Document:

Exhibit
10.01

 

SECURITIES
PURCHASE AGREEMENT

 

This SECURITIES
PURCHASE AGREEMENT (the “Agreement”), dated as of December 4, 2012, is by and among WPCS International Incorporated,
a Delaware corporation with offices located at One East Uwchlan Avenue, Suite 301, Exton, Pennsylvania 19341 (the ”Company”),
and each of the investors listed on the Schedule of Buyers attached hereto (individually, a “Buyer” and collectively,
the “Buyers”).

 

RECITALS

 

A.The Company and
each Buyer is executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section
4(a)(2) of the Securities Act of 1933, as amended (the “1933 Act”), and Rule 506 of Regulation D (“Regulation D”)
as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the 1933 Act.

 

B.The Company has
authorized the issuance of senior secured convertible notes, in the aggregate amount of $4,000,000, in the form attached hereto
as Exhibit A (the “Notes”), which Notes shall be convertible into shares of the Company’s
common stock, $0.0001 par value per share (the “Common Stock”) (as converted, collectively, the “Conversion
Shares”), in accordance with the terms of the Notes.

 

C.Each Buyer wishes
to purchase, and the Company wishes to sell, upon the terms and conditions stated in this Agreement, (i) a Note in the aggregate
original principal amount set forth opposite such Buyer’s name in column (3) on the Schedule of Buyers and (ii) a warrant
to acquire up to that aggregate number of additional shares of Common Stock set forth opposite such Buyer’s name in column
(4) on the Schedule of Buyers, in the form attached hereto as Exhibit B (the “Warrants”) (as exercised,
collectively, the “Warrant Shares”).

 

D.The Notes are
entitled to interest, amortization payments and certain other amounts, which, at the option of the Company and subject to certain
conditions, may be paid in shares of Common Stock (the “Interest Shares”) or in cash.

 

E.At the Closing,
the parties hereto shall execute and deliver a Registration Rights Agreement, in the form attached hereto as Exhibit C
(the “Registration Rights Agreement”), pursuant to which the Company has agreed to provide certain registration
rights with respect to the Registrable Securities (as defined in the Registration Rights Agreement), under the 1933 Act and the
rules and regulations promulgated thereunder, and applicable state securities laws.

 

F.The Notes, the
Conversion Shares, the Interest Shares, the Warrants and the Warrant Shares are collectively referred to herein as the “Securities.”

 

G.The Notes will
be secured by a first priority perfected security interest in all of the assets of the Company and its direct and indirect Subsidiaries
(as defined below), including a pledge of all of the capital stock of each of the Company’s U.S. Subsidiaries, a 66% pledge
of the capital stock of each of the Company’s Australia Subsidiaries and a 60% pledge of the capital stock of WPCS Asia Ltd
(“WPCS Asia”), (i) as evidenced by (i) a security agreement as each of the Buyers shall require in form and
substance acceptable to each Buyer (the “Security Agreement”), (ii) a blocked account(s) agreement and a securities
account control agreement with respect to certain accounts described in the Security Agreement, in form and substance acceptable
to each Buyer, duly executed by the Company and the depositary bank (each, an “Account Control Bank”) in which
such account is maintained (the “Account Control Agreements”, and together with the Security Agreement and the
other security documents and agreements entered into in connection with this Agreement and each of such other documents and agreements,
as each may be amended or modified from time to time, collectively, the “Company Security Documents”) and (iii)
a guaranty executed by each U.S. Subsidiary of the Company (as may be amended or modified from time to time, the “Guaranties”,
and together with the Company Security Documents, the “Security Documents”) in favor of each Buyer pursuant
to which each of them will guarantee the obligations of the Company under the Transaction Documents (as defined below).

 

    	 

    	 

    
 

H.The Buyers desire
to appoint Worldwide Stock Transfer LLC as collateral agent with respect to the Collateral (as defined in the Security Agreement)
(in such capacity, the “Collateral Agent”) pursuant to a Collateral Agency Agreement, in form and substance
acceptable to each Buyer (as amended or modified from time to time, the “Collateral Agency Agreement”).

 

AGREEMENT

 

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

 

1.PURCHASE AND
SALE OF NOTES AND WARRANTS.

 

(a)Notes
and Warrants. Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below, the Company
shall issue and sell to each Buyer, and each Buyer severally, but not jointly, shall purchase from the Company on the Closing
Date (as defined below), a Note in the original principal amount as is set forth opposite such Buyer’s name in column
(3) on the Schedule of Buyers along with Warrants to acquire up to that aggregate number of Warrant Shares as is set forth
opposite such Buyer’s name in column (4) on the Schedule of Buyers.

 

(b)Closing.
The closing (the “Closing”) of the purchase of the Notes and the Warrants by the Buyers shall occur at
the offices of Greenberg Traurig, LLP, MetLife Building, 200 Park Avenue, New York, NY 10166. The date and time of the
Closing (the “Closing Date”) shall be 10:00 a.m., New York time, on the first (1st) Business
Day on which the conditions to the Closing set forth in Sections 6 and 7 below are satisfied or waived (or such later
date as is mutually agreed to by the Company and each Buyer). As used herein “Business Day” means any day
other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law
to remain closed.

 

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(c)Purchase
Price. The aggregate purchase price for the Notes and the Warrants to be purchased by each Buyer (the “Purchase Price”)
shall be the amount set forth opposite such Buyer’s name in column (5) on the Schedule of Buyers.

 

(d)Form
of Payment. On the Closing Date, (i) each Buyer shall pay its respective Purchase Price (less, in the case of any Buyer, the
amounts withheld pursuant to Section 4(g)) to the Company for the Notes and the Warrants to be issued and sold to such Buyer
at the Closing, by wire transfer of immediately available funds in accordance with the Flow of Funds Letter (as defined below)
and (ii) the Company shall deliver to each Buyer (A) a Note in the aggregate original principal amount as is set forth opposite
such Buyer’s name in column (3) on the Schedule of Buyers and (B) a Warrant pursuant to which such Buyer shall have the
right to acquire up to such aggregate number of Warrant Shares as is set forth opposite such Buyer’s name in column (4)
on the Schedule of Buyers, in all cases, duly executed on behalf of the Company and registered in the name of such Buyer or its
designee.

 

2.BUYER’S
REPRESENTATIONS AND WARRANTIES.

 

Each Buyer, severally
and not jointly, represents and warrants to the Company with respect to only itself that, as of the date hereof and as of the Closing
Date:

 

(a)Organization;
Authority. Such Buyer is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction
of its organization with the requisite power and authority to enter into and to consummate the transactions contemplated by the
Transaction Documents (as defined below) to which it is a party and otherwise to carry out its obligations hereunder and thereunder.

 

(b)No
Public Sale or Distribution. Such Buyer (i) is acquiring its Note and Warrants, (ii) may acquire the Interest Shares in accordance
with the terms of the Notes, (iii) upon conversion of its Note will acquire the Conversion Shares issuable upon conversion thereof,
and (iv) upon exercise of its Warrants will acquire the Warrant Shares issuable upon exercise thereof, in each case, for
its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof in violation
of applicable securities laws, except pursuant to sales registered or exempted under the 1933 Act; provided, however, by making
the representations herein, such Buyer does not agree, or make any representation or warranty, to hold any of the Securities for
any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant
to a registration statement or an exemption under the 1933 Act. Such Buyer is acquiring the Securities hereunder in the ordinary
course of its business. Such Buyer does not presently have any agreement or understanding, directly or indirectly, with any Person
to distribute any of the Securities in violation of applicable securities laws.

 

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

 

(d)Reliance
on Exemptions. Such 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 in part
upon the truth and accuracy of, and such Buyer’s compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such Buyer set forth herein in order to determine the availability of such exemptions and the eligibility
of such Buyer to acquire the Securities.

 

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(e)Information.
Such Buyer and its advisors, if any, 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 such Buyer. Such Buyer
and its advisors, if any, have been afforded the opportunity to ask questions of the Company. Such Buyer understands that its
investment in the Securities involves a high degree of risk. Such Buyer has sought such accounting, legal and tax advice as it
has considered necessary to make an informed investment decision with respect to its acquisition of the Securities.

 

(f)No
Governmental Review. Such 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 or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.

 

(g)Transfer
or Resale. Such Buyer understands that except as provided in the Registration Rights Agreement and Section 4(h) hereof:
(i) the Securities have not been and are not being registered under the 1933 Act or any state securities laws, and may not be
offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) such Buyer shall have
delivered to the Company (if requested by the Company) an opinion of counsel to such Buyer, in a form reasonably acceptable
to the Company, to the effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred
pursuant to an exemption from such registration, or (C) such Buyer provides the Company with reasonable assurance that such
Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act (or a
successor rule thereto) (collectively, “Rule 144”); (ii) any sale of the Securities made in reliance on
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
the Securities under circumstances in which the seller (or the Person (as defined below) through whom the sale is made) may
be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption
under the 1933 Act or the rules and regulations of the SEC promulgated thereunder; and (iii) neither the Company nor any
other Person is under any obligation to register the Securities under the 1933 Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder.

 

(h)Validity;
Enforcement. This Agreement, the Collateral Agency Agreement and the Registration Rights Agreement have been duly and validly
authorized, executed and delivered on behalf of such Buyer and constitutes the legal, valid and binding obligations of such Buyer
enforceable against such Buyer in accordance with their respective terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating
to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

 

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(i)No
Conflicts. The execution, delivery and performance by such Buyer of this Agreement, the Collateral Agency Agreement and the
Registration Rights Agreement and the consummation by such Buyer of the transactions contemplated hereby and thereby will not
(i) result in a violation of the organizational documents of such Buyer, (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which such Buyer is a party, or (iii) result in a violation
of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to such Buyer,
except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually
or in the aggregate, reasonably be expected to have a material adverse effect on the ability of such Buyer to perform its obligations
hereunder.

 

(j)Residency.
Such Buyer is a resident of the jurisdiction specified below its address on the Schedule of Buyers.

 

(k)Certain
Trading Activities. Such Buyer has not directly or indirectly, nor has any Person
acting on behalf of or pursuant to any understanding with such Buyer, engaged in any transactions in the securities of the Company
(including, without limitation, any Short Sales (as defined below) involving the Company’s securities) during the period
commencing as of the time that such Buyer was first contacted regarding the specific investment in the Company contemplated by
this Agreement and ending immediately prior to the execution of this Agreement by such Buyer (it being understood and agreed that
for all purposes of this Agreement, and, without implication that the contrary would otherwise be true, that neither transactions
nor purchases nor sales shall include the location and/or reservation of borrowable shares of Common
Stock). “Short Sales” means all “short sales” as defined in Rule 200 promulgated under Regulation
SHO under the Securities Exchange Act of 1934, as amended (the “1934 Act”).

 

(l)Experience
of Such Buyer. Such Buyer, either alone or together with its representatives, has
such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. Such Buyer
is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss
of such investment.

 

(m)Not
a 10% Owner. Such Buyer is not a “beneficial owner” of more than 10% of
the shares of Common Stock (as defined for purposes of Rule 13d-3 of the 1934 Act).

 

3.REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.

 

The Company represents
and warrants to each of the Buyers that, as of the date hereof and as of the Closing Date:

 

(a)Organization
and Qualification. Each of the Company and each of its Subsidiaries are entities duly organized and validly existing and
in good standing under the laws of the jurisdiction in which they are formed, and have the requisite power and authorization
to own their properties and to carry on their business as now being conducted and as presently proposed to be conducted. Each
of the Company and each of its Subsidiaries is duly qualified as a foreign entity to do business and is in good standing in
every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse
Effect. As used in this Agreement, “Material Adverse Effect” means any material adverse effect on (i) the
business, properties, assets, liabilities, operations (including results thereof), condition (financial or otherwise) or
prospects of the Company and its Subsidiaries, taken as a whole, (ii) the transactions contemplated hereby or in any of the
other Transaction Documents or (iii) the authority or ability of the Company or any of its Subsidiaries to perform any of
their respective obligations under any of the Transaction Documents (as defined below). Other than the Persons (as defined
below) set forth on Schedule 3(a) the Company has no Subsidiaries. “Subsidiaries” means any Person in
which the Company, directly or indirectly, (I) owns a majority of the outstanding capital stock or holds a majority of 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 each of the foregoing, is individually referred to herein as a “Subsidiary.”

 

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(b)Authorization;
Enforcement; Validity. Subject to the Stockholder Approval, the Company has the requisite power and authority to enter into
and perform its obligations under this Agreement and the other Transaction Documents and to issue the Securities in accordance
with the terms hereof and thereof. Each Subsidiary has the requisite power and authority to enter into and perform its obligations
under the Transaction Documents to which it is a party. The execution and delivery of this Agreement and the other Transaction
Documents by the Company and its Subsidiaries, and the consummation by the Company and its Subsidiaries of the transactions contemplated
hereby and thereby (including, without limitation, the issuance of the Notes and the reservation for issuance and issuance of
the Conversion Shares issuable upon conversion of the Notes and the reservation for issuance and issuance any Interest Shares
issuable pursuant to the terms of the Notes and the issuance of the Warrants and the reservation for issuance and issuance of
the Warrant Shares issuable upon exercise of the Warrants) have been duly authorized by the Company’s board of directors
and each of its U.S. Subsidiaries’ board of directors or other governing body, as applicable, and, other than, the Stockholder
Approval (as defined below), the filing with the SEC of one or more Registration Statements in accordance with the requirements
of the Registration Rights Agreement, the 8-K Filing (as defined below), a Form D with the SEC and any other filings as may be
required by any state securities agencies (collectively, the “Required Approvals”)) no further filing, consent
or authorization is required by the Company, its Subsidiaries, their respective boards of directors or their stockholders or other
governing body. This Agreement has been, and the other Transaction Documents to which it is a party will be prior to the Closing,
duly executed and delivered by the Company, and each constitutes the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with its respective terms, except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting
generally, the enforcement of applicable creditors’ rights and remedies and except as rights to indemnification and to contribution
may be limited by federal or state securities law and public policy, and the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding
therefor may be brought. Prior to the Closing, the Transaction Documents to which each Subsidiary is a party will be duly executed
and delivered by each such Subsidiary, and shall constitute the legal, valid and binding obligations of each such Subsidiary,
enforceable against each such Subsidiary in accordance with their respective terms, except as such enforceability may be limited
by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies and except as rights to
indemnification and to contribution may be limited by federal or state securities law. “Transaction Documents”
means, collectively, this Agreement, the Notes, the Warrants, the Collateral Agency Agreement, the Guaranties, the Security Documents,
the Registration Rights Agreement, the Irrevocable Transfer Agent Instructions (as defined below) and each of the other agreements
and instruments entered into or delivered by any of the parties hereto in connection with the transactions contemplated hereby
and thereby, as may be amended from time to time.

 

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(c)Issuance
of Securities. The issuance of the Notes and the Warrants are duly authorized and upon issuance in accordance with the terms
of the Transaction Documents shall be validly issued, fully paid and non-assessable and free from all preemptive or similar rights,
taxes, liens, charges and other encumbrances with respect to the issue thereof. As of the Closing, the Company shall have reserved
from its duly authorized capital stock not less than (i) 100% of the maximum number of Conversion Shares initially issuable upon
conversion of the Notes (assuming for purposes hereof that the Notes are convertible at the initial Conversion Price (as defined
in the Notes) and without taking into account any limitations on the conversion of the Notes set forth in the Notes), (ii) 100%
of the maximum number of Interest Shares initially issuable pursuant to the terms of the Notes from the Closing Date through the
eighteen month anniversary of the Closing Date (determined as if issued on the Trading Day (as defined in the Notes) immediately
preceding the Closing Date without taking into account any limitations on the issuance of securities set forth in the Notes) and
(iii) 36.4% of the maximum number of Warrant Shares initially issuable upon exercise of the Warrants (without taking into account
any limitations on the exercise of the Warrants set forth therein). Subject to Stockholder Approval, upon issuance or conversion
in accordance with the Notes or exercise in accordance with the Warrants (as the case may be), the Conversion Shares, the Interest
Shares and the Warrant Shares, respectively, when issued, will be validly issued, fully paid and nonassessable and free from all
preemptive or similar rights, taxes, liens, charges and other encumbrances with respect to the issue thereof, with the holders
being entitled to all rights accorded to a holder of Common Stock. Subject to the accuracy of the representations and warranties
of the Buyers in this Agreement, the offer and issuance by the Company of the Securities is exempt from registration under the
1933 Act.

 

(d)No
Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and its Subsidiaries and the
consummation by the Company and its Subsidiaries of the transactions contemplated hereby and thereby (including, without limitation,
the issuance of the Notes, the Warrants, the Conversion Shares, the Interest Shares and Warrant Shares and the reservation for
issuance of the Conversion Shares, the Interest Shares and the Warrant Shares) will not (i) result in a violation of the Certificate
of Incorporation (as defined below) or other organizational documents of the Company or any of its Subsidiaries, any capital stock
of the Company or any of its Subsidiaries or Bylaws (as defined below) of the Company or any of its Subsidiaries, (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its Subsidiaries is a party, or (iii) subject to the Required Approvals, result in a violation of any law,
rule, regulation, order, judgment or decree (including foreign, federal and state securities laws and regulations and the rules
and regulations of the Nasdaq Capital Market (the “Principal Market”) and including all applicable federal
laws, rules and regulations) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company
or any of its Subsidiaries is bound or affected except, in the case of clause (ii) or (iii) above, to the extent such violations
that would not reasonably be expected to have a Material Adverse Effect.

 

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(e)Consents.
Neither the Company nor any Subsidiary is required to obtain any consent from, authorization or order of, or make any filing or
registration with (other than the Required Approvals), any Governmental Entity (as defined below) or any regulatory or self-regulatory
agency or any other Person in order for it to execute, deliver or perform any of its respective obligations under or contemplated
by the Transaction Documents, in each case, in accordance with the terms hereof or thereof. All consents, authorizations, orders,
filings and registrations which the Company or any Subsidiary is required to obtain at or prior to the Closing have been obtained
or effected on or prior to the Closing Date, and neither the Company nor any of its Subsidiaries are aware of any facts or circumstances
which might prevent the Company or any of its Subsidiaries from obtaining or effecting any of the registration, application or
filings contemplated by the Transaction Documents. Except as set forth on Schedule 3(e), the Company is not in violation of the
requirements of the Principal Market and has no knowledge of any facts or circumstances which could reasonably lead to delisting
or suspension of the Common Stock in the foreseeable future. “Governmental Entity” means any nation, state,
county, city, town, village, district, or other political jurisdiction of any nature, federal, state, local, municipal, foreign,
or other government, governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department,
official, or entity and any court or other tribunal), multi-national organization or body; or body exercising, or entitled to
exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature.

 

(f)Acknowledgment
Regarding Buyer’s Purchase of Securities. The Company acknowledges and agrees that each Buyer is acting solely in the
capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated hereby
and thereby and that no Buyer is (i) an officer or director of the Company or any of its Subsidiaries, (ii) an “affiliate”
(as defined in Rule 144) of the Company or any of its Subsidiaries or (iii) to its knowledge, a “beneficial owner”
of more than 10% of the shares of Common Stock (as defined for purposes of Rule 13d-3 of the 1934 Act. The Company further acknowledges
that no Buyer is acting as a financial advisor or fiduciary of the Company or any of its Subsidiaries (or in any similar capacity)
with respect to the Transaction Documents and the transactions contemplated hereby and thereby, and any advice given by a Buyer
or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby
and thereby is merely incidental to such Buyer’s purchase of the Securities. The Company further represents to each Buyer
that the Company’s and each Subsidiary’s decision to enter into the Transaction Documents to which it is a party has
been based solely on the independent evaluation by the Company, each Subsidiary and their respective representatives.

 

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(g)No
General Solicitation; Placement Agent’s Fees. Neither the Company, nor any of its Subsidiaries or affiliates, nor any
Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning
of Regulation D) in connection with the offer or sale of the Securities. The Company shall be responsible for the payment of any
placement agent’s fees, financial advisory fees, or brokers’ commissions (other than for Persons engaged by any Buyer
or its investment advisor) relating to or arising out of the transactions contemplated hereby. Except for Max Communications (the
“Placement Agent”), neither the Company nor any of its Subsidiaries has engaged any placement agent or other
agent in connection with the offer or sale of the Securities.

 

(h)No
Integrated Offering. None of the Company, its Subsidiaries or any of their affiliates, nor, to the knowledge of the Company,
any Person acting on their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers
to buy any security, under circumstances that would require registration of the issuance of any of the Securities under the 1933
Act, whether through integration with prior offerings or otherwise, or cause this offering of the Securities to require approval
of stockholders of the Company under any applicable stockholder approval provisions, including, without limitation, under the
rules and regulations of any exchange or automated quotation system on which any of the securities of the Company are listed or
designated for quotation. None of the Company, its Subsidiaries, their affiliates nor, to the knowledge of the Company, any Person
acting on their behalf will take any action or steps that would require registration of the issuance of any of the Securities
under the 1933 Act or cause the offering of any of the Securities to be integrated with other offerings of securities of the Company.

 

(i)Dilutive
Effect. The Company understands and acknowledges that the number of Conversion Shares, Interest Shares and Warrant Shares
may increase in certain circumstances. The Company further acknowledges that its obligation to issue the Conversion Shares upon
conversion of the Notes in accordance with this Agreement and the Notes, the Interest Shares in accordance with this Agreement
and the Notes and the Warrant Shares upon exercise of the Warrants in accordance with this Agreement and the Warrants is, absolute
and unconditional (subject to any limitations on conversion or exercise as set forth in the Notes and in the Warrants, respectively)
regardless of the dilutive effect that such issuance may have on the ownership interests of other stockholders of the Company.

 

(j)Application
of Takeover Protections; Rights Agreement. At or prior to Closing, the Company and its board of directors shall have taken
all necessary action, if any, in order to render inapplicable any control share acquisition, interested stockholder, business
combination, poison pill (including, without limitation, any distribution under a rights agreement) or other similar anti-takeover
provision under the Certificate of Incorporation, Bylaws or other organizational documents or the laws of the jurisdiction of
its incorporation or otherwise which is or could become applicable to any Buyer as a result of the transactions contemplated by
this Agreement, including, without limitation, the Company’s issuance of the Securities and any Buyer’s ownership
of the Securities. At or prior to Closing, the Company and its board of directors shall have taken all necessary action, if any,
in order to render inapplicable any stockholder rights plan or similar arrangement relating to accumulations of beneficial ownership
of shares of Common Stock or a change in control of the Company or any of its Subsidiaries.

 

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(k)SEC
Documents; Financial Statements. During the two (2) years prior to the date hereof, the Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act (all of the foregoing filed prior to the date hereof and all exhibits included therein and
financial statements, notes and schedules thereto and documents incorporated by reference therein being hereinafter referred
to as the “SEC Documents”). The Company has delivered to the Buyers or their respective representatives
true, correct and complete copies of each of the SEC Documents not available on the EDGAR system. As of their respective
dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time
they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they
were made, not misleading. As of their respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto as in effect as of the time of filing. Such financial statements have been
prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in
all material respects the financial position of the Company as of the dates thereof and the results of its operations and
cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments which will not be material, either individually or in the aggregate). No other information provided by or on
behalf of the Company to any of the Buyers which is not included in the SEC Documents (including, without limitation,
information referred to in Section 2(e) of this Agreement) contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements therein not misleading, in the light of the circumstance
under which they are or were made.

 

(l)Absence
of Certain Changes. Since the date of the Company’s most recent audited financial statements contained in a Form 10-K
except as disclosed in the SEC Documents filed subsequent to such Form 10-K, there has been no material adverse change and no
material adverse development in the business, assets, liabilities, properties, operations (including results thereof), condition
(financial or otherwise) or prospects of the Company and its Subsidiaries taken as a whole. Since the date of the Company’s
most recent audited financial statements contained in a Form 10-K except as disclosed in the SEC Documents filed subsequent to
such Form 10-K, neither the Company nor any of its Subsidiaries has (i) declared or paid any dividends, (ii) sold any assets,
individually or in the aggregate, outside of the ordinary course of business or (iii) made any material capital expenditures,
individually or in the aggregate, outside the ordinary course of business. Neither the Company nor any of its Subsidiaries has
taken any steps to seek protection pursuant to any law or statute relating to bankruptcy, insolvency, reorganization, receivership,
liquidation or winding up, nor does the Company or any Subsidiary have any knowledge or reason to believe that any of their respective
creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead
a creditor to do so. The Company and its Subsidiaries, on a consolidated basis, are not as of the date hereof, and after giving
effect to the transactions contemplated hereby to occur at the Closing, will not be Insolvent (as defined below). For purposes
of this Section 3(l), “Insolvent” means, with respect to the Company and its Subsidiaries, on a consolidated
basis, (i) the present fair saleable value of the Company’s and its Subsidiaries’ assets is less than the amount required
to pay the Company’s and its Subsidiaries’ total Indebtedness (as defined below), (ii) the Company and its Subsidiaries
are unable to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute
and matured or (iii) the Company and its Subsidiaries intend to incur or believe that they will incur debts that would be beyond
their ability to pay as such debts mature. Neither the Company nor any of its Subsidiaries has engaged in any business or in any
transaction, and is not about to engage in any business or in any transaction, for which the Company’s or such Subsidiary’s
remaining assets constitute unreasonably small capital.

 

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(m)No
Undisclosed Events, Liabilities, Developments or Circumstances. Except as disclosed in the SEC Documents, no event, liability,
development or circumstance has occurred or exists, or is reasonably expected to exist or occur with respect to the Company, any
of its Subsidiaries or any of their respective businesses, properties, liabilities, prospects, operations (including results thereof)
or condition (financial or otherwise), that (i) would be required to be disclosed by the Company under applicable securities laws
on a registration statement on Form S-1 filed with the SEC relating to an issuance and sale by the Company of its Common Stock
and which has not been publicly announced, (ii) could have a material adverse effect on any Buyer’s investment hereunder
or (iii) could have a Material Adverse Effect.

 

(n)Conduct
of Business; Regulatory Permits. Neither the Company nor any of its Subsidiaries is in violation of any term of or in default
under its Certificate of Incorporation, any certificate of designation, preferences or rights of any other outstanding series
of preferred stock of the Company or any of its Subsidiaries or Bylaws or their organizational charter, certificate of formation
or certificate of incorporation or bylaws, respectively. Except as disclosed in the SEC Documents, neither the Company nor any
of its Subsidiaries is in violation of any judgment, decree or order or any statute, ordinance, rule or regulation applicable
to the Company or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries will conduct its business in violation
of any of the foregoing, except in all cases for possible violations which could not, individually or in the aggregate, have a
Material Adverse Effect. Except as set forth on Schedule 3(n), without limiting the generality of the foregoing, the Company is
not in violation of any of the rules, regulations or requirements of the Principal Market and has no knowledge of any facts or
circumstances that could reasonably lead to delisting or suspension of the Common Stock by the Principal Market in the foreseeable
future. Since January 1, 2009, (i) the Common Stock has been listed or designated for quotation on the Principal Market or the
Nasdaq Global Market, (ii) trading in the Common Stock has not been suspended by the SEC or the Principal Market and (iii) except
as disclosed in the SEC Documents, the Company has received no communication, written or oral, from the SEC or the Principal Market
regarding the suspension or delisting of the Common Stock from the Principal Market. The Company and each of its Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate regulatory authorities necessary to conduct their
respective businesses, except where the failure to possess such certificates, authorizations or permits would not have, individually
or in the aggregate, a Material Adverse Effect, and neither the Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such certificate, authorization or permit.

 

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

 

(p)Sarbanes-Oxley
Act. The Company and each Subsidiary is in material compliance with all applicable requirements of the Sarbanes-Oxley Act
of 2002 that are effective as of the date hereof, and all applicable rules and regulations promulgated by the SEC thereunder that
are effective as of the date hereof.

 

(q)Transactions
With Affiliates. Except as disclosed in the SEC Documents, none of the officers, directors or employees of the Company or
any of its Subsidiaries is presently a party to any transaction with the Company or any of its Subsidiaries (other than for ordinary
course services as employees, officers or directors), including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments
to or from any such officer, director or employee or, to the knowledge of the Company or any of its Subsidiaries, any corporation,
partnership, trust or other Person in which any such officer, director, or employee has a substantial interest or is an employee,
officer, director, trustee or partner.

 

(r)Equity
Capitalization. As of the date hereof, the authorized capital stock of the Company consists of (i) 25,000,000 shares of
Common Stock, of which, 6,954,766 are issued and outstanding and 990,074 shares are reserved for issuance pursuant to
securities (other than the Notes and the Warrants) exercisable or exchangeable for, or convertible into, shares of Common
Stock and (ii) 5,000,000 shares of preferred stock, none of which are issued and outstanding. No shares of Common Stock are
held in treasury. All of such outstanding shares are duly authorized and have been, or upon issuance will be, validly issued
and are fully paid and nonassessable. To the Company’s knowledge, 1,061,567 shares of the Company’s issued and
outstanding Common Stock on the date hereof are owned by Persons who are “affiliates” (as defined in Rule 405 of
the 1933 Act and calculated based on the assumption that only executive officers, directors and holders of at least 10% of
the Company’s issued and outstanding Common Stock are “affiliates” without conceding that any such Persons
are “affiliates” for purposes of federal securities laws) of the Company or any of its Subsidiaries. Except as
disclosed in the SEC Documents, to the Company’s knowledge, no Person owns 10% or more of the Company’s issued
and outstanding shares of Common Stock (calculated based on the assumption that all Convertible Securities (as defined
below), whether or not presently exercisable or convertible, have been fully exercised or converted (as the case
may be) taking account of any limitations on exercise or conversion (including “blockers”) contained therein
without conceding that such identified Person is a 10% stockholder for purposes of federal securities laws). (i) None of the
Company’s or any Subsidiary’s capital stock is subject to preemptive rights or any other similar rights or any
liens or encumbrances suffered or permitted by the Company or any Subsidiary; (ii) except as disclosed in
Schedule 3(r) (iii), there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any
capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue additional capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating
to, or securities or rights convertible into, or exercisable or exchangeable for, any capital stock of the Company or any of
its Subsidiaries; (iii) except as disclosed in Schedule 3(r) (iii), there are no outstanding debt securities, notes,
credit agreements, credit facilities or other agreements, documents or instruments evidencing Indebtedness of the Company or
any of its Subsidiaries or by which the Company or any of its Subsidiaries is or may become bound; (iv) there are no
financing statements securing obligations in any amounts filed in connection with the Company or any of its Subsidiaries; (v)
there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale
of any of their securities under the 1933 Act (except pursuant to the Registration Rights Agreement); (vi) there are no
outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries; (vii) there are no
securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of
the Securities; (viii) neither the Company nor any Subsidiary has any stock appreciation rights or “phantom
stock” plans or agreements or any similar plan or agreement; and (ix) neither the Company nor any of its Subsidiaries
have any liabilities or obligations required to be disclosed in the SEC Documents which are not so disclosed in the SEC
Documents, other than those incurred in the ordinary course of the Company’s or its Subsidiaries’ respective
businesses and which, individually or in the aggregate, do not or could not have a Material Adverse Effect. The Company has
furnished to the Buyers true, correct and complete copies of the Company’s Certificate of Incorporation, as amended and
as in effect on the date hereof (the “Certificate of Incorporation”), and the Company’s bylaws, as
amended and as in effect on the date hereof (the “Bylaws”), and the terms of all securities convertible
into, or exercisable or exchangeable for, shares of Common Stock and the material rights of the holders thereof in respect
thereto.

 

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(s)Indebtedness
and Other Contracts. Neither the Company nor any of its Subsidiaries, (i) except as disclosed on Schedule 3(s), has any
outstanding Indebtedness (as defined below), (ii) is a party to any contract, agreement or instrument, the violation of which,
or default under which, by the other party(ies) to such contract, agreement or instrument could reasonably be expected to result
in a Material Adverse Effect, (iii) is in violation of any term of, or in default under, any contract, agreement or instrument
relating to any Indebtedness, except where such violations and defaults would not result, individually or in the aggregate, in
a Material Adverse Effect, or (iv) is a party to any contract, agreement or instrument relating to any Indebtedness, the performance
of which, in the judgment of the Company’s officers, has or is expected to have a Material Adverse Effect. For purposes
of this Agreement: (x) “Indebtedness” of any Person means, without duplication (A) all indebtedness for borrowed
money, (B) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (including, without
limitation, “capital leases” in accordance with generally accepted accounting principles) (other than trade payables
entered into in the ordinary course of business), (C) all reimbursement or payment obligations with respect to letters of credit,
surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness
created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with
respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (F) all monetary
obligations under any leasing or similar arrangement which, in connection with generally accepted accounting principles, consistently
applied for the periods covered thereby, is classified as a capital lease, (G) all indebtedness referred to in clauses (A) through
(F) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any mortgage, claim, lien, tax, right of first refusal, pledge, charge, security interest or other encumbrance upon or in
any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets
or property has not assumed or become liable for the payment of such indebtedness, and (H) all Contingent Obligations in respect
of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above; (y) “Contingent Obligation”
means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any indebtedness,
lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability,
or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole
or in part) against loss with respect thereto; and (z) “Person” means an individual, a limited liability company,
a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and any Governmental
Entity or any department or agency thereof.

 

    	13

    	 

    
 

(t)Absence
of Litigation. Except as disclosed in the SEC Documents, there is no action, suit, proceeding, inquiry or investigation before
or by the Principal Market, any court, public board, other Governmental Entity, self-regulatory organization or body pending or,
to the knowledge of the Company, threatened against or affecting the Company or any of its Subsidiaries, the Common Stock or any
of the Company’s or its Subsidiaries’ officers or directors which is outside of the ordinary course of business or
individually or in the aggregate material to the Company or any of its Subsidiaries. Without limitation of the foregoing, there
has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the SEC involving
the Company, any of its Subsidiaries or any current or former director or executive officer of the Company or any of its Subsidiaries.
The SEC has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company
under the 1933 Act or the 1934 Act.

 

(u)Insurance.
The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and
risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company
and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been refused any insurance coverage sought or
applied for, and neither the Company nor any such Subsidiary has any reason to believe that it will be unable to renew its existing
insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not have a Material Adverse Effect.

 

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(v)Employee
Relations. Except as disclosed in the SEC Documents, neither the Company nor any of its Subsidiaries is a party to any collective
bargaining agreement or employs any member of a union. The Company believes that its and its Subsidiaries’ relations with
their respective employees are good. No executive officer (as defined in Rule 501(f) promulgated under the 1933 Act) or other
key employee of the Company or any of its Subsidiaries has notified the Company or any such Subsidiary that such officer intends
to leave the Company or any such Subsidiary or otherwise terminate such officer’s employment with the Company or any such
Subsidiary. To the knowledge of the Company, no executive officer or other key employee of the Company or any of its Subsidiaries
is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary
information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued
employment of each such executive officer or other key employee (as the case may be) does not subject the Company or any of its
Subsidiaries to any liability with respect to any of the foregoing matters. The Company and its Subsidiaries are in compliance
with all federal, state, local and foreign laws and regulations respecting labor, employment and employment practices and benefits,
terms and conditions of employment and wages and hours, except where failure to be in compliance would not, either individually
or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

 

(w)Title.
The Company and its Subsidiaries have good and marketable title in fee simple to all real property and have good and marketable
title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case,
free and clear of all liens, encumbrances and defects except such as do not materially affect the value of such property and do
not interfere with the use made and proposed to be made of such property by the Company and any of its Subsidiaries. Any real
property and facilities held under lease by the Company or any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company or any of its Subsidiaries.

 

(x)Intellectual
Property Rights. The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks, trade
names, service marks, service mark registrations, service names, patents, patent rights, copyrights, original works, inventions,
licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights and all applications and
registrations therefor (“Intellectual Property Rights”) necessary to conduct their respective businesses as
now conducted and as presently proposed to be conducted. Except as disclosed on Schedule 3(x), none of the Company’s or
its Subsidiaries’ Intellectual Property Rights have expired, terminated or been abandoned, or are expected to expire, terminate
or be abandoned, within two years from the date of this Agreement. The Company has no knowledge of any infringement by the Company
or any of its Subsidiaries of Intellectual Property Rights of others. There is no claim, action or proceeding being made or brought,
or to the knowledge of the Company or any of its Subsidiaries, being threatened, against the Company or any of its Subsidiaries
regarding their Intellectual Property Rights. The Company is not aware of any facts or circumstances which might give rise to
any of the foregoing infringements or claims, actions or proceedings. The Company and each of its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of their Intellectual Property Rights, except where
failure to take such measures would not, either individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.

 

    	15

    	 

    
 

(y)Environmental
Laws. The Company and its Subsidiaries (i) are in compliance with all Environmental Laws (as defined below), (ii) have received
all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses
and (iii) are in compliance with all terms and conditions of any such permit, license or approval where, in each of the foregoing
clauses (i), (ii) and (iii), the failure to so comply could be reasonably expected to have, individually or in the aggregate,
a Material Adverse Effect. The term “Environmental Laws” means all federal, state, local or foreign laws relating
to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous
Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand
letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated
or approved thereunder.

 

(z)Subsidiary
Rights. Except as set forth on Schedule 3(z), the Company or one of its Subsidiaries has the unrestricted right to vote, and
(subject to limitations imposed by applicable law) to receive dividends and distributions on, all capital securities of its Subsidiaries
as owned by the Company or such Subsidiary.

 

(aa)Tax
Status. Except as set forth on Schedule 3(aa), the Company and each of its Subsidiaries (i) has timely made or filed all foreign,
federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject,
(ii) has timely paid all taxes and other governmental assessments and charges that are material in amount, shown or determined
to be due on such returns, reports and declarations, except those being contested in good faith and (iii) has set aside on its
books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns,
reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company and its Subsidiaries know of no basis for any such claim. The Company is not operated
in such a manner as to qualify as a passive foreign investment company, as defined in Section 1297 of the U.S. Internal Revenue
Code of 1986, as amended.

 

(bb)Internal
Accounting and Disclosure Controls. The Company and each of its Subsidiaries maintains internal control over financial reporting
(as such term is defined in Rule 13a-15(f) under the 1934 Act) that is effective to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles, including that (i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity
with generally accepted accounting principles and to maintain asset and liability accountability, (iii) access to assets or incurrence
of liabilities is permitted only in accordance with management’s general or specific authorization and (iv) the recorded
accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate
action is taken with respect to any difference. The Company maintains disclosure controls and procedures (as such term is defined
in Rule 13a-15(e) under the 1934 Act) that are effective in ensuring that information required to be disclosed by the Company
in the reports that it files or submits under the 1934 Act is recorded, processed, summarized and reported, within the time periods
specified in the rules and forms of the SEC, including, without limitation, controls and procedures designed to ensure that information
required to be disclosed by the Company in the reports that it files or submits under the 1934 Act is accumulated and communicated
to the Company’s management, including its principal executive officer or officers and its principal financial officer or
officers, as appropriate, to allow timely decisions regarding required disclosure. Neither the Company nor any of its Subsidiaries
has received any notice or correspondence from any accountant or other Person relating to any potential material weakness or significant
deficiency in any part of the internal controls over financial reporting of the Company or any of its Subsidiaries, that has not
been cured or otherwise resolved prior to the date hereof.

 

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(cc)Off
Balance Sheet Arrangements. There is no transaction, arrangement, or other relationship between the Company or any of its
Subsidiaries and an unconsolidated or other off balance sheet entity that is required to be disclosed by the Company in its 1934
Act filings and is not so disclosed or that otherwise could be reasonably likely to have a Material Adverse Effect.

 

(dd)Investment
Company Status. The Company is not, and upon consummation of the sale of the Securities will not be, an “investment
company,” an affiliate of an “investment company,” a company controlled by an “investment company”
or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment
company” as such terms are defined in the Investment Company Act of 1940, as amended.

 

(ee)Acknowledgement
Regarding Buyers’ Trading Activity. It is understood and acknowledged by the Company that (i) following the public disclosure
of the transactions contemplated by the Transaction Documents, in accordance with the terms thereof, none of the Buyers have been
asked by the Company or any of its Subsidiaries to agree, nor has any Buyer agreed with the Company or any of its Subsidiaries,
to desist from effecting any transactions in or with respect to (including, without limitation, purchasing or selling, long and/or
short) any securities of the Company, or “derivative” securities based on securities issued by the Company or to hold
the Securities for any specified term; (ii) any Buyer, and counterparties in “derivative” transactions to which any
such Buyer is a party, directly or indirectly, presently may have a “short” position in the Common Stock which was
established prior to such Buyer’s knowledge of the transactions contemplated by the Transaction Documents; and (iii) each
Buyer shall not be deemed to have any affiliation with or control over any arm’s length counterparty in any “derivative”
transaction. The Company further understands and acknowledges that following the public disclosure of the transactions contemplated
by the Transaction Documents pursuant to the Press Release (as defined below) one or more Buyers may engage in hedging and/or
trading activities at various times during the period that the Securities are outstanding, including, without limitation, during
the periods that the value and/or number of the Warrant Shares, the Interest Shares or Conversion Shares, as applicable, deliverable
with respect to the Securities are being determined and such hedging and/or trading activities, if any, can reduce the value of
the existing stockholders’ equity interest in the Company both at and after the time the hedging and/or trading activities
are being conducted. The Company acknowledges that such aforementioned hedging and/or trading activities do not constitute a breach
of this Agreement, the Notes, the Warrants or any other Transaction Document or any of the documents executed in connection herewith
or therewith.

 

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(ff)Manipulation
of Price. Neither the Company nor any of its Subsidiaries has, and, to the knowledge of the Company, no Person acting on their
behalf has, directly or indirectly, (i) taken any action designed to cause or to result in the stabilization or manipulation of
the price of any security of the Company or any of its Subsidiaries to facilitate the sale or resale of any of the Securities,
(ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed
to pay to any Person any compensation for soliciting another to purchase any other securities of the Company or any of its Subsidiaries.

 

(gg)U.S.
Real Property Holding Corporation. Neither the Company nor any of its Subsidiaries is, or has ever been, and so long as any
of the Securities are held by any of the Buyers, shall become, a U.S. real property holding corporation within the meaning of
Section 897 of the Internal Revenue Code of 1986, as amended, and the Company and each Subsidiary shall so certify upon any
Buyer’s request.

 

(hh)Registration
Eligibility. The Company is eligible to register the Registrable Securities for resale by the Buyers using Form S-3 promulgated
under the 1933 Act.

 

(ii)Transfer
Taxes. On the Closing Date, all stock transfer or other taxes (other than income or similar taxes) which are required to be
paid in connection with the issuance, sale and transfer of the Securities to be sold to each Buyer hereunder will be, or will
have been, fully paid or provided for by the Company, and all laws imposing such taxes will be or will have been complied with.

 

(jj)Bank
Holding Company Act. Neither the Company nor any of its Subsidiaries is subject to the Bank Holding Company Act of 1956, as
amended (the “BHCA”) and to regulation by the Board of Governors of the Federal Reserve System (the “Federal
Reserve”). Neither the Company nor any of its Subsidiaries or affiliates owns or controls, directly or indirectly, five
percent (5%) or more of the outstanding shares of any class of voting securities or twenty-five percent (25%) or more of the total
equity of a bank or any equity that is subject to the BHCA and to regulation by the Federal Reserve. Neither the Company nor any
of its Subsidiaries or affiliates exercises a controlling influence over the management or policies of a bank or any entity that
is subject to the BHCA and to regulation by the Federal Reserve.

 

(kk)Shell
Company Status. The Company is not currently, and has not been within the last 12 months, an issuer identified in, or subject
to, Rule 144(i).

 

    	18

    	 

    
 

(ll)Illegal
or Unauthorized Payments; Political Contributions. Neither the Company nor any of its Subsidiaries nor, to the Company’s
knowledge (after reasonable inquiry of its executive officers and directors), any of the officers, directors, employees, agents
or other representatives of the Company or any of its Subsidiaries or any other business entity or enterprise with which the Company
or any Subsidiary is or has been affiliated or associated, has, directly or indirectly, made or authorized any payment, contribution
or gift of money, property, or services, whether or not in contravention of applicable law, (a) as a kickback or bribe to any
Person or (b) to any political organization, or the holder of or any aspirant to any elective or appointive public office except
for personal political contributions not involving the direct or indirect use of funds of the Company or any of its Subsidiaries.

 

(mm)Money
Laundering. The Company and its Subsidiaries are in compliance with, and have not previously violated, the USA Patriot Act
of 2001 and all other applicable U.S. and non-U.S. anti-money laundering laws and regulations, including, but not limited to,
the laws, regulations and Executive Orders and sanctions programs administered by the U.S. Office of Foreign Assets Control, including,
but not limited, to (i) Executive Order 13224 of September 23, 2001 entitled, “Blocking Property and Prohibiting Transactions
With Persons Who Commit, Threaten to Commit, or Support Terrorism” (66 Fed. Reg. 49079 (2001)); and (ii) any regulations
contained in 31 CFR, Subtitle B, Chapter V.

 

(nn)Management.
Except as set forth in Schedule 3(nn) hereto, during the past five year period, no current officer or director
or, to the knowledge of the Company, former officer or director of the Company or any of its Subsidiaries has been the
subject of:

 

(i)a
petition under bankruptcy laws or any other insolvency or moratorium law or the appointment by a court of a receiver, fiscal agent
or similar officer for such Person, or any partnership in which such person was a general partner at or within two years before
the filing of such petition or such appointment, or any corporation or business association of which such person was an executive
officer at or within two years before the time of the filing of such petition or such appointment;

 

(ii)a
conviction in a criminal proceeding or a named subject of a pending criminal proceeding (excluding traffic violations, including
those relating to driving while intoxicated or driving under the influence);

 

(iii)any
order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining any such person from, or otherwise limiting, the following activities:

 

(1)Acting
as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage
transaction merchant, any other person regulated by the United States Commodity Futures Trading Commission or an associated person
of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person,
director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing
any conduct or practice in connection with such activity;

 

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(2)Engaging
in any type of business practice; or

 

(3)Engaging
in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of securities
laws or commodities laws;

 

(iv)any
order, judgment or decree, not subsequently reversed, suspended or vacated, of any authority barring, suspending or otherwise limiting
for more than 60 days the right of any such person to engage in any activity described in the preceding sub paragraph, or to be
associated with persons engaged in any such activity;

 

(v)a
finding by a court of competent jurisdiction in a civil action or by the SEC or other authority to have violated any securities
law, regulation or decree and the judgment in such civil action or finding by the SEC or any other authority has not been subsequently
reversed, suspended or vacated; or

 

(vi)a
finding by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated
any federal commodities law, and the judgment in such civil action or finding has not been subsequently reversed, suspended or
vacated.

 

(oo)No
Additional Agreements. The Company does not have any agreement or understanding with any Buyer with respect to the transactions
contemplated by the Transaction Documents other than as specified in the Transaction Documents.

 

(pp)Public
Utility Holding Act. None of the Company nor any of its Subsidiaries is a “holding company,” or an “affiliate”
of a “holding company,” as such terms are defined in the Public Utility Holding Act of 2005.

 

(qq)Federal
Power Act. None of the Company nor any of its Subsidiaries is subject to regulation as a “public utility” under
the Federal Power Act, as amended.

 

(rr)Ranking
of Notes. No Indebtedness of the Company, at the Closing, will be senior to, or pari passu with, the Notes in right
of payment, whether with respect to payment or redemptions, interest, damages, upon liquidation or dissolution or otherwise.

 

(ss)Disclosure.
The Company confirms that neither it nor any other Person acting on its behalf has provided any of the Buyers or their agents
or counsel with any information that constitutes or could reasonably be expected to constitute material, non-public information
concerning the Company or any of its Subsidiaries, other than the existence of the transactions contemplated by this Agreement
and the other Transaction Documents. The Company understands and confirms that each of the Buyers will rely on the foregoing representations
in effecting transactions in securities of the Company. All disclosure provided to the Buyers regarding the Company and its Subsidiaries,
their businesses and the transactions contemplated hereby, including the schedules to this Agreement, furnished by or on behalf
of the Company or any of its Subsidiaries is true and correct in all material respects and does not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of
the circumstances under which they were made, not misleading. Each press release issued by the Company or any of its Subsidiaries
during the twelve (12) months preceding the date of this Agreement did not at the time of release contain any untrue statement
of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not misleading. No event or circumstance has occurred or
information exists with respect to the Company or any of its Subsidiaries or its or their business, properties, liabilities, prospects,
operations (including results thereof) or conditions (financial or otherwise), which, under applicable law, rule or regulation,
requires public disclosure at or before the date hereof or announcement by the Company but which has not been so publicly disclosed.
The Company acknowledges and agrees that no Buyer makes or has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 2.

 

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4.COVENANTS.

 

(a)Reasonable
Best Efforts. Each Buyer shall use its reasonable best efforts to timely satisfy each of the conditions to be satisfied by
it as provided in Section 6 of this Agreement. The Company shall use its reasonable best efforts to timely satisfy each of the
conditions to be satisfied by it as provided in Section 7 of this Agreement.

 

(b)Form
D and Blue Sky. The Company agrees to file a Form D with respect to the Securities as required under Regulation D and to provide
a copy thereof to each Buyer promptly after such filing. The Company shall, on or immediately after the Closing Date take such
action as the Company shall reasonably determine is necessary in order to obtain an exemption for, or to, qualify the Securities
for sale to the Buyers at the Closing pursuant to this Agreement under applicable securities or “Blue Sky” laws of
the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action
so taken to the Buyers on or immediately after the Closing Date. Without limiting any other obligation of the Company under this
Agreement, the Company shall timely make all filings and reports relating to the offer and sale of the Securities required under
all applicable securities laws (including, without limitation, all applicable federal securities laws and all applicable “Blue
Sky” laws), and the Company shall comply in all material respects with all applicable federal, state and local laws, statutes,
rules, regulations and the like relating to the offering and sale of the Securities to the Buyers.

 

(c)Reporting
Status. Until the date on which the Buyers shall have sold all of the Registrable Securities (the “Reporting Period”),
the Company shall timely file all reports required to be filed with the SEC pursuant to the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act even if the 1934 Act or the rules and regulations
thereunder would no longer require or otherwise permit such termination.

 

(d)Use
of Proceeds. The Company will use the proceeds from the sale of the Securities for general corporate purposes, but not for
(i) except as set forth on Schedule 4(d), the repayment of any outstanding Indebtedness of the Company or any of its Subsidiaries,
(ii) the redemption or repurchase of any securities of the Company or any of its Subsidiaries, or (iii) the settlement of any
outstanding litigation.

 

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(e)Financial
Information. The Company agrees to send the following to each Investor (as defined in the Registration Rights Agreement) during
the Reporting Period (i) unless the following are filed with the SEC through EDGAR and are available to the public through the
EDGAR system, within one (1) Business Day after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-K and
Quarterly Reports on Form 10-Q, any interim reports or any consolidated balance sheets, income statements, stockholders’
equity statements and/or cash flow statements for any period other than annual, any Current Reports on Form 8-K and any registration
statements (other than on Form S-8) or amendments filed pursuant to the 1933 Act, and (ii) copies of any notices and other information
made available or given to the stockholders of the Company generally, contemporaneously with the making available or giving thereof
to the stockholders.

 

(f)Listing.
The Company shall promptly secure the listing or designation for quotation (as the case may be) of all of the Conversion Shares,
Interest Shares and Warrant Shares upon each national securities exchange and automated quotation system, if any, upon which the
Common Stock is then listed or designated for quotation (as the case may be) (subject to official notice of issuance) and shall
maintain such listing or designation for quotation (as the case may be) of all Conversion Shares, Interest Shares and Warrant
Shares from time to time issuable under the terms of the Transaction Documents on such national securities exchange or automated
quotation system. The Company shall use its best efforts to maintain the Common Stock’s listing or authorization for quotation
(as the case may be) on the Principal Market, The New York Stock Exchange, the NYSE Amex LLC, the Nasdaq Global Market or the
Nasdaq Capital Market (each, an “Eligible Market”). Neither the Company nor any of its Subsidiaries shall take
any action which could be reasonably expected to result in the delisting or suspension of the Common Stock on an Eligible Market.
The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 4(f).

 

(g)Fees.
The Company shall reimburse each Buyer for all reasonable costs and expenses incurred by it or its affiliates in connection with
the transactions contemplated by the Transaction Documents (including, without limitation, as applicable, all reasonable legal
fees and disbursements of Greenberg Traurig, LLP, counsel to the lead Buyer, any other reasonable fees and expenses in connection
with the structuring, documentation and implementation of the transactions contemplated by the Transaction Documents and due diligence
and regulatory filings in connection therewith) (the “Expense Amount”), which amount shall not exceed, in the
aggregate, $115,000 (with such non-legal fees and expenses not to exceed, in the aggregate, $15,000), without prior written notice
to the Company (other than with respect to the reasonable fees and expenses of each Buyer, the Investors and/or the Collateral
Agent, as applicable, incurred in connection with the preparation, review and negotiation of account control agreements and related
ancillary documents with respect to the Collateral (as defined in the Security Agreement) disclosed in the Perfection Certificate
(or as disclosed to the Collateral Agent or any Buyer or Investor by the Company or any of its Subsidiaries, from time to time,
pursuant to the Security Documents, any Guaranty, the Notes or any other Transaction Document) and otherwise with respect to the
perfection and/or enforcement of the security interest created by the Security Documents and/or any Guaranty) and shall be withheld
by a Buyer (with respect to its portion of the Expense Amount reimbursable hereunder or, with respect to the lead Buyer, the fees
and expenses of Greenberg Traurig, LLP) from its Purchase Price at the Closing or paid by the Company upon termination of this
Agreement on demand by any such Buyer and/or Greenberg Traurig, LLP so long as such termination did not occur as a result of a
material breach by the applicable Buyer of any of its obligations hereunder (as the case may be), less, solely with respect to
the lead Buyer, $15,000 which was previously advanced to Greenberg Traurig, LLP by the Company. Subject to the limitation set
forth in the immediately preceding sentence, if the amount so withheld at the Closing by a Buyer was less than the Expense Amount
actually incurred by the Buyers and/or Greenberg Traurig, LLP, as applicable, in connection with the transactions contemplated
by the Transaction Documents and entitled to reimbursement from the Company in accordance herewith or any other Transaction Document,
the Company shall promptly reimburse each such Buyer and/or Greenberg Traurig, LLP, as applicable, on demand for such Expense
Amount not so reimbursed by the Company on the date hereof or through such withholding at the Closing. The Company shall be responsible
for the payment of any placement agent’s fees, financial advisory fees, transfer agent fees, the fees and expenses of the
Collateral Agent, DTC (as defined below) fees or broker’s commissions (other than for Persons engaged by any Buyer) relating
to or arising out of the transactions contemplated hereby (including, without limitation, any fees payable to the Placement Agent,
who is the Company’s sole placement agent in connection with the transactions contemplated by this Agreement). The Company
shall pay, and hold each Buyer harmless against, any liability, loss or expense (including, without limitation, reasonable attorneys’
fees and out-of-pocket expenses) arising in connection with any claim relating to any such payment. Except as otherwise set forth
in the Transaction Documents, each party to this Agreement shall bear its own expenses in connection with the sale of the Securities
to the Buyers.

 

    	22

    	 

    
 

(h)Pledge
of Securities. Notwithstanding anything to the contrary contained in this Agreement, the Company acknowledges and agrees that
the Securities may be pledged by a Buyer in connection with a bona fide margin agreement or other loan or financing arrangement
that is secured by the Securities. The pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities
hereunder, and no Buyer effecting a pledge of Securities shall be required to provide the Company with any notice thereof or otherwise
make any delivery to the Company pursuant to this Agreement or any other Transaction Document. The Company hereby agrees to execute
and deliver such documentation as a pledgee of the Securities may reasonably request in connection with a pledge of the Securities
to such pledgee by a Buyer.

 

(i)Disclosure
of Transactions and Other Material Information. The Company shall, on or before 8:30 a.m., New York time, on the
first (1st) Business Day after the date of this Agreement, issue a press release (the “Press
Release”) reasonably acceptable to the Buyers disclosing all the material terms of the transactions contemplated by
the Transaction Documents. On or before 8:30 a.m., New York time, on the first (1st) Business Day after the date
of this Agreement, the Company shall file a Current Report on Form 8-K describing all the material terms of the transactions
contemplated by the Transaction Documents in the form required by the 1934 Act and attaching all the material Transaction
Documents (including, without limitation, this Agreement (and all schedules to this Agreement), the form of Notes, the form
of the Warrants, the form of Guaranties, the form of Security Documents and the form of the Registration Rights Agreement)
(including all attachments, the “8-K Filing”). From and after the filing of the 8-K Filing, the Company
shall have disclosed all material, non-public information (if any) provided to any of the Buyers by the Company or any of its
Subsidiaries or any of their respective officers, directors, employees or agents in connection with the transactions
contemplated by the Transaction Documents. The Company shall not, and the Company shall cause each of its Subsidiaries and
each of its and their respective officers, directors, employees and agents not to, provide any Buyer with any material,
non-public information regarding the Company or any of its Subsidiaries from and after the issuance of the Press Release
without the express prior written consent of such Buyer. In the event of a breach of any of the foregoing
covenants, including, without limitation, Section 4(o) of this Agreement, or any of the covenants or agreements
contained in any other Transaction Document, by the Company, any of its Subsidiaries, or any of its or their respective
officers, directors, employees and agents (as determined in the reasonable good faith judgment of such Buyer), in addition to
any other remedy provided herein or in the Transaction Documents, such Buyer shall have the right to make a public
disclosure, in the form of a press release, public advertisement or otherwise, of such breach or such material, non-public
information, as applicable, without the prior approval by the Company, any of its Subsidiaries, or any of its or their
respective officers, directors, employees or agents. No Buyer shall have any liability to the Company, any of its
Subsidiaries, or any of its or their respective officers, directors, employees, stockholders or agents, for any such
disclosure. Subject to the foregoing, neither the Company, its Subsidiaries nor any Buyer shall issue any press releases or
any other public statements with respect to the transactions contemplated hereby; provided, however, the Company shall be
entitled, without the prior approval of any Buyer, to make the Press Release and any press release or other public disclosure
with respect to such transactions (i) in substantial conformity with the 8-K Filing and contemporaneously therewith and (ii)
as is required by applicable law and regulations (provided that in the case of clause (i) each Buyer shall be consulted by
the Company in connection with any such press release or other public disclosure prior to its release). Without the prior
written consent of the applicable Buyer, the Company shall not (and shall cause each of its Subsidiaries and affiliates to
not) disclose the name of such Buyer in any filing, announcement, release or otherwise (other than the 8-K Filing or as
required by applicable law). Notwithstanding anything contained in this Agreement to the contrary and without implication
that the contrary would otherwise be true, the Company expressly acknowledges and agrees that upon filing of the Form 8-K, no
Buyer shall have (unless expressly agreed to by a particular Buyer after the date hereof in a written definitive and binding
agreement executed by the Company and such particular Buyer (it being understood and agreed that no Buyer may bind any other
Buyer with respect thereto)), any duty of confidentiality with respect to, or a duty not to trade on the basis of, any
material, non-public information regarding the Company or any of it Subsidiaries.

 

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(j)Additional
Registration Statements. Until the Applicable Date (as defined below) and at any time thereafter while any Registration Statement
is not effective or the prospectus contained therein is not available for use, the Company shall not file a registration statement
under the 1933 Act relating to securities that are not the Registrable Securities. “Applicable Date” means
the first date on which the resale by the Buyers of all Registrable Securities is covered by one or more effective Registration
Statements (as defined in the Registration Rights Agreement) (and each prospectus contained therein is available for use on such
date).

 

(k)Additional
Issuance of Securities. So long as any Buyer beneficially owns any Securities, the Company will not, without the prior
written consent of Buyers holding a majority in aggregate principal amount of the Notes then outstanding, issue any Notes
(other than to the Buyers as contemplated hereby) and the Company shall not issue any other securities that would cause a
breach or default under the Notes or the Warrants. The Company agrees that for the period commencing on the date hereof and
ending on the date immediately following the one hundred twenty (120) Trading Day (as defined in the Warrants) anniversary of
the Applicable Date (provided that such period shall be extended by the number of Trading Days during such period and any
extension thereof contemplated by this proviso on which any Registration Statement is not effective or any prospectus
contained therein is not available for use) (the “Restricted Period”), neither the Company nor any
of its Subsidiaries shall directly or indirectly issue, offer, sell, grant any option or right to purchase, or otherwise
dispose of (or announce any issuance, offer, sale, grant of any option or right to purchase or other disposition of) any
equity security or any equity-linked or related security (including, without limitation, any “equity security”
(as that term is defined under Rule 405 promulgated under the 1933 Act), any Convertible Securities (as defined below), any
debt, any preferred stock or any purchase rights) (any such issuance, offer, sale, grant, disposition or announcement
(whether occurring during the Restricted Period or at any time thereafter) is referred to as a “Subsequent
Placement”). Notwithstanding the foregoing, this Section 4(k) shall not apply in respect of the issuance of (A)
shares of Common Stock or standard options to purchase Common Stock to directors, officers or employees of the Company in
their capacity as such pursuant to an Approved Stock Plan (as defined below), provided that (1) 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
(A) do not, in the aggregate, exceed more than 10% of the Common Stock issued and outstanding immediately prior to the date
hereof and (2) 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 Buyers; (B) 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 (A) above) issued prior to the date hereof, provided that the conversion, exercise or other method of
issuance (as the case may be) of any such Convertible Security is made solely pursuant to the conversion, exercise or other
method of issuance (as the case may be) provisions of such Convertible Security that were in effect on the date immediately
prior to the date of this Agreement, the conversion, exercise or issuance 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 (A)
above) is not lowered, 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 (A) 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 (A) above) are otherwise
materially changed in any manner that adversely affects any of the Buyers; (C) the Conversion Shares, (D) the Interest
Shares, (E) the Warrant Shares, and (F) shares of Common Stock issued in connection with strategic mergers and acquisitions,
provided that (I) the primary purpose of such issuance is not to raise capital, (II) the acquirer of such shares of Common
Stock in such issuance solely consists of either (1) the actual owners of such assets or securities acquired in such merger
or acquisition or (2) the stockholders, partners or members of the foregoing Persons, (III) the number or amount (as the case
may be) of such shares of Common Stock issued to each such Person by the Company shall not be disproportionate to such
Person’s actual ownership of such assets or securities to be acquired by the Company (as applicable) and (IV) all such
issuances of Common Stock after the date hereof pursuant to this clause (E) do not, in the aggregate, exceed more than 10% of
the Common Stock issued and outstanding immediately prior to the date hereof (each of the foregoing in clauses (A) through
(E), collectively the “Excluded Securities”). “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. “Convertible
Securities” means any capital stock or other security of the Company or any of its Subsidiaries 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 capital stock or other security of the Company (including, without limitation,
Common Stock) or any of its Subsidiaries.

 

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(l)Reservation
of Shares. So long as any Notes or Warrants remain outstanding, the Company shall take all action necessary to at all times
have authorized, and reserved for the purpose of issuance, (x) if on or prior to the Stockholder Approval Date (as defined below),
no less than (i) 100% of the maximum number of Conversion Shares initially issuable upon conversion of the Notes (assuming for
purposes hereof that the Notes are convertible at the initial Conversion Price (as defined in the Notes) and without taking into
account any limitations on the conversion of the Notes set forth in the Notes), (ii) 100% of the maximum number of Interest Shares
initially issuable pursuant to the terms of the Notes from the Closing Date through the eighteen month anniversary of the Closing
Date (determined as if issued on the Trading Day (as defined in the Notes) immediately preceding the Closing Date without taking
into account any limitations on the issuance of securities set forth in the Notes) and (iii) 36.4% of the maximum number of Warrant
Shares initially issuable upon exercise of the Warrants (without taking into account any limitations on the exercise of the Warrants
set forth therein) or (y) if after the Stockholder Approval Date, no less than 150% of (i) the maximum number of shares of Common
Stock issuable upon conversion of all the Notes (assuming for purposes hereof, that the Notes are convertible at the Conversion
Price (as defined in the Notes) and without regard to any limitations on the conversion of the Notes set forth therein), and (ii)
the maximum number of Interest Shares issuable pursuant to the terms of the Notes from the Closing Date through the eighteen month
anniversary of the Closing Date (determined without taking into account any limitations on the issuance of securities set forth
in the Notes) and (iii) the maximum number of Warrant Shares issuable upon exercise of all the Warrants (without regard to any
limitations on the exercise of the Warrants set forth therein).

 

(m)Conduct
of Business. The business of the Company and its Subsidiaries shall not be conducted in violation of any law, ordinance or
regulation of any Governmental Entity, except where such violations would not reasonably be expected to result, either individually
or in the aggregate, in a Material Adverse Effect.

 

(n)Other
Notes; Variable Securities. (i) So long as any Notes remain outstanding, the Company will not issue any Notes (other than
to the Buyers as contemplated hereby) and the Company shall not issue any other securities that would cause a breach or default
under the Notes. So long as any Notes remain outstanding, the Company and each Subsidiary shall be prohibited from effecting or
entering into an agreement to effect any Subsequent Placement involving a Variable Rate Transaction. “Variable Rate Transaction”
means a transaction in which the Company or any Subsidiary (i) issues or sells any Convertible Securities either (A) at a conversion,
exercise or exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the shares
of Common Stock at any time after the initial issuance of such Convertible Securities, or (B) with a conversion, exercise or exchange
price that is subject to being reset at some future date after the initial issuance of such Convertible Securities or upon the
occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the
Common Stock, other than pursuant to a customary “weighted average” anti-dilution provision or (ii) enters into any
agreement (including, without limitation, an equity line of credit or an “at-the-market” offering) whereby the Company
or any Subsidiary may sell securities at a future determined price (other than standard and customary “preemptive”
or “participation” rights). Each Buyer shall be entitled to obtain injunctive relief against the Company and its Subsidiaries
to preclude any such issuance, which remedy shall be in addition to any right to collect damages.

 

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(o)Participation
Right. From the date hereof through the two (2) year anniversary of the Closing Date, neither the Company nor any of its
Subsidiaries shall, directly or indirectly, effect any Subsequent Placement unless the Company shall have first complied with
this Section 4(o). The Company acknowledges and agrees that the right set forth in this Section 4(o) is a right
granted by the Company, separately, to each Buyer.

 

(i)At
least three (3) Trading Days prior to any proposed or intended Subsequent Placement, the Company shall deliver to each Buyer
a written notice of its proposal or intention to effect a Subsequent Placement (each such notice, a
“Pre-Notice”), which Pre-Notice shall not contain any information (including, without limitation,
material, non-public information) other than: (i) a statement that the Company proposes or intends to effect a Subsequent
Placement, (ii) a statement that the statement in clause (i) above does not constitute material, non-public information and
(iii) a statement informing such Buyer that it is entitled to receive an Offer Notice (as defined below) with respect to such
Subsequent Placement upon its written request. Upon the written request of a Buyer within two (2) Trading Days after the
Company’s delivery to such Buyer of such Pre-Notice, and only upon a written request by such Buyer, the Company shall
promptly, but no later than one (1) Trading Day after such request, deliver to such Buyer an irrevocable written notice (the
“Offer Notice”) of any proposed or intended issuance or sale or exchange (the “Offer”)
of the securities being offered (the “Offered Securities”) in a Subsequent Placement, which Offer Notice
shall (w) identify and describe the Offered Securities, (x) describe the price and other terms upon which they are to be
issued, sold or exchanged, and the number or amount of the Offered Securities to be issued, sold or exchanged, (y) identify
the Persons (if known) to which or with which the Offered Securities are to be offered, issued, sold or exchanged and (z)
offer to issue and sell to or exchange with such Buyer in accordance with the terms of the Offer such Buyer’s pro rata
portion of 66% of the Offered Securities, provided that the number of Offered Securities which such Buyer shall have the
right to subscribe for under this Section 4(o) shall be (a) based on such Buyer’s pro rata portion of the
aggregate original principal amount of the Notes purchased hereunder by all Buyers (the “Basic
Amount”), and (b) with respect to each Buyer that elects to purchase its Basic Amount, any additional portion of
the Offered Securities attributable to the Basic Amounts of other Buyers as such Buyer shall indicate it will purchase or
acquire should the other Buyers subscribe for less than their Basic Amounts (the “Undersubscription
Amount”).

 

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(ii)To
accept an Offer, in whole or in part, such Buyer must deliver a written notice to the Company prior to the end of the third (3rd)
Business Day after such Buyer’s receipt of the Offer Notice (the “Offer Period”), setting forth the portion
of such Buyer’s Basic Amount that such Buyer elects to purchase and, if such Buyer shall elect to purchase all of its Basic
Amount, the Undersubscription Amount, if any, that such Buyer elects to purchase (in either case, the “Notice of Acceptance”).
If the Basic Amounts subscribed for by all Buyers are less than the total of all of the Basic Amounts, then such Buyer who has
set forth an Undersubscription Amount in its Notice of Acceptance shall be entitled to purchase, in addition to the Basic Amounts
subscribed for, the Undersubscription Amount it has subscribed for; provided, however, if the Undersubscription Amounts subscribed
for exceed the difference between the total of all the Basic Amounts and the Basic Amounts subscribed for (the “Available
Undersubscription Amount”), such Buyer who has subscribed for any Undersubscription Amount shall be entitled to purchase
only that portion of the Available Undersubscription Amount as the Basic Amount of such Buyer bears to the total Basic Amounts
of all Buyers that have subscribed for Undersubscription Amounts, subject to rounding by the Company to the extent it deems reasonably
necessary. Notwithstanding the foregoing, if the Company desires to modify or amend the terms and conditions of the Offer prior
to the expiration of the Offer Period, the Company may deliver to each Buyer a new Offer Notice and the Offer Period shall expire
on the third (3rd) Business Day after such Buyer’s receipt of such new Offer Notice.

 

(iii)The
Company shall have five (5) Business Days from the expiration of the Offer Period above (i) to offer, issue, sell or exchange all
or any part of such Offered Securities as to which a Notice of Acceptance has not been given by a Buyer (the “Refused
Securities”) pursuant to a definitive agreement(s) (the “Subsequent Placement Agreement”), but only
to the offerees described in the Offer Notice (if so described therein) and only upon terms and conditions (including, without
limitation, unit prices and interest rates) that are not more favorable to the acquiring Person or Persons or less favorable to
the Company than those set forth in the Offer Notice and (ii) to publicly announce (a) the execution of such Subsequent Placement
Agreement, and (b) either (x) the consummation of the transactions contemplated by such Subsequent Placement Agreement or (y) the
termination of such Subsequent Placement Agreement, which shall be filed with the SEC on a Current Report on Form 8-K with such
Subsequent Placement Agreement and any documents contemplated therein filed as exhibits thereto.

 

(iv)In
the event the Company shall propose to sell less than all the Refused Securities (any such sale to be in the manner and on the
terms specified in Section 4(o)(iii) above), then such Buyer may, at its sole option and in its sole discretion, reduce the
number or amount of the Offered Securities specified in its Notice of Acceptance to an amount that shall be not less than the
number or amount of the Offered Securities that such Buyer elected to purchase pursuant to Section 4(o)(ii) above multiplied
by a fraction, (i) the numerator of which shall be the number or amount of Offered Securities the Company actually proposes to
issue, sell or exchange (including Offered Securities to be issued or sold to Buyers pursuant to this Section 4(o) prior
to such reduction) and (ii) the denominator of which shall be the original amount of the Offered Securities. In the event that
any Buyer so elects to reduce the number or amount of Offered Securities specified in its Notice of Acceptance, the Company may
not issue, sell or exchange more than the reduced number or amount of the Offered Securities unless and until such securities
have again been offered to the Buyers in accordance with Section 4(o)(i) above.

 

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(v)Upon
the closing of the issuance, sale or exchange of all or less than all of the Refused Securities, such Buyer shall acquire from
the Company, and the Company shall issue to such Buyer, the number or amount of Offered Securities specified in its Notice of Acceptance.
The purchase by such Buyer of any Offered Securities is subject in all cases to the preparation, execution and delivery by the
Company and such Buyer of a separate purchase agreement relating to such Offered Securities reasonably satisfactory in form and
substance to such Buyer and its counsel.

 

(vi)Any
Offered Securities not acquired by a Buyer or other Persons in accordance with this Section 4(o) may not be issued, sold
or exchanged until they are again offered to such Buyer under the procedures specified in this Agreement.

 

(vii)The
Company and each Buyer agree that if any Buyer elects to participate in the Offer, neither the Subsequent Placement Agreement with
respect to such Offer nor any other transaction documents related thereto (collectively, the “Subsequent Placement Documents”)
shall include any term or provision whereby such Buyer shall be required to agree to any restrictions on trading as to any securities
of the Company (except for any restrictions imposed by any existing laws, rules or regulations) or be required to consent to any
amendment to or termination of, or grant any waiver, release or the like under or in connection with, any agreement previously
entered into with the Company or any instrument received from the Company.

 

(viii)Notwithstanding
anything to the contrary in this Section 4(o) and unless otherwise agreed to by such Buyer, the Company shall either confirm in
writing to such Buyer that the transaction with respect to the Subsequent Placement has been abandoned or shall publicly disclose
its intention to issue the Offered Securities, in either case, in such a manner such that such Buyer will not be in possession
of any material, non-public information, by the fifth (5th) Business Day following the expiration of the Offer Period.
If by such fifth (5th) Business Day, no public disclosure regarding a transaction with respect to the Offered Securities
has been made, and no notice regarding the abandonment of such transaction has been received by such Buyer, such transaction shall
be deemed to have been abandoned and such Buyer shall not be in possession of any material, non-public information with respect
to the Company or any of its Subsidiaries. Should the Company decide to pursue such transaction with respect to the Offered Securities,
the Company shall provide such Buyer with another Offer Notice and such Buyer will again have the right of participation set forth
in this Section 4(o). The Company shall not be permitted to deliver more than one such Offer Notice to such Buyer in any sixty
(60) day period, except as expressly contemplated by the last sentence of Section 4(o)(ii).

 

(ix)The
restrictions contained in this Section 4(o) shall not apply in connection with the issuance of any Excluded Securities. The
Company shall not circumvent the provisions of this Section 4(o) by providing terms or conditions to one Buyer that are not
provided to all.

 

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(p)Dilutive
Issuances . For so long as any Notes or Warrants remain outstanding, the Company shall not, in any manner, enter into or
affect any Dilutive Issuance (as defined in the Notes) if the effect of such Dilutive Issuance is to cause the Company to be
required to issue upon conversion of any Notes or exercise of any Warrant any shares of Common Stock in excess of that number
of shares of Common Stock which the Company may issue upon conversion of the Notes and exercise of the Warrants without
breaching the Company’s obligations under the rules or regulations of the Principal Market or any such exchange or
market that the Company’s Common Stock is then listed or available for quotation on. As of any date, unless either (i)
the Company has obtained the written approval of its stockholders providing for the Company’s issuance of all of the
Securities as described in the Transaction Documents in accordance with applicable law and the rules and regulations of the
Principal Market prior to such date and the Equity Conditions (as defined in the Notes) are satisfied as of such date or (ii)
no Notes or Warrants remain outstanding, the Company shall not, in any manner, enter into or affect any Dilutive
Issuance.

 

(q)Passive
Foreign Investment Company. The Company shall conduct its business in such a manner as will ensure that the Company will not
be deemed to constitute a passive foreign investment company within the meaning of Section 1297 of the U.S. Internal Revenue Code
of 1986, as amended.

 

(r)Restriction
on Redemption and Cash Dividends. So long as any Notes are outstanding, the Company shall not, directly or indirectly, redeem,
or declare or pay any cash dividend or distribution on, any securities of the Company without the prior express written consent
of the Buyers.

 

(s)Corporate
Existence. So long as any Buyer beneficially owns any Notes or Warrants, the Company shall not be party to any Fundamental
Transaction (as defined in the Notes) unless the Company is in compliance with the applicable provisions governing Fundamental
Transactions set forth in the Notes and the Warrants.

 

(t)Stockholder
Approval. The Company shall provide each stockholder entitled to vote at either (x) the next annual meeting of stockholders
of the Company or (y) a special meeting of stockholders of the Company (the “Stockholder Meeting”), which shall
be promptly called and held not later than March 4, 2013 (the “Stockholder Meeting Deadline”), a proxy statement,
soliciting each such stockholder’s affirmative vote at the Stockholder Meeting for approval of resolutions (“Stockholder
Resolutions”) providing for (I) the increase of the authorized shares of Common Stock of the Company from 25 million
to 100 million shares of Common Stock and (II) the issuance of all of the Securities as described in the Transaction Documents
in accordance with applicable law and the rules and regulations of the Principal Market (such affirmative approval being referred
to herein as the “Stockholder Approval”, and the date such Stockholder Approval is obtained, the “Stockholder
Approval Date”), and the Company shall use its reasonable best efforts to solicit its stockholders’ approval of
such resolutions and to cause the Board of Directors of the Company to recommend to the stockholders that they approve such resolutions.
The Company shall be obligated to seek to obtain the Stockholder Approval by the Stockholder Meeting Deadline. If, despite the
Company’s reasonable best efforts the Stockholder Approval is not obtained on or prior to the Stockholder Meeting Deadline,
the Company shall cause an additional Stockholder Meeting to be held annually thereafter at the annual meeting of stockholders
of the Company (or if no annual meeting of stockholders of the Company is held in any given year, at a special meeting of stockholders
of the Company in such given year) until such Stockholder Approval is obtained.

 

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(u)No
Waiver of Voting Agreements. The Company shall not amend, waive or modify any provision of any of the Voting Agreements (as
defined below).

 

(v)Stock
Splits. Until the Notes and Warrants and all notes and warrants issued pursuant to the terms thereof are no longer outstanding,
the Company shall not effect any stock combination, reverse stock split or other similar transaction (or make any public announcement
or disclosure with respect to any of the foregoing) without the prior written consent of the Required Buyers (as defined below),
provided, however, that no consent of the Required Buyers shall be required for a reverse stock split of the Common Stock that
the Board of Directors of the Company, in the good faith exercise of its business judgment, determines to be necessary or advisable
to list or continue listing the Common Stock on the Principal Market or another trading market.

 

(w)Consultant.
So long as any Notes remain outstanding the Company shall employ a business consultant, reasonably satisfactory to the Required
Holders; provided, that, notwithstanding the foregoing, the Company shall not be required to enter into any consulting agreement
with any such consultant which would require the Company to pay fees to such consultant in excess of $5,000 per month.

 

(x)Closing
Documents. On or prior to fourteen (14) calendar days after the Closing Date, the Company agrees to deliver, or cause to be
delivered, to each Buyer and Greenberg Traurig, LLP executed copies of the Transaction Documents, Securities and other document
required to be delivered to any party pursuant to Section 7 hereof.

 

(y)WPCS
Asia Certificate. On or prior to fifteen (15) Business Day after the Closing Date,
the Company agrees to deliver, or cause to be delivered, to the Collateral Agent a certificate representing WPCS Asia’s shares
of capital stock, along with duly executed blank stock powers, in accordance with the Security Agreement.

 

5.REGISTER;
TRANSFER AGENT INSTRUCTIONS; LEGEND.

 

(a)Register.
The Company shall maintain at its principal executive offices (or such other office or agency of the Company as it may designate
by notice to each holder of Securities), a register for the Notes and the Warrants in which the Company shall record the name
and address of the Person in whose name the Notes and the Warrants have been issued (including the name and address of
each transferee), the principal amount of the Notes held by such Person, the number of Conversion Shares issuable upon conversion
of the Notes, the number of Interest Shares issuable with respect to the Notes and the number of Warrant Shares issuable upon
exercise of the Warrants held by such Person. The Company shall keep the register open and available at all times during business
hours for inspection of any Buyer or its legal representatives.

 

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(b)Transfer
Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent and any subsequent transfer
agent in a form acceptable to each of the Buyers (the “Irrevocable Transfer Agent Instructions”) to issue
certificates or credit shares to the applicable balance accounts at The Depository Trust Company (“DTC”),
registered in the name of each Buyer or its respective nominee(s), for the Conversion Shares, the Interest Shares and the
Warrant Shares in such amounts as specified from time to time by each Buyer to the Company upon conversion of the Notes or
the exercise of the Warrants (as the case may be). The Company represents and warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 5(b), and stop transfer instructions to give effect
to Section 2(g) hereof, will be given by the Company to its transfer agent with respect to the Securities, and that the
Securities shall otherwise be freely transferable on the books and records of the Company, as applicable, to the extent
provided in this Agreement and the other Transaction Documents. If a Buyer effects a sale, assignment or transfer of the
Securities in accordance with Section 2(g), the Company shall permit the transfer and shall promptly instruct its transfer
agent to issue one or more certificates or credit shares to the applicable balance accounts at DTC in such name and in such
denominations as specified by such Buyer to effect such sale, transfer or assignment. In the event that such sale, assignment
or transfer involves Conversion Shares, Interest Shares or Warrant Shares sold, assigned or transferred pursuant to an
effective registration statement or in compliance with Rule 144, the transfer agent shall issue such shares to such Buyer,
assignee or transferee (as the case may be) without any restrictive legend in accordance with Section 5(d) below. The
Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to a Buyer.
Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 5(b)
will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this
Section 5(b), that a Buyer shall be entitled, in addition to all other available remedies, to an order and/or
injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic
loss and without any bond or other security being required. The Company shall cause its counsel to issue the legal opinion
referred to in the Irrevocable Transfer Agent Instructions to the Company’s transfer agent on each Effective Date (as
defined in the Registration Rights Agreement). Any fees (with respect to the transfer agent, counsel to the Company or
otherwise) associated with the issuance of such opinion or the removal of any legends on any of the Securities shall be borne
by the Company.

 

(c)Legends.
Each Buyer understands that the Securities have been issued (or will be issued in the case of the Conversion Shares, Interest
Shares and the Warrant Shares) pursuant to an exemption from registration or qualification under the 1933 Act and applicable state
securities laws, and except as set forth below, the Securities shall bear any legend as required by the “blue sky”
laws of any state and a restrictive legend in substantially the following form (and a stop-transfer order may be placed against
transfer of such stock certificates):

 

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

 

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(d)Removal
of Legends. Certificates evidencing Securities shall not be required to contain the legend set forth in Section 5(c)
above or any other legend (i) while a registration statement (including a Registration Statement) covering the resale of such
Securities is effective under the 1933 Act, (ii) following any sale of such Securities pursuant to Rule 144 (assuming the transferor
is not an affiliate of the Company), (iii) if such Securities are eligible to be sold, assigned or transferred under Rule 144
(provided that a Buyer provides the Company with reasonable assurances that such Securities are eligible for sale, assignment
or transfer under Rule 144 which shall not include an opinion of counsel), (iv) in connection with a sale, assignment or other
transfer (other than under Rule 144), provided that such Buyer provides the Company with an opinion of counsel to such Buyer,
in a generally acceptable form, to the effect that such sale, assignment or transfer of the Securities may be made without registration
under the applicable requirements of the 1933 Act or (v) if such legend is not required under applicable requirements of the 1933
Act (including, without limitation, controlling judicial interpretations and pronouncements issued by the SEC). If a legend is
not required pursuant to the foregoing, the Company shall no later than three (3) Trading Days following the delivery by a Buyer
to the Company or the transfer agent (with notice to the Company) of a legended certificate representing such Securities (endorsed
or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer,
if applicable), together with any other deliveries from such Buyer as may be required above in this Section 5(d), as directed
by such Buyer, either: (A) provided that the Company’s transfer agent is participating in the DTC Fast Automated Securities
Transfer Program and such Securities are Conversion Shares, Interest Shares or Warrant Shares, credit the aggregate number of
shares of Common Stock to which such Buyer shall be entitled to such Buyer’s or its designee’s balance account with
through its Deposit/Withdrawal at Custodian system or (B) if the Company’s transfer agent is not participating in the Fast
Automated Securities Transfer Program, issue and deliver (via reputable overnight courier) to such Buyer, a certificate representing
such Securities that is free from all restrictive and other legends, registered in the name of such Buyer or its designee (the
date by which such credit is so required to be made to the balance account of such Buyer’s or such Buyer’s nominee
with DTC or such certificate is required to be delivered to such Buyer pursuant to the foregoing is referred to herein as the
“Required Delivery Date”). The Company shall be responsible for any transfer agent fees or DTC fees with respect
to any issuance of Securities or the removal of any legends with respect to any Securities in accordance herewith.

 

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(e)Failure
to Timely Deliver; Buy-In. If the Company fails to (i) issue and deliver (or cause to be delivered) to a Buyer by the Required
Delivery Date a certificate representing the Securities so delivered to the Company by such Buyer that is free from all restrictive
and other legends or (ii) credit the balance account of such Buyer’s or such Buyer’s nominee with DTC for such number
of Conversion Shares or Warrant Shares so delivered to the Company, then, in addition to all other remedies available to such
Buyer, the Company shall pay in cash to such Buyer on each day after the Required Delivery Date that the issuance or credit of
such shares is not timely effected an amount equal to 1% of the product of (A) the number of shares of Common Stock not so delivered
or credited (as the case may be) to such Buyer or such Buyer’s nominee multiplied by (B) the Closing Sale Price (as defined
in the applicable Note or Warrant) of the Common Stock on the Trading Day (as defined in the applicable Note or Warrant) immediately
preceding the Required Delivery Date. In addition to the foregoing, if the Company fails to so properly deliver such unlegended
certificates or so properly credit the balance account of such Buyer’s or such Buyer’s nominee with DTC by the Required
Delivery Date, and if on or after the Required Delivery Date such Buyer purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by such Buyer of shares of Common Stock that such Buyer anticipated
receiving from the Company without any restrictive legend, then, in addition to all other remedies available to such Buyer, the
Company shall, within three (3) Trading Days after such Buyer’s request and in such Buyer’s sole discretion, either
(i) pay cash to such Buyer in an amount equal to such Buyer’s total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation
to deliver such certificate or credit such Buyer’s balance account shall terminate and such shares shall be cancelled, or
(ii) promptly honor its obligation to deliver to such Buyer a certificate or certificates or credit such Buyer’s DTC account
representing such number of shares of Common Stock that would have been issued if the Company timely complied with its obligations
hereunder and pay cash to such Buyer in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such
number of shares of Conversion Shares, Interest Shares or Warrant Shares (as the case may be) that the Company was required to
deliver to such Buyer by the Required Delivery Date times (B) the Closing Sale Price (as defined in the Warrants) of the Common
Stock on the Trading Day immediately preceding the Required Delivery Date.

 

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

 

(a)The obligation
of the Company hereunder to issue and sell the Notes and the related Warrants to each Buyer at the Closing is subject to
the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the
Company’s sole benefit and may be waived by the Company at any time in its sole discretion by providing each Buyer with prior
written notice thereof:

  

(i)Such
Buyer shall have executed each of the other Transaction Documents to which it is a party and delivered the same to the Company.

 

(ii)Such
Buyer and each other Buyer shall have delivered to the Company the Purchase Price (less, in the case of any Buyer, the amounts
withheld pursuant to Section 4(g)) for the Note and the related Warrants being purchased by such Buyer at the Closing by
wire transfer of immediately available funds in accordance with the Flow of Funds Letter.

 

    	33

    	 

    
 

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

 

7.CONDITIONS
TO EACH BUYER’S OBLIGATION TO PURCHASE.

 

(a)The obligation
of each Buyer hereunder to purchase its Note and its related Warrants at the Closing is subject to the satisfaction, at
or before the Closing Date, of each of the following conditions, provided that these conditions are for each Buyer’s sole
benefit and may be waived by such Buyer at any time in its sole discretion by providing the Company with prior written notice thereof:

  

(i)The
Company and each Subsidiary (as the case may be) shall have duly executed and delivered to such Buyer each of the Transaction Documents
to which it is a party and the Company shall have duly executed and delivered to such Buyer a Note (in such original principal
amount as is set forth across from such Buyer’s name in column (3) of the Schedule of Buyers) and the related Warrants
(for such aggregate number of shares of Common Stock as is set forth across from such Buyer’s name in column (4) of the Schedule
of Buyers) being purchased by such Buyer at the Closing pursuant to this Agreement.

 

(ii)Such
Buyer shall have received the opinion of Sichenzia Ross Friedman Ference LLP, the Company’s counsel, dated as of the Closing
Date, in the form reasonably acceptable to such Buyer.

 

(iii)The
Company shall have delivered to such Buyer a copy of the Irrevocable Transfer Agent Instructions, in the form reasonably acceptable
to such Buyer, which instructions shall have been delivered to and acknowledged in writing by the Company’s transfer agent.

 

(iv)The
Company shall have delivered to such Buyer a certificate evidencing the formation and good standing of the Company and each of
its Subsidiaries in each such entity’s jurisdiction of formation issued by the Secretary of State (or comparable office)
of such jurisdiction of formation as of a date within fifteen (15) days of the Closing Date.

 

(v)The
Company shall have delivered to such Buyer a certificate evidencing the Company’s and each Subsidiary’s qualification
as a foreign corporation and good standing issued by the Secretary of State (or comparable office) of each jurisdiction in which
the Company and each Subsidiary conducts business and is required to so qualify, as of a date within fifteen (15) days of the Closing
Date.

 

    	34

    	 

    
 

(vi)The
Company shall have delivered to such Buyer a certified copy of the Certificate of Incorporation as certified by the Delaware Secretary
of State within fifteen (15) days of the Closing Date.

 

(vii)Each
Subsidiary shall have delivered to such Buyer a certified copy of its certificate of incorporation as certified by the Secretary
of State (or comparable office) of such Subsidiary’s jurisdiction of incorporation within fifteen (15) days of the Closing
Date.

 

(viii)The
Company and each Subsidiary shall have delivered to such Buyer a certificate, in the form reasonably acceptable to such
Buyer, executed by the Secretary of the Company and each Subsidiary and dated as of the Closing Date, as to (i) the
resolutions consistent with Section 3(b) as adopted by the Company’s and each Subsidiary’s board of
directors in a form reasonably acceptable to such Buyer, (ii) the Certificate of Incorporation of the Company and the
organizational documents of each Subsidiary and (iii) the Bylaws of the Company and the bylaws of each Subsidiary, each
as in effect at the Closing.

 

(ix)The
representations and warranties of the Company shall be true and correct as of the date when made and as of the Closing Date as
though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be
true and correct as of such specific date) and the Company shall have performed, satisfied and complied in all respects with the
covenants, agreements and conditions required to be performed, satisfied or complied with by the Company at or prior to the Closing
Date. Such Buyer shall have received a certificate, duly executed by the Chief Executive Officer of the Company, dated as of the
Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by such Buyer in the form acceptable
to such Buyer.

 

(x)The
Company shall have delivered to such Buyer a report from the Company’s transfer agent identifying the number of shares of
Common Stock outstanding on the Closing Date immediately prior to the Closing.

 

(xi)The
Common Stock (I) shall be designated for quotation or listed (as applicable) on the Principal Market and (II) shall not have been
suspended, as of the Closing Date, by the SEC or the Principal Market from trading on the Principal Market nor shall suspension
by the SEC or the Principal Market have been threatened (except as already disclosed in the SEC Documents), as of the Closing Date,
either (A) in writing by the SEC or the Principal Market or (B) by falling below the minimum maintenance requirements of the Principal
Market.

 

(xii)The
Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale
of the Securities, including without limitation, those required by the Principal Market.

 

(xiii)No
statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed
by any court or governmental authority or other Governmental Entity of competent jurisdiction that prohibits the consummation of
any of the transactions contemplated by the Transaction Documents.

 

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(xiv)Since
the date of execution of this Agreement, no event or series of events shall have occurred that reasonably would have or result
in a Material Adverse Effect.

 

(xv)The
Company shall have obtained approval of the Principal Market to list or designate for quotation (as the case may be) the Conversion
Shares, the Interest Shares and the Warrant Shares.

 

(xvi)The
Company shall have duly executed and delivered to such Buyer the voting agreements in the forms of Exhibit F hereof
(the “Voting Agreements”), by and between the Company and Andrew Hidalgo, Joseph Heater, Myron Polulak, Kevin
Coyle, Norm Dumbroff, Neil Hebenton and Charles Benton (the “Stockholders”) and the Stockholders shall have
duly executed and delivered to such Buyer the Voting Agreement.

 

(xvii)In
accordance with the terms of the Security Documents, the Company shall have delivered to the Collateral Agent (i) except for WPCS
Asia Ltd., certificates representing the Subsidiaries’ shares of capital stock to the extent such subsidiary is a corporation
or otherwise has certificated capital stock, along with duly executed blank stock powers and (ii) appropriate financing statements
on Form UCC-1 to be duly filed in such office or offices as may be necessary or, in the opinion of the Collateral Agent, desirable
to perfect the security interests purported to be created by each Security Document.

 

(xviii)Within
two (2) Business Days prior to the Closing, the Company shall have delivered or caused to be delivered to each Buyer and the Collateral
Agent (i) true copies of UCC search results, listing all effective financing statements which name as debtor the Company or any
of its Subsidiaries filed in the prior five years to perfect an interest in any assets thereof, together with copies of such financing
statements, none of which, except as otherwise agreed in writing by the Buyers, shall cover any of the Collateral (as defined in
the Security Documents) and the results of searches for any tax lien and judgment lien filed against such Person or its property,
which results, except as otherwise agreed to in writing by the Buyers shall not show any such Liens (as defined in the Security
Documents); and (ii) a perfection certificate, duly completed and executed by the Company and each of its Subsidiaries, in form
and substance satisfactory to the Buyers.

 

(xix)Contemporaneously
with the Closing, the Collateral Agent shall have received (i) a duly executed copy of the payoff letter with respect to the Indebtedness
owed to Sovereign Bank N.A. set forth on Schedule 3(r)(iii) (“Existing Secured Indebtedness”), (ii) any
and all related release, cancellation and/or termination documents, duly executed by the Company and the holder of the Existing
Secured Indebtedness, together with the UCC-3 termination statements for all UCC-1 financing statements, filed by holder of the
Existing Secured Indebtedness, covering any portion of the Collateral (as defined in the Security Agreement) and existing as of
the Closing Date, and (iii) acknowledgement filings of such UCC-3 termination statements, in form and substance reasonably satisfactory
to the Required Holders; or, in the case of clauses (ii) - (iii) hereof arrangements satisfactory to the Required Holders shall
have been made providing for the delivery of such items to the Collateral Agent promptly following payment in full of the Existing
Secured Indebtedness.

 

    	36

    	 

    
 

(xx)Each
Account Control Bank and the Collateral Agent shall have duly executed and delivered to such Buyer an Account Control Agreement
with respect to each Restricted Account held at such Account Control Bank.

 

(xxi)The
Company shall have duly executed and delivered to such Buyer, a flow of funds letter in form and substance reasonably satisfactory
to such Buyer (the “Flow of Funds Letter”).

 

(xxii)The
Company and its Subsidiaries shall have delivered to such Buyer such other documents relating to the transactions contemplated
by this Agreement as such Buyer or its counsel may reasonably request.

 

8.TERMINATION.

 

In the event
that the Closing shall not have occurred with respect to a Buyer within five (5) days of the date hereof, then such Buyer
shall have the right to terminate its obligations under this Agreement with respect to itself at any time on or after the
close of business on such date without liability of such Buyer to any other party; provided, however, (i) the right to
terminate its obligations under this Agreement pursuant to this Section 8 shall not be available to such Buyer if the
failure of the transactions contemplated by this Agreement to have been consummated by such date is the result of such
Buyer’s breach of this Agreement and (ii) the abandonment of the sale and purchase of the Notes and the Warrants shall
be applicable only to such Buyer providing such written notice, provided further that no such termination shall affect any
obligation of the Company under this Agreement to reimburse such Buyer for the expenses described in Section 4(g) above.
Nothing contained in this Section 8 shall be deemed to release any party from any liability for any breach by such party
of the terms and provisions of this Agreement or the other Transaction Documents or to impair the right of any party to
compel specific performance by any other party of its obligations under this Agreement or the other Transaction
Documents.

 

9.MISCELLANEOUS.

 

(a)Governing
Law; Jurisdiction; Jury Trial. All questions concerning the construction, validity, enforcement and interpretation of this
Agreement 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. Each party 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. Each party hereby irrevocably waives personal service of process and consents to process being served
in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this
Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY 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 AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

    	37

    	 

    
 

(b)Counterparts.
This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event that
any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of
an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.

 

(c)Headings;
Gender. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation
of, this Agreement. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine,
feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include”
and words of like import shall be construed broadly as if followed by the words “without limitation.” The terms “herein,”
“hereunder,” “hereof” and words of like import refer to this entire Agreement instead of just the provision
in which they are found.

 

(d)Severability;
Maximum Payment Amounts. If any provision of this Agreement 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 Agreement so long as this Agreement 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). Notwithstanding anything to the contrary contained in this Agreement or any other Transaction Document (and without
implication that the following is required or applicable), it is the intention of the parties that in no event shall amounts and
value paid by the Company and/or its Subsidiaries (as the case may be), or payable to or received by any of the Buyers, under
the Transaction Documents (including without limitation, any amounts that would be characterized as “interest” under
applicable law) exceed amounts permitted under any applicable law. Accordingly, if any obligation to pay, payment made to any
Buyer, or collection by any Buyer pursuant the Transaction Documents is finally judicially determined to be contrary to any such
applicable law, such obligation to pay, payment or collection shall be deemed to have been made by mutual mistake of such Buyer,
the Company and its Subsidiaries and such amount shall be deemed to have been adjusted with retroactive effect to the maximum
amount or rate of interest, as the case may be, as would not be so prohibited by the applicable law. Such adjustment shall be
effected, to the extent necessary, by reducing or refunding, at the option of such Buyer, the amount of interest or any other
amounts which would constitute unlawful amounts required to be paid or actually paid to such Buyer under the Transaction Documents.
For greater certainty, to the extent that any interest, charges, fees, expenses or other amounts required to be paid to or received
by such Buyer under any of the Transaction Documents or related thereto are held to be within the meaning of “interest”
or another applicable term to otherwise be violative of applicable law, such amounts shall be pro-rated over the period of time
to which they relate.

 

    	38

    	 

    
 

(e)Entire
Agreement; Amendments. This Agreement, the other Transaction Documents and the schedules and exhibits attached hereto
and thereto and the instruments referenced herein and therein supersede all other prior oral or written agreements between
the Buyers, the Company, its Subsidiaries, their affiliates and Persons acting on their behalf solely with respect to the
matters contained herein and therein, and this Agreement, the other Transaction Documents, the schedules and exhibits
attached hereto and thereto and the instruments referenced herein and therein contain the entire understanding of the parties
solely with respect to the matters covered herein and therein; provided, however, nothing contained in this Agreement or any
other Transaction Document shall (or shall be deemed to) (i) have any effect on any agreements any Buyer has entered into
with the Company or any of its Subsidiaries prior to the date hereof with respect to any prior investment made by such Buyer
in the Company or (ii) waive, alter, modify or amend in any respect any obligations of the Company or any of its
Subsidiaries, or any rights of or benefits to any Buyer or any other Person, in any agreement entered into prior to the date
hereof between or among the Company and/or any of its Subsidiaries and any Buyer and all such agreements shall continue in
full force and effect. Except as specifically set forth herein or therein, neither the Company nor any Buyer makes any
representation, warranty, covenant or undertaking with respect to such matters. For clarification purposes, the Recitals are
part of this Agreement. No provision of this Agreement may be amended other than by an instrument in writing signed by the
Company and the Required Holders (as defined below), and any amendment to any provision of this Agreement made in conformity
with the provisions of this Section 9(e) shall be binding on all Buyers and holders of Securities, as applicable,
provided that no such amendment shall be effective to the extent that it (1) applies to less than all of the holders of the
Securities then outstanding or (2) imposes any obligation or liability on any Buyer without such Buyer’s prior written
consent (which may be granted or withheld in such Buyer’s sole discretion). No waiver shall be effective unless it is
in writing and signed by an authorized representative of the waiving party, provided that the Required Holders may waive any
provision of this Agreement, and any waiver of any provision of this Agreement made in conformity with the provisions of
this Section 9(e) shall be binding on all Buyers and holders of Securities, as applicable, provided that no such waiver
shall be effective to the extent that it (1) applies to less than all of the holders of the Securities then outstanding
(unless a party gives a waiver as to itself only) or (2) imposes any obligation or liability on any Buyer without such
Buyer’s prior written consent (which may be granted or withheld in such Buyer’s sole discretion). No
consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any
of the Transaction Documents unless the same consideration also is offered to all of the parties to the Transaction
Documents, all holders of the Notes or all holders of the Warrants (as the case may be). The Company has not, directly or
indirectly, made any agreements with any Buyers relating to the terms or conditions of the transactions contemplated by the
Transaction Documents except as set forth in the Transaction Documents. Without limiting the foregoing, the Company confirms
that, except as set forth in this Agreement, no Buyer has made any commitment or promise or has any other obligation to
provide any financing to the Company, any Subsidiary or otherwise. As a material inducement for each Buyer to enter into this
Agreement, the Company expressly acknowledges and agrees that (i) no due diligence or other investigation or inquiry
conducted by a Buyer, any of its advisors or any of its representatives shall affect such Buyer’s right to rely on, or
shall modify or qualify in any manner or be an exception to any of, the Company’s representations and warranties
contained in this Agreement or any other Transaction Document and (ii) unless a provision of this Agreement or any other
Transaction Document is expressly preceded by the phrase “except as disclosed in the SEC Documents,”
nothing contained in any of the SEC Documents shall affect such Buyer’s right to rely on, or shall modify or qualify in
any manner or be an exception to any of, the Company’s representations and warranties contained in this Agreement or
any other Transaction Document. “Required Holders” means (i) prior to the Closing Date, each Buyer
entitled to purchase at least $250,000 in principal amount of the Notes at the Closing and (ii) on or after the Closing Date,
holders of a majority of the Registrable Securities (excluding any Registrable Securities held by the Company or any of its
Subsidiaries) issued or issuable hereunder or pursuant to the Notes and/or the Warrants.

 

    	39

    	 

    
 

(f)Notices.
Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must
be in writing and will be deemed to have been delivered: (i) upon receipt, if delivered personally; (ii) when sent, if sent by
facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party);
(iii) when sent, if sent by e-mail (provided that such sent e-mail is kept on file (whether electronically or otherwise) by the
sending party and the sending party does not receive an automatically generated message from the recipient’s e-mail server
that such e-mail could not be delivered to such recipient) and (iv) if sent by overnight courier service, one (1) Business Day
after deposit with an overnight courier service with next day delivery specified, in each case, properly addressed to the party
to receive the same. The addresses, facsimile numbers and e-mail addresses for such communications shall be:

 

If to the Company:

 

One East Uwchlan Avenue

Suite 301

Exton, Pennsylvania 19341

Telephone: (610) 903-0400

Facsimile: (610) 903-0401

E-mail address: andy.hidalgo@wpcs.com

Attention: Chief Executive Officer

 

    	40

    	 

    
 

With a copy (for informational purposes only) to:

 

Sichenzia Ross Friedman Ference LLP

61 Broadway, 32nd Floor

New York, New York 10006

Telephone: (212) 930-9700

Facsimile: (212) 930-9725

E-mail address: trose@srff.com

Attention: Thomas A. Rose, Esq.

 

If to the Transfer Agent:

 

Interwest Transfer Co., Inc.

1981 Murray Holladay Road, Suite 100

Salt Lake City Utah 84117

Telephone: (801) 272-9294

Facsimile: (801) 277-3147

E-mail address: melinda@interwesttc.com

Attention: Melinda Orth

 

If to a Buyer, to its address and facsimile
number set forth on the Schedule of Buyers, with copies to such Buyer’s representatives as set forth on the Schedule of Buyers,

 

with a copy (for informational purposes only) to:

 

Greenberg Traurig, LLP

MetLife Building

200 Park Avenue

New York, NY 10166

Telephone: (212) 801-9200

Facsimile: (212) 805-9222

E-mail address: adelsteinm@gtlaw.com

Attention: Michael A. Adelstein, Esq.

 

or to such other address, facsimile number
or e-mail address and/or to the attention of such other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change, provided that Greenberg Traurig, LLP shall only be provided
copies of notices sent to the lead Buyer. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver
or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such transmission or (C) provided by an overnight courier service
shall be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight courier service in accordance
with clause (i), (ii) or (iv) above, respectively. A copy of the e-mail transmission containing the time, date and recipient e-mail
address shall be rebuttable evidence of receipt by e-mail in accordance with clause (iii) above.

 

    	41

    	 

    
 

(g)Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors
and assigns, including any purchasers of any of the Securities. The Company shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Required Holders, including, without limitation, by way of a Fundamental Transaction
(as defined in the Warrants) (unless the Company is in compliance with the applicable provisions governing Fundamental Transactions
set forth in the Warrants) or a Fundamental Transaction (as defined in the Notes) (unless the Company is in compliance with the
applicable provisions governing Fundamental Transactions set forth in the Notes). A Buyer may assign some or all of its rights
hereunder in connection with any transfer of any of its Securities without the consent of the Company, in which event such assignee
shall be deemed to be a Buyer hereunder with respect to such assigned rights.

 

(h)No
Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, other than
the Indemnitees referred to in Section 9(k).

 

(i)Survival.
The representations, warranties, agreements and covenants shall survive the Closing. Each Buyer shall be responsible only for
its own representations, warranties, agreements and covenants hereunder.

 

(j)Further
Assurances. Each party shall use its reasonable best efforts to 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
any 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.

 

(k)Indemnification.
In consideration of each Buyer’s execution and delivery of the Transaction Documents and acquiring the Securities
thereunder and in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall
defend, protect, indemnify and hold harmless each Buyer and each holder of any Securities and all of their stockholders,
partners, members, officers, directors, employees and direct or indirect investors and any of the foregoing Persons’
agents or other representatives (including, without limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions,
causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company or any Subsidiary in any of the Transaction Documents, (b) any breach of any
covenant, agreement or obligation of the Company or any Subsidiary contained in any of the Transaction Documents or (c) any
cause of action, suit or claim brought or made against such Indemnitee by a third party (including for these purposes a
derivative action brought on behalf of the Company or any Subsidiary) and arising out of or resulting from (i) the execution,
delivery, performance or enforcement of any of the Transaction Documents, (ii) any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds of the issuance of the Securities, (iii) any disclosure
properly made by such Buyer pursuant to Section 4(i), or (iv) the status of such Buyer or holder of the Securities as an
investor in the Company pursuant to the transactions contemplated by the Transaction Documents. To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. Except as
otherwise set forth herein, the mechanics and procedures with respect to the rights and obligations under this
Section 9(k) shall be the same as those set forth in Section 6 of the Registration Rights Agreement.

 

    	42

    	 

    
 

(l)Construction.
The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and
no rules of strict construction will be applied against any party. No specific representation or warranty shall limit the generality
or applicability of a more general representation or warranty. Each and every reference to share prices, shares of Common Stock
and any other numbers in this Agreement that relate to the Common Stock shall be automatically adjusted for stock splits, stock
combinations and other similar transactions that occur with respect to the Common Stock after the date of this Agreement.

 

(m)Remedies.
Each Buyer and each holder of any Securities shall have all rights and remedies set forth in the Transaction Documents and all
rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights
which such holders have under any law. Any Person having any rights under any provision of this Agreement shall be entitled to
enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by law. Furthermore, the Company recognizes that in the event
that it or any Subsidiary fails to perform, observe, or discharge any or all of its or such Subsidiary’s (as the case may
be) obligations under the Transaction Documents, any remedy at law may prove to be inadequate relief to the Buyers. The Company
therefore agrees that the Buyers shall be entitled to seek specific performance and/or temporary, preliminary and permanent injunctive
or other equitable relief from any court of competent jurisdiction in any such case without the necessity of proving actual damages
and without posting a bond or other security.

 

(n)Withdrawal
Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever any Buyer exercises a right, election, demand or option under a Transaction Document and the Company or any
Subsidiary does not timely perform its related obligations within the periods therein provided, then such Buyer may rescind or
withdraw, in its sole discretion from time to time upon written notice to the Company or such Subsidiary (as the case may be),
any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights

 

(o)Payment
Set Aside; Currency. To the extent that the Company makes a payment or payments to any Buyer hereunder or pursuant to any
of the other Transaction Documents or any of the Buyers enforce or exercise their rights hereunder or thereunder, and such payment
or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent
or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company,
a trustee, receiver or any other Person under any law (including, without limitation, any bankruptcy law, foreign, state or federal
law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred. Unless otherwise expressly indicated, all dollar amounts referred to in this Agreement
and the other Transaction Documents are in United States Dollars (“U.S. Dollars”), and all amounts owing under
this Agreement and all other Transaction Documents shall be paid in U.S. Dollars. All amounts denominated in other currencies
(if any) shall be converted into the U.S. Dollar equivalent amount in accordance with the Exchange Rate on the date of calculation.
“Exchange Rate” means, in relation to any amount of currency to be converted into U.S. Dollars pursuant to
this Agreement, the U.S. Dollar exchange rate as published in the Wall Street Journal on the relevant date of calculation.

 

    	43

    	 

    
 

(p)Judgment
Currency.

 

(i)If
for the purpose of obtaining or enforcing judgment against the Company in connection with this Agreement or any other
Transaction Document in any court in any jurisdiction it becomes necessary to convert into any other currency (such other
currency being hereinafter in this Section 9(p) referred to as the “Judgment Currency”) an amount due in US
Dollars under this Agreement, the conversion shall be made at the Exchange Rate prevailing on the Trading Day immediately
preceding:

 

(1)the date
actual payment of the amount due, in the case of any proceeding in the courts of New York or in the courts of any other jurisdiction
that will give effect to such conversion being made on such date: or

 

(2)the
date on which the foreign court determines, in the case of any proceeding in the courts of any other jurisdiction (the date
as of which such conversion is made pursuant to this Section 9(p)(i)(2) being hereinafter referred to as the
“Judgment Conversion Date”).

 

(ii)If
in the case of any proceeding in the court of any jurisdiction referred to in Section 9(p)(i)(2)  above, there is a
change in the Exchange Rate prevailing between the Judgment Conversion Date and the date of actual payment of the amount due,
the applicable party shall pay such adjusted amount as may be necessary to ensure that the amount paid in the Judgment Currency,
when converted at the Exchange Rate prevailing on the date of payment, will produce the amount of US Dollars which could have
been purchased with the amount of Judgment Currency stipulated in the judgment or judicial order at the Exchange Rate prevailing
on the Judgment Conversion Date.

 

(iii)Any
amount due from the Company under this provision shall be due as a separate debt and shall not be affected by judgment being obtained
for any other amounts due under or in respect of this Agreement or any other Transaction Document.

 

(q)Independent
Nature of Buyers’ Obligations and Rights. The obligations of each Buyer under the Transaction Documents are several
and not joint with the obligations of any other Buyer, and no Buyer shall be responsible in any way for the performance of the
obligations of any other Buyer under any Transaction Document. Nothing contained herein or in any other Transaction Document,
and no action taken by any Buyer pursuant hereto or thereto, shall be deemed to constitute the Buyers as, and the Company acknowledges
that the Buyers do not so constitute, a partnership, an association, a joint venture or any other kind of group or entity, or
create a presumption that the Buyers are in any way acting in concert or as a group or entity with respect to such obligations
or the transactions contemplated by the Transaction Documents or any matters, and the Company acknowledges that the Buyers are
not acting in concert or as a group, and the Company shall not assert any such claim, with respect to such obligations or the
transactions contemplated by the Transaction Documents. The decision of each Buyer to purchase Securities pursuant to the Transaction
Documents has been made by such Buyer independently of any other Buyer. Each Buyer acknowledges that no other Buyer has acted
as agent for such Buyer in connection with such Buyer making its investment hereunder and that no other Buyer will be acting as
agent of such Buyer in connection with monitoring such Buyer’s investment in the Securities or enforcing its rights under
the Transaction Documents. The Company and each Buyer confirms that each Buyer has independently participated with the Company
and its Subsidiaries in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors.
Each Buyer shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising
out of this Agreement or out of any other Transaction Documents, and it shall not be necessary for any other Buyer to be joined
as an additional party in any proceeding for such purpose. The use of a single agreement to effectuate the purchase and sale of
the Securities contemplated hereby was solely in the control of the Company, not the action or decision of any Buyer, and was
done solely for the convenience of the Company and its Subsidiaries and not because it was required or requested to do so by any
Buyer. It is expressly understood and agreed that each provision contained in this Agreement and in each other Transaction Document
is between the Company, each Subsidiary and a Buyer, solely, and not between the Company, its Subsidiaries and the Buyers collectively
and not between and among the Buyers.

 

[signature pages follow]

 

    	44

    	 

    
 

IN WITNESS WHEREOF,
each Buyer and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first
written above.

 

 

	
        COMPANY:

         

	
        WPCS International
        incorporated 

         

        By:/s/ Joseph Heater                                          

        Name: Joseph Heater

        Title: Chief Financial
        Officer

         

    	 

    	 

     

IN WITNESS WHEREOF,
each Buyer and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first
written above.

 

	 	
        BUYER:

         

	 	HUDSON BAY MASTER FUND LTD.

         

        By: /s/ Yoav
        Roth                                

        Name: Yoav Roth

        Title: Authorized Signatory 

         

  

    	 

    	 

    
 

IN WITNESS WHEREOF,
each Buyer and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first
written above.

 

 

	 	
        BUYER:

         

	 	
        Iroquois Master Fund
        Ltd. 

         

        By: /s/ Joshua
        Silverman                             

        Name: Joshua Silverman

        Title: Director

 

    	 

    	 

    
 

IN WITNESS WHEREOF,
each Buyer and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first
written above.

 

 

	 	
        BUYER:

         

	 	
        American Capital
        Management LLC 

         

        By:/s/ Philip Mirabelli                                          

        Name: Philip Mirabelli

        Title: Managing Member

         

 

    	 

    	 

    
 

IN WITNESS WHEREOF,
each Buyer and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first
written above.

 

 

	 	
        BUYER:

         

	 	
        Bay Capital A.G.
        

         

        By:  /s/ D.
        Hauenstein/ /s/ F. Buser                   
         Name: D. Hauenstein/ F. Buser

        Title: Director/ Director

         

 

    	 

    	 

    
 

IN WITNESS WHEREOF,
each Buyer and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first
written above.

 

 

	 	
        BUYER:

         

	 	
        GRQ Consultants,
        Inc. 401K

         

        By: /s/ Barry
        Honig                             

        Name: Barry Honig

        Title: Trustee

         

 

    	 

    	 

    
 

IN WITNESS WHEREOF,
each Buyer and the Company have caused their respective signature page to this Agreement to be duly executed as of the date first
written above.

 

 

	 	
        BUYER:

         

	 	
         

         

        /s/ Richard Molinsky                                  

        RICHARD MOLINSKY

         

         

 

    	 

    	 

    
 

SCHEDULE
OF BUYERS

 

 

	(1)	(2)	(3)	(4)	(5)	(6)
	 	 	 	 	 	 
	
        Buyer
	
        Address
        and Facsimile Number
	
        Original
        Principal Amount of Notes
	
        Aggregate

        Number of

        Warrant Shares
	
        Purchase
        Price
	
        Legal
        Representative’s

        Address and Facsimile Number

	 	 	 	 	 	 
	Hudson Bay Master Fund Ltd.	777 Third Avenue, 30th Floor
 New York, NY 10017
 Attention:  Yoav Roth
 Facsimile:  (212) 571-1279
 E-mail:  investments@hudsonbaycapital.com
 Residence:  Cayman Islands	$1,357,500	5,404,061	$1,357,500	
N/A
	Iroquois Master Fund Ltd.	
         

        c/o Iroquois Capital Management, LLC

        641 Lexington Avenue

        26th Floor

        New York, NY 10022

        Attention: Joshua Silverman

        Facsimile: (646) 274-1728

        Telephone: (212) 974-3070

        Email: jsilverman@icfunds.com

        Residence: Cayman Islands

         
	$1,257,500	5,005,971	$1,257,500	N/A
	American Capital Management LLC	
         

        c/o Iroquois Capital Management, LLC

        641 Lexington Avenue

        26th Floor

        New York, NY 10022

        Attention: Joshua Silverman

        Facsimile: (646) 274-1728

        Telephone: (212) 974-3070

        Email: jsilverman@icfunds.com

        Residence: Cayman Islands

         
	$100,000	398,089	$100,000	N/A

 

    	 

    	 

    
 

	(1)	(2)	(3)	(4)	(5)	(6)
	 	 	 	 	 	 
	
        Buyer
	
        Address
        and Facsimile Number
	
        Original
        Principal Amount of Notes
	
        Aggregate

        Number of

        Warrant Shares
	
        Purchase
        Price
	
        Legal
        Representative’s

        Address and Facsimile Number

	 	 	 	 	 	 
	Bay Capital A.G.	Oberneuhofstrasse 5
 6340, Baar
 Switzerland
 Residence: Switzerland	$600,000	2,388,535	$600,000	N/A
	GRQ Consultants, Inc. 401K	c/o Barry Honig
 4400 Biscayne Blvd. #850
 Miami, FL 33137
 Email:  BRHonig@aol.com
 Residence: Florida
 
	$600,000	2,388,535	$600,000	N/A
	Richard Molinsky	51 Lords Hwy East
 Weston,CT 06883
 Email: rmol15@aol.com
 Residence: Connecticut	$85,000	338,376	$85,000	N/A
	TOTAL	 	$4,000,000	15,923,567	$4,000,000Exhibit
10.02

 

[FORM OF SENIOR SECURED
CONVERTIBLE NOTE]

 

NEITHER THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED BY THIS NOTE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER
SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE,
INCLUDING SECTIONS 3(c)(iii) AND 18(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE AND, ACCORDINGLY, THE SECURITIES ISSUABLE
UPON CONVERSION HEREOF MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 3(c)(iii) OF THIS NOTE.

 

WPCS
International Incorporated

 

Senior
Secured Convertible Note

 

	Issuance Date:  December __, 2012	Original Principal Amount: U.S. $[         ]

 

FOR VALUE RECEIVED,
WPCS International Incorporated, a Delaware corporation (the “Company”), hereby promises to pay to the order
of [BUYERS] or its registered assigns (“Holder”) the amount set out above as the Original Principal Amount (as
reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the “Principal”) when
due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with
the terms hereof) and to pay interest (“Interest”) on any outstanding Principal (as defined below) at the applicable
Interest Rate (as defined below) from the date set out above as the Issuance Date (the “Issuance Date”)
until the same becomes due and payable, whether upon the Maturity Date or acceleration, conversion, redemption or otherwise (in
each case in accordance with the terms hereof). This Senior Secured Convertible Note (including all Senior Secured Convertible
Notes issued in exchange, transfer or replacement hereof, this “Note”) is one of an issue of Senior Secured
Convertible Notes issued pursuant to the Securities Purchase Agreement (as defined below) on the Closing Date (as defined below)
(collectively, the “Notes” and such other Senior Secured Convertible Notes, the “Other Notes”).
Certain capitalized terms used herein are defined in Section 30.

 

    	 

    	 	

    
 

1.          PAYMENTS
OF PRINCIPAL. On the Maturity Date, the Company shall pay to the Holder an amount in cash representing all outstanding Principal,
accrued and unpaid Interest and accrued and unpaid Late Charges on such Principal and Interest. Other than as specifically permitted
by this Note, the Company may not prepay any portion of the outstanding Principal, accrued and unpaid Interest or accrued and unpaid
Late Charges on Principal and Interest, if any.

 

2.          INTEREST;
INTEREST RATE. Interest on this Note shall commence accruing on the Issuance Date, shall accrue daily at the Interest Rate
on the outstanding Principal amount from time to time, shall be computed on the basis of a 360-day year comprised of twelve (12)
thirty (30) day months and shall be payable in arrears on the first Trading Day of each Quarter, commencing on February 1, 2013
(each, an “Interest Date”) and shall compound each calendar month and shall be payable in accordance with the
terms of this Note. From and after the occurrence and during the continuance of any Event of Default, the Interest Rate shall automatically
be increased to fifteen percent (15%). In the event that such Event of Default is subsequently cured, the adjustment referred to
in the preceding sentence shall cease to be effective as of the date of such cure, provided that the Interest as calculated and
unpaid at such increased rate during the continuance of such Event of Default shall continue to apply to the extent relating to
the days after the occurrence of such Event of Default through and including the date of such cure of such Event of Default.

 

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

 

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

 

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

 

(i)          “Conversion
Amount” means the portion of the Principal to be converted, redeemed or otherwise with respect to which this determination
is being made, plus all accrued and unpaid Interest with respect to such portion of the Principal amount
and accrued and unpaid Late Charges with respect to such portion of such Principal and such Interest.

 

    	2

    	 

    
 

(ii)          “Conversion
Price” means, as of any Conversion Date or other date of determination, $0.3768, subject to adjustment as provided herein.

 

(c)          Mechanics
of Conversion.

 

(i)          Optional
Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a “Conversion Date”),
the Holder shall deliver (whether via facsimile or otherwise), for receipt on or prior to 11:59 p.m., New York time, on such date,
a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the “Conversion Notice”)
to the Company. If required by Section 33(c)(iii), within three (3) Trading Days following a conversion of this Note as aforesaid,
the Holder shall surrender this Note to a nationally recognized overnight delivery service for delivery to the Company (or an indemnification
undertaking with respect to this Note in the case of its loss, theft or destruction as contemplated by Section 18(b)). On or before
the first (1st) Trading Day following the date of receipt of a Conversion Notice, the Company shall transmit by facsimile
an acknowledgment of confirmation, in the form attached hereto as Exhibit II, of receipt of such Conversion Notice to the
Holder and the Company’s transfer agent (the “Transfer Agent”). On or before the second (2nd)
Trading Day following the date of receipt of a Conversion Notice, the Company shall (1) provided that the Transfer Agent is participating
in The Depository Trust Company’s (“DTC”) Fast Automated Securities Transfer Program, credit such aggregate
number of shares of Common Stock to which the Holder shall be entitled to the Holder’s or its designee’s balance account
with DTC through its Deposit/Withdrawal at Custodian system or (2) if the Transfer Agent is not participating in the DTC Fast Automated
Securities Transfer Program, issue and deliver (via reputable overnight courier) to the address as specified in the Conversion
Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which
the Holder shall be entitled. If this Note is physically surrendered for conversion pursuant to Section 3(c)(iii) and the outstanding
Principal of this Note is greater than the Principal portion of the Conversion Amount being converted, then the Company shall as
soon as practicable and in no event later than three (3) Business Days after receipt of this Note and at its own expense, issue
and deliver to the Holder (or its designee) a new Note (in accordance with Section 18(d)) representing the outstanding Principal
not converted. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall
be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date.

 

    	3

    	 

    
 

(ii)          Company’s
Failure to Timely Convert. If the Company shall fail, for any reason or for no reason, to issue to the Holder within three
(3) Trading Days after the Company’s receipt of a Conversion Notice (whether via facsimile or otherwise), a certificate for
the number of shares of Common Stock to which the Holder is entitled and register such shares of Common Stock on the Company’s
share register or to credit the Holder’s or its designee’s balance account with DTC for such number of shares of Common
Stock to which the Holder is entitled upon the Holder’s conversion of any Conversion Amount (as the case may be) (a “Conversion
Failure”), then, in addition to all other remedies available to the Holder, (1) the Company shall pay in cash to the
Holder on each day after such third (3rd) Trading Day that the issuance of such shares of Common Stock is not timely
effected an amount equal to 1% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on
a timely basis and to which the Holder is entitled multiplied by (B) the Closing Sale Price of the Common Stock on the Trading
Day immediately preceding the last possible date which the Company could have issued such shares of Common Stock to the Holder
without violating Section 3(c)(i) and (2) the Holder, upon written notice to the Company, may void its Conversion Notice with respect
to, and retain or have returned (as the case may be) any portion of this Note that has not been converted pursuant to such Conversion
Notice, provided that the voiding of a Conversion Notice shall not affect the Company’s obligations to make any payments
which have accrued prior to the date of such notice pursuant to this Section 3(c)(ii) or otherwise. In addition to the foregoing,
if within three (3) Trading Days after the Company’s receipt of a Conversion Notice (whether via facsimile or otherwise),
the Company shall fail to issue and deliver a certificate to the Holder and register such shares of Common Stock on the Company’s
share register or credit the Holder’s or its designee’s balance account with DTC for the number of shares of Common
Stock to which the Holder is entitled upon the Holder’s conversion hereunder (as the case may be), and if on or after such
third (3rd) Trading Day 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 shares of Common Stock issuable upon such conversion that the Holder 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 (the “Buy-In Price”), at which point the Company’s obligation
to deliver such certificate (and to issue such shares of Common Stock) shall terminate, or (ii) promptly honor its obligation to
deliver to the Holder a certificate or certificates representing such shares of Common Stock or credit the Holder’s balance
account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder’s conversion hereunder
(as the case may be) and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product
of (A) such number of shares of Common Stock multiplied by (B) the Closing Sale Price of the Common Stock on the Trading Day immediately
preceding the Conversion Date.

 

(iii)          Registration;
Book-Entry. The Company shall maintain a register (the “Register”) for the recordation of the names and
addresses of the holders of each Note and the principal amount of the Notes held by such holders (the “Registered Notes”).
The entries in the Register shall be conclusive and binding for all purposes absent manifest error. The Company and the holders
of the Notes shall treat each Person whose name is recorded in the Register as the owner of a Note for all purposes, including,
without limitation, the right to receive payments of Principal and Interest hereunder, notwithstanding notice to the contrary.
A Registered Note may be assigned or sold in whole or in part only by registration of such assignment or sale on the Register.
Upon its receipt of a request to assign or sell all or part of any Registered Note by a Holder, the Company shall record the information
contained therein in the Register and issue one or more new Registered Notes in the same aggregate principal amount as the principal
amount of the surrendered Registered Note to the designated assignee or transferee pursuant to Section 18. Notwithstanding anything
to the contrary set forth in this Section 3, upon conversion of any portion of this Note in accordance with the terms hereof, the
Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion Amount represented
by this Note is being converted (in which event this Note shall be delivered to the Company as contemplated by Section 3(c)(i))
or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting
reissuance of this Note upon physical surrender of this Note. The Company shall update the Register to reflect the Principal, Interest
and Late Charges converted and/or paid (as the case may be) and the dates of such conversions and/or payments (as the case may
be) or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender
of this Note upon conversion.

 

    	4

    	 

    
 

(iv)          Pro
Rata Conversion; Disputes. In the event that the Company receives a Conversion Notice from more than one holder of Notes for
the same Conversion Date and the Company can convert some, but not all, of such portions of the Notes submitted for conversion,
the Company, subject to Section 3(d), shall convert from each holder of Notes electing to have Notes converted on such date a pro
rata amount of such holder’s portion of its Notes submitted for conversion based on the principal amount of Notes submitted
for conversion on such date by such holder relative to the aggregate principal amount of all Notes submitted for conversion on
such date. In the event of a dispute as to the number of shares of Common Stock issuable to the Holder in connection with a conversion
of this Note, the Company shall issue to the Holder the number of shares of Common Stock not in dispute and resolve such dispute
in accordance with Section 23.

 

(d)          Limitations
on Conversions.

 

(i)          Beneficial
Ownership. Notwithstanding anything to the contrary contained in this Note, this Note shall not be convertible by the Holder
hereof, and the Company shall not effect any conversion of this Note or otherwise issue any shares of Common Stock pursuant hereto,
to the extent (but only to the extent) that after giving effect to such conversion or other share issuance hereunder the Holder
(together with its affiliates) would beneficially own in excess of 9.99% (the “Maximum Percentage”) of the
Common Stock. To the extent the above limitation applies, the determination of whether this Note shall be convertible (vis-à-vis
other convertible, exercisable or exchangeable securities owned by the Holder or any of its affiliates) 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 convert this Note, or to issue shares of Common Stock, pursuant to this paragraph
shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of
convertibility. For 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
1934 Act (as defined in the Securities Purchase Agreement) 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 Note. 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 Note or securities issued pursuant to the Securities Purchase Agreement.

 

    	5

    	 

    
 

(ii)          Principal
Market Regulation. The Company shall not issue any shares of Common Stock upon conversion of this Note if the issuance of such
shares of Common Stock would exceed the aggregate number of shares of Common Stock which the Company may issue upon exercise or
conversion (as the case may be) of the Warrants and the Notes without breaching the Company’s obligations under the rules
or regulations of the Principal Market (the number of shares which may be issued without violating such rules and regulations,
the “Exchange Cap”), except that such limitation shall not apply in the event that the Company (A) obtains the
approval of its stockholders as required by the applicable rules of the Principal Market for issuances of shares of Common Stock
in excess of such amount or (B) obtains a written opinion from outside counsel to the Company that such approval is not required,
which opinion shall be reasonably satisfactory to the Holder. Until such approval or such written opinion is obtained, no Buyer
(as defined in the Securities Purchase Agreement) shall be issued in the aggregate, upon conversion or exercise (as the case may
be) of any Notes or any of the Warrants, shares of Common Stock in an amount greater than the product of (i) the Exchange Cap as
of the Issuance Date multiplied by (ii) the quotient of (1) the original principal amount of the Note issued to such Buyer pursuant
to the Securities Purchase Agreement on the Closing Date divided by (2) the aggregate original principal amount of all Notes issued
to the Buyers pursuant to the Securities Purchase Agreement on the Closing Date (with respect to each Buyer, the “Exchange
Cap Allocation”). In the event that any Buyer shall sell or otherwise transfer any of such Buyer’s Notes, the transferee
shall be allocated a pro rata portion of such Buyer’s Exchange Cap Allocation with respect to such portion of such Notes
so transferred, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange
Cap Allocation so allocated to such transferee. Upon conversion and exercise in full of a holder’s Notes and Warrants, the
difference (if any) between such holder’s Exchange Cap Allocation and the number of shares of Common Stock actually issued
to such holder upon such holder's conversion in full of such Notes and such holder’s exercise in full of such Warrants shall
be allocated to the respective Exchange Cap Allocations of the remaining holders of Notes and Warrants on a pro rata basis in proportion
to the shares of Common Stock underlying the Notes and Warrants then held by each such holder.

 

    	6

    	 

    
 

4.          RIGHTS
UPON EVENT OF DEFAULT.

 

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

 

(i)          the
failure of the applicable Registration Statement (as defined in the Registration Rights Agreement) to be filed with the SEC on
or prior to the date that is ten (10) days after the applicable Filing Deadline (as defined in the Registration Rights Agreement)
or the failure of the applicable Registration Statement to be declared effective by the SEC on or prior to the date that is fifteen
(15) days after the applicable Effectiveness Deadline (as defined in the Registration Rights Agreement) and the Holder does not
then have the right to sell all of such Holder’s Registrable Securities without restriction pursuant to Rule 144 (including,
without limitation, volume limitations);

 

(ii)          while
the applicable Registration Statement is required to be maintained effective pursuant to the terms of the Registration Rights Agreement,
the effectiveness of the applicable Registration Statement lapses for any reason (including, without limitation, the issuance of
a stop order) or such Registration Statement (or the prospectus contained therein) is unavailable to any holder of Registrable
Securities (as defined in the Registration Rights Agreement) for sale of all of such holder’s Registrable Securities in accordance
with the terms of the Registration Rights Agreement, and (I) such lapse or unavailability continues for a period of five (5) consecutive
days or for more than an aggregate of ten (10) days in any 365-day period (excluding days during an Allowable Grace Period (as
defined in the Registration Rights Agreement)) and (II) any such holder does not then have the right to sell all of such holder’s
Registrable Securities without restriction pursuant to Rule 144 (including, without limitation, volume limitations);

 

(iii)          the
suspension (or threatened suspension) from trading or the failure (or threatened failure) of the Common Stock to be trading or
listed (as applicable) on an Eligible Market for a period of five (5) consecutive days or for more than an aggregate of ten (10)
days in any 365-day period;

 

(iv)          the
Company’s (A) failure to cure a Conversion Failure or a Delivery Failure (as defined in the Warrants) by delivery of the
required number of shares of Common Stock within five (5) Trading Days after the applicable Conversion Date or exercise date (as
the case may be) or (B) notice, written or oral, to any holder of the Notes or Warrants, including, without limitation, by way
of public announcement or through any of its agents, at any time, of its intention not to comply, as required, with a request for
conversion of any Notes into shares of Common Stock that is requested in accordance with the provisions of the Notes, other than
pursuant to Section 3(d), or a request for exercise of any Warrants for Warrant Shares in accordance with the provisions of the
Warrants, other than pursuant to Section 1(f) of the Warrants;

 

(v)          at
any time following the tenth (10th) consecutive day that the Holder’s Authorized Share Allocation is less than
the number of shares of Common Stock that the Holder would be entitled to receive upon a conversion of the full Conversion Amount
of this Note (without regard to any limitations on conversion set forth in Section 3(d) or otherwise);

 

    	7

    	 

    
 

(vi)          the
Company’s or any Subsidiary’s failure to pay to the Holder any amount of Principal, Interest, Late Charges or other
amounts when and as due under this Note (including, without limitation, the Company’s or any Subsidiary’s failure to
pay any redemption payments or amounts hereunder) or any other Transaction Document (as defined in the Securities Purchase Agreement)
or any other agreement, document, certificate or other instrument delivered in connection with the transactions contemplated hereby
and thereby, except, in the case of a failure to pay Interest and Late Charges when and as due, in which case only if such failure
remains uncured for a period of at least five (5) days;

 

(vii)          the
Company fails to remove any restrictive legend on any certificate or any shares of Common Stock issued to the Holder upon conversion
or exercise (as the case may be) of any Securities acquired by the Holder under the Securities Purchase Agreement (including this
Note) as and when required by such Securities or the Securities Purchase Agreement, unless otherwise then prohibited by applicable
federal securities laws, and any such failure remains uncured for at least five (5) days;

 

(viii)          the
occurrence of any default under, redemption of or acceleration prior to maturity of any Indebtedness (as defined in the Securities
Purchase Agreement) of the Company or any of its Subsidiaries, other than with respect to any Other Notes or any amounts not in
excess of an aggregate of $25,000; (other than a Subsidiary in connection with the financing arrangement with Zurich American Insurance
Company described on Schedule 4(a)(viii) attached hereto (the “Zurich Matter”));

 

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

 

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

 

    	8

    	 

    
 

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

 

(xii)          a
final judgment or judgments for the payment of money aggregating in excess of $100,000 are rendered against the Company and/or
any of its Subsidiaries and which judgments are not, within forty-five (45) days after the entry thereof, bonded, discharged or
stayed pending appeal, or are not discharged within thirty (30) days after the expiration of such stay; provided, however, any
judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the $100,000
amount set forth above so long as the Company provides the Holder a written statement from such insurer or indemnity provider (which
written statement shall be reasonably satisfactory to the Holder) to the effect that such judgment is covered by insurance or an
indemnity and the Company or such Subsidiary (as the case may be) will receive the proceeds of such insurance or indemnity within
forty-five (45) days of the issuance of such judgment;

 

(xiii)          except
with respect to the Zurich Matter, the Company and/or any Subsidiary, individually or in the aggregate, either (i) fails to pay,
when due, or within any applicable grace period, any payment with respect to any Indebtedness in excess of $100,000 due to any
third party (other than, with respect to unsecured Indebtedness only, payments contested by the Company and/or such Subsidiary
(as the case may be) in good faith by proper proceedings and with respect to which adequate reserves have been set aside for the
payment thereof in accordance with GAAP) or is otherwise in breach or violation of any agreement for monies owed or owing in an
amount in excess of $100,000, which breach or violation permits the other party thereto to declare a default or otherwise accelerate
amounts due thereunder, or (ii) suffer to exist any other circumstance or event that would, with or without the passage of time
or the giving of notice, result in a default or event of default under any agreement binding the Company or any Subsidiary, which
default or event of default would or is likely to have a material adverse effect on the business, assets, operations (including
results thereof), liabilities, properties, condition (including financial condition) or prospects of the Company or any of its
Subsidiaries, individually or in the aggregate;

 

    	9

    	 

    
 

(xiv)          other
than as specifically set forth in another clause of this Section 4(a), the Company or any
Subsidiary breaches any representation, warranty, covenant or other term or condition of any Transaction Document (including, without
limitation, the Security Documents (as defined in the Securities Purchase Agreement) and the Guaranties (as defined in the Securities
Purchase Agreement)), except, in the case of a breach of a covenant or other term or condition that is curable, only if such breach
remains uncured for a period of three (3) consecutive Trading Days;

 

(xv)          a
false or inaccurate certification (including a false or inaccurate deemed certification) by the Company that the Equity Conditions
are satisfied, that there has been no Equity Conditions Failure or Volume Failure or as to whether any Event of Default has occurred;

 

(xvi)          any
breach or failure in any respect by the Company or any Subsidiary to comply with any provision of Section 13 of this Note, except,
in the case of a breach of Section 13(m) that is curable, only if such breach remains uncured for a period of five (5) consecutive
Business Days;

 

(xvii)          any
Material Adverse Effect (as defined in the Securities Purchase Agreement) occurs;

 

(xviii)          any
provision of any Transaction Document (including, without limitation, the Security Documents and the Guaranties) shall at any time
for any reason (other than pursuant to the express terms thereof) cease to be valid and binding on or enforceable against the parties
thereto, or the validity or enforceability thereof shall be contested by any party thereto, or a proceeding shall be commenced
by the Company or any Subsidiary or any governmental authority having jurisdiction over any of them, seeking to establish the invalidity
or unenforceability thereof, or the Company or any Subsidiary shall deny in writing that it has any liability or obligation purported
to be created under any Transaction Document (including, without limitation, the Security Documents and the Guaranties);

 

(xix)          the
Security Documents shall for any reason fail or cease to create a separate valid and perfected and, except to the extent permitted
by the terms hereof or thereof, first priority Lien on the Collateral (as defined in the Security Agreement) in favor of the Collateral
Agent;

 

(xx)          any
material damage to, or loss, theft or destruction of, any Collateral, whether or not insured, or any strike, lockout, labor dispute,
embargo, condemnation, act of God or public enemy, or other casualty which causes, for more than fifteen (15) consecutive days,
the cessation or substantial curtailment of revenue producing activities at any facility of the Company or any Subsidiary, if any
such event or circumstance could have a Material Adverse Effect; or

 

    	10

    	 

    
 

(xxi)          any
Event of Default (as defined in the Other Notes) occurs with respect to any Other Notes.

 

(b)          Notice
of an Event of Default; Redemption Right. Upon the occurrence of an Event of Default with respect to this Note or any Other
Note, the Company shall within one (1) Business Day deliver written notice thereof via facsimile and overnight courier (with next
day delivery specified) (an “Event of Default Notice”) to the Holder. At any time after the earlier of the Holder’s
receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default, the Holder may require the Company
to redeem (regardless of whether such Event of Default has been cured) all or any portion of this Note by delivering written notice
thereof (the “Event of Default Redemption Notice”) to the Company, which Event of Default Redemption Notice
shall indicate the portion of this Note the Holder is electing to have the Company redeem. Each portion of this Note subject to
redemption by the Company pursuant to this Section 4(b) shall be redeemed by the Company at a price equal to the greater of (i)
the product of (A) the Conversion Amount to be redeemed multiplied by (B) the Redemption Premium and (ii) the product of (X) the
Conversion Rate with respect to the Conversion Amount in effect at such time as the Holder delivers an Event of Default Redemption
Notice multiplied by (Y) the product of (1) the Equity Value Redemption Premium multiplied by (2) the greatest Closing Sale Price
of the Common Stock on any Trading Day during the period commencing on the date immediately preceding such Event of Default and
ending on the date the Company makes the entire payment required to be made under this Section 4(b) (the “Event of Default
Redemption Price”). Redemptions required by this Section 4(b) shall be made in accordance with the provisions of Section
11. To the extent redemptions required by this Section 4(b) are deemed or determined by a court of competent jurisdiction to be
prepayments of this Note by the Company, such redemptions shall be deemed to be voluntary prepayments. Notwithstanding anything
to the contrary in this Section 4(b), but subject to Section 3(d), until the Event of Default Redemption Price (together with any
Late Charges thereon) is paid in full, the Conversion Amount submitted for redemption under this Section 4(b) (together with any
Late Charges thereon) may be converted, in whole or in part, by the Holder into Common Stock pursuant to the terms of this Note.
In the event of the Company’s redemption of any portion of this Note 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.

 

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5.          RIGHTS
UPON FUNDAMENTAL TRANSACTION.

 

(a)          Assumption.
The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes in writing
all of the obligations of the Company under this Note and the other Transaction Documents in accordance with the provisions of
this Section 5(a) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holder prior
to such Fundamental Transaction, including agreements to deliver to each holder of Notes in exchange for such Notes a security
of the Successor Entity evidenced by a written instrument substantially similar in form and substance to the Notes, including,
without limitation, having a principal amount and interest rate equal to the principal amounts then outstanding and the interest
rates of the Notes held by such holder, having similar conversion rights as the Notes and having similar ranking to the Notes,
and satisfactory to the Holder and (ii) the Successor Entity (including its Parent Entity) is a publicly traded corporation
whose common stock is quoted on or listed for trading on an Eligible Market. Upon the occurrence of any Fundamental Transaction,
the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction,
the provisions of this Note and the other Transaction Documents referring to the “Company” shall refer instead to the
Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company
under this Note and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company
herein. Upon consummation of a Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there
shall be issued upon conversion or redemption of this Note at any time after the consummation of such Fundamental Transaction,
in lieu of the shares of the Company’s Common Stock (or other securities, cash, assets or other property (except such items
still issuable under Sections 6 and 15, which shall continue to be receivable thereafter) issuable upon the conversion or redemption
of the Notes prior to such Fundamental Transaction, such shares of the publicly traded common stock (or their equivalent) of the
Successor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of such
Fundamental Transaction had this Note been converted immediately prior to such Fundamental Transaction (without regard to any limitations
on the conversion of this Note), as adjusted in accordance with the provisions of this Note. Notwithstanding the foregoing, the
Holder may elect, at its sole option, by delivery of written notice to the Company to waive this Section 5(a) to permit the Fundamental
Transaction without the assumption of this Note. The provisions of this Section 5 shall apply similarly and equally to successive
Fundamental Transactions and shall be applied without regard to any limitations on the conversion of this Note.

 

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(b)          Notice
of a Fundamental Transaction; Redemption Right. No sooner than twenty (20) Trading Days nor later than ten (10) Trading Days
prior to the consummation of a Fundamental Transaction, but not prior to the public announcement of such Fundamental Transaction,
the Company shall deliver written notice thereof via facsimile and overnight courier to the Holder (a “Fundamental Transaction
Notice”). At any time during the period beginning after the Holder’s receipt of a Fundamental Transaction Notice
or the Holder becoming aware of a Fundamental Transaction if a Fundamental Transaction Notice is not delivered to the Holder in
accordance with the immediately preceding sentence (as applicable) and ending on the later of twenty (20) Trading Days after (A)
consummation of such Fundamental Transaction or (B) the date of receipt of such Fundamental Transaction Notice, the Holder may
require the Company to redeem all or any portion of this Note by delivering written notice thereof (“Fundamental Transaction
Redemption Notice”) to the Company, which Fundamental Transaction Redemption Notice shall indicate the Conversion Amount
the Holder is electing to redeem. The portion of this Note subject to redemption pursuant to this Section 5 shall be redeemed by
the Company in cash at a price equal to the greater of (i) the product of (w) the Fundamental Transaction Redemption Premium multiplied
by (y) the Conversion Amount being redeemed, (ii) the product of (x) the Equity Value Redemption Premium multiplied by (y) the
product of (A) the Conversion Amount being redeemed multiplied by (B) the quotient determined by dividing (I) the greatest Closing
Sale Price of the Common Stock during the period beginning on the date immediately preceding the earlier to occur of (1) the consummation
of the Fundamental Transaction and (2) the public announcement of such Fundamental Transaction and ending on the date the Holder
delivers the Fundamental Transaction Redemption Notice by (II) the Conversion Price
then in effect and (iii) the product of (y) the Equity Value Redemption Premium multiplied by (z) the product of (A)
the Conversion Amount being redeemed multiplied by (B) the quotient of (I) the aggregate cash consideration and the aggregate cash
value of any non-cash consideration per share of Common Stock to be paid to the holders of the shares of Common Stock upon consummation
of such Fundamental Transaction (any such non-cash consideration constituting publicly-traded securities shall be valued at the
highest of the Closing Sale Price of such securities as of the Trading Day immediately prior to the consummation of such Fundamental
Transaction, the Closing Sale Price of such securities on the Trading Day immediately following the public announcement of such
proposed Fundamental Transaction and the Closing Sale Price of such securities on the Trading Day immediately prior to the public
announcement of such proposed Fundamental Transaction) divided by (II) the Conversion Price then in effect (the “Fundamental
Transaction Redemption Price”). Redemptions required by this Section 5 shall be made in accordance with the provisions
of Section 11 and shall have priority to payments to stockholders in connection with such Fundamental Transaction. To the extent
redemptions required by this Section 5(b) are deemed or determined by a court of competent jurisdiction to be prepayments of this
Note by the Company, such redemptions shall be deemed to be voluntary prepayments. Notwithstanding anything to the contrary in
this Section 5, but subject to Section 3(d), until the Fundamental Transaction Redemption Price (together with any Late Charges
thereon) is paid in full, the Conversion Amount submitted for redemption under this Section 5(b) (together with any Late Charges
thereon) may be converted, in whole or in part, by the Holder into Common Stock pursuant to Section 3. In the event of the Company’s
redemption of any portion of this Note under this Section 5(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 5(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.

 

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(c)          Adjustment
to the Conversion Rate Upon a Fundamental Transaction.

 

(i)          In
connection with a Fundamental Transaction, if the Holder converts its Note at any time beginning on the date of the Fundamental
Transaction Notice and ending at the close of business on the Trading Day immediately prior to the applicable Fundamental Transaction
Date, the Company will increase the Conversion Rate per $1,000 principal amount of Notes converted by a number of additional shares
(the “Additional Shares”) for such Note as described in Section 5(c)(ii) hereof; provided that (A) such increase
in the Conversion Rate shall not take place if such Fundamental Transaction is not consummated, (B) the Company shall issue shares
of Common Stock at the Conversion Rate (excluding such increase) on the earlier to occur of (x) the third (3rd) Trading Day after
the Conversion Date and (y) the time immediately prior to such Fundamental Transaction and (C) the Company shall issue such Additional
Shares at the time immediately prior to such Fundamental Transaction; provided, that if the issuance of any Additional Shares would
cause the Holder or any of its affiliates to beneficially own shares of Common Stock (or securities of the Successor Entity or
other issuer upon the consummation of the Fundamental Transaction) in excess of the Maximum Percentage (a “Maximum Percentage
Event”), the Holder shall have the right, exercisable by the delivery of one or more written notices to the Company,
to cause the Company to alternatively issue to the Holder such Additional Shares (or the cash, securities and/or other consideration
to be issued in exchange for such Additional Shares in such Fundamental Transaction, if applicable), or such portion thereof as
set forth in the applicable notice, on or prior to the third (3rd) Trading Day after the Holder delivers the applicable
notice to the Company (or the Public Successor Entity or other issuer, as applicable) that the issuance of such Additional Shares
(or the cash, securities and/or other consideration to be issued in exchange for such Additional Shares in such Fundamental Transaction,
if applicable), or such portion thereof as set forth in the applicable Notice, would not result in a Maximum Percentage Event.

 

(ii)          The
number of Additional Shares will be determined by the quotient of (x) the Additional Share Amount and (y) the lowest of (A) the
Conversion Price as in effect on the Trading Day immediately prior to the applicable Conversion Date, (B) 85% of the lowest Closing
Bid Price of the Common Stock during the period beginning on and including the earlier to occur of (I) any oral or written agreement
by the Company or any of its Subsidiaries, which upon consummation of the transaction contemplated thereby would reasonably be
expected to result in a Fundamental Transaction and (II) the Holder's receipt of a Fundamental Transaction Notice and ending on
and including the Trading Day immediately prior to the applicable Conversion Date and (C) 85% of the VWAP for the five (5) Trading
Day period immediately preceding the applicable Conversion Date.

 

6.          RIGHTS
UPON ISSUANCE OF PURCHASE RIGHTS AND OTHER CORPORATE EVENTS.

 

(a)          Purchase
Rights. In addition to any adjustments pursuant to Section 7 below, 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 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 conversion of this Note (without taking into account any limitations
or restrictions on the convertibility of this Note) 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 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)          Other
Corporate Events. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental
Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect
to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision
to insure that the Holder will thereafter have the right to receive upon a conversion of this Note (i) in addition to the shares
of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with
respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate
Event (without taking into account any limitations or restrictions on the convertibility of this Note) or (ii) in lieu of the shares
of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of
Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled
to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to shares
of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Rate. Provision made pursuant to
the preceding sentence shall be in a form and substance satisfactory to the Holder. The provisions of this Section 6 shall apply
similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion or
redemption of this Note.

 

7.          RIGHTS
UPON ISSUANCE OF OTHER SECURITIES.

 

(a)          Adjustment
of Conversion Price upon Issuance of Common Stock. If and whenever on or after the Subscription Date the Company issues or
sells, or in accordance with this Section 7(a) 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 Conversion Price in effect immediately prior
to such issue or sale or deemed issuance or sale (such Conversion Price then in effect is referred to herein as the “Applicable
Price”) (the foregoing a “Dilutive Issuance”), then, immediately after such Dilutive Issuance, the
Conversion Price then in effect shall be reduced to an amount equal to the New Issuance Price. For all purposes of the foregoing
(including, without limitation, determining the adjusted Conversion Price and consideration per share under this Section 7(a)),
the following shall be applicable:

 

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(i)          Issuance
of Options. If the Company in any manner grants or sells any Options 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 7(a)(i), the “lowest price per share for which one share of Common Stock is issuable
upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise
of any such Option” 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 Conversion Price shall be made upon the
actual issuance of such share of Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual
issuance of such share 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 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 7(a)(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 Conversion Price shall be made upon the actual issuance
of such share 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 the Conversion Price has been or is
to be made pursuant to other provisions of this Section 7(a), except as contemplated below, no further adjustment of the Conversion
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
Conversion Price in effect at the time of such increase or decrease shall be adjusted to the Conversion Price which would have
been in effect at such time had such Options or Convertible Securities provided for such increased or decreased purchase price,
additional consideration or increased or decreased conversion rate (as the case may be) at the time initially granted, issued or
sold. For purposes of this Section 7(a)(iii), if the terms of any Option or Convertible Security that was outstanding as of the
Subscription Date are increased or decreased in the manner described in the immediately preceding sentence, then such Option or
Convertible Security and the shares of Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed
to have been issued as of the date of such increase or decrease. No adjustment pursuant to this Section 7(a) shall be made if such
adjustment would result in an increase of the Conversion Price then in effect.

 

(iv)          Calculation
of Consideration Received. If any Option or Convertible Security or Adjustment Right is issued or deemed issued in connection
with the issuance or sale or deemed issuance or sale of any other securities of the Company, together comprising one integrated
transaction, (x) such Option or Convertible Security (as applicable) or Adjustment Right (as applicable) will be deemed to have
been issued for consideration equal to the Black Scholes Consideration Value thereof and (y) the other securities issued or sold
or deemed to have been issued or sold in such integrated transaction shall be deemed to have been issued for consideration equal
to the difference of (I) the aggregate consideration received or receivable by the Company minus (II) the Black Scholes Consideration
Value of each such Option or Convertible Security (as applicable) or Adjustment Right (as applicable). 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 will be deemed to be the net amount of consideration received by the Company therefor. If any shares of Common Stock,
Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of such consideration received
by the Company 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 average VWAP of such security
for the five (5) Trading Day period immediately preceding the date of receipt. If any shares of Common Stock, Options or Convertible
Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving
entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business
of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities (as the case may
be). The fair value of any consideration other than cash or publicly traded securities will be determined jointly by the Company
and the Holder. If such parties are unable to reach agreement within ten (10) days after the occurrence of an event requiring valuation
(the “Valuation Event”), the fair value of such consideration will be determined within five (5) Trading Days
after the tenth (10th) day following such Valuation Event by an independent, reputable appraiser jointly selected by
the Company and the Holder. The determination of such appraiser shall be final and binding upon all parties absent manifest error
and the fees and expenses of such appraiser shall be borne by the Company.

 

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(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).

 

(b)          Adjustment
of Conversion Price upon Subdivision or Combination of Common Stock. If the Company at any time on or after the Subscription
Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares
of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately
reduced. If the Company at any time on or after the Subscription Date combines (by combination, reverse stock split or otherwise)
one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately
prior to such combination will be proportionately increased. Any adjustment pursuant to this Section 7(b) shall become effective
immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this Section
7(b) occurs during the period that a Conversion Price is calculated hereunder, then the calculation of such Conversion Price shall
be adjusted appropriately to reflect such event.

 

(c)          Holder's
Right of Alternative Conversion Price Following Issuance of Certain Options or Convertible Securities. Subject to Section 4(n)
of the Securities Purchase Agreement, in addition to and not in limitation of the other provisions of this Section 7, if the Company
in any manner issues or sells or enters into any agreement to issue or sell, any Common Stock, Options or Convertible Securities
(any such securities, “Variable Price Securities”) after the Subscription Date that are issuable pursuant to
such agreement or convertible into or exchangeable or exercisable for shares of Common Stock pursuant to such Options or Convertible
Securities, as applicable, at a price which varies or may vary with the market price of the shares of Common Stock, including by
way of one or more reset(s) to a fixed price, but exclusive of such formulations reflecting customary anti-dilution provisions
(such as share splits, share combinations, share dividends and similar transactions) (each of the formulations for such variable
price being herein referred to as, the “Variable Price”), the Company shall provide written notice thereof via
facsimile and overnight courier to the Holder on the date of such agreement and/or the issuance of such Convertible Securities
or Options, as applicable. Subject to Section 4(n) of the Securities Purchase Agreement, from and after the date the Company enters
into such agreement or issues any such Variable Price Securities, the Holder shall have the right, but not the obligation, in its
sole discretion to substitute the Variable Price for the Conversion Price upon conversion of this Note by designating in the Conversion
Notice delivered upon any conversion of this Note that solely for purposes of such conversion the Holder is relying on the Variable
Price rather than the Conversion Price then in effect. The Holder’s election to rely on a Variable Price for a particular
conversion of this Note shall not obligate the Holder to rely on a Variable Price for any future conversion of this Note.

 

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(d)          Stock
Combination Event Adjustments. If at any time and from time to time on or after the Issuance Date there occurs any stock split,
stock dividend, stock combination recapitalization or other similar transaction involving the Common Stock (each, a “Stock
Combination Event”) and the product of (i) the quotient determined by dividing (x) the Conversion 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 Conversion Price then in effect (after giving effect to the adjustment in Section 7(b)
above), then on the sixteenth (16th) Trading Day immediately following such Stock Combination Event, the Conversion Price then
in effect on such sixteenth (16th) Trading Day (after giving effect to the adjustment in Section 7(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 Conversion Price hereunder, no adjustment shall be made.

 

(e)          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 7 but not expressly provided for by such provisions (including, without limitation, the granting
of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company’s board of directors
shall in good faith determine and implement an appropriate adjustment in the Conversion Price so as to protect the rights of the
Holder, provided that no such adjustment pursuant to this Section 7(e) will increase the Conversion Price as otherwise determined
pursuant to this Section 7, 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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(f)          Adjustment.
If on each of (I) the earlier of (x) the Effective Date and (y) the six month anniversary of the Closing Date and, if applicable,
(II) if a Current Public Information Failure (as defined in the Registration Rights Agreement) exists as of the six month anniversary
of the Closing Date, the earlier of (A) such date thereafter when such Current Public Information Failure is cured and (B) the
first anniversary of the Issuance Date (each, a “First Adjustment Date”), the Conversion Price then in effect
exceeds the Market Price as of such First Adjustment Date (each a “First Adjustment Conversion Price”) or, if
later, in each case, the Stockholder Approval Date (as defined in the Securities Purchase Agreement), the Conversion Price hereunder
shall be reset to such First Adjustment Conversion Price as of such First Adjustment Date (each, a “First Conversion Price
Adjustment”). If immediately following the close of business on the later of (x) the first anniversary of the Closing
Date, (y) the three month anniversary of the last First Adjustment Date, if any, on or prior to the first anniversary of the Closing
Date and (z) the three month anniversary of the Stockholder Approval Date (the “Second Adjustment Date”, and
together with each First Adjustment Date and the Stockholder Approval Date, collectively, the “Adjustment Dates”),
the Conversion Price then in effect exceeds the Market Price as of such Second Adjustment Date (the “Second Adjustment
Conversion Price”), the Conversion Price hereunder shall be reset to the Second Adjustment Conversion Price as of the
Second Adjustment Date (the “Second Conversion Price Adjustment”). In addition to the foregoing, if as of the
close of business on the Stockholder Approval Date (after giving effect to any adjustments pursuant to this Section 7(f) and Section
7(a)(vi)) the Conversion Price then in effect exceeds the Closing Bid Price of the Common Stock on the Stockholder Approval Date
(the “Stockholder Approval Adjustment Price”, and together with each First Adjustment Conversion Price and the
Second Adjustment Conversion Price, collectively, the “Adjustment Conversion Prices”), the Conversion Price
hereunder shall be reset to the Stockholder Approval Adjustment Price as of the close of business of Stockholder Approval Date
(the “Stockholder Approval Conversion Price Adjustment”, and together with each First Adjustment Conversion
Price Adjustment and the Second Conversion Price Adjustment, collectively, the “Conversion Price Adjustments”).

 

8.          NONCIRCUMVENTION.
The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined
in the Securities Purchase Agreement), Bylaws (as defined in the Securities Purchase Agreement) or through any reorganization,
transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith
carry out all of the provisions of this Note and take all action as may be required to protect the rights of the Holder of this
Note. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of
Common Stock receivable upon conversion of this Note above the Conversion 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 nonassessable shares
of Common Stock upon the conversion of this Note, and (iii) shall, so long as any of the Notes 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 conversion of the Notes, the maximum number of shares of Common Stock as shall from time to time be necessary to effect the
conversion of the Notes then outstanding (without regard to any limitations on conversion).

 

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9.          RESERVATION
OF AUTHORIZED SHARES.

 

(a)          Reservation.
The Company shall initially reserve out of its authorized and unissued Common Stock a number of shares of Common Stock for each
of the Notes equal to 100% of the entire Conversion Rate with respect to the entire Conversion Amount of each such Note as of the
Issuance Date. So long as any of the Notes are outstanding, the Company shall take all action reasonably necessary to reserve
and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Notes,
(x) if prior to the Stockholder Approval Date, 100% or (y) if after the Stockholder Approval Date, 150%, as applicable, of the
number of shares of Common Stock as shall from time to time be necessary to effect the conversion of all of the Notes then outstanding,
provided that at no time shall the number of shares of Common Stock so reserved be less than the number of shares required to be
reserved by the previous sentence (without regard to any limitations on conversions) (the “Required Reserve Amount”).
The initial number of shares of Common Stock reserved for conversions of the Notes and each increase in the number of shares so
reserved shall be allocated pro rata among the holders of the Notes based on the original principal amount of the Notes held by
each holder on the Closing Date or increase in the number of reserved shares (as the case may be) (the “Authorized Share
Allocation”). In the event that a holder shall sell or otherwise transfer any of such holder’s Notes, each transferee
shall be allocated a pro rata portion of such holder’s Authorized Share Allocation. Any shares of Common Stock reserved and
allocated to any Person which ceases to hold any Notes shall be allocated to the remaining holders of Notes, pro rata based on
the principal amount of the Notes then held by such holders.

 

(b)          Insufficient
Authorized Shares. If, notwithstanding Section 9(a), and not in limitation thereof, at any time while any of the Notes remain
outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation
to reserve for issuance upon conversion of the Notes at least a number of shares of Common Stock equal to the Required Reserve
Amount (an “Authorized Share Failure”), then the Company shall immediately take all action necessary to increase
the Company’s authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve
Amount for the Notes then outstanding; provided, however, that no Authorized Share Failure shall occur if (x) the Exchange Cap
limitation is in effect and (y) the aggregate number of shares of Common Stock which the Company has reserved for issuance upon
conversion of the Notes is equal to or greater than the aggregate number of shares of Common Stock that may be issued upon conversion
of the Notes subject to the Exchange Cap. 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 any conversion due to the failure by the Company to have
sufficient shares of Common Stock available out of the authorized but unissued shares of Common Stock (such unavailable number
of shares of Common Stock, the “Authorization Failure Shares”), in lieu of delivering such Authorization Failure
Shares to the Holder, the Company shall pay cash in exchange for the redemption of such portion of the Conversion Amount convertible
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 Closing Sale Price on the Trading Day immediately preceding the date the Holder delivers the applicable Conversion
Notice with respect to such Authorization Failure Shares to the Company 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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10.          Company
Optional Redemption. If at any time after the first anniversary of the Issuance Date (the “Company Redemption Eligibility
Date”), no Equity Conditions Failure or Volume Failure then exists, the Company shall have the right to redeem all, but
not less than all (except in accordance with a Company Optional Redemption Blocker Notice (as defined below)), of the Conversion
Amount then remaining under this Note (the “Company Optional Redemption Amount”) on the Company Optional Redemption
Date (each as defined below) (a “Company Optional Redemption”); provided that, notwithstanding the foregoing,
if the Company Optional Redemption Amount for such Company Optional Redemption exceeds such portion of the Conversion Amount remaining
under this Note that the Holder would be permitted to convert into Common Stock pursuant to Section 3 on the Company Optional Redemption
Notice Date (as defined below) without violating Section 3(d) (the “Permitted Company Optional Redemption Amount”),
the Holder, at its sole option, may deliver a written notice to the Company (a “Company Optional Redemption Blocker Notice”)
stating that such Company Optional Redemption Amount set forth in the applicable Company Optional Redemption Notice (as defined
below) exceeds the Permitted Company Optional Redemption Amount and, thereafter, the applicable Company Optional Redemption Amount
shall be automatically reduced to the Permitted Company Optional Redemption Amount set forth in the applicable Company Optional
Redemption Blocker Notice. The portion of this Note subject to redemption pursuant to this Section 10 shall be redeemed by the
Company in cash at a price (the “Company Optional Redemption Price”) equal to 120% of the Conversion Amount
being redeemed. The Company may exercise its right to require redemption under this Section 10 by delivering an irrevocable written
notice thereof by facsimile and overnight courier to all, but not less than all, of the holders of Notes (the “Company
Optional Redemption Notice” and the date all of the holders of Notes received such notice is referred to as the “Company
Optional Redemption Notice Date”). The Company may deliver only one Company Optional Redemption Notice during any thirty
day period hereunder. The Company Optional Redemption Notice shall (x) state the date on which the Company Optional Redemption
shall occur (the “Company Optional Redemption Date”) which date shall not be less than twenty (20) Trading Days
nor more than thirty (30) Trading Days following the Company Optional Redemption Notice Date, (y) certify that neither an Equity
Conditions Failure or a Volume Failure exists as of the date of the Company Optional Redemption Notice, and (z) state the aggregate
Conversion Amount of the Notes which is being redeemed in such Company Optional Redemption from the Holder and all of the other
holders of the Notes pursuant to this Section 10 (and analogous provisions under the Other Notes) on the Company Optional Redemption
Date. Notwithstanding anything herein to the contrary, (i) if an Equity Conditions Failure or Volume Failure occurs at any time
prior to the Company Optional Redemption Date, (A) the Company shall provide the Holder a subsequent notice to that effect and
(B) unless the Holder waives the applicable Equity Conditions Failure or Volume Failure occurrence, as applicable, the Company
Optional Redemption shall be cancelled and the applicable Company Optional Redemption Notice shall be null and void and (ii) at
any time prior to the date the Company Optional Redemption Price is paid, in full, the Company Optional Redemption Amount may be
converted, in whole or in part, by the Holders into Common Shares pursuant to Section 3. All Conversion Amounts converted by the
Holder after the Company Optional Redemption Notice Date shall reduce the Company Optional Redemption Amount of this Note required
to be redeemed on the Company Optional Redemption Date. Redemptions made pursuant to this Section 10 shall be made in accordance
with Section 11.

 

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11.          REDEMPTIONS.

 

(a)          Mechanics.
The Company shall deliver the applicable Event of Default Redemption Price to the Holder in cash within five (5) Business Days
after the Company’s receipt of the Holder’s Event of Default Redemption Notice. If the Holder has submitted a Fundamental
Transaction Redemption Notice in accordance with Section 5(b), the Company shall deliver the applicable Fundamental Transaction
Redemption Price to the Holder in cash concurrently with the consummation of such Fundamental Transaction if such notice is received
prior to the consummation of such Fundamental Transaction and within five (5) Business Days after the Company’s receipt of
such notice otherwise. The Company shall deliver the applicable Company Optional Redemption Price to the Holder in cash on the
applicable Company Optional Redemption Date. In the event of a redemption of less than all of the Conversion Amount of this Note,
the Company shall promptly cause to be issued and delivered to the Holder a new Note (in accordance with Section 18(d)) representing
the outstanding Principal which has not been redeemed. In the event that the Company does not pay the applicable Redemption Price
to the Holder within the time period required, at any time thereafter and until the Company pays such unpaid Redemption Price in
full, the Holder shall have the option, in lieu of redemption, to require the Company to promptly return to the Holder all or any
portion of this Note representing the Conversion Amount that was submitted for redemption and for which the applicable Redemption
Price (together with any Late Charges thereon) has not been paid. Upon the Company’s receipt of such notice, (x) the applicable
Redemption Notice shall be null and void with respect to such Conversion Amount, (y) the Company shall immediately return this
Note, or issue a new Note (in accordance with Section 18(d)), to the Holder, and in each case the principal amount of this
Note or such new Note (as the case may be) shall be increased by an amount equal to the difference between (1) the applicable Event
of Default Redemption Price or Fundamental Transaction Redemption Price (as the case may be) minus (2) the Principal portion of
the Conversion Amount submitted for redemption and (z) the Conversion Price of this Note or such new Notes (as the case may be)
shall be automatically adjusted with respect to each conversion effected thereafter by the Holder to the lowest of (A) the Conversion
Price as in effect on the date on which the applicable Redemption Notice is voided, (B) 85% of the lowest Closing Bid Price of
the Common Stock during the period beginning on and including the date on which the applicable Redemption Notice is delivered to
the Company and ending on and including the date on which the applicable Redemption Notice is voided and (C) 85% of the VWAP of
the Common Stock for the five (5) Trading Day period immediately preceding the Conversion Date of the applicable conversion. The
Holder’s delivery of a notice voiding a Redemption Notice and exercise of its rights following such notice shall not affect
the Company’s obligations to make any payments of Late Charges which have accrued prior to the date of such notice with respect
to the Conversion Amount subject to such notice.

 

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(b)          Redemption
by Other Holders. Upon the Company’s receipt of notice from any of the holders of the Other Notes for redemption or repayment
as a result of an event or occurrence substantially similar to the events or occurrences described in Section 4(b) or Section 5(b)
(each, an “Other Redemption Notice”), the Company shall immediately, but no later than one (1) Business Day
of its receipt thereof, forward to the Holder by facsimile a copy of such notice. If the Company receives a Redemption Notice and
one or more Other Redemption Notices, during the seven (7) Business Day period beginning on and including the date which is three
(3) Business Days prior to the Company’s receipt of the Holder’s applicable Redemption Notice and ending on and including
the date which is three (3) Business Days after the Company’s receipt of the Holder’s applicable Redemption Notice
and the Company is unable to redeem all principal, interest and other amounts designated in such Redemption Notice and such Other
Redemption Notices received during such seven (7) Business Day period, then the Company shall redeem a pro rata amount from each
holder of the Notes (including the Holder) based on the principal amount of the Notes submitted for redemption pursuant to such
Redemption Notice and such Other Redemption Notices received by the Company during such seven (7) Business Day period.

 

12.          VOTING
RIGHTS. The Holder shall have no voting rights as the holder of this Note, except as required by law (including, without limitation,
the Delaware General Corporation Law) and as expressly provided in this Note.

 

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

 

(a)          Rank.
All payments due under this Note (a) shall rank pari passu with all Other Notes and (b) shall be senior to all other Indebtedness
of the Company and its Subsidiaries.

 

(b)          Incurrence
of Indebtedness. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly,
incur or guarantee, assume or suffer to exist any Indebtedness (other than (i) the Indebtedness evidenced by this Note and the
Other Notes and (ii) other Permitted Indebtedness.

 

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(c)          Existence
of Liens. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, allow
or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets
(including accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively, “Liens”)
other than Permitted Liens.

 

(d)          Restricted
Payments. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, redeem,
defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents (in whole or in part,
whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any Indebtedness
(other than the Notes), whether by way of payment in respect of principal of (or premium, if any) or interest on, such Indebtedness
if at the time such payment is due or is otherwise made or, after giving effect to such payment, (i) an event constituting an Event
of Default has occurred and is continuing or (ii) an event that with the passage of time and without being cured would constitute
an Event of Default has occurred and is continuing.

 

(e)          Restriction
on Redemption and Cash Dividends. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly
or indirectly, redeem, repurchase or declare or pay any cash dividend or distribution on any of its capital stock (other than dividends
and distributions by direct or indirect wholly-owned Subsidiaries of the Company made to the Company or any other direct or indirect
wholly-owned Subsidiary of the Company).

 

(f)          Restriction
on Transfer of Assets. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly,
sell, lease, license, assign, transfer, spin-off, split-off, close, convey or otherwise dispose of any material assets or rights
of the Company or any Subsidiary owned or hereafter acquired whether in a single transaction or a series of related transactions,
other than (i) sales, leases, licenses, assignments, transfers, conveyances and other dispositions of such assets or rights by
the Company and its Subsidiaries in the ordinary course of business and (ii) sales of inventory in the ordinary course of business.
Notwithstanding the foregoing, the Company shall use its best efforts to effect the sale of WPCS Australia, WPCS China and WPCS
International - Trenton, Inc., on an arm’s length basis for fair consideration (which, for the avoidance of doubt, may consist,
in whole or in part, of the cancellation of Indebtedness of the Company or any of its Subsidiaries owed to the applicable purchaser)
by no later than [               ]1.

 

(g)          Maturity
of Indebtedness. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly,
permit any Indebtedness of the Company or any of the Subsidiaries to mature or accelerate prior to the Maturity Date.

 

 

1
Insert six month anniversary of the Issuance Date 

 

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(h)          Change
in Nature of Business. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or
indirectly, engage in any material line of business substantially different from those lines of business conducted by the Company
and each of its Subsidiaries on the Issuance Date or any business substantially related or incidental thereto. The Company shall
not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, modify its or their corporate structure
or purpose.

 

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

 

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

 

(k)          Maintenance
of Intellectual Property. The Company will, and will cause each of its Subsidiaries to, take all action reasonably necessary
or advisable to maintain all of the Intellectual Property Rights (as defined in the Securities Purchase Agreement) of the Company
and/or any of its Subsidiaries that are necessary or material to the conduct of its business in full force and effect.

 

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

 

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(m)          Lockbox,
Cash & Receivables Balance; Lockbox Account.

 

(i)          The
Company shall at all times cause the Lockbox, Cash & Receivables Balance to exceed the sum of the principal and accrued
and unpaid interest, fees, costs and expenses and other obligations outstanding under this Note and the other Transaction
Documents at such time (collectively, the “Adjusted Note Obligations”).

 

(ii)          If
on any day, the Adjusted Note Obligations exceeds the Lockbox, Cash & Receivables Balance, the Company shall, within one (1)
Business Day, cause an amount equal to such excess to be deposited into the Master Collection Account.

 

(iii)          The
Company shall (A) establish and maintain cash management services of a type and on terms reasonably satisfactory to Holder
at one or more of the banks set forth on Schedule IV to the Security Agreement (each a “Controlled Account
Bank”), and shall take steps to ensure that all of the Company’s and each of its Subsidiaries’ Account Debtors
(as such term is defined in the Code) forward payment of the amounts owed by them directly to one or more Controlled Accounts (other
than an Operating Account) at any such Controlled Account Bank, and (B), deposit or cause to be deposited promptly, and in any
event no later than the first Business Day after the date of receipt thereof , all of its and its Subsidiaries’ cash, checks,
notes, instruments, and other items of payment (including insurance proceeds, cash proceeds of asset sales, rental proceeds, and
tax refunds) (including those sent directly by such Account Debtors to the Company or any of its Subsidiaries) into one or more
Controlled Account (other than an Operating Account) at any such Controlled Account Banks, which amounts shall be swept daily into
the Master Collection Account.

 

(iv)          The
Company shall establish and maintain Controlled Account Agreements with the Collateral Agent (as defined in the Security Agreement)
and each Controlled Account Bank (other than with respect to any Foreign Currency Controlled Account), in form and substance reasonably
acceptable to the Collateral Agent. Each such Controlled Account Agreement shall provide, among other things, that (A) the Controlled
Account Bank will comply with any and all instructions originated by the Collateral Agent directing the disposition of the funds
in each account maintained at such bank on behalf of Company and/or its Subsidiaries (each such account a “Controlled
Account” and collectively, the “Controlled Accounts”) without further consent by the Company or any
such Subsidiaries, (B) the Controlled Account Bank waives, subordinates or agrees not to exercise any rights of setoff or recoupment
or any other claim against the applicable Controlled Account other than for payment of its service fees and other charges directly
related to the administration of such Controlled Account and for returned checks or other items of payment, (C) with respect to
the Master Collection Account and each such other Controlled Account (other than the Operating Accounts), the Controlled Account
Bank shall not comply with any instructions, directions or orders of any form with respect to such Controlled Accounts other than
instructions, directions or orders originated by the Collateral Agent and (D) with respect to each Operating Account, upon the
instruction of Collateral Agent (an “Activation Instruction”), the Controlled Account Bank shall not comply
with any instructions, directions or orders of any form with respect to such Operating Accounts other than instructions, directions
or orders originated by Collateral Agent. The Collateral Agent shall not issue an Activation Instruction with respect to the Operating
Accounts unless an Event of Default has occurred and is continuing at the time such Activation Instruction is issued.

 

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(v)          At
the time of each Cash Release (or at such additional times as may be requested by the Company, the Collateral Agent or the Holder),
the Company shall deliver a Cash and Receivables Report (together with a summary specifying the name, aging (showing Accounts Receivable
aged from invoice date as follows: 1 to 30 days, 31 to 45 days, 45 to 60 days, 61 to 90 days or more), address, invoice number
and balance due for each Account Debtor to the Collateral Agent dated as of such date and certified as being true and correct by
a senior officer of the Company. Upon request by the Collateral Agent, the Company shall provide copies of invoices supporting
the Accounts Receivable set forth on a Cash and Receivables Report. The value of the Qualified Receivables evidenced in the Cash
and Receivables Report shall not be reduced based on collections until the earlier to occur of (x) the collection of at least $2
million (the “Additional Cash Release Threshold”) in Qualified Receivables in such month (and then, only reduced
in an amount equal to any Qualified Receivables in such month in excess of the Additional Cash Release Threshold (the “Excess
Collected Receivables”) and (y) delivery of a Cash and Receivables Report in the immediate succeeding month. Upon receipt
of each Cash and Receivables Report, the Holder and the Company agree that the Collateral Agent (pursuant to the terms and conditions
set forth in the Notes and in the Security Agreement) shall, so long as no Event of Default has occurred and is continuing or could
reasonably be expected to result therefrom, promptly cause an amount equal to the Cash Release Amount (if any) set forth on such
Cash and Receivables Report to be transferred from a Controlled Account (other than an Operating Account) of Company to the extent
of cash availability therein to an Operating Account as directed by Company; provided that, after giving effect to each such transfer,
the Lockbox, Cash & Receivables Balance shall be greater than or equal to the Adjusted Note Obligations as of such date.

 

(vi)          If
on the last day of each calendar month, the aggregate available balance in the Foreign Currency Controlled Accounts (other than
the Foreign Currency Controlled Accounts of WPCS Australia and WPCS China) exceeds the US Dollar Equivalent of $50,000,
the Company shall, within three (3) Business Days, cause an amount equal to such excess to be transferred from such Foreign
Currency Controlled Accounts and deposited into the Master Collection Account; provided, that except in accordance with Section
13(m)(vii) below, so long as the Notes remain outstanding neither the Company nor any of its Subsidiaries shall transfer (directly
or indirectly, whether in connection with an intercompany loan, a capital contribution, or otherwise) more than an aggregate of
the US Dollar Equivalent of $25,000 to any non-United States Subsidiary.

 

(vii)          If
on the last day of each calendar month, the aggregate available balance in the Foreign Currency Controlled Accounts of WPCS Australia
exceeds the US Dollar Equivalent of $400,000 (the “Australia Transfer Cap”), the
Company shall, within three (3) Business Days, cause an amount equal to such excess to be transferred from such Foreign Currency
Controlled Accounts and deposited into the Master Collection Account (the “Australia Overage Amounts”); provided,
that so long as the Notes remain outstanding neither the Company nor any of its Subsidiaries (other than WPCS Australia) shall
transfer (directly or indirectly, whether in connection with an intercompany loan, a capital contribution, or otherwise) more than
an aggregate of the US Dollar Equivalent of (A) $200,000 plus the Australia Overage Amounts minus (B) any amounts previously transferred
to WPCS Australia by the Company or any of its Subsidiaries (other than WPCS Australia) from the Issuance Date to immediately prior
to such transfer (an “Australia Transfer”), provided further that, notwithstanding the foregoing, neither the
Company nor any of its Subsidiaries (other than WPCS Australia) shall consummate an Australia Transfer if after giving effect to
such Australia Transfer the aggregate available balance in the Foreign Currency Controlled Accounts of WPCS Australia exceeds the
Australia Transfer Cap.

 

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(viii)          During
the period commencing on the Subscription Date through the date no Notes remain outstanding, neither the Company nor any of its
Subsidiaries (other than WPCS China) shall transfer (directly or indirectly, whether in connection with an intercompany loan, a
capital contribution, or otherwise) any cash or cash equivalents to WPCS China.

 

(n)          Current
Ratio Covenant. The Company shall at all times maintain a Current Ratio of not less than 0.6 to 1.0 measured as of the last
calendar day in each month (the “Current Ratio Test”). No later than the last calendar day of each month, the
Company shall provide to the Collateral Agent a certification, executed on behalf of the Company by the Chief Financial Officer
of the Company, certifying whether the Company has satisfied or failed to satisfy the Current Ratio Test as of the last calendar
day in such prior calendar month (the portion of such notice with respect to a failure to meet the Current Ratio Test, a "Current
Ratio Default Notice"). Concurrently with the delivery of any Current Ratio Failure Notice to the Collateral Agent, the
Company shall also make publicly available (as part of a Quarterly Report on Form 10-Q or on a Current Report on Form 8-K, or otherwise)
that the Company has failed to meet the Current Ratio Test and an Event of Default has occurred under the Notes.

 

(o)          Transactions
with Affiliates. The Company shall not, nor shall it permit any of its Subsidiaries to, enter into, renew, extend or be a party
to, any transaction or series of related transactions (including, without limitation, the purchase, sale, lease, transfer or exchange
of property or assets of any kind or the rendering of services of any kind) with any affiliate, except in the ordinary course of
business in a manner and to an extent consistent with past practice and necessary or desirable for the prudent operation of its
business, for fair consideration and on terms no less favorable to it or its Subsidiaries than would be obtainable in a comparable
arm’s length transaction with a Person that is not an affiliate thereof.

 

(p)          Restricted
Issuances. The Company shall not, directly or indirectly, without the prior written consent of the holders of a majority in
aggregate principal amount of the Notes then outstanding, (i) issue any Notes (other than as contemplated by the Securities Purchase
Agreement and the Notes) or (ii) issue any other securities that would cause a breach or default under the Notes or the Warrants.

 

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(q)          New
Subsidiaries. Simultaneously with the acquisition or formation of each New Subsidiary, the Company shall cause such New Subsidiary
to execute, and deliver to each holder of Notes, all Security Document (as defined in the Securities Purchase Agreement) and Guaranties
(as defined in the Securities Purchase Agreement) as requested by the Collateral Agent. The Company
shall also deliver to the Collateral Agent an opinion of counsel to such New Subsidiary that is reasonably satisfactory to the
Collateral Agent covering such legal matters with respect to such New Subsidiary becoming a guarantor of the Company’s obligations,
executing and delivering the Security Document and the Guaranties and any other matters that the Collateral Agent may reasonably
request. The Company shall deliver, or cause the applicable Subsidiary to deliver to the Collateral Agent, each of the physical
stock certificates of such New Subsidiary, along with undated stock powers for each such certificates, executed in blank (or, if
any such shares of capital stock are uncertificated, confirmation and evidence reasonably satisfactory to the Collateral Agent
that the security interest in such uncertificated securities has been transferred to and perfected by the Collateral Agent, in
accordance with Sections 8-313, 8-321 and 9-115 of the Uniform Commercial Code or any other similar or local or foreign law that
may be applicable).

 

(r)          Change
in Collateral; Collateral Records. The Company shall (i) give the Collateral Agent not less than thirty (30) days’ prior
written notice of any change in the location of any Collateral (as defined in the Security Documents), other than to locations
set forth in the Perfection Certificate (as defined in the Securities Purchase Agreement) hereto and with respect to which the
Collateral Agent has filed financing statements and otherwise fully perfected its Liens thereon, (ii) advise the Collateral
Agent promptly, in sufficient detail, of any material adverse change relating to the type, quantity or quality of the Collateral
or the Lien granted thereon and (iii) execute and deliver, and cause each of its Subsidiaries to execute and deliver, to the
Collateral Agent for the benefit of the Holder and holders of the Other Notes from time to time, solely for the Collateral Agent’s
convenience in maintaining a record of Collateral, such written statements and schedules as the Collateral Agent may reasonably
require, designating, identifying or describing the Collateral.

 

(s)          Independent
Investigation. At the request of the Required Holders (as defined in the Securities Purchase Agreement), which may be requested
no more than once in any twelve month period, the Company shall hire an independent, reputable investment bank selected by the
Company and approved by the Holder to investigate as to whether any breach of this Section 13 has occurred (the “Independent
Investigator”). If the Independent Investigator determines that such breach of this Section 13 has occurred, the Independent
Investigator shall notify the Company of such breach and the Company shall deliver written notice to the Buyers of such breach.
In connection with such investigation, the Independent Investigator may, during normal business hours, inspect all contracts, books,
records, personnel, offices and other facilities and properties of the Company and its Subsidiaries and, to the extent available
to the Company after the Company uses reasonable efforts to obtain them, the records of its legal advisors and accountants (including
the accountants’ work papers) and any books of account, records, reports and other papers not contractually required of the
Company to be confidential or secret, or subject to attorney-client or other evidentiary privilege, and the Independent Investigator
may make such copies and inspections thereof as the Independent Investigator may reasonably request. The Company shall furnish
the Independent Investigator with such financial and operating data and other information with respect to the business and properties
of the Company as the Independent Investigator may reasonably request. The Company shall permit the Independent Investigator to
discuss the affairs, finances and accounts of the Company with, and to make proposals and furnish advice with respect thereto to,
the Company’s officers, directors, key employees and independent public accountants or any of them (and by this provision
the Company authorizes said accountants to discuss with such Independent Investigator the finances and affairs of the Company and
any Subsidiaries), all at such reasonable times, upon reasonable notice, and as often as may be reasonably requested.

 

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(t)          Director
Nominations. The board of directors of the Company shall nominate and recommend no less than two persons reasonably acceptable
to the holders of a majority of the Notes then outstanding for election to the board of directors of the Company at the first annual
meeting of stockholders occurring after the Issuance Date.

 

14.          SECURITY.
This Note and the Other Notes are secured to the extent and in the manner set forth in the Transaction Documents (including, without
limitation, the Security Agreement, the other Security Documents and the Guaranties).

 

15.          PARTICIPATION.
Except with respect to any adjustments pursuant to Section 7, the Holder, as the holder of this Note, shall be entitled to receive
such dividends paid and distributions made to the holders of Common Stock to the same extent as if the Holder had converted this
Note into Common Stock (without regard to any limitations on conversion herein or elsewhere) and had held such shares of Common
Stock on the record date for such dividends and distributions. Payments under the preceding sentence shall be made concurrently
with the dividend or distribution to the holders of Common Stock (provided, however, to the extent that the Holder’s right
to participate in any such dividend or distribution would result in the Holder exceeding the Maximum Percentage, then the Holder
shall not be entitled to participate in such dividend or distribution to such extent (or the beneficial ownership of any such shares
of Common Stock as a result of such dividend or distribution to such extent) and such dividend or 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).

 

16.          AMENDING
THE TERMS OF THIS NOTE. The prior written consent of the Holder shall be required for any change or amendment to this Note.
No consideration shall be offered or paid to the Holder to amend or consent to a waiver or modification
of any provision of this Note unless the same consideration is also offered to all of the holders of the Other Notes. The
Holder shall be entitled, at its option, to the benefit of any amendment to any of the Other Notes.

 

17.          TRANSFER.
This Note and any shares of Common Stock issued upon conversion of this Note may be offered, sold, assigned or transferred by the
Holder without the consent of the Company, subject only to the provisions of Section 2(g) of the Securities Purchase Agreement.

 

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18.          REISSUANCE
OF THIS NOTE.

 

(a)          Transfer.
If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue
and deliver upon the order of the Holder a new Note (in accordance with Section 18(d)), registered as the Holder may request, representing
the outstanding Principal being transferred by the Holder and, if less than the entire outstanding Principal is being transferred,
a new Note (in accordance with Section 18(d)) to the Holder representing the outstanding Principal not being transferred. The Holder
and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section 3(c)(iii) following
conversion or redemption of any portion of this Note, the outstanding Principal represented by this Note may be less than the Principal
stated on the face of this Note.

 

(b)          Lost,
Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Note (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 Note, the Company shall
execute and deliver to the Holder a new Note (in accordance with Section 18(d)) representing the outstanding Principal.

 

(c)          Note
Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder at the principal
office of the Company, for a new Note or Notes (in accordance with Section 18(d) and in principal amounts of at least $1,000) representing
in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding
Principal as is designated by the Holder at the time of such surrender.

 

(d)          Issuance
of New Notes. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall
be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding
(or in the case of a new Note being issued pursuant to Section 18(a) or Section 18(c), the Principal designated by the Holder which,
when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal
remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated
on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions
as this Note, and (v) shall represent accrued and unpaid Interest and Late Charges on the Principal and Interest of this Note,
from the Issuance Date.

 

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

 

20.          PAYMENT
OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If (a) this Note is placed in the hands of an attorney for collection or enforcement
or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this
Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership of the Company
or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the Company shall pay
the reasonable costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization,
receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements. The Company expressly
acknowledges and agrees that no amounts due under this Note shall be affected, or limited, by the fact that the purchase price
paid for this Note was less than the original Principal amount hereof.

 

21.          CONSTRUCTION;
HEADINGS. This Note shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against
any Person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect
the interpretation of, this Note. Terms used in this Note but defined in the other Transaction Documents shall have the meanings
ascribed to such terms on the Closing Date in such other Transaction Documents unless otherwise consented to in writing by the
Holder.

 

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

 

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

 

24.          NOTICES;
CURRENCY; PAYMENTS.

 

(a)          Notices.
Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance
with Section 9(f) of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all
actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefore. Without
limiting the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon any adjustment
of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least
fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or
distribution upon the Common Stock, (B) with respect to any grant, 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.

 

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

 

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(c)          Payments.
Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, unless otherwise expressly set forth
herein, such payment shall be made in lawful money of the United States of America by a certified check drawn on the account of
the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing
(which address, in the case of each of the Buyers, shall initially be as set forth on the Schedule of Buyers attached to the Securities
Purchase Agreement), provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available
funds by providing the Company with prior written notice setting out such request and the Holder’s wire transfer instructions.
Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall
instead be due on the next succeeding day which is a Business Day. Any amount of Principal or other amounts due under the Transaction
Documents which is not paid when due shall result in a late charge being incurred and payable by the Company in an amount equal
to interest on such amount at the rate of fifteen percent (15%) per annum from the date such amount was due until the same is paid
in full (“Late Charge”).

 

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

 

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

 

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

 

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28.          JUDGMENT
CURRENCY.

 

(a)          If
for the purpose of obtaining or enforcing judgment against the Company in any court in any jurisdiction it becomes necessary to
convert into any other currency (such other currency being hereinafter in this Section 28 referred to as the “Judgment
Currency”) an amount due in U.S. dollars under this Note, the conversion shall be made at the Exchange Rate prevailing
on the Trading Day immediately preceding:

 

(i)          the
date actual payment of the amount due, in the case of any proceeding in the courts of New York or in the courts of any other jurisdiction
that will give effect to such conversion being made on such date: or

 

(ii)          the
date on which the foreign court determines, in the case of any proceeding in the courts of any other jurisdiction (the date as
of which such conversion is made pursuant to this Section 28(a)(ii) being hereinafter referred to as the “Judgment Conversion
Date”).

 

(b)          If
in the case of any proceeding in the court of any jurisdiction referred to in Section 28(a)(ii) above, there is a change in the
Exchange Rate prevailing between the Judgment Conversion Date and the date of actual payment of the amount due, the applicable
party shall pay such adjusted amount as may be necessary to ensure that the amount paid in the Judgment Currency, when converted
at the Exchange Rate prevailing on the date of payment, will produce the amount of US dollars which could have been purchased with
the amount of Judgment Currency stipulated in the judgment or judicial order at the Exchange Rate prevailing on the Judgment Conversion
Date.

 

(c)          Any
amount due from the Company under this provision shall be due as a separate debt and shall not be affected by judgment being obtained
for any other amounts due under or in respect of this Note.

 

29.          MAXIMUM
PAYMENTS. Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges
in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges
hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed
by the Company to the Holder and thus refunded to the Company.

 

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

 

(a)          “Accounts
Payable” means the Company’s obligations of its United States subsidiaries to creditors or other vendors, as determined
in accordance with GAAP, consistently applied in accordance with past practices.

 

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(b)          “Accounts
Receivable” means the accounts receivables owed to the United States subsidiaries of the Company from customers , as
determined in accordance with GAAP, consistently applied in accordance with past practices.

 

(c)          “Account
Debtor” means any Person obligated on any Account owing to the Company or the Company’s U.S. Subsidiaries.

 

(d)          
“Accrued Job Loss” means, as of any date of determination, for the United States subsidiaries of the Company,
the non-cash provision for the total loss anticipated on contracts accounted for on a percentage of completion basis, which may
be properly classified as current liabilities on a consolidated balance sheet of the Company in accordance with GAAP consistently
applied in accordance with past practices.

 

(e)          “Accrued
Liabilities”, means, as of any date of determination, the accrued expenses of the Company and the Company’s U.S.
Subsidiaries, incurred in the ordinary course of business, which may be classified as current liabilities on a consolidated balance
sheet of the Company in accordance with GAAP consistently applied in accordance with past practices.

 

(f)          “Additional
Share Amount” means, as to any Conversion Amount being converted in connection with a Fundamental Transaction, an amount
equal to the present value of the difference between (i) Interest that, but for the applicable conversion, would have been paid
to the Holder on such Conversion Amount from the Issuance Date through the Maturity Date and (ii) the amount of Interest already
paid to the Holder through the applicable Conversion Date.

 

(g)          “Adjusted
Note Obligations” has the meaning assigned to such term in Section 13(m).

 

(h)          “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 7) of shares of Common Stock (other than rights of the type described
in Section 5(c) 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).

 

(i)          “Approved
Stock Plan” means any employee benefit plan or employment agreement 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.

 

(j)          “Assignment
of Claims Act” means The Federal Assignment of Claims Act, 31 U.S.C. § 3727 et seq., as amended from time to time.

 

    	37

    	 

    
 

(k)          “Bankruptcy
Proceeding” means, with respect to any Person, (i) the occurrence of a voluntary case or proceeding under any applicable
federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree, order, judgment or other similar document in
respect of such Person in an involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the
filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal, state or foreign
law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of such Person or of any substantial part of its property,
or the making by it of an assignment for the benefit of creditors, or the execution of a composition of debts, or the occurrence
of any other similar federal, state or foreign proceeding, or the admission by it in writing of its inability to pay its debts
generally as they become due, the taking of corporate action by such Person in furtherance of any such action or the taking of
any action by any Person to commence a UCC foreclosure sale or any other similar action under federal, state or foreign law or
(ii) the entry by a court of (A) a decree, order, judgment or other similar document in respect of such Person of a voluntary or
involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar
law or (B) a decree, order, judgment or other similar document adjudging such Person as bankrupt or insolvent, or approving as
properly filed a petition seeking liquidation, reorganization, arrangement, adjustment or composition of or in respect of such
Person under any applicable federal, state or foreign law or (C) a decree, order, judgment or other similar document appointing
a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of such Person or of any substantial
part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree, order,
judgment or other similar document or any such other decree, order, judgment or other similar document unstayed and in effect for
a period of thirty (30) consecutive days.

 

(l)          “Billings
in Excess of Cost” means any amounts billed to Account Debtors (including milestone payments) with respect to goods and/or
services that have not yet been delivered or performed.

 

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

 

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

 

(o)          “Blue
Chip Customer” means each of Verizon, Motorola, Johnson Controls, Genentech, Siemens, Simplex Grinnell, ATT, Honeywell,
Sprint/Nextel, Alcatel Lucent, Skanska USA, Trane, and Turner Construction.

 

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

 

(q)          “Cash
and Receivables Report” means a report in the form of Exhibit III.

 

(r)          “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 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 23. All such determinations shall be appropriately
adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

 

(s)          “Closing
Date” shall have the meaning set forth in the Securities Purchase Agreement, which date is the date the Company initially
issued Notes pursuant to the terms of the Securities Purchase Agreement.

 

(t)          “Code”
means the Uniform Commercial Code as in effect from time to time in the State of New York.

 

    	39

    	 

    
 

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

 

(v)          “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.

 

(w)          “Current
Ratio” means, as of any given time the quotient of (I) the sum of (x) all cash and cash equivalents held in the Company’s
Controlled Accounts and Operating Accounts (y) the sum of all Qualified Accounts Receivables as of such given time, (z) Qualified
Retainage Receivable and (aa) Inventory Value, divided by (II) the sum of (w) Accounts Payable, (x) Payroll Liabilities, (y) Qualified
Retainage Payable and (z) Other Current Liabilities.

 

(x)          “Current
Subsidiary” means any Person in which the Company on the Subscription Date, 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, collectively, “Current Subsidiaries.”

 

(y)          “Effective
Date” means such date the applicable Registration Statement filed pursuant to the Registration
Rights Agreement shall be effective and the prospectus contained therein shall be available for the resale by the Holder of all
of the Registrable Securities (which, solely for clarification purposes, includes at least 100% of all shares of Common
Stock issuable upon conversion of the Notes and upon exercise of the Warrants (without regard for any limitations on conversion,
issuance or exercise set forth therein) in accordance with the terms of the Registration Rights Agreement).

 

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

 

(aa)          “Equipment
Indebtedness”- means, as of any date of determination, for the Company and the Company’s U.S. Subsidiaries, the
portion of equipment loans or equipment capital leases, secured by Permitted Liens, which may be properly classified as current
liabilities on a consolidated balance sheet of the Company in accordance with GAAP consistently applied in accordance with past
practices.

 

    	40

    	 

    
 

(bb)          
“Equity Conditions” means: (i) on each day during the period beginning one month prior to the applicable date of
determination and ending on and including the applicable date of determination either (x) one or more
Registration Statements filed pursuant to the Registration Rights Agreement shall be effective and the prospectus contained therein
shall be available for the resale by the Holder of all of the Registrable Securities (which, solely for clarification purposes,
includes all shares of Common Stock issuable upon conversion of this Note and upon exercise of the Warrants)
in accordance with the terms of the Registration Rights Agreement and there shall not have been during such period any Grace
Periods (as defined in the Registration Rights Agreement) or (y) all
Registrable Securities shall be eligible for sale without restriction under Rule 144 (as defined in the Securities Purchase
Agreement) (including, without limitation, volume restrictions) and without the need for current public information required by
Rule 144(c)(1) (or Rule 144(i)(2), if applicable) and without the need for registration under any applicable
federal or state securities laws (in each case, disregarding any limitation on conversion of the Notes and exercise of the Warrants);
(ii) 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 (including
all Registrable Securities) 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 have been threatened (with a reasonable prospect of delisting occurring) or pending either (A)
in writing by such Eligible Market or (B) by falling below the minimum listing maintenance requirements of the Eligible Market
on which the Common Stock is then listed or designated for quotation (as applicable); (iii) on each day during the Equity Conditions
Measuring Period, the Company shall have delivered all shares of Common Stock issuable upon conversion of this Note on a timely
basis as set forth in Section 3 hereof and all other shares of capital stock required to be delivered by the Company on a timely
basis as set forth in the other Transaction Documents; (iv) any shares of Common Stock to be issued in connection with the event
requiring determination may be issued in full without violating Section 3(d) hereof; (v) 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); (vi) 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; (vii) the Company shall have no knowledge of
any fact that would reasonably be expected to cause (1) any Registration Statement filed pursuant to the Registration Rights Agreement
to not be effective or any prospectus contained therein to not be available for the resale of all of the Registrable Securities
in accordance with the terms of the Registration Rights Agreement or (2) any Registrable Securities to not be eligible for sale
without restriction pursuant to Rule 144 (including, without limitation, volume restrictions) and without the need for current
public information required by Rule 144(c)(1) (or Rule 144(i)(2), if applicable) or any applicable state
securities laws (in each case, disregarding any limitation on conversion of the Notes and exercise of the Warrants); (viii) the
Holder shall not be in (and no other Buyer shall 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 employees, officers, representatives, agents or the like; (ix)
on each day during the Equity Conditions Measuring Period, the Company otherwise shall have been in compliance with each,
and shall not have breached any, provision, covenant, representation or warranty of any Transaction Document; and (x) on each day
during the Equity Conditions Measuring Period, there shall not have occurred an Event of Default or an event that with the passage
of time or giving of notice would constitute an Event of Default.

 

    	41

    	 

    
 

(cc)          “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).

 

(dd)          “Equity
Value Redemption Premium” means 125%.

 

(ee)          
“Excluded Securities” means (i) shares of Common Stock or standard options to purchase Common Stock to directors,
officers or employees of the Company in their capacity as such pursuant to an Approved Stock Plan (as defined below), 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 10% 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 Buyers; (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, 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 Buyers; (iii) the shares of Common Stock issuable upon exercise of the Notes and (iv) the shares of Common Stock
issuable upon exercise of the Warrants .

 

(ff)          “Foreign
Currency Controlled Account” means any account of the Company or its Subsidiaries holding non-USD deposits.

 

(gg)          “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) reorganize,
recapitalize or reclassify 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.

 

    	42

    	 

    
 

(hh)          “Fundamental
Transaction Redemption Premium” means 125%.

 

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

 

(jj)          “Holder
Pro Rata Amount” means a fraction (i) the numerator of which is the original Principal amount of this Note on the Closing
Date and (ii) the denominator of which is the aggregate original principal amount of all Notes issued to the initial purchasers
pursuant to the Securities Purchase Agreement on the Closing Date.

 

(kk)          “Interest
Rate” means four percent (4%) per annum, subject to adjustment as set forth in Section 2.

 

(ll)          “Instrument”
shall have the meaning as set forth in Article 3 of the New York Uniform Commercial Code.

 

(mm)          “Inventory
Value” means the fair market value of the inventory of the United States subsidiaries of the Company, as determined in
accordance with GAAP, consistently applied in accordance with past practices.

 

(nn)          “Lockbox,
Cash & Receivables Balance” means, as of any given time, the sum of (i) the cash balance held in the Controlled Accounts
(other than Operating Accounts and Foreign Currency Controlled Accounts) as of such given time and (ii) the difference of (x) 95%
of the sum of all Qualified Accounts Receivables of the Company as of such given time, less (y) $250,000.

 

(oo)          “Market
Price” means, for any given date, 85% of the quotient of (I) the Closing Bid Price of the Common Stock on each of the
five (5) consecutive Trading Days ending and including the Trading Day immediately preceding any Adjustment Date, divided by (II)
five (5) (such period, the “Market Price Measuring Period”). All such determinations to be appropriately adjusted
for any stock dividend, stock split, stock combination, reclassification or similar transaction during such Market Price Measuring
Period.

 

    	43

    	 

    
 

(pp)          “Master
Collection Account” shall have the meaning assigned to the term “Master Collection Account” in the Security
Agreement.

 

(qq)          
“Maturity Date” shall mean [               
]2; provided, however, the Maturity Date may be extended at the option of the Holder (i) in the event that, and for
so long as, an Event of Default shall have occurred and be continuing or any event shall have occurred and be continuing that
with the passage of time and the failure to cure would result in an Event of Default or (ii) through the date that is twenty (20)
Business Days after the consummation of a Fundamental Transaction in the event that a Fundamental Transaction is publicly announced
or a Fundamental Transaction Notice is delivered prior to the Maturity Date, provided further that if a Holder elects to convert
some or all of this Note pursuant to Section 3 hereof, and the Conversion Amount would be limited pursuant to Section 3(d) hereunder,
the Maturity Date shall automatically be extended until such time as such provision shall not limit the conversion of this Note.

 

(rr)          “New
Subsidiary” means, as of any date of determination, any Person in which the Company after the Subscription Date, directly
or indirectly, (i) owns or acquires 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,
collectively, “New Subsidiaries.”

 

(ss)          “Operating
Account” shall have the meaning assigned to the term “Operating Account” in the Security Agreement.

 

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

 

(uu)          “Other
Current Liabilities” means, as of any date of determination, the sum of the following liabilities of the Company and
the Company’s U.S. Subsidiaries, which may be properly classified as current liabilities on a consolidated balance sheet
of the Company in accordance with GAAP, (w) Accrued Liabilities (excluding Accrued Job Losses), (x) Qualified Retainage Payable,
(y) Equipment Indebtedness, and (z) Adjusted Note Obligation.

 

(vv)          “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.

 

(ww)          “Payroll
Liabilities” means any and all amounts owed by the U.S. Subsidiaries of the Company for work
performed and any other payroll-related liabilities including, without limitation, amounts owed to third parties by Company for
any amounts withheld from the gross earnings of each such employee and any and all payroll taxes related thereto.

 

 

2
Insert eighteen month anniversary of the Issuance Date

 

    	44

    	 

    
 

(xx)          “Permitted
Indebtedness” means (i) Indebtedness evidenced by this Note and the Other Notes, (ii) Indebtedness secured by Permitted
Liens described in clauses (iv) and (v) of the definition of Permitted Liens, in an aggregate amount not to exceed $250,000, (iii)
Indebtedness outstanding as of the Issuance Date and described on Schedule 3(s) to the Securities Purchase Agreement (other than
Indebtedness owed to Sovereign Bank, N.A. or any of its affiliates) and (iv) unsecured Indebtedness incurred by the Company that
is made expressly subordinate in right of payment to the Indebtedness evidenced by this Note, as reflected in a written agreement
acceptable to the Holder and approved by the Holder in writing, and which Indebtedness does not provide at any time for (A) the
payment, prepayment, repayment, repurchase or defeasance, directly or indirectly, of any principal or premium, if any, thereon
until ninety-one (91) days after the Maturity Date or later and (B) total interest and fees at a rate in excess of 4.00% per annum.

 

(yy)          “Permitted
Liens” means (i) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings
for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course
of business by operation of law with respect to a liability that is not yet due or delinquent, (iii) any Lien created by operation
of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business
with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings,
(iv) Liens (A) upon or in any equipment acquired or held by the Company or any of its Subsidiaries to secure the purchase price
of such equipment or indebtedness incurred solely for the purpose of financing the acquisition or lease of such equipment, or (B)
existing on such equipment at the time of its acquisition, provided that the Lien is confined solely to the property so acquired
and improvements thereon, and the proceeds of such equipment, (v) Liens incurred in connection with the extension, renewal or refinancing
of the indebtedness secured by Liens of the type described in clause (iv) above, provided that any extension, renewal or replacement
Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the Indebtedness being extended,
renewed or refinanced does not increase, and (vi) Liens securing the Company’s obligations under the Notes.

 

(zz)          “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.

 

(aaa)          “Principal
Market” means the Nasdaq Capital Market.

 

    	45

    	 

    
 

(bbb)          “Qualified
Accounts Receivables” means all Account Receivables of the United States subsidiaries of the Company meeting all of the
following specifications: (i) the Account Receivable is lawfully and exclusively owned by the Company and subject to a first priority
Lien in favor of the Collateral Agent and subject to no other Lien (other than Permitted Liens, if applicable, and Liens granted
under this Agreement) and Company has the right of assignment thereof and the power to grant a security interest therein; (ii)
the Account Receivable does not represent a rebilling and is valid and enforceable representing the undisputed indebtedness of
an Account Debtor not more than ninety (90) days past the original invoice date (other than with respect to Account Receivables
owing by any Blue Chip Customer, which shall not be more than one hundred and fifty (150) days past the original invoice date);
(iii) not more than fifty percent (50%) of the aggregate balance of all Account Receivables owing from an Account Debtor obligated
on the Account Receivable are outstanding more than sixty (60) days past their original due dates or ninety (90) days past their
original invoice dates; (iv) the amount of the Account Receivable, when aggregated with all other Account Receivables of such Account
Debtor, is less than fifteen percent (15%) of the face value of all Account Receivables of the Company then outstanding; (v) the
Account Receivable is not a contra Account Receivable and is not subject to any defense, set-off, or counterclaim, deduction, discount,
credit, chargeback, freight claim, allowance or adjustment of any kind; (vi) the Account Receivable is net of any portion thereof
attributable to the sale of goods that have been returned, rejected, lost or damaged; (vii) if the Account Receivable arises from
the sale of goods by the Company, such sale was an absolute sale and not on consignment or on approval or on a sale-or-return basis
nor subject to any other repurchase or return agreement, and such goods have been shipped to the Account Debtor or its designee;
(viii) if the Account Receivable arises from the performance of services, such services have actually been performed and have been
approved by the Account Debtor; (ix) the Account Receivable arose in the ordinary course of Company's business; (x) no notice of
the bankruptcy, receivership, reorganization, liquidation, dissolution, or insolvency of the Account Debtor has been received by
the Collateral Agent or the Company; (xi) the Account Receivable is an Account Receivable for which the Collateral Agent believes
that the validity, enforceability or collection of the Account Receivable is not invalid or otherwise impaired; (xii) the Account
Debtor is not a Subsidiary or affiliate of the Company; (xiii) the sale does not represent a sale pursuant to a government contract
unless the Company has complied, for the benefit of the Collateral Agent and the holders of Notes, with the Assignment of Claims
Act; (xiv) the Account Receivable is not an Account Receivable of an Account Debtor having its principal place of business or executive
office outside the United States, unless the payment of such Account Receivable is guaranteed by an irrevocable letter of credit
satisfactory to the Collateral Agent or by credit insurance, satisfactory to the Collateral Agent; (xv) the Account Receivable
is not an Account Receivable on which the Account Debtor is obligated to the Company under any Instrument; (xvi) the transaction
which gave rise to the Account Receivable complies in all respects with all applicable laws, rules and regulations of any Governmental
Authority (as defined in the Securities Purchase Agreement); (xvii) the transaction which gave rise to the Account Receivable did
not involve the issuance of a performance bond; and (xviii) the Account Receivable meets such other reasonable specifications and
requirements which may from time to time be established by the Collateral Agent. Qualified Accounts Receivable shall not include
that portion of an Account Receivable representing (i) interest or finance charges for past due balances or debit memos and (ii)
Billings in Excess of Cost.

 

    	46

    	 

    
 

(ccc)          “Qualified
Retainage Payable”- means the obligations of the U.S. Subsidiaries of the Company for amounts due on construction contracts
to other creditors or vendors not yet paid pending final inspection of the project, and the transaction which gave rise to the
Qualified Retainage Payable did not involve the issuance of a performance bond, which may be properly classified as current liabilities
on a consolidated balance sheet of the Company in accordance with GAAP consistently applied in accordance with past practices.

 

(ddd)          “Qualified
Retainage Receivable”- means account receivables for amounts owed on construction contracts to the U.S. Subsidiaries
of the Company not yet received from customers pending final inspection of the project, and the transaction which gave rise to
the Qualified Retention Receivable did not involve the issuance of a performance bond, as determined in accordance with GAAP consistently
applied in accordance with past practices.

 

(eee)          
“Quarter” means each of: (i) the period beginning on and including February 1 and ending on and including April
30; (ii) the period beginning on and including May 1 and ending on and including July 31; (iii) the period beginning on and including
August 1 and ending on and including October 31; and (iv) the period beginning on and including November 1 and ending on and including
January 31.

 

(fff)          “Redemption
Notices” means, collectively, Event of Default Redemption Notices, the Company Optional Redemption Notices and the Fundamental
Transaction Redemption Notices, and each of the foregoing, individually, a “Redemption Notice.”

 

(ggg)          “Redemption
Premium” means (i) in the case of the Events of Default described in Section 4(a) (other than Sections 4(a)(ix) through
4(a)(xi)), 125% or (ii) in the case of the Events of Default described in Sections 4(a)(ix) through 4(a)(xi), 100%.

 

(hhh)          “Redemption
Prices” means, collectively, Event of Default Redemption Prices, the Fundamental Transaction Redemption Prices and the
Company Optional Redemption Prices, and each of the foregoing, individually, a “Redemption Price.”

 

(iii)          “Registration
Rights Agreement” means that certain registration rights agreement, dated as of the Closing Date, by and among the Company
and the initial holders of the Notes relating to, among other things, the registration of the resale of the Common Stock issuable
upon conversion of the Notes or otherwise pursuant to the terms of the Notes and exercise of the Warrants, as may be amended from
time to time.

 

(jjj)          “SEC”
means the United States Securities and Exchange Commission or the successor thereto.

 

(kkk)          “Securities
Purchase Agreement” means that certain securities purchase agreement, dated as of the Subscription Date, by and among
the Company and the initial holders of the Notes pursuant to which the Company issued the Notes and Warrants, as may be amended
from time to time.

 

(lll)          “Security
Agreement” means that certain security agreement, dated as of the Closing Date, by and among the Company, the Subsidiaries
and the initial holders of the Notes, as may be amended from time to time.

 

    	47

    	 

    
 

(mmm)          “Subscription
Date” means December 4, 2012.

 

(nnn)          “Subsidiaries”
means, as of any date of determination, collectively, all Current Subsidiaries and all New Subsidiaries, and each of the foregoing,
individually, a “Subsidiary.”

 

(ooo)          “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.

 

(ppp)          “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.

 

(qqq)          “Volume
Failure” means, with respect to a particular date of determination, the aggregate dollar trading volume (as reported
on Bloomberg) of the Common Stock on the Principal Market of any Trading Day in the thirty (30) consecutive Trading Day period
ending on the Trading Day immediately preceding such date of determination is less than $100,000 (adjusted for any stock dividend,
stock split, stock combination or other similar transaction during such period).

 

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

 

(sss)          “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 the 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 23. All such determinations shall be appropriately
adjusted for any stock dividend, stock split, stock combination or other similar transaction during such period.

 

    	48

    	 

    
 

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

 

(uuu)          “WPCS
Australia” means collectively WPCS Australia Pty Ltd and any of its direct wholly-owned subsidiaries.

 

(vvv)          “WPCS
China” means collectively Taian AGS Pipeline Construction Co. Ltd. and WPCS Asia Limited.

 

31.          DISCLOSURE.
Upon receipt or delivery by the Company of any notice in accordance with the terms of this Note, unless the Company has in good
faith determined that the matters relating to such notice do not constitute material, non-public information relating to the Company
or any of its Subsidiaries, the Company shall within one (1) Business Day after any such receipt or delivery publicly disclose
such material, non-public information on a Current Report on Form 8-K or otherwise. In the event that the Company believes that
a notice contains material, non-public information relating to the Company or any of its Subsidiaries, the Company so shall indicate
to such Holder contemporaneously with delivery of such notice, and in the absence of any such indication, the Holder shall be allowed
to presume that all matters relating to such notice do not constitute material, non-public information relating to the Company
or its Subsidiaries. Nothing contained in this Section 31 shall limit any obligations of the Company, or any rights of the Holder,
under Section 4(i) of the Securities Purchase Agreement.

 

[signature page follows]

 

    	49

    	 

    
 

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

 

	 	WPCS International Incorporated
         
	 	 
	 	By: 	/s/ 
	 	 	Name:
Title:

 

    	 

    	 

    

EXHIBIT I

WPCS International Incorporated

CONVERSION NOTICE

 

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

 

	Date of Conversion:	 
	Aggregate Principal to be converted:	 
	Aggregate accrued and unpaid Interest and accrued and unpaid Late Charges with respect to such portion of the Aggregate Principal and such Aggregate Interest to be converted:	 
	AGGREGATE CONVERSION AMOUNT
  TO BE CONVERTED:	 
	Please confirm the following information:
	Conversion Price:	 
	Number of shares of Common Stock to be issued:	 
	
        

Notwithstanding anything to the contrary
        contained herein, this Conversion Notice shall constitute a representation by the Holder of the Note submitting this Conversion
        Notice that, after giving effect to the conversion provided for in this Conversion Notice, such Holder (together with its affiliates)
        will not have beneficial ownership (together with the beneficial ownership of such Person's affiliates) of a number of Common Shares
        which exceeds the Maximum Percentage (as defined in the Note) of the total outstanding Common Shares of the Company as determined
        pursuant to the provisions of Section 3(d) of the Note.

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

	Issue to:	 
	 	 
	 	 
	Facsimile Number:	 
	Holder:	 
	By:	 
	Title:	 
	Dated:	 
	Account Number:	 
	  (if electronic book entry transfer)	 
	Transaction Code Number:	 
	  (if electronic book entry transfer)	 
	 	 	 	 	 	 	 	 	 	 	 	 

 

    	 

    	 

    
 

EXHIBIT II

 

ACKNOWLEDGMENT

 

The Company hereby
acknowledges this Conversion 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 ________________________.

 

	 	WPCS International Incorporated
         
	 	 
	 	By: 	/s/ 
	 	 	Name:
Title:

 

    	 

    	 

    

 

EXHIBIT
III

 

FORM
OF CASH AND RECEIVABLES REPORT

 

To:[______________], as Collateral Agent

 

WPCS International
Incorporated, a Delaware corporation (the “Company”), hereby certifies and warrants to Collateral Agent that at the
close of business on ______________, ____ (the “Calculation Date”), the requested Cash Release Amount is $_____________,
computed as set forth on Schedule I attached hereto. Such Cash Release Amount shall be transferred to account [_______] at [BANK].

 

The undersigned hereby
certifies that on the date hereof: (i) no Event of Default has occurred and is continuing under any of the Transaction Documents
(as such term is defined in those certain Senior Secured Convertible Note issued by Company on December [__], 2012 to the noteholders
thereof (as amended, supplemented, modified and/or assigned in whole or in part, collectively, the “Note”); defined
terms used herein, but not defined herein shall have the meanings assigned to such terms in the Note); (ii) each of the representations
and warranties contained in the Transaction Documents is true and correct as of the date hereof; and (iii) the Current Ratio (as
defined in the Notes) as of the date hereof is equal to ___ (the calculation of which is set forth on Schedule II attached hereto).
The Company has caused this Certificate to be executed and delivered by its officer thereunto duly authorized on ___________, 20__.

 

	 	WPCS
International Incorporated,
	 	 
	 	By: 	 
	 	Title:	

  

    	 

    	 

    
 

SCHEDULE I

 

to

 

Cash and Receivables Report

 

Dated as of [_________________]

 

	1.	Cash balance in Controlled Accounts	 
	 	(other than Operating Accounts and Foreign Currency Controlled Accounts):	$_________
	 	 	 
	2.	Accounts Receivable:	$_________
	 	(calculated as of the time of the delivery of the first Cash and Receivables	 
	 	Report of the applicable month)	 
	 	 	 
	3.	Less Accounts Receivable that are ineligible	 
	 	(For more detail see definition of “Qualified Receivable” in Notes):	 

 

	-	(i) Subject to other Lien or non-assignable:	$_________
	-	(ii) Rebilled or over 90 days past due (over 150 days if from Blue Chip):	$_________
	-	(iii) Over 50% from Account Debtor over 60 days past due or 90 days past original invoice dates:	$_________
	-	(iv) Amount of such Account Debtor more than 15% of all outstanding Account Receivables:	$_________
	-	(v) Subject to (Offset)/Credit:	$_________
	-	(vi) Portion of Account Receivables for sale of goods that have been returned, rejected, lost or damaged:	$_________
	-	(vii) Sale on Approval, Sale or Return, Bill and Hold or Consignment:	$_________
	-	(viii) Account Receivables from services either not completed or not approved by Account Debtor:	$_________
	-	(ix) Account Receivables outside of the ordinary course of business:	$_________
	-	(x) Account Debtor subject to a Bankruptcy Proceeding:	$_________
	-	(xi) Invalid, impaired or uncollectible Account Receivables:	$_________
	-	(xii)- Account Receivables from a Subsidiary or Affiliate of the Company:	$_________
	-	(xiii) Government Contract without prior compliance with Assignment of Claims Act:	$_________
	-	(xiv) Account Debtor not in U.S. (unless letter of or by credit insurance, satisfactory to the Collateral Agent):	$_________
	-	(xv) Obligation to Company pursuant to an Instrument:	$_________
	-	(xvi) Account Receivable from illegal transaction:	$_________
	-	(xvii) Performance Bond related Account Receivable:	$_________
	-	(xviii) Portion of Account Receivables representing (i) interest or finance charges for past due balances or debit memos and (ii) Billings in Excess of Cost:	$_________

 

	 	Total	$_________

 

    	 

    	 

    
 

	4.	Qualified Accounts Receivables [Item 2 minus Item 3]	$_________
	 	 	 
	5.	Excess Collected Receivables (aggregate amount of Qualified Accounts	 
	 	Receivable in Item 4 above collected in this month in excess of $2 million)	$_________
	 	 	 
	6.	Available Qualified Receivables [Item 4 minus Item 5]	$_________
	 	 	 
	7.	Item 6 times 95%	$_________
	 	 	 
	8.	Lockbox, Cash & Receivables Balance (Before Reserve) [Item 1 plus Item 7]	$_________
	 	 	 
	9.	Less $250,000 Required Reserve [Item 8 minus $250,000] 	$_________
	 	 	 
	10.	Sum of principal and accrued and unpaid interest, fees, costs and expenses	 
	 	and other obligations outstanding under the Notes	$_________
	 	 	 
	11.	Sum of other fees, costs and expenses and other obligations 	 
	 	outstanding under the Transaction Documents	$_________
	 	 	 
	12.	Adjusted Note Obligations [Item 10 plus Item 11]	$_________
	 	 	 
	13.	Availability [Excess of Item 9 over Item 12] 	$_________
	 	 	 
	14.	Transfer Requirement [Excess of Item 12 over Item 9]	$_________
	 	 	 
	15.	Cash Release Amount (solely to the extent the amount in Item 14 aboveis zero or less than zero)	$_________

 

    	 

    	 

    
 

SCHEDULE II

 

Calculation of Current Ratio

 

 

[_________________]

 

    	 

    	 

    
 

SCHEDULE 4(A)(VIII)

 

Description of Zurich Matter

 

On
July 12, 2012, the Company executed the Surety Financing and Confession of Judgment Agreement (the Zurich Agreement) with Zurich
American Insurance Company (Zurich). The Company is not in compliance with the terms of the Zurich Agreement.
Zurich advanced the Company $793,927 for the payment of labor
and labor-related benefits to assist in completing the project contract with the Camden County Improvement Authority for work
at the Cooper Medical Center in New Jersey (the Owner or Cooper Project). The Cooper Project is a $15.1 million project that was
completed by WPCS International-Trenton, Inc. Zurich and its affiliate Fidelity and Deposit Company of Maryland (F&D), as
surety, have issued certain performance and payment bonds on behalf of the Owner in regard to the Company’s work on this
project. The Company was to repay Zurich the financial advances pursuant to the following repayment schedule: (1) $397,000 on
or about August 3, 2012; and (2) the balance of $396,927 on or about September 7, 2012. As a condition precedent to the financial
advance, the Company executed two letters which are held by Zurich: (1) a letter to the Owner voluntarily terminating its contract
for reason of the Company’s default and assigning the contract to Zurich, and (2) a letter of direction to the Owner. The
letters may be forwarded to the Owner in an Event of Default. An Event of Default under the Zurich Agreement includes: (a) the
Company’s failure to make repayments to Zurich in accordance with the repayment schedule; (b) Zurich, at the Company’s
request, advances more than $888,000; (c) Zurich pays any of the Company’s vendors, subcontractors, suppliers or material
men pursuant to Zurich’s obligations under its payment bond or any other reason; or (d) the Company uses any of the funds
advanced by Zurich for any reason other than the payment of labor and labor benefits incurred in regard to the Cooper Project.
The Company is in default under the Zurich Agreement as it has not repaid Zurich the $793,927. As a result, a letter of direction
was sent to the Owner, requesting that all current and future amounts to be paid on the contract be assigned and paid to Zurich
directly.

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