Exhibit 10.2


 


SECURITIES PURCHASE
AGREEMENT


 


THIS SECURITIES PURCHASE
AGREEMENT (the “Agreement”), dated as of November 8, 2016, is entered into by and between ARKADOS GROUP, INC.,
a Delaware corporation, (the “Company”) and Peak One Opportunity Fund, L.P.,
a Delaware limited partnership (the “Buyer”).


 


WITNESSETH:


 


WHEREAS, the Company
and the Buyer are executing and delivering this Agreement in accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under Regulation D (“Regulation D”) as promulgated by the United
States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933
Act”), and/or Section 4(2) of the 1933 Act; and


 


WHEREAS, the Buyer
wishes to purchase from the Company, and the Company wishes to sell the Buyer, upon the terms and subject to the conditions of
this Agreement, securities consisting of the Company’s Convertible Debentures due three years from the respective dates of
issuance (the “Debentures”), each of which are in the form of Exhibit A hereto, which will be convertible into
shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), in the aggregate principal
amount of up to Five Hundred Thousand and 00/100 Dollars ($500,000.00), for an aggregate Purchase Price of up to Four Hundred Fifty
Thousand and 00/100 Dollars ($450,000.00), all upon the terms and subject to the conditions of this Agreement, the Debentures,
and other related documents;


 


NOW THEREFORE, in
consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:


 


1.           DEFINITIONS;
AGREEMENT TO PURCHASE.


 


a.           Certain
Definitions. As used herein, each of the following terms has the meaning set forth below, unless the context otherwise requires:


 


(i)           “Affiliate”
means, with respect to a specific Person referred to in the relevant provision, another Person who or which controls or is controlled
by or is under common control with such specified Person.


 


(ii)          “Certificates”
means certificates representing the Conversion Shares issuable hereunder, each duly executed on behalf of the Company and issued
hereunder.


 


(iii)         “Closing
Date” means the date on which one of the three (3) Closings are held, which are the Signing Closing Date, the Second Closing
Date and the Third Closing Date.


 




     


     


    

 


(iv)        [Reserved]


 


(v)         “Commitment
Fee” shall have the meaning ascribed to such term in Section 12(a).


 


(vi)        “Common
Stock” shall have the meaning ascribed to such term in the Recitals.


 


(vii)       “Conversion
Amount” shall mean the Conversion Amount as defined in the Debentures, provided, however that for purposes of the
foregoing calculation, the full indebtedness under the Debentures shall be deemed immediately convertible, notwithstanding the
4.99% limitation on ownership set forth in the Debentures.


 


(viii)      “Conversion
Price” means the Conversion Price as defined in the Debentures.


 


(ix)         “Conversion
Shares” means the shares of Common Stock issuable upon conversion of the Debentures.


 


(x)          “DWAC
Operational” means that the Common Stock is eligible for clearing through the Depository Trust Company (“DTC”)
via the DTC’s Deposit Withdrawal Agent Commission or “DWAC” system and active and in good standing for DWAC issuance
by the Transfer Agent (as defined herein).


 


(xi)         “Dollars”
or “$” means United States Dollars.


 


(xii)        “Exchange
Act” means the Securities Exchange Act of 1934, as amended.


 


(xiii)       “Investments”
means Peak One Investments, LLC, the general partner of the Buyer.


 


(xiv)       “Irrevocable
Resolutions” has the meaning set forth in Section 8(i).


 


(xv)        “Market
Price of the Common Stock” means (x) the closing bid price of the Common Stock for the period indicated in the relevant provision
hereof (unless a different relevant period is specified in the relevant provision), as reported by Bloomberg, LP or, if not so
reported, as reported on the OTCQB, OTCQX or OTC Pink or (y) if the Common Stock is listed on a stock exchange, the closing price
on such exchange, as reported by Bloomberg LP.


 




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(xvi)       “Material
Adverse Effect” means a material adverse effect on the business, operations or condition (financial or otherwise) or results
of operation of the Company and its Subsidiaries taken as a whole, in the reasonable commercial discretion of the Buyer, irrespective
of any finding of fault, magnitude of liability (or lack of financial liability). Without limiting the generality of the foregoing,
the occurrence of any of the following, in the reasonable commercial discretion of the Buyer, shall be considered a Material Adverse
Effect: (i) any final money, judgment, writ or warrant of attachment, or similar process (including an arbitral determination)
in excess of Fifty Thousand Dollars ($50,000) shall be entered or filed against the Company or any of its Subsidiaries (including,
in any event, products liability claims against the Company or its Subsidiaries), (ii) the suspension or withdrawal of any governmental
authority or permit pertaining to a material amount of the Company’s or any Subsidiary’s products or services, (iii)
the loss of any material insurance coverage (including, in any case, comprehensive general liability coverage, products liability
coverage or directors and officers coverage, in each case in effect at the time of execution and delivery of this Agreement), (iv)
an action by a regulatory agency or governmental body affecting the Common Stock (including, without limitation, (1) the commencement
of any regulatory investigation of which the Company is aware, the suspension of trading of the Common Stock by the Financial Industry
Regulation Authority (“FINRA”), the SEC, the OTC Bulletin Board (“OTCBB”) or the OTC Markets Group, Inc.,
the failure of the Common Stock to be DTC eligible or the placing of the Common Stock on the DTC “chill list” or (2)
the engaging in any market manipulation or other unlawful or improper trading or other activity by any Affiliate), (v) the Company’s
independent registered accountants shall resign under circumstances where a disagreement exists between the Company and its independent
registered accountants, (vi) the Company shall fail to timely file any disclosure document as required by applicable federal or
state securities laws and regulations or by the rules and regulations of any exchange, trading market or quotation system to which
the Company or the Common Stock is subject, or (vii) the Chief Executive Officer of the Company or any other key full-time officer
or director of the Company, shall, for any reason (including, without limitation, termination, resignation, retirement, death or
disability) cease to act on behalf of the Company in the same role and to the same extent as his or her involvement as of the date
of execution and delivery of this Agreement.


 


(xvii)      “Person”
means any living person or any entity, such as, but not necessarily limited to, a corporation, partnership or trust.


 


(xviii)     “Purchase
Price” means the price that the Buyer pays for the Debentures at each respective Closing, which are the Signing Purchase
Price, the Second Purchase Price and the Third Closing Price, as the case may be.


 


(xix)       “Registrable
Securities” shall mean the Conversion Shares, the Restricted Stock issued to Investments pursuant to Section 12(a) and, to
the extent applicable, and any other shares of capital stock or other securities of the Company or any successor to the Company
that are issued upon exchange of Conversion Shares and/or such Restricted Stock.


 


(xx)        “Registration
Statement” shall mean a registration statement on Form S-1 (or any successor thereto) filed or contemplated to be filed by
the Company with the SEC under the Securities Act.


 


(xxi)       “Restricted
Stock” shall mean shares of Common Stock which are not freely trading shares when issued.


 


(xxii)      “Securities”
means the Debentures and the Shares.


 


(xxiii)    
“Shares” means the Conversion Shares.


 




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(xxiv)    
“Second Closing Date” shall have the meaning ascribed to such term in Section 6(b).


 


(xxv)      “Second
Debenture” means the second of the three (3) Debentures, in the principal amount of One Hundred Seventy Five Thousand and
00/100 Dollars ($175,000.00), which is issued by the Company to the Buyer on the Second Closing Date.


 


(xxvi)     “Second
Purchase Price” shall be One Hundred Fifty Seven Thousand Five Hundred and 00/100 Dollars ($157,500.00)


 


(xxvii)    “Signing
Closing Date” shall have the meaning ascribed to such term in Section 6(a).


 


(xxviii)   “Signing Debenture” means the first of the three (3) Debentures, in the principal amount of One Hundred Fifty Thousand
and 00/100 Dollars ($150,000.00), to be issued by the Company to the Buyer on the Signing Closing Date.


 


(xxix)      “Signing
Purchase Price” shall be One Hundred Thirty Five Thousand and 00/100 Dollars ($135,000.00).


 


(xxx)       “Subsidiary”
shall have the meaning ascribed to such term in Section 3(b).


 


(xxxi)      “Third
Closing Date” shall have the meaning ascribed to such term in Section 6(c).


 


(xxxii)     “Third Debenture” means the third of the three (3) Debentures, in the principal amount of One Hundred Seventy Five
Thousand and 00/100 Dollars ($175,000.00), which is issued by the Company to the Buyer on the Third Closing Date.


 


(xxxiii)    “Third Purchase Price” shall be One Hundred Fifty Seven Thousand Five Hundred and 00/100 Dollars ($157,500.00).


 


(xxxiv)    “Transaction Documents” means, collectively, this Agreement, the Debentures, the Transfer Agent Instruction Letter,
the Irrevocable Resolutions and the other agreements, documents and instruments contemplated hereby or thereby.


 


(xxxv)     “Transfer
Agent” shall have the meaning ascribed to such term in Section 4(a).


 


(xxxvi)    “Transfer Agent Instruction Letter” shall have the meaning ascribed to such term in Section 5(a).


 




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b.           Purchase
and Sale of Debentures.


 


(i)           The
Buyer agrees to purchase from the Company, and the Company agrees to sell to the Buyer, the Debentures on the terms and conditions
set forth below in this Agreement and the other Transaction Documents.


 


(ii)          Subject
to the terms and conditions of this Agreement and the other Transaction Documents, the Buyer will purchase the Debentures at certain
closings (each, a “Closing”) to be held on certain respective Closing Dates.


 


c.           [Reserved]



 


(i)          [Reserved]


 


(ii)         [Reserved]


 


2.           BUYER’S
REPRESENTATIONS, WARRANTIES, ETC.


 


The Buyer represents and
warrants to, and covenants and agrees with, the Company as follows:


 


a.           Investment
Purpose. Without limiting the Buyer’s right to sell the Shares pursuant to a Registration Statement, Buyer is purchasing
the Debentures, and will be acquiring the Conversion Shares, for its own account for investment only and not with a view towards
the public sale or distribution thereof and not with a view to or for sale in connection with any distribution thereof.


 


b.           Accredited
Investor Status. Buyer is (i) an “accredited investor” as that term is defined in Rule 501 of the General Rules
and Regulations under the 1933 Act by reason of Rule 501(a)(3), (ii) experienced in making investments of the kind described in
this Agreement and the related documents, (iii) able, by reason of the business and financial experience of its officers (if an
entity) and professional advisors (who are not affiliated with or compensated in any way by the Company or any of its affiliates
or selling agents), to protect its own interests in connection with the transactions described in this Agreement, and the related
documents, and (iv) able to afford the entire loss of its investment in the Securities.


 


c.           Subsequent
Offers and Sales. All subsequent offers and sales of the Securities by the Buyer shall be made pursuant to registration of
the Shares under the 1933 Act or pursuant to an exemption from registration and compliance with applicable states’ securities
laws.


 


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


 




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e.           Information.
Buyer and its advisors have been furnished with all materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Securities which have been requested by the Buyer. Buyer and its advisors have
been afforded the opportunity to ask questions of the Company and have received complete and satisfactory answers to any such inquiries.
Without limiting the generality of the foregoing, Buyer has also had the opportunity to obtain and to review the Company’s
Annual Report on Form 10-K for the fiscal year ended May 31, 2016, and Quarterly Report on Form 10-Q for the fiscal quarter ended
August 31, 2016 (collectively, the “SEC Documents”).


 


f.            Investment
Risk. Buyer understands that its investment in the securities constitutes high risk investment, its investment in the Securities
involves a high degree of risk, including the risk of loss of the Buyer’s entire investment.


 


g.           Governmental
Review. Buyer understands that no United States federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities.


 


h.           Organization;
Authorization. Buyer is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization.
This Agreement and the other Transaction Documents have been duly and validly authorized, executed and delivered on behalf of the
Buyer and create a valid and binding agreement of the Buyer enforceable in accordance with its terms, subject as to enforceability
to general principles of equity and to bankruptcy, insolvency, moratorium and other similar laws affecting the enforcement of creditors’
rights generally.


 


i.            Residency.
The state in which any offer to sell Securities hereunder was made to or accepted by the Buyer is the state shown as the Buyer’s
address contained herein, and Buyer is a resident of such state only.


 


3.           COMPANY
REPRESENTATIONS AND WARRANTIES, ETC.


 


The Company represents
and warrants to the Buyer that:


 


a.           Concerning
the Debentures and the Shares. There are no preemptive rights of any stockholder of the Company to acquire the Debentures or
the Shares.


 




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b.           Organization;
Subsidiaries; Reporting Company Status. Attached hereto as Schedule 3(b) is an organizational chart describing all of
the Company’s wholly-owned and majority-owned subsidiaries (the “Subsidiaries”) and other Affiliates, including
the relationships among the Company and such Subsidiaries, including as to each Subsidiary its jurisdiction of organization and
the percentage of ownership held by the Company, and the parent company of the Subsidiary, including the percentage of ownership
of the Company held by it. The Company and each Subsidiary is a corporation or other form of businesses entity duly organized,
validly existing and in good standing under the laws its respective jurisdiction of organization, and each of them has the requisite
corporate or other power to own its properties and to carry on its business as now being conducted. The Company and each Subsidiary
is duly qualified as a foreign corporation or other entity to do business and is in good standing in each jurisdiction where the
nature of the business conducted or property owned by it makes such qualification necessary, other than those jurisdictions in
which the failure to so qualify would not have a Material Adverse Effect. The Common Stock is listed and traded on the OTC Pink
Market of the OTC Markets Group, Inc. (trading symbol: AKDS). The Company has received no notice, either oral or written, from
FINRA, the SEC, or any other organization, with respect to the continued eligibility of the Common Stock for such listing, and
the Company has maintained all requirements for the continuation of such listing. The Company is an operating company in that,
among other things (A) it primarily engages, wholly or substantially, directly or indirectly through a majority owned Subsidiary
or Subsidiaries, in the production or sale, or the research or development, of a product or service other than the investment of
capital, (B) it is not an individual or sole proprietorship, (C) it is not an entity with no specific business plan or purpose
and its business plan is not to engage in a merger or acquisition with an unidentified company or companies or other entity or
person, and (D) it intends to use the proceeds from the sale of the Debentures solely for the operation of the Company’s
business and uses other than personal, family, or household purposes.


 


c.           Authorized
Shares. Schedule 3(c) sets forth all capital stock and derivative securities of the Company that are authorized
for issuance and that are issued and outstanding. All issued and outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable. The Company has sufficient authorized and unissued shares of Common Stock
as may be necessary to effect the issuance of the Shares, assuming the prior issuance and exercise, exchange or conversion, as
the case may be, of all derivative securities authorized, as indicated in Schedule 3(c). The Shares have been duly authorized
and, when issued upon conversion of, or as interest on, the Debentures, the Shares will be duly and validly issued, fully paid
and non-assessable and will not subject the holder thereof to personal liability by reason of being such holder. At all times,
the Company shall keep available and reserved for issuance to the holders of the Debentures shares of Common Stock duly authorized
for issuance against the Debentures.


 


d.           Authorization.
This Agreement, the issuance of the Debentures (including without limitation the incurrence of indebtedness thereunder), the
issuance of the Conversion Shares under the Debentures, and the other transactions contemplated by the Transaction Documents, have
been duly, validly and irrevocably authorized by the Company, and this Agreement has been duly executed and delivered by the Company.
The Company’s board of directors, in the exercise of its fiduciary duties, has irrevocably approved the entry into and performance
of the Transaction Documents, including, without limitation the sale of the Debentures and the issuance of Conversion Shares, based
upon a reasonable inquiry concerning the Company’s financing objectives and financial situation. Each of the Transaction
Documents, when executed and delivered by the Company, are and will be, valid, legal and binding agreements of the Company, enforceable
in accordance with their respective terms, subject as to enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors’ rights generally.


 




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e.           Non-contravention.
The execution and delivery of the Transaction Documents, the issuance of the Securities and the consummation by the Company
of the other transactions contemplated by this Agreement and the Debentures (including without limitation the incurrence of indebtedness
thereunder) do not and will not conflict with or result in a breach by the Company of any of the terms or provisions of, or constitute
a default under (i) the articles of incorporation or by-laws of the Company, each as currently in effect, (ii) any indenture, mortgage,
deed of trust, or other material agreement or instrument to which the Company is a party or by which it or any of its properties
or assets are bound, including any listing agreement for the Common Stock, except as herein set forth or an event which results
in the creation of any lien, charge or encumbrance upon any assets of the Company or the triggering of any anti-dilution rights,
rights of first refusal or first offer on the part of holders of the Company’s securities, (iii) to its knowledge, any existing
applicable law, rule, or regulation or any applicable decree, judgment, or order of any court, United States federal or state regulatory
body, administrative agency, or other governmental body having jurisdiction over the Company or any of its properties or assets,
or (iv) the Company’s listing agreement for its Common Stock (if applicable).


 


f.            Approvals.
No authorization, approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, or
stock exchange or market or the stockholders of the Company is required to be obtained by the Company for the entering into and
performing this Agreement and the other Transaction Documents (including without limitation the issuance and sale of the Securities
to the Buyer as contemplated by this Agreement) except such authorizations, approvals and consents that have been obtained, or
such authorizations, approvals and consents, the failure of which to obtain would not have a Material Adverse Effect.


 


g.           SEC
Filings; Rule 144 Status. None of the SEC Documents contained, at the time they were filed, any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or necessary to make the statements made therein in light
of the circumstances under which they were made, not misleading. The Company timely filed all requisite forms, reports and exhibits
thereto with the SEC as required. The Company is not aware of any event occurring on or prior to the execution and delivery of
this Agreement that would require the filing of, or with respect to which the Company intends to file, a Form 8-K after such time.
The Company satisfies the requirements of Rule 144(i)(2), and the Company shall continue to satisfy all applicable requirements
of Rule 144 (or any successor thereto) for so long as any Securities are outstanding and not registered pursuant to an effective
registration statement filed with the SEC.


 




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h.           Absence
of Certain Changes. Since August 31, 2016, when viewed from the perspective of the Company and its Subsidiaries taken as a
whole, there has been no material adverse change and no material adverse development in the business, properties, operations, condition
(financial or otherwise), or results of operations of the Company and its Subsidiaries (including, without limitation, a change
or development which constitutes, or with the passage of time is reasonably likely to become, a Material Adverse Effect), except
as disclosed in the SEC Documents. Since August 31, 2016, except as provided in the SEC Documents, the Company has not (i) incurred
or become subject to any material liabilities (absolute or contingent) except liabilities incurred in the ordinary course of business
consistent with past practices; (ii) discharged or satisfied any material lien or encumbrance or paid any material obligation or
liability (absolute or contingent), other than current liabilities paid in the ordinary course of business consistent with past
practices; (iii) declared or made any payment or distribution of cash or other property to stockholders with respect to its capital
stock, or purchased or redeemed, or made any agreements to purchase or redeem, any shares of its capital stock; (iv) sold, assigned
or transferred any other tangible assets, or canceled any debts or claims, except in the ordinary course of business consistent
with past practices; (v) suffered any substantial losses or waived any rights of material value, whether or not in the ordinary
course of business, or suffered the loss of any material amount of existing business; (vi) made any changes in employee compensation,
except in the ordinary course of business consistent with past practices; or (vii) experienced any material problems with labor
or management in connection with the terms and conditions of their employment.


 


i.            Full
Disclosure. There is no fact known to the Company (other than general economic conditions known to the public generally or
as disclosed in the SEC Documents) that has not been disclosed in writing to the Buyer that (i) would reasonably be expected to
have a Material Adverse Effect, (ii) would reasonably be expected to materially and adversely affect the ability of the Company
to perform its obligations pursuant to the Transaction Documents, or (iii) would reasonably be expected to materially and adversely
affect the value of the rights granted to the Buyer in the Transaction Documents.


 


j.            Absence
of Litigation. Except as described in the SEC Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board or body pending or, to the knowledge of the Company, threatened against or affecting the Company,
wherein an unfavorable decision, ruling or finding would have a Material Adverse Effect or which would adversely affect the validity
or enforceability of, or the authority or ability of the Company to perform its obligations under, any of the Transaction Documents.
The Company is not a party to or subject to the provisions of, any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality which could reasonably be expected to have a Material Adverse Effect.


 


k.           Absence
of Liens. The Company’s assets are not encumbered by any liens or mortgages except as described in the SEC Documents.


 


l.             Absence
of Events of Default. No event of default (or its equivalent term), as defined in the respective agreement, indenture, mortgage,
deed of trust or other instrument, to which the Company is a party, and no event which, with the giving of notice or the passage
of time or both, would become an event of default (or its equivalent term) (as so defined in such document), has occurred and is
continuing, which would have a Material Adverse Effect.


 




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m.          No
Undisclosed Liabilities or Events. The Company has no liabilities or obligations other than those disclosed in the SEC Documents
or those incurred in the ordinary course of the Company’s business since August 31, 2016, and which individually or in the
aggregate, do not or would not have a Material Adverse Effect. No event or circumstances has occurred or exists with respect to
the Company or its properties, business, condition (financial or otherwise), or results of operations, which, under applicable
law, rule or regulation, requires public disclosure or announcement prior to the date hereof by the Company but which has not been
so publicly announced or disclosed. There are no proposals currently under consideration or currently anticipated to be under consideration
by the Board of Directors or the executive officers of the Company which proposal would (x) change the articles of incorporation,
by-laws or any other charter document of the Company, each as currently in effect, with or without shareholder approval, which
change would reduce or otherwise adversely affect the rights and powers of the shareholders of the Common Stock or (y) materially
or substantially change the business, assets or capital of the Company.


 


n.           No
Integrated Offering. Neither the Company nor any of its affiliates nor any Person acting on its or their behalf has, directly
or indirectly, at any time during the six month period immediately prior to the date of this Agreement made any offer or sales
of any security or solicited any offers to buy any security under circumstances that would eliminate the availability of the exemption
from registration under Rule 506 of Regulation D in connection with the offer and sale of the Securities as contemplated hereby.


 


o.           Dilution.
The number of Shares issuable upon conversion of the Debentures may increase substantially in certain circumstances, including,
but not necessarily limited to, the circumstance wherein the Market Price of the Common Stock declines prior to the conversion
of the Debentures. The Company’s executive officers and directors have studied and fully understand the nature of the securities
being sold hereby and recognize that they have a potential dilutive effect and further that the conversion of the Debentures and/or
sale of the Conversion Shares may have an adverse effect on the Market Price of the Common Stock. The Board of Directors of the
Company has concluded, in its good faith business judgment that such issuance is in the best interests of the Company. The Company
specifically acknowledges that its obligation to issue the Conversion Shares upon conversion of the Debentures is binding upon
the Company and enforceable regardless of the dilution such issuance may have on the ownership %s of other shareholders of the
Company.


 


p.           Regulatory
Permits. The Company has all such permits, easements, consents, licenses, franchises and other governmental and regulatory
authorizations from all appropriate federal, state, local or other public authorities (“Permits”) as are necessary
to own and lease its properties and conduct its businesses in all material respects in the manner described in the SEC Documents
and as currently being conducted. All such Permits are in full force and effect and the Company has fulfilled and performed all
of its material obligations with respect to such Permits, and no event has occurred that allows, or after notice or lapse of time
would allow, revocation or termination thereof or will result in any other material impairment of the rights of the holder of any
such Permit, subject in each case to such qualification as may be disclosed in the SEC Documents. Such Permits contain no restrictions
that would materially impair the ability of the Company to conduct businesses in the manner consistent with its past practices.
The Company has not received notice or otherwise has knowledge of any proceeding or action relating to the revocation or modification
of any such Permit.


 


q.           Residency.
The state in which any offer to sell Securities hereunder was made or accepted by the Seller is the state shown as the Seller’s
address contained herein, and Seller is a resident of such state only.


 




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r.            Hazardous
Materials. The Company is in compliance with all applicable Environmental Laws in all respects except where the failure to
comply does not have and could not reasonably be expected to have a Material Adverse Effect. For purposes of the foregoing:


 


“Environmental Laws”
means, collectively, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Superfund
Amendments and Reauthorization Act of 1986, the Resource Conservation and Recovery Act, the Toxic Substances Control Act, as amended,
the Clean Air Act, as amended, the Clean Water Act, as amended, any other “Superfund” or “Superlien” law
or any other applicable federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating
to, or imposing liability or standards of conduct concerning, the environment or any Hazardous Material.


 


“Hazardous Material”
means and includes any hazardous, toxic or dangerous waste, substance or material, the generation, handling, storage, disposal,
treatment or emission of which is subject to any Environmental Law.


 


s.           Independent
Public Accountants.  The Company’s auditor, BDO USA, LLP, is an independent registered public accounting firm with respect
to the Company, as required by the 1933 Act, the Exchange Act and the rules and regulations promulgated thereunder.


 


t.            Internal
Accounting Controls. The Company maintains a system of internal accounting controls sufficient to provide reasonable assurances
that (1) transactions are executed in accordance with management’s general or specific authorization; (2) transactions are
recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles
and to maintain accountability for assets; (3) access to assets is permitted only in accordance with management’s general
or specific authorization; and (4) the recorded accountability for assets is compared with existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.


 


u.           Brokers.
No Person (other than the Buyer and its principals, employees and agents) is entitled to receive any consideration from the Company
or the Buyer arising from any finder’s agreement, brokerage agreement or other agreement to which the Company is a party.


 


v.          
DWAC Operational; DRS. The Company shall, within ten (10) business days from the date of this Agreement, apply through its
Transfer Agent to become DWAC Operational and eligible for DRS


 




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4.           CERTAIN
COVENANTS AND ACKNOWLEDGMENTS.


 


a.           Transfer
Restrictions. The parties acknowledge and agree that (1) the Debentures have not been registered under the provisions of the
1933 Act and the Shares have not been registered under the 1933 Act, and may not be transferred unless (A) subsequently registered
thereunder or (B) the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration;
(2) any sale of the Securities made in reliance on Rule 144 promulgated under the 1933 Act (“Rule 144”) may be made
only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of such Securities under circumstances
in which the seller, or the Person through whom the sale is made, may be deemed to be an underwriter, as that term is used in the
1933 Act, may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder,
(3) at the request of the Buyer, the Company shall, from time to time, within two (2) business days of such request, at the sole
cost and expense of the Company, either (i) deliver to its transfer agent and registrar for the Common Stock (the “Transfer
Agent”) a written letter instructing and authorizing the Transfer Agent to process transfers of the Shares at such time as
the Buyer has held the Securities for the minimum holding period permitted under Rule 144, subject to the Buyer’s providing
to the Transfer Agent certain customary representations contemporaneously with any requested transfer, or (ii) at the Buyer’s
option or if the Transfer Agent requires further confirmation of the availability of an exemption from registration, furnish to
the Buyer an opinion of the Company’s counsel in favor of the Buyer (and, at the request of the Buyer, any agent of the Buyer,
including but not limited to the Buyer’s broker or clearing firm) and the Transfer Agent, reasonably satisfactory in form,
scope and substance to the Buyer and the Transfer Agent, to the effect that a contemporaneously requested transfer of shares does
not require registration under the 1933 Act, pursuant to the 1933 Act, Rule 144 or other regulations promulgated under the 1933
Act and (4) neither the Company nor any other Person is under any obligation to register the Securities (other than pursuant to
this Agreement) under the 1933 Act or to comply with the terms and conditions of any exemption thereunder.


 


b.           Restrictive
Legend. The Buyer acknowledges and agrees that the Debentures, and, until such time as the Shares have been registered under
the 1933 Act as contemplated hereby and sold in accordance with an effective Registration Statement, certificates and other instruments
representing any of the Securities shall bear a restrictive legend in substantially the following form (and a stop-transfer order
may be placed against transfer of any such Securities):


 


THIS SECURITY HAS NOT BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE
TO THE COMPANY.


 




    	 	12	 



     


    

 


c.           Piggy-Back Registration Rights. From and after the Signing Closing Date and until eighteen (18) months after the Signing
Closing Date, if the Company contemplates making an offering of Common Stock (or other equity securities convertible into or exchangeable
for Common Stock) registered for sale under the Securities Act or proposes to file a Registration Statement covering any of its
securities, the Company shall at each such time give prompt written notice to Investments and Buyer of its intention to do so and
of the registration rights granted under this Agreement. Upon the written request of Investments and/or Buyer made within thirty
(30) days after the receipt of any such notice (which request shall specify the Registrable Securities intended to be disposed
of by Investments and/or Buyer and the intended method of disposition thereof), the Company shall, at its sole cost and expense,
use its best efforts to effect the registration of all Registrable Securities which the Company has been so requested to register
by Investments and/or Buyer, to the extent requisite to permit the disposition (in accordance with the intended methods of disposition)
of the Registrable Securities by Investments and/or Buyer, by inclusion of such Registrable Securities in the Registration Statement
which covers the securities which the Company proposes to register; provided, that if the Company is unable to register the full
amount of Registrable Securities in an “at the market offering” under SEC rules and regulations due to the high percentage
of the Company’s Common Stock the Registrable Securities represents (giving effect to all other securities being registered
in the Registration Statement), then the Company may reduce, on a pro rata basis, the amount of Registrable Securities subject
to the Registration Statement to a lesser amount which equals the maximum number of Registrable Securities that the Company is
permitted to register in an “at the market offering”; and provided, further, that if, at any time after giving written
notice of its intention to register any Registrable Securities and prior to the effective date of the Registration Statement filed
in connection with such registration, the Company shall determine for any reason either not to register or to delay registration
of such Registrable Securities, the Company may, at its election, give written notice of such determination to Investments and/or
the Buyer and, thereupon, (i) in the case of a determination not to register, the Company shall be relieved of its obligation to
register any Registrable Securities in connection with such registration (but not from its obligation to pay the expenses of registration
in connection therewith), and (ii) in the case of a determination to delay registering such Registrable Securities, shall be permitted
to delay registering any Registrable Securities, for the same period as the delay in registering such other securities. If Buyer
shall have transferred all or part of its Registrable Securities, then for purposes of this Section, the term “Buyer”
shall reference Buyer and/or such transferee(s).


 


d.           Securities
Filings. The Company undertakes and agrees to make all necessary filings (including, without limitation, a Form D) in connection
with the sale of the Securities to the Buyer required under any United States laws and regulations applicable to the Company (including
without limitation state “blue sky” laws), or by any domestic securities exchange or trading market, and to provide
a copy thereof to the Buyer promptly after such filing.


 




    	 	13	 



     


    

 


e.           Reporting
Status; Public Trading Market; DTC Eligibility. So long as the Buyer and/or Investments beneficially own any Securities, (i)
the Company shall timely file, prior to or on the date when due, all reports that would be required to be filed with the SEC pursuant
to Section 13 or 15(d) of the Exchange Act if the Company had securities registered under Section 12(b) or 12(g) of the Exchange
Act; (ii) the Company shall not be operated as, or report, to the SEC or any other Person, that the Company is a “shell company”
or indicate to the contrary to the SEC or any other Person; (iii) the Company shall take all other action under its control necessary
to ensure the availability of Rule 144 under the 1933 Act for the sale of Shares by the Buyer at the earliest possible date; and
(iv) the Company shall at all times while any Securities are outstanding maintain its engagement of an independent registered public
accounting firm. Except as otherwise set forth in Transaction Documents, the Company shall take all action under its control necessary
to obtain and to continue the listing and trading of its Common Stock (including, without limitation, all Registrable Securities)
on the OTC Markets, Inc. (“OTCM”) on the OTC Pink (“OTCP”), OTCQB (“OTCQB”), or OTCQX (“OTCQX”),
and will comply in all material respects with the Company’s reporting, filing and other obligations under the by-laws or
rules of the Financial Industry Regulatory Authority (“FINRA”). If, so long as the Buyer and/or Investments beneficially
own any of the Securities, the Company receives any written notice from the OTCM, FINRA, or the SEC with respect to either any
alleged deficiency in the Company’s compliance with applicable rules and regulations (including without limitation any comments
from the SEC on any of the Company’s documents filed (or the failure to have made any such filing) under the 1933 Act or
the Exchange Act) (each, a “Regulatory Notice”), then the Company shall promptly, and in any event within two (2) business
days, provide copies of the Regulatory Notice to the Buyer, and shall promptly, and in any event within five (5) business days
of receipt of the Regulatory Notice (a “Regulatory Response”), respond in writing to the OTCM, FIRNA and/or SEC (as
the case may be), setting forth the Company’s explanation and/or response to the issues raised in the Regulatory Notice,
with a view towards maintaining and/or regaining full compliance with the applicable rules and regulations of the OTCM, FIRNA and/or
SEC and maintaining or regaining good standing of the Company with the OTCM, FINRA and/or SEC, as the case may be, the intent being
to ensure that the Company maintain its reporting company status with the SEC and that its Common Stock be and remain available
for trading on the OTCP, OTCQB, or OTCQX. Further, at all times while any Securities are outstanding, the Common Stock shall be
DWAC Operational, and the Common Stock shall not be subject to any DTC “chill” designation or similar restriction on
the clearing of the Common Stock through DTC.


 


f.            Use
of Proceeds. The Company shall use the proceeds from the sale of the Debentures for working capital purposes only subject to
customary restrictions. Absent the prior written approval of a majority of the principal amount of the Debentures then outstanding,
the Company shall not use any portion of the proceeds of the sale of the Debentures to (i) repay any indebtedness or other obligation
of the Company incurred prior to the date of this Agreement outside the normal course of business, (ii) pay any dividends or redemption
amount on any of the Company’s equity or equity equivalents, (iii) pay any amounts, whether on account of debt obligations
of the Company or otherwise, except for compensation, to any officer, director or other related party of the Company or (iv) pay
deferred compensation or any compensation to any of the directors or officers of the Company in excess of the rate or amount paid
or accrued during the fiscal year ended May, 2016 (as base compensation and excluding any discretionary amounts), other than modest
increases consistent with prior practice that are approved by the Company’s Board of Directors.


 




    	 	14	 



     


    

 


g.           Available
Shares. Commencing on the date of execution and delivery of this Agreement, the Company shall have and maintain authorized
and reserved for issuance, free from preemptive rights, that number of shares equal to Seven Hundred percent (700%) of the number
of shares of Common Stock (1) issuable based upon the conversion of the then-outstanding Debentures (including accrued interest
thereon) as may be required to satisfy the conversion rights of the Buyer pursuant to the terms and conditions of the Debenture
Debenture (without giving effect to the 4.99% limitation on ownership as set forth in the Debentures), provided, however that
for purposes of the foregoing calculation, the full indebtedness under the Debentures shall be deemed immediately convertible and
(2) issuable to the Buyer on future Closing Dates, based upon the lowest closing bid price per share of the Common Stock on the
date before the most recent Closing Date (as reported by Bloomberg LP). The Company shall monitor its compliance with the foregoing
requirements on an ongoing basis. If at any time the Company does not have available an amount of authorized and non-issued Shares
required to be reserved pursuant to this Section, then the Company shall, without notice or demand by the Buyer, call within thirty
(30) days of such occurrence and hold within sixty (60) days of such occurrence a special meeting of shareholders, for the sole
purpose of increasing the number of shares authorized. Management of the Company shall recommend to shareholders to vote in favor
of increasing the number of Common Stock authorized at the meeting. Members of the Company’s management shall also vote all
of their own shares in favor of increasing the number of Common Stock authorized at the meeting. If the increase in authorized
shares is approved by the stockholders at the meeting, the Company shall implement the increase in authorized shares within one
(1) business day following approval at such meeting. Alternatively, to the extent permitted by applicable law, in lieu of calling
and holding a meeting as described above, the Company may, within thirty (30) days of the date when the Company does not have available
an amount of authorized and non-issued Shares required to be reserved as described above, procure the written consent of stockholders
to increase the number of shares authorized, and provide the stockholders with notice thereof as may be required under applicable
law (including without limitation Section 14(c) of the Exchange Act and Regulation 14C thereunder). Upon obtaining stockholder
approval as aforesaid, the Company shall cause the appropriate increase in its authorized shares of Common Stock within one (1)
business day (or as soon thereafter as permitted by applicable law). Company’s failure to comply with these provisions will
be an Event of Default (as defined in the Debentures).


 


h.           Reimbursement.
If (i) Buyer and/or Investments becomes a party defendant in any capacity in any action or proceeding brought by any stockholder
of the Company, in connection with or as a result of the consummation of the transactions contemplated by the Transaction Documents,
or if the Buyer and/or Investments is impleaded in any such action, proceeding or investigation by any Person, or (ii) the Buyer
and/or Investments, other than by reason of its own gross negligence, willful misconduct or breach of law (as adjudicated by a
court of law having proper jurisdiction and such adjudication is not subject to appeal), becomes a party defendant in any capacity
in any action or proceeding brought by the SEC against or involving the Company or in connection with or as a result of the consummation
of the transactions contemplated by the Transaction Documents, or if the Buyer or Investments is impleaded in any such action,
proceeding or investigation by any Person, then in any such case, the Company shall promptly reimburse the Buyer and/or Investments
for its or their reasonable legal and other expenses (including the cost of any investigation and preparation) incurred in connection
therewith. The reimbursement obligations of the Company under this paragraph shall be in addition to any liability which the Company
may otherwise have, shall extend upon the same terms and conditions to any affiliates of the Buyer and/or Investments who are actually
named in such action, proceeding or investigation, and partners, directors, agents, employees and controlling Persons (if any),
as the case may be, of the Buyer, Investments and any such Affiliate, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Company, the Buyer, Investments and any such Affiliate and any such
Person. Except as otherwise set forth in the Transaction Documents, the Company also agrees that neither any Buyer, Investments
nor any such Affiliate, partners, directors, agents, employees or controlling Persons shall have any liability to the Company or
any Person asserting claims on behalf of or in right of the Company in connection with or as a result of the consummation of the
Transaction Documents.


 




    	 	15	 



     


    

 


i.            The
Company shall provide the Transfer Agent and/or the Buyer, Investments or their respective brokerage and/or clearing firm with
all relevant legal opinions and other documentation requested by the Buyer or Investments in connection with the issuance of the
Conversion Shares or the Restricted Stock, or the sale thereof, to confirm the share issuance(s) such that the Conversion Shares
and/or Restricted Stock may be deposited with the applicable brokerage and/or clearing firm.


 


j.            No
Payments to Affiliates or Related Parties.  So long as any of the Debentures remain outstanding, if the Debentures are
in default, the Company shall not, absent the prior written consent of the holders of all Debentures then outstanding, make any
payments to any of the Company’s or the Subsidiaries’ respective affiliates or related parties, including without limitation
payments or prepayments of principal or interest accrued on any indebtedness or obligation in favor of affiliates or related parties. 
Notwithstanding anything to the contrary contained herein, the provisions of this Section 4(j) shall not apply to payments to the
Subsidiaries, or other businesses in which affiliates have an interest, made in the ordinary course of business and consistent
with past practice as disclosed in the SEC Documents.


 


k.           Notice
of Material Adverse Effect. The Company shall notify the Buyer (and any subsequent holder of the Debentures), as soon as practicable
and in no event later than three (3) business days of the Company’s knowledge of any Material Adverse Effect on the Company.
For purposes of the foregoing, “knowledge” means the earlier of the Company’s actual knowledge or the Company’s
constructive knowledge upon due inquiry.


 


l.            Public
Disclosure. Except to the extent required by applicable law, absent the Buyer’s prior written consent, the Company shall
not reference the name of the Buyer in any press release, securities disclosure, business plan, marketing or funding proposal.


 




    	 	16	 



     


    

 


m.           Nature
of Transaction; Savings Clause. It is the parties’ express understanding and agreement that the transactions contemplated
by the Transaction Documents constitute an investment and not a loan. If nonetheless such transactions are deemed to be a loan
(as adjudicated by a court of law having proper jurisdiction and such adjudication is not subject to appeal), the Company shall
not be obligated or required to pay interest at a rate that could subject Buyer to either civil or criminal liability as a result
of such rate exceeding the maximum rate that the Buyer is permitted to charge under applicable law, and the Company’s obligations
under the Transaction Documents shall not be void or voidable on the basis of the Buyer’s lack of any license or registration
as a lender with any governmental authority. It is expressly understood and agreed by the parties that neither the amounts payable
pursuant to Section 12, any redemption premium, remedy upon an Event of Default (as defined in the Debentures) or any Acceleration
Amount (as defined in the Debentures), original issue discount nor any investment returns of the Buyer on the sale of the Debentures
or the sale of any Conversion Shares (whether unrealized or realized) shall be construed as interest. If, by the terms of the Debentures,
any other Transaction Document or any other instrument, Buyer is at any time required or obligated to pay interest at a rate exceeding
such maximum rate, interest payable under the Debenture and/or such other Transaction Documents or other instrument shall be computed
(or recomputed) at such maximum rate, and the portion of all prior interest payments (if any) exceeding such maximum shall be applied
to payment of the outstanding principal of the Debentures.


 


5.           TRANSFER
AGENT INSTRUCTIONS.


 


a.           Transfer
Agent Instruction Letter. On or before the Signing Closing Date, the Company shall irrevocably instruct its Transfer Agent
in writing using the letter substantially in the form of Exhibit B annexed hereto, with only such modifications as the Buyer
agrees to, executed by the Company, the Buyer and the Transfer Agent (the “Transfer Agent Instruction Letter”), to
(i) reserve that number of shares of Common Stock as is required under Section 4(g) hereof, and (ii) issue Common Stock from time
to time upon conversion of the Debentures in such amounts as specified from time to time by the Buyer to the Transfer Agent in
a Notice of Conversion, in such denominations to be specified by the Buyer in connection with each conversion of the Debentures.
The Transfer Agent shall not be restricted from issuing shares from only the allotment reserved hereunder for the Conversion Amount
(as defined in the Debentures), but instead may, to the extent necessary to satisfy the amount of shares issuable upon conversion,
issue shares above and beyond the amount reserved on account of the Conversion Amount, without any additional instructions or authorization
from the Company, and the Company shall not provide the Transfer Agent with any instructions or documentation contrary to the foregoing.
As of the date of this Agreement, the Transfer Agent is VStock Transfer, LLC. The Company shall at all times while any Debentures
are outstanding engage a Transfer Agent which is a party to the Transfer Agent Instruction Letter. If for any reason the Company’s
Transfer Agent is not a signatory of the Transfer Agent Instruction Letter while any Debentures or Restricted Stock are outstanding
and held by the Buyer and/or Investments, then such Transfer Agent shall nonetheless be deemed bound by the Transfer Agent Instruction
Letter, and the Company shall neither (i) permit the Transfer Agent to disclaim, disregard or refuse to abide by the Transfer Agent’s
obligations, terms and agreements set forth in the Transfer Agent Instruction Letter, nor (ii) issue any instructions to the Transfer
Agent contrary to the obligations, terms and agreements set forth in the Transfer Agent Instruction Letter . The Company shall
not terminate the Transfer Agent or otherwise change Transfer Agents without at least fifteen (15) days prior written notice to
the Buyer and with the Buyer’s prior written consent to such change, which the Buyer may grant or withhold in its sole discretion.
The Company shall continuously monitor its compliance with the share reservation requirements and, if and to the extent necessary
to increase the number of reserved shares to remain and be at least Seven Hundred percent (700%) of the Conversion Amount to account
for any decrease in the Market Price of the Common Stock, the Company shall immediately (and in any event within two (2) business
days) notify the Transfer Agent in writing of the reservation of such additional shares, provided that in the event that
the number of shares reserved for conversion of the Debentures is less than Seven Hundred percent (700%) of the Conversion Amount,
the Buyer may also directly instruct the Transfer Agent to increase the reserved shares as necessary to satisfy the minimum reserved
share requirement, and the Transfer Agent shall act accordingly, provided, further, that the Company shall within two (2)
business days provide any written confirmation, assent or documentation thereof as the Transfer Agent may request to act upon a
share increase instruction delivered by the Buyer. The Company shall provide the Buyer with a copy of all written instructions
to the Company’s Transfer Agent with respect to the reservation of shares simultaneously with the issuance of such instructions
to the Transfer Agent. The Company covenants that no instruction other than such instructions referred to in this Section 5 and
stop transfer instructions to give effect to Section 4(a) hereof prior to registration and sale of the Conversion Shares under
the 1933 Act will be given by the Company to the Transfer Agent and that the Conversion Shares shall otherwise be freely transferable
on the books and records of the Company as and to the extent provided in this Agreement and applicable law. If the Buyer provides
the Company and/or the Transfer Agent with an opinion of counsel reasonably satisfactory to the Company that registration of a
resale by the Buyer of any of the Securities in accordance with clause (1)(B) of Section 4(a) of this Agreement is not required
under the 1933 Act, the Company shall (except as provided in clause (2) of Section 4(a) of this Agreement) permit the de-legending
or transfer of the Securities and, in the case of the Conversion Shares, instruct the Company’s Transfer Agent to issue one
or more certificates for Common Stock without legend in such name and in such denominations as specified by the Buyer.


 




    	 	17	 



     


    

 


b.           Conversion.
(i) The Company shall permit the Buyer to exercise the right to convert the Debentures by faxing, emailing or delivering overnight
an executed and completed Notice of Conversion to the Company or the Transfer Agent. If so requested by the Buyer or the Transfer
Agent, the Company shall within one (1) business day respond with its endorsement so as to confirm the outstanding principal amount
of any Debenture submitted for conversion or shall reconcile any difference with the Buyer promptly after receiving such Notice
of Conversion.


 


(ii)          The
term “Conversion Date” means, with respect to any conversion elected by the holder of the Debentures, the date specified
in the Notice of Conversion, provided the copy of the Notice of Conversion is given either via mail or facsimile to or otherwise
delivered to the Transfer Agent and/or the Company in accordance with the provisions hereof so that it is received by the Transfer
Agent and/or the Company on or before such specified date.


 


(iii)         The
Company shall deliver (or will cause the Transfer Agent to deliver) the Conversion Shares issuable upon conversion as follows:
(1) if the Company is then DWAC Operational, via DWAC, (2) if the Common Stock is then eligible for the Depository Trust Company’s
Direct Registration System (“DRS”), if so requested by the Buyer, or (3) if the Company is not then DWAC Operational
or the Common Stock is not then eligible for DRS, in certificated form, to the Buyer at the address specified in the Notice of
Conversion (which may be the Buyer’s address for notices as contemplated by Section 10 hereof or a different address) via
express courier, in each case within two (2) business days (the “Delivery Date”) after (A) the business day on which
the Company or the Transfer Agent has received the Notice of Conversion (by facsimile, email or other delivery) or (B) the date
on which payment of interest and principal on the Debentures, which the Company has elected to pay by the issuance of Common Stock,
as contemplated by the Debentures, was due, as the case may be.


 




    	 	18	 



     


    

 


c.           Failure
to Timely Issue Conversion Shares or De-Legended Shares. The Company’s failure to issue and deliver Conversion Shares
to the Buyer (either by DWAC, DRS or in certificated form, as required by Section 5(b)) on or before the Delivery Date shall be
considered an Event of Default, which shall entitle the Buyer to certain remedies set forth in the Debentures and provided by applicable
law.  Similarly, the Company’s failure to issue and deliver Common Stock in unrestricted form without a restrictive
legend when required under the Transaction Documents shall entitle the Buyer to damages for the diminution in value (if any) of
the relevant shares between the date delivery was due versus the date ultimately delivered in unrestricted form. The Company acknowledges
that its failure to timely honor a Notice of Conversion (or the occurrence of any other Event of Default) shall cause definable
financial hardship on the Buyer(s) and that the remedies set forth herein and in the Debentures are reasonable and appropriate.


 


d.           Duties
of Company; Authorization. The Company shall inform the Transfer Agent of the reservation of shares contemplated by Section
4(g) and this Section 5, and shall keep current in its payment obligations to the Transfer Agent such that the Transfer Agent will
continue to process share transfers and the initial issuance of shares of Common Stock upon the conversion of Debentures. The Company
hereby authorizes and agrees to authorize the Transfer Agent to correspond and otherwise communicate with the Buyer or their representatives
in connection with the foregoing and other matters related to the Common Stock. Further, the Company hereby authorizes the Buyer
or its representative to provide instructions to the Transfer Agent that are consistent with the foregoing and instructs the Transfer
Agent to honor any such instructions. Should the Company fail for any reason to keep current in its payment obligations to the
Transfer Agent, the Buyer and/or Investments may pay such amounts as are necessary to compensate the Transfer Agent for performing
its duties with respect to share reservation, issuance of Conversion Shares and/or de-legending certificates representing Restricted
Stock, and all amounts so paid shall be promptly reimbursed by the Company. If not so reimbursed within thirty (30) days, such
amounts shall, at the option of the Buyer and without prior notice to or consent of the Company, be added to the principal amount
due under the Debenture(s) held by the Buyer, whereupon interest will begin to accrue on such amounts at the rate specified in
the Debentures.


 


e.           Effect
of Bankruptcy. The Buyer shall be entitled to exercise its conversion privilege with respect to the Debentures notwithstanding
the commencement of any case under 11 U.S.C. §101 et seq. (the “Bankruptcy Code”). In the event the Company
is a debtor under the Bankruptcy Code, the Company hereby waives, to the fullest extent permitted, any rights to relief it may
have under 11 U.S.C. §362 in respect of the Buyer’s conversion privilege. The Company hereby waives, to the fullest
extent permitted, any rights to relief it may have under 11 U.S.C. §362 in respect of the conversion of the Debentures. The
Company agrees, without cost or expense to the Buyer, to take or to consent to any and all action necessary to effectuate relief
under 11 U.S.C. §362.  


 




    	 	19	 



     


    

 


6.           CLOSINGS.



 


a.           Signing
Closing. Promptly upon the execution and delivery of this Agreement, the Signing Debenture, and all conditions in Sections
7 and 8 herein are met (the “Signing Closing Date”), (A) the Company shall deliver to the Buyer the following: (i)
the Signing Debenture; (ii) the Transfer Agent Instruction Letter; (iii) duly executed counterparts of the Transaction Documents;
and (iv) an officer’s certificate of the Company confirming the accuracy of the Company’s representations and warranties
contained herein, and (B) the Buyer shall deliver to the Company the following: (i) the Signing Purchase Price and (ii) duly executed
counterparts of the Transaction Documents (as applicable). The Company shall immediately pay the fees due under Section 12 of this
Agreement upon receipt of the Signing Purchase Price if Buyer does not withhold such amounts from the Signing Purchase Price pursuant
to Section 12.


 


b.           Second
Closing. At any time sixty one (61) to ninety (90) days following the Signing Closing Date, subject to the mutual agreement
of the Buyer and the Company, for the “Second Closing Date” and subject to satisfaction of the conditions set forth
in Sections 7 and 8, (A) the Company shall deliver to the Buyer the following: (i) the Second Debenture; (ii) an amendment to the
Transfer Agent Instruction Letter instructing the Transfer Agent to reserve that number of shares of Common Stock as is required
under Section 4(g) hereof, if necessary; and (iii) an officer’s certificate of the Company confirming, as of the Second Closing
Date, the accuracy of the Company’s representations and warranties contained herein and updating Schedules 3(b), 3(c)
and 3(k) as of the Second Closing Date, and (B) the Buyer shall deliver to the Company the Second Purchase Price.


 


c.           Third
Closing. At any time sixty one (61) to ninety (90) days following the Second Closing Date, subject to the mutual agreement
of the Buyer and the Company, for the “Third Closing Date” and subject to satisfaction of the conditions set forth
in Sections 7 and 8, (A) the Company shall deliver to the Buyer the following: (i) the Third Debenture; (ii) an amendment to the
Transfer Agent Instruction Letter instructing the Transfer Agent to reserve that number of shares of Common Stock as is required
under Section 4(g) hereof, if necessary; and (iii) an officer’s certificate of the Company confirming, as of the Third Closing
Date, the accuracy of the Company’s representations and warranties contained herein and updating Schedules 3(b), 3(c)
and 3(k) as of the Third Closing Date, and (B) the Buyer shall deliver to the Company the Third Purchase Price.


 


d.           Location
and Time of Closings. Each Closing shall be deemed to occur on the related Closing Date at the office of the Buyer’s
counsel and shall take place no later than 5:00 P.M., New York time, on such day or such other time as is mutually agreed upon
by the Company and the Buyer.


 


7.           CONDITIONS
TO THE COMPANY’S OBLIGATION TO SELL.


 


The Company’s obligation
to sell the Debentures to the Buyer pursuant to this Agreement on each Closing Date is conditioned upon:


 




    	 	20	 



     


    

 


a.           Purchase
Price. Delivery to the Company of good funds as payment in full of the respective Purchase Price for the Debentures at each
Closing in accordance with this Agreement;


 


b.           Representations
and Warranties; Covenants.  The accuracy on the Closing Date of the representations and warranties of the Buyer contained in
this Agreement, each as if made on such date, and the performance by the Buyer on or before such date of all covenants and agreements
of the Buyer required to be performed on or before such date; and


 


c.           Laws
and Regulations; Consents and Approvals. There shall not be in effect any law, rule or regulation prohibiting or restricting
the transactions contemplated hereby, or requiring any consent or approval which shall not have been obtained.


 


8.           CONDITIONS
TO THE BUYER’S OBLIGATION TO PURCHASE.


 


The Buyer’s obligation
to purchase the Debentures at each Closing is conditioned upon:


 


a.           Transaction
Documents. The execution and delivery of this Agreement by the Company;


 


b.           Debenture(s).
Delivery by the Company to the Buyer of the Debentures to be purchased in accordance with this Agreement; 



 


c.           Section
4(2) Exemption. The Debentures and the Conversion Shares shall be exempt from registration under the Securities Act of 1933
(as amended), pursuant to Section 4(2) thereof;


 


d.          
DWAC Status. The Common Stock shall be DWAC Operational;


 


e.           Representations
and Warranties; Covenants. The accuracy in all material respects on the Closing Date of the representations and warranties
of the Company contained in this Agreement, each as if made on such date, and the performance by the Company on or before such
date of all covenants and agreements of the Company required to be performed on or before such date;


 


f.            Good-faith
Opinion. It should be Buyer’s reasonable belief that (i) no Event of Default under the terms of any outstanding indebtedness
of the Company shall have occurred or would likely occur with the passage of time and (ii) no material adverse change in the financial
condition or business operations of the Company shall have occurred;


 


g.           Legal
Proceedings. There shall be no litigation, criminal or civil, regulatory impairment or other legal and/or administrative proceedings
challenging or seeking to limit the Company’s ability to issue the Securities or the Common Stock;


 


h.           [Reserved];


 




    	 	21	 



     


    

 


i.            Corporate
Resolutions. Delivery by the Company to the Buyer a copy of resolutions of the Company’s board of directors, approving
and authorizing the execution, delivery and performance of the Transaction Documents and the transactions contemplated thereby
in the form attached hereto as Exhibit C (the “Irrevocable Resolutions”);


 


j.            Officer’s
Certificate. Delivery by the Company to the Buyer of a certificate of the Chief Executive Officer of the Company in the form
attached hereto as Exhibit D;


 


k.           Search
Results. Delivery by the Company to the Buyer of copies of UCC search reports, issued by the Secretary of State of the state
of incorporation of the Company and each Subsidiary, dated such a date as is reasonably acceptable to Buyer, listing all effective
financing statements which name the Company or Subsidiary (as applicable), under its present name and any previous names, as debtor,
together with copies of such financing statements;


 


l.            Certificate
of Good Standing. Delivery by the Company to the Buyer of a copy of a certificate of good standing with respect to the Company,
issued by the Secretary of State of the state of incorporation of the Company, dated such a date as is reasonably acceptable to
Buyer, evidencing the good standing thereof;


 


m.          Laws
and Regulations; Consents and Approvals. There shall not be in effect any law, rule or regulation prohibiting or restricting
the transactions contemplated hereby, or requiring any consent or approval which shall not have been obtained; and


 


n.           Adverse
Changes. From and after the date hereof to and including each Closing Date, (i) the trading of the Common Stock shall not have
been suspended by the SEC, FINRA, or any other governmental or self-regulatory organization, and trading in securities generally
on OTCM shall not have been suspended or limited, nor shall minimum prices been established for securities traded on the OTCM;
(ii) there shall not have occurred any outbreak or escalation of hostilities involving the United States or any material adverse
change in any financial market that in either case in the reasonable judgment of the Buyer makes it impracticable or inadvisable
to purchase the Debentures.


 


9.           GOVERNING
LAW; MISCELLANEOUS. 


 


a.           MANDATORY
FORUM SELECTION. Any dispute arising under, relating to, or in connection with the Agreement or related to any matter which
is the subject of or incidental to the Agreement (whether or not such claim is based upon breach of contract or tort) shall be
subject to the exclusive jurisdiction and venue of the state and/or federal courts located in MIAMI-DADE County, Florida. 
This provision is intended to be a “mandatory” forum selection clause and governed by and interpreted consistentLY
with Florida law.


 




    	 	22	 



     


    

 


b.           Governing
Law. Except in the case of the Mandatory Forum Selection clause above, this Agreement shall be delivered and accepted in and
shall be deemed to be contracts made under and governed by the internal laws of the State of Nevada, and for all purposes shall
be construed in accordance with the laws of the State of Nevada, without giving effect to the choice of law provisions. To the
extent determined by the applicable court described above, the Company shall reimburse the Buyer for any reasonable legal fees
and disbursements incurred by the Buyer in enforcement of or protection of any of its rights under any of the Transaction Documents.


 


c.           Waivers.
Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such
right or remedy, shall not operate as a waiver thereof.


 


d.           Successors
and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties
hereto.


 


e.           Construction.
All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require.


 


f.            Facsimiles;
E-mails. A facsimile or email transmission of this signed Agreement or a Notice of Conversion under the Debentures shall be
legal and binding on all parties hereto. Such electronic signatures shall be the equivalent of original signatures.


 


g.           Counterparts.
This Agreement may be signed in one or more counterparts, each of which shall be deemed an original.


 


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


 


i.            Enforceability.
If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.


 


j.            Amendment.
This Agreement may be amended only by the written consent of a majority in interest of the holders of the Debentures and an instrument
in writing signed by the Company.


 


k.           Entire
Agreement. This Agreement, together with the other Transaction Documents, supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof.


 


l.            No
Strict Construction. This Agreement shall be construed as if both Parties had equal say in its drafting, and thus shall not
be construed against the drafter.


 


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


 




    	 	23	 



     


    

 


10.         NOTICES.


 


Any notice required or
permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be deemed effectively given on the
earliest of:


 


a.           the
date delivered, if delivered by personal delivery as against written receipt therefor or by confirmed facsimile or email transmission,


 


b.           the
third (3rd) business day after deposit, postage prepaid, in the United States Postal Service by registered or certified
mail, or


 


c.           the
first (1st) business day after deposit with a recognized courier service (e.g. FedEx, UPS, DHL, US Postal Service) for
delivery by next-day express courier, with delivery costs and fees prepaid,


 


in each case, addressed to
each of the other parties thereunto entitled at the following addresses (or at such other addresses as such party may designate
by ten (10) days’ advance written notice similarly given to each of the other parties hereto):


 


	COMPANY:    	
        Arkados Group, Inc.

        211 Warren Street, Suite 320

        Newark, NJ 07103

        Attention: Terrence DeFranco, Chief Executive
        Officer

        Facsimile: ___________________

        Email: tmdefranco@arkadosgroup.com

         

	
         

         
	
        With copies to (which shall not constitute
        notice):

         

        LKP Global Law, LLP

        1901 Avenue of the Stars, Suite 480

        Los Angeles, CA 90067

        Attention: ______________________

        Email: _________________________

         

	BUYER:	
        Peak One Opportunity Fund, L.P.

        333 South Hibiscus Drive

        Miami Beach, FL 33139

        Attention: Jason Goldstein

        Email: jgoldstein@peakoneinvestments.com

         

	 	
        With copies to (which shall not constitute
        notice):

         

	 	
        Legal & Compliance, LLC

        330 Clematis Street, Suite 217

        West Palm Beach, FL 33401

        Attention: Laura Anthony, Esq.

        Email: LAnthony@LegalandCompliance.com



 




    	 	24	 



     


    

 


11.         SURVIVAL
OF REPRESENTATIONS AND WARRANTIES. The Company’s representations and warranties herein shall survive for so long as any
Debentures are outstanding, and shall inure to the benefit of the Buyer, its successors and assigns.


 


12.         FEES;
EXPENSES.


 


a.           Commitment
Fee. The Company shall pay to Investments a non-accountable fee (the “Commitment Fee”) of (i) Three Thousand Five
Hundred and 00/100 Dollars ($3,500.00) and (ii) Fifty Thousand (50,000) shares of Restricted Stock for Investments’ expenses
and analysis performed in connection with the analysis of the Company and the propriety of the Buyer’s making the contemplated
investment. The Commitment Fee shall be paid on the Signing Closing Date if Buyer does not withhold such amounts from the Signing
Purchase Price pursuant to Section 12(c).


 


b.           Legal
Fees. The Company shall pay the legal fees of the Buyer’s counsel (the “Legal Fees”) in the amount of Two
Thousand Five Hundred and 00/100 Dollars ($2,500.00). The foregoing legal fees shall be paid on the Signing Closing Date if Buyer
does not withhold such amounts from the Signing Purchase Price pursuant to Section 12(c). The Company further agrees to pay in
full the reasonable legal fees of the Buyer’s counsel incurred after the Signing Closing Date incurred in connection with
the Transaction Documents (including addressing any purported breach(es) or default(s) by the Company, enforcement of the Company’s
obligations or the exercise of the Buyer’s remedies thereunder).


 


c.           Disbursements.
In furtherance of the foregoing, the Company hereby authorizes the Buyer to deduct the cash portion of the Commitment Fee and the
Legal Fees from the Signing Purchase Price and transmit same to the respective payee.


 


[Signature Page Follows]


 




    	 	25	 



     


    

 


IN WITNESS WHEREOF,
this Agreement has been duly executed by the Buyer and the Company as of the date first set forth above.


 


	 	COMPANY:
	 	 
	 	ARKADOS GROUP, INC.
	 	 
	 	By:	/s/ Terrence DeFranco
	 	Name:	Terrence DeFranco
	 	Title:	Chief Executive Officer
	 	 
	 	BUYER:  
	 	 
	 	PEAK ONE OPPORTUNITY FUND, L.P.  
	 	 
	 	By:	Peak One Investments, LLC,
	 	 	General Partner


 


	 	By:	/s/ Jason Goldstein
	 	Name: 	Jason Goldstein
	 	Title:	Managing Member


 


[Signature Page to Securities Purchase Agreement]


 




     


     


    

 


SCHEDULE 3(b)


 


COMPANY ORGANIZATION CHART


 


	
        Subsidiary / Affiliate 

        Name and Relationship
	 	Jurisdiction of Incorporation	 	Percentage of Ownership
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 


 




    	 	2	 



     


    

 


SCHEDULE 3(c)


 


COMPANY CAPITALIZATION TABLE


 


COMMON STOCK AND COMMON STOCK EQUIVALENTS



ISSUED, OUTSTANDING AND RESERVED


 


	DESCRIPTION	 	AMOUNT
	Authorized Common Stock	 	  
	Authorized Capital Stock	 	 
	Authorized Common Stock	 	 
	Issued Common Stock	 	 
	Outstanding Common Stock	 	 
	Treasury Stock	 	 
	Authorized, but unissued	 	 
	 	 	 
	Authorized Preferred Stock	 	 
	Issued Preferred Stock	 	 
	 	 	 
	Reserved for Equity Incentive Plans	 	 
	Reserved for Convertible Debt	 	 
	Reserved for Options and Warrants	 	 
	Reserved for Other Purposes	 	 
	 	 	 
	TOTAL COMMON STOCK AND COMMON STOCK EQUIVALENTS OUTSTANDING	 	 


 




    	 	3	 



     


    

 


EXHIBITS


 


	Exhibit A	FORM OF DEBENTURE
	 	 
	Exhibit B	FORM OF TRANSFER AGENT INSTRUCTION LETTER
	 	 
	Exhibit C	FORM OF RESOLUTIONS OF THE BOARD OF DIRECTORS
	 	 
	Exhibit D	FORM OF OFFICER’S CERTIFICATE


 




    	 	4	 



     


    

 


EXHIBIT A


 


FORM OF DEBENTURE


 


NEITHER THESE SECURITIES NOR THE SECURITIES
ISSUABLE UPON CONVERSION HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES ARE RESTRICTED AND MAY NOT BE OFFERED,
RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION REQUIREMENTS THEREOF OR EXEMPTION THEREFROM.


 


ARKADOS GROUP, INC.


 


CONVERTIBLE DEBENTURE DUE
____________, 2019


 


	Issuance Date:  ____________, 2016	Principal Amount:  $____________


 


FOR VALUE RECEIVED, ARKADOS
GROUP, INC., a corporation organized and existing under the laws of the State of Delaware) (the “Company”), hereby
promises to pay to PEAK ONE OPPORTUNITY FUND, L.P., having its address at 333 South Hibiscus Drive, Miami Beach, FL 33139,
or its assigns (the “Holder” and together with the other holders of Debentures issued pursuant to the Securities Purchase
Agreement (as defined below), the “Holders”), the initial principal sum of ____________and 00/100 Dollars ($____________)
(subject to adjustment as provided herein, the “Principal Amount”) on ____________, 2019 (the “Maturity
Date”) [THIRD ANNIVERSARY OF DATE OF ISSUANCE]. The Company has the option to redeem this Debenture prior to the Maturity
Date pursuant to Section 2(b). All unpaid principal due and payable on the Maturity Date shall be paid in the form of Common Stock
of the Company, par value $0.0001 per share (“Common Stock”) pursuant to Section 3. The Holder has the option to cause
any outstanding principal and accrued interest, if any, on this Debenture to be converted into Common Stock at any time prior to
the Redemption Date (as defined below) or the Maturity Date pursuant to Section 2(a).


 


This Debenture is one of
the Debentures referred to in the Securities Purchase Agreement (the “Securities Purchase Agreement”) dated as of November
__, 2016, between the Company and the Holder. Capitalized terms used but not defined herein shall have the meanings set forth in
the Securities Purchase Agreement. This Debenture is subject to the provisions of the Securities Purchase Agreement and further
is subject to the following additional provisions:


 


1.           This
Debenture has been issued subject to investment representations of the original purchaser hereof and may be transferred or exchanged
only in compliance with the Securities Act and other applicable state and foreign securities laws. The Holder may transfer or assign
this Debenture (or any part thereof) without the prior consent of the Company, and the Company shall cooperate with any such transfer.
In the event of any proposed transfer of this Debenture, the Company may require, prior to issuance of a new Debenture in the name
of such other Person, that it receive reasonable transfer documentation including legal opinions that the issuance of the Debenture
in such other name does not and will not cause a violation of the Securities Act or any applicable state or foreign securities
laws or is exempt from the registration requirements of the Securities Act. Prior to due presentment for transfer of this Debenture
to which the Company has consented, the Company and any agent of the Company may treat the Person in whose name this Debenture
is duly registered on the Company's books and records of outstanding debt securities and obligations (“Debenture Register”)
as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Debenture
be overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.


 




    	 	5	 



     


    

 


2.           Conversion
at Holder’s Option; Redemption at Company’s Option.


 


a.           The
Holder is entitled to, at any time or from time to time, convert the Conversion Amount (as defined below) into Conversion Shares,
at a conversion price for each share of Common Stock (the “Conversion Price”) equal to either: (i) if no Event of Default
(as defined herein) has occurred and the date of conversion is prior to the date that is one hundred fifty (150) days after the
Issuance Date, $0.65, or (ii) if an Event of Default has occurred or the date of conversion is on or after the date that is one
hundred fifty (150) days after the Issuance Date, the lesser of (a) $0.65 or (b) Sixty Five percent (65%) of the lowest closing
bid price (as reported by Bloomberg LP) of the Common Stock for the twenty (20) Trading Days immediately preceding the date of
the date of conversion of the Debentures (provided, further, that if either the Company is not DWAC Operational at the time of
conversion or the Common Stock is traded on the OTC Pink (“OTCP”) at the time of conversion, then Sixty Five percent
(65%) shall automatically adjust to Sixty percent (60%) of the lowest closing bid price (as reported by Bloomberg LP) of the Common
Stock for the twenty (20) Trading Days immediately preceding the date of conversion of the Debentures), subject in each case to
equitable adjustments resulting from any stock splits, stock dividends, recapitalizations or similar events. The Company shall
issue irrevocable instructions to its Transfer Agent regarding conversions such that the transfer agent shall be authorized and
instructed to issue Conversion Shares upon its receipt of a Notice of Conversion without further approval or authorization from
the Company. For purposes of this Debenture, the “Conversion Amount” shall mean the sum of (A) all or any portion of
the outstanding Principal Amount of this Debenture, as designated by the Holder upon exercise of its right of conversion plus (B)
any interest, pursuant to Section 10 or otherwise, that has accrued on the portion of the Principal Amount that has been designated
for payment pursuant to (A).


 


Conversion shall be effectuated
by delivering by facsimile, email or other delivery method to the Transfer Agent of the completed form of conversion notice attached
hereto as Annex A (the “Notice of Conversion”), executed by the Holder of the Debenture evidencing such Holder's
intention to convert this Debenture or a specified portion hereof. No fractional shares of Common Stock or scrip representing
fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share.
The Holder may, at its election, deliver a Notice of Conversion to either the Company or the Transfer Agent. The date on which
notice of conversion is given (the “Conversion Date”) shall be deemed to be the date on which the Company or the Transfer
Agent, as the case may be, receives by fax, email or other means of delivery used by the Holder the Notice of Conversion (such
receipt being evidenced by electronic confirmation of delivery by facsimile or email or confirmation of delivery by such other
delivery method used by the Holder). Delivery of a Notice of Conversion to the Transfer Agent may be given by the Holder by facsimile
at 212-828-8436, by email to Yoel@vstocktransfer.com or by delivery to the Transfer Agent at the address set forth in the Transfer
Agent Instruction Letter (or such other contact facsimile number, email or street address as may be designated by the Transfer
Agent to the Holder). Delivery of a Notice of Conversion to the Company shall be given by the Holder pursuant to the notice
provisions set forth in Section 10 of the Agreement. The Conversion Shares must be delivered to the Holder within two (2) business
days from the date of delivery of the Notice of Conversion to the Transfer Agent or Company, as the case may be. Conversion shares
shall be delivered by DWAC so long as the Company is then DWAC Operational, unless the Holder expressly requests delivery in certificated
form or the Conversion Shares are in the form of Restricted Stock and are required to bear a restrictive legended. Conversion
Shares shall be deemed delivered (i) if delivered by DWAC, upon deposit into the Holder’s brokerage account, or (ii) if
delivered in certificated form, upon the Holder’s actual receipt of the Conversion Shares in certificated form at the address
specified by the Holder in the Notice of Conversion, as confirmed by written receipt.


 




    	 	6	 



     


    

 


Notwithstanding the foregoing,
unless the Holder delivers to the Company written notice at least sixty-one (61) days prior to the effective date of such notice
that the provisions of this paragraph (the “Limitation on Ownership”) shall not apply to such Holder, in no event shall
a holder of Debentures have the right to convert Debentures into, nor shall the Company issue to such Holder, shares of Common
Stock to the extent that such conversion would result in the Holder and its affiliates together beneficially owning more than 4.99%
of the then issued and outstanding shares of Common Stock. For purposes hereof, beneficial ownership shall be determined in accordance
with Section 13(d) of the Exchange Act and Regulation 13D-G under the Exchange Act.


 


b.           So
long as no Event of Default (as defined in Section 10) shall have occurred and be continuing (whether such Event of Default has
been declared by the Holder) (unless the Holder consents to such redemption notwithstanding such Event of Default, as described
in clause (v), below), the Company may at its option call for redemption all or part of the Debentures, with the exception of any
portion thereof which is the subject of a previously-delivered Notice of Conversion, prior to the Maturity Date, as follows:


 


(i)           The
Debentures called for redemption shall be redeemable by the Company, upon not more than two (2) days written notice, for an amount
(the “Redemption Price”) equal to: (i) if the Redemption Date (as defined below) is one hundred twenty (120) days or
less from the date of issuance of this Debenture, One Hundred percent (100%) of the sum of the Principal Amount so redeemed plus
accrued interest, if any; (ii) if the Redemption Date is greater than or equal to one hundred twenty-one (121) days from the date
of issuance of this Debenture and less than or equal to one hundred fifty (150) days from the date of issuance of this Debenture,
One Hundred Fifteen percent (115%) of the sum of the Principal Amount so redeemed plus accrued interest, if any; (iii) if the Redemption
Date is greater than or equal to one hundred fifty one (151) days from the date of issuance of this Debenture and less than or
equal to one hundred eighty (180) days from the date of issuance of this Debenture, One Hundred Twenty percent (120%) of the sum
of the Principal Amount so redeemed plus accrued interest, if any; and (iv) if either (1) the Debentures are in default but the
Holder consents to the redemption notwithstanding such default or (2) the Redemption Date is greater than or equal to one hundred
eighty one (181) days from the date of issuance of this Debenture, One Hundred Thirty percent (130%) of the sum of the Principal
Amount so redeemed plus accrued interest, if any. The date upon which the Debentures are redeemed and paid shall be referred to
as the “Redemption Date” (and, in the case of multiple redemptions of less than the entire outstanding Principal Amount,
each such date shall be a Redemption Date with respect to the corresponding redemption).


 




    	 	7	 



     


    

 


(ii)          If
fewer than all outstanding Debentures are to be redeemed and are held by different investors, then all Debentures shall be partially
redeemed on a pro rata basis.


 


(iii)         [Reserved]


 


(iv)        On
the Redemption Date, the Company shall cause the Holders whose Debentures have been presented for redemption to be issued payment
of the Redemption Price. In the case of a partial redemption, the Company shall also issue new Debentures to the Holders for the
Principal Amount remaining outstanding after the Redemption Date promptly after the Holders’ presentation of the Debentures
called for redemption.


 


(v)         To
effect a redemption the Company shall provide a written notice to the Holder(s) not more than two (2) days prior to the Redemption
Date (the “Redemption Notice”), setting forth the following:


 


		1.	the Redemption Date;



 


		2.	the Redemption Price;



 


		3.	the aggregate Principal Amount of the Debentures being
called for redemption;



 


		4.	a statement instructing the Holders to surrender their
Debentures for redemption and payment of the Redemption Price, including the name and address of the Company or, if applicable,
the paying agent of the Company, where Debentures are to be surrendered for redemption;



 


		5.	a statement advising the Holders that the Debentures (or,
in the case of a partial redemption, that portion of the Principal Amount being called for redemption) as of the Redemption Date
will cease to be convertible into Common Stock as of the Redemption Date; and



 


		6.	in the case of a partial redemption, a statement advising
the Holders that after the Redemption Date a substitute Debenture will be issued by the Company after deduction the portion thereof
called for redemption, at no cost to the Holder, if the Holder so requests.



 


Notwithstanding the foregoing, in the event
the Company issues a Redemption Notice but fails to fund the redemption on the Redemption Date, then such Redemption Notice shall
be null and void, and (i) the Holder(s) shall be entitled to convert the Debentures previously the subject of the Redemption Notice,
and (ii) the Company may not redeem such Debentures for at least thirty (30) days following the intended Redemption Date that was
voided, and the Company shall be required to pay to the Holder(s) the Redemption Price simultaneously with the issuance of a Redemption
Notice in connection with any subsequent redemption pursued by the Company.


 




    	 	8	 



     


    

 


3.           Unless
demand has otherwise been made by the Holder in writing for payment in cash as provided hereunder, and so long as no Event of Default
shall exist (whether or not notice thereof has been delivered by the Holder to the Company), any Debentures not previously tendered
to the Company for conversion as of the Maturity Date shall be deemed to have been surrendered for conversion, without further
action of any kind by the Company or any of its agents, employees or representatives, as of the Maturity Date at the Conversion
Price applicable on the Maturity Date (“Mandatory Conversion”).


 


4.           No
provision of this Debenture shall alter or impair the obligation of the Company, which is absolute and unconditional to convert
this Debenture into Common Stock, at the time, place, and rate herein prescribed. This Debenture is a direct obligation of the
Company.


 


5.           If
the Company (a) merges or consolidates with another corporation or business entity and the Company is not the surviving entity
or (b) sells or transfers all or substantially all of its assets to another Person and the holders of the Common Stock are entitled
to receive stock, securities or property in respect of or in exchange for Common Stock, then as a condition of such merger, consolidation,
sale or transfer, the Company and any such successor, purchaser or transferee will agree that this Debenture may thereafter be
converted on the terms and subject to the conditions set forth above into the kind and amount of stock, securities or property
receivable upon such merger, consolidation, sale or transfer by a holder of the number of shares of Common Stock into which this
Debenture might have been converted immediately before such merger, consolidation, sale or transfer, subject to adjustments which
shall be as nearly equivalent as may be practicable. In the event of any (i) proposed merger or consolidation where the Company
is not the surviving entity or (ii) sale or transfer of all or substantially all of the assets of the Company (in either such case,
a “Sale”), the Holder shall have the right to convert by delivering a Notice of Conversion to the Company within fifteen
(15) days of receipt of notice of such Sale from the Company.


 


6.           If,
at any time while any portion of this Debenture remains outstanding, the Company effectuates a stock split or reverse stock split
of its Common Stock or issues a dividend on its Common Stock consisting of shares of Common Stock or otherwise recapitalizes its
Common Stock, the Conversion Price shall be equitably adjusted to reflect such action. By way of illustration, and not in limitation,
of the foregoing (i) if the Company effectuates a 2:1 split of its Common Stock, thereafter, with respect to any conversion for
which the Company issues the shares after the record date of such split, the Conversion Price shall be deemed to be one-half of
what it had been calculated to be immediately prior to such split; (ii) if the Company effectuates a 1:10 reverse split of its
Common Stock, thereafter, with respect to any conversion for which the Company issues the shares after the record date of such
reverse split, the Conversion Price shall be deemed to be the amount of such Conversion Price calculated immediately prior to the
record date multiplied by 10; and (iii) if the Company declares a stock dividend of one share of Common Stock for every 10 shares
outstanding, thereafter, with respect to any conversion for which the Company issues the shares after the record date of such dividend,
the Conversion Price shall be deemed to be the amount of such Conversion Price calculated immediately prior to such record date
multiplied by a fraction, of which the numerator is the number of shares for which a dividend share will be issued and the denominator
is such number of shares plus the dividend share(s) issuable or issued thereon.


 




    	 	9	 



     


    

 


7.           All
payments contemplated hereby to be made “in cash” shall be made by wire transfer of immediately available funds in
such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private
debts. All payments of cash and each delivery of shares of Common Stock issuable to the Holder as contemplated hereby shall be
made to the Holder to an account designated by the Holder to the Company and if the Holder has not designated any such accounts
at the address last appearing on the Debenture Register of the Company as designated in writing by the Holder from time to time;
except that the Holder may designate, by notice to the Company, a different delivery address for any one or more specific payments
or deliveries.


 


8.           The
Holder of the Debenture, by acceptance hereof, agrees that this Debenture is being acquired for investment and that such Holder
will not offer, sell or otherwise dispose of this Debenture or the Shares of Common Stock issuable upon conversion thereof except
in compliance with the terms of the Securities Purchase Agreement and under circumstances which will not result in a violation
of the Securities Act or any applicable state Blue Sky or foreign laws or similar laws relating to the sale of securities.


 


9.           This
Debenture shall be governed by and construed in accordance with the laws of the State of Nevada. Each of the parties consents to
the exclusive jurisdiction and venue of the state and/or federal courts located in Miami-Dade County,
Florida in connection with any dispute arising under this Agreement. This provision is intended
to be a “mandatory” forum selection clause and governed by and interpreted consistent with Florida law (Nevada law
governing all other, substantive matters). Each of the parties hereby consents to the exclusive jurisdiction and venue of any state
or federal court having its situs in said county, and each waives any objection based on forum non conveniens. To the extent
determined by such court, the Company shall reimburse the Holder for any reasonable legal fees and disbursements incurred by the
Holder in enforcement of or protection of any of its rights under this Debenture or the Securities Purchase Agreement.


 


10.         The
following shall constitute an “Event of Default”:


 


a.           The
Company fails in the payment of principal or interest (to the extent that interest is imposed under this Section 10) on this Debenture
as required to be paid in cash hereunder, and payment shall not have been made for a period of five (5) business days following
the payment due date (as to which no further cure period shall apply); or


 


b.           Any
of the representations or warranties made by the Company herein, in the Securities Purchase Agreement or in any certificate or
financial or other written statements heretofore or hereafter furnished by the Company to the Holder in connection with the issuance
of this Debenture, shall be false or misleading (including without limitation by way of the misstatement of a material fact or
the omission of a material fact) in any material respect at the time made (as to which no cure period shall apply); or


 




    	 	10	 



     


    

 


c.           The
Company fails to remain listed on OTCP, OTCQB, or OTCQX, or a more senior stock exchange any time from the date hereof to the Maturity
Date for a period in excess of five (5) Trading Days (as to which no further cure period shall apply); or


 


d.           The
Company (i) fails to timely file required SEC reports when due (including extensions), becomes, is deemed to be or asserts that
it is a “shell company” at any time for purposes of the 1933 Act, and Rule 144 promulgated thereunder or otherwise
takes any action, or refrains from taking any action, the result of which makes Rule 144 under the 1933 unavailable to the Holder
for the sale of their Securities, (ii) fails to issue shares of Common Stock to the Holder or to cause its Transfer Agent to issue
shares of Common Stock upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this
Debenture, (iii) fails to transfer or to cause its Transfer Agent to transfer any certificate for shares of Common Stock issued
to the Holder upon conversion of this Debenture as and when required by this Debenture and such transfer is otherwise lawful, (iv)
fails to remove any restrictive legend or to cause its Transfer Agent to transfer any certificate or any shares of Common Stock
issued to the Holder upon conversion of this Debenture as and when required by the relevant Transaction Document(s) and such legend
removal is otherwise lawful, or (v) the Company fails to perform or observe any of its obligations under the Section 5 of the Agreement
or under the Transfer Agent Instruction Letter (no cure period shall apply in the case of clauses (i) through (v) above, inclusive);
or


 


e.           The
Company fails to perform or observe, in any material respect (i) any other covenant, term, provision, condition, agreement or obligation
set forth in the Debenture, (subject to a cure period of three (3) days other than in the case of a failure under Section 5 hereof,
as to which no cure period shall apply), or (ii) any other covenant, term, provision, condition, agreement or obligation of the
Company set forth in the Securities Purchase Agreement and such failure shall continue uncured for a period of either (1) three
(3) days after the occurrence of the Company’s failure under Section 4(d), (e) (except as described in Section 10(c) hereof,
as to which Section 10(c) hereof shall control), (f), (g) or (h) of the Securities Purchase Agreement, or (2) ten (10) days after
the occurrence of the Company’s failure under any other provision of the Securities Purchase Agreement not otherwise specifically
addressed in the Events of Default set forth in this Section 10; or


 


f.            The
Company shall (1) admit in writing its inability to pay its debts generally as they mature; (2) make an assignment for the benefit
of creditors or commence proceedings for its dissolution; or (3) apply for or consent to the appointment of a trustee, liquidator
or receiver for its or for a substantial part of its property or business (as to which no cure period shall apply); or


 


g.           A
trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within sixty (60) days after such appointment (as to which no cure period shall apply);
or


 


h.           Any
governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control
of the whole or any substantial portion of the properties or assets of the Company and shall not be dismissed within sixty (60)
days thereafter (as to which no cure period shall apply); or


 




    	 	11	 



     


    

 


i.            Any
money judgment, writ or warrant of attachment, or similar process (including an arbitral determination), in excess of Fifty Thousand
Dollars ($50,000) in the aggregate shall be entered or filed against the Company or any of its properties or other assets (as to
which no cure period shall apply); or


 


j.            The
occurrence of a breach or an event of default under the terms of any indebtedness or financial instrument of the Company or any
subsidiary (including but not limited to any Subsidiary) of the Company in an aggregate amount in excess of Fifty Thousand Dollars
($50,000) or more which is not waived by the creditors under such indebtedness (as to which no cure period shall apply); or


 


k.           Bankruptcy,
reorganization, insolvency or liquidation proceedings or other proceedings for relief under any bankruptcy law or any law for the
relief of debtors shall be instituted by or against the Company and, if instituted against the Company, shall not be dismissed
within sixty (60) days after such institution or the Company shall by any action or answer approve of, consent to, or acquiesce
in any such proceedings or admit the material allegations of, or default in answering a petition filed in any such proceeding (as
to which no further cure period shall apply); or


 


l.            The
issuance of an order, ruling, finding or similar adverse determination the SEC, the Secretary of State of the State of Nevada or
Florida, the National Association of Securities Dealers, Inc. or any other securities regulatory body (whether in the United States,
Canada or elsewhere) having proper jurisdiction that the Company and/or any of its past or present directors or officers have committed
a material violation of applicable securities laws or regulations (as to which no cure period shall apply); or


 


m.          The
Company shall have its Common Stock suspended or delisted from a national securities exchange or an electronic quotation service
such as the OTCP, OTCQB, or OTCQX for a period in excess of five (5) Trading Days (as to which no further cure period shall apply);
or


 


n.           Any
of the following shall occur and be continuing: a breach or default by any party under (a) any agreement identified by the Company
in its SEC filings as a material agreement or (b) any note or other form of indebtedness in favor of the Company representing indebtedness
of at least Fifty Thousand Dollars ($50,000.00), irrespective of whether such breach or default was waived (as to which no cure
period shall apply); or


 


o.           Notice
of a Material Adverse Effect is provided by the Company or the determination in good faith by the Holder that a Material Adverse
Effect has occurred (as to which no cure period shall apply); or


 


p.           The
Company attempts to modify, amend, withdraw, rescind, disavow or repudiate any part of the Irrevocable Instructions (as to which
no cure period shall apply).


 


q.           Any
attempt by the Company or its officers, directors, and/or affiliates to transmit, convey, disclose, or any actual transmittal,
conveyance, or disclosure by the Company or its officers, directors, and/or affiliates of, material non-public information concerning
the Company, to the Holder or its successors and assigns, which is not immediately cured by Company’s filing of a Form 8-K
pursuant to Regulation FD on that same date.


 




    	 	12	 



     


    

 


r.            At
any time while this Debenture is outstanding, the lowest traded price on the OTCP, OTCQB, or OTCQX, or other applicable principal
trading market for the Common Stock, is equal to or less than $0.0001.


 


Then, or at any time thereafter,
the Company shall immediately give written notice of the occurrence of such Event of Default to the Holders of all Debentures then
outstanding, and in each and every such case, unless such Event of Default shall have been waived in writing by a majority in interest
of the Holders of the Debentures (which waiver shall not be deemed to be a waiver of any subsequent default), then at the option
of a majority in interest of the Holders and in the discretion of a majority in interest of the Holders, take any or all of the
following actions: (i) pursue remedies against the Company in accordance with any of the Holder’s rights, (ii) increase the
interest rate applicable to the Debentures to the lesser of eighteen percent (18%) per annum and the maximum interest rate allowable
under applicable law, (iii) in the case of an Event of Default under Section 10(e)(ii)(1) based on the Company’s failure
to be DWAC Operational, increase the Principal Amount to an amount equal to one hundred five percent (105%) of the then-outstanding
Principal Amount, (iv) in the case of an Event of Default under Section 10(d)(i), increase the Principal Amount to an amount equal
to one hundred ten percent (110%) of the then-outstanding Principal Amount, (v) in the case of an Event of Default under Section
10(d)(i) through (v), increase the Principal Amount of the relevant Holder’s Debenture by One Thousand Dollars and 00/100
($1,000.00) for each day the related failure continues, (vi) in the case of an Event of Default under Section 10(d)(ii) through
(v) arising from an untimely delivery to the Holder of Conversion Shares or shares of Common Stock in de-legended form, if the
closing bid price of the Common Stock on the Trading Day immediately prior to the actual date of delivery of Conversion Shares
or de-legended shares, as the case may be, is less than the closing bid price on the Trading Day immediately prior to the date
when Conversion Shares or de-legended shares were required to be delivered, increase the Principal Amount of the relevant Holder’s
Debenture by an amount per share equal to such difference, and (vii) following the expiration of the applicable grace period (if
any), at the option and discretion of the Holder, accelerate the full indebtedness under this Debenture, in an amount equal to
one hundred forty percent (140%) of the outstanding Principal Amount and accrued and unpaid interest (the “Acceleration Amount”),
whereupon the Acceleration Amount shall be immediately due and payable, without presentment, demand, protest or notice of any kinds,
all of which are hereby expressly waived, anything contained herein, in the Securities Purchase Agreement or in any other note
or instruments to the contrary notwithstanding. In the case of an Event of Default under Section 10(d)(ii), the Holder may either
(i) declare the Acceleration Amount to exclude the Conversion Amount that is the subject of the Event of Default, in which case
the Acceleration Amount shall be based on the remaining Principal Amount and accrued interest (if any), in which case the Company
shall continue to be obligated to issue the Conversion Shares, or (ii) declare the Acceleration Amount to include the Conversion
Amount that is the subject of the Event of Default, in which case the Acceleration Amount shall be based on the full Principal
Amount, including the Conversion Amount, and accrued interest (if any), whereupon the Notice of Conversion shall be deemed withdrawn.
At its option, the Holder may elect to convert the Debenture pursuant to Section 2 notwithstanding the prior declaration of a default
and acceleration, in the sole discretion of such Holder. A majority in interest of the Holders may immediately enforce any and
all of the Holder's rights and remedies provided herein or any other rights or remedies afforded by applicable law. Notwithstanding
the foregoing, in the case of a default under Section 10(d)(ii) through (iv), the Holder of the Debenture sought to be converted,
transferred or de-legended, as the case may be, acting singly, shall have the sole and absolute discretion to increase the applicable
interest rate on the Debentures held by such Holder and/or to accelerate the Debenture(s) held by such Holder. The Company expressly
acknowledges and agrees that the Holder’s exercise of any or all of the remedies provided herein or under applicable law,
including without limitation the increase(s) in the Principal Amount and the Acceleration Amount as may be declared in the case
of a default, is reasonable and appropriate due to the inability to define the financial hardship that the Company’s default
would impose on the Holders. To the extent that the Holder’s exercise of any of its remedies in the case of an Event of Default
shall be construed to exceed the maximum interest rate allowable under applicable law, then such remedies shall be reduced to equal
the maximum interest rate allowable under applicable law


 




    	 	13	 



     


    

 


11.         Nothing
contained in this Debenture shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent
or receive notice as a shareholder in respect of any meeting of shareholders or any rights whatsoever as a shareholder of the Company,
unless and to the extent converted in accordance with the terms hereof.


 


12.         This
Debenture may be amended only by the written consent of the parties hereto. Notwithstanding the foregoing, the Principal Amount
of this Debenture shall automatically be reduced by any and all Conversion Amounts (to the extent that the same relate to principal
hereof). In the absence of manifest error, the outstanding Principal Amount of the Debenture on the Holder’s book and records
shall be the correct amount.


 


13.         In
the event of any inconsistency between the provisions of this Debenture and the provisions of any other Transaction Document, the
provisions of this Debenture shall prevail. Without limiting the generality of the foregoing, in the event the Transfer Agent is
not required to transfer any Common Stock, issue Conversion Shares or de-legended shares of Restricted Stock pursuant to the Transfer
Agent Instruction Letter, this shall not operate as an excuse, extension or waiver of the Company’s obligation to issue and
deliver Conversion Shares or de-legended Restricted Stock.


 


14.         The
Company specifically acknowledges and agrees that in the event of a breach or threatened breach by the Company of any provision
hereof or of any other Transaction Document, the Holder will be irreparably damaged, and that damages at law would be an inadequate
remedy if this Debenture or such other Transaction Document were not specifically enforced. Therefore, in the event of a breach
or threatened breach by the Company, the Holder shall be entitled, in addition to all other rights and remedies, to an injunction
restraining such breach, without being required to show any actual damage or to post any bond or other security, and/or to a decree
for a specific performance of the provisions of this Debenture and the other Transaction Documents.


 


15.         No
waivers or consents in regard to any provision of this Debenture may be given other than by an instrument in writing signed by
the Holder.


 




    	 	14	 



     


    

 


16.         Each
time, while this Debenture is outstanding, the Company enters into a Section 3(a)(9) transaction (including but not limited to
the issuance of new promissory notes or debentures, or of a replacement promissory note or debenture), or Section 3(a)(10) transaction,
in which any 3rd party has the right to convert monies owed to that 3rd party (or receive shares pursuant to a settlement or otherwise)
at a discount to market greater than the Conversion Price in effect at that time (prior to all other applicable adjustments in
this Debenture), then the Conversion Price shall be automatically adjusted to such greater discount percentage (prior to all applicable
adjustments in this Debenture) until this Debenture is no longer outstanding. Each time, while this Debenture is outstanding, the
Company enters into a Section 3(a)(9) transaction (including but not limited to the issuance of new promissory notes or debentures,
or of a replacement promissory note or debenture), or Section 3(a)(10) transaction, in which any 3rd party has a look back period
greater than the look back period in effect under this Debenture at that time (currently a twenty (20) Trading Day look back period
as described in this Debenture applies), then the Holder’s look back period shall automatically be adjusted to such greater
number of days until this Debenture is no longer outstanding. The Company shall give written notice to the Holder, with the adjusted
Conversion Price and/or adjusted look back period (each adjustment that is applicable due to the triggering event), within one
(1) business day of an event that requires any adjustment described in this section.


 


[Signature Page Follows]


 




    	 	15	 



     


    

 


IN WITNESS WHEREOF,
the Company has caused this Debenture to be duly executed by an officer thereunto duly authorized as of the date of issuance set
forth above.


 


	 	Arkados Group, Inc.
	 	 	 
	 	By:	 
	 	Name:	Terrence DeFranco
	 	Title:	Chief Executive Officer


 


[Signature Page to Convertible Debenture]


 




     


     


    

 


EXHIBIT B


 


ARKADOS GROUP, INC.


 


IRREVOCABLE TRANSFER AGENT INSTRUCTION LETTER


 


November __, 2016


 


VStock Transfer, LLC


18 Lafayette Place


Woodmere, NY 11598


 


Re: Irrevocable Instructions for Peak One Opportunity
Fund, LP


 


Ladies and Gentlemen:


 


ARKADOS GROUP, INC., a Delaware corporation
(the "Company") and Peak One Opportunity Fund, L.P. (together with its successors and assigns, the "Investor")
have entered into a Securities Purchase Agreement dated as of November __, 2016 (the "Agreement") providing for the issuance
of the Convertible Debentures, convertible into the Company’s common stock, par value $0.0001 per share (“Common Stock”)
in the principal amount of up to $500,000.00 (collectively, the "Debentures").


 


A copy of the form of the Debentures is attached
hereto. The shares of Common Stock to be issued upon conversion of the Debentures are to be registered in the name(s) of the registered
holder(s) of the Debentures submitted for conversion, or its assignees, as requested by the Investor.


 


VStock Transfer, LLC (“VStock Transfer,”
the “Transfer Agent” or “you”) are hereby irrevocably authorized and instructed to reserve a sufficient
number of shares of Common Stock of the Company to satisfy the Company’s share reservation requirement of 700% of the Debentures
under the Agreement (initially, 4,375,000 shares of Common Stock which should be held in reserve for the Investor pursuant to the
subject Debentures as of this date) for issuance upon conversion of any of the Debentures referenced herein in accordance with
the terms thereof (without giving effect to the 4.99% limitation on ownership, each as set forth in the Debentures). The amount
of Common Stock so reserved may be increased, from time to time, by written instructions of the Company or the Investor. The amount
of Common Stock so reserved may not be decreased without the prior written consent of the Investor (unless such decrease in reserved
shares is due to an issuance of reserved shares pursuant to the conversion of Debentures). You will adjust the number of reserved
shares accordingly, within one (1) business day of receipt of any such instructions, so as long as there are sufficient available
authorized shares.


 




     


     


    

 


The ability to convert the Debentures in a
timely manner is a material obligation of the Company pursuant to the Debentures. Your firm is hereby irrevocably authorized and
instructed to issue shares of Common Stock of the Company (without any restrictive legend) to the Investor at the request of the
Investor without any further action or confirmation by the Company, in which case the issuance shall be deducted against the reserve
or, if there are not enough shares held in reserve, from available authorized shares of the Company, either (i) electronically
by crediting the account of the Investor’s broker with the Depository Trust Company through its Deposit Withdrawal Agent
Commission system, provided that the Company has been made FAST/DRS eligible by DTCC (DWAC), or (ii) if requested by the Investor
or if a legal opinion is not provided to the Transfer Agent as described below, in certificated form without any legend which would
restrict the transfer of the shares, and you should remove all stop-transfer instructions relating to such shares: (A) upon your
receipt from the Investor dated within two (2) business days from the date of the issuance or transfer request, of: (i) a notice
of conversion ("Notice of Conversion") executed by the Investor; and (ii) an opinion of counsel of the Investor or the
Company, in form, substance and scope customary for opinions of counsel in comparable transactions (and reasonably satisfactory
to the Transfer Agent), to the effect that the shares of Common Stock of the Company issued to the Investor pursuant to the Notice
of Conversion are not "restricted securities" as defined in Rule 144 and should be issued to the Investor without any
restrictive legend; and (B) the number of shares to be issued is less than 4.99% of the total issued Common Stock of the Company.
If an opinion from counsel is not provided, you are instructed and authorized to issue shares to the Investor as restricted and
the associated certificate(s) should include the customary 144 restrictive legend. You will issue the Common Stock upon conversion
within two (2) business days of receipt of a Conversion Notice and any other documents and information you reasonably request.
The Transfer Agent must issue the shares of Common Stock to the Investor, pursuant to this agreement, despite any threatened or
ongoing dispute between the Company and Investor, unless there is a valid court order prohibiting such issuance.


 


The Company affirms that it has by all appropriate
corporate action irrevocably resolved to issue all required Common Stock to the investor and hereby requests that your firm act
immediately, without delay and without the need for any action or confirmation by the Company with respect to the reservation of
shares and the issuance of Common Stock pursuant to any Conversion Notices received from the Investor. You agree that the Company’s
irrevocable resolutions and this irrevocable letter of instructions constitute sufficient documentation to evidence the Company’s
authorization to complete the activities contemplated hereby and that no other Company documentation or confirmation shall be necessary
or requested from the Company. The Company hereby irrevocably appoints the Investor as its attorney-in-fact for purposes of executing
and delivering, in the Company’s name, any documentation or confirmation that the transfer agent may request in connection
with the reservation of shares or the issuance of Common Stock upon conversion as contemplated hereby.


 




     


     


    

 


The Investor and the Company understand that
VStock Transfer shall not be required to perform any issuances or transfers of shares if (a) the Company or request violates, or
is in material violation of, any terms of the Transfer Agent Agreement, (b) such an issuance or transfer of shares is, in the opinion
of the Transfer Agent’s legal counsel, as demonstrated by a written legal opinion addressed to the Company and the Investor,
in violation of any state or federal securities law or regulation or (c) the issuance or transfer of shares is prohibited or stopped
as required or directed by a valid court order. If the Company informs you that there is a court order stopping issuances, then
the Company agrees to provide VStock Transfer with a copy of such court order immediately, and a legal opinion from counsel within
three (3) business days addressing the matter and, once such court order and legal opinion are received, you will not be obligated
to perform any issuances related to the Debentures and this agreement. If the Company has an outstanding balance of fees owed to
VStock Transfer for any reason, the Investor understands VStock Transfer will not be obligated to issue Common Stock to the Investor
unless the Company or Investor first pays all fees owed to VStock Transfer, provided that if the Investor pays the fees of VStock
Transfer for the specific issuance of Common Stock to the Investor under a given Conversion Notice, then VStock Transfer will issue
such shares notwithstanding any unpaid fees owed it by the Company for other purposes. The Company authorizes VStock Transfer to
inform the Investor of the amount and nature of any outstanding transfer agency fee balances owed by the Company if the Investor
requests such information.


 


You are hereby authorized and directed to promptly
disclose to the Investor without any additional confirmation from the Company, after Investor’s request from time to time,
the total number of shares of Common Stock issued and outstanding, the total number of shares of Common Stock in the float, and
the total number of shares of Common Stock that are authorized but unissued and unreserved.


 


The Company shall indemnify you and your officers,
directors, principals, partners, agents and representatives, and hold each of them harmless from and against any and all loss,
liability, damage, claim or expense (including the reasonable fees and disbursements of its attorneys) incurred by or asserted
against you or any of them arising out of or in connection the instructions set forth herein, the performance of your duties hereunder
and otherwise in respect hereof, including the costs and expenses of defending yourself or themselves against any claim or liability
hereunder, except that the Company shall not be liable hereunder as to matters in respect of which it is determined that you have
acted with gross negligence or in bad faith. You shall have no liability to the Company in respect to any action taken or any failure
to act in respect of this if such action was taken or omitted to be taken in good faith, and you shall be entitled to rely in this
regard on the advice of counsel.


 


The Board of Directors of the Company has approved
the foregoing (irrevocable instructions) and does hereby extend the Company’s irrevocable agreement to indemnify your firm
and any successor transfer agent for all loss, liability or expense in carrying out the authority and direction herein contained
on the terms herein set forth.


 


The Investor is intended to be, and is,
a third party beneficiary hereof, and no amendment or modification to the instructions set forth herein may be made without
the consent of the Investor. The Transfer Agent agrees that in the event of its resignation, then the Transfer Agent will
provide at least fifteen (15) days prior written notice to the Company and the Investor. The Transfer Agent also agrees that
if the Company requests the Transfer Agent provide records pertaining to the register of Common Stock to any third party in
what the Transfer Agent has reason to believe is in contemplation of replacing the Transfer Agent with another party, then
the Transfer Agent shall notify the Investor within two (2) business days of the Transfer Agent’s receipt of such
request.


 




     


     


    

 


The Company agrees that in the event it seeks
to replace the Transfer Agent, the Company shall provide at least fifteen (15) days prior written notice to the Transfer Agent
and the Investor, and the Company shall propose to the Investor a suitable replacement transfer agent and obtain the Investor’s
written consent to the replacement of the Transfer Agent at least ten (10) days prior to the proposed effective date of the transition
to the replacement transfer agent. The Transfer Agent shall not transfer any records or documentation pertaining to the Common
Stock to any purported successor transfer agent without the Investor’s prior written consent. Any replacement transfer agent
(whether approved by the Investor or appointed by the Company without the Investor’ prior consent in breach of the foregoing
provisions) shall automatically be bound by this Letter Agreement as if a party hereto, and any such replacement transfer agent
shall confirm in writing to the Investor within two (2) business days that it is bound by the terms and conditions of these irrevocable
instructions.


 


[Signature Page Follows]


 




     


     


    

 


Very truly yours,


 


ARKADOS GROUP, INC.


 


	By: 	 	 
	Name:	Terrence DeFranco	 
	Title:	Chief Executive Officer	 


 


Acknowledged and Agreed:


 


VSTOCK TRANSFER, LLC


 


	By:	 	 
	Name:	 	 
	Title:	 	 


 


PEAK ONE OPPORTUNITY FUND, L.P.


 


	 	By:	Peak One Investments, LLC,	 
	 	 	its General Partner	 
	 	 	 	 	 
	 	 	By:	 	 
	 	 	Name:	Jason Goldstein	 
	 	 	Title:	Managing Member	 


 




     


     


    

 


EXHIBIT C


 


IRREVOCABLE CORPORATE
RESOLUTIONS OF THE


BOARD OF DIRECTORS OF


ARKADOS GROUP, INC.


 


We, the undersigned,
do hereby certify that at a meeting of the Board of Directors (the “Board”) of Arkados Group, Inc., a corporation incorporated
under the laws of the State of Delaware (the “Corporation”), duly held on November __, 2016, at which said meeting
no less than a majority of the directors were present and voting throughout, the following resolution, upon motions made, seconded
and carried, was duly adopted and is now in full force and effect:


 


WHEREAS, the Board
deems it in the best interests of the Corporation to enter into a Securities Purchase Agreement to be dated on or about November
__, 2016 (the “Agreement”), by and between the Corporation and Peak One Opportunity Fund LP (the “Buyer”)
in connection with the purchase and sale of certain Debentures of the Corporation, in the aggregate principal amount of up to Five
Hundred Thousand and 00/100 Dollars ($500,000.00) (the “Debentures”), convertible into shares of common stock, par
value $0.0001 per share, of the Corporation (the “Common Stock”), upon the terms and subject to the limitations and
conditions set forth in the Agreement; and


 


WHEREAS, the Board
deems it in the best interest of the Corporation to, pursuant to the Agreement, enter into an irrevocable letter agreement with
VStock Transfer, LLC, the Corporation’s transfer agent (the “Transfer Agent”), with respect to the reserve of
shares of Common Stock which may be issued to the Buyer upon conversion of the Debentures, the issuance of such shares of Common
Stock in connection with a conversion of the Debentures, and the indemnification of the Transfer Agent for all loss, liability,
or expense in carrying out the authority and direction contained in the irrevocable letter agreement (the “Letter Agreement”).


 


NOW, THEREFORE, BE IT:


 


RESOLVED, that the
Corporation is hereby authorized and instructed to enter into and perform the Agreement (including, without limitation, the incurrence
of indebtedness thereunder), the Debentures, the Letter Agreement, and all other related documents and, to the extent that any
corporate action has been taken prior to the date hereof with respect to any matter which would be otherwise authorized pursuant
hereto, such action is hereby ratified and confirmed in its entirety;


 


RESOLVED, that the
Corporation is hereby irrevocably authorized and instructed to issue the Securities (as defined in the Agreement) and all Common
Stock (including without limitation the issuance of 50,000 shares of Common Stock (the “Restricted Stock”) to Peak
One Investments, LLC pursuant to the Agreement) issuable under the Agreement or upon conversion of the Debentures, when issued
pursuant to the Transaction Documents (as defined in the Agreement), shall be fully-paid, validly issued, non-assessable shares
of Common Stock of the Corporation;


 




     


     


    

 


RESOLVED, that the
Corporation is hereby irrevocably authorized and instructed to: (i) reserve shares of Common Stock of the Corporation to be issued
upon any conversion of the Debentures, (ii) issue such shares of Common Stock in connection with a conversion of the Debentures,
upon issuance of a notice of conversion by the holder of the Debentures) without any further action or confirmation by the Corporation,
(iii) indemnify the Transfer Agent for all loss, liability, or expense in carrying out the authority and direction contained in
the Letter Agreement (iv) provide a power or attorney wherein it appoints the Investor as the Corporation’s attorney-in-fact
for purposes of the transactions contemplated by the Letter Agreement.


 


RESOLVED, that any
executive officer of the Corporation be, and hereby is, authorized, empowered and directed, from time to time, to take such additional
action and to execute, certify and deliver to the transfer agent of the Corporation, as any appropriate or proper to implement
the provisions of the foregoing resolutions; and


 


RESOLVED, that the
foregoing resolutions are irrevocable and cannot be modified, repealed or rescinded without the prior written consent of the Buyer,
any purported modification, repeal or rescission without the prior written consent of the Buyer being void, invalid, of no force
or effect and unenforceable; and


 


The undersigned, do hereby
certify that we are members of the Board, that the attached is a true and correct copy of resolutions duly adopted and ratified
at a meeting of the Board duly convened and held in accordance with its by-laws and the laws of the Corporation’s state of
incorporation, as transcribed by us from the minutes; and that the same have not in any way been modified, repealed or rescinded
and are in full force and effect. The foregoing resolutions are irrevocable and cannot be modified, repealed or rescinded without
the prior written consent of the Buyer.


 


[Signature Page Follows]


 




     


     


    

 


IN WITNESS WHEREOF, we have hereunto set our hands
as Members of the Board of Directors of the Corporation.


 


Dated: November __, 2016


 


	 	 
	 	Name: 	Terrence DeFranco
	 	Title: 	Director


 




     


     


    

 


EXHIBIT D


 


OFFICER'S
CERTIFICATE


 


The undersigned,
Terrence DeFranco, Chief Executive Officer of Arkados Group, Inc., a Delaware corporation (the “Company”), in connection
with the sale and issuance of those certain Debentures in the aggregate principal amount of up to Five Hundred Thousand and 00/100
Dollars ($500,000.00), in accordance with that certain Securities Purchase Agreement dated November __, 2016, by and between the
Company and Peak One Opportunity Fund, L.P. (the “Purchase Agreement”), hereby certifies that:


 


1.          I
am the duly appointed Chief Executive Officer of the Company.


 


2.          Attached
hereto as Exhibit I is a true and complete copy of the Articles of Incorporation of the Company and all amendments thereto
to the date hereof.


 


3.          Attached hereto
as Exhibit II is a true and complete copy of the Bylaws of the Company as in effect on the date hereof


 


4.          Attached
hereto as Exhibit III are resolutions dated November __, 2016, duly adopted by the Board of Directors of the Company, which
resolutions have not been amended, modified or rescinded and remain on this date in full force and effect.


 


5.          The representations
and warranties made by the Company in the Purchase Agreement are true and correct in all material respects as of the date of this
Officer’s Certificate. The capitalization of the Company described in the Purchase Agreement has not changed as of the date
hereof.


 


6.          As
of the date hereof, the Company has satisfied and duly performed all of the conditions and obligations specified the Purchase Agreement
to be satisfied on or prior to the Closing Date (as defined in the Purchase Agreement) or such conditions and obligations have
been waived expressly in writing signed by the purchaser.


 


7.          The
Company has complied with or, if compliance prior to Closing (as defined in the Purchase Agreement) is not required, promptly following
the Closing the Company shall comply with, the filing requirements in respect of this transaction under (a) Regulation D under
the Securities Act of 1933, as amended (the “1933 Act”) (and applicable Blue Sky regulations) and (b) the Securities
Exchange Act of 1934, as amended.


 


8.          There
has been no adverse change in the business, affairs, prospects, operations, properties, assets or condition of the Company since
the date of the Company’s most recent financial statements filed with the SEC, other than losses and matters which would
not, individually or in the aggregate, have a Material Adverse Effect (as defined in the Purchase Agreement).


 




     


     


    

 


9.          The
Company is qualified as a foreign corporation in all jurisdictions in which the Company owns or leases properties, or conducts
any business except where failure of the Company to be so qualified would not have a Material Adverse Effect (as defined in the
Purchase Agreement).


 


10.        The
Company is subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and
is in compliance with all applicable filing requirements, and has filed all required reports during the previous twelve months.


 


11.        To
the best of my knowledge and belief, no officer, director, owner of ten percent (10%) or more of the common stock, or other affiliate
of the Company has been convicted within the previous ten (10) years of any felony in connection with the purchase or sale of any
security, nor been subject to a United States Postal Service false representation order within the past five (5) years.


 


12.        The
Company is an operating company, and is not a shell company. If the Company has previously been a shell company, it has since filed
Form 10 information (supporting the claim that it is no longer a shell company), reported that it is no longer a shell company,
filed all required reports for at least twelve consecutive months after the filing of the respective Form 10 information, and has
therefore complied with Rule 144(i)(2).


 


13.        The
Company is a corporation organized under the laws of the state of Delaware and is in good standing therein.


 


[Signature Page Follows]


 




     


     


    

 


IN WITNESS WHEREOF,
the undersigned has executed this Officer’s Certificate as of November __, 2016.


 


	 	 
	 	Name:	Terrence DeFranco
	 	Title:	Chief Executive Officer


 




     


     


    

 


EXHIBIT I


 


ARTICLES OF INCORPORATION


 


(see attached)


 




     


     


    

 


EXHIBIT II


 


BYLAWS


 


(see attached)


 




     


     


    

 


EXHIBIT III


 


RESOLUTIONS OF THE BOARD OF DIRECTORS


 


(see Exhibit C to Securities Purchase Agreement)