Document:

NEITHER
THIS SECURITY NOR THE SECURITIES FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THIS SECURITY AND
THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES.

 

COMMON
STOCK PURCHASE WARRANT

 

REEDS,
INC.

 

	Warrant
    Shares: 1,416,667	 	Initial
Issuance Date: April 21, 2017
	No. 2017-2	 	 

 

THIS
COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, Raptor/Harbor Reeds SPV LLC,
a Delaware limited liability company or its assigns (the “Holder”) is entitled, upon the terms and subject
to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the six-month anniversary of
the Initial Issuance Date (the “Initial Exercise Date”) and on or prior to the close of business on the fifth
year anniversary of the Initial Issuance Date (the “Termination Date”) but not thereafter, to subscribe for
and purchase from Reeds, Inc., a Delaware corporation (the “Company”), up to 1,416,667 shares (as subject to
adjustment hereunder, the “Warrant Shares”) of Common Stock. The purchase price of one share of Common Stock
under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

 

Section
1. Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain
Securities Purchase Agreement (the “Purchase Agreement”), dated April 21, 2017, between the Company and the
purchaser signatory thereto.

 

Section
2. Exercise.

 

a)
Exercise of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any
time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such
other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the
Holder appearing on the books of the Company) of a duly executed and completed facsimile copy (or e-mail attachment) of the Notice
of Exercise in the form annexed hereto and, within three (3) Trading Days of the date of said Notice of Exercise is delivered
to the Company, payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s check
drawn on a United States bank or, if available, pursuant to the cashless exercise procedure specified in Section 2(c) below is
specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion
guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be required. Notwithstanding anything herein
to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased
all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender
this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered
to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available
hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal
to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of
Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise within
two (2) Business Days of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree
that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the
number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

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b)
Exercise Price. The exercise price per share of the Common Stock under this Warrant shall be $4.00, subject to adjustment
hereunder (the “Exercise Price”).

 

c)
Cashless Exercise. This Warrant may also be exercised, in whole or in part, at such time by means of a “cashless
exercise” in which the Holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by
dividing [(A-B) (X)] by (A), where:

 

	 	(A)
    = 	the
    last VWAP immediately preceding the time of delivery of the Notice of Exercise giving rise to the applicable “cashless
    exercise”, as set forth in the applicable Notice of Exercise (to clarify, the “last VWAP” will be the last
    VWAP as calculated over an entire Trading Day such that, in the event that this Warrant is exercised at a time that the Trading
    Market is open, the prior Trading Day’s VWAP shall be used in this calculation);
	 	 	 
	 	(B)
    = 	the
    Exercise Price of this Warrant, as adjusted hereunder; and
	 	 	 
	 	(X)
    = 	the
    number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant
    if such exercise were by means of a cash exercise rather than a cashless exercise.

 

If
Warrant Shares are issued in such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9)
of the Securities Act, the Warrant Shares shall take on the characteristics of the Warrants being exercised, and the holding period
of the Warrant Shares being issued may be tacked on to the holding period of this Warrant. The Company agrees not to take any
position contrary to this Section 2(c).

 

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

 

d) Mechanics
of Exercise.

 

i.
Delivery of Warrant Shares Upon Exercise. The Company shall cause the Transfer Agent to transmit the Warrant Shares purchased
hereunder to the Holder by (a) crediting the account of the Holder’s or its designee’s balance account with The Depository
Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant
in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or
resale of the Warrant Shares by the Holder or (B) the Warrant Shares are eligible for resale by the Holder without volume or manner-of-sale
limitations pursuant to Rule 144 or (b) otherwise by physical delivery of a certificate, registered in the Company’s share
register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant
to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is one (1) Trading Day after
the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). For purposes
of Rule 200 under Regulation SHO of the Securities Act, the Warrant Shares shall be deemed to have been issued, and Holder shall
be deemed for all such purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has
been exercised upon delivery of the Notice of Exercise, irrespective of the date of delivery of the Warrant Shares; provided payment
of the aggregate Exercise Price (other than in the case of a Cashless Exercise) is received within three Trading Days of delivery
of the Notice of Exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST Automated Securities
Transfer program so long as this Warrant remains outstanding and exercisable.

 

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ii.
Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request
of a Holder and upon surrender of this Warrant certificate, at the time of delivery of the Warrant Shares, deliver to the Holder
a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which
new Warrant shall in all other respects be identical with this Warrant.

 

iii.
Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Warrant Shares pursuant
to Section 2(d)(i) by the Warrant Share Delivery Date, subject to receipt of the aggregate exercise price for the applicable exercise
(other than in the case of a Cashless Exercise), then the Holder will have the right to rescind such exercise.

 

iv.
Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. If the Company fails to cause the Transfer
Agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise
on or before the Warrant Share Delivery Date (subject to receipt of the aggregate Exercise Price for the applicable exercise (other
than in the case of a Cashless Exercise)), and if after such date the Holder is required by its broker to purchase (in an open
market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”),
then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying
(1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue
times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the
Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored
(in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would
have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares
of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately
preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount
of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law
or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

 

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v.
No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise
of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the
Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction
multiplied by the Exercise Price or round up to the next whole share.

 

vi.
Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer
tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid
by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed
by the Holder; provided, however, that in the event that Warrant Shares are to be issued in a name other than the
name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly
executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for
any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice
of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions)
required for same-day electronic delivery of the Warrant Shares.

 

vii.
Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise
of this Warrant, pursuant to the terms hereof.

 

Section
3. Certain Adjustments.

 

a)
Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or
otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities
payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company
upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines
(including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues by
reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price
shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares,
if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding
immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted
such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a)
shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend
or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

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b)
[RESERVED]

 

c)
Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time the Company
grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata
to all the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will
be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could
have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without
regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before
the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the
date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase
Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result
in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase
Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent)
and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto
would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

d)
Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend
or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock as a class, by way
of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property
or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction)
(a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Holder shall
be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder
had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations
on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a
record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common
Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the
Holder’s right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation,
then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any
shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in
abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding
the Beneficial Ownership Limitation). To the extent that this Warrant has not been partially or completely exercised at the time
of such Distribution, such portion of the Distribution shall be held in abeyance for the benefit of the Holder until the Holder
has exercised this Warrant.

 

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e)
Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in
one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company,
directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange
offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of
the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in
one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons whereby
such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common
Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making
or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”),
then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would
have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the
Holder, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving
corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such
Fundamental Transaction by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately
prior to such Fundamental Transaction. For purposes of any such exercise, the determination of the Exercise Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share
of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration
in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of
Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the
Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following
such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is
not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under
this Warrant and the other Transaction Documents in accordance with the provisions of this Section 3(e) pursuant to written agreements
in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such
Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security
of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is
exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to
the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise
of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder
to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental
Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being
for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction),
and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction,
the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction,
the provisions of this Warrant and the other Transaction Documents referring to the “Company” shall refer instead
to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the
Company under this Warrant and the other Transaction Documents with the same effect as if such Successor Entity had been named
as the Company herein. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction, the Company or any
Successor Entity shall, at the Holder’s option, on or within 30 days after the consummation of the Fundamental Transaction,
purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the Black Scholes Value of the remaining
unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction. “Black Scholes Value”
means the value of this Warrant based on the Black and Scholes Option Pricing Model obtained from the “OV” function
on Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation of the applicable Fundamental Transaction
for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to
the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date, (B) an
expected volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of
the Trading Day immediately following the public announcement of the applicable Fundamental Transaction, (C) the underlying price
per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any
non-cash consideration, if any, being offered in such Fundamental Transaction and (D) a remaining option time equal to the time
between the date of the public announcement of the applicable Fundamental Transaction and the Termination Date. The Company shall
cause the Successor Entity to assume in writing all of the obligations of the Company under this Warrant and the other Transaction
Documents in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably
satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall,
at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by
a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number
of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable
and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such
Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock
(but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value
of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting
the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably
satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity
shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this
Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity),
and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant
and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

 

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f)
Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share,
as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as
of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

g)
Notice to Holder.

 

i.
Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the
Company shall promptly deliver to the Holder by facsimile or email a notice setting forth the Exercise Price after such adjustment
and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.

 

ii.
Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever
form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common
Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall
be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a
party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby
the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be delivered
by facsimile or email to the Holder at its last facsimile number or email address as it shall appear upon the Warrant Register
of the Company, at least 30 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants,
or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that
holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure
to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action
required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material,
non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with
the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the
period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise
be expressly set forth herein.

 

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Section
4. Transfer of Warrant.

 

a)
Transferability. Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d)
hereof and to the provisions of Section 4.1 of the Purchase Agreement, this Warrant and all rights hereunder (including, without
limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office
of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached
hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making
of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants
in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument
of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this
Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically
surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender
this Warrant to the Company within three (3) Trading Days of the date the Holder delivers an assignment form to the Company assigning
this Warrant full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase
of Warrant Shares without having a new Warrant issued.

 

b)
New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office
of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved
in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or
Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated
the original issuance date and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant
thereto.

 

c)
Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose
(the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and
treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution
to the Holder, and for all other purposes, absent actual notice to the contrary.

 

d)
Transfer Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant,
the transfer of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities
Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions
or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer,
that the Holder or transferee of this Warrant, as the case may be, comply with the provisions of Section 4.1 of the Purchase Agreement.

 

e)
Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant
and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a
view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable
state securities law, except pursuant to sales registered or exempted under the Securities Act.

 

    	 	9	 

    	 

    

 

Section
5. Miscellaneous.

 

a)
No Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividends or other
rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i), except as expressly set forth
in Section 3.

 

b)
Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant
Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case
of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate,
if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation,
in lieu of such Warrant or stock certificate.

 

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

 

d)
Authorized Shares.

 

The
Company covenants that it has reserved and, during the period the Warrant is outstanding, it will reserve and keep available at
all times, its authorized and unissued Common Stock, free of preemptive rights, a sufficient number of shares to provide for the
issuance of the Warrant Shares upon the exercise of this Warrant. If at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of the Warrants, the Company shall take such corporate act as
may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number
as shall be sufficient for such purposes. The Company further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase
rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares
may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading
Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise
of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and
payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free
from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer
occurring contemporaneously with such issue).

 

Except
and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation,
amending its articles of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the
terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment.
Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above
the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may
be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares
upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions
or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform
its obligations under this Warrant.

 

    	 	10	 

    	 

    

 

Before
taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or
in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be
necessary from any public regulatory body or bodies having jurisdiction thereof.

 

e)
Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall
be determined in accordance with the provisions of the Purchase Agreement.

 

f)
Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered,
will have restrictions upon resale imposed by state and federal securities laws.

 

g)
Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder
shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies, notwithstanding
the fact that all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with
any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts
as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including
those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing
any of its rights, powers or remedies hereunder.

 

h)
Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company
shall be delivered in accordance with the notice provisions of the Purchase Agreement.

 

i)
Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant
to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability
of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted
by the Company or by creditors of the Company.

 

    	 	11	 

    	 

    

 

j)
Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages,
will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees
to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

 

k)
Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby
shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted
assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant
and shall be enforceable by the Holder or holder of Warrant Shares.

 

l)
Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company
and each Holder.

 

m)
Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions
or the remaining provisions of this Warrant.

 

n)
Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be
deemed a part of this Warrant.

 

o) Acceptance.
Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and
conditions contained herein.

 

    	 	12	 

    	 

    

 

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

 

********************

 

(Signature
Page Follows)

 

    	 	13	 

    	 

    

 

IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first
above indicated.

 

	 	REEDS, Inc.
	 	 
	 	By:	     
	 	Name:	 
	 	Title:	 

 

    	 	14	 

    	 

    

 

NOTICE
OF EXERCISE

 

	To:	REEDS,
    INC.

 

(1)
The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant
(only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer
taxes, if any.

 

(2)
Payment shall take the form of (check applicable box):

 

[  ]
in lawful money of the United States; or

 

[  ]
[if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection
2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise
procedure set forth in subsection 2(c).

 

(3)
Please issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

	 		 

 

The
Warrant Shares shall be delivered to the following DWAC Account Number:

 

	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 

 

(4)
Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under
the Securities Act of 1933, as amended. If the undersigned exercises this Warrant other than by Cashless Exercise, the undersigned
hereby makes for the benefit of the Company the representations set forth in Section 3.2(b) of the Purchase Agreement.

 

[SIGNATURE
OF HOLDER]

 

Name
of Investing Entity: ___________________________________________________________________________

Signature
of Authorized Signatory of Investing Entity: _____________________________________________________

Name
of Authorized Signatory: _______________________________________________________________________

Title
of Authorized Signatory: ________________________________________________________________________

Date:
___________________________________________________________________________________________

 

    	 		 

    	 

    

 

EXHIBIT
B

 

ASSIGNMENT
FORM

 

(To
assign the foregoing Warrant, execute this form and supply required information. Do not use this form to purchase shares.)

 

FOR
VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

	Name:	
	 	(Please
    Print)
	 	 
	Address:	
	 	(Please
    Print)
	 	 
	Phone
    Number:	
	 	 
	Email
    Address:	
	 	 
	Dated:
    _______________ __, ______	 
	 	 
	Holder’s
    Signature:__________________________	 
	 	 
	Holder’s
    Address:___________________________FORM
OF 

SUBORDINATED
CONVERTIBLE NON-REDEEMABLE SECURED NOTE

 

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

 

THIS
NOTE IS SUBJECT TO THE TERMS OF THAT CERTAIN SUBORDINATION AGREEMENT, DATED AS OF THE DATE HEREOF, BY AND BETWEEN RAPTOR/HARBOR
REEDS SPV LLC AND PMC FINANCIAL SERVICES GROUP, LLC AND PAYMENT HEREUNDER IS SUBORDINATE TO THE PAYMENT OF ALL PMC INDEBTEDNESS
(AS DEFINED IN THE SUBORDINATION AGREEMENT).

 

REED’S,
Inc.

 

Subordinated
Convertible Non-Redeemable Secured Note

 

	Issuance
    Date: April 21, 2017	Original
    Principal Amount: U.S. $3,400,000

 

FOR
VALUE RECEIVED, Reed’s, Inc., a Delaware corporation (the “Company”), hereby promises to pay to Raptor/Harbor
Reeds SPV LLC, a Delaware limited liability company, or its registered assigns (“Holder”) the amount set out
above as the Original Principal Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise,
the “Principal”) when due, whether upon the Maturity Date, or upon acceleration or otherwise (in each case
in accordance with the terms hereof) and to pay interest (“Interest”) on any outstanding Principal at the applicable
Interest Rate (as defined below) from the date set out above as the Issuance Date (the “Issuance Date”) until
the same becomes due and payable, whether upon the Maturity Date, conversion, redemption or otherwise (in each case in accordance
with the terms hereof). This Subordinated Convertible Non-Redeemable Secured Note (including all Subordinated Convertible Non-Redeemable
Secured Notes issued in exchange, transfer or replacement hereof, this “Note”) is issued on the Closing Date
pursuant to (i) the Securities Purchase Agreement, (ii) the Security Agreement and (iii) the Registration Rights Agreement. Certain
capitalized terms used herein are defined in Section 31.

 

    	 	 	 

    	 		 

    

 

1. DEMAND
NOTE. The Principal, accrued unpaid Interest and accrued and unpaid Late Charges are due and payable to Holder on the earlier
of (i) [INSERT DATE THAT IS 24-MONTH ANNIVERSARY OF CLOSING DATE] and (ii) the date that all of the outstanding Principal shall
become due and payable in full, whether by acceleration or otherwise (“Maturity Date”). Other than as specifically
permitted by this Note, the Company may not prepay any portion of the outstanding Principal, accrued and unpaid Interest or accrued
or unpaid Late Charges.

 

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

 

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

 

(a) Conversion
Right. Subject to the provisions of Section 3(d), at any time or times on or after [INSERT DATE THAT IS 180 DAYS AFTER CLOSING
DATE], the Holder shall be entitled to convert any portion of the outstanding Conversion Amount (as defined below) into validly
issued, fully paid and non-assessable shares of Common Stock in accordance with Section 3(c), at the Conversion Rate (as defined
below). The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result
in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up
to the nearest whole share. The Company shall pay any and all transfer, stamp, issuance and similar taxes that may be payable
with respect to the issuance and delivery of Common Stock upon conversion of any Conversion Amount.

 

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

 

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

 

(ii)
“Conversion Price” means, as of any Conversion Date (as defined below) or other date of determination, $3.00
per share, subject to adjustment as provided herein.

 

(c)
  Mechanics of Conversion.

 

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

 

    	 	 	 2

    	 		 

    

 

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

 

    	 	 	 3

    	 		 

    

 

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

 

4.
 RIGHTS UPON EVENT OF DEFAULT.

 

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

 

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

 

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

 

    	 	 	 4

    	 		 

    

 

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

 

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

 

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

 

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

 

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

 

    	 	 	 5

    	 		 

    

 

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

 

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

 

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

 

(xi) a
Change of Control shall occur;

 

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

 

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

 

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

 

    	 	 	 6

    	 		 

    

 

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

 

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

 

5.
 RIGHTS UPON FUNDAMENTAL TRANSACTION.

 

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

 

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

 

    	 	 	 7

    	 		 

    

 

7.
 RIGHTS UPON ISSUANCE OF OTHER SECURITIES.

 

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

 

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

 

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

 

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

 

9.
SUBORDINATION.

 

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

 

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

 

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

 

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11.
 RESERVATION OF AUTHORIZED SHARES.

 

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

 

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

 

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

 

    	 	 	 10

    	 		 

    

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    	 	 	 11

    	 		 

    

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    	 	 	 13

    	 		 

    

 

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

 

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

 

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

 

16.
 The Note and the Warrants (as both terms are defined in the Securities Purchase Agreement)
shall not be convertible or exercisable, as appropriate, into more than 2,794,660 shares of the Company’s Common Stock (as
the same may be adjusted on a pro rate basis to take into account stock splits, stock dividends recapitalizations and similar
events) in the aggregate. The Company covenants that the Company has at least 13,974,000 shares of Common Stock outstanding on
April 21, 2017.

 

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

 

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

 

19.
 REISSUANCE OF THIS NOTE.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    	 	 	 16

    	 		 

    

 

25.
NOTICES; CURRENCY; PAYMENTS.

 

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

 

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

 

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

 

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

 

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

 

    	 	 	 17

    	 		 

    

 

28.
 GOVERNING LAW. This Note shall be construed and enforced in accordance with,
and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the
internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether
of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than
the State of New York. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting
in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. In the event that any provision
of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative
to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other
provision of this Note. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking
other legal action against the Company in any other jurisdiction to collect on the Company’s obligations to the Holder to
realize on any collateral or any other security for such obligations or to enforce a judgment or other court ruling in favor of
the Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

29.
 [RESERVED]

 

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

 

    	 	 	 18

    	 		 

    

 

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

 

“Bloomberg”
means Bloomberg, L.P.

 

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

 

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

 

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

 

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

 

    	 	 	 19

    	 		 

    

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    	 	 	 20

    	 		 

    

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“PIPE
Participants” has the meaning ascribed to such term in the Securities Purchase Agreement.

 

    	 	 	 21

    	 		 

    

 

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

 

“Securities
Purchase Agreement” means that certain securities purchase agreement, dated as of April 14, 2017, by and among the Company
and the initial holder of the Note pursuant to which the Company issued the Notes and the Warrants, as may be amended, modified
or supplemented from time to time.

 

“Senior
Debt Document” means the Amended and Restated Loan and Security Agreement dated December 5, 2014, by and between the
Company and Senior Lender, as amended from time to time.

 

“Senior
Lender” means PMC Financial Services Group, LLC, a Delaware limited liability company.

 

“Securities
Purchase Agreement” means that certain securities purchase agreement, dated as of April 14, 2017, by and among the Company
and the initial holder of the Note pursuant to which the Company issued the Notes and the Warrants, as may be amended, modified
or supplemented from time to time.

 

“Security
Agreement” means that certain Second Lien Security Agreement, dated as of [April 21, 2017], by and among the Company
and the Holder, as may be amended, modified or supplemented from time to time.

 

“Subordination
Agreement” means that certain subordination agreement, dated as of [April 21, 2017], by and between the Senior Lender
and the Holder, as may be amended, modified or supplemented from time to time.

. 

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

 

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

 

    	 	 	 22

    	 		 

    

 

“Trading
Market” means the NYSE MKT.

 

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

 

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

 

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

 

[signature
page follows]

 

    	 	 	 23

    	 		 

    

 

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

 

	 	REEDS,
    INC.
	 	 	 
	 	By:	    
	 	Name:	 
	 	Title:	 

 

Attest:

 

	By:	 	 
	Name:	 	 
	Title:	 	 

 

    	 	 	 24

    	 		 

    

 

EXHIBIT
I

 

REED’S,
Inc.

CONVERSION NOTICE

 

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

 

	Date
    of Conversion:	 

 

	Aggregate
    Principal to be converted:	 

 

	AGGREGATE
    CONVERSION 

AMOUNT TO BE CONVERTED:	 

 

	Please
    confirm the following information:
	 
	Conversion
    Price:	 
	 	 
	Number
    of shares of Common Stock to be issued:	 

 

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

 

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

 

    	 	 	 25

    	 		 

    

 

EXHIBIT
II

 

ACKNOWLEDGMENT

 

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

 

	 	REEDS,
    INC.
	 	 	 
	 	By:	   
	 	Name:	 
	 	Title:	 

 

    	 	 	 26

    	 		 

    

 

EXHIBIT
III

 

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

 

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

 

Dated:
______________ ____, ___

 

	By:	 	 
	Name:	 	 
	Title:	 	 

 

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

 

    	 	 	 27

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