Document:

Exhibit 4.2

 

EXECUTION COPY

 

NEITHER THE ISSUANCE NOR SALE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES.

 

	Principal Amount U.S. $302,646.58	May 13, 2016
	 	 
	Original Investment Date (determined pursuant to Rule 144(d)(3)(ii))	April 18, 2016

 

SECURED CONVERTIBLE PROMISSORY NOTE

 

FOR VALUE RECEIVED,
EASTSIDE DISTILLING, INC., a NEVADA corporation (hereinafter called the “Borrower”), hereby promises to pay
to the order of MR Group I LLC, a New York limited liability company, or registered assigns (the “Holder”) the
sum of Three Hundred Two Thousand Dollars Six Hundred Forty Six and 58/100 dollars ($302.646.58), on April 30, 2017 (the “Maturity
Date”), and to pay interest at the rate of fourteen percent (14%) (the “Interest Rate”) per annum. After the
Maturity Date, interest shall continue to accrue at the then applicable Interest Rate on the Principal Amount outstanding from
Maturity Date until the same becomes due and payable. This Note may not be prepaid in whole or in part except as otherwise explicitly
set forth in Section 1.9 hereof. Any amount of principal or interest on this Note which is not paid when due shall bear interest
at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”).
Interest shall commence accruing on the Issue Date, shall be computed on the basis of a 365-day year and the actual number of days
elapsed. All payments due hereunder (to the extent not converted into common stock, (the “Common Stock”) in accordance
with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address
as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever
any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead
be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on
which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining
the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than
a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive
order to remain closed. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in
that certain Exchange Agreement as of the date hereof, pursuant to which this Note was originally issued (the “Exchange Agreement”).

 

Except as set forth
in the Security Agreement, this Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and
shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal
liability upon the holder thereof.

 

    	 	Page 1 of 21	 

     

    

 

EASTSIDE DISTILLING, INC.

SECURED CONVERTIBLE PROMISSORY NOTE 

Issue Date: May 13, 2016

 

The following terms shall apply to this Note:

 

ARTICLE I. CONVERSION RIGHTS

 

1.1          Conversion
Right. The Holder shall have the right from time to time, and at any time during the period beginning on the date of this Note
and ending on the later of (i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined in Article III)
pursuant to Section 1.6(a) or Article III, each in respect of the remaining outstanding principal amount of this Note to convert
all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non-assessable shares of Common
Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which
such Common Stock shall hereafter be changed or reclassified at the conversion price (the “Conversion Price”) determined
as provided herein (a “Conversion”). The number of shares of Common Stock to be issued upon each conversion of this
Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect
on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”),
delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted
by facsimile (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New
York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means,
with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion
plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates
provided in this Note to the Conversion Date, provided, however, that the Borrower shall have the right to pay any or all interest
in cash plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding
clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and
1.4(g) hereof.

 

(a) Limitations on
Conversions. The Company shall not effect the conversion of any portion of this Note, and the Holder shall not have the right
to convert any portion of this Note pursuant to the terms and conditions of this Note and any such conversion shall be null and
void and treated as if never made, to the extent that after giving effect to such conversion, the Holder together with the other
Attribution Parties collectively would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the shares
of Common Stock outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the aggregate
number of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties (as defined below) shall include
the number of shares of Common Stock held by the Holder and all other Attribution Parties plus the number of shares of Common Stock
issuable upon conversion of this Note with respect to which the determination of such sentence is being made, but shall exclude
shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted portion of this Note beneficially
owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or nonconverted portion
of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or
warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous
to the limitation contained in this Section 1.1(a). For purposes of this Section 1.1(a), beneficial ownership shall be calculated
in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For purposes
of determining the number of outstanding shares of Common Stock the Holder may acquire upon the conversion of this Note without
exceeding the Maximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the
Company’s most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other public
filing with the SEC, as the case may be, (y) a more recent public announcement by the Company or (z) any other written notice by
the Company or the Transfer Agent, if any, setting forth the number of shares of Common Stock outstanding (the “Reported
Outstanding Share Number”). If the Company receives a Conversion Notice from the Holder at a time when the actual number
of outstanding shares of Common Stock is less than the Reported Outstanding Share Number, the Company shall notify the Holder in
writing of the number of shares of Common Stock then outstanding and, to the extent that such Conversion Notice would otherwise
cause the Holder’s beneficial ownership, as determined pursuant to this Section 1.1(a), to exceed the Maximum Percentage,
the Holder must notify the Company of a reduced number of shares of Common Stock to be purchased pursuant to such Conversion Notice.
For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm
orally and in writing or by electronic mail to the Holder the number of shares of Common Stock then outstanding. In any case, the
number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities
of the Company, including this Note, by the Holder and any other Attribution Party since the date as of which the Reported Outstanding
Share Number was reported. In the event that the issuance of shares of Common Stock to the Holder upon conversion of this Note
results in the Holder and the other Attribution Parties being deemed to beneficially own, in the aggregate, more than the Maximum
Percentage of the number of outstanding shares of Common Stock (as determined under Section 13(d) of the Exchange Act), the number
of shares so issued by which the Holder’s and the other Attribution Parties’ aggregate beneficial ownership exceeds
the Maximum Percentage (the “Excess Shares”) shall be deemed null and void and shall be cancelled ab initio, and the
Holder shall not have the power to vote or to transfer the Excess Shares. Upon delivery of a written notice to the Company, the
Holder may from time to time increase (with such increase not effective until the sixty-first (61st) day after delivery of such
notice) or decrease the Maximum Percentage to any other percentage not in excess of 9.99% as specified in such notice; provided
that (i) any such increase in the Maximum Percentage will not be effective until the sixty-first (61st) day after such notice is
delivered to the Company and (ii) any such increase or decrease will apply only to the Holder and the other Attribution Parties
and not to any other holder of Notes that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common
Stock issuable pursuant to the terms of this Note in excess of the Maximum Percentage shall not be deemed to be beneficially owned
by the Holder for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the Exchange Act. No prior inability
to convert this Note pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph
with respect to any subsequent determination of convertibility. The provisions of this paragraph shall be construed and implemented
in a manner otherwise than in strict conformity with the terms of this Section 1.1(a) to the extent necessary to correct this paragraph
(or any portion of this paragraph) which may be defective or inconsistent with the intended beneficial ownership limitation contained
in this Section 1.1(a) or to make changes or supplements necessary or desirable to properly give effect to such limitation. The
limitation contained in this paragraph may not be waived and shall apply to a successor holder of this Note. For the purpose of
this Section 1.1(a), “Attribution Parties” means, collectively, the following Persons and entities: (A) any investment
vehicle, including, any funds, feeder funds or managed accounts, currently, or from time to time after the Issuance Date, directly
or indirectly managed or advised by the Holder’s investment manager or any of its affiliates or principals, (B) any direct
or indirect affiliates of the Holder or any of the foregoing, (C) any Person acting or who could be deemed to be acting as a “group”
(as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d-5 thereunder, each, a “Group”) together
with the Holder or any of the foregoing and (D) any other Persons whose beneficial ownership of the Company’s Common Stock
would or could be aggregated with the Holder’s and the other Attribution Parties for purposes of Section 13(d) of the Exchange
Act. For clarity, the purpose of the foregoing is to subject collectively the Holder and all other Attribution Parties to the Maximum
Percentage.

 

    	 	Page 2 of 21	 

     

    

 

EASTSIDE DISTILLING, INC.

SECURED CONVERTIBLE PROMISSORY NOTE 

Issue Date: May 13, 2016

 

1.2          Conversion
Price.

 

(a)          Calculation
of Conversion Price. The conversion price (the “Conversion Price”) shall be equal to the lesser of (x) $0.40 per
share of Common Stock (the “Fixed Conversion Price”) (subject to equitable adjustments for stock splits, stock dividends
or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower,
combinations, recapitalization, reclassifications, extraordinary distributions and similar events) and (y) 35% discount from the
lowest Trading Price in the (i) five (5) Traading Days prior to conversion (for any conversions on or before May 22, 2016) or (ii)
ten (10) Trading Days prior to conversion (for any conversions after May 22, 2016). “Trading Price” means, for any
security as of any date, the lowest trading price on the Over-the-Counter Bulletin Board, or applicable trading market (the “OTCQB”)
as reported by a reliable reporting service (“Reporting Service”) mutually acceptable to Borrower and Holder (i.e.
Bloomberg). If the Trading Price cannot be calculated for such security on such date in the manner provided above, the Trading
Price shall be the fair market value as mutually determined by the Borrower and the holders of a majority in interest of the Notes
being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price of such Notes.
“Trading Day” shall mean any day on which the Common Stock is traded for any period on the OTCQB, or on the principal
securities exchange or other securities market on which the Common Stock is then being traded.

 

(b)          Fixed
Conversion Price Adjustment. Notwithstanding anything contained in Section 1.2(a) to the contrary, in the event the Borrower
(i) makes a public announcement that it intends to consolidate or merge with any other corporation (other than a merger in which
the Borrower is the surviving or continuing corporation and its capital stock is unchanged) or sell or transfer all or substantially
all of the assets of the Borrower or (ii) any person, group or entity (including the Borrower) publicly announces a tender offer
to purchase 50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the date of the announcement referred
to in clause (i) or (ii) is hereinafter referred to as the “Announcement Date”), then the Fixed Conversion Price shall,
effective upon the Announcement Date and continuing through the Adjusted Fixed Conversion Price Termination Date (as defined below),
be equal to the lower of (x) the Fixed Conversion Price which would have been applicable for a Conversion occurring on the Announcement
Date and (y) the Fixed Conversion Price that would otherwise be in effect. From and after the Adjusted Fixed Conversion Price Termination
Date, the Fixed Conversion Price shall be determined as set forth in this Section 1.2(a). For purposes hereof, “Adjusted
Fixed Conversion Price Termination Date” shall mean, with respect to any proposed transaction or tender offer (or takeover
scheme) for which a public announcement as contemplated by this Section 1.2(b) has been made, the date upon which the Borrower
(in the case of clause (i) above) or the person, group or entity (in the case of clause (ii) above) consummates or publicly announces
the termination or abandonment of the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(b)
to become operative.

 

    	 	Page 3 of 21	 

     

    

 

EASTSIDE DISTILLING, INC.

SECURED CONVERTIBLE PROMISSORY NOTE 

Issue Date: May 13, 2016

 

(c)          Adjustment
of Fixed Conversion Price upon Issuance of Common Stock. If and whenever on or after the Issue Date the Company issues or sells,
or in accordance with this Section 1.2(c) is deemed to have issued or sold, any shares of Common Stock (including the issuance
or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding any Excluded Securities issued
or sold or deemed to have been issued or sold) for a consideration per share (the “New Issuance Price”) less than a
price equal to the Fixed Conversion Price in effect immediately prior to such issuance or sale or deemed issuance or sale (such
Fixed Conversion Price then in effect is referred to herein as the “Applicable Price”) (the foregoing a “Dilutive
Issuance”), then, immediately after such Dilutive Issuance, the Fixed Conversion Price then in effect shall be reduced to
an amount equal to the New Issuance Price. For all purposes of the foregoing (including, without limitation, determining the adjusted
Fixed Conversion Price and the New Issuance Price under this Section 1.2(c)), the following shall be applicable (except with respect
to the issuance of Variable Price Securities (as defined in Section 1.2(e) which shall be governed by Section 1.2(e)):

 

(i)          Issuance
of Options. If the Company in any manner grants or sells any Options (as defined below) and the lowest price per share for
which one share of Common Stock is at any time issuable (it being understood that if all, or any portion, of the Common Stock issuable
upon exercise of an Option is subject to vesting, such Common Stock is only issuable at such time as the Option or portion thereof
is vested) upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable
upon exercise of any such Option or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share
of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or
sale of such Option for such price per share. For purposes of this Section 1.2(c)(i), the “lowest price per share for which
one share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible
Securities issuable upon exercise of any such Option or otherwise pursuant to the terms thereof” shall be equal to (1) the
lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any
one share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise
or exchange of any Convertible Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof and (y)
the lowest exercise price set forth in such Option for which one share of Common Stock is issuable upon the exercise of any such
Options or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option or otherwise
pursuant to the terms thereof, minus (2) the sum of all amounts paid or payable to the holder of such Option (or any other Person)
upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible
Security issuable upon exercise of such Option or otherwise pursuant to the terms thereof plus the value of any other consideration
received or receivable by, or benefit conferred on, the holder of such Option (or any other Person). Except as contemplated below,
no further adjustment of the Fixed Conversion Price shall be made upon the actual issuance of such share of Common Stock or of
such Convertible Securities (as defined below) upon the exercise of such Options or otherwise pursuant to the terms thereof or
upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities. For
purposes of this Agreement: (x)“Convertible Securities” means any stock or other security (other than Options) that
is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or which
otherwise entitles the holder thereof to acquire, any shares of Common Stock and (y) “Options” means any rights, warrants
or options to subscribe for or purchase shares of Common Stock or Convertible Securities.

 

    	 	Page 4 of 21	 

     

    

 

EASTSIDE DISTILLING, INC.

SECURED CONVERTIBLE PROMISSORY NOTE 

Issue Date: May 13, 2016

 

(ii)         Issuance
of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities and the lowest price per
share for which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise
pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding
and to have been issued and sold by the Company at the time of the issuance or sale of such Convertible Securities for such price
per share. For the purposes of this Section 1.2(c)(ii), the “lowest price per share for which one share of Common Stock is
issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof” shall be equal to
(1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect
to one share of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of
such Convertible Security or otherwise pursuant to the terms thereof and (y) the lowest conversion price set forth in such Convertible
Security for which one share of Common Stock is issuable upon conversion, exercise or exchange thereof or otherwise pursuant to
the terms thereof minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person)
upon the issuance or sale of such Convertible Security plus the value of any other consideration received or receivable by, or
benefit conferred on, the holder of such Convertible Security (or any other Person). Except as contemplated below, no further adjustment
of the Fixed Conversion Price shall be made upon the actual issuance of such shares of Common Stock upon conversion, exercise or
exchange of such Convertible Securities or otherwise pursuant to the terms thereof, and if any such issuance or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of the Fixed Conversion Price has been or is to be made pursuant
to other provisions of this Section 1.2(c), except as contemplated below, no further adjustment of the Fixed Conversion Price shall
be made by reason of such issuance or sale.

 

(iii)        Change
in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration,
if any, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible
Securities are convertible into or exercisable or exchangeable for shares of Common Stock increases or decreases at any time (other
than proportional changes in conversion or exercise prices, as applicable, in connection with an event referred to in Section 1.2(d)
below), the Fixed Conversion Price in effect at the time of such increase or decrease shall be adjusted to the Fixed Conversion
Price which would have been in effect at such time had such Options or Convertible Securities provided for such increased or decreased
purchase price, additional consideration or increased or decreased conversion rate (as the case may be) at the time initially granted,
issued or sold. For purposes of this Section 1.2(c)(iii), if the terms of any Option or Convertible Security that was outstanding
as of the Subscription Date are increased or decreased in the manner described in the immediately preceding sentence, then such
Option or Convertible Security and the shares of Common Stock deemed issuable upon exercise, conversion or exchange thereof shall
be deemed to have been issued as of the date of such increase or decrease. No adjustment pursuant to this Section 1.2(c) shall
be made if such adjustment would result in an increase of the Fixed Conversion Price then in effect.

 

    	 	Page 5 of 21	 

     

    

 

EASTSIDE DISTILLING, INC.

SECURED CONVERTIBLE PROMISSORY NOTE 

Issue Date: May 13, 2016

 

(iv)        Calculation
of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right (as defined below) is issued in
connection with the issuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder,
the “Primary Security”, and such Option and/or Convertible Security and/or Adjustment Right, the “Secondary Securities”),
together comprising one integrated transaction (or one or more transactions if such issuances or sales or deemed issuances or sales
of securities of the Company either (A) (1) have at least one investor or purchaser in common, or (2) are consummated under the
same plan of financing) (B) (1) are consummated in reasonable proximity to each other or (2) are consummated under the same plan
of financing), the aggregate consideration per share of Common Stock with respect to such Primary Security shall be deemed to be
equal to the difference of (x) the lowest price per share for which one share of Common Stock was issued (or was deemed to be issued
pursuant to Section 1.2(c)(i) or 1.2(c)(ii) above, as applicable) in such integrated transaction solely with respect to such Primary
Security, minus (y) with respect to such Secondary Securities, the sum of (I) the Black Scholes Consideration Value of each such
Option, if any, (II) the fair market value (as determined by the Holder in good faith) or the Black Scholes Consideration Value
(as defined below), as applicable, of such Adjustment Right, if any, and (III) the fair market value (as determined by the Holder)
of such Convertible Security, if any, in each case, as determined on a per share basis in accordance with this Section 1.2(c)(iv).
If any shares of Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash,
the consideration received therefor (for the purpose of determining the consideration paid for such Common Stock, Option or Convertible
Security, but not for the purpose of the calculation of the Black Scholes Consideration Value) will be deemed to be the net amount
of consideration received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued
or sold for a consideration other than cash, the amount of such consideration received by the Company (for the purpose of determining
the consideration paid for such Common Stock, Option or Convertible Security, but not for the purpose of the calculation of the
Black Scholes Consideration Value) will be the fair value of such consideration, except where such consideration consists of publicly
traded securities, in which case the amount of consideration received by the Company for such securities will be the arithmetic
average of the VWAPs of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares
of Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any
merger in which the Company is the surviving entity, the amount of consideration therefor (for the purpose of determining the consideration
paid for such Common Stock, Option or Convertible Security, but not for the purpose of the calculation of the Black Scholes Consideration
Value) will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable
to such shares of Common Stock, Options or Convertible Securities (as the case may be). The fair value of any consideration other
than cash or publicly traded securities will be determined jointly by the Company and the Holder. If such parties are unable to
reach agreement within ten (10) days after the occurrence of an event requiring valuation (the “Valuation Event”),
the fair value of such consideration will be determined within five (5) Trading Days after the tenth (10th) day following such
Valuation Event by an independent, reputable appraiser jointly selected by the Company and the Holder. The determination of such
appraiser shall be final and binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be
borne by the Company. For purposes of this Agreement (x) “Adjustment Right” means any right granted with respect to
any securities issued in connection with, or with respect to, any issuance or sale (or deemed issuance or sale in accordance with
Section 1.2(c)) of shares of Common Stock that could result in a decrease in the net consideration received by the Company in connection
with, or with respect to, such securities (including, without limitation, any cash settlement rights, cash adjustment or other
similar rights).and (y) “Black Scholes Consideration Value” means the value of the applicable Option, Convertible Security
or Adjustment Right (as the case may be) as of the date of issuance thereof calculated using the Black Scholes Option Pricing Model
obtained from the “OV” function on Bloomberg, L.P. utilizing (i) an underlying price per share equal to the Closing
Sale Price of the Common Stock on the Trading Day immediately preceding the public announcement of the execution of definitive
documents with respect to the issuance of such Option, Convertible Security or Adjustment Right (as the case may be), (ii) a risk-free
interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of such Option, Convertible Security
or Adjustment Right (as the case may be) as of the date of issuance of such Option, Convertible Security or Adjustment Right (as
the case may be), (iii) a zero cost of borrow and (iv) an expected volatility equal to the greater of 100% and the 100 day volatility
obtained from the “HVT” function on Bloomberg (determined utilizing a 365 day annualization factor) as of the Trading
Day immediately following the date of issuance of such Option, Convertible Security or Adjustment Right (as the case may be).

 

(v)         Record
Date. If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive
a dividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for
or purchase shares of Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the
issuance or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the
making of such other distribution or the date of the granting of such right of subscription or purchase (as the case may be).

 

(d)          Adjustment
of Fixed Conversion Price upon Subdivision or Combination of Common Stock. Without limiting any provision of Section 1.2(c),
if the Company at any time on or after the Subscription Date subdivides (by any stock split, stock dividend, stock combination,
recapitalization or other similar transaction) one or more classes of its outstanding shares of Common Stock into a greater number
of shares, the Fixed Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. Without
limiting any provision of Section 1.2(c), if the Company at any time on or after the Issue Date combines (by any stock split, stock
dividend, stock combination, recapitalization or other similar transaction) one or more classes of its outstanding shares of Common
Stock into a smaller number of shares, the Fixed Conversion Price in effect immediately prior to such combination will be proportionately
increased. Any adjustment pursuant to this Section 1.2(d) shall become effective immediately after the effective date of such subdivision
or combination. If any event requiring an adjustment under this Section 1.2(d) occurs during the period that a Fixed Conversion
Price is calculated hereunder, then the calculation of such Fixed Conversion Price shall be adjusted appropriately to reflect such
event.

 

    	 	Page 6 of 21	 

     

    

 

EASTSIDE DISTILLING, INC.

SECURED CONVERTIBLE PROMISSORY NOTE 

Issue Date: May 13, 2016

 

(e)          Holder’s
Right of Adjusted Fixed Conversion Price. In addition to and not in limitation of the other provisions of this Section 1.2,
if the Company in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible
Securities (any such securities, “Variable Price Securities”), after the Subscription Date that are issuable pursuant
to such agreement or convertible into or exchangeable or exercisable for shares of Common Stock at a price which varies or may
vary with the market price of the shares of Common Stock, including by way of one or more reset(s) to a fixed price, but exclusive
of such formulations reflecting customary anti-dilution provisions (such as share splits, share combinations, share dividends and
similar transactions) (each of the formulations for such variable price being herein referred to as, the “Variable Price”),
the Company shall provide written notice thereof via facsimile and overnight courier to the Holder on the date of such agreement
and the issuance of such Convertible Securities or Options. From and after the date the Company enters into such agreement or issues
any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its sole discretion to substitute
the Variable Price for the Fixed Conversion Price upon conversion of this Note by designating in the Conversion Notice delivered
upon any conversion of this Note that solely for purposes of such conversion the Holder is relying on the Variable Price rather
than the Fixed Conversion Price then in effect. The Holder’s election to rely on a Variable Price for a particular conversion
of this Note shall not obligate the Holder to rely on a Variable Price for any future conversion of this Note.

 

(f)          Other
Events. In the event that the Company (or any Subsidiary) shall take any action to which the provisions hereof are not strictly
applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplated
by the provisions of this Section 1.2 but not expressly provided for by such provisions (including, without limitation, the granting
of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s board of directors
shall in good faith determine and implement an appropriate adjustment in the Fixed Conversion Price so as to protect the rights
of the Holder, provided that no such adjustment pursuant to this Section 1.2(f) will increase the Fixed Conversion Price as otherwise
determined pursuant to this Section 1.2, provided further that if the Holder does not accept such adjustments as appropriately
protecting its interests hereunder against such dilution, then the Company’s board of directors and the Holder shall agree,
in good faith, upon an independent investment bank of nationally recognized standing to make such appropriate adjustments, whose
determination shall be final and binding absent manifest error and whose fees and expenses shall be borne by the Company.

 

(f)          Calculations.
All calculations under this Section 1.2 shall be made by rounding to the nearest cent or the nearest 1/100th of a share, as applicable.
The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account
of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

 

(g)          Voluntary
Adjustment by Company. The Company may at any time during the term of this Note, with the prior written consent of the Holder,
reduce the then current Fixed Conversion Price of each of the Notes to any amount and for any period of time deemed appropriate
by the board of directors of the Company.

 

    	 	Page 7 of 21	 

     

    

 

EASTSIDE DISTILLING, INC.

SECURED CONVERTIBLE PROMISSORY NOTE 

Issue Date: May 13, 2016

 

(h)          Additional
Definitions. For purposes of this Agreement (x) “Approved Stock Plan” means any employee benefit plan which has
been approved by the board of directors of the Company prior to or subsequent to the Subscription Date pursuant to which shares
of Common Stock and standard options to purchase Common Stock may be issued to any employee, officer, consultant or director for
services provided to the Company in their capacity as such. and (y) “Excluded Securities” means: means (i) shares of
Common Stock or standard options to purchase Common Stock issued or issuable to directors, officers or employees of the Company
for services rendered to the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided
that all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) of options or shares
of Common Stock after the Subscription Date pursuant to this clause (i) do not, in the aggregate, exceed more than 5 million shares
of Common Stock in any calendar year (assuming, for such purpose, that all shares of Common Stock issuable upon exercise of such
options vested upon the date of issuance of such option); (ii) shares of Common Stock issued upon the conversion or exercise of
Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are
covered by clause (i) above) issued prior to the Issue Date, provided that such Convertible Securities (other than standard options
to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i) above) are not amended to lower
the conversion price or to increase the number of shares issuable thereunder (other than antidilution adjustments pursuant to the
terms thereof in effect on the date hereof); (iii) the shares of Common Stock issuable upon conversion of the Notes or otherwise
pursuant to the terms of the Notes; provided, that the terms of the Notes are not amended, modified or changed on or after the
Issue Date (other than antidilution adjustments pursuant to the terms thereof in effect as of the Issue Date), (iv) the shares
of Common Stock issuable pursuant to the Certificate of Designations for the Series A Preferred Stock of the Company as in effect
on March 9, 2016 (including, without limitation, the issuance of up to 3,000 shares of Series A Preferred Stock in accordance therewith);
warrants to purchase Common Stock issued in connection therewith, exercisable, in the aggregate, into up to 20 million shares of
Common Stock at an exercise price of $0.18 per share of Common Stock (provided, that the terms of such Certificate of Designations
and such warrants are not amended, modified or changed in any material respect adverse to the Holder from the forms thereof filed
with the Securities and Exchange Commission prior to the Issue Date and warrants to purchase common stock to broker-dealers on
connection with such offering of Series A Preferred Stock at an exercise price of $0.15 as partial consideration under such offering;
and (iv) shares of Common Stock, Options and Convertible Securities issued pursuant to equipment
lease financings, strategic partnerships, strategic alliances, strategic mergers or acquisitions of other assets or businesses,
or strategic licensing or development transactions; provided that (x) the primary purpose of such issuance is not, directly or
indirectly, to raise capital as determined in good faith by the Holder, (y) the purchaser or acquirer of such shares of Common
Stock in such issuance solely consists of either (1) the actual participants in such equipment lease financings, strategic partnership,
strategic alliances, or strategic licensing or development transactions, or (2) the actual owners of such assets or securities
acquired in such merger or acquisition.

 

1.3          Authorized
Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized
and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock
upon the full conversion of this Note issued pursuant to the Exchange Agreement. The Borrower is required at all times to have
authorized and reserved five times the number of shares that is actually issuable upon full conversion of the Note (based on the
Conversion Price of the Notes in effect from time to time) (the “Reserved Amount”). The Reserved Amount shall be increased
from time to time in accordance with the Borrower’s obligations pursuant to Section 4(g) of the Exchange Agreement. Commencing
on the expiration of the first month from the issue date of this Note, the Reserved Amount shall be recalculated each month based
upon the Variable Conversion Price and the Company shall notify the Transfer Agent and the Holder in writing by the fifth day of
the following month of the new Reserved Amount. In the event the Company does not notify the Transfer Agent of the new Reserved
Amount in a timely manner, the Holder shall have the absolute right to notify the Transfer Agent, without any further action by
the Company. Notwithstanding the foregoing, in no event shall the Reserved Amount be lower than the initial Reserved Amount, regardless
of any prior conversions. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and
non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would
change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the
Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common
Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Notes. The Borrower (i) acknowledges
that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this
Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged
with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance
with the terms and conditions of this Note.

 

If, at any time the Borrower does not maintain
the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.

 

    	 	Page 8 of 21	 

     

    

 

EASTSIDE DISTILLING, INC.

SECURED CONVERTIBLE PROMISSORY NOTE 

Issue Date: May 13, 2016

 

1.4          
Method of Conversion.

 

(a)           Mechanics
of Conversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time to
time after the Issue Date, by: (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable
means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section
1.4(b), surrendering this Note at the principal office of the Borrower.

 

(b)           Surrender
of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance
with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid
principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount
so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower,
so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such
records of the Borrower shall, prima facie, be controlling and determinative in the absence of manifest error. Notwithstanding
the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first
physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the
Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request,
representing in the aggregate the remaining unpaid principal amount of this Note. The Holder and any assignee, by acceptance of
this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this
Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the
face hereof.

 

(c)          
Payment of Taxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved
in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other
than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other
securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such
shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount
of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.

 

(d)           Delivery
of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other
reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section
1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for
the Common Stock issuable upon such conversion within three (3) business days after such receipt (but in any event the fifth (5th)
business day being hereinafter referred to as the “Deadline”) (and, solely in the case of conversion of the entire
unpaid principal amount hereof, surrender of the this Note) in accordance with the terms hereof and the Exchange Agreement.

 

(e)          
Obligation of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall
be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the
amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults
on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith
terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion.
If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver
the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder
to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person
or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder
of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of
any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower
to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion
Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m., New York, New York time, on such date.

 

    	 	Page 9 of 21	 

     

    

 

EASTSIDE DISTILLING, INC.

SECURED CONVERTIBLE PROMISSORY NOTE 

Issue Date: May 13, 2016

 

(f)           Delivery
of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable
upon conversion, provided the Borrower’s transfer agent is participating in the Depository Trust Company (“DTC”)
Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions
contained in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically
transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC
through its Deposit/Withdrawal at Custodian (“DWAC”) system.

 

(g)          
Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other
remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon
conversion of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3
above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $2,000 per day in cash, for each day
beyond the Deadline that the Borrower fails to deliver such Common Stock; provided, however that such damages shall cease to accrue
upon cancellation of the applicable conversion by Holder in accordance with Section 1.8 hereof. Such cash amount shall be paid
to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written
notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal
amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional
principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the
right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with
such conversion right are difficult if not impossible to qualify. Accordingly the parties acknowledge that the liquidated damages
provision contained in this Section 1.4(g) are justified.

 

1.5           Concerning
the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such
shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall
have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel
in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption
from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule
144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees
to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined
in the Exchange Agreement). Except as otherwise provided in the Exchange Agreement (and subject to the removal provisions set forth
below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Act
or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that
can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been
so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or
an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

 

“NEITHER THE ISSUANCE
AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

 

    	 	Page 10 of 21	 

     

    

 

EASTSIDE DISTILLING, INC.

SECURED CONVERTIBLE PROMISSORY NOTE 

Issue Date: May 13, 2016

 

The legend set forth
above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i)
the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions
of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration
under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected or (ii) in the case of the
Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration
statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities
as of a particular date that can then be immediately sold. In the event that the Company does not accept the opinion of counsel
provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or
Regulations S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

 

1.6           Effect
of Certain Events.

 

(a)          
Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially
all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which
more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of
the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either: (i)
be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the
Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article
III) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited
liability company, partnership, association, trust or other entity or organization.

 

(b)           Adjustment
Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all
of the Notes, there shall be any merger, consolidation, exchange of shares, reca-pitalization, reorganization, or other similar
event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares
of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all
or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower,
then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion,
such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted
in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such
case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the
provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares
issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities
or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section
1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least fifteen
(15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record
date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event
or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring
entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above provisions shall similarly
apply to successive consolidations, mergers, sales, transfers or share exchanges.

 

(c)           Adjustment
Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets)
to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or
distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary
(i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this
Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets
which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder
been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.

 

    	 	Page 11 of 21	 

     

    

 

EASTSIDE DISTILLING, INC.

SECURED CONVERTIBLE PROMISSORY NOTE 

Issue Date: May 13, 2016

 

(d)          
Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the
events described in this Section 1.6, the Borrower, at its expense, shall promptly compute such adjustment or readjustment and
prepare and furnish to the Holder of a certificate setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Borrower shall, upon the written request at any time of the Holder, furnish
to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect
and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would
be received upon conversion of the Note.

 

1.7           Trading
Market Limitations. Unless permitted by the applicable rules and regulations of the principal securities market on which the
Common Stock is then listed or traded, in no event shall the Borrower issue upon conversion of or otherwise pursuant to this Note
and the other Notes issued pursuant to the Exchange Agreement more than the maximum number of shares of Common Stock that the Borrower
can issue pursuant to any rule of the principal United States securities market on which the Common Stock is then traded (the “Maximum
Share Amount”), subject to equitable adjustment from time to time for stock splits, stock dividends, combinations, capital
reorganizations and similar events relating to the Common Stock occurring after the date hereof. Once the Maximum Share Amount
has been issued, if the Borrower fails to eliminate any prohibitions under applicable law or the rules or regulations of any stock
exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Borrower or any of its
securities on the Borrower’s ability to issue shares of Common Stock in excess of the Maximum Share Amount, in lieu of any
further right to convert this Note, this will be considered an Event of Default under Section 3.3 of the Note.

 

1.8           Status
as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares,
if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount
or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of
such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares
of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure
by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates
for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion
of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common
Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted
portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note
has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the
Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default
Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any subsequent Conversion Default
and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3)
for the Borrower’s failure to convert this Note.

 

1.9          
Prepayment. Notwithstanding anything to the contrary contained in this Note, so long as the Borrower has not received a
Notice of Conversion from the Holder and so long as the Borrower is not in default pursuant to Section 3 of this Note, then at
any time during the period beginning on the Issue Date and ending on the date that one day prior to the Maturity Date, the Borrower
shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay
the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.9. Any notice of prepayment hereunder
(an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its registered address and shall
state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more
than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional
Prepayment Date”), the Borrower shall make payment to or upon the order of the Holder as specified by the Holder in writing
to the Borrower. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount
in cash. Not withstanding anything to the contrary herein, the Holder may elect to exercise its right to convert all or any part
of this Note at the then applicable Conversion Price during the three (3) Trading Days following receipt of the Optional Prepayment
Notice by delivery during such period of a Conversion Notice. Any such delivery of a Conversion Notice shall supersede any Optional
Prepayment Notice.

 

    	 	Page 12 of 21	 

     

    

 

EASTSIDE DISTILLING, INC.

SECURED CONVERTIBLE PROMISSORY NOTE 

Issue Date: May 13, 2016

 

ARTICLE II. CERTAIN COVENANTS

 

2.1           Negative
Covenants As long as at least 50% or more of the original Principal Amount of this Note remains outstanding, unless the holders
of all of the outstanding Notes shall have otherwise given prior written consent, the Borrower shall not, and shall not permit
any of its subsidiaries (whether or not a subsidiary on the Issue Date) to, directly or indirectly:

 

(a)           other
than indebtedness existing as of the date of this Note (including this Note and the Second Note), incurred in the ordinary course
of business for trade expenses (not borrowed money) or which indebtedness will repay all amounts due under this Note in full (“Permitted
Indebtedness”), enter into, create, incur, assume, guarantee or suffer to exist any indebtedness for borrowed money of any
kind, including, but not limited to, a guarantee, on or with respect to any of its property or assets now owned or hereafter acquired
or any interest therein or any income or profits therefrom, which indebtedness shall be senior is respect to security to this Note;

 

(b)           other
than Permitted Liens (as defined below), enter into, create, incur, assume or suffer to exist any liens, charges or encumbrances
of any kind or nature (“Liens”), on or with respect to any of its property or assets now owned or hereafter acquired
or any interest therein or any income or profits therefrom. “Permitted Lien” means the individual and collective reference
to the following: (a) Liens for taxes, assessments and other governmental charges or levies not yet due or Liens for taxes, assessments
and other governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves
(in the good faith judgment of the management of the Borrower) have been established in accordance with GAAP; (b) Liens imposed
by law which were incurred in the ordinary course of the Borrower’s business, such as carriers’, warehousemen’s
and mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in the ordinary course of the Borrower’s
business, and which (x) do not individually or in the aggregate materially detract from the value of such property or assets or
materially impair the use thereof in the operation of the business of the Borrower and its consolidated subsidiaries or (y) are
being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing for the foreseeable future
the forfeiture or sale of the property or asset subject to such Lien; (c) Liens incurred in connection with Permitted Indebtedness
or (d) any Liens disclosed under Section 3t. of the Exchange Agreement.

 

2.2. Additional Negative
Covenants. As long as any portion of this Note remains outstanding, unless the holders of all of the outstanding Notes shall have
otherwise given prior written consent, the Borrower shall not, and shall not permit any of its subsidiaries (whether or not a subsidiary
on the Issue Date) to, directly or indirectly:

 

(a)           amend
its charter documents, including, without limitation, its Articles of Incorporation and bylaws, in any manner that materially and
adversely affects any rights of the Holder;

 

(b)           repay,
repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its Common Stock or Common
Stock equivalents;

 

(c)           pay
cash dividends or distributions on any equity securities of the Borrower;

 

(d)           sell,
lease or otherwise dispose of any portion of its assets outside the ordinary course of business, other than de minimis sales. Any
consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition;

 

(e)           so
long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent,
lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without limitation, officers,
directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a) in existence or committed
on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof, (b) made in the ordinary course
of business or (c) not in excess of $10,000;

 

    	 	Page 13 of 21	 

     

    

 

EASTSIDE DISTILLING, INC.

SECURED CONVERTIBLE PROMISSORY NOTE 

Issue Date: May 13, 2016

 

(f)           enter
into any transaction with any affiliate of the Borrower which would be required to be disclosed in any public filing with the Commission,
unless such transaction is made on an arm’s length basis and expressly approved by a majority of the disinterested directors
of the Borrower (even if less than a quorum otherwise required for board approval); or

 

(g)           enter
into any agreement with respect to any of the foregoing.

 

ARTICLE III. EVENTS OF DEFAULT

 

If any of the following events of default (each, an
“Event of Default”) shall occur:

 

3.1          
Failure to Pay Principal or Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this
Note, whether at maturity, upon acceleration or otherwise.

 

3.2          Conversion
and the Shares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that
it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with
the terms of this Note by the Deadline, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in
certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to
this Note as and when required by this Note by the Deadline, the Borrower directs its transfer agent not to transfer or delays,
impairs, and/or hinders its transfer agent in transferring (or issuing( electronically or in certificated form) any certificate
for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required
by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent
from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for
any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this
Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this
paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations
shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion.

 

3.3          Breach
of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any
collateral documents including but not limited to the Exchange Agreement and such breach continues for a period of ten (10) days
after written notice thereof to the Borrower from the Holder;

 

3.4          Breach
of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement
or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Exchange Agreement),
shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have)
a material adverse effect on the rights of the Holder with respect to this Note or the Exchange Agreement;

 

3.5          Bankruptcy,
Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall commence, or there shall be commenced against the
Borrower or any subsidiary of the Borrower under any applicable bankruptcy or insolvency laws as now or hereafter in effect or
any successor thereto, or the Borrower or any subsidiary of the Borrower commences any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether
now or hereafter in effect relating to the Borrower or any subsidiary of the Borrower or there is commenced against the Borrower
or any subsidiary of the Borrower any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of
61 days; or the Borrower or any subsidiary of the Borrower is adjudicated insolvent or bankrupt; or any order of relief or other
order approving any such case or proceeding is entered; or the Borrower or any subsidiary of the Borrower suffers any appointment
of any custodian, private or court appointed receiver or the like for it or any substantial part of its property which continues
undischarged or unstayed for a period of sixty one (61) days; or the Borrower or any subsidiary of the Borrower makes a general
assignment for the benefit of creditors; or the Borrower or any subsidiary of the Borrower shall fail to pay, or shall state that
it is unable to pay, or shall be unable to pay, its debts generally as they become due; or the Borrower or any subsidiary of the
Borrower shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts;
or the Borrower or any subsidiary of the Borrower shall by any act or failure to act expressly indicate its consent to, approval
of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Borrower or any subsidiary of the
Borrower for the purpose of effecting any of the foregoing;

 

    	 	Page 14 of 21	 

     

    

 

EASTSIDE DISTILLING, INC.

SECURED CONVERTIBLE PROMISSORY NOTE 

Issue Date: May 13, 2016

 

3.6          Judgments.
Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or
any of its property or other assets for more than $50,000, and shall remain unvaca-ted, unbonded or unstayed for a period of twenty
(20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld;

 

3.7          Indebtedness
Default. The Borrower or any subsidiary of the Borrower shall default in any of its obligations under any other Note or any
mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may
be issued, or by which there may be secured or evidenced any indebtedness for borrowed money or money due under any long term leasing
or factoring arrangement of the Borrower or any subsidiary of the Borrower in an amount exceeding $50,000, whether such indebtedness
now exists or shall hereafter be created and such default shall result in such indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise become due and payable;

 

3.8          Delisting
of Common Stock; DTC Chill. The Borrower shall fail to maintain the quoting or listing of the Common Stock on at least one
of the OTC Markets or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, the New York
Stock Exchange, or the American Stock Exchange or there shall be no bid price for the stock for a period of one business day OR
the Depository Trust Company places a chill on new deposits of Common Stock, which is not removed within ten (20) trading days;

 

3.9          Failure
to Comply with the Exchange Act. The Borrower shall fail to meet the current public information requirements under Rule 144
(provided that where Borrower files a periodic report within the time period required under Form NT shall not be deemed a default
of this Section 3.9); and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

 

3.10        Liquidation.
Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

 

3.11        Cessation
of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts
as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going
concern” shall not be an admission that the Borrower cannot pay its debts as they become due.

 

3.12        Maintenance
of Assets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other
assets which are necessary to conduct its business (whether now or in the future).

 

3.13        Financial
Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC for any date or period
from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement
would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder
with respect to this Note or the Exchange Agreement.

 

3.14        Reverse
Splits. The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.

 

    	 	Page 15 of 21	 

     

    

 

EASTSIDE DISTILLING, INC.

SECURED CONVERTIBLE PROMISSORY NOTE 

Issue Date: May 13, 2016

 

3.15        Replacement
of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior
to the effective date of such replacement, fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered
pursuant to the Exchange Agreement (including but not limited to the provision to irrevocable reserve shares of Common Stock in
the Reserved Amount) signed by the successor transfer agent to Holder and the Borrower.

 

3.16        Failure
to Pay Post-Closing Expenses. The failure by Borrower to pay any and all Post-Closing Expenses as defined in section 4.6.

 

3.17        Delisting.
From and after the initial trading, listing or quotation of the Common Stock on a Principal Market, an event resulting in the Common
Stock no longer being traded, listed or quoted on a Principal Market; failure to comply with the requirements for continued quotation
on a Principal Market; or notification from a Principal Market that the Borrower is not in compliance with the conditions for such
continued quotation and such non-compliance continues for seven (7) trading days following such notification.

 

3.18        Cross-Default.
Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default
by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable
notice and cure or grace periods, shall, at the option of the Borrower, be considered a default under this Note and the Other Agreements,
in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the
terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements”
means collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the
Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term “Other
Agreements” shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted
with each other loan transaction and with all other existing and future debt of Borrower to the Holder.

 

3.19        Consecutive
Late Filings. If the Company files a late notification (NT 10-Q or NT 10-K) for any quarterly or annual report for any two
(2) consecutive periods.

 

Upon the occurrence and
during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof
or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable and the Borrower shall pay
to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Amount (as defined herein). Upon
the occurrence and during the continuation of any Event of Default specified in Sections 3.1 (solely with respect to failure to
pay the principal hereof or interest thereon when due on this Note upon a Trading Market Prepayment Event pursuant to Section 1.7
or upon acceleration), 3.2, 3.3, 3.4, 3.6, 3.8, 3.9, 3.11, 3.12, 3.13, 3.14, 3.15, 3.16, 3.17, 3.18, and/or 3.19 exercisable through
the delivery of written notice to the Borrower by such Holders (the “Default Notice”), and upon the occurrence of an
Event of Default specified in the remaining sections of Articles III (other than failure to pay the principal hereof or interest
thereon at the Maturity Date specified in Section 3.1 hereof), the Note shall become immediately due and payable and the Borrower
shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount 133% times the sum of (w) the
then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this
Note to the date of payment (the “Mandatory Prepayment Date”) plus (y) Default Interest, if any, on the amounts
referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof
(the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in clauses (x),
(y) and (z) shall collectively be known as the “Default Amount”)

 

If the Borrower fails to pay the Default
Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right
at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares),
to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common
Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.

 

    	 	Page 16 of 21	 

     

    

 

EASTSIDE DISTILLING, INC.

SECURED CONVERTIBLE PROMISSORY NOTE 

Issue Date: May 13, 2016

 

ARTICLE IV. MISCELLANEOUS

 

4.1          Failure
or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative
to, and not exclusive of, any rights or remedies otherwise available.

 

4.2          Notices.
All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted
by hand delivery, telegram, email or facsimile, addressed as set forth below or to such other address as such party shall have
specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall
be deemed effective (a) upon hand delivery or delivery by facsimile or email, with accurate confirmation generated by the transmitting
facsimile machine or computer as applicable, at the address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day following such delivery (if delivered other than
on a business day during normal business hours where such notice is to be received) or (b) on the second business day following
the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall be:

 

If to the Borrower, to:

 

EASTSIDE DISTILLING, INC.

1805 S.E. MARTIN LUTHER KING JR. BLVD.

PORTLAND, OR 97214

Attn: Mr. Steven Earles, CEO

Email: steven@eastsidedistilling.com

 

If to the Holder:

 

MR Group, I, LLC

c/o Magna Equities
II LLC

5 Hanover Square

16th Floor

New York, NY 10004

Attn: Joshua Sason,
CEO

Email: joshua.sason@magna.ca

 

with a copy to

 

WWOD Holdings LLC

535 Fifth Avenue

4th Floor

New York, NY 10017

Attention: Neil Rock

Email: neil@diamondrockcap.com

 

with a copy (for information
purposes only) to:

 

Kelley Drye & Warren
LLP

101 Park Avenue

New York, NY 10178

Attention: Michael
Adelstein, Esq

Email: MAdelstein@KelleyDrye.com

 

    	 	Page 17 of 21	 

     

    

 

EASTSIDE DISTILLING, INC.

SECURED CONVERTIBLE PROMISSORY NOTE 

Issue Date: May 13, 2016

 

4.3          Amendments.
This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term
“Note” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes
issued pursuant to the Exchange Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.

 

4.4          Assignability.
This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and
its successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a)
of the 1933 Act). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with
a bona-fide margin account or other lending arrangement.

 

4.5          Cost
of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection,
including reasonable attorneys’ fees.

 

4.6          Post-Closing
Expenses. The Issuer will bear any and all miscellaneous expenses that may arise as a result of this Agreement post-closing.
These expenses include, but are not limited to, the cost of legal opinion production, transfer agent fees, equity issuance fees,
etc. The failure to pay any and all Post-Closing Expenses will be deemed a default as described in Section 3.16 herein.

 

4.7          Governing
Law. This Note shall be governed by and construed in accordance with the laws of the State of Illinois without regard to principles
of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note
shall be brought only in the state courts of New York or in the federal courts located in the state and county of New York. The
parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall
not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Borrower and Holder
waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees
and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith 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 any agreement. Each party
hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in
connection with this Agreement or any other Transaction Document 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.

 

4.8          Certain
Amounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount
(or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest,
the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult
to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate
the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock
acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower
and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the
Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.

 

4.9          Exchange
Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Exchange Agreement.

 

    	 	Page 18 of 21	 

     

    

 

EASTSIDE DISTILLING, INC.

SECURED CONVERTIBLE PROMISSORY NOTE 

Issue Date: May 13, 2016

 

4.10        Notice
of Corporate Events. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common
Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior
notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders).
In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are
entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including
by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property,
or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed
sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or
winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date
specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date
on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement
regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower
shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with
the notification to the Holder in accordance with the terms of this Section 4.10.

 

4.11        Remedies.
The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for
a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the
Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law
or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing
any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic
loss and without any bond or other security being required.

 

4.12        Severability.
If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances.
If it shall be found that any interest or other amount deemed interest due hereunder shall violate applicable laws governing usury,
the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest. The
Borrower covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive
the Borrower from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted,
now or at any time hereafter in force, or which may affect the covenants or the performance of this indenture, and the Borrower
(to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it
will not, by resort to any such law, hinder, delay or impeded the execution of any power herein granted to the Holder, but will
suffer and permit the execution of every such as though no such law has been enacted.

 

(Signature Pages Follow)

 

 

    	 	Page 19 of 21	 

     

    

 

IN WITNESS WHEREOF,
Borrower has caused this Note to be signed in its name by its duly authorized officer this May 13, 2016.

 

	 	EASTSIDE DISTILLING, INC.	 
	 	 	 	 
	 	By	 /x/ Steven Earles	 
	 	 	Steven Earles, CEO	 

 

    	 	Page 20 of 21	 

     

    

 

Exhibit A.

 

NOTICE OF CONVERSION

 

The undersigned hereby elects to convert
$________________ of the principal amount of the Note (defined below) into Shares of Common Stock of EASTSIDE DISTILLING, INC.,
a NEVADA Corporation (the “Borrower”) according to the conditions of the Convertible Note of the Borrower dated
as of May 13, 2016 (the “Note”). No fee will be charged to the Holder or Holder’s Custodian for any conversion,
except for transfer taxes, if any.

 

Box Checked as to applicable instructions: 

 

	 	 ̈	The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit/Withdrawal at Custodian system (“DWAC Transfer”). 
	 	 	 
	 	 	Name of DTC Prime Broker: _____________________________________________
	 	 	 
	 	 	Account Number: ____________________________________________________
	 	 	 
	 	 ̈	The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below:

 

	Date of Conversion:	 	 
	 	 	 
	Conversion Price:	 	 
	 	 	 
	Shares to Be Delivered:	 	 
	 	 	 
	Remaining Principal Balance Due  	 	 
	 	 	 
	After This Conversion:	 	 
	 	 	 
	Signature	 	 
	 	 	 
	Print Name:	 	 

 

    	 	Page 21 of 21Exhibit 10.1

 

EXCHANGE AGREEMENT

 

This EXCHANGE AGREEMENT (the “Agreement”),
dated as of May 13, 2016, by and between EASTSIDE DISTILLING, INC., a NEVADA corporation, with headquarters located at 1805
S.E. MARTIN LUTHER KING JR. BLVD., PORTLAND, OR 97214 (the “Company”), and MR GROUP I, LLC a New York limited
liability company, with its address at 5 Hanover Square, 16th Floor, New York, NY 10004 (the “Investor”).

 

WHEREAS:

 

A.           On
September 10, 2015, WWOD Holdings, LLC purchased a 14% secured convertible promissory note in the aggregate principal amount of
$275,000, which note was assigned to Investor on April 14, 2016 (the “Initial Note”).

 

B.           On
April 18, 2016, the Investor purchased a 14% secured convertible promissory note in the aggregate principal amount of $300,000
(the “Additional Note”).

 

C.           As
of the date hereof, the Initial Note is in default and the outstanding amount due thereunder (including accrued interest of $21,992.32)
is $219,200.65

 

D.           As
of the date hereof, the Additional Note is in default and the outstanding amount due thereunder (including accrued interest of
$2,646.58) is $302.646.58.

 

E.           The
Company and the Investor desire to exchange the Initial Note (including accrued interest) for a new 14% secured convertible promissory
note in the aggregate principal amount of $219,200.65 (the “Note”), the form of which is attached hereto as Exhibit
A, on the terms and subject to the conditions set forth herein. The Note is convertible into shares (the “Conversion Shares”)
of the Company’s common stock, $.0001 par value per share (the “Common Stock”) at the Conversion Price set forth
in the Note.

 

F.           The
Company and the Investor desire to exchange the Additional Note (including accrued interest) for a new 14% secured convertible
promissory note in the aggregate principal amount of $302.646.58 (the “Second Note”, together with the Note, the “Notes”),
the form of which is attached hereto as Exhibit B, on the terms and subject to the conditions set forth herein. The Second Note
is convertible into at the Conversion Price set forth in the Second Note.

 

G.           The
Company’s obligations to the Investor under this Agreement and the Notes shall be secured by a first priority security interest
in the Company’s and each of its current and hereafter existing subsidiaries, right, title and interest in and to their respective
assets, presently existing or hereafter created or acquired, pursuant to the terms of a Security Agreement, dated May 13, 2016
(the “Security Agreement”);

 

NOW THEREFORE, the Company and the
Investor severally (and not jointly) hereby agree as follows:

 

1. Exchange of Securities.

 

a. Exchange of Securities. On the
Closing Date (as defined below), in reliance upon the representations and warranties of the Company and the Investor contained
herein, and subject to the terms and conditions set forth herein, the Investor agrees to sell, assign, transfer, and deliver to
the Company, and the Company agrees to purchase from the Investor, (i) the Initial Note (and all accrued interest thereunder),
in exchange for the issuance of the Note by the Company to the Investor and (ii) the Additional Note (and all accrued interest
thereunder), in exchange for the issuance of the Second Note by the Company to the Investor

 

b. Closing Date. Subject to the
satisfaction (or written waiver) of the conditions thereto set forth in Section 6 and Section 7 below, the date and time of the
issuance, exchange and sale of the Notes pursuant to this Agreement (the “Closing Date”) shall be 12:00 noon, Eastern
Standard Time on May 13, 2016, or such other mutually agreed upon time. The closing of the transactions contemplated by this Agreement
(the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties.

 

    	 	1	 

     

    

 

2. Investor’s Representations
and Warranties. The Investor represents and warrants to the Company that:

 

a. Investment Purpose. As of the
date hereof, the Investor is purchasing the Notes and the shares of Common Stock issuable upon conversion of or otherwise pursuant
to the Notes (including, without limitation, such additional shares of Common Stock, if any, as are issuable (i) on account of
interest on the Notes, (ii) as a result of the events described in Sections 1.3 and 1.4(g) of the Notes or (iii) in payment of
the Standard Liquidated Damages Amount (as defined in Section 2(f) below) pursuant to this Agreement, such shares of Common Stock
being collectively referred to herein as the “Conversion Shares” and, collectively with the Notes, the “Securities”)
for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered
or exempted from registration under the 1933 Act; provided, however, that by making the representations herein, the
Investor does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose
of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act.

 

b. Accredited Investor Status. The
Investor is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”).

 

c. Reliance on Exemptions. The Investor
understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements
of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Investor’s
compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Investor set forth herein
in order to determine the availability of such exemptions and the eligibility of the Investor to acquire the Securities.

 

d. Information. The Investor and
its advisors, if any, have been, and for so long as the Notes remain outstanding will continue to be, furnished with all materials
relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities
which have been requested by the Investor or its advisors. The Investor and its advisors, if any, have been, and for so long as
the Note remain outstanding will continue to be, afforded the opportunity to ask questions of the Company. Notwithstanding the
foregoing, the Company has not disclosed to the Investor any material nonpublic information and will not disclose such information
unless such information is disclosed to the public prior to or promptly following such disclosure to the Investor. Neither such
inquiries nor any other due diligence investigation conducted by Investor or any of its advisors or representatives shall modify,
amend or affect Investor’s right to rely on the Company’s representations and warranties contained in Section 3 below.
The Investor understands that its investment in the Securities involves a significant degree of risk. The Investor is not aware
of any facts that may constitute a breach of any of the Company’s representations and warranties made herein.

 

e. Governmental Review. The Investor
understands that no United States federal or state agency or any other government or governmental agency has passed upon or made
any recommendation or endorsement of the Securities.

 

f. Transfer or Re-sale. The Investor
understands that (i) the sale or resale of the Securities has not been and is not being registered under the 1933 Act or any applicable
state securities laws, and the Securities may not be transferred unless (a) the Securities are sold pursuant to an effective registration
statement under the 1933 Act, (b) the Investor shall have delivered to the Company, at the cost of the Investor, an opinion of
counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that
the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, which opinion
shall be accepted by the Company, (c) the Securities are sold or transferred to an “affiliate” (as defined in Rule
144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Investor who agrees to sell or otherwise
transfer the Securities only in accordance with this Section 2(f) and who is an Accredited Investor, (d) the Securities are sold
pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under the 1933 Act (or a successor rule) (“Regulation
S”), and the Investor shall have delivered to the Company, at the cost of the Investor, an opinion of counsel that shall
be in form, substance and scope customary for opinions of counsel in corporate transactions, which opinion shall be accepted by
the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said
Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the seller (or the
person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require
compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws
or to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the foregoing or anything
else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bona fide margin
account or other lending arrangement.

 

    	 	2	 

     

    

 

g. Legends. The Investor understands
that the Note and, until such time as the Conversion Shares have been registered under the 1933 Act may be sold pursuant to Rule
144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately
sold, the Conversion Shares may bear a restrictive legend in substantially the following form (and a stop-transfer order may be
placed against transfer of the certificates for such Securities):

 

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL
BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT
OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY
BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY
THE SECURITIES.”

 

The legend set forth above shall be removed
and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if, unless
otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration
statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without any restriction as to
the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides the Company with
an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect
that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted
by the Company so that the sale or transfer is effected. The Investor agrees to sell all Securities, including those represented
by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if
any. In the event that the Company does not accept the opinion of counsel provided by the Investor with respect to the transfer
of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered
an Event of Default pursuant to Section 3.2 of the Note.

 

h. Authorization; Enforcement. This
Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf of the Investor,
and this Agreement constitutes a valid and binding agreement of the Investor enforceable in accordance with its terms.

 

i. Residency. The Investor is a
resident of the jurisdiction set forth immediately below the Investor’s name on the signature pages hereto.

 

    	 	3	 

     

    

 

3. Representations and Warranties of
the Company. The Company represents and warrants to the Investor that:

 

a. Organization and Qualification.
The Company is a corporation duly organized, validly existing and in good standing under the laws of Nevada, with full power and
authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned,
leased, used, operated and conducted, except where any such failure would not have a Material Adverse Effect (as defined below).
The Company does not have any Subsidiaries. The Company is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such
qualification necessary except where the failure to be so qualified or in good standing would not have a Material Adverse Effect.
“Material Adverse Effect” means any material adverse effect on the business, operations, assets, financial condition
or prospects of the Company taken as a whole, or on the transactions contemplated hereby or by the agreements or instruments to
be entered into in connection herewith. “Subsidiaries” means any corporation or other organization, whether incorporated
or unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership interest.

 

b. Authorization; Enforcement. (i)
The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Notes, and the Security
Agreement and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the
terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Notes and the Security Agreement by the Company
and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the
Note and the issuance and reservation for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have
been duly authorized by the Company’s Board of Directors and except as set forth on Schedule 3(b) or the Required Approvals
(as defined below) no further consent or authorization of the Company, its Board of Directors, or its shareholders is required,
(iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized
representative is the true and official representative with authority to sign this Agreement and the other documents executed in
connection herewith and bind the Company accordingly, and (iv) this Agreement, the Security Agreement and the Notes constitute
legal, valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms,
except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, fraudulent transfer, 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.

 

c. Capitalization. As of the date
hereof, the authorized capital stock of the Company consists of: (i) 900,000,000 shares of Common Stock, of which 49,369,591shares
are issued and outstanding; and (ii) 100,000,000 shares of preferred stock, of which 3,000 shares have been designated as “Series
A Preferred Stock” of which 930 shares are issued and outstanding. Except as set forth in Schedule 3(c), no shares of Common
Stock have been reserved for issuance pursuant to the Company’s stock option plans, and, except for shares of Common Stock
issuable upon conversion of the Notes, no shares of Common Stock have been reserved for issuance pursuant to any securities exercisable
for, or convertible into or exchangeable for shares of Common Stock. Subject to Schedule 3(c), the Company has reserved a sufficient
number of shares of Common Stock for issuance upon conversion of the Notes (subject to adjustment pursuant to the Company’s
covenant set forth in Section 4(g) below). All of such outstanding shares of Common Stock have been duly authorized, validly issued,
fully paid and non-assessable and have been issued in material compliance with all federal and state securities laws. No shares
of capital stock of the Company are subject to preemptive rights or any other similar rights of the shareholders of the Company
or any liens or encumbrances imposed through the actions or failure to act of the Company. As of the effective date of this Agreement,
except as set forth in the SEC Documents (as defined below) (i) there are no outstanding options, warrants, scrip, rights to subscribe
for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for any shares of capital stock of the Company or any of
its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares
of capital stock of the Company or any of its Subsidiaries, (ii) except as set forth on Schedule 3(c), there are no agreements
or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities
under the 1933 Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the
Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of the Note or the Conversion
Shares. The Company has furnished (or made available on the SEC website) to the Investor true and correct copies of the Company’s
Amended and Restated Articles of Incorporation as in effect on the date hereof (“Articles of Incorporation”), the Company’s
Bylaws, as in effect on the date hereof (the “By-laws”), and the terms of all securities convertible into or exercisable
for Common Stock of the Company and the material rights of the holders thereof in respect thereto. The Company shall provide the
Investor with a written update of this representation signed by the Company’s Chief Executive on behalf of the Company as
of the Closing Date.

 

    	 	4	 

     

    

 

d. Issuance of Shares. The Conversion
Shares are duly authorized and reserved for issuance and, upon conversion of the Notes in accordance with its respective terms,
will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to
the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will
not impose personal liability upon the holder thereof.

 

e. Acknowledgment of Dilution. The
Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Conversion Shares
upon conversion of the Notes. The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of
the Notes in accordance with this Agreement, the Notes is absolute and unconditional regardless of the dilutive effect that such
issuance may have on the ownership interests of other shareholders of the Company.

 

f. No Conflicts. Subject to the
Required Approvals and except as set forth on Schedule 3(f), the execution, delivery and performance of this Agreement, the Notes
by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation,
the issuance and reservation for issuance of the Conversion Shares) will not (i) conflict with or result in a violation of any
provision of the Articles of Incorporation or By-laws or (ii) violate or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument
to which the Company is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or
its securities are subject) applicable to the Company or by which any property or asset of the Company is bound or affected (except
for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually
or in the aggregate, have a Material Adverse Effect). The Company is not in violation of its Articles of Incorporation, By-laws
or other organizational documents and the Company is not in default (and no event has occurred which with notice or lapse of time
or both could put the Company in default) under, and the Company has not taken any action or failed to take any action that would
give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to
which the Company is a party or by which any property or assets of the Company is bound or affected, except for possible defaults
as would not, individually or in the aggregate, have a Material Adverse Effect. The businesses of the Company are not being conducted,
and shall not be conducted so long as a Investor owns any of the Securities, in material violation of any law, ordinance or regulation
of any governmental entity. Except as specifically contemplated by this Agreement and as required under the 1933 Act and any applicable
state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration
with, any court, governmental agency, regulatory agency, self regulatory organization or stock market or any third party in order
for it to execute, deliver or perform any of its obligations under this Agreement, the Notes in accordance with the terms hereof
or thereof or to issue and sell the Notes in accordance with the terms hereof and to issue the Conversion Shares upon conversion
of the Note other than: (i) any filings required pursuant to Section 4(b) of this Agreement, (ii) any such consents, waivers, authorizations
or orders as have already been obtained, (iii) any other filings that have been made pursuant to applicable state securities laws
and (iv) any post-sale filings pursuant to applicable state and federal securities laws (including, without limitation, the filing
of Form D with the SEC) which the Company undertakes to file within the applicable time periods (collectively, the “Required
Approvals”). All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant
to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company is not in violation of the
listing requirements of the Over-the-Counter Bulletin Board (the “OTCQB”) and does not reasonably anticipate that the
Common Stock will be delisted by the OTCQB in the foreseeable future. The Company and its Subsidiaries are unaware of any facts
or circumstances which might give rise to any of the foregoing.

 

    	 	5	 

     

    

 

g. SEC Documents; Financial Statements.
Since October 31, 2014, the Company has filed all reports, schedules, forms, statements and other documents required to be filed
by it with the SEC (other than Form 8-K Reports) pursuant to the reporting requirements of the Securities Exchange Act of 1934,
as amended (the “1934 Act”) (all of the foregoing filed prior to the date hereof and all exhibits included therein
and financial statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference
therein, being hereinafter referred to herein as the “SEC Documents”). To the extent not available on the SEC website,
the Company has delivered to the Investor true and complete copies of the SEC Documents, except for such exhibits and incorporated
documents. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents,
at the time they were filed with the SEC, 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 light of the circumstances under which they
were made, not misleading. None of the statements made in any such SEC Documents is, or has been, required to be amended or updated
under applicable law (except for such statements as have been amended or updated in subsequent filings prior the date hereof).
As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all
material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto.
Such financial statements have been prepared in accordance with United States generally accepted accounting principles, consistently
applied, during the periods involved and fairly present in all material respects the consolidated financial position of the Company
as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit adjustments). Except as set forth in the financial statements of the
Company included in the SEC Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred
in the ordinary course of business subsequent to four months prior to the date hereof 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 such financial statements, which, individually or in the aggregate, are not material to the financial condition or operating
results of the Company. The Company is subject to the reporting requirements of the 1934 Act.

 

h. Absence of Certain Changes. Since
the date of the latest financial statements included in the SEC reports: (i) there has been no event, occurrence or development
that has had or that could reasonably be expected to result 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 generally accepted accounting principles (“GAAP”) or disclosed in filings made with the SEC, (iii) the Company has
not altered its method of accounting, (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 equity
incentive plans. The Company does not have pending before the SEC any request for confidential treatment of information. Except
for the issuance of the Securities contemplated by this Agreement, no event, liability or development has occurred or exists with
respect to the Company or its business, properties, operations 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 one trading day prior to the date that this representation is made.

 

i. Absence of Litigation. There
is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the
Company, or its officers or directors in their capacity as such, that could have a Material Adverse Effect. Schedule 3(i) contains
a complete list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting
the Company, without regard to whether it would have a Material Adverse Effect. The Company and its Subsidiaries are unaware of
any facts or circumstances which might give rise to any of the foregoing.

 

j. Patents, Copyrights, etc. To
its knowledge, the Company owns or possesses the requisite licenses or rights to use all patents, patent applications, patent rights,
inventions, know-how, trade secrets, trademarks, trademark applications, service marks, service names, trade names and copyrights
(“Intellectual Property”) necessary to enable it to conduct its business as now operated (and, as presently contemplated
to be operated in the future); there is no claim or action by any person pertaining to, or proceeding pending, or to the Company’s
knowledge threatened, which challenges the right of the with respect to any Intellectual Property necessary to enable it to conduct
its business as now operated (and, as presently contemplated to be operated in the future); to the best of the Company’s
knowledge, the Company’s current and intended products, services and processes do not infringe on any Intellectual Property
or other rights held by any person; and the Company is unaware of any facts or circumstances which might give rise to any of the
foregoing. The Company has taken reasonable security measures to protect the secrecy, confidentiality and value of their Intellectual
Property.

 

    	 	6	 

     

    

 

k. No Materially Adverse Contracts,
Etc. The Company is not subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule
or regulation which in the judgment of the Company’s officers has or is expected in the future to have a Material Adverse
Effect. The Company is not a party to any contract or agreement which in the judgment of the Company’s officers has or is
expected to have a Material Adverse Effect. Except as set forth on Schedule 3k., the Company: (i) is not 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, nor has the Company 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 material 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) to its knowledge is not in violation
of any order of any court, arbitrator or governmental body or (iii) to its knowledge is or has been in violation of any statute,
rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws applicable
to its business and all such laws that affect the environment, except in each of the foregoing cases as could not have or reasonably
be expected to result in a Material Adverse Effect.

 

l. Tax Status. To its knowledge,
the Company has made or filed all federal, state and foreign income and all other tax returns, reports and declarations required
by any jurisdiction to which it is subject (unless and only to the extent that the Company has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and 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, except those
being contested in good faith and has set aside on its books provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply. Except as set forth on Schedule 3l., to the Company’s
knowledge, 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 know of no basis for any such claim. The Company has not executed a waiver with respect to the statute
of limitations relating to the assessment or collection of any foreign, federal, state or local tax. None of the Company’s
tax returns is presently being audited by any taxing authority.

 

m. Certain Transactions. Except
as set forth in the SEC Documents and for arm’s length transactions pursuant to which the Company makes payments in the ordinary
course of business upon terms no less favorable than the Company could obtain from third parties and other than the grant of stock
options disclosed on Schedule 3(c), none of the officers, directors, or employees of the Company is presently a party to any transaction
with the Company (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, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust
or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee
or partner.

 

n. Disclosure. All information relating
to or concerning the Company set forth in this Agreement and provided to the Investor pursuant to Section 2(d) hereof and otherwise
in connection with the transactions contemplated hereby is true and correct in all material respects and the Company has not omitted
to state any material fact necessary in order to make the statements made herein or therein, in light of the circumstances under
which they were made, not misleading. No event or circumstance has occurred or exists with respect to the Company or its business,
properties, prospects, operations or financial conditions, 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 (assuming for this purpose that the Company’s
reports filed under the 1934 Act are being incorporated into an effective registration statement filed by the Company under the
1933 Act).

 

    	 	7	 

     

    

 

o. Acknowledgment Regarding Investor’s
Purchase and Exchange of Securities. The Company acknowledges and agrees that the Investor is acting solely in the capacity
of arm’s length purchasers with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges
that no Investor is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby and any statement made by any Investor or any of their respective representatives
or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely
incidental to the Investor’s purchase and exchange of the Securities. The Company further represents to the Investor that
the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the Company and
its representatives.

 

p. No Integrated Offering. Neither
the Company, nor any of its affiliates, nor any person acting on behalf of the Company or such affiliate, will sell, offer for
sale, or solicit offers to buy or otherwise negotiate with respect to any security (as defined in the 1933 Act) which will be integrated
with the sale of the securities in a manner which would require the registration of the securities under the Securities Act of
1933, or require stockholder approval, under the rules and regulations of the trading market for the common stock. The Company
will take all action that is appropriate or necessary to assure that its offerings of other securities will not be integrated for
purposes of the Securities Act of 1933 or the rules and regulations of the trading market, with the issuance of securities contemplated
hereby.

 

q. No Brokers. The Company has taken
no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating
to this Agreement or the transactions contemplated hereby.

 

r. Permits; Compliance. To its knowledge,
the Company is in possession of all material franchises, grants, authorizations, licenses, permits, easements, variances, exemptions,
consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its business as
it is now being conducted (collectively, the “Company Permits”), and there is no action pending or, to the knowledge
of the Company, threatened regarding suspension or cancellation of any of the Company Permits. The is not in conflict with, or
in default or violation of, any of the Company Permits, except for any such conflicts, defaults or violations which, individually
or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. In the prior four months to the date hereof,
the Company has not received any notification with respect to possible conflicts, defaults or violations of applicable laws, except
for notices relating to possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material
Adverse Effect.

 

s. Environmental Matters.

 

(i) There are, to the Company’s knowledge,
with respect to the Company or any predecessor of the Company, no past or present violations of Environmental Laws (as defined
below), releases of any material into the environment, actions, activities, circumstances, conditions, events, incidents, or contractual
obligations which may give rise to any common law environmental liability or any liability under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 or similar federal, state, local or foreign laws and the Company has not received
any notice with respect to any of the foregoing, nor is any action pending or, to the Company’s knowledge, threatened in
connection with any of the foregoing. The term “Environmental Laws” means all federal, state, local or foreign laws
relating to pollution or protection of human health or the environment (including, without limitation, 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.

 

(ii) Other than those that are or were
stored, used or disposed of in compliance with applicable law, no Hazardous Materials are contained on or about any real property
currently owned, leased or used by the Company, and no Hazardous Materials were released on or about any real property previously
owned, leased or used by the Company during the period the property was owned, leased or used by the Company, except in the normal
course of the Company’s business.

 

(iii) There are no underground storage
tanks on or under any real property owned, leased or used by the Company that are not in compliance with applicable law.

 

    	 	8	 

     

    

 

t. Title to Property. The Company
has good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by
them which is material to the business of the Company, in each case free and clear of all liens, encumbrances and defects except
such as are described in Schedule 3t. or such as would not have a Material Adverse Effect. Any real property and facilities held
under lease by the Company are held by them under valid, subsisting and enforceable leases with such exceptions as would not have
a Material Adverse Effect.

 

u. Insurance. The Company is insured
by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company
believes to be prudent and customary in the businesses in which the Company is engaged. The Company has no 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 at a cost that would not have a Material Adverse Effect. The Company
has provided to Investor true and correct copies of all policies relating to directors’ and officers’ liability coverage,
errors and omissions coverage, and commercial general liability coverage.

 

v. Internal Accounting Controls.
Except as set forth in the SEC Documents, the Company is in material compliance with all provisions of the Sarbanes-Oxley Act of
2002 which are applicable to it as of the Closing Date. Except as disclosed in the SEC Documents, the Company maintains 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 has established
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company 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 is recorded, processed, summarized and reported, within the time periods specified in the Commission’s
rules and forms. The Company’s certifying officers have evaluated the effectiveness of the Company’s disclosure controls
and procedures as of the end of the period covered by the Company’s 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. Since the Evaluation Date, there have been no changes in the Company’s internal
control over financial reporting (as such term is defined in the Exchange Act) that has materially affected, or is reasonably likely
to materially affect, the Company’s internal control over financial reporting.

 

w. Foreign Corrupt Practices. Neither
the Company, nor any director, officer, agent, employee or other person acting on behalf of the Company has, in the course of his
actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act
of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.

 

x. Solvency. Except as set forth
in the SEC Documents, the Company (after giving effect to the transactions contemplated by this Agreement) is solvent (i.e.,
its assets have a fair market value in excess of the amount required to pay its probable liabilities on its existing debts as they
become absolute and matured) and currently the Company has no information that would lead it to reasonably conclude that the Company
would not, after giving effect to the transaction contemplated by this Agreement, have the ability to, nor does it intend to take
any action that would impair its ability to, pay its debts from time to time incurred in connection therewith as such debts mature.
The Company did not receive a qualified opinion from its auditors with respect to its most recent fiscal year end and, after giving
effect to the transactions contemplated by this Agreement, does not anticipate or know of any basis upon which its auditors might
issue a qualified opinion in respect of its current fiscal year.

 

    	 	9	 

     

    

 

y. Application of Takeover Protections.
The Company and the Board of Directors have, to their knowledge, 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 Articles of Incorporation (or similar charter documents) or the laws
of its state of incorporation that is or could become applicable to the Investor as a result of the Investor 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 Investor’ ownership of the Securities.

 

z. No Investment Company. The Company
is not, and upon the issuance and sale of the Securities as contemplated by this Agreement will not be an “investment company”
required to be registered under the Investment Company Act of 1940 (an “Investment Company”). The Company is not controlled
by an Investment Company.

 

aa. No Disagreements with Accountants
and Lawyers; Outstanding SEC Comments. 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 or immediately after the Closing Date will be current with respect to any fees owed to its accountants which could
affect the Company’s ability to perform any of its obligations under any of the Transaction Documents. There are no unresolved
comments or inquiries received by the Company or its Affiliates from the SEC which remain unresolved as of the date hereof.

 

bb. Bad Actor Disqualification.

 

(i) No Disqualification Events. With respect
to Securities to be offered and sold hereunder in reliance on Rule 506 under the Securities Act (“Regulation D Securities”),
none of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company
participating in the offering, 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 Placement Agent and the Purchaser a copy of any disclosures provided thereunder.

 

(ii) Other Covered Persons. The Company
is not aware of any person that (i) has been or will be paid (directly or indirectly) remuneration for solicitation of Purchaser
in connection with the sale of the Securities and (ii) who is subject to a Disqualification Event.

 

(iii) Notice of Disqualification Events.
The Company will notify the Purchaser in writing 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, prior to
any Closing of this Offering.

 

cc. Breach of Representations and Warranties
by the Company. If the Company breaches any of the representations or warranties set forth in this Section 3, and in addition
to any other remedies available to the Investor pursuant to this Agreement, it will be considered an Event of default under Section
3.4 of the Note.

 

4. COVENANTS.

 

a. Best Efforts. The parties shall
use their best efforts to satisfy timely each of the conditions described in Section 6 and 7 of this Agreement.

 

b. Blue Sky Laws; Form 8-K. The
Company shall, on or before the Closing Date, take such action as the Company shall reasonably determine is necessary to qualify
the Securities for sale to the Investor at the applicable closing pursuant to this Agreement under applicable securities or “blue
sky” laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence
of any such action so taken to the Investor on or prior to the Closing Date. If required under the requirements of materiality,
the Company shall file a Current Report on Form 8-K (or a Quarterly Report on Form 10-Q) disclosing this transaction not later
than one business day after the Closing Date.

 

    	 	10	 

     

    

 

c. Holding Period. The Company agrees
and stipulates that, for purposes of Rule 144 of the Securities Act of 1933, as amended (the “Securities Act”), (i)
the Note (and the Conversion Shares) are deemed to have been acquired by Investor on or before September 10, 2015, pursuant to
Rule 144(d)(3)(i) and Rule 144(d)(3)(ii) of the Securities Act and (ii) the Second Note (and the Conversion Shares) are deemed
to have been acquired by Investor on or before April 18, 2016, pursuant to Rule 144(d)(3)(i) and Rule 144(d)(3)(ii) of the Securities
Act

 

d. Section 3(A)(9) or 3(A)(10) Transaction.
Except as set forth on Schedule 4(d), so long as the Notes are outstanding, the Company shall not enter into any transaction or
arrangement structured in accordance with, based upon, or related or pursuant to, in whole or in part, either Section 3(a)(9) of
the Securities Act (a “3(a)(9) Transaction”) or Section 3(a)(10) of the Securities Act (a “3(a)(10) Transaction”).
In the event that the Company does enter into, or makes any issuance of Common Stock related to a 3(a)(9) Transaction (other than
as set forth in Schedule 4(d)) or a 3(a)(10) Transaction while the Notes outstanding, a liquidated damages charge of 25% of the
outstanding principal balance of the Note or the Second Note, as applicable, but not less than $25,000, will be assessed and will
become immediately due and payable to the Holder at its election in the form of cash payment or addition to the balance of the
Note or the Second Note, as applicable.

 

e. Rollover of Second Note. The
parties hereto acknowledge and agree that, in connection with the consummation of the transactions contemplated in the term sheet
attached hereto as Exhibit C (the “Subsequent Placement”), $200,000 of aggregate principal of the Additional
Note, together with any accrued, and unpaid, interest then outstanding or any additional amounts due and payable as a result of
an Event of Default under the Second Note, shall be applied, on a dollar-for-dollar basis, to reduce the purchase price of the
Investor in such Subsequent Placement and upon the closing of such Subsequent Placement and such application, the remainder of
the Second Note then outstanding shall be deemed cancelled for no additional consideration

 

f. Financial Information. To the
extent such items are not publicly available, upon written request the Company agrees to send or make available the following reports
to the Investor until the Investor transfers, assigns, or sells all of the Securities: (i) within two (2) days after the filing
with the SEC, a copy of its Annual Report on Form 10-K its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K;
(ii) within one (1) day after release, copies of all press releases issued by the Company; and (iii) contemporaneously with the
making available or giving to the shareholders of the Company, copies of any notices or other information the Company makes available
or gives to such shareholders.

 

g. Authorization and Reservation of
Shares. The Company shall at all times have authorized, and reserved for the purpose of issuance, a sufficient number of shares
of Common Stock to provide for the full conversion or exercise of the outstanding Notes and issuance of the Conversion Shares in
connection therewith (based on the Conversion Price of the Notes in effect from time to time) and as otherwise required by the
Notes. The Company shall not reduce the number of shares of Common Stock reserved for issuance upon conversion of Notes without
the consent of the Investor. The Company shall at all times maintain the number of shares of Common Stock so reserved for issuance
at an amount (“Reserved Amount”) equal to five times the number that is then actually issuable upon full conversion
of the Notes (based on the Conversion Price of the Note in effect from time to time). If at any time the number of shares of Common
Stock authorized and reserved for issuance (“Authorized and Reserved Shares”) is below the Reserved Amount, the Company
will promptly take all corporate action reasonably necessary to authorize and reserve a sufficient number of shares, including,
without limitation, calling a special meeting of shareholders to authorize additional shares to meet the Company’s obligations
under this Section 4(g), in the case of an insufficient number of authorized shares, obtain shareholder approval of an increase
in such authorized number of shares, and voting the management shares of the Company in favor of an increase in the authorized
shares of the Company to ensure that the number of authorized shares is sufficient to meet the Reserved Amount. If the Company
fails to obtain such shareholder approval within ninety (90) days following the date on which the number of Reserved Amount exceeds
the Authorized and Reserved Shares, it will be considered an Event of default under Section 3.4 of the Notes.

 

    	 	11	 

     

    

 

h. Listing. The Company shall promptly
secure the listing of the Conversion Shares upon each national securities exchange or automated quotation system, if any, upon
which shares of Common Stock are then listed (subject to official notice of issuance) and, so long as any Investor owns any of
the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Conversion
Shares from time to time issuable upon conversion of the Note. The Company will obtain and, so long as any Investor owns any of
the Securities, maintain the listing and trading of its Common Stock on the OTCQB or any equivalent replacement exchange, the Nasdaq
National Market (“Nasdaq”), the Nasdaq SmallCap Market (“Nasdaq SmallCap”), the New York Stock Exchange
(“NYSE”), or the American Stock Exchange (“AMEX”) and will comply in all respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”)
and such exchanges, as applicable. The Company shall promptly provide to the Investor copies of any notices it receives from the
OTCQB and any other exchanges or quotation systems on which the Common Stock is then listed regarding the continued eligibility
of the Common Stock for listing on such exchanges and quotation systems. If the market price of the Company’s Common Stock
shall at any time fall below the price required to continue to be quoted on the Company’s then principal exchange or automated
quotation system, the Company shall as soon as practicable take all actions necessary to effect a reverse split of the Company’s
Common Stock, such that the price would then be at least fifty percent (50%) above the required price, post-split. If the Company
fails to achieve the required reverse split within thirty (30) days following the date on which the price fell below the required
minimum trading price, it will be considered an Event of default under Section 3.4 of the Notes.

 

i. Corporate Existence. So long
as a Investor beneficially owns the Notes, the Company shall maintain its corporate existence and shall not sell all or substantially
all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially all of the
Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations
hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded corporation
whose Common Stock is listed for trading on the OTCQB, Nasdaq, Nasdaq SmallCap, NYSE or AMEX.

 

j. No Integration. The Company shall
not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of
the Securities being offered or sold hereunder under the 1933 Act or cause the offering of the Securities to be integrated with
any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company
or its securities.

 

k. Breach of Covenants. If the Company
breaches any of the covenants set forth in this Section 4, and in addition to any other remedies available to the Investor pursuant
to this Agreement, it will be considered an Event of default under Section 3.3 of the Notes.

 

l. Failure to Comply with the 1934 Act.
So long as the Investor beneficially owns the Notes, the Company shall comply with the periodic reporting requirements of the 1934
Act; and the Company shall continue to be subject to the reporting requirements of the 1934 Act. Notwithstanding anything contained
herein and for the avoidance of any doubt, this covenant shall include the continued public disclosure by the Company of the Company’s
Common Stock in the public domain upon any material change in its shares outstanding.

 

m. Trading Activities. Neither the
Investor nor their affiliates has an open short position in the common stock of the Company and the Investor agree that they shall
not, and that they will cause their affiliates not to, engage in any short sales of or hedging transactions with respect to the
common stock of the Company.

 

n. Piggyback Registration Rights.
In the event that the Company files a registration statement with respect to its Common Stock with the SEC (other than a registration
statement on Form S- 4 or S-8 or any successor form thereto) after the Closing Date but before the Investor sells the Conversion
Shares, the Conversion Shares shall be registered pursuant to such registration statement, subject to standard underwriter cutbacks.

 

o. Non-Frustration of Purpose. So
long as the Investor or its affiliates hold any Securities, neither the Company nor any of its affiliates or subsidiaries, nor
any of its or their respective officers, employees, directors, agents or other representatives, will effect, enter into, announce
or recommend to its stockholders any agreement, plan, arrangement or transaction the terms of which would or would reasonably be
expected to (i) have a material adverse effect on the Investor’s investment in the Note or Conversion Shares or (ii) restrict,
delay, conflict with or impair the ability or right of the Company to timely perform its obligations under this Agreement or the
Notes, including, without limitation, the obligation of the Company to timely deliver shares of Common Stock to the Investor or
its affiliates in accordance with this Agreement or the Note.

 

    	 	12	 

     

    

 

p. Right of First Refusal. Commencing
on the Closing Date and until nine (9) months thereafter, the Company shall provide the Investor not less than three (3) Business
Days prior written notice of any proposed sale by the Company for cash of its common stock or other securities or debt obligations,
except in connection with the proposed inventory line of credit of up to $8 million (ii) the issuance of shares of Common Stock
or options to employees, officers, consultants or directors of the Company (iii) full or partial consideration in connection with
a strategic merger, acquisition, consolidation or purchase of substantially all of the securities or assets of a corporation or
other entity; (iv) the Company’s issuance of securities in connection with strategic license agreements, the entering into
or acquiring of material contracts in connection with the Company’s business as currently being conducted, and other partnering
arrangements so long as such issuances are not for the purpose of raising capital; (iv) as a result of the exercise of warrants
outstanding on the date hereof; (v) upon conversion of Notes issued pursuant to this Agreement or any other convertible notes outstanding
on the date hereof, and (v) the payment of any interest on the Notes and liquidated damages, or other damages pursuant to the Transaction
Documents. The Investor will have the right during the three (3) Business Days following receipt of the notice to purchase all
or any part of such offered common stock, debt or other securities in accordance with the terms and conditions set forth in the
notice of sale.

 

q. Rule 144. With a view to making
available to Investor the benefits of Rule 144 under the Securities Act (“Rule 144”), or any similar rule or regulation
of the SEC that may at any time permit Investor to sell shares of Common Stock issuable to Investor under any Transaction Documents
to the public without registration, the Company represents and warrants that:

 

(i) the Company is, and has been for a period
of at least ninety (90) days immediately preceding the date hereof, subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act; (ii) the Company has filed all required reports under Section 13 or 15(d) of the Exchange Act, as applicable,
during the twelve (12) months preceding the Closing Date (or for such shorter period that the Company was required to file such
reports); and (iii) the Company is not currently and has not been an issuer defined as a “Shell Company” (as hereinafter
defined). For the purposes hereof, the term “Shell Company” shall mean an issuer that meets such a description as defined
under Rule 144. In addition, so long as Investor owns, legally or beneficially, any securities of the Company, the Company shall,
at its sole expense:

 

(1) Make, keep and ensure that adequate current
public information with respect to the Company, as required in accordance with Rule 144,is publicly available;

 

(2) furnish to the Investor, promptly upon
reasonable request: (a) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act; and (b) such other information as may be reasonably requested by Investor to permit the Investor
to sell any of the shares of Common Stock acquired hereunder or under any other Transaction Documents pursuant to Rule 144 without
limitation or restriction; and

 

    	 	13	 

     

    

 

(3) promptly at the request of Investor, give
the Company’s transfer agent (the “Transfer Agent”) instructions to the effect that, upon the Transfer Agent’s
receipt from Investor of a certificate (a “Rule 144 Certificate”) certifying that Investor’s holding period (as
determined in accordance with the provisions of Rule 144) for any portion of the shares of Common Stock issuable under any Transaction
Document which Investor proposes to sell (or any portion of such shares which Investor is not presently selling, but for which
Investor desires to remove any restrictive legends applicable thereto) (the “Securities Being Sold”) is not less than
six (6) months, and receipt by the Transfer Agent of the “Rule 144 Opinion” (as hereinafter defined) from the Company
or its counsel (or from Investor and its counsel as permitted below), the Transfer Agent is to effect the transfer (or issuance
of a new certificate without restrictive legends, if applicable) of the Securities Being Sold and issue to Investor or trans-feree(s)
thereof one or more stock certificates representing the transferred (or re-issued) Securities Being Sold without any restrictive
legend and without recording any restrictions on the transferability of such shares on the Transfer Agent’s books and records.
In this regard, upon Investor’s request, the Company shall have an affirmative obligation to cause its counsel to promptly
issue to the Transfer Agent a legal opinion providing that, based on the Rule 144 Certificate, the Securities Being Sold may be
sold pursuant to the provisions of Rule 144, even in the absence of an effective registration statement (the “Rule 144 Opinion”).
If the Transfer Agent requires any additional documentation in connection with any proposed transfer (or re-issuance) by Investor
of any Securities Being Sold, the Company shall promptly deliver or cause to be delivered to the Transfer Agent or to any other
Person, all such additional documentation as may be necessary to effectuate the transfer (or re- issuance) of the Securities Being
Sold and the issuance of an unlegended certificate to any such Investor or any transferee thereof, all at the Company’s expense.
Any and all fees, charges or expenses, including, without limitation, attorneys’ fees and costs, incurred by Investor in
connection with issuance of any such shares, or the removal of any restrictive legends thereon, or the transfer of any such shares
to any assignee of Investor, shall be paid by the Company, and if not paid by the Company, the Investor may, but shall not be required
to, pay any such fees, charges or expenses, and the amount thereof, together with interest thereon at the highest non- usurious
rate permitted by law, from the date of outlay, until paid in full, shall be due and payable by the Company to Investor immediately
upon demand therefor, and all such amounts shall be additional Obligations of the company to Investor secured under the Transaction
Documents. In the event that the Company and/or its counsel refuses or fails for any reason to render the Rule 144 Opinion or any
other documents, certificates or instructions required to effectuate the transfer (or re-issuance) of the Securities Being Sold
and the issuance of an unlegended certificate to any such Investor or any transferee thereof, then: (A) to the extent the Securities
Being Sold could be lawfully transferred (or re-issued) without restrictions under applicable laws, Company’s failure to
promptly provide the Rule 144 Opinion or any other documents, certificates or instructions required to effectuate the transfer
(or re-issuance)of the Securities Being Sold and the issuance of an unlegended certificate to any such Investor or any transferee
thereof shall be an immediate Event of Default under this Agreement and all other Transaction Documents; and (B)the Company hereby
agrees and acknowledges that Investor is hereby irrevocably and expressly authorized to have counsel to Investor render any and
all opinions and other certificates or instruments which may be required for purposes of effectuating the transfer (or re-issuance)
of the Securities Being Sold and the issuance of an unlegended certificate to any such Investor or any transferee thereof, and
the Company hereby irrevocably authorizes and directs the Transfer Agent to, without any further confirmation or instructions from
the Company, transfer or re-issue any such Securities Being Sold as instructed by Investor and its counsel.

 

r. Non-Public Information. Except
with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company covenants
and agrees that after the Closing Date neither it, nor any other person acting on its behalf, will provide Investor or its agents
or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto the
Investor shall have executed a written agreement regarding the confidentiality and use of such information. The Company understands
and confirms that the Investor shall be relying on the foregoing covenant in effecting transactions in securities of the Company.
Each Investor acknowledges that it is aware that the United States securities laws prohibit any person who has material non-public
information about a company from purchasing or selling securities of such company, or from communicating such information to any
other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities,
and the Investor agrees not to engage in any unlawful trading in securities of the Company or unlawful misuse or misappropriation
of any such information. Investor agrees to maintain the confidentiality of and not disclose or use (except for purposes relating
to the transactions contemplated by this Agreement) any confidential, proprietary or non-public information disclosed by the Company
to Investor.

 

    	 	14	 

     

    

 

5. Transfer Agent Instructions.
The Company covenants and agrees that it will at all times while any Securities remain outstanding maintain a duly qualified independent
transfer agent. On or prior to the initial Closing Date, the Company shall provide a copy of its agreement with the transfer agent
to the Investor. If a new transfer agent is appointed at any time, the Company shall provide the Investor with a copy of the new
agreement within three (3) business days of its execution. The Company shall issue irrevocable instructions to its transfer agent
to issue certificates, registered in the name of the Investor or its nominee, for the Conversion Shares in such amounts as specified
from time to time by the Investor to the Company upon conversion of the Note in accordance with the terms thereof (the “Irrevocable
Transfer Agent Instructions”). In the event that the Borrower proposes to replace its transfer agent, the Borrower shall
provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as
initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares
of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower. Prior to registration
of the Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to Rule 144 without
any restriction as to the number of Securities as of a particular date that can then be immediately sold, all such certificates
shall bear the restrictive legend specified in Section 2(g) of this Agreement. The Company warrants that: (i) no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this Section 5, and stop transfer instructions to give effect to
Section 2(f) hereof (in the case of the Conversion Shares, prior to registration of the Conversion Shares under the 1933 Act or
the date on which the Conversion Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities
as of a particular date that can then be immediately sold), will be given by the Company to its transfer agent and that the Securities
shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement
and the Note; (ii) it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its transfer agent in
transferring (or issuing)(electronically or in certificated form) any certificate for Conversion Shares to be issued to the Investor
upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement; and (iii) it will not
fail to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing)
any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion
Shares issued to the Investor upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement.
Nothing in this Section shall affect in any way the Investor’s obligations and agreement set forth in Section 2(g) hereof
to comply with all applicable prospectus delivery requirements, if any, upon re-sale of the Securities. If a Investor provides
the Company, at the cost of the Investor, with an opinion of counsel in form, substance and scope customary for opinions in comparable
transactions, to the effect that a public sale or transfer of such Securities may be made without registration under the 1933 Act
and such sale or transfer is effected, the Company shall permit the transfer, and, in the case of the Conversion Shares, promptly
instruct its transfer agent to issue one or more certificates, free from restrictive legend, in such name and in such denominations
as specified by the Investor. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable
harm to the Investor, by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges
that the remedy at law for a breach of its obligations under this Section 5 may be inadequate and agrees, in the event of a breach
or threatened breach by the Company of the provisions of this Section, that the Investor shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing
economic loss and without any bond or other security being required.

 

6. Conditions to the Company’s
Obligation to Issue and Exchange. The obligation of the Company hereunder to issue and exchange the Notes to the Investor at
the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions thereto, provided
that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:

 

a. The Investor shall have executed this
Agreement and the Security Agreement and delivered the same to the Company.

 

b. The Investor shall have delivered to
the Company the original Initial Note and the Additional Note along with a duly endorsed note endorsement for purposes of assigning
and transferring all of the Investor’s right, title, and interest in and to the Initial Note and the Additional Note to the
Company. From time to time after the effective date of this Agreement, and without further consideration, Investor will execute
and deliver such other instruments of transfer and take such other actions as the Company may reasonably request in order to facilitate
the transfer to the Company of the securities intended to be transferred hereunder.

 

c. The representations and warranties of
the applicable Investor shall be true and correct in all material respects as of the date when made and as of the Closing Date
as though made at that time (except for representations and warranties that speak as of a specific date), and the applicable Investor
shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the applicable Investor at or prior to the Closing Date.

 

d. No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental
authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this Agreement.

 

7. Conditions to The Investor’s
Obligation to Purchase and Exchange. The obligation of the Investor hereunder to purchase and exchange the Notes at the Closing
is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that these conditions
are for the Investor’s sole benefit and may be waived by the Investor at any time in its sole discretion:

 

    	 	15	 

     

    

 

a. The Company shall have executed this
Agreement and the Security Agreement and delivered the same to the Investor.

 

b. The Company shall have delivered to
the Investor a duly executed Note and Second Note in accordance with Section 1(a) above.

 

c. The Irrevocable Transfer Agent Instructions,
in form and substance satisfactory to the Investor, shall have been delivered to the Company’s Transfer Agent.

 

d. The representations and warranties of
the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made
at such time (except for representations and warranties that speak as of a specific date) and the Company shall have performed,
satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to the Closing Date. The Investor shall have received a certificate
or certificates, executed by the chief executive officer of the Company, dated as of the Closing Date, to the foregoing effect
and as to such other matters as may be reasonably requested by the Investor including, but not limited to certificates with respect
to the Company’s Articles of Incorporation, By-laws and Board of Directors’ resolutions relating to the transactions
contemplated hereby.

 

e. No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental
authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this Agreement.

 

f. No event shall have occurred which could
reasonably be expected to have a Material Adverse Effect on the Company including but not limited to a change in the 1934 Act reporting
status of the Company or the failure of the Company to be timely in its 1934 Act reporting obligations, or in the sole discretion
of Investor, the transaction’s risk profile, market pricing or implied volatility substantially changes, due diligence concerns
arise, or any other conditions material to the successful closing of the transaction are not acceptable to the Investor.

 

g. The Conversion Shares shall have been
authorized for quotation on the OTCQB and trading in the Common Stock on the OTCQB or such equivalent exchange and shall not have
been suspended by the SEC or the OTCQB or such equivalent exchange.

 

h. The Investor shall have received an
officer’s certificate described in Section 7(d) above, dated as of the Closing Date.

 

8. Governing Law; Miscellaneous.

 

a. Governing Law. This Agreement
shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts
of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall
be brought only in the state courts of New York or in the federal courts located in the state and county of New York. The parties
to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall
not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Company and Investor
waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees
and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith 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 any agreement.
Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding
in connection with this Agreement or any other agreement or document executed in connection with this transaction (each a “Transaction
Document”), 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.

 

    	 	16	 

     

    

 

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. 

 

b. Counterparts; Signatures by Facsimile.
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 the other party, it being
understood that both 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.

 

c. Headings. The headings of this
Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.

 

d. 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.

 

e. Entire Agreement; Amendments.
This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Investor makes
any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived
or amended other than by an instrument in writing signed by the majority in interest of the Investor.

 

f. Notices. All notices, demands,
requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram,
email or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written
notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile or email, with accurate confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a business day during normal business hours where such notice
is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed
to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall
be:

 

If to the Company, to:

 

Eastside Distilling, Inc.

1805 SE Martin Luther King Jr. Blvd.

Portland, OR 97214

Attn: Steven Earles, CEO

Email: steven@eastsidedistilling.com

 

    	 	17	 

     

    

 

If to the Investor:

 

MR Group I, LLC. 

c/o Magna Equities II LLC

5 Hanover Square

16th Floor

New York, NY 10004

Attn: Joshua Sason, CEO

Email: Joshua.sason@magna.ca

 

Each party shall provide notice to the
other party of any change in address.

 

g. Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor
any Investor shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, subject to Section 2(f), any Investor may assign its rights hereunder to any person that purchases
Securities in a private transaction from a Investor or to any of its “affiliates,” as that term is defined under the
1934 Act, without the consent of the Company.

 

h. Third Party Beneficiaries. This
Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for
the benefit of, nor may any provision hereof be enforced by, any other person.

 

i. Survival. The representations
and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder
notwithstanding any due diligence investigation conducted by or on behalf of the Investor. The Company agrees to indemnify and
hold harmless each of the Investor and all their officers, directors, employees and agents for loss or damage arising as a result
of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth
in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.

 

j. Publicity. The Company, and each
of the Investor shall have the right to review a reasonable period of time before issuance of any press releases, SEC, OTCQB or
FINRA filings, or any other public statements with respect to the transactions contemplated hereby; provided, however,
that the Company shall be entitled, without the prior approval of each of the Investor, to make any press release or SEC, OTCQB
(or other applicable trading market) or FINRA filings with respect to such transactions as is required by applicable law and regulations
(although each of the Investor shall be consulted by the Company in connection with any such press release prior to its release
and shall be provided with a copy thereof and be given an opportunity to comment thereon).

 

k. Further Assurances. Each party
shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such
other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

l. No Strict Construction. The language
used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.

 

m. Remedies. The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to the Investor by vitiating the intent and purpose
of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations
under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions
of this Agreement, that the Investor shall be entitled, in addition to all other available remedies at law or in equity, and in
addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this
Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without
any bond or other security being required.

 

    	 	18	 

     

    

 

n. 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 Investor 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 the Investor may rescind or withdraw, in its sole
discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights; provided, however, that in the case of a rescission of a conversion of
a Note, the Investor shall be required to return any shares of Common Stock subject to any such rescinded conversion or exercise
notice.

 

o. Usury. To the extent it may lawfully
do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts
to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection
with any claim, action or proceeding that may be brought by Investor in order to enforce any right or remedy under any Transaction
Document. Notwithstanding any provision to the contrary contained in any Transaction Document, it is expressly agreed and provided
that the total liability of the Company under the Transaction Documents for payments in the nature of interest shall not exceed
the maximum lawful rate authorized under applicable law (the “Maximum Rate”), and, without limiting the foregoing,
in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature
of interest that the Company may be obligated to pay under the Transaction Documents exceed such Maximum Rate. It is agreed that
if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents is increased or decreased by
statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by
law will be the Maximum Rate applicable to the Transaction Documents from the effective date forward, unless such application is
precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company
to Investor with respect to indebtedness evidenced by the Transaction Documents, such excess shall be applied by the Investor to
the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at
the Investor’s election.

 

    	 	19	 

     

    

 

IN WITNESS WHEREOF, the undersigned Investor
and the Company have caused this Agreement to be duly executed as of the date first above written.

 

EASTSIDE DISTILLING, INC.

 

	By:	 /s/Steven Earles	 
	 	Steven Earles	 
	 	CEO	 

 

MR GROUP, I, LLC

 

	By:	 /s/Joshua Sason	 
	 	Joshua Sason	 
	 	CEO	 

 

    	 	20

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00258-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00258-of-00352.parquet"}]]