Document:

ex_101581.htm

 

Exhibit 10.1

Executive Short-Term Incentive Plan January 1, 2018

 

 

 

 

 

 

 

 

 

	Executive Short-Term Incentive Plan

 

TABLE OF CONTENTS

 

 

	WHAT ARE THE PLAN OBJECTIVES	1
	WHEN IS THE PLAN EFFECTIVE 	1
	WHO IS ELIGIBLE 	1
	WHAT ARE THE INCENTIVE LEVELS	2
	CAN I LOSE MY INCENTIVE	2
	WHAT ARE THE PERFORMANCE TARGETS	3
	WHAT ARE TIERS	4
	WHAT ARE PERFORMANCE LEVELS & INCENTIVE FORMULAS	5
	HOW IS THE INCENTIVE CALCULATED	7
	WHEN IS THE INCENTIVE PAID	8
	WHO ADMINISTERS THE PLAN	8
	 	 
	 	 
	APPENDIX A – INCENTIVE SCHEDULE FOR MOST GOALS	9
	APPENDIX B – INCENTIVE SCHEDULE FOR NET INCOME GOAL	10

  

 

 

 

	Executive Short-Term Incentive Plan
	 
	What are the Plan Objectives?

 

	 	
			■

				
			To further the growth and financial success of Farmers Capital Bank Corporation by aligning the interests of the plan participants, through cash incentives, with the interests of the Bank’s shareholders.

			

 

	 	
			■

				
			To provide participants with an incentive for excellence in individual performance; and to promote teamwork among participants.

			

 

	 	
			■

				
			To motivate, attract, and retain the services of executives who make significant contributions to the Bank’s success.

			

 

	 	
			■

				
			To allow participants to share in the success of the Bank.

			

 

	 	
			■

				
			To communicate the drivers of success of the business.

			

 

	 	
			■

				
			To provide competitive levels of compensation.

			

 

	 	
			■

				
			To select performance goals that when achieved will result in additional profits and productivity improvements that provide for a self-funded incentive plan.

			

 

When is the Plan Effective?

 

	 	
			■

				
			January 1, 2018.

			

 

Who is Eligible?

 

	 	
			■

				
			The Bank’s philosophy is to establish competitive compensation programs that are designed to reward employees for the achievement of performance-based objectives. Rewards and participation in these programs are proportional to the individual’s level of responsibility in the organization.

			

 

	 	
			■

				
			The Compensation Committee of the Board of Directors determines participating employees as well as target awards.

			

 

	 	
			■

				
			All executives will be eligible for participation, excluding executives who were not employed the entire incentive period or are no longer employed on December 31st of the Plan Year. 

			

 

	 	
			■

				
			Executives who are participants as of January 1, 2018 will continue to be eligible during the Plan Year providing their performance meets or exceeds expectations and they are not placed on probation for any disciplinary action initiated within the plan year.

			

 

1

 

 

	Executive Short-Term Incentive Plan
	 
	What are the Incentive Levels?

 

	 	
			■

				
			The incentive opportunity for eligible executive tiers as a percent of base salary for the targeted performance are as follows:

			

 

	
			TIER

				
			TARGET %

			
	
			1

				
			50%

			
	
			2

				
			40%

			
	
			3

				
			30%

			
	
			4

				
			25%

			
	
			5

				
			20%

			
	
			6

				
			15%

			

 

 

	 	
			■

				
			The Target Incentive Percent for each Tier has been set at a level that will give the participant a realistic opportunity to achieve competitive total cash compensation.

			

 

	 	
			■

				
			Executive Short-Term Incentive Plan (E-STIP) incentives will be based on the participant’s base salary as of January 1, 2018. Any salary changes which occur after that date will not result in an increase or decrease in the participant’s E-STIP incentive opportunity for the fiscal year.

			

 

	 	
			■

				
			If a participant transfers between E-STIP tiers, the Bank will prorate the participant’s incentive based on the number of months worked in each group. 

			

 

Can I lose my Incentive?

 

	 	
			■

				
			A participant who terminates employment during the calendar year forfeits the entire annual incentive payment for that year, unless determined otherwise by the BOD Chairman. 

			

 

	 	
			■

				
			Employees who have received an annual performance rating of Needs Improvement will forfeit their right to any earned E-STIP incentive for the Plan Year.

			

 

	 	
			■

				
			Participants are expected to adhere to the policies and procedures of the Bank. The daily activities and behaviors of the Participants are expected to be consistent with their job duties and responsibilities as described in their job description. If in the judgment of Bank management a Participant is not satisfactorily performing their job responsibilities or satisfactorily achieving their objectives, the Bank may temporarily or permanently discontinue or prorate that Participant’s incentive payments under this Incentive Plan.

			

 

2

 

 

	Executive Short-Term Incentive Plan

 

What are the Performance Targets?

 

	 	
			■

				
			Performance targets for all participants will be based on one or more performance factors. The weight assigned to each performance factor will vary depending on the tier, location and nature of the participant’s position. 

			

 

	 	
			■

				
			The bank-wide Net Income (NI) target or other corporate financial targets are approved by the Compensation Committee. All other business unit targets are linked to the corporate financial target. 

			

 

	 	
			■

				
			Performance targets will be communicated to participants as soon as feasible following Compensation Committee approval and previous fiscal year result calculations.

			

 

	 	
			■

				
			Each Business Unit is responsible for appraising E-STIP participants on a periodic basis on how actual results compare to targeted performance levels.

			

 

	 	
			■

				
			Adjustments to Financial Targets

			

 

The annual financial targets used for E-STIP purposes will generally remain the same during the plan year. The Bank, however, reserves the right to adjust financial goals. Examples of situations that could or will result in an adjustment to a financial goal include:

 

	 	
			1.

				
			New Units / Groups: This applies to the financial target(s) for E-STIP Group(s) which are less than 5 years old. Reason: These are generally small units or units resulting from restructuring for which the Bank doesn’t have sufficient information to establish appropriate targets at the beginning of the fiscal year. E-STIP financial targets will be reviewed and finalized by Top Management no later than February 28th of each Fiscal Year. 

			

 

	 	
			2.

				
			Non Recurring Events: There are a variety of situations that constitute a Non Recurring Event. For example, branch sales, significant restructuring, a corporate decision to take a one-time restructuring charge, etc. (unintended consequences; positive or negative) Executive Management, subject to Compensation Committee approval, will determine if such events are material enough to merit an adjustment to a previously established financial target.

			

 

3

 

 

	Executive Short-Term Incentive Plan

 

What are Tiers?

 

Each participant, based on their assigned E-STIP Tier, will receive Performance Targets which total 100%. The goals for the first year of the plan are:

 

5.5% Loan Growth will be measured as the change of the 4th Quarter Averages in 2018 compared to the 4th Quarter Averages in 2017.

 

4% Core Deposit Growth will also be measured as the change of the 4th Quarter Averages in 2018 compared to the 4th Quarter Averages in 2017.

 

Annual Net Income of $18.0 million.

 

Efficiency Ratio below 65.0% for the year ended December 31, 2018 (adjusted for one-time, nonrecurring costs).

 

The purpose of the tiers is to provide flexibility in the assignment of goals and goal weightings that more appropriately reflect the key performance metrics that executives within the tier can personally impact through their individual performance. 

 

Note: Quarterly scorecards will be provided to measure progress towards these four key goals.

 

In addition to weighted goals each individual will also have qualifiers identified which clarify specific minimum expectations that must be met to be eligible for incentive earning opportunities. These qualifiers will be included in the eligibility notice provided at the beginning of the fiscal year. 

 

In future years the goals, weightings and qualifiers may change to remain in alignment with the Bank’s strategic plans.

 

4

 

 

	Executive Short-Term Incentive Plan
	 
	What are the Performance Levels and Incentive Formulas?

 

Financial goal results are divided into four different Performance Zones. Each zone has its own incentive formula. The Zones are described as follows:

 

☐     ZONE 1      BELOW THRESHOLD

 

	 	
			■

				
			The performance threshold is set at 75% for most goals and 90% for the Net Income goal. If actual results are below threshold for a goal then no incentive is earned for that goal.

			

 

☐     ZONE 2      BETWEEN THRESHOLD AND TARGET

 

	 	
			■

				
			Once threshold is reached, payout accelerates sharply between 75% or 90% and 100% of performance at a rate of 2.4% per percent of improvement.

			

 

☐     ZONE 3     TARGET

 

	 	
			■

				
			100% performance achievement results in 100% target payout

			

 

☐     ZONE 4     ABOVE ACCEPTABLE RANGE

 

	 	
			■

				
			Above 100% of performance the incentive opportunities climb gradually at greater than 1% payout for 1% performance achievement which encourages and provides greater rewards for above target performance. 

			

 

	 	
			-

				
			INCENTIVE MAXIMUM

			

 

	 	
			■

				
			This new plan has a maximum incentive level or cap of 125% payout for any performance equal to or greater than 120% of target.

			

 

The chart below illustrates how the E-STIP incentive “Performance Factor” increases or decreases in relationship to Financial Performance (Variance to Target.)

 

	
			 

			 

			 

			 

				
			

			 

				
			 

			 

			 

			 

			

 

5

 

 

	Executive Short-Term Incentive Plan

 

	ZONE 	PERFORMANCE RANGE 	FORMULA
	 	 	 
	1a	Performance Target <75% 	No Incentive earned
	1b	NI Performance Target <90% 	No Incentive earned
	2a	=75% to 99% performance	Begins at 40% and increases @ 2.4% rate
	2b	=90% to 99% performance 	Begins at 76% and increases @ 2.4% rate
	3	=100% performance 	100% payout
	4	>100% to 120% performance	100% plus 1.25% for each additional percent

                  

6

 

 

	Executive Short-Term Incentive Plan
	 
	How is the Incentive Calculated?

 

These are examples showing how a Tier 5 participant’s incentive would be calculated in various situations. In each example, assume that the participant met their qualifier(s) and had a:

 

	 	Base salary of: 	$70,000
	 	 	 
	 	Target Incentive Award (%) of:	20%
	 	 	 
	 	Resulting in a Target Award of: 	$14,000

 

Example 1 – Participant Performance was mixed but above threshold for both goals.

 

	
			 

				
			Net Income

				
			Efficiency

			Ratio

				
			Total

			
	
			Performance to Target

				
			90%

				
			103%

				 
	
			Payout Percentage

				
			76%

				
			103.75%

				 
	
			Goal Weight

				
			60%

				
			40%

				
			100%

			
	
			Target Award

				
			$8,400

				
			$5,600

				
			$14,000

			
	
			Actual Award

				
			$6,384

				
			$5,810

				
			$12,194

			

 

Example 2 – Participant Performance was mixed with one goal below threshold and one above.

 

	
			 

				
			Net Income

				
			Efficiency

			Ratio

				
			Total

			
	
			Performance to Target

				
			85%

				
			75%

				 
	
			Payout Percentage

				
			0%

				
			40%

				 
	
			Goal Weight

				
			60%

				
			40%

				
			100%

			
	
			Target Award

				
			$8,400

				
			$5,600

				
			$14,000

			
	
			Actual Award

				
			$0

				
			$2,240

				
			$2,240

			

 

Example 3 – Participant Performance was at or above goal.

 

	
			 

				
			Net Income

				
			Efficiency

			Ratio

				
			Total

			
	
			Performance to Target

				
			105%

				
			100%

				 
	
			Payout Percentage

				
			106.25%

				
			100%

				 
	
			Goal Weight

				
			60%

				
			40%

				
			100%

			
	
			Target Award

				
			$8,400

				
			$5,600

				
			$14,000

			
	
			Actual Award

				
			$8,925

				
			$5,600

				
			$14,525

			

 

7

 

 

	Executive Short-Term Incentive Plan
	 
	When is the Incentive Paid?

 

	 	
			■

				
			Incentive payments are made within 60 days of the end of the Plan year.

			

 

	 	
			■

				
			The final incentive earned will be paid from general assets of the Bank.

			

 

 

Who Administers the Plan?

 

	 	
			■

				
			The Corporation CEO, under the oversight of the Board Compensation Committee, administers this Plan.

			

 

	 	
			■

				
			Annual calculation is based on a Performance period of January 1 to December 31 of each year.

			

 

	 	
			■

				
			Award calculation will be the responsibility of the Finance department subject to review by the CEO.

			

 

	 	
			■

				
			The appropriate department is responsible for calculation and tracking of actual performance versus budget / business plan targets (e.g., Finance will track Net Income). 

			

 

	 	
			■

				
			The Board Compensation Committee will have the authority to adjust final awards if, in the judgment of the committee, the results attained either overstate or understate the performance of the individuals involved. Such determination/judgment will be made by December 31st of the Plan Year.

			

 

8

 

 

	Executive Short-Term Incentive Plan

 

Appendix A – Incentive Schedule for all goals except NI:

 

	
			Level of Target Achieved

				
			Incentive Payout %

			
	
			< 75%

				
			0.000

			
	
			75%

				
			40.0%

			
	
			76%

				
			42.4%

			
	
			77%

				
			44.8%

			
	
			78%

				
			47.2%

			
	
			79%

				
			49.6%

			
	
			80%

				
			52.0%

			
	
			81%

				
			54.4%

			
	
			82%

				
			56.8%

			
	
			83%

				
			59.2%

			
	
			84%

				
			61.6%

			
	
			85%

				
			64.0%

			
	
			86%

				
			66.4%

			
	
			87%

				
			68.8%

			
	
			88%

				
			71.2%

			
	
			89%

				
			73.6%

			
	
			90%

				
			76.0%

			
	
			91%

				
			78.4%

			
	
			92%

				
			80.8%

			
	
			93%

				
			83.2%

			
	
			94%

				
			85.6%

			
	
			95%

				
			88.0%

			
	
			96%

				
			90.4%

			
	
			97%

				
			92.8%

			
	
			98%

				
			95.2%

			
	
			99%

				
			97.6%

			
	
			100%

				
			100.0%

			
	
			101%

				
			101.3%

			
	
			102%

				
			102.5%

			
	
			103%

				
			103.8%

			
	
			104%

				
			105.0%

			
	
			105%

				
			106.3%

			
	
			106%

				
			107.5%

			
	
			107%

				
			108.8%

			
	
			108%

				
			110.0%

			
	
			109%

				
			111.3%

			
	
			110%

				
			112.5%

			
	
			111%

				
			113.8%

			
	
			112%

				
			115.0%

			
	
			113%

				
			116.3%

			
	
			114%

				
			117.5%

			
	
			115%

				
			118.8%

			
	
			116%

				
			120.0%

			
	
			117%

				
			121.3%

			
	
			118%

				
			122.5%

			
	
			119%

				
			123.8%

			
	
			120%

				
			125.0%

			
	
			>120%

				
			125.0%

			

 

9

 

 

	Executive Short-Term Incentive Plan

 

Appendix B – Incentive Schedule for Net Income Growth goal:

 

NOTE: The performance threshold for Net Income results is higher than for other goals.

 

	
			Level of Target Achieved

				
			Incentive Payout %

			
	
			< 90%

				
			0.000

			
	
			90%

				
			76.0%

			
	
			91%

				
			78.4%

			
	
			92%

				
			80.8%

			
	
			93%

				
			83.2%

			
	
			94%

				
			85.6%

			
	
			95%

				
			88.0%

			
	
			96%

				
			90.4%

			
	
			97%

				
			92.8%

			
	
			98%

				
			95.2%

			
	
			99%

				
			97.6%

			
	
			100%

				
			100.0%

			
	
			101%

				
			101.3%

			
	
			102%

				
			102.5%

			
	
			103%

				
			103.8%

			
	
			104%

				
			105.0%

			
	
			105%

				
			106.3%

			
	
			106%

				
			107.5%

			
	
			107%

				
			108.8%

			
	
			108%

				
			110.0%

			
	
			109%

				
			111.3%

			
	
			110%

				
			112.5%

			
	
			111%

				
			113.8%

			
	
			112%

				
			115.0%

			
	
			113%

				
			116.3%

			
	
			114%

				
			117.5%

			
	
			115%

				
			118.8%

			
	
			116%

				
			120.0%

			
	
			117%

				
			121.3%

			
	
			118%

				
			122.5%

			
	
			119%

				
			123.8%

			
	
			120%

				
			125.0%

			
	
			>120%

				
			125.0%

			

 

 

10Exhibit 10.1

WPCS International Incorporated

 

 

LETTER AGREEMENT

 

 

December 4, 2017

 

 

Dear Warrant Holders,

 

The Warrant ledger
of WPCS International Incorporated (“WPCS”) indicates that you own the Warrant to purchase Common Stock identified
on Schedule A hereto (the “Warrants”). The Warrants were issued pursuant to Section 2 of that certain
Securities Purchase Agreement dated as of July 15, 2015. Capitalized terms used herein and not otherwise defined shall have the
definitions ascribed to such terms in the Securities Purchase Agreement and the Warrants. WPCS desires that you exercise your Warrants
in order to generate cash funds for WPCS. To accomplish that WPCS is willing to reduce the Exercise Price of the Warrants and issue
an additional warrant to the Warrant Holders to purchase Common Stock on terms nearly identical to the terms of the Warrants, as
an inducement to you to presently exercise the Warrants.

 

WPCS hereby temporarily
allows the Warrants to be exercised for an Exercise Price equal to the lower of $1.66 or the last consolidated bid closing price
as reported on the NASDAQ Stock Market for the Common Stock preceding the date WPCS has received a countersigned copy of this Letter
Agreement from all of the holders of Warrants identified on Schedule A hereto (the “Effective Date”).
This Letter Agreement shall be null and void and of no force and effect unless WPCS has received by the Business Day following
the date of this Letter Agreement a countersigned copy of this Letter Agreement from all the Warrant Holders identified on Schedule
A.

 

The reduction of the
Exercise Price shall be effective only from the Effective Date through 5:00 P.M. Eastern Standard Time on December 26, 2017, fifteen
(15) Trading Days thereafter (“End Date”). During that time the Warrants will be able to be exercised to buy
some or all of the Warrant Shares on the preferential terms described in this Letter Agreement on a cash only basis as described
in Section 1(a) of your Warrant.

 

In addition to
the potential reduction of the Exercise Price, if at least one-half of the Warrants listed on Schedule A on the Effective
Date (“Threshold Amount”) are exercised by the End Date, the Warrant Holders of the Warrants identified on
Schedule A (regardless if the Warrants are assigned or transferred by you after the Effective Date and exercised by such
assignee or transferee) will receive a warrant to purchase Common Stock substantially identical to the Warrant, representing
the right to acquire one share of Common Stock for each Warrant Share acquired upon cash exercise of the Warrants after the
Effective Date and through the End Date (“Reload Warrant”). The Reload Warrant will be identical to the
Warrants and grant the Warrant Holders the same rights, benefits and obligations as the Warrants except (i) for Reload
Warrants issuable upon exercise of the Threshold Amount, the Exercise Price will be equal to the last consolidated bid
closing price as reported on the NASDAQ Stock Market for the Common Stock prior to the date of such exercise of the Threshold
Amount, (ii) once the Threshold Amount has been exercised, the Exercise Price of the Reload Warrant issuable in connection
with any additional exercise of the Warrants will be equal to the last consolidated bid closing price as reported on the
NASDAQ Stock Market for the Common Stock prior to the exercise date of the Warrants giving rise to the issuance of such
Reload Warrant, (iii) the Expiration Date shall be seven (7) years after the Exercise Date of the Warrant which required the
issuance of the Reload Warrant, and (iv) the Reload Warrant may be exercised at all times on a cash basis and also on a
cashless basis as described in Section 2(d) of the Reload Warrant commencing six (6) months after the Date of Issuance of the
Reload Warrant and only in the event a Registration Statement for the public resale of the Warrant Shares issuable upon
exercise thereof is not effective (unless the Warrant holder has waived its right to have the resale of the Warrant Shares
registered.). A form of Reload Warrant is annexed hereto as Exhibit 1.

 

    	 	1	 

     

       

The Warrant Holder
represents to WPCS that the Warrant Holder has entered into an irrevocable agreement with Alpha Capital Anstalt to sell to Alpha
Capital Anstalt all the Warrants that are unexercised as of the End Date. Such sale will take place promptly after the End Date
or sooner as agreed to between Alpha and the Warrant Holder.

 

Additionally, in lieu
of registration rights granted pursuant to the Securities Purchase Agreement and the Registration Rights Agreement referred to
therein, until the Expiration Date of the Reload Warrants and at a time when 1933 Act, Rule 144b(1)(i) is unavailable for the
resale of the Warrant Shares, if WPCS determines to prepare and file with the SEC a registration statement relating to an offering
for its own account or the account of others under the 1933 Act of any of its equity securities (but excluding Forms S-4 or S-8
and similar forms which do not permit such registration), then WPCS shall send to each holder of any of the Reload Warrants or
Warrant Shares issued upon exercise of the Reload Warrants (collectively, the “Securities”) written notice
of such determination and, if within fifteen calendar days after receipt of such notice, any such holder shall so request in writing,
WPCS shall include in such registration statement all or any part of the Warrant Shares issuable upon exercise of the Reload Warrants,
that such holder requests to be registered. Inclusion of such Warrant Shares issuable upon exercise of the Reload Warrants will
be subject to customary underwriter cutbacks applicable to all holders of registration rights and minimum cutbacks in accordance
with guidance provided by the SEC (including, but not limited to Rule 415). The obligations of WPCS under this paragraph may be
waived by any holder of any of the Securities entitled to registration rights under this paragraph, in which case the Warrants
holder shall also be deemed to have waived its right to exercise the Reload Warrant on a cashless basis with respect to the Warrant
Shares for which registration was waived. The holders whose Warrant Shares are included or required to be included in such registration
statement are granted the same rights, benefits, liquidated or other damages and indemnification granted to other holders of securities
included in such registration statement. In no event shall the liability of any holder of Securities or permitted successor be
greater in amount than the dollar amount of the net proceeds actually received by such holder upon the sale of the Warrant Shares
pursuant to such registration or such lesser amount in proportion to all other holders of securities included in such registration
statement. All expenses incurred by WPCS in complying with this paragraph, including, without limitation, all registration and
filing fees, printing expenses (if required), fees and disbursements of counsel and independent public accountants for WPCS, fees
and expenses (including reasonable counsel fees) incurred in connection with complying with state securities or “blue sky”
laws, fees of the FINRA, transfer taxes, and fees of transfer agents and registrars, are called “Registration Expenses.”
All underwriting discounts and selling commissions applicable to the sale of the Securities are called "Selling Expenses."
WPCS will pay all Registration Expenses in connection with such registration statement. Selling Expenses in connection with such
registration statement shall be borne by the holders of the Securities and will be apportioned among all such holders in proportion
to the number of Warrant Shares included in a registration statement for a holder relative to all the securities included therein
for all selling holders, or as all holders may otherwise agree. It shall be a condition precedent to the obligations of WPCS to
complete the registration pursuant to this paragraph with respect to the Warrant Shares of a particular holder that such holder
shall furnish to WPCS in writing such information and representation letters, including a completed form of a securityholder questionnaire,
with respect to itself and the proposed distribution by it as WPCS may reasonably request to assure compliance with federal and
applicable state securities laws.

 

The Reload Warrant
will be delivered within the same period after exercise of a Warrant as the Warrant Shares are deliverable upon exercise of the
Warrant. The Reload Warrant will be deemed issued pursuant to the Securities Purchase Agreement, including with respect to the
representations, warranties and undertakings therein contained, mutatis mutandis, which representations and warranties
are accurate as of the dates made.

    	 	2	 

     

       

The Warrant Shares
issuable upon exercise of the Warrants are presently registered for resale pursuant to an effective Registration Statement as
described in the Registration Rights Agreement referred to in the Securities Purchase Agreement. WPCS will file a Form 8-K with
the Securities and Exchange Commission disclosing the effectuation of the reduction of the Exercise Price and the other terms
of this Letter Agreement within one (1) Business Day after the Effective Date and file a “sticker” amendment to such
effective Registration Statement which must be effective for the public resale of the Warrant Shares immediately upon filing.

 

 

 

[Signature Page to Follow]

 

    	 	3	 

     

    

  

If this proposal is
acceptable to you, please indicate your consent below and return this Letter Agreement to WPCS electronically.

 

	 	Very truly yours,
	 	 
	 	WPCS INTERNATIONAL INCORPORATED
		 
	 	 
	 	 
	 	By:	      

 

 

	Consented and Agreed by Warrant
    Holder:	 
	 	 
	 	 
	 	 
	By:	 	 
	 	 
	Dated: December , 2017	 

 

 

 

    	 	4	 

     

    

 

 

SCHEDULE A

 

 

	HOLDER	WARRANT NO.	NUMBER OF WARRANT

                                                                                SHARES ISSUABLE

                                                                                UPON CASH EXERCISE

                                                                                OF WARRANT

	IROQUOIS MASTER FUND LTD.	2015-1	1,055,481
	IROQUOIS CAPITAL INVESTMENT GROUP	2015-2	81,190
	AMERICAN CAPITAL MANAGEMENT, LLC	2015-3	81,190

 

 

 

    	 	5	 

     

    

 

Exhibit 1

 

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 SELECTED BY THE HOLDER, 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.

 

WPCS
International Incorporated

 

Warrant
To Purchase Common Stock

 

Warrant No.: ____________

Number of Shares of Common Stock: ___________

Date of Issuance: __________ ___, 2017 ("Issuance Date")

 

WPCS International
Incorporated, a Delaware corporation (the "Company"), hereby certifies that, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, _____________________________, the registered
holder hereof or its permitted assigns (the "Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company, at the Exercise Price (as defined below) then in effect, at any time or times on or after the
Issuance Date, but not after 11:59 p.m., New York time, on the Expiration Date, (as defined below),
_____________________________ (_______________) fully paid nonassessable shares of Common Stock, subject to adjustment as
provided herein (the "Warrant Shares"). Except as otherwise defined herein, capitalized terms in this
Warrant to Purchase Common Stock (including any Warrants to Purchase Common Stock issued in exchange, transfer or
replacement hereof, this "Warrant") shall have the meanings set forth in Section 17. This Warrant is one of
the Warrants to purchase Common Stock (the "SPA Warrants") deemed issued pursuant to Section 2 and subject
to that certain Securities Purchase Agreement, dated as of July 14, 2015 (the "Subscription Date"), by and
among the Company and the investors (the "Buyers") referred to therein (the "Securities Purchase
Agreement"). Capitalized terms used herein and not otherwise defined shall have the definitions ascribed to such
terms in the Securities Purchase Agreement.

 

1.                 
EXERCISE OF WARRANT.

 

(a)  
Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth
in Section 1(f)), this Warrant may be exercised by the Holder at any time or times on or after the Issuance Date, in whole or in
part, by (i) delivery of this Warrant and a written notice, in the form attached hereto as Exhibit A (the "Exercise
Notice"), of the Holder's election to exercise this Warrant and (ii) (A) payment to the Company of an amount equal
to the applicable Exercise Price multiplied by the number of Warrant Shares as to which this Warrant is being exercised (the "Aggregate
Exercise Price") in cash by wire transfer of immediately available funds or (B) if the provisions of Section 1(d) are
applicable, by notifying the Company that this Warrant is being exercised pursuant to a Cashless Exercise (as defined in Section
1(d)). Execution and delivery of the Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect
as cancellation of the original Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of
Warrant Shares. On or before the first (1st) Trading Day following the date on which the Company has received the

 

    	 		 

     

    

Exercise Notice and this Warrant, the Company
shall transmit by facsimile an acknowledgment of confirmation of receipt of the Exercise Notice and this Warrant to the Holder.
On or before the third (3rd) Trading Day following the date on which the Company has received the Exercise Notice and this Warrant,
so long as the Holder delivers the Aggregate Exercise Price (or notice of a Cashless Exercise) on or prior to the second (2nd)
Trading Day following the date on which the Company has received the Exercise Notice and this Warrant (the "Share Delivery
Date") (provided that if the Aggregate Exercise Price (or notice of a Cashless Exercise) has not been delivered by such
date, the Share Delivery Date shall be extended one (1) Trading Day after the Aggregate Exercise Price (or notice of a Cashless
Exercise) is delivered), the Company shall (X) provided that the Company’s transfer agent (“Transfer Agent”)
is participating in The Depository Trust Company ("DTC") Fast Automated Securities Transfer Program and the Warrant
Shares are eligible to be issued without a restrictive legend, credit such aggregate number of Warrant Shares to which the Holder
is entitled pursuant to such exercise to the Holder's or its designee's balance account with DTC through its Deposit/Withdrawal
At Custodian system, or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program or
the Warrant Shares are not eligible to be issued without a restrictive legend, issue and dispatch by overnight courier to the address
as specified in the Exercise Notice, a certificate, registered in the Company's share register in the name of the Holder or its
designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise. The Company shall be responsible
for all fees and expenses of the Transfer Agent and all fees and expenses with respect to the issuance of Warrant Shares via DTC,
if any. Upon delivery of this Warrant, the Exercise Notice and the Aggregate Exercise Price (or notice of a Cashless Exercise)
(such date of delivery being the “Exercise Date”), the Holder shall be deemed for all corporate purposes to
have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the
date such Warrant Shares are credited to the Holder's DTC account or the date of delivery of the certificates evidencing such Warrant
Shares, as the case may be. If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a) and the
number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being
acquired upon an exercise, then the Company shall as soon as practicable and in no event later than three (3) Trading Days after
any exercise and at its own expense, issue a new Warrant (in accordance with Section 7(d)) representing the right to purchase the
number of Warrant Shares issuable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with
respect to which this Warrant is exercised. No fractional Warrant Shares are to be issued upon the exercise of this Warrant, but
rather the number of Warrant Shares to be issued shall be rounded up to the nearest whole number. The Company shall pay any and
all taxes which may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant; provided,
that the Company shall not be required to pay any tax or governmental charge that may be imposed with respect to any applicable
withholding or the issuance or delivery of the Warrant Shares to any Person other than the Holder, and no such issuance or delivery
shall be made unless and until such Person other than the Holder requesting such issuance has paid to the Company the amount of
any such tax, or has established to the satisfaction of the Company that such tax has been paid. The Company's obligations to issue
and deliver Warrant Shares in accordance with the terms and subject to the conditions hereof are absolute and unconditional, irrespective
of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery
of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination.

 

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

 

(c)  
Company's Failure to Timely Deliver Securities. If (I) the Company shall fail for any
reason or for no reason on or prior to the Share Delivery Date either (a) if the Transfer Agent is not participating in the DTC
Fast Automated Securities Transfer Program and the Warrant Shares are eligible to be issued without a restrictive legend, to issue
to the Holder a certificate without any restrictive legend 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 (b) if the Transfer Agent is participating in the DTC

 

    	 	2	 

     

    

Fast Automated Securities Transfer Program
and the Warrant Shares are eligible to be issued without a restrictive legend, to credit the Holder's balance account with DTC,
for such number of shares of Common Stock to which the Holder is entitled upon the Holder's exercise of this Warrant the Warrant
Shares are not eligible to be issued without a restrictive legend to issue and dispatch by overnight courier to the address as
specified in the Exercise Notice for delivery on or before the Share Delivery Date a certificate, registered in the Company’s
share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant
to such exercise, or (II) after the Initial Effective Date (as defined in the Registration Statement) and during the Registration
Period (as defined in the Registration Rights Agreement), (x) the Registration Statement (as defined in the Registration Rights
Agreement) covering the resale of all of the Warrant Shares that are the subject of the Exercise Notice (the "Unavailable
Warrant Shares") is not available for the resale of such Unavailable Warrant Shares, (y) the Company fails to promptly,
but in no event later than as required pursuant to the Registration Rights Agreement so notify the Holder and (z) the Company fails
to, on or prior to the Share Delivery Date, deliver the Warrant Shares electronically without any restrictive legend by crediting
such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the Holder's or its designee's
balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause
(II) is hereinafter referred as a "Notice Failure") and either a Notice Failure or an event described in clause
(I) above (referred to herein as an "Exercise Failure") occurs, then, in addition to all other remedies available
to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Notice
Failure or Exercise Failure an amount equal to 1.0% of the product of (A) the sum of the number of shares of Common Stock not issued
to the Holder on or prior to the Share Delivery Date and to which the Holder is entitled, and (B) any trading price of the Common
Stock selected by the Holder in writing as in effect at any time during the period beginning on the applicable Exercise Date and
ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void its Exercise Notice
with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant
to such Exercise Notice; provided that the voiding of an Exercise 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 1(c) or otherwise. If the Company is required
to pay liquidated damages hereunder solely as a result of a Notice Failure, the liquidated damages related thereto will cease to
accrue upon delivery of a written notice to the Holder specifying the correct status of the applicable Registration Statement.
For the avoidance of doubt, the Company acknowledges that the Company may be liable for Registration Delay Payments pursuant to
the Registration Rights Agreement in the event of an Exercise Failure or Notice Failure. In addition to the foregoing, if an Exercise
Failure or Notice Failure occurs, and if on or after the Share Delivery Date the Holder purchases (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of a sale through a broker by the Holder of shares of Common Stock
issuable upon such exercise that the Holder anticipated receiving from the Company (a "Buy-In"), then the Company
shall, within three (3) Trading 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) or credit such Holder's balance account with DTC for 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 such Holder's balance account with DTC, as applicable, 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, times (B) any trading
price of the Common Stock selected by the Holder in writing as in effect at any time during the period beginning on the applicable
Exercise Date and ending on the applicable Share Delivery Date. Nothing shall limit the Holder's right to pursue any other remedies
available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive
relief with respect to the Company's failure to timely deliver certificates representing shares of Common Stock (or to electronically
deliver such shares of Common Stock) upon the exercise of this Warrant as required pursuant to the terms hereof.

 

    	 	3	 

     

    

(d)  
Cashless Exercise. Notwithstanding anything contained herein to the contrary (other
than Section 1(f) below), in addition to cash exercises of this Warrant as described in Section 1(a) commencing six (6) months
after the Issuance Date and while the Registration Statement covering the resale of the Warrant Shares is not available for the
public resale of the Warrant Shares, the Holder may, in its sole discretion (and without limiting the Holder’s rights and
remedies contained herein), exercise this Warrant with respect to the Warrant Shares for which such Registration Statement is unavailable,
in whole or in part and, subject to the provisions of Section 1(a), in lieu of making the cash payment otherwise contemplated
to be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to receive the number of
Warrant Shares as is computed using the following formula:

 

X =Y(A - B) ÷ A

 

Where:

 

X = the number of Warrant Shares
to be issued to the Holder.

 

Y = the total number of Warrant
Shares for which the Holder has elected to exercise this Warrant pursuant to Section 1(a).

 

A = the Closing Bid Price of the
Company’s Common Stock as of the applicable Exercise Date.

 

B = the Exercise Price in effect
under this Warrant as of the applicable Exercise Date.

 

For purposes of Rule 144(d) promulgated
under the 1933 Act, as in effect on the date hereof, it is intended that the Warrant Shares issued in a Cashless Exercise shall
be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced,
on the date this Warrant was originally issued pursuant to the Securities Purchase Agreement.

 

(e)  
Disputes. In the case of a dispute as to the determination of the Exercise Price or
the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the Holder the number of Warrant Shares that
are not disputed and resolve such dispute in accordance with Section 12.

 

(f)   
Limitations on Exercises. Notwithstanding anything to the contrary contained herein,
the Company shall not effect the exercise of any portion of this Warrant, and the Holder shall not have the right to exercise any
portion of this Warrant, pursuant to the terms and conditions of this Warrant and any such exercise shall be null and void and
treated as if never made, to the extent that after giving effect to such exercise, the Holder together with the other Attribution
Parties collectively would beneficially own in excess of 9.99% (the "Maximum Percentage") of the number of shares
of Common Stock outstanding immediately after giving effect to such exercise. For purposes of the foregoing sentence, the aggregate
number of shares of Common Stock beneficially owned by the Holder and the other Attribution Parties shall include the number of
shares of Common Stock held by the Holder and all other Attribution Parties plus the number of shares of Common Stock issuable
upon exercise of this Warrant with respect to which the determination of such sentence is being made, but shall exclude the number
of shares of Common Stock which would be issuable upon (A) exercise of the remaining, unexercised portion of this Warrant beneficially
owned by the Holder or any of the other Attribution Parties and (B) exercise or conversion of the unexercised or unconverted portion
of any other securities of the Company (including, without limitation, any convertible notes or convertible preferred stock or
warrants, including the other SPA Warrants) beneficially owned by the Holder or any other Attribution Party subject to a limitation
on conversion or exercise analogous to the limitation contained in this Section 1(f). For purposes of this Section 1(f), beneficial
ownership shall be calculated in accordance with Section 13(d) of the Securities

 

    	 	4	 

     

    

Exchange Act of 1934, as amended (the "1934
Act"). For purposes of this Warrant, in determining the number of outstanding shares of Common Stock the Holder may acquire
upon the exercise of this Warrant without exceeding the Maximum Percentage, the Holder may rely on the number of outstanding shares
of Common Stock as reflected in (x) the Company's most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current
Report on Form 8-K or other public filing with the Securities and Exchange Commission (the "SEC"), as the case
may be, (y) a more recent public announcement by the Company or (3) any other written notice by the Company or the Transfer Agent
setting forth the number of shares of Common Stock outstanding (the "Reported Outstanding Share Number"). If the
Company receives an Exercise Notice from the Holder at a time when the actual number of outstanding shares of Common Stock is less
than the Reported Outstanding Share Number, the Company shall (i) notify the Holder in writing of the number of shares of Common
Stock then outstanding and, to the extent that such Exercise Notice would otherwise cause the Holder's beneficial ownership, as
determined pursuant to this Section 1(f), to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number
of Warrant Shares to be purchased pursuant to such Exercise Notice (the number of shares by which such purchase is reduced, the
"Reduction Shares") and (ii) as soon as reasonably practicable, the Company shall return to the Holder any exercise
price paid by the Holder for the Reduction Shares. 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 or by electronic mail to the Holder the number of shares
of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder and any other Attribution
Party since the date as of which the Reported Outstanding Share Number was reported. In the event that the issuance of shares of
Common Stock to the Holder upon exercise of this Warrant results in the Holder and the other Attribution Parties being deemed to
beneficially own, in the aggregate, more than the Maximum Percentage of the number of outstanding shares of Common Stock (as determined
under Section 13(d) of the 1934 Act), the number of shares so issued by which the Holder's and the other Attribution Parties' aggregate
beneficial ownership exceeds the Maximum Percentage (the "Excess Shares") shall be deemed null and void and shall
be cancelled ab initio, and the Holder shall not have the power to vote or to transfer the Excess Shares. As soon as reasonably
practicable after the issuance of the Excess Shares has been deemed null and void, the Company shall return to the Holder the exercise
price paid by the Holder for the Excess Shares. Upon delivery of a written notice to the Company, the Holder may from time to time
increase (with such increase not effective until the sixty-first (61st) day after delivery of such notice) or decrease
the Maximum Percentage to any other percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase
in the Maximum Percentage will not be effective until the sixty-first (61st) day after such notice is delivered to the
Company and (ii) any such increase or decrease will apply only to the Holder and the other Attribution Parties and not to any other
holder of SPA Warrants that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stock issuable
pursuant to the terms of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder
for any purpose including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the 1934 Act. No prior inability to exercise this
Warrant pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect
to any subsequent determination of exercisability. The provisions of this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or any
portion of this paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in
this Section 1(f) or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitation
contained in this paragraph may not be waived and shall apply to a successor holder of this Warrant.

 

(g)  
Insufficient Authorized Shares. If at any time while this Warrant remains outstanding
the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to
reserve for issuance upon exercise of this Warrant at least a number of shares of Common Stock equal to the number of shares of
Common Stock as shall from time to time be necessary to effect the exercise of all of this Warrant then outstanding (the "Required
Reserve Amount" and the failure to have such sufficient number of authorized and unreserved shares of Common Stock, 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 this
Warrant then outstanding. Without limiting the generality of the foregoing sentence, as soon as practicable after the date of
the occurrence of an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized
Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number of authorized
shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy statement and
shall use its commercially reasonable 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. Notwithstanding the
foregoing, if any such time of an Authorized Share Failure, the Company is able to obtain the written consent of a majority of
the shares of its issued and outstanding Common Stock to approve the increase in the number of authorized shares of Common Stock
without soliciting its stockholders, the Company may satisfy this obligation by obtaining such consent and submitting for filing
with the SEC an Information Statement on Schedule 14C. In the event that upon any exercise of this Warrant, the Company does not
have sufficient authorized shares to deliver in satisfaction of such exercise, then unless the Holder elects to void such attempted
exercise, the Holder may require the Company to pay to the Holder within three (3) Trading Days of the applicable exercise, cash
in an amount equal to the product of (i) the quotient determined by dividing (x) the number of Warrant Shares that the Company
is unable to deliver pursuant to this Section 1(g), by (y) the total number of Warrant Shares issuable upon exercise of this Warrant
(without regard to any limitations or restrictions on exercise of this Warrant) and (ii) the Black Scholes Value; provided, that
(x) references to "the day immediately following the public announcement of the applicable Fundamental Transaction"
in the definition of "Black Scholes Value" shall instead refer to "the date the Holder exercises this Warrant and
the Company cannot deliver the required number of Warrant Shares because of an Authorized Share Failure" and (y) clause (iii)
of the definition of "Black Scholes Value" shall instead refer to "the underlying price per share used in such
calculation shall be the highest Weighted Average Price during the period beginning on the date of the applicable date of exercise
and the date that the Company makes the applicable cash payment."

 

    	 	5	 

     

    

 

2.     
ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and
the number of Warrant Shares shall be adjusted from time to time as follows:

 

(a)  
Intentionally Omitted.

 

(b)  
Adjustment Upon Subdivision or Combination of Shares 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 Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced and the number of Warrant Shares will be proportionately increased. 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 Exercise Price in effect immediately prior
to such combination will be proportionately increased and the number of Warrant Shares will be proportionately decreased. Any adjustment
under this Section 2(b) shall become effective at the close of business on the date the subdivision or combination becomes
effective.

 

3.                 
RIGHTS UPON DISTRIBUTION OF ASSETS. If the Company shall declare or make any dividend
or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of
capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property, options, evidence
of indebtedness or any other assets by way of a

 

    	 	6	 

     

    

dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction) (a "Distribution"), at any time after the issuance
of this Warrant, then, in each such case, the Holder shall be entitled, and the Company shall reserve the Holder’s pro rata
share of the Distribution pending complete exercise of this Warrant, to participate in such Distribution to the same extent that
the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete
exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant, including without limitation,
the Maximum Percentage) immediately before the date of which a record is taken for such Distribution, or, if no such record is
taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution
(provided, however, that to the extent that the Holder's right to participate in any such Distribution would result
in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate
in such Distribution to such extent (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result
of such Distribution (and beneficial ownership) to such extent).

 

4.     
PURCHASE RIGHTS; FUNDAMENTAL TRANSACTIONS; REGISTRATION RIGHTS.

 

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

 

(b)              
Fundamental Transactions. In the event of any Fundamental Transaction, this Warrant
shall, immediately after such Fundamental Transaction, remain outstanding and shall thereafter, be exercisable for the number of
Warrant Shares then exercisable under this Warrant, subject to appropriate adjustment (in form and substance satisfactory to the
Holder) in the Exercise Price to the value per share for the Common Stock reflected by the terms of such Fundamental Transaction,
and a corresponding immediate adjustment to the number of Warrant Shares acquirable upon exercise of this Warrant without regard
to any limitations or restrictions on exercise, if the value so reflected is less than the Exercise Price in effect immediately
prior to such consolidation, merger, sale or similar transaction). The provisions of this Section 4(b) shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers, sales or similar transactions. The Company shall not effect
any such Fundamental Transaction unless, prior to the consummation thereof, the successor Person (if other than the Company) resulting
from such Fundamental Transaction, shall assume, by written instrument substantially similar in form and substance to this Warrant
and satisfactory to the Holder, the obligation to deliver to the Holder the number of Warrant Shares then exercisable under this
Warrant, subject to adjustment, in accordance with the foregoing provisions. Notwithstanding anything to the contrary contained
herein, with respect to any Fundamental Transaction, the Holder shall have the right to elect prior to the consummation of such

 

    	 	7	 

     

    

Fundamental Transaction, to give effect
to the exercise rights contained in Section 1 instead of giving effect to the provisions contained in this Section 4(b) with respect
to this Warrant.

 

(c)              
Registration Rights. In lieu of the registration rights granted pursuant to the Registration
Rights Agreement, until the Expiration Date and at a time when Rule 144b(1)(i) of the 1933 Act is unavailable for the resale of
the issued and issuable Warrant Shares, if the Company determines to prepare and file with the SEC a registration statement relating
to an offering for its own account or the account of others under the 1933 Act of any of its equity securities (but excluding Forms
S-4 or S-8 and similar forms which do not permit such registration), then the Company shall send to the Holder written notice of
such determination and, if within fifteen calendar days after receipt of such notice, the Holder shall so request in writing, the
Company shall include in such registration statement all or any part of the Warrant Shares issuable upon exercise of this Warrant
that the Holder requests to be registered. Inclusion of such issued and issuable Warrant Shares will be subject to customary underwriter
cutbacks applicable to all holders of registration rights and minimum cutbacks in accordance with guidance provided by the SEC
(including, but not limited to Rule 415). The obligations of the Company under Section 4(c) may be waived by any Holder entitled
to registration rights under this Section 4(c) in which case the Warrant Holder shall also be deemed to have waived its right to
exercise this Warrant on a cashless basis with respect to those Warrant Shares for which registration was waived. The Holder whose
Warrant Shares are included or required to be included in such registration statement are granted the same rights, benefits, liquidated
or other damages and indemnification granted to other holders of securities included in such registration statement. In no event
shall the liability of any Holder or permitted successor be greater in amount than the dollar amount of the net proceeds actually
received by such Holder upon the sale of the Warrant Shares pursuant to such registration or such lesser amount in proportion to
all other holders of securities included in such registration statement. All expenses incurred by the Company in complying with
Section 4(c), including, without limitation, all registration and filing fees, printing expenses (if required), fees and disbursements
of counsel and independent public accountants for the Company, fees and expenses (including reasonable counsel fees) incurred in
connection with complying with state securities or “blue sky” laws, fees of the FINRA, transfer taxes, and fees of
transfer agents and registrars, are called “Registration Expenses.” All underwriting discounts and selling commissions
applicable to the sale of the Warrant Shares are called "Selling Expenses." The Company will pay all Registration
Expenses in connection with such registration statement. Selling Expenses in connection with such registration statement shall
be borne by the beneficial Holders of the Warrant Shares included in the registration statement and will be apportioned among all
such Holders in proportion to the number of Warrant Shares included in a registration statement for a Holder relative to all the
securities included therein for all selling holders, or as all selling holders may otherwise agree. It shall be a condition precedent
to the obligations of the Company to complete the registration pursuant to Section 4(c) with respect to the Warrant Shares of a
particular Holder that such Holder shall furnish to the Company in writing such information and representation letters, including
a completed form of a securityholder questionnaire, with respect to itself and the proposed distribution by it as the Company may
reasonably request to assure compliance with federal and applicable state securities laws.

 

5.     
NONCIRCUMVENTION. The Company hereby covenants and agrees that the Company will not,
by amendment of its Articles of Incorporation or Bylaws, or through any reorganization, transfer of assets, consolidation, merger,
scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, and will at all times in good faith carry out all of the provisions of this
Warrant and take all action as may be required to protect the rights of the Holder. Without limiting the generality of the foregoing,
the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant
above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the proper exercise of this
Warrant by the Holder, and (iii) shall, so long as any of the SPA Warrants are outstanding, take all action necessary to reserve
and keep available out of its

 

    	 	8	 

     

    

authorized and unissued shares of Common
Stock, solely for the purpose of effecting the exercise of the SPA Warrants, the number of shares of Common Stock as shall from
time to time be necessary to effect the exercise of the SPA Warrants then outstanding (without regard to any limitations on exercise).

 

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

 

7.     
REISSUANCE OF WARRANTS.

 

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

 

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

 

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

 

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

 

    	 	9	 

     

    

indicated on the face of such new Warrant
which is the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.

 

8.     
NOTICES. Whenever notice is required to be given under this Warrant, unless otherwise
provided herein, such notice shall be given in accordance with Section 9.4 of the Securities Purchase Agreement. The Company shall
provide the Holder with prompt written notice of all actions taken pursuant to this Warrant, including in reasonable detail a description
of such action and the reason therefor. Without limiting the generality of the foregoing, the Company will give written notice
to the Holder (i) immediately upon any adjustment of the Exercise 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 shares of Common Stock, (B) with respect to any grants, issuances
or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders
of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation;
provided in each case that such information shall be made known to the public prior to or in conjunction with such notice
being provided to the Holder. It is expressly understood and agreed that the time of exercise specified by the Holder in each Exercise
Notice shall be definitive and may not be disputed or challenged by the Company.

 

9.     
AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of this
Warrant may be amended or waived and the Company may take any action herein prohibited, or omit to perform any act herein required
to be performed by it, only if the Company has obtained the written consent of the Required Holders, and with respect to any amendment,
the amendment is in writing and signed by the Company, except that any Holder may waive the Company’s performance hereunder
or provide consent as the only such Holder. 

 

10.             
GOVERNING LAW; JURISDICTION; JURY TRIAL. This Warrant shall be governed by and construed
and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this
Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict
of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. The Company hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any
such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. The Company 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 the Company at the address set forth in Section 9.4 of the
Securities Purchase 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.
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, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

 

    	 	10	 

     

    

 

11. 
CONSTRUCTION; HEADINGS. This Warrant shall be deemed to be jointly drafted by the
Company and all the Buyers and shall not be construed against any Person as the drafter hereof. The headings of this Warrant are
for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant.

 

12. 
DISPUTE RESOLUTION. In the case of a dispute as to the determination of the Exercise
Price or the arithmetic calculation of the Warrant Shares, the Company shall submit the disputed determinations or arithmetic calculations
via facsimile within two (2) Business Days of receipt of the Exercise Notice giving rise to such dispute, as the case may be, to
the Holder. If the Holder and the Company are unable to agree upon such determination or calculation of the Exercise Price or the
Warrant Shares within three (3) Business Days of such disputed determination or arithmetic calculation being submitted to the Holder,
then the Company shall, within two (2) Business Days submit via facsimile (a) the disputed determination of the Exercise Price
to an independent, reputable investment bank selected by the Company and approved by the Holder or (b) the disputed arithmetic
calculation of the Warrant Shares to the Company's independent, outside accountant. The Company shall cause at its expense the
investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and
the Holder of the results no later than ten (10) Business Days from the time it receives the disputed determinations or calculations.
Such investment bank's or accountant's determination or calculation, as the case may be, shall be binding upon all parties absent
demonstrable error.

 

13. 
REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided
in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and 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 right of the Holder to pursue actual damages for any failure by the Company to comply with the terms of this Warrant.
The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the
remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened
breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to an injunction restraining
any breach, without the necessity of showing economic loss and without any bond or other security being required.

 

14. 
TRANSFER.This Warrant and the Warrant Shares may be offered for sale, sold,
transferred, pledged or assigned without the consent of the Company.

 

15. 
SEVERABILITY.If any provision of this Warrant is prohibited by law or otherwise
determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited,
invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the
invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long
as this Warrant as so modified continues to express, without material change, the original intentions of the parties as to the
subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially
impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would
otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid
or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited,
invalid or unenforceable provision(s).

 

    	 	11	 

     

    

16.             
DISCLOSURE. Upon receipt or delivery by the Company of any notice in accordance with
the terms of this Warrant, unless the Company has in good faith determined that the matters relating to such notice do not constitute
material, nonpublic information relating to the Company or its Subsidiaries (as defined in the Securities Purchase Agreement),
the Company shall within four (4) Business Days after any such receipt or delivery publicly disclose such material, nonpublic information
on a Current Report on Form 8-K or otherwise. In the event that the Company believes that a notice contains material, nonpublic
information relating to the Company or 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, nonpublic information relating to the Company or its Subsidiaries.

 

17. 
CERTAIN DEFINITIONS. For purposes of this Warrant, the following terms shall have
the following meanings:

 

(a)  
"1933 Act" means the Securities Act of 1933, as amended.

 

(b)  
"Affiliate" means any Person that, directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed
under Rule 405 under the Securities Act.

 

(a)  
"Attribution Parties" means, collectively, the following Persons and entities:
(i) any investment vehicle, including, any funds, feeder funds or managed accounts, currently, or from time to time after the Issuance
Date, directly or indirectly managed or advised by the Holder's investment manager or any of its Affiliates or principals, (ii)
any direct or indirect Affiliates of the Holder or any of the foregoing, (iii) any Person acting or who could be deemed to be acting
as a Group together with the Holder or any of the foregoing and (iv) any other Persons whose beneficial ownership of the Company's
Common Stock would or could be aggregated with the Holder's and the other Attribution Parties for purposes of Section 13(d) of
the 1934 Act. For clarity, the purpose of the foregoing is to subject collectively the Holder and all other Attribution Parties
to the Maximum Percentage. 

 

(b)  
"Black Scholes Value" means the value of this Warrant based on the Black-Scholes
Option Pricing Model obtained from the "OV" function on Bloomberg determined as of the day immediately following the
public announcement of the applicable Fundamental Transaction, or, if the Fundamental Transaction is not publicly announced, the
date the Fundamental Transaction is consummated, for pricing purposes and reflecting (i) a risk-free interest rate corresponding
to the U.S. Treasury rate for a period equal to the remaining term of this Warrant as of such date of request, (ii) an expected
volatility equal to the greater of 100% and the 100 day volatility obtained from the HVT function on Bloomberg as of the day immediately
following the public announcement of the applicable Fundamental Transaction, or, if the Fundamental Transaction is not publicly
announced, the date the Fundamental Transaction is consummated, (iii) the underlying price per share used in such calculation shall
be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered
in the Fundamental Transaction, (iv) a zero cost of borrow and (v) a 360 day annualization factor.

 

(c)  
"Bloomberg" means Bloomberg Financial Markets.

 

(d)  
"Business Day" means any day except any Saturday, any Sunday, any day which
is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized
or required by law or other governmental action to close.

 

(e)  
"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

 

    	 	12	 

     

    

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 the 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 OTC Link or "pink sheets" by OTC Markets Group Inc. (formerly Pink OTC Markets Inc.). 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 pursuant to Section 12. All such determinations to be appropriately adjusted
for any stock dividend, stock split, stock combination, reclassification or other similar transaction during the applicable calculation
period.

 

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

 

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

 

(h)  
"Eligible Market" means the Principal Market, the NYSE MKT LLC, The NASDAQ
Capital Market, The NASDAQ Global Market, The NASDAQ Global Select Market, or The New York Stock Exchange, Inc.

 

(i)    
“Equity Conditions” means: (i) the Company shall have complied
in all material respects with all applicable securities laws and regulations and all rules and regulations of the Eligible Markets
in respect of the offer, sale and issuance of the Securities, (ii) the Common Stock (including all shares of Common Stock
to be received by Holder) shall be listed or designated for quotation (as applicable) on an Eligible Market and no Trading Market
Event (or event which with notice or passage of time would be a Trading Market Event) has occurred, nor shall delisting or suspension
by any Eligible Market be pending or threatened, unless upon the occurrence of such Trading Market Event, delisting or suspension,
the Common Stock would be eligible for listing or for quotation (as applicable) on another Eligible Market, (iii) the Company
shall be in compliance in all material respects with all of its obligations under this Warrant, (iv) each of the Registration
Statement (as defined in the Securities Purchase Agreement) and the prospectus contained therein shall be effective and fully
available for use with respect to the resale of all of the Registrable Securities (as defined in the Registration Rights Agreement),
including, without limitation, any Warrant Shares issued pursuant to a cash exercise hereof, (v) all Warrant Shares (including
any Warrant Shares to be received upon exercise or exchange of this Warrant and including any Warrant Shares to be issued in a
cash exercise, but taking into account the limitations of Section 1(f)) shall be then (or upon such issuance (as the case
may be)) freely tradable by the Holder without restriction of any kind or nature (and the Company shall have no knowledge of any
fact which would reasonably be expected to negate the foregoing in the foreseeable future), (vi) no limitation shall be applicable
with respect to the issuance of any Warrant Shares hereunder (other than under Section 1(f)), and (vii) the Company
is fully reporting under the 1934 Act and Rule 144 (as defined in the Securities Purchase Agreement). For purposes hereof,
a “Trading Market Event” shall mean if the Company or the Common Stock or any shares of Common Stock
issued or issuable hereunder shall cease or fail to be listed for trading or quoted on any Eligible Market or shall fall below
any dollar threshold for listing or qualification or the Company shall then not be in compliance with any applicable listing or
qualification standard (or will be with the passage of time).

 

    	 	13	 

     

    

 

(j)    
"Expiration Date" means the date eighty-four (84) months after the Issuance
Date or, if such date falls on a day other than a Business Day or on which trading does not take place on the Principal Market
(a "Holiday"), the next day that is not a Holiday. 

 

(k)  
"Fundamental Transaction" means (A) that the Company shall, directly or indirectly,
including through Subsidiaries, Affiliates or otherwise, in one or more related transactions, (i) consolidate or merge with or
into (whether or not the Company is the surviving corporation) another Subject Entity, or (ii) sell, assign, transfer, convey or
otherwise dispose of all or substantially all of the properties or assets of the Company or any of its "significant subsidiaries"
(as defined in Rule 1-02 of Regulation S-X) to one or more Subject Entities, or (iii) make, or allow one or more Subject Entities
to make, or allow the Company to be subject to or have its Common Stock be subject to or party to one or more Subject Entities
making, a purchase, tender or exchange offer that is accepted by the holders of at least either (x) 50% of the outstanding shares
of Common Stock, (y) 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock held by all Subject
Entities making or party to, or Affiliated with any Subject Entities making or party to, such purchase, tender or exchange offer
were not outstanding; or (z) such number of shares of Common Stock such that all Subject Entities making or party to, or Affiliated
with any Subject Entity making or party to, such purchase, tender or exchange offer, become collectively the beneficial owners
(as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding shares of Common Stock, or (iv) consummate a stock
purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or
scheme of arrangement) with one or more Subject Entities whereby all such Subject Entities, individually or in the aggregate, acquire,
either (x) at least 50% of the outstanding shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated
as if any shares of Common Stock held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making
or party to, such stock purchase agreement or other business combination were not outstanding; or (z) such number of shares of
Common Stock such that the Subject Entities become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934
Act) of at least 50% of the outstanding shares of Common Stock, or (v) reorganize, recapitalize or reclassify its Common Stock,
(B) that the Company shall, directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related
transactions, allow any Subject Entity individually or the Subject Entities in the aggregate to be or become the "beneficial
owner" (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, whether through acquisition, purchase, assignment,
conveyance, tender, tender offer, exchange, reduction in outstanding shares of Common Stock, merger, consolidation, business combination,
reorganization, recapitalization, spin-off, scheme of arrangement, reorganization, recapitalization or reclassification or otherwise
in any manner whatsoever, of either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstanding
Common Stock, (y) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held
by all such Subject Entities as of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject
Entities were not outstanding, or (z) a percentage of the aggregate ordinary voting power represented by issued and outstanding
shares of Common Stock or other equity securities of the Company sufficient to allow such Subject Entities to effect a statutory
short form merger or other transaction requiring other stockholders of the Company to surrender their shares of Common Stock without
approval of the stockholders of the Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise,
in one or more related transactions, the issuance of or the entering into any other instrument or transaction structured in a manner
to circumvent, or that circumvents, the intent of this definition in which case this definition shall be construed and implemented
in a manner otherwise than in strict conformity with the terms of this definition to the extent necessary to correct this definition
or any

 

    	 	14	 

     

    

portion of this definition which may be
defective or inconsistent with the intended treatment of such instrument or transaction.

 

(l)    
"Group" means a "group" as that term is used in Section 13(d) of
the 1934 Act and as defined in Rule 13d-5 thereunder.

 

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

 

(n)  
"Parent Entity" of a Person means an entity that, directly or indirectly,
controls the applicable Person, including such entity whose common shares or common stock or equivalent equity security is quoted
or listed on an Eligible Market (or, if so elected by the Required Holders, any other market, exchange or quotation system), or,
if there is more than one such Person or such entity, the Person or such entity designated by the Required Holders or in the absence
of such designation, such Person or entity with the largest public market capitalization as of the date of consummation of the
Fundamental Transaction.

 

(o)  
"Person" means an individual or corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision
thereof) or other entity of any kind.

 

(p)  
"Principal Market" means the Nasdaq Capital Market.

 

(q)  
"Registration Rights Agreement" means that certain Registration Rights Agreement
dated as of the date of the Securities Purchase Agreement by and among the Company and the Buyers.

 

(r)   
"Required Holders" means the holders of the SPA Warrants representing at
least a majority of the shares of Common Stock underlying the SPA Warrants then outstanding.

 

(s)   
"Subject Entity" means any Person, Persons or Group or any Affiliate or associate
of any such Person, Persons or Group.

 

(t)    
"Successor Entity" means one or more Person or Persons (or, if so elected
by the Holder, the Company or Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or one or more
Person or Persons (or, if so elected by the Holder, the Company or the Parent Entity) with which such Fundamental Transaction shall
have been entered into.

 

(u)  
"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).

 

(v)  
"Weighted Average Price" means, for any security as of any date, the dollar
volume-weighted average price for such security on the Principal Market during the period beginning at 9:30:01 a.m., New York time
(or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New
York time (or such other time as the Principal Market

 

    	 	15	 

     

    

publicly announces is the official close
of trading), 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 (or such other time as such market publicly announces is the
official open of trading), and ending at 4:00:00 p.m., New York time (or such other time as such market publicly announces is the
official close of trading), 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 OTC Link or "pink sheets" by OTC Markets Group Inc. (formerly Pink OTC Markets
Inc.). If the Weighted Average Price cannot be calculated for a security on a particular date on any of the foregoing bases, the
Weighted Average Price 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 pursuant to Section 12 with the term "Weighted Average Price" being substituted for the term "Exercise
Price." All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification
or other similar transaction during the applicable calculation period.

 

[Signature Page Follows]

 

    	 	16	 

     

    

 

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

 

 

 

	 	WPCS INTERNATIONAL INCORPORATED
	 	 
	 	 
	 	 
	 	By:	          
	 	Name:	 
	 	Title:	 

 

 

    

    	 		 

     

    

EXHIBIT A

 

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

 

WPCS
INTERNATIONAL INCORPORATED 

The undersigned holder
hereby exercises the right to purchase _________________ of the shares of Common Stock ("Warrant Shares") of WPCS
International Incorporated, a Delaware corporation (the "Company"), evidenced by the attached Warrant to Purchase
Common Stock (the "Warrant"). Capitalized terms used herein and not otherwise defined shall have the respective
meanings set forth in the Warrant.

 

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

 

____________a
"Cash Exercise" with respect to _________________ Warrant Shares; and/or

 

____________a
"Cashless Exercise" with respect to _______________ Warrant Shares.

 

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

 

3. Delivery of Warrant
Shares. The Company shall deliver to the holder __________ Warrant Shares in accordance with the terms of the Warrant.

 

	 	 	Electronic
    Delivery	 	DTC Participant:	 
	 	 	 	 	 DTC Number:	 
	 	 	 	 	Account Name:	 
	 	 	 	 	Account Number:	 
	 	 	 	 	 	 
	 	 	Physical Delivery	 	Address:	 
	 	 	 	 	 	 
	 	 	 	 	 	 

 

 

 

Date: _______________ __, ______

 

 

 

 

Name of Registered Holder

 

 
	By:	 	 
	 	Name:	 
	 	Title:	 

 

    	 		 

     

    

ACKNOWLEDGMENT

 

 

The Company hereby
acknowledges this Exercise Notice and hereby directs Interwest Transfer Company, Inc. to issue the above indicated number of shares
of Common Stock in accordance with the Exercise Notice.

 

	 	WPCS INTERNATIONAL INCORPORATED
	 	 
	 	 
	 	 
	 	By:	          
	 	Name:	 
	 	Title:

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