[FORM OF WARRANT]


 


VUZIX CORPORATION


 


Warrant
To Purchase Common Stock


 


Warrant No.: _________ 


Date of Issuance: [                         ], 2013 (“Issuance
Date”)


 


Vuzix
Corporation, a Delaware corporation (the “Company”), hereby certifies that, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
[                         ],
the registered holder hereof or its permitted assigns (the “Holder”), is entitled, subject to the terms
set forth below, to purchase from the Company, at the Exercise Price (as defined below) then in effect, upon exercise of this
Warrant to Purchase Common Stock (including any Warrants to Purchase Common Stock issued in exchange, transfer or replacement
hereof, the “Warrant”), at any time or times on or after the Issuance Date, but not after 11:59 p.m., New York
time, on the Expiration Date (as defined below), [______________](subject to adjustment as provided herein) fully paid and
nonassessable shares of Common Stock (as defined below) (the “Warrant Shares”). Except as otherwise
defined herein, capitalized terms in this Warrant shall have the meanings set forth in Section 16. This Warrant is one of the
Warrants to Purchase Common Stock (the “Warrants”) issued pursuant to (i) Section 1.1 of that certain
Underwriting Agreement, dated as of [ , 2013] (the “Subscription Date”), by and among the Company and the
underwriters referred to therein, as amended from time to time (the “Underwriting Agreement”) and (ii) the
Company’s Registration Statement on Form S-1 (File number 333-185661) (the “Registration
Statement”).


 




    	 



    	 



    

 


1.          EXERCISE
OF WARRANT.


 


(a)          Mechanics
of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)),
this Warrant may be exercised by the Holder on any day on or after the Issuance Date (each, an “Exercise Date”),
in whole or in part, by delivery (whether via facsimile or otherwise) of a written notice, in the form attached hereto as Exhibit
A (the “Exercise Notice”), of the Holder’s election to exercise this Warrant. Within one (1) Trading
Day following an exercise of this Warrant as aforesaid, the Holder shall deliver payment to the Company of an amount equal to the
Exercise Price in effect on the date of such exercise multiplied by the number of Warrant Shares as to which this Warrant was so
exercised (the “Aggregate Exercise Price”) in cash or via wire transfer of immediately available funds if the
Holder did not notify the Company in such Exercise Notice that such exercise was made pursuant to a Cashless Exercise (as defined
in Section 1(d)). The Holder shall not be required to deliver the original of this Warrant in order to effect an exercise
hereunder. Execution and delivery of an Exercise Notice with respect to less than all of the Warrant Shares shall have the same
effect as cancellation of the original of this Warrant and issuance of a new Warrant evidencing the right to purchase the remaining
number of Warrant Shares. Execution and delivery of an Exercise Notice for all of the then-remaining Warrant Shares shall have
the same effect as cancellation of the original of this Warrant after delivery of the Warrant Shares in accordance with the terms
hereof. On or before the first (1st) Trading Day following the date on which the Company has received an Exercise Notice,
the Company shall transmit by facsimile an acknowledgment of confirmation of receipt of such Exercise Notice, in the form attached
hereto as Exhibit B, to the Holder and the Company’s transfer agent (the “Transfer Agent”).
On or before the third (3rd) Trading Day following the date on which the Company has received such Exercise Notice,
the Company shall (X) provided that the Transfer Agent is participating in The Depository Trust Company (“DTC”)
Fast Automated Securities Transfer Program, upon the request of the Holder, credit such aggregate number of shares of Common Stock
to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC
through its Deposit/Withdrawal at Custodian system, or (Y) if the Transfer Agent is not participating in the DTC Fast Automated
Securities Transfer Program, issue and deliver to the Holder or, at the Holder’s instruction pursuant to the Exercise Notice,
the Holder’s agent or designee, in each case, sent by reputable overnight courier to the address as specified in the applicable
Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee (as
indicated in the applicable Exercise Notice), for the number of shares of Common Stock to which the Holder is entitled pursuant
to such exercise. Upon delivery of an Exercise Notice, the Holder shall be deemed for all corporate purposes to have become the
holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date such Warrant
Shares are credited to the Holder’s DTC account or the date of delivery of the certificates evidencing such Warrant Shares
(as the case may be). If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a) and the number
of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired
upon an exercise, then, at the request of the Holder, the Company shall as soon as practicable and in no event later than three
(3) Business Days after any exercise and at its own expense, issue and deliver to the Holder (or its designee) a new Warrant (in
accordance with Section 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior
to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised. No fractional
shares of Common Stock are to be issued upon the exercise of this Warrant, but rather the number of shares of Common Stock to be
issued shall be rounded up to the nearest whole number. The Company shall pay any and all taxes and fees which may be payable with
respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant. Notwithstanding the foregoing, except in
the case where an exercise of this Warrant is validly made pursuant to a Cashless Exercise (as defined in Section 1(d)), the
Company’s failure to deliver Warrant Shares to the Holder on or prior to the second (2nd) Trading Day after the Company’s
receipt of the Aggregate Exercise Price shall not be deemed to be a breach of this Warrant.


 


(b)          Exercise
Price. For purposes of this Warrant, “Exercise Price” means $____, subject to adjustment as provided herein.


 




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(c)          Company’s
Failure to Timely Deliver Securities. If the Company shall fail, for any reason or for no reason, to issue to the Holder within
the later of (i) three (3) Trading Days after receipt of the applicable Exercise Notice and (ii) two (2) Trading Days after the
Company’s receipt of the Aggregate Exercise Price (or valid notice of a Cashless Exercise) (such later date, the “Share
Delivery Deadline”), a certificate for the number of shares of Common Stock to which the Holder is entitled and register
such shares of Common Stock on the Company’s share register or to credit the Holder’s balance account with DTC for
such number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise of this Warrant (as the
case may be) (a “Delivery Failure”), and if on or after such Share Delivery Deadline the Holder purchases (in
an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of all or any
portion of the number of shares of Common Stock, or a sale of a number of shares of Common Stock equal to all or any portion of
the number of shares of Common Stock, issuable upon such exercise that the Holder so anticipated receiving from the Company, then,
in addition to all other remedies available to the Holder, the Company shall, within three (3) Business Days after the Holder’s
request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total
purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased
(including, without limitation, by any other Person in respect, or on behalf, of the Holder) (the “Buy-In Price”),
at which point the Company’s obligation to so issue and deliver such certificate or credit the Holder’s balance account
with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise hereunder (as
the case may be) (and to issue such shares of Common Stock) shall terminate, or (ii) promptly honor its obligation to so issue
and deliver to the Holder a certificate or certificates representing such shares of Common Stock or credit the Holder’s balance
account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s exercise hereunder
(as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product
of (A) such number of shares of Common Stock multiplied by (B) the lowest Closing Sale Price of the Common Stock on any Trading
Day during the period commencing on the date of the applicable Exercise Notice and ending on the date immediately preceding the
date of such issuance and payment under this clause (ii).


 


(d)          Cashless
Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), the Holder may, in
its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to
be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise
the “Net Number” of shares of Common Stock (the “Net Number”) determined according to the following
formula (a “Cashless Exercise”):


 


Net Number = (A x B) - (A x C)


     D


 


For purposes of the foregoing formula:


 


A = the
total number of shares with respect to which this Warrant is then being exercised.


 


B =
the quotient of (x) the sum of the VWAP of the Common Stock of each of the ten (10) Trading Days ending at the close of
business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice,
divided by (y) ten (10).


 




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C = the
Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.


 


D = the
lower of (w) as applicable, (i) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the date of
the applicable Exercise Notice if such Exercise Notice is (1) both executed and delivered pursuant to Section 1(a) hereof
on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 1(a) hereof on a Trading Day prior
to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMS promulgated under the federal
securities laws) on such Trading Day, and (ii) the Closing Sale Price of the Common Stock on the date of the applicable Exercise
Notice if the date of such Exercise Notice is a Trading Day and such Exercise Notice is both executed and delivered pursuant to
Section 1(a) hereof during such Trading Day or after the close of “regular trading hours” on such Trading Day,
(x) the VWAP of the Common Stock at the close of business on the Principal Market on the Trading Day immediately prior to the applicable
Exercise Date, (y) the quotient of (A) the sum of the VWAP of the Common Stock of each of the ten (10) Trading Days ending at the
close of business on the Principal Market immediately prior to the time of exercise as set forth in the applicable Exercise Notice,
divided by (B) ten (10) and (z) the lowest Bid Price of the Common Stock at any time during the Trading Day on the applicable Exercise
Date.


 


(e)          Disputes.
In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the number of Warrant Shares
to be issued pursuant to the terms hereof, the Company shall promptly issue to the Holder the number of Warrant Shares that are
not disputed and resolve such dispute in accordance with Section 13.


 


(f)          Limitations
on Exercises. Notwithstanding anything to the contrary contained in this Warrant, this Warrant shall not be exercisable by
the Holder hereof to the extent (but only to the extent) that after giving effect to such exercise the Holder (together with any
of its affiliates) would beneficially own in excess of  4.99% (the “Maximum Percentage”) of the Common Stock.
To the extent the above limitation applies, the determination of whether this Warrant shall be exercisable (vis-à-vis other
convertible, exercisable or exchangeable securities owned by the Holder or any of its affiliates) and of which such securities
shall be convertible, exercisable or exchangeable (as the case may be, as among all such securities owned by the Holder) shall,
subject to such Maximum Percentage limitation, be determined on the basis of the first submission to the Company for conversion,
exercise or exchange (as the case may be). No prior inability to exercise this Warrant pursuant to this paragraph shall have any
effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of exercisability.
For the purposes of this paragraph, beneficial ownership and all determinations and calculations (including, without limitation,
with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the Securities
Act of 1934, as amended (the “1934 Act”) and the rules and regulations promulgated thereunder. The provisions
of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms of this paragraph to correct
this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Maximum Percentage beneficial ownership
limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Maximum Percentage
limitation. The limitations contained in this paragraph shall apply to a successor Holder of this Warrant. The holders of Common
Stock shall be third party beneficiaries of this paragraph and the Company may not waive this paragraph without the consent of
holders of a majority of its Common Stock. For any reason at any time, upon the written or oral request of the Holder, the Company
shall within one (1) Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding,
including by virtue of any prior conversion or exercise of convertible or exercisable securities into Common Stock, including,
without limitation, pursuant to this Warrant or securities issued pursuant to the Underwriting Agreement. By written notice to
the Company, any Holder may increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% specified
in such notice; provided that (i) any such increase will not be effective until the 61st day after such notice is delivered to
the Company, and (ii) any such increase or decrease will apply only to the Holder sending such notice and not to any other holder
of Warrants.


 




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(g)          Insufficient
Authorized Shares. From and after the Initial Exercisability Date, the Company shall at all times keep reserved for issuance
under this Warrant a number of shares of Common Stock at least equal to 150% of the maximum number of shares of Common Stock as
shall be necessary to satisfy the Company’s obligation to issue shares of Common Stock hereunder (without regard to any limitation
otherwise contained herein with respect to the number of shares of Common Stock that may be acquirable upon exercise of this Warrant).
From and after the Initial Exercisability Date, if, notwithstanding the foregoing, and not in limitation thereof, at any time while
any of the Warrants remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common
Stock to satisfy its obligation to reserve for issuance upon exercise of the Warrants at least a number of shares of Common Stock
(the “Required Reserve Amount”) equal to the number of shares of Common Stock as shall from time to time be
necessary to effect the exercise of all of the Warrants then outstanding (an “Authorized Share Failure”), then
the Company shall immediately take all action reasonably necessary to increase the Company’s authorized shares of Common
Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for all the Warrants then outstanding.
Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized
Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall
hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection
with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its reasonable best efforts
to solicit its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its board of directors
to recommend to the stockholders that they approve such proposal. In the event that the Company is prohibited from issuing shares
of Common Stock upon an exercise of this Warrant due to the failure by the Company to have sufficient shares of Common Stock available
out of the authorized but unissued shares of Common Stock (such unavailable number of shares of Common Stock, the “Authorization
Failure Shares”), in lieu of delivering such Authorization Failure Shares to the Holder, the Company shall pay cash in
exchange for the cancellation of such portion of this Warrant exercisable into such Authorized Failure Shares at a price equal
to the sum of (i) the product of (x) such number of Authorization Failure Shares and (y) the greatest Closing Sale Price of the
Common Stock on any Trading Day during the period commencing on the date the Holder delivers the applicable Exercise Notice with
respect to such Authorization Failure Shares to the Company and ending on the date immediately preceding the date of such issuance
and payment under this Section 1(g) and (ii) to the extent the Holder purchases (in an open market transaction or otherwise) shares
of Common Stock to deliver in satisfaction of a sale by the Holder of Authorization Failure Shares, any brokerage commissions and
other out-of-pocket expenses, if any, of the Holder incurred in connection therewith.


 




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2.          ADJUSTMENT
OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The
Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time
as set forth in this Section 2.


 


(a)          Stock
Dividends and Splits. Without limiting any provision of Section 2(b) or Section 4, if the Company, at any time on
or after the date of the Underwriting Agreement, (i) pays a stock dividend on one or more classes of its then outstanding shares
of Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii)
subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its then outstanding shares
of Common Stock into a larger number of shares or (iii) combines (by combination, reverse stock split or otherwise) one or more
classes of its then outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price
shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately
before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such
event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for
the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii)
or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any
event requiring an adjustment under this paragraph occurs during the period that an Exercise Price is calculated hereunder, then
the calculation of such Exercise Price shall be adjusted appropriately to reflect such event.


 


(b)          Adjustment
Upon Issuance of Shares of Common Stock. If and whenever on or after the date of the Underwriting Agreement, the Company issues
or sells, or in accordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the
issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding any Excluded Securities
issued or sold or deemed to have been issued or sold) for a consideration per share (the “New Issuance Price”)
less than a price equal to the Exercise Price in effect immediately prior to such issue or sale or deemed issuance or sale (such
Exercise Price then in effect is referred to as the “Applicable Price”) (the foregoing a “Dilutive
Issuance”), then immediately after such Dilutive Issuance, the Exercise Price then in effect shall be reduced to the
New Issuance Price. For all purposes of the foregoing (including, without limitation, determining the adjusted Exercise Price and
consideration per share under this Section 2(b)), the following shall be applicable:


 




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


 


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


 




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(iii)        Change
in Option Price or Rate of Conversion. If the purchase or exercise price provided for in any Options, the additional consideration,
if any, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible
Securities are convertible into or exercisable or exchangeable for shares of Common Stock increases or decreases at any time, the
Exercise Price in effect at the time of such increase or decrease shall be adjusted to the Exercise Price which would have been
in effect at such time had such Options or Convertible Securities provided for such increased or decreased purchase price, additional
consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued or sold. For
purposes of this Section 2(b)(iii), if the terms of any Option or Convertible Security that was outstanding as of the date
of issuance of this Warrant are increased or decreased in the manner described in the immediately preceding sentence, then such
Option or Convertible Security and the shares of Common Stock deemed issuable upon exercise, conversion or exchange thereof shall
be deemed to have been issued as of the date of such increase or decrease. No adjustment pursuant to this Section 2(b) shall
be made if such adjustment would result in an increase of the Exercise Price then in effect.


 




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(iv)        Calculation
of Consideration Received. If any Option and/or Convertible Security and/or Adjustment Right is issued in connection with the
issuance or sale or deemed issuance or sale of any other securities of the Company (as determined by the Holder, the “Primary
Security”, and such Option and/or Convertible Security and/or Adjustment Right, the “Secondary Securities”),
together comprising one integrated transaction, the consideration per share of Common Stock with respect to such Primary Security
shall be deemed to be equal to the difference of (x) the lowest price per share for which one share of Common Stock was issued
in such integrated transaction (or was deemed to be issued pursuant to Section 2(b)(i) or 2(b)(ii) above, as applicable) solely
with respect to such Primary Security, minus (y) with respect to such Secondary Securities, the sum of (I) the Black Scholes Consideration
Value of each such Option, if any, (II) the fair market value (as determined by the Holder) or the Black Scholes Consideration
Value, as applicable, of such Adjustment Right, if any, and (III) the fair market value (as determined by the Holder) of such Convertible
Security, if any, in each case, as determined on a per share basis in accordance with this Section 2(b)(iv). If any shares of Common
Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received
therefor (for the purpose of determining the consideration paid for such Common Stock, Option or Convertible Security, but not
for the purpose of the calculation of the Black Scholes Consideration Value) will be deemed to be the net amount of consideration
received by the Company therefor. If any shares of Common Stock, Options or Convertible Securities are issued or sold for a consideration
other than cash (for the purpose of determining the consideration paid for such Common Stock, Option or Convertible Security, but
not for the purpose of the calculation of the Black Scholes Consideration Value), the amount of such consideration received by
the Company will be the fair value of such consideration, except where such consideration consists of publicly traded securities,
in which case the amount of consideration received by the Company for such securities will be the arithmetic average of the VWAPs
of such security for each of the five (5) Trading Days immediately preceding the date of receipt. If any shares of Common Stock,
Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the
Company is the surviving entity (for the purpose of determining the consideration paid for such Common Stock, Option or Convertible
Security, but not for the purpose of the calculation of the Black Scholes Consideration Value), the amount of consideration therefor
will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable
to such shares of Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other
than cash or publicly traded securities (for the purpose of determining the consideration paid for such Common Stock, Option or
Convertible Security, but not for the purpose of the calculation of the Black Scholes Consideration Value) will be determined jointly
by the Company and the Holder. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event
requiring valuation (the “Valuation Event”), the fair value of such consideration will be determined within
five (5) Trading Days after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser
jointly selected by the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties
absent manifest error and the fees and expenses of such appraiser shall be borne by the Company.


 


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


 


(c)          Number
of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to paragraphs (a), (b), (d), (e) or (f)
of this Section 2, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or
decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the adjusted number
of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regard
to any limitations on exercise contained herein).


 




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(d)          Holder's
Right of Alternative Exercise Price Following Issuance of Certain Options or Convertible Securities. In addition to and not
in limitation of the other provisions of this Section 2, if the Company in any manner issues or sells any Options or Convertible
Securities (any such securities, “Variable Price Securities”) after the Subscription Date that are convertible
into or exchangeable or exercisable for shares of Common Stock at a price which varies or may vary with the market price of the
Common Shares, including by way of one or more reset(s) to a fixed price, but exclusive of such formulations reflecting customary
anti-dilution provisions (such as share splits, share combinations, share dividends and similar transactions) (each of the formulations
for such variable price being herein referred to as, the “Variable Price”), the Company shall provide written
notice thereof via facsimile and overnight courier to the Holder on the date of issuance of such Convertible Securities or Options.
From and after the date the Company issues any such Convertible Securities or Options with a Variable Price, the Holder shall have
the right, but not the obligation, in its sole discretion to substitute the Variable Price for the Exercise Price upon exercise
of this Warrant by designating in the Exercise Notice delivered upon any exercise of this Warrant that solely for purposes of such
exercise the Holder is relying on the Variable Price rather than the Exercise Price then in effect. The Holder's election to rely
on a Variable Price for a particular exercise of this Warrant shall not obligate the Holder to rely on a Variable Price for any
future exercises of this Warrant.


 


(e)          Stock
Combination Event Adjustment. If at any time and from time to time on or after the Issuance Date there occurs any stock
split, stock combination recapitalization or other similar transaction involving the Common Stock (other than a forward split or
dividend on the Common Stock) (each, a “Stock Combination Event”) and the product of (i) the quotient determined
by dividing (x) the Exercise Price in effect immediately prior to the Stock Combination Event by (y) the quotient determined by
dividing (A) the sum of the VWAP of the Common Stock on each day of the fifteen (15) Trading Day period immediately prior to the
Stock Combination Event, divided by (B) fifteen (15); and (ii) the quotient determined by dividing (x) the sum of the VWAP of the
Common Stock on each day of the fifteen (15) Trading Day period immediately following the date of such Stock Combination Event,
divided by (y) fifteen (15) (each, an “Event Market Price”) is less than the Exercise Price then in effect (after
giving effect to the adjustment in clause (b) above), then on the sixteenth (16th) Trading Day immediately following such Stock
Combination Event, the Exercise Price then in effect on such sixteenth (16th) Trading Day (after giving effect to the adjustment
in clause (b) above) shall be reduced (but in no event increased) to the Event Market Price. For the avoidance of doubt, if the
adjustment in the immediately preceding sentence would otherwise result in an increase in the Exercise Price hereunder, no adjustment
shall be made.


 


(f)          Other
Events. In the event that the Company (or any Subsidiary) shall take any action to which the provisions hereof are not strictly
applicable, or, if applicable, would not operate to protect the Holder from dilution or if any event occurs of the type contemplated
by the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the
granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s board
of directors shall in good faith determine and implement an appropriate adjustment in the Exercise Price and the number of Warrant
Shares (if applicable) so as to protect the rights of the Holder, provided that no such adjustment pursuant to this Section 2(e)
will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2,
provided further that if the Holder does not accept such adjustments as appropriately protecting its interests hereunder against
such dilution, then the Company’s board of directors and the Holder shall agree, in good faith, upon an independent investment
bank of nationally recognized standing to make such appropriate adjustments, whose determination shall be final and binding and
whose fees and expenses shall be borne by the Company.


 




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(g)          Calculations.
All calculations under this Section 2 shall be made by rounding to the nearest cent or the nearest 1/100th of a
share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held
by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.


 


3.          RIGHTS
UPON DISTRIBUTION OF ASSETS. In addition to any adjustments
pursuant to Section 2 above, if the Company shall declare or make any dividend or other distribution of its assets (or rights
to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation,
any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), at any time after the
issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same
extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the
Maximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken,
the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution
(provided, however, to the extent that the Holder’s right to participate in any such Distributions would result in the Holder
exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Distribution to such extent (or
the beneficial ownership of any such shares of Common Stock as a result of such Distribution to such extent) and such Distribution
to such extent shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not
result in the Holder exceeding the Maximum Percentage).


 


4.          PURCHASE
RIGHTS; FUNDAMENTAL TRANSACTIONS.


 


(a)          Purchase
Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells
any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record
holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired
if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to
any limitations on exercise hereof, including without limitation, the Maximum Percentage) immediately before the date on which
a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which
the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided,
however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding
the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial
ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent
shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding
the Maximum Percentage).


 




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(b)          Fundamental
Transactions. Upon the consummation of any Fundamental Transaction, the Company or the Successor Entity (as the case may be)
shall purchase this Warrant from the Holder by paying to the Holder an amount in cash equal to
200% of the Black Scholes Value (the “Fundamental Transaction Redemption Price”), by wire transfer of U.S. dollars
and immediately available funds, as soon as commercially practicable following the time of consummation of such Fundamental Transaction,
but no later than the third (3rd) Trading Day thereafter. In the event the Company fails to pay the Fundamental Transaction
Redemption Price in a timely manner in accordance with the foregoing, the Fundamental Transaction Redemption Price shall bear interest
at the rate of two percent (2%) per month (prorated for partial months) until paid in full. The Holder and Company agree that in
the event of the Company's redemption of any Warrant under this Section 4(b), the Holder's damages would be uncertain and difficult
to estimate because of the parties' inability to predict future interest rates and the uncertainty of the availability of a suitable
substitute investment opportunity for the Holder. Accordingly, any redemption premium due under this Section 4(b) is intended by
the parties to be, and shall be deemed, a reasonable estimate of the Holder's actual loss of its investment opportunity and not
as a penalty.


 


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


 


6.          WARRANT
HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically provided
herein, the Holder, solely in its capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be
deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to
confer upon the Holder, solely in its capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company
or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights,
or otherwise, prior to the issuance to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise
of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to
purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities
are asserted by the Company or by creditors of the Company. Notwithstanding this Section 6, the Company shall provide the
Holder with copies of the same notices and other information given to the stockholders of the Company generally, contemporaneously
with the giving thereof to the stockholders.


 




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7.          REISSUANCE
OF WARRANTS.


 


(a)          Transfer
of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company
will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered
as the Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and,
if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance
with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.


 


(b)          Lost,
Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant (as to which a written certification and the indemnification contemplated below shall
suffice as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to
the Company in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Warrant, the
Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing the right to
purchase the Warrant Shares then underlying this Warrant.


 


(c)          Exchangeable
for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the
Company, for a new Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase
the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such
portion of such Warrant Shares as is designated by the Holder at the time of such surrender; provided, however, no warrants for
fractional shares of Common Stock shall be given.


 


(d)          Issuance
of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant
(i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to
purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a)
or Section 7(c), the Warrant Shares designated by the Holder which, when added to the number of shares of Common Stock underlying
the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this
Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date,
and (iv) shall have the same rights and conditions as this Warrant.


 




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8.          NOTICES. Whenever notice is required to be given
under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 9.1 of the Underwriting
Agreement. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Warrant, including
in reasonable detail a description of such action and the reason therefor. Without limiting the generality of the foregoing, the
Company will give written notice to the Holder (i) promptly upon each adjustment of the Exercise Price and the number of Warrant
Shares, setting forth in reasonable detail, and certifying, the calculation of such adjustment(s) and (ii) at least fifteen (15)
days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution
upon the shares of Common Stock, (B) with respect to any grants, issuances or sales of any Options, Convertible Securities or rights
to purchase stock, warrants, securities or other property to holders of shares of Common Stock or (C) for determining rights to
vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall
be made known to the public prior to or in conjunction with such notice being provided to the Holder and (iii) at least ten (10)
Trading Days prior to the consummation of any Fundamental Transaction. To the extent that any notice provided hereunder constitutes,
or contains, material, non-public information regarding the Company or any of its Subsidiaries, the Company shall simultaneously
file such notice with the SEC pursuant to a Current Report on Form 8-K. It is expressly understood and agreed that the time of
execution specified by the Holder in each Exercise Notice shall be definitive and may not be disputed or challenged by the Company.


 


9.          AMENDMENT
AND WAIVER. Except as otherwise provided herein,
the provisions of this Warrant (other than Section 1(f)) may be amended and the Company may take any action herein prohibited,
or omit to perform any act herein required to be performed by it, only if the Company has obtained the written consent of the Holder.
No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party.


 


10.         SEVERABILITY. If any provision of this Warrant is prohibited
by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise
be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable,
and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant
so long as this Warrant as so modified continues to express, without material change, the original intentions of the parties as
to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not
substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits
that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited,
invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the
prohibited, invalid or unenforceable provision(s).


 




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


 


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


 


13.         DISPUTE
RESOLUTION. In the case of a dispute as to the determination
of the Exercise Price, the Closing Bid Price, the Closing Sale Price or fair market value or the arithmetic calculation of the
number of Warrant Shares (as the case may be), the Company or the Holder (as the case may be) shall submit the disputed determinations
or arithmetic calculations (as the case may be) via facsimile (i) within two (2) Business Days after receipt of the applicable
notice giving rise to such dispute to the Company or the Holder (as the case may be) or (ii) if no notice gave rise to such dispute,
at any time after the Holder learned of the circumstances giving rise to such dispute (including, without limitation, as to whether
any issuance or sale or deemed issuance or sale was an issuance or sale or deemed issuance or sale of Excluded Securities). If
the Holder and the Company are unable to agree upon such determination or calculation (as the case may be) of the Exercise Price,
the Closing Sale Price or fair market value or the number of Warrant Shares (as the case may be) within three (3) Business Days
of such disputed determination or arithmetic calculation being submitted to the Company or the Holder (as the case may be), then
the Company shall, within two (2) Business Days submit via facsimile (a) the disputed determination of the Exercise Price, the
Closing Bid Price, the Closing Sale Price or fair market value (as the case may be) to an independent, reputable investment bank
selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the number of Warrant Shares to
the Company’s independent, outside accountant. The Company shall cause at its expense the investment bank or the accountant
(as the case may be) to perform the determinations or calculations (as the case may be) and notify the Company and the Holder of
the results no later than ten (10) Business Days from the time it receives such disputed determinations or calculations (as the
case may be). Such investment bank’s or accountant’s determination or calculation (as the case may be) shall be binding
upon all parties absent demonstrable error.


 




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14.         REMEDIES,
CHARACTERIZATION, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Warrant
shall be cumulative and in addition to all other remedies available under this Warrant, at law or in equity (including a decree
of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual
and consequential damages for any failure by the Company to comply with the terms of this Warrant. The Company covenants to the
Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set
forth or provided for herein with respect to payments, exercises and the like (and the computation thereof) shall be the amounts
to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company
(or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable
harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the
event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other
security being required. The Company shall provide all information and documentation to the Holder that is requested by the Holder
to enable the Holder to confirm the Company’s compliance with the terms and conditions of this Warrant (including, without
limitation, compliance with Section 2 hereof). The issuance of shares and certificates for shares as contemplated hereby upon
the exercise of this Warrant shall be made without charge to the Holder or such shares for any issuance tax or other costs in respect
thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any certificate in a name other than the Holder or its agent on its behalf.


 


15.         TRANSFER. This Warrant may be offered for sale,
sold, transferred or assigned without the consent of the Company.


 


16.         CERTAIN
DEFINITIONS. For purposes of this Warrant, the following
terms shall have the following meanings:


 


(a)          
“Adjustment Right” means any right granted with respect to any securities issued in connection with, or with
respect to, any issuance or sale (or deemed issuance or sale in accordance with Section 2) of shares of Common Stock (other
than rights of the type described in Section 3 and 4 hereof) that could result in a decrease in the net consideration received
by the Company in connection with, or with respect to, such securities (including, without limitation, any cash settlement rights,
cash adjustment or other similar rights).


 


(b)          “Approved
Stock Plan” means any employee benefit plan which has been approved by the board of directors of the Company prior to
or subsequent to the date hereof pursuant to which shares of Common Stock and standard options to purchase Common Stock may be
issued to any employee, officer or director for services provided to the Company in their capacity as such.


 




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(c)          “Bid
Price” means, for any security as of the particular time of determination, the bid price for such security on the Principal
Market as reported by Bloomberg as of such time of determination, or, if the Principal Market is not the principal securities exchange
or trading market for such security, the bid price of such security on the principal securities exchange or trading market where
such security is listed or traded as reported by Bloomberg as of such time of determination, or if the foregoing does not apply,
the bid price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by
Bloomberg as of such time of determination, or, if no bid price is reported for such security by Bloomberg as of such time of determination,
the average of the bid prices of any market makers for such security as reported in the “pink sheets” by OTC Markets
Group Inc. (formerly Pink Sheets LLC) as of such time of determination. If the Bid Price cannot be calculated for a security as
of the particular time of determination on any of the foregoing bases, the Bid Price of such security as of such time of determination
shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to
agree upon the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 13.
All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar
transaction during such period.


 


(d)          “Black
Scholes Consideration Value” means the value of the applicable Option, Convertible Security or Adjustment Right (as the
case may be) as of the date of issuance thereof calculated using (x) if on or prior to the six month anniversary of the Issuance
Date, the greater of the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, as a put
option or a call option, or (y) if after the six month anniversary of the Issuance Date, the Black Scholes Option Pricing Model
obtained from the “OV” function on Bloomberg as a call option, in each case, utilizing (i) an underlying price per
share equal to the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the public announcement of the
execution of definitive documents with respect to the issuance of such Option or Convertible Security (as the case may be), (ii)
a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of such Option, Convertible
Security or Adjustment Right (as the case may be) as of the date of issuance of such Option, Convertible Security or Adjustment
Right (as the case may be), (iii) a zero cost of borrow and (iv) an expected volatility equal to the greater of 100% and the 100
day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365 day annualization factor) as of the
Trading Day immediately following the date of issuance of such Option, Convertible Security or Adjustment Right (as the case may
be).


 




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(e)          “Black
Scholes Value” means the value of the unexercised portion of this Warrant as of the Trading Day immediately prior to
the time of consummation of the Fundamental Transaction, which value is calculated using (x) if on or prior to the six month anniversary
of the Issuance Date, the greater of the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg,
as a put option or a call option, or (y) if after the six month anniversary of the Issuance Date, the Black Scholes Option Pricing
Model obtained from the “OV” function on Bloomberg as a call option, in each case, utilizing (i) an underlying price
per share equal to the greater of (1) the highest Closing Sale Price of the Common Stock during the period beginning on the Trading
Day immediately preceding the announcement of the applicable Fundamental Transaction (or the consummation of the applicable Fundamental
Transaction, if earlier) and ending on the Trading Day of the Holder’s request pursuant to Section 4(b), and (2) the sum
of the price per share being offered in cash in the applicable Fundamental Transaction (if any) plus the value of the non-cash
consideration being offered in the applicable Fundamental Transaction (if any), (ii) a strike price equal to the Exercise Price
in effect on the date of the Holder’s request pursuant to Section 4(b), (iii) a risk-free interest rate corresponding
to the U.S. Treasury rate for a period equal to the greater of (1) the remaining term of this Warrant as of the date of the Holder’s
request pursuant to Section 4(b) and (2) the remaining term of this Warrant as of the date of consummation of the applicable
Fundamental Transaction or as of the date of the Holder’s request pursuant to Section 4(b) if such request is prior
to the date of the consummation of the applicable Fundamental Transaction, (iv) a zero cost of borrow and (v) an expected volatility
equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg (determined utilizing a 365
day annualization factor) as of the Trading Day immediately following the earliest to occur of (x) the public disclosure of the
applicable Fundamental Transaction, (y) the consummation of the applicable Fundamental Transaction and (z) the date on which the
Holder first became aware of the applicable Fundamental Transaction.


 


(f)          “Bloomberg”
means Bloomberg, L.P.


 


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


 


(h)          “Closing
Bid Price” and “Closing Sale Price” means, for any security as of any date, the last closing bid price
and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal
Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as
the case may be) then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New York City
time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such
security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing
bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security
by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported
in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If the Closing Bid Price or the Closing
Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the
Closing Sale Price (as the case may be) of such security on such date shall be the fair market value as mutually determined by
the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately
adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.


 


(i)          “Common
Stock” means (i) the Company’s shares of common stock, $0.001 par value per share, and (ii) any capital stock
into which such common stock shall have been changed or any share capital resulting from a reclassification of such common stock.


 




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(j)          “Convertible
Securities” means any stock or other security (other than Options) that is at any time and under any circumstances, directly
or indirectly, convertible into, exercisable or exchangeable for, or which otherwise entitles the holder thereof to acquire, any
shares of Common Stock.


 


(k)          “Eligible
Market” means The New York Stock Exchange, the NYSE MKT, the Nasdaq Global Select Market, the Nasdaq Global Market, the
Nasdaq Capital Market, the OTCQB or the Principal Market.


 


(l)          “Equity
Conditions” means: (i) on each day during the period beginning three months prior to the applicable date of determination
and ending on and including the applicable date of determination (the “Equity Conditions Measuring Period”),
the Common Stock is listed or designated for quotation (as applicable) on an Eligible Market and shall not have been suspended
from trading on an Eligible Market (other than suspensions of not more than two (2) days and occurring prior to the applicable
date of determination due to business announcements by the Company) nor shall delisting or suspension by an Eligible Market be
pending in writing by such Eligible Market; (ii) on each day during the Equity Conditions Measuring Period, the Company shall have
delivered all shares of Common Stock issuable upon exercise of this Warrant on a timely basis pursuant to the applicable provisions
hereof; (iii) any shares of Common Stock to be issued in connection with the event requiring determination may be issued in full
without violating Section 1(f) hereof; (iv) any shares of Common Stock to be issued in connection with the event requiring determination
may be issued in full without violating the rules or regulations of the Eligible Market on which the Common Stock is then listed
or designated for quotation (as applicable); (v) on each day during the Equity Conditions Measuring Period, no public announcement
of a pending, proposed or intended Fundamental Transaction shall have occurred which has not been abandoned, terminated or consummated;
(vi) the Holder shall not be in possession of any material, non-public information provided to any of
them by the Company, any of its affiliates or any of their respective officers, employees, directors, representatives, agents or
the like; (vii) on each day during the Equity Conditions Measuring Period, the Company shall
not be in breach of any term or condition of this Warrant and (viii) on each day during the Equity Conditions Measuring
Period, there shall not be any Volume Failure or any Price Failure.


 


(m)          “Equity
Conditions Failure” means, with respect to a particular date of determination, that on any day during the period commencing
twenty (20) Trading Days immediately prior to such date of determination, the Equity Conditions have not been satisfied (or waived
in writing by the Holder).


 




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(n)          “Excluded
Securities” means (i) shares of Common Stock or standard options to purchase Common Stock issued to directors, officers
or employees of the Company in their capacity as such pursuant to an Approved Stock Plan (as defined above), provided that (A)
all such issuances (taking into account the shares of Common Stock issuable upon exercise of such options) after the date hereof
pursuant to this clause (i) do not, in the aggregate, exceed more than 5% of the Common Stock issued and outstanding immediately
prior to the date hereof and (B) the exercise price of any such options is not lowered, none of such options are amended to increase
the number of shares issuable thereunder and none of the terms or conditions of any such options are otherwise materially changed
in any manner that adversely affects any of the holders of Warrants; (ii) shares of Common Stock issued upon the conversion or
exercise of Convertible Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan
that are covered by clause (i) above) issued prior to the date hereof, provided that the conversion price of any such Convertible
Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by
clause (i) above) is not lowered through the amendment or waiver of such Convertible Security, none of such Convertible Securities
(other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by clause (i)
above) are amended to increase the number of shares issuable thereunder and none of the terms or conditions of any such Convertible
Securities (other than standard options to purchase Common Stock issued pursuant to an Approved Stock Plan that are covered by
clause (i) above) are otherwise materially changed in any manner that adversely affects any of the holders of Warrants; (iv) the
shares of Common Stock issuable upon exercise of the Warrants and (v) securities issuable in connection with strategic license
agreements and other partnering arrangements where the purchaser or acquirer of the securities in such
issuance solely consists of either (x) the actual participants in such strategic license, strategic alliance, strategic partnership
or other partnering arrangements, (y) the actual owners of such assets or securities acquired in such acquisition or merger or
(z) the stockholders, partners or members of the foregoing Persons and (C) number or amount of securities issued to such Person
by the Company shall not be disproportionate (as determined in good faith by the Board of Directors of the Company) to either (x)
the fair market value of such Person’s actual contribution to such strategic alliance or strategic partnership or (y) the
proportional ownership of such assets or securities to be acquired by the Company, as applicable; provided, that, notwithstanding
the foregoing, such purchaser or acquirer of the securities in such issuance shall not include any person regularly engaged in
the business of buying or selling securities.


 


(o)          “Expiration
Date” means the date that is [          ] 1 or, if such date falls on a day other than a Business Day or on which
trading does not take place on the Principal Market (a “Holiday”), the next date that is not a Holiday.


 


 






1 Insert
fifth anniversary of the initial Issuance Date


 




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(p)          “Fundamental
Transaction” means that (i) the Company or any of its Subsidiaries shall, directly or indirectly, in one or more related
transactions, (1) consolidate or merge with or into (whether or not the Company or any of its Subsidiaries is the surviving corporation)
any other Person, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its
respective properties or assets to any other Person, or (3) allow any other Person to make a purchase, tender or exchange offer
that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company (not including any shares
of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated with the Persons making
or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other
Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Company (not including
any shares of Voting Stock of the Company held by the other Person or other Persons making or party to, or associated or affiliated
with the other Persons making or party to, such stock or share purchase agreement or other business combination), or (5) (I) reorganize,
recapitalize or reclassify the Common Stock, (II) effect or consummate a stock combination, reverse stock split or other similar
transaction involving the Common Stock or (III) make any public announcement or disclosure with respect to any stock combination,
reverse stock split or other similar transaction involving the Common Stock (including, without limitation, any public announcement
or disclosure of (x) any potential, possible or actual stock combination, reverse stock split or other similar transaction involving
the Common Stock or (y) board or stockholder approval thereof, or the intention of the Company to seek board or stockholder approval
of any stock combination, reverse stock split or other similar transaction involving the Common Stock) (for the avoidance of doubt,
this subsection (5) shall not include any forward splits or dividends on the Common Stock), or (ii) any “person” or
“group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations
promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly
or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.


 


(q)          
“Market Price” means, as of any Exercise Date, the lower of (i) 70% of the VWAP of the Common Stock on the Trading
Day immediately prior to such Exercise Date, (ii) the price which shall be computed as 70% of the quotient of (I) the sum of the
VWAPs of the Common Stock of each Trading Day during the ten (10) consecutive Trading Day period ending and including the Trading
Day immediately prior to such Exercise Date, divided by (II) ten (10) and (iii) the lowest Bid Price of the Common Stock at any
time during the Trading Day on such Exercise Date.


 


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


 


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


 


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


 


(u)          “Price
Failure” means, with respect to a particular date of determination, the volume-weighted average of the VWAP of the Common
Stock during the fifteen (15) consecutive Trading Day period ending on the Trading Day immediately preceding such date of determination
fails to exceed $1.00 (as adjusted for any stock splits, stock dividends, stock combinations,
recapitalizations or other similar transactions). All such determinations to be appropriately adjusted for any stock splits, stock
dividends, stock combinations, recapitalizations or other similar transactions during such Price Failure Measuring Period.


 


(v)         “Principal
Market” means the OTC Bulletin Board.


 




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(w)          “Subsidiary”
means any Person in which the Company, directly or indirectly, (i) owns any of the outstanding capital stock or holds any equity
or similar interest of such Person or (ii) controls or operates all or any part of the business, operations or administration of
such Person, and all of the foregoing.


 


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


 


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


 


(z)          “Volume
Failure” means, with respect to a particular date of determination, the quotient of (x) the sum of the aggregate daily
dollar trading volume (as reported on Bloomberg) of the Common Stock on each Trading Day over the fifteen (15) consecutive Trading
Day period ending on the Trading Day immediately preceding such date of determination (such period, the “Volume Failure
Measuring Period”), divided by (y) fifteen (15) is not less than $150,000 (as adjusted for any stock splits, stock dividends,
stock combinations, recapitalizations or other similar transactions). All such determinations to be appropriately adjusted for
any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions during such Volume Failure
Measuring Period.


 


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


 


(bb)         “VWAP”
means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market (or,
if the Principal Market is not the principal trading market for such security, then on the principal securities exchange or securities
market on which such security is then traded) during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00
p.m., New York time, as reported by Bloomberg through its “Volume at Price” function or, if the foregoing does not
apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board
for such security during the period beginning at 9:30:01 a.m., New York time, and ending at 4:00:00 p.m., New York time, as reported
by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average
of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in
the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC). If VWAP cannot be calculated for such security
on such date on any of the foregoing bases, the VWAP of such security on such date shall be the fair market value as mutually determined
by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved in accordance with the procedures in Section 13. All such determinations shall be appropriately
adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.


 




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17.         MANDATORY
EXERCISE.


 


(a)          General.
If at any time after the initial Issuance Date, (i) the daily VWAP of the Common Stock is equal to or greater than $10.00 (as adjusted
for any stock dividend, stock split, stock combination or other similar transaction occurring after the date of the initial Issuance
Date) (the “Trigger Price”) for a period of sixty (60) consecutive Trading Days (the sixty (60) consecutive
Trading Days on which the condition in this clause (i) is satisfied are referred to herein as the “Mandatory Exercise
Measuring Period”), and (ii) no Equity Conditions Failure shall have occurred, then the Company shall have the right
to require the Holder to exercise all, but not less than all, of this Warrant for all of the then-remaining Warrant Shares in a
Cashless Exercise in accordance with Section 1 hereof (a “Mandatory Exercise”).


 


(b)          Mechanics.
The Company may exercise its right to require exercise under this Section 17 on one occasion by delivering (provided that all of
the conditions set forth in clauses (i) and (ii) above are then satisfied), on the first (1st)
Trading Day immediately following the end of the Mandatory Exercise Measuring Period, a written notice thereof by facsimile and
overnight courier to the Holder (the “Mandatory Exercise Notice” and the date the Holder receives such notice
by facsimile is referred to as the “Mandatory Exercise Notice Date”). The Mandatory Exercise Notice shall be
irrevocable. The Mandatory Exercise Notice shall (1) state the Trading Day selected for the Mandatory Exercise in accordance with
this Section 17, which Trading Day shall be at least ten (10) Trading Days but not more than sixty (60) Trading Days following
the Mandatory Exercise Notice Date (the “Mandatory Exercise Date”), (2) state the number of shares of Common
Stock to be issued to the Holder on the Mandatory Exercise Date (subject to any adjustments thereto pursuant to Section 2 that
may occur prior to the Mandatory Exercise Date), (3) contain a certification from the Chief Executive Officer of the Company that
there is then no Equity Conditions Failure and (4) contain a certification from the Chief Executive Officer of the Company that
the Company has simultaneously taken the same action with respect to all of the Warrants. Any portion of this Warrant exercised
by the Holder after the Mandatory Exercise Notice Date shall reduce the number of Warrant Shares for which this Warrant is required
to be exercised on the Mandatory Exercise Date. If the Company has elected a Mandatory Exercise, the mechanics of exercise set
forth in Section 1 shall apply, to the extent applicable, as if the Company had received from the Holder on the Mandatory Exercise
Date an Exercise Notice with respect to all of the then-remaining Warrant Shares. Notwithstanding anything contained in this Section
17 to the contrary, if (I) any daily VWAP of the Common Stock is less than the Trigger Price on any day during the period commencing
on the Mandatory Exercise Notice Date and ending on the Trading Day immediately preceding the Mandatory Exercise Date; or (II)
an Equity Conditions Failure occurs on any day during the period commencing on the Mandatory Exercise Notice Date and ending on
the Mandatory Exercise Date which has not been waived in writing by the Holder, then, in either case, the Mandatory Exercise Notice
delivered to the Holder shall be null and void ab initio and the Mandatory Exercise shall not occur. If the Company elects to cause
a Mandatory Exercise of this Warrant pursuant to this Section 17, then it must simultaneously take the same action with respect
to all of the other Warrants.


 


[signature page follows]


 




    	23



    	 



    

 


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


 


	 	Vuzix Corporation
	 	 	 
	 	By:	 
	 	 	Name:
	 	 	Title:


 




    	24



    	 



    

 


EXHIBIT A


 


EXERCISE
NOTICE


 


TO
BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK


 


VUZIX CORPORATION


 


The undersigned holder
hereby exercises the right to purchase _________________ of the shares of Common Stock (“Warrant Shares”) of
Vuzix Corporation, a Delaware corporation (the “Company”), evidenced by Warrant to Purchase Common Stock No. _______
(the “Warrant”). Capitalized terms used herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.


 


1.          Form
of Exercise Price. The Holder intends that payment of the Exercise Price shall be made as:


 


		____________  a 	“Cash Exercise” with respect to _________________ Warrant Shares; and/or



 


		____________  a	“Cashless Exercise” with respect to _______________ Warrant Shares, resulting
in a delivery obligation by the Company to the Holder of __________ shares of Common Stock representing the applicable Net Number
and, if applicable, Adjusted Net Number, subject to adjustment.



 


2.          Cashless
Exercise Adjustment. Check if applicable: __________


 


The Holder hereby notifies the Company
that the Holder has previously delivered the Exercise Notice(s) attached hereto as Schedule I for Cashless Exercise.


 


As the applicable Net Number and/or Adjusted
Net Number has changed since the time of delivery of such Exercise Notice(s):


 


Check if applicable:


 


		____________	The Company’s delivery obligation to the Holder with respect to such Exercise Notice(s),
in the aggregate, should be adjusted to __________ shares of Common Stock.



 


		____________	Due to the application of Section 1(f) of the Warrant, the
number of Warrant Shares of this Warrant to be exercised, with respect to such Exercise Notice(s),
in the aggregate, was automatically reduced to ________, Warrant Shares, resulting in a delivery
obligation by the Company to the Holder of __________ shares of Common Stock representing the applicable Net Number and, if applicable,
Adjusted Net Number,.



 




    	 



    	 



    

 


3.          Payment
of Exercise Price. In the event that the Holder has elected a Cash Exercise with respect to some or all of the Warrant Shares
to be issued pursuant hereto, the Holder shall pay the Aggregate Exercise Price in the sum
of $___________________ to the Company in accordance with the terms of the Warrant.


 


4.          Delivery
of Warrant Shares. The Company shall deliver to Holder, or its designee or agent as specified below, __________ Warrant
Shares in accordance with the terms of the Warrant. Delivery shall be made to Holder, or for its benefit, to the following address:


 


	 	 	 
	 	 	 
	 	 	 


 


	Date: _____________ __, ____	 
	 	 
	____________________	 
	Name of Registered Holder	 


 


	By:  	 	 
	 	Name:	 
	 	Title:	 


 




    	 



    	 



    

 


EXHIBIT B


 


ACKNOWLEDGMENT


 


The
Company hereby acknowledges this Exercise Notice and hereby directs ______________ to issue the above indicated
number of shares of Common Stock in accordance with the Transfer Agent Instructions dated _________, 20__, from the Company and
acknowledged and agreed to by _______________.


 


	 	Vuzix Corporation
	 	 	 	 
	 	By:	 	 
	 	 	Name: 	 
	 	 	Title: