Document:

Exhibit 10.17

 

EXCHANGE AGREEMENT 

 

This Exchange Agreement
(this “Agreement”), effective as of the 8th day of January, 2016 (the “Effective Date”),
is entered into by and between Arkados Group, Inc., a Delaware corporation (the “Company”), with headquarters
located at 211 Warren St., Suite 320, Newark, NJ 07103, and William Carson (“Mr. Carson”) and Susan Carson (“Mrs.
Carson,” and, collectively with Mr. Carson, the “Holders”), individuals having their address at 2703
Cottonwood Lane, Colleyville, TX 76034. 

 

WHEREAS, Mr. Carson
and the Company entered into that certain Securities Purchase Agreement, dated September 10, 2014 (the “Individual SPA”),
pursuant to which Mr. Carson purchased, and the Company sold and issued to Mr. Carson its 6% Convertible Note No. 2014-3 dated
September 10, 2014 (“Note 2014-3”) in the original principal amount of $65,000;

 

WHEREAS, the Holders
and the Company entered into that certain Securities Purchase Agreement, dated August __, 2014 (the “Joint SPA,”
and, together with the Individual SPA, the “SPAs”), pursuant to which the Holders purchased, and the Company sold and
issued to the Holders its 6% Convertible Note No. 2014-4 dated September 10, 2014 (“Note 2014-4,” and, together
with Note 2014-3, the “Notes”) also in the original principal amount of $65,000;

 

WHEREAS, the Notes
matured on October 31, 2015, and the Company has requested the Holders to extend the Maturity Date (as defined in the Notes) to
December 31, 2016;

 

WHEREAS, the Holders
are willing to reduce the amount due under the Notes to $40,000 and to extend the Maturity Date in exchange for a cash payment
of $60,000 and the Company’s issuance to the Holders of 50,000 shares of its Common Stock, par value $0.001 per share (the
“Common Stock”) and certain changes to the terms and conditions of the Notes.

 

NOW THEREFORE, in consideration
of the sum of $10.00 paid in hand, the sufficiency and receipt of which is hereby acknowledged, the parties, intending to be legally
bound, hereby agree as follows:

 

1.          Immediately
upon the full execution of this Agreement, the Holders will tender the Notes for cancellation by the Company. In exchange the Company
will issue, sell and deliver to the Holders its 6% Convertible Note due December 31, 2016 in the original principal amount of $40,000,
such note to be in the form set forth as Exhibit “A” to this Agreement (“Note 2016-1”).

 

2.          Immediately
upon the full execution of this Agreement, the Company will pay the sum of $60,000 to the Holders by wire transfer of immediately
available fund to the following bank account of the Holders:

 

[insert bank name, routing number, bank a/c number]

 

3.          Immediately
upon the full execution of this Agreement, the Company will immediately instruct its transfer agent to issue 50,000 shares of the
Common Stock (the Shares”). The Shares are “restricted securities” as defined in Rule 144 under the Securities
Act of 1933, as amended, and, accordingly, the certificate representing the Shares will bear a restrictive legend.

 

4.          The
Holders hereby accept the Shares and the sum of $60,000 as payment in full for all interest accrued on the Notes (including interest,
Default Interest and all other penalty amounts due under the Notes) through the Effective Date and $70,000 aggregate principal
amount of the Notes. The Holders hereby release the Company from any and all claims that have accrued or may have accrued under
the SPAs or the Notes up to the Effective Date.

 

     

     

    

 

5.          In
order to induce the Company to issue Note 2016-1 and the Shares, the Holders repeat and reconfirm their representations and warranties
contained in Sections 1d through 1i of the SPAs.

 

6.          The
SPAs are hereby amended to the extent required to reflect the terms of this Agreement.

 

7.          Each
party to this Agreement shall use its, his or her commercially reasonable efforts at its own expense to take all actions and to
do all things necessary, proper or advisable in order to consummate and make effective the transactions contemplated by this Agreement.

 

8.          This
Agreement shall supersede any and all prior amendments or agreements between the parties with respect to the subject matter. This
Agreement may not be amended except by a written instrument executed by all of the parties.

 

9.          This
Agreement may be executed in counterparts and facsimile of same shall be deemed an original.

 

IN WITNESS WHEREOF,
the parties have hereafter set their signature as of the Effective Date.

 

	 	HOLDERS:
	 	 
	 	/s/ William Carson
	 	(Signature)
	 	Name:	William Carson
	 	 
	 	/s/ SusanCarson
	 	  (Signature)
	 	Name:	Susan Carson
	 	 
	 	COMPANY:
	 	 
	 	Arkados GROUP, Inc.
	 	 	 
	 	By:	/s/ Terrence DeFranco
	 	Name:	Terrence DeFranco
	 	Title:	Chief Executive Officer

 

     

     

    

 

EXHIBIT A

 

Form of Convertible Note

 

     

     

    

 

This
Note and the securities represented hereby have not been registered under the Securities Act of 1933, as amended, or any state
securities laws and may not be transferred in violation of such Act, the rules and regulations thereunder or any state securities
laws or the provisions of this Note.

 

ARKADOS GROUP, INC.

 

6% CONVERTIBLE NOTE

 

DUE DECEMBER 31, 2016

 

Number: 2016-1

 

Principal: US$40,000

 

Original Issue Date: January 8, 2016

 

Registered Holder: William Carson and Susan Carson, jointly

 

Arkados Group, Inc., a Delaware corporation
(the “Company”) with principal offices at 211 Warren Street, Suite 320, Newark, NJ 07103, for value received,
hereby promises to pay the registered holder hereof (the “Holder”) the principal sum set forth above on December 31,
2016 (the “Maturity Date”), in such coin or currency of the United States of America as at the time of payment
shall be the legal tender for the payment of public and private debts, and to pay interest, less any amounts required by law to
be deducted or withheld, computed on the basis of a 365-day year, on the unpaid principal balance hereof from the date hereof (the
“Original Issue Date”), at the rate of 6% per year, compounded quarterly, until such principal sum shall have
become due and payable, or has been converted pursuant to Section 1.1, below. Interest shall be paid, on the Maturity Date, or
if the principal of the Note is earlier converted pursuant to Section 1.1 below, upon such exchange or conversion. All references
herein to dollar amounts refer to U.S. dollars and all references to Common Stock shall refer to voting stock.

 

This Note may not be prepaid in whole or
in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note which is not paid when
due shall bear interest at the rate of twelve percent 12% per annum from the due date thereof until the same is paid (“Default
Interest”). Interest shall commence accruing on the date that the Note is made and shall be computed on the basis of
a 365-day year and the actual number of days elapsed. All payments due hereunder (to the extent not converted into common stock,
$0.001 par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful
money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Company
by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of
this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business
day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the
due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. As used in
this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial
banks in the city of New York, New York are authorized or required by law or executive order to remain closed. Each capitalized
term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement
dated the date hereof, pursuant to which this Note was originally issued (the “Purchase Agreement”).

 

     

     

    

 

This Note is free from
all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other
similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.

 

The following terms
shall apply to this Note:

 

ARTICLE I. CONVERSION RIGHTS

 

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

 

1.2 Conversion Price.
The conversion price (the “Conversion Price”) shall be equal to $1.20 (subject to equitable adjustments for
stock splits, stock dividends or rights offerings by the Company relating to the Company’s securities or the securities of
any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events).

 

     

     

    

 

1.3 Authorized Shares.
The Company covenants that during the period the conversion right exists, the Company will reserve from its authorized and unissued
Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full
conversion of this Note issued pursuant to the Purchase Agreement. The Company is required at all times to have authorized and
reserved a sufficient number of shares equal to at least the number issuable upon full conversion of the Note (based on the Conversion
Price of the Notes in effect from time to time)(the “Reserved Amount”). The Reserved Amount shall be increased
from time to time in accordance with the Company’s obligations pursuant to the Purchase Agreement. The Company represents
that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Company shall
issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which
the Notes shall be convertible at the then current Conversion Price, the Company shall at the same time make proper provision so
that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights,
for conversion of the outstanding Notes. The Company hereby acknowledges that the number of shares of its Common Stock authorized
and reserved for issuance is below the number of Conversion Shares issued and issuable upon conversion of or otherwise pursuant
to the Note (based on the Conversion Price) and any other shares of Common Stock issued or issuable pursuant to the terms of this
Note, the Company will promptly take all corporate action necessary to authorize and reserve a sufficient number of shares, including,
without limitation, calling a special meeting of stockholders, if necessary, to authorize additional shares to meet the Company’s
obligations under this Section 1.3, in the case of an insufficient number of authorized shares, and using its best efforts to obtain
stockholder approval of an increase in such authorized number of shares.

 

1.4 Method of Conversion.

 

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

 

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

 

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

 

     

     

    

 

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

 

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

 

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

 

(vii) Failure
to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including
actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this
Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3 above, which failure
shall be governed by such Section) a reasonable equivalent approximation of the damages would be $100 per day, for each day beyond
the Deadline that the Company fails to deliver such Common Stock through willful or deliberate acts on the part of the Company.
Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option
of the Holder (by written notice to the Company by the first day of the month following the month in which it has accrued), shall
be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this
Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The
Company agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate,
and interference with such conversion right are difficult if not impossible to qualify. Accordingly the parties acknowledge that
the liquidated damages provision contained in this Section 1.4(g) are justified.

 

     

     

    

 

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

 

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

 

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

 

     

     

    

 

1.6 Effect of Certain Events.

 

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

 

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

 

     

     

    

 

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

 

(d) Adjustment Due
to Dilutive Issuance. If, at any time when any Notes are issued and outstanding, the Company issues or sells, or in accordance
with this Section 1.6(d) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration
per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith)
less than the Conversion Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive
Issuance”), then immediately upon the Dilutive Issuance, the Conversion Price will be reduced to the amount of the consideration
per share received by the Company in such Dilutive Issuance.

 

The Company shall be
deemed to have issued or sold shares of Common Stock if the Company in any manner issues or grants any warrants, rights or options
(not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common Stock
or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants,
rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”)
and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price
then in effect, then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the “price
per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount,
if any, received or receivable by the Company as consideration for the issuance or granting of all such Options, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company upon the exercise of all such Options, plus, in the
case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration
payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable,
by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion
of Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance
of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon
exercise of such Options.

 

Additionally, the Company
shall be deemed to have issued or sold shares of Common Stock if the Company in any manner issues or sells any Convertible Securities,
whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and the price per
share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect, then
the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the “price per share
for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount, if any,
received or receivable by the Company as consideration for the issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof at the time
such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion Price will
be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.

 

     

     

    

 

(e) Purchase Rights. If, at any time
when any Notes are issued and outstanding, the Company issues any convertible securities or rights to purchase stock, warrants,
securities or other property (the “Purchase Rights”) pro rata to the record holders of any class of Common Stock,
then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase
Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete
conversion of this Note (without regard to any limitations on conversion contained herein) 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.

 

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

 

1.7 Status as Shareholder. Upon submission
of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because
their issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share Amount)
all be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted
portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock
and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Company
to comply with the terms of this Note. In all cases, the Holder shall retain all of its rights and remedies (including, without
limitation, (i) the right to receive Conversion Default Payments pursuant to Section 1.3 to the extent required thereby for such
Conversion Default and any subsequent Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent
conversions determined in accordance with Section 1.3) for the Company’s failure to convert this Note.

 

1.8 Prepayment. The
Company shall have no right of prepayment or redemption of this Note.

 

1.9 Qualifying Financing. Upon the
closing of a financing transaction in which the Company raises cash proceeds net of the costs of the transaction of not less than
$1,000,000 in one transaction or in a series of related transactions in which the Company issues equity securities or securities
convertible into or exchangeable for, equity securities, or options or rights to purchase equity securities to one or more investors,
this Note shall immediately become due and payable.

 

     

     

    

 

ARTICLE II. CERTAIN COVENANTS

 

2.1 Distributions on Capital Stock.
So long as the Company shall have any obligation under this Note, the Company shall not without the Holder’s written consent
(a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities)
on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock
or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock
except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Company’s
disinterested directors.

 

2.2 Restriction on Stock Repurchases.
So long as the Company shall have any obligation under this Note, the Company shall not without the Holder’s written consent
redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any
one transaction or series of related transactions any shares of capital stock of the Company or any warrants, rights or options
to purchase or acquire any such shares.

 

2.3 Sale of Assets. So long as the
Company shall have any obligation under this Note, the Company shall not, without the Holder’s written consent, sell, lease
or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition
of any assets may be conditioned on a specified use of the proceeds of disposition.

 

2.4 Advances and Loans. So long as
the Company shall have any obligation under this Note, the Company shall not, without the Holder’s written consent, lend
money, give credit or make advances to any person, firm, joint venture or corporation, including, without limitation, officers,
directors, employees, subsidiaries and affiliates of the Company, except loans, credits or advances (a) in existence or committed
on the date, (b) made in the ordinary course of business or (c) not in excess of $500,000.

 

2.5 Stockholder Approval.
The Company will promptly take all corporate action necessary to authorize and reserve a sufficient number of shares, including,
without limitation, calling a special meeting of stockholders to authorize additional shares to meet the Company’s obligations
under this Section 2.5, in the case of an insufficient number of authorized shares, and using its best efforts to obtain stockholder
approval of an increase in such authorized number of shares.

 

2.6 Reporting Requirements.
The Company will within 60 days from the date of this Note to take all necessary actions to bring the Company current with
its reporting requirements of the Exchange Act.

 

ARTICLE III. EVENTS OF DEFAULT

 

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

 

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

 

     

     

    

 

3.2 Conversion and the Shares. The
Company fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation
to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to
transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of
Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the
Company directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing)
(electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion
of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not
to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop
transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion
of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat
that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any
written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for five (5) business
days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Company to remain current in its
obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered
or frustrated due to a balance owed by the Company to its transfer agent. If at the option of the Holder, the Holder advances any
funds to the Company’s transfer agent in order to process a conversion; such advanced funds shall be paid by the Company
to the Holder within forty eight (48) hours of a demand from the Holder.

 

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

 

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

 

3.5 Receiver or Trustee. The Company
or any subsidiary of the Company shall make an assignment for the benefit of creditors, or apply for or consent to the appointment
of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise
be appointed.

 

3.6 Judgments. Any money judgment,
writ or similar process shall be entered or filed against the Company or any subsidiary of the Company or any of its property or
other assets for more than $100,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise
consented to by the Holder, which consent will not be unreasonably withheld.

 

3.7 Bankruptcy. Bankruptcy, insolvency,
reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or
any law for the relief of debtors shall be instituted by or against the Company or any subsidiary of the Company.

 

     

     

    

 

3.8 Failure to Comply with the Exchange
Act. The Company shall fail to comply with the reporting requirements of the Exchange Act; and/or the Company shall cease to
be subject to the reporting requirements of the Exchange Act.

 

3.9 Liquidation. Any dissolution, liquidation,
or winding up of Company or any substantial portion of its business.

 

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

 

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

 

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

 

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

 

3.14  Reserved.

 

3.15  Cross-Default. 
Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default
by the Company of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable
notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements,
in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the
terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder.
“Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the
Company, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory
notes; provided, however, the term “Other Agreements” shall not include the related or companion documents to this
Note. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future
debt of Company to the Holder.Upon the occurrence and during the continuation of any Event of Default specified in Section 3.1
(solely with respect to failure to pay the principal hereof or interest thereon when due at the Maturity Date), the Note shall
become immediately due and payable and the Company shall pay to the Holder, in full satisfaction of its obligations hereunder,
an amount equal to the Default Sum (as defined herein).  UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT
SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND THE COMPANY SHALL PAY TO THE HOLDER, IN FULL SATISFACTION
OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the
occurrence and during the continuation of any Event of Default specified in Sections 3.1, 3.3, 3.4, 3.6, 3.8, 3.9, 3.11, 3.12,
3.13, , and/or 3.15 exercisable through the delivery of written notice to the Company by such Holders (the “Default Notice”),
and upon the occurrence of an Event of Default specified the remaining sections of Articles III (other than failure to pay the
principal hereof or interest thereon at the Maturity Date specified in Section 3.1 hereof), the Note shall become immediately due
and payable and the Company shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the
greater of (i) 150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued
and unpaid interest on the unpaid principal amount of this Note to the date of payment (the “Mandatory Prepayment Date”)
plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed
to the Holder pursuant to Section 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus
the amounts referred to in clauses (x), (y) and (z) shall collectively be known as the “Default Sum”) and all
other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which
hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and
the Holder shall be entitled to exercise all other rights and remedies available at law or in equity. 

 

     

     

    

 

If the Company fails to pay the Default Amount
within twenty (20) business days of written notice that such amount is due and payable, then the Holder shall have the right at
any time, so long as the Company remains in default (and so long and to the extent that there are sufficient authorized shares),
to require the Company, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common
Stock of the Company equal to the Default Amount divided by the Conversion Price then in effect.

 

ARTICLE IV. MISCELLANEOUS

 

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

 

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

 

     

     

    

 

If to the
Company, to:

Terrence
DeFranco

President

211 Warren
Street

Suite 320

Newark,
NJ 07103

 

If to the Holder:

 

William Carson and
Susan Carson

[insert address]

 

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

 

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

 

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

 

4.6 Governing Law. This Note shall
be governed by and construed in accordance with the laws of the State of New Jersey except with respect to the Default Interest
Rate, which will be governed by the law of the State of New York without regard to principles of conflicts of laws. Any action
brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state
courts of New Jersey or in the federal courts located in the state and county of Santa Clara. The parties to this Note hereby irrevocably
waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack
of jurisdiction or venue or based upon forum non conveniens. The Company and Holder waive trial by jury. The prevailing
party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision
of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified
to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service
of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other
Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to
serve process in any other manner permitted by law.

 

     

     

    

 

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

 

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

 

4.9 Notice of Corporate Events. Except
as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent
that it converts this Note into Common Stock. The Company shall provide the Holder with prior notification of any meeting of the
Company’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking
by the Company of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment
of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation,
reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right,
or for the purpose of determining shareholders who are entitled to vote in connection with any proposed sale, lease or conveyance
of all or substantially all of the assets of the Company or any proposed liquidation, dissolution or winding up of the Company,
the Company shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty
(30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is
to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and
character of such dividend, distribution, right or other event to the extent known at such time. The Company shall make a public
announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to
the Holder in accordance with the terms of this Section 4.9.

 

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

 

     

     

    

 

IN WITNESS WHEREOF,
Company has caused this Note to be signed in its name by its duly authorized officer as of the issuance date.

 

	 	ARKADOS GROUP, INC.
	 	 	 
	 	By:	/s/ Terrence DeFranco
	 	 	 
	 	Terrence DeFranco
	 	President and Chief Executive Officer

 

     

     

    

 

EXHIBIT
A

NOTICE
OF CONVERSION

 

The undersigned hereby
elects to convert US$_______________ principal amount plus interest in the amount of US$______________ per day accruing
through the Date of Conversion of the Note (defined below) into that number of shares
of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of
ARKADOS GROUP, INC., a Delaware corporation (the “Company”) according to the conditions of the convertible note of
the Company dated as of January 8, 2016 (the “Note”), as of the date written below. No fee will be charged to the Holder
for any conversion, except for transfer taxes, if any.

 

Box Checked as to applicable
instructions:

 

		 ̈	The
Company shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned
or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).

 

Name of DTC
Prime Broker:

Account Number:

 

		 ̈	The
undersigned hereby requests that the Company issue a certificate or certificates for the number of shares of Common Stock set
forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below
or, if additional space is necessary, on an attachment hereto:

 

	 	 	 
	 	 	 
	 	 	 

 

	Date of Conversion:	 	 ___________________
	 	 	 
	Total obligation converted:	 	US$ ________________
	 	 	 
	Applicable Conversion Price:	 	US$1.20 per US$1.00 of Principal and interest converted
	 	 	 
	Number of Shares of Common Stock to be Issued

Pursuant to Conversion of the Notes:	 	____________________
	 	 	 
	Amount of Principal Balance Due remaining

Under the Note after this conversion:	 	_____________________
	 	 	 
	U.S. Social Security Number/Taxpayer

Identification Number/Employer Identification Number	 	________________ (William)
	 	 	 
	 	 	________________ (Susan)

 

PLEASE NOTE: If non-US individual or
company, you will be required to complete a W-8-BEN (individual) or W-8-BEN-E (entity) prior to acceptance of the conversion.

 

     

     

    

 

Acknowledgement:

 

	By: 	         	 
	(signature)	 

 

	Name (printed): 	     	 

 

	Title: 	     	 
	
        Date:
	    	 	 
	 	 	 	 
	By: 	     	 
	(signature)	 

 

	Name (printed): 	      	 

 

	Title: 	     	 
	Date:Exhibit 10.18

 

 

 

CONSULTING
AGREEMENT

 

 

This
Consulting Agreement (the “Agreement”), effective as of February 23, 2016 is entered into by and between, Arkados Group,
Inc., a Delaware corporation, with its principal address at 211 Warren Street, #320, Newark, NJ 07103 (herein referred to as
the “Company”) and LP Funding, LLC DBA LPF Communications, a Nevada limited liability company with principal address
at 3820 Gulf Blvd, #1205, St. Pete beach, FL 33706 (herein referred to as the “Consultant”). As used in this Agreement,
the term “Parties” shall refer to the Company and Consultant jointly.

 

WHEREAS:

 

		A.	The
Company seeks to engagethe services of Consultant to assist the Company in its efforts to gain greater recognition and awareness
among investors in the public capital markets.

 

		B.	Consultant
will seek to assistthe Company in its efforts to better develop investor recognition and awareness in the public capital markets.

 

		C.	The
Company is familiar withConsultant and Consultant’s skills and expertise.

 

		D.	The
Parties acknowledge andagree that Consultant has completed a preliminary review of the Company and the challenges facing the
Company and the Company and Consultant have had discussions regarding these and other matters relating to the Company’s
objectives.

 

NOW
THEREFORE THE PARTIES AGREE AS FOLLOWS:

 

		1)	Commencement
and Term of Consulting Services from Consultant.

 

The
Company hereby agrees to retain the Consultant to act in a consulting capacity to the Company, and Consultant hereby agrees
to provide certain consulting services to the Company as described in Section 2 of this Agreement for a period of six (6)
months from the date at which a copy of this Agreement is executed and delivered to Consultant with the Fees (defined in
Section 4 of this Agreement) (the “Term”), unless terminated earlier in accordance with the terms of this
Agreement.

 

		2)	Duties
of Consultant.

 

Consultant
agrees that it shall provide the following specified consulting services:

		•	Assist
the Company in packaging its investment story, by analyzing strengths and weaknesses, as well as providing general strategy for
its corporate communications.

		•	Review
the Company’s marketing materials and provide comments in order to make them effective for distribution to existing and
potential investors.

		•	Present
the Company’s investment story to Consultant’s network of market participants.

		•	Through
the term of the Contract, communicate with the Consultant’s network relevant information about the ongoing development of
the Company’s activities.

		•	At
the Company's request, review business plans, corporate strategies and proposed financing transactions for the purpose of advising
the Company of the public relations implications thereof; and

		•	Assist
the Company in the development and execution of a strategy to achieve a Nasdaq listing.

 

     

     

    

 

		3)	Allocation
of Time and Energies.

 

The
Consultant hereby agrees to use its best efforts to diligently perform and discharge faithfully the responsibilities which may
be assigned to the Consultant from time to time by the officers and duly authorized representatives of the Company in connection
with the conduct of the Company’s financial, public relations and communications activities, subject to compliance with applicable
state and federal securities laws and regulations, all in accordance with the prevailing standards of the investor relations industry.

 

The
services to be provided by Consultant shall not be measured by the number of hours devoted by Consultant’s staff on a
per day basis and Consultant and the Company agree that Consultant shall perform the duties set forth in Section 2 of this
Agreement in a diligent and professional manner. The Parties acknowledge and agree that a disproportionately large amount of
the effort to be expended and the costs to be incurred by the Consultant and the benefits to be received by the Company are
expected to occur within or shortly after the first three (3) months from the commencement of the Term of this Agreement. It
is expressly understood that Consultant's performance of its duties hereunder will in no way be measured by the price of the
Company's common stock, nor the trading volume of the Company's common stock.

 

The
Parties acknowledge and agree that the services to be performed under this Agreement are to be performed by Consultant and not
by any individual staff member of Consultant. At all times hereunder, the death, disability, or incapacity of any member of Consultant’s
staff shall not be deemed a breach of this Agreement.

 

		4)	Compensation
to Consultant for Consulting Services.

 

In
consideration for the consulting services rendered to the Company as described in Section 2 of this Agreement, the Company hereby
agrees to pay Consultant the following consulting fee (the “Fee”):

 

Common
Stock Fee. A service fee equal to three hundred
thousand (300,000) shares of the Company’s common stock, par value $0.0001 per share (the “Shares”), which Shares
shall be restricted as to transferability under applicable securities law.

 

The
stock certificate(s) should be in the name “LP Funding. LLC.”
and the Shares shall be issued in two tranches of one hundred fifty thousand shares (150,000) each. The first tranche of one hundred
fifty thousand shares (150,000) shall be issued no later than March 8, 2016; and the second tranche of one hundred fifty thousand
shares (150,000) shall be issued no later than June 8, 2016; provided,
that if the Company terminates this Agreement on or prior to June 8, 2016, the Company shall have no obligation to issue the second
tranche of Shares or pay any other fee or compensation to Consultant. Each certificate shall bear a restrictive securities legend
in compliance with the exemptive provisions of the Securities Act of 1933, as amended. These Fees shall be for all purposes nonrefundable
in every respect when paid. The Shares are fully earned at the time of issuance.

 

In
order to induce the Company to pay the Fee by issuing the Shares, Consultant has executed and delivered to the Company the
Accredited Investor Representation in the form of Schedule I to this Agreement. Notwithstanding any other provision of this
Agreement, the obligation of the Company to issue the Shares shall be subject to the Company’s execution and delivery
of the Accredited Investor Representation.

 

The
Company agrees to deliver a true and accurate photocopy of
the Board of Directors’ resolution(s) duly adopted by the Company’s Board of Directors authorizing and approving this
Agreement and authorizing the issuance of the shares in accordance with the terms and conditions of this Agreement.

 

     

     

    

 

		5)	Termination.

 

Notwithstanding
any other provision of this Agreement, the Company may terminate this Agreement and its obligations hereunder at any time upon
written notice to Consultant delivered to the address set forth in the first paragraph of this Agreement without further liability
except as expressly set forth in this Agreement.

 

		6)	Representations
of Each of the Parties.

 

The
Company represents that: (1) it has the requisite authority and power to enter into this Agreement; (2) this Agreement and the
obligations recited hereunder have been approved by the respective board of directors or managers of the Parties.

 

		7)	Additional
Representations of the Company.

 

In
addition, the Company represents that Company, and not Consultant, is responsible to perform any and all due diligence on such
lender, equity purchaser or acquisition candidate introduced to it by Consultant under this Agreement, prior to Company receiving
funds or closing on any acquisition. However, Consultant shall undertake its best efforts to avoid the introduction of any third
party which is known to Consultant to have had a prior reputation or history of questionable, unethical, or illicit activities.

 

		8)	Assignment
of Agreement & Assignment of Rights and Obligations.

 

Consultant’s
services under this contract are offered to Company only and may not be assigned by the Company to any other person or entity with
which Company merges or which acquires the Company or substantially all of its assets. In the event of said merger or acquisition,
except as otherwise set forth in this Agreement, all compensation to Consultant herein under the schedules set forth herein shall
remain due and payable, and any compensation received by the Consultant may be retained in the entirety by Consultant, all without
any reduction or pro—rating and shall be considered and remain fully paid and non—assessable. Company shall assure
that in the event of any merger, acquisition, or similar change of form of entity that its successor entity shall agree to complete
all obligations to Consultant, including the provision and transfer of all compensation herein, and the preservation of the value
thereof consistent with the rights granted to Consultant by the Company herein, and to Shareholders.

 

		9)	Obligation
for Expenses.

 

Consultant
agrees to pay for all of its routine business expenses, such as phone, mailing, labor, etc. In the event of the need for expenditures
on extraordinary items, such as travel required by/or specifically requested by the Company, luncheons or dinners to large groups
of investment professionals, print advertisements in publications, etc. the Consultant will discuss those with the Company and
gain its prior written approval to incur those expenses on behalf of the Company, and have it billed directly to the Company.

 

     

     

    

 

 

		10)	Indemnification
of Consultant and Consultant’s Employees and Agents by the Company.

 

The
Company hereby agrees to indemnify and hold Consultant and Consultant’s employees and agents (the “Indemnified
Parties”) harmless against (i) any and all liabilities, obligations, losses, damages, claims, actions, asserted against
any one or more of the Indemnified Parties, based upon, resulting from or arising out of any misstatement or omission of
material fact contained in one or more of the statements, representations, press releases, announcements, reports, or filings
made or prepared by the Company or its agents, except to the extent that the misstatement or the omission was a result of an
act of Consultant, and (ii) any cost or expense (including reasonable attorneys' fees and court costs) incurred by the
Indemnified Parties or any of them in connection with the foregoing (including, without limitation, any cost or expense
incurred by the Indemnified Parties in enforcing their rights pursuant to this Section 9). No demand or claim for
indemnification under this Section 9 may be made after 11:59 p.m., East Coast Standard Time (EST), on the date six (6) years
following the last date at which services were rendered to the Company under this Agreement or any extension
thereof.

 

		11)	Obligation
for Compliance with Securities Laws.

 

The
Parties agree that the Company shall assume and remain at all times responsible for all information, statements, and documents
released or provided to Consultant and for compliance with Regulation FD or any other provisions of the Securities Exchange Act
of 1934 (the “1934 Act Obligations”).

 

		12)	Further
Assurances.

 

Each
of the Parties shall hereafter execute all documents and do all acts reasonably necessary to effect the provisions of this Agreement.

 

		13)	Successors.

 

The
provisions of this Agreement shall be deemed to obligate, extend to and inure to the benefit of the successors, assigns, transferees,
grantees, and indemnities of each of the Parties to this Agreement.

 

		14)	Independent
Counsel.

 

Each
of the Parties to this Agreement acknowledges and agrees that it has been represented by independent counsel of its own choice
throughout all negotiations which preceded the execution of this Agreement and the transactions referred to in this Agreement,
and each has executed this Agreement with the consent and upon the advice of said independent counsel. Each party represents that
he or it fully understands the provisions of this Agreement, has consulted with counsel concerning its terms and executes this
Agreement of his or its own free choice without reference to any representations, promises or expectations not set forth herein.

 

		15)	Integration.

 

This
Agreement, after full execution, acknowledgment and delivery, memorializes and constitutes the entire agreement and understanding
between the parties and supersedes and replaces all prior negotiations and agreements of the parties, whether written or unwritten.
Each of the Parties to this Agreement acknowledges that no other party, nor any agent or attorney of any other party has made any
promises, representations, or warranty whatsoever, express or implied, which is not expressly contained in this Agreement; and
each party further acknowledges that he or it has not executed this Agreement in reliance upon any belief as to any fact not expressly
recited hereinabove.

 

		16)	Attorneys
Fees.

 

In
the event of a dispute between the parties concerning the enforcement or interpretation of this Agreement, the prevailing party
in such dispute, whether by legal proceedings or otherwise, shall be reimbursed immediately for the reasonably incurred attorneys’
fees and other costs and expenses by the other Parties to the dispute.

 

     

     

    

 

		17)	Captions & Exhibits.

 

The captions by which the sections and subsections
of this Agreement are identified are for convenience only, and shall have no effect whatsoever upon its interpretation.

 

		18)	Severance.

 

If any provision of this Agreement is held to be illegal
or invalid by a court of competent jurisdiction, such provision shall be deemed to be severed and deleted; and neither such provision,
nor its severance and deletion, shall affect the validity of the remaining provisions.

 

		19)	Expenses Associated With This Agreement.

 

Each of the Parties agrees to bear its own costs, attorney’s
fees and related expenses associated with this Agreement.

 

		20)	Arbitration.

 

Any dispute or claim arising to or in any way related
to this Agreement shall be settled by arbitration in the State of New York. All arbitration shall be conducted in accordance with
the rules and regulations of the American Arbitration Association ("AAA"). AAA shall designate an arbitrator from an
approved list of arbitrators following both parties' review and deletion of those arbitrators on the approved list having a conflict
of interest with either party. Each of the Parties shall pay its own expenses associated with such arbitration. A demand for arbitration
shall be made within a reasonable time after the claim, dispute or other matter has arisen and in no event shall such demand be
made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question
would be barred by the applicable statutes of limitations. The decision of the arbitrators shall be rendered within 60 days of
submission of any claim or dispute, shall be in writing and mailed to all the Parties included in the arbitration. The decision
of the arbitrator shall be binding upon the Parties and judgment in accordance with that decision may be entered in any court having
jurisdiction thereof.

 

		21)	Power to Bind.

 

A responsible officer of the Company has read and understands
the contents of this Agreement and is empowered and duly authorized on behalf of the Company to execute it.

 

		22)	Confidentiality.

 

The Parties agree that the terms
of this Agreement shall be kept strictly confidential (a) except to the extent necessary to protect the rights of the Parties or
to satisfy he Company’s obligations under the Securities Exchange Act of 1934 and the rules adopted by the Securities and
Exchange Commission thereunder and (b) unless the term of this Agreement have been disclosed by the other Party or have otherwise
become part of the public domain.

 

     

     

    

 

IN WITNESS WHEREOF, the parties
have executed this Agreement as of the date set forth above.

 

	Arkados Group, Inc.	 	LPF Communications
	 	 	 
	By:	/s/ T.DeFranco	 	By:	/s/ William
    Luckman
	 	 	William Luckman, Director

 

	Name (print):	T.DeFranco	 	 
	 	 	 	 	 	 

 

	Title:	CEO	 	 
	211 Warren Street #320	 	 
	Newark, NJ 07103	 	 

 

     

     

    

 

Accredited Investor Representations

 

The undersigned Consultant hereby
represents and warrants to Arkados, Inc. (the “Company”) as follows:

 

1.1.          Consultant
understands that the Shares (as defined in the Consulting Agreement, dated February 23, 2016, to which this Schedule is annexed)
have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions
of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of
the Consultant’s representations as expressed herein. The Consultant understands that the Shares are “restricted securities”
under applicable U.S. federal and state securities laws and that, pursuant to these laws, the Consultant must hold them indefinitely
unless they are registered with the Securities and Exchange Commission and qualified by state authorities, or an exemption from
such registration and qualification requirements is available. The Consultant acknowledges that the Company has no obligation to
register or qualify Shares for further transfer. The Consultant further acknowledges that if an exemption from registration or
qualification is available for further transfer, it may be conditioned on various requirements, including, but not limited to,
the time and manner of sale, the holding period for the the Shares and requirements relating to the Company which are outside of
the Consultant’s control, and which the Company is under no obligation, and may not be able, to satisfy.

 

1.2.          No
Public Market. The Consultant understands that no public market now exists for the Shares, and that the Company has made no
assurances that a public market will ever exist for the Shares.

 

1.3.          Legends.
The Consultant understands that the Shares may bear the following legend:

 

“THE SECURITIES REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH
A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933.”

 

1.4.          Accredited
Investor. The Consultant is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the
Securities Act. The Consultant is a sophisticated investor with substantial experience in evaluating and investing in private
offerings of securities in companies similar to the Company, so that the Consultant is capable of evaluating the merits and
risks of the investment in the Shares and in the Company, and has the capacity to protect the Consultant’s own
interests. The Consultant has adequate means of providing for the Consultant’s current financial needs and
contingencies, is able to bear the substantial economic risks of an investment in the Shares for an indefinite period of
time, has no need for liquidity in such investment and, at the present time, could afford a complete loss of such investment.
The Consultant has not relied on the Company, or any manager, officer, employee, agent, representative or professional
advisor of the Company, for any legal, tax or financial advice, and the Consultant has, to the extent the Consultant has
deemed it to be advisable, consulted with the Consultant’s own professional legal, financial and/or tax advisors in
connection with the Consultant’s receipt of the Shares.

 

1.5.          No
General Solicitation. Neither the Consultant, nor (if an entity) any of its officers, directors, managers, employees,
agents, stockholders, members or partners has either directly or indirectly (a) responded to any general solicitation or (b)
responded to any advertisement in connection with the offer and sale of the Shares.

 

     

     

    

 

IN WITNESS WHEREOF, the undersigned
has executed these Accredited Investor Representations as of the date set forth below.

 

 

	 	LP FUNDING, LLC
	 	 
	 	/s/ William Luckman
	 	(signature)
	 	 
	 	Print Name: William Luckman, Director 
	 	 
	 	Date: February 23, 2016

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