligations between (among) the
parties with respect to the subject matter hereof.

 

    	 

    	 

    

 

6.11            Further
Assurances. From and after the date of this Agreement, upon the request of any Investor or the Company, the Company and
the Investors shall execute and deliver such instruments, documents or other writings as may be reasonably necessary or desirable
to confirm, carry out and to effectuate fully the intent and purposes of this Agreement.

 

6.12            Expenses.
The Company and the Investors shall each pay their own expenses in connection with the transactions contemplated by this Agreement.

 

 

 

 

 

    	 

    	 

    

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

 

 

	COMPANY	 	 
	 	 	 
	PENZANCE, LLC	 	 
	 	 	 
	 	 	 
	By: 	/s/ Keith Cohn	 	 
	Name: 	Keith Cohn	 	 
	
    Title:	CEO	 	 
	 	 	 
	 	 	 
	COLLATERAL AGENT AND INVESTOR:	 
	 	 	 
	LOTON,
    CORP.	 	

	
         

        

        
	 	Amount: $100,000
	By:  	/s/ Robert Ellin	 	 
	Name:  	Robert Ellin	 	 
	
    Title:	CEO	 	 
	 	 	 
	 	 	 
	INVESTOR:	 	 
	 	 	Amount: $100,000
	
        Loton
        Corp.

        
	 	 
	 	 	 
	 	 	 
	By: 	 /s/ Robert Ellin	 	 
	Name:  	Robert Ellin	 	 
	Title:	CEO

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