Document:

Exhibit 10.02

 

ISSUANCE AND SALE OF THE SECURITIES
REPRESENTED BY THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE
COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE
OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE, INCLUDING SECTIONS 12(a) HEREOF. THE PRINCIPAL AMOUNT REPRESENTED
BY THIS NOTE MAY BE LESS THAN THE AMOUNTS SET FORTH ON THE FACE HEREOF PURSUANT TO SECTION 7 OF THIS NOTE.

 

WPCS
International Incorporated

 

Promissory
Note

 

	Issuance Date:  September 30, 2014	Original Principal Amount: $794,000

 

FOR VALUE RECEIVED,
WPCS International Incorporated, a Delaware corporation (the “Company”), hereby promises to pay to the order
of HUDSON BAY MASTER FUND LTD. or registered assigns (“Holder”) the amount set out above as the Original
Principal Amount (as reduced pursuant to the terms hereof pursuant to redemption or otherwise, the “Principal”)
when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance
with the terms hereof) and to pay interest (“Interest”) on any outstanding Principal at a rate equal to the
applicable Interest Rate (as defined below), from the date set out above as the Issuance Date (the “Issuance Date”)
until the same becomes due and payable, whether upon an Interest Date (as defined below), the Maturity Date, acceleration, redemption
or otherwise (in each case in accordance with the terms hereof). This Note (including any Note issued in exchange, transfer or
replacement hereof, this “Note”) is the Note issued pursuant to that certain Amendment, Waiver and Exchange
Agreement, dated as of September 30, 2014, by and between the Company and the Holder (the “Exchange Agreement”)
on the Closing Date (as defined in the Exchange Agreement). Certain capitalized terms used herein are defined in Section 24.

 

1.           MATURITY
DATE. On the Maturity Date, the Company shall pay to the Holder an amount in cash representing all outstanding Principal, accrued
and unpaid Interest and accrued and unpaid Late Charges on such Principal and Interest (collectively, the “Obligations
Amount”).

 

    	 

    	 

    

 

2.           INTEREST;
INTEREST RATE. Except as otherwise set forth herein, no Interest on this Note shall accrue prior to the Maturity Date. From
and after the occurrence and during the continuance of any Event of Default or from and after the Maturity Date, to the extent
this Note remains outstanding, as applicable, the interest on this Note shall commence accruing daily at an interest rate of twenty-five
percent (25%) (the “Interest Rate”) on the Obligations Amount from time to time, shall be computed on the basis
of a 360-day year comprised of twelve (12) thirty (30) day months and shall be payable in arrears on the first Trading Day (as
defined in the Second Securities Purchase Agreement) of each Quarter (each, an “Interest Date”) and shall compound
each calendar month and shall be payable in accordance with the terms of this Note.

 

3.           RIGHTS
UPON EVENT OF DEFAULT.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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(viii)      other
than as specifically set forth in another clause of this Section 3(a), the Company or any
Subsidiary breaches any representation, warranty, covenant or other term or condition of any Transaction Document, except, in the
case of a breach of a covenant or other term or condition that is curable, only if such breach remains uncured for a period of
three (3) consecutive Trading Days; or

 

(ix)         any
Material Adverse Effect (as defined in the Second Securities Purchase Agreement) occurs.

 

(b)          Notice
of an Event of Default; Redemption Right. Upon the occurrence of an Event of Default with respect to this Note or any Other
Note, the Company shall within one (1) Business Day deliver written notice thereof via facsimile and overnight courier (with next
day delivery specified) (an “Event of Default Notice”) to the Holder. At any time after the earlier of the Holder’s
receipt of an Event of Default Notice and the Holder becoming aware of an Event of Default, the Holder may require the Company
to redeem (regardless of whether such Event of Default has been cured) all or any portion of this Note by delivering written notice
thereof (the “Event of Default Redemption Notice”) to the Company, which Event of Default Redemption Notice
shall indicate the portion of this Note the Holder is electing to have the Company redeem. Each portion of this Note subject to
redemption by the Company pursuant to this Section 3(b) shall be redeemed by the Company at a price equal to the product of (A)
the aggregate portion of the Obligations Amount to be redeemed multiplied by (B) the Redemption Premium (the “Event of
Default Redemption Price”). Redemptions required by this Section 3(b) shall be made in accordance with the provisions
of Section 7. To the extent redemptions required by this Section 3(b) are deemed or determined by a court of competent jurisdiction
to be prepayments of this Note by the Company, such redemptions shall be deemed to be voluntary prepayments. In the event of the
Company’s redemption of any portion of this Note under this Section 3(b), the Holder’s damages would be uncertain and
difficult to estimate because of the parties’ inability to predict future interest rates and the uncertainty of the availability
of a suitable substitute investment opportunity for the Holder. Accordingly, any redemption premium due under this Section 3(b)
is intended by the parties to be, and shall be deemed, a reasonable estimate of the Holder’s actual loss of its investment
opportunity and not as a penalty.

 

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4.           RIGHTS
UPON FUNDAMENTAL TRANSACTION.

 

(a)          Assumption.
The Company shall not enter into or be party to a Fundamental Transaction unless (i) the Successor Entity assumes in writing
all of the obligations of the Company under this Note and the other Transaction Documents in accordance with the provisions of
this Section 4(a) pursuant to written agreements in form and substance satisfactory to the Holder and approved by the Holder prior
to such Fundamental Transaction, including agreements to deliver to the Holder in exchange for such Note a security of the Successor
Entity evidenced by a written instrument substantially similar in form and substance to the Note, including, without limitation,
having a principal amount and interest rate equal to the principal amounts then outstanding and the interest rates of the Note
held by such holder and having similar ranking to the Note, and satisfactory to the Holder and (ii) the Successor Entity (including
its Parent Entity) is a publicly traded corporation whose common stock is quoted on or listed for trading on an Eligible Market.
Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from
and after the date of such Fundamental Transaction, the provisions of this Note and the other Transaction Documents referring to
the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and
shall assume all of the obligations of the Company under this Note and the other Transaction Documents with the same effect as
if such Successor Entity had been named as the Company herein. Notwithstanding the foregoing, the Holder may elect, at its sole
option, by delivery of written notice to the Company to waive this Section 4(a) to permit the Fundamental Transaction without the
assumption of this Note. The provisions of this Section 4 shall apply similarly and equally to successive Fundamental Transactions.

 

(b)          Notice
of a Fundamental Transaction; Redemption Right. No sooner than twenty (20) Trading Days nor later than ten (10) Trading Days
prior to the consummation of a Fundamental Transaction, but not prior to the public announcement of such Fundamental Transaction,
the Company shall deliver written notice thereof via facsimile and overnight courier to the Holder (a “Fundamental Transaction
Notice”). At any time during the period beginning after the Holder’s receipt of a Fundamental Transaction Notice
or the Holder becoming aware of a Fundamental Transaction if a Fundamental Transaction Notice is not delivered to the Holder in
accordance with the immediately preceding sentence (as applicable) and ending on the later of twenty (20) Trading Days after (A)
consummation of such Fundamental Transaction or (B) the date of receipt of such Fundamental Transaction Notice, the Holder may
require the Company to redeem all or any portion of this Note by delivering written notice thereof (“Fundamental Transaction
Redemption Notice”) to the Company, which Fundamental Transaction Redemption Notice shall indicate the aggregate portion
of the Obligations Amount the Holder is electing to redeem. The portion of this Note subject to redemption pursuant to this Section
4 shall be redeemed by the Company in cash at a price equal to the product of (w) the Fundamental Transaction Redemption Premium
multiplied by (y) the aggregate portion of the Obligations Amount being redeemed (the “Fundamental Transaction Redemption
Price”). Redemptions required by this Section 4 shall be made in accordance with the provisions of Section 7 and shall
have priority to payments to stockholders in connection with such Fundamental Transaction. To the extent redemptions required by
this Section 4(b) are deemed or determined by a court of competent jurisdiction to be prepayments of this Note by the Company,
such redemptions shall be deemed to be voluntary prepayments. In the event of the Company’s redemption of any portion of
this Note under this Section 4(b), the Holder’s damages would be uncertain and difficult to estimate because of the parties’
inability to predict future interest rates and the uncertainty of the availability of a suitable substitute investment opportunity
for the Holder. Accordingly, any redemption premium due under this Section 4(b) is intended by the parties to be, and shall be
deemed, a reasonable estimate of the Holder’s actual loss of its investment opportunity and not as a penalty.

 

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5.           NONCIRCUMVENTION.
The Company hereby covenants and agrees that the Company will not, by amendment of its Certificate of Incorporation (as defined
in the Second Securities Purchase Agreement), Bylaws (as defined in the Second Securities Purchase Agreement) or through any reorganization,
transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms of this Note, and will at all times in good faith
carry out all of the provisions of this Note and take all action as may be required to protect the rights of the Holder of this
Note.

 

6.           OPTIONAL
AND MANDATORY REDEMPTIONS

 

(a)         Company
Optional Redemption. The Company shall have the right at any time to redeem all or any aggregate portion of the Obligations
Amount then remaining under this Note (an “Optional Redemption”). The portion of this Note subject to redemption
pursuant to this Section 6(a) shall be redeemed by the Company in cash at a price equal to the product of (i) the aggregate portion
of the Obligations Amount being redeemed to, but excluding, the applicable date of redemption and (ii) the Default Redemption Premium,
if any (the “Optional Redemption Price”). The Company may exercise its redemption right under this Section 6(a)
by delivering a written notice thereof by confirmed facsimile and overnight courier to all, but not less than all, of the record
holders of Note (the “Optional Redemption Notice” and the date such notice is delivered to all the record holders
is referred to as the “Optional Redemption Notice Date”). The Optional Redemption Notice shall be irrevocable.
The Optional Redemption Notice shall state (A) the date on which the Optional Redemption shall occur (the “Optional Redemption
Date”) which date shall be not less than three (3) Business Days after the Optional Redemption Notice Date and (B) the
aggregate portion of the Obligations Amount of the Note which the Company has elected to be subject to Optional Redemption from
the Holder pursuant to this Section on the Optional Redemption Date. Redemptions made pursuant to this Section 6(a) shall be made
in accordance with Section 7.

 

(b)         Subsequent
Placement Offerings. Following the consummation of an Subsequent Placement Offering, the Company shall redeem 17% of the Note
with the net proceeds of such Subsequent Placement Offering. Promptly after the consummation of an Subsequent Placement Offering,
but in no event later than three (3) Business Days thereafter, the Company shall deliver written notice thereof via facsimile and
overnight courier to the Holder (the “Subsequent Placement Offering Redemption Notice” and the date such notice
is delivered to all the record holders is referred to as the “Subsequent Placement Offering Redemption Notice Date”)
which notice shall (A) describe the terms of such Subsequent Placement Offering including (1) the date of consummation of such
sale, (2) the number of Common Shares sold in such Subsequent Placement Offering and (3) the sale price per Common Share (the “Sale
Price”), (B) state that the Company shall redeem (an “Subsequent Placement Offering Redemption”) all
or a portion of this Note in accordance with this Section 6(b), (C) state the date on which the Subsequent Placement Offering Redemption
shall occur (the “Subsequent Placement Offering Redemption Date”) which date shall not be less than two (2)
Business Days nor more than the earlier of (x) five (5) Business Days after the Subsequent Placement Offering Redemption Notice
Date and (y) three (3) Business Days after date of consummation of the Subsequent Placement Offering and (D) state the aggregate
portion of the Obligations Amount of the Note which the Company shall redeem pursuant to an Subsequent Placement Offering Redemption.
Each portion of this Note subject to redemption by the Company pursuant to this Section 6(b) shall be redeemed by the Company at
a price equal to the product of (i) aggregate portion of the Obligations Amount being redeemed to, but excluding, the date of redemption
and (ii) the applicable Default Redemption Premium, if any (the “Subsequent Placement Offering Redemption Price”).
Redemptions required by this Section 6(b) shall be made in accordance with the provisions of Section 7.

 

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7.           REDEMPTIONS.

 

(a)          Mechanics.
The Company shall deliver the applicable Event of Default Redemption Price to the Holder in cash within five (5) Business Days
after the Company’s receipt of the Holder’s Event of Default Redemption Notice. If the Holder has submitted a Fundamental
Transaction Redemption Notice in accordance with Section 4(b), the Company shall deliver the applicable Fundamental Transaction
Redemption Price to the Holder in cash concurrently with the consummation of such Fundamental Transaction if such notice is received
prior to the consummation of such Fundamental Transaction and within five (5) Business Days after the Company’s receipt of
such notice otherwise. The Company shall deliver in cash (i) the applicable Optional Redemption Price to the Holder on the Optional
Redemption Date and (ii) the applicable Subsequent Placement Offering Redemption Price to the Holder on the Subsequent Placement
Offering Redemption Date. In the event of a redemption of less than all of the Obligations Amount of this Note, the Company shall
promptly cause to be issued and delivered to the Holder a new Note (in accordance with Section 12(d)) representing the aggregate
portion of the Obligations Amount which has not been redeemed. In the event that the Company does not pay the applicable Redemption
Price to the Holder within the time period required, at any time thereafter and until the Company pays such unpaid Redemption Price
in full, the Holder shall have the option, in lieu of redemption, to require the Company to promptly return to the Holder all or
any portion of this Note representing the aggregate portion of the Obligations Amount that was submitted for redemption and for
which the applicable Redemption Price (together with any Late Charges thereon) has not been paid. Upon the Company’s receipt
of such notice, (x) the applicable Redemption Notice shall be null and void with respect to such aggregate portion of the Obligations
Amount, (y) the Company shall immediately return this Note, or issue a new Note (in accordance with Section 12(d)), to the Holder.
The Holder’s delivery of a notice voiding a Redemption Notice and exercise of its rights following such notice shall not
affect the Company’s obligations to make any payments of Late Charges which have accrued prior to the date of such notice
with respect to the aggregate portion of the Obligations Amount subject to such notice.

 

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

 

9.           [Intentionally
Omitted]

 

10.         AMENDING
THE TERMS OF THIS NOTE. The prior written consent of the Holder shall be required for any change or amendment to this Note.

 

11.         TRANSFER.
This Note may be offered, sold, assigned or transferred by the Holder without the consent of the Company, subject only to the provisions
of Section 2(g) of the Second Securities Purchase Agreement.

 

12.         REISSUANCE
OF THIS NOTE.

 

(a)          Transfer.
If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue
and deliver upon the order of the Holder a new Note (in accordance with Section 11(d)), registered as the Holder may request, representing
the outstanding Principal being transferred by the Holder and, if less than the entire outstanding Principal is being transferred,
a new Note (in accordance with Section 11(d)) to the Holder representing the outstanding Principal not being transferred. The Holder
and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section 7 following redemption
of any portion of this Note, the outstanding Principal represented by this Note may be less than the Principal stated on the face
of this Note.

 

(b)          Lost,
Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Note (as to which a written certification and the indemnification contemplated below shall suffice
as such evidence), and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company
in customary and reasonable form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall
execute and deliver to the Holder a new Note (in accordance with Section 11(d)) representing the outstanding Principal.

 

(c)          Note
Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder at the principal
office of the Company, for a new Note or Notes (in accordance with Section 11(d) and in principal amounts of at least $1,000) representing
in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding
Principal as is designated by the Holder at the time of such surrender.

 

(d)          Issuance
of New Notes. Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall
be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding
(or in the case of a new Note being issued pursuant to Section 11(a) or Section 11(c), the Principal designated by the Holder which,
when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the Principal
remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated
on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions
as this Note, and (v) shall represent accrued and unpaid Interest and Late Charges on the Principal and Interest of this Note,
from the Issuance Date.

 

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

 

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

 

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

 

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

 

17.         DISPUTE
RESOLUTION. In the case of a dispute as to the arithmetic calculation of any Redemption Price, the Company shall submit the
disputed determinations or arithmetic calculations via facsimile within one (1) Business Day of receipt, or deemed receipt, of
the applicable Redemption Notice or other event 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 calculation within one (1) Business Day of such disputed arithmetic calculation being
submitted to the Holder, then the Company shall, within one (1) Business Day submit via facsimile the disputed arithmetic calculation
of such Redemption Price to the Company's independent, outside accountant. The Company, at the Company's expense, shall cause the
accountant to perform the determinations or calculations and notify the Company and the Holder of the results no later than five
(5) Business Days from the time it receives the disputed calculations. Such accountant's calculation shall be binding upon all
parties absent demonstrable error.

 

18.         NOTICES;
CURRENCY; PAYMENTS.

 

(a)          Notices.
Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance
with Section 9(f) of the Second Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice
of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefore.
Without limiting the generality of the foregoing, the Company will give written notice to the Holder at least twenty (20) days
prior to the date on which the Company closes its books or takes a record for determining rights to vote with respect to any Fundamental
Transaction, dissolution or liquidation, provided that such information shall be made known to the public prior to or in conjunction
with such notice being provided to the Holder.

 

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

 

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

 

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

 

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

 

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

 

    	11

    	 

    

 

22.          JUDGMENT
CURRENCY.

 

(a)          If
for the purpose of obtaining or enforcing judgment against the Company in any court in any jurisdiction it becomes necessary to
convert into any other currency (such other currency being hereinafter in this Section 22 referred to as the “Judgment
Currency”) an amount due in U.S. dollars under this Note, the conversion shall be made at the Exchange Rate prevailing
on the Trading Day immediately preceding:

 

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

 

(ii)         the
date on which the foreign court determines, in the case of any proceeding in the courts of any other jurisdiction (the date as
of which such conversion is made pursuant to this Section 22(a)(ii) being hereinafter referred to as the “Judgment Conversion
Date”).

 

(b)          If
in the case of any proceeding in the court of any jurisdiction referred to in Section 22(a)(ii) above, there is a change in the
Exchange Rate prevailing between the Judgment Conversion Date and the date of actual payment of the amount due, the applicable
party shall pay such adjusted amount as may be necessary to ensure that the amount paid in the Judgment Currency, when converted
at the Exchange Rate prevailing on the date of payment, will produce the amount of US dollars which could have been purchased with
the amount of Judgment Currency stipulated in the judgment or judicial order at the Exchange Rate prevailing on the Judgment Conversion
Date.

 

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

 

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

 

    	12

    	 

    

 

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

 

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

 

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

 

(c)          “Default
Redemption Premium” means, as of any date of determination (i) if such date of determination occurs after October 5,
2015, 125% or (ii) if such date of determination occurs on or prior to October 5, 2015, 100%.

 

(d)          
“Fundamental Transaction” means that (i) the Company or any of its Subsidiaries shall, directly or indirectly,
in one or more related transactions, (1) consolidate or merge with or into (whether or not the Company or any of its Subsidiaries
is the surviving corporation) any other Person, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all
or substantially all of its respective properties or assets to any other Person, or (3) allow any other Person to make a purchase,
tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Company
(not including any shares of Voting Stock of the Company held by the Person or Persons making or party to, or associated or affiliated
with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement
or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement)
with any other Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Company
(not including any shares of Voting Stock of the Company held by the other Person or other Persons making or party to, or associated
or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination),
or (5) reorganize, recapitalize or reclassify the Common Stock, or (ii) any “person” or “group” (as these
terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act and the rules and regulations promulgated thereunder) is
or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50%
of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Company.

 

    	13

    	 

    

 

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

 

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

 

(g)          “Maturity Date” shall mean September 30, 2015; provided, however, the Maturity Date may be extended at
the option of the Holder in the event that, and for so long as, an Event of Default shall have occurred and be continuing or any
event shall have occurred and be continuing that with the passage of time and the failure to cure would result in an Event of Default.

 

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

 

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

 

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

 

(k)          “Redemption
Notices” means, collectively, Event of Default Redemption Notices, the Optional Redemption Notice, the Subsequent Placement
Offering Redemption Notice and the Fundamental Transaction Redemption Notices, and each of the foregoing, individually, a “Redemption
Notice.”

 

(l)           “Redemption
Premium” means (i) in the case of the Events of Default described in Section 3(a) (other than Sections 3(a)(iii) through
3(a)(v)), 125% or (ii) in the case of the Events of Default described in Sections 3(a)(iii) through 3(a)(v), 100%.

 

(m)         “Redemption
Prices” means, collectively, Event of Default Redemption Prices, the Fundamental Transaction Redemption Prices, the Optional
Redemption Prices and the Subsequent Placement Offering Redemption Prices, and each of the foregoing, individually, a “Redemption
Price.”

 

    	14

    	 

    

 

(n)          “Second
Securities Purchase Agreement” shall have the meaning as set forth in the Exchange Agreement.

 

(o)          “Subsequent
Placement Offering” means the sale, lease, conveyance or other disposition, directly or indirectly, by the Company of
any securities of the Company or any of its Subsidiaries in a Subsequent Placement (as defined in the Second Securities Purchase
Agreement) (other than (i) account receivables facilities and credit lines that, in either case, do not include the issuance of
any common equity, Convertible Securities (as defined in the Second Securities Purchase Agreement), Options (as defined in the
Second Securities Purchase Agreement) or are not otherwise equity-linked to any securities of the Company or any of its Subsidiaries
and (ii) Excluded Securities (as defined in the Second Securities Purchase Agreement).

 

(p)           “Subscription Date” means September 30, 2014.

 

(q)          “Subsidiaries”
shall have the meaning as set forth in the Second Securities Purchase Agreement.

 

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

 

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

 

25.         DISCLOSURE.
Upon receipt or delivery by the Company of any notice in accordance with the terms of this Note, unless the Company has in good
faith determined that the matters relating to such notice do not constitute material, non-public information relating to the Company
or any of its Subsidiaries, the Company shall within one (1) Business Day after any such receipt or delivery publicly disclose
such material, non-public information on a Current Report on Form 8-K or otherwise. In the event that the Company believes that
a notice contains material, non-public information relating to the Company or any of its Subsidiaries, the Company so shall indicate
to such Holder contemporaneously with delivery of such notice, and in the absence of any such indication, the Holder shall be allowed
to presume that all matters relating to such notice do not constitute material, non-public information relating to the Company
or its Subsidiaries. Nothing contained in this Section 25 shall limit any obligations of the Company, or any rights of the Holder,
under Section 4(i) of the Second Securities Purchase Agreement.

 

[signature page follows]

 

    	15

    	 

    

 

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

 

	 	WPCS International Incorporated
	 	 
	 	By:	 
	 	 	Name: Sebastian Giordano
	 	 	Title:  Chief Executive Officer

 

    	 

    	 

    

 

SCHEDULE 4(A)(VIII)

 

Description of Zurich Matter

 

On
July 12, 2012, the Company executed the Surety Financing and Confession of Judgment Agreement (the Zurich Agreement) with Zurich
American Insurance Company (Zurich). The Company is not in compliance with the terms of the Zurich Agreement.
Zurich advanced the Company $793,927 for the payment of labor and
labor-related benefits to assist in completing the project contract with the Camden County Improvement Authority for work at the
Cooper Medical Center in New Jersey (the Owner or Cooper Project). The Cooper Project is a $15.1 million project that was completed
by WPCS International-Trenton, Inc. Zurich and its affiliate Fidelity and Deposit Company of Maryland (F&D), as surety, have
issued certain performance and payment bonds on behalf of the Owner in regard to the Company’s work on this project. The
Company was to repay Zurich the financial advances pursuant to the following repayment schedule: (1) $397,000 on or about August
3, 2012; and (2) the balance of $396,927 on or about September 7, 2012. As a condition precedent to the financial advance, the
Company executed two letters which are held by Zurich: (1) a letter to the Owner voluntarily terminating its contract for reason
of the Company’s default and assigning the contract to Zurich, and (2) a letter of direction to the Owner. The letters may
be forwarded to the Owner in an Event of Default. An Event of Default under the Zurich Agreement includes: (a) the Company’s
failure to make repayments to Zurich in accordance with the repayment schedule; (b) Zurich, at the Company’s request, advances
more than $888,000; (c) Zurich pays any of the Company’s vendors, subcontractors, suppliers or material men pursuant to Zurich’s
obligations under its payment bond or any other reason; or (d) the Company uses any of the funds advanced by Zurich for any reason
other than the payment of labor and labor benefits incurred in regard to the Cooper Project. The Company is in default under the
Zurich Agreement as it has not repaid Zurich the $793,927. As a result, a letter of direction was sent to the Owner, requesting
that all current and future amounts to be paid on the contract be assigned and paid to Zurich directly.Exhibit 10.04

 

ESCROW AGREEMENT

 

THIS ESCROW AGREEMENT
(this “Agreement”) is made as of September 30, 2014 by and among EC COMPANY, an Oregon corporation (the “Purchaser”),
WPCS International-Seattle, Inc., a Washington corporation (“WPCS-Seattle”), WPCS International Incorporated, a Delaware
corporation (“WPCS”), and Sichenzia Ross Friedman Ference LLP, with an address at 61 Broadway, New York, NY 10006 (the
“Escrow Agent”). WPCS and WPCS Seattle are collectively referred to as the “Sellers”. All capitalized terms
contained herein and not otherwise defined shall have the meaning ascribed to them in the Purchase Agreement (as hereinafter defined).

 

RECITALS

 

WHEREAS, the Purchaser
and the Sellers are parties to that certain asset purchase agreement dated as of March 31, 2014 (the “Purchase Agreement”);

 

WHEREAS, pursuant to
Section 2.4(b) of the Purchase Agreement, the Purchaser has agreed to place in escrow under the terms of the Purchase Agreement
an aggregate amount equal to the Payroll Liabilities calculated as of the last day of the calendar month prior to the Closing Date
plus Two Hundred Fifty Thousand Dollars ($250,000) (collectively, the “Escrow Funds”) to secure the payment of the
Payroll Liabilities and satisfy any other obligations of the Sellers or claims of the Purchaser under Section 9.1 of the Purchase
Agreement provided that such claims exceed the Basket (collectively, “Other Obligations of Sellers”). The Other Obligations
of Sellers specifically excludes the obligations of the Sellers to pay the Purchaser the Post Closing Adjustment Amount, if any,
required under Section 2.5(d) of the Purchase Agreement.

 

WHEREAS, the Purchaser
and the Sellers have requested that the Escrow Agent hold the Escrowed Funds in escrow and distribute the Escrowed Funds upon the
terms set forth herein; and

 

WHEREAS, the Purchaser
and the Sellers desire to appoint the Escrow Agent as escrow agent and the Escrow Agent is willing to accept such appointment and
be bound as set forth herein, subject to the terms and conditions of this Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in consideration
of the covenants and mutual promises contained herein and other good and valuable consideration, the receipt and legal sufficiency
of which are hereby acknowledged and intending to be legally bound hereby, the parties agree as follows:

 

    	1

    	 

    

  

ARTICLE I

 

TERMS OF THE ESCROW

 

1.1           The parties
hereby agree to establish the escrow account with the Escrow Agent whereby the Escrow Agent shall hold the Escrowed Funds. Notwithstanding
anything else to the foregoing, the parties agree that the Escrow Agent may hold the Escrowed Funds in one or more sub-accounts
under a master attorney escrow account.

 

1.2           Upon the Escrow
Agent’s receipt of the Escrowed Funds into the escrow account, it shall advise the Purchaser and the Sellers, or each of
their designated attorneys or agents, in writing, of the amount of Escrowed Funds it has received into the escrow accounts.

 

1.3           Wire transfers
to the Escrow Agent shall be made as follows:

 

Citibank

153 East 53rd Street

23rd Floor

New York, NY 10022

 

A/C of Sichenzia Ross Friedman Ference
LLP

61 Broadway, 32nd Floor

New York, NY  10006

A/C#:             
49206659

ABA#:            
021000089

SWIFT Code:  CITIUS33

 

 

1.4           The duties and
responsibilities of the Escrow Agent are as set forth below:

 

(A)            Out of the Escrowed Funds, the
Parties intend, for a period of 120 days from the Closing Date (subject to extension as provided under Section 2.15 below, the
“Escrow Termination Date”), to set aside $250,000 to satisfy the Other Obligations of Sellers. In the event that any
Other Obligations of Sellers have not been satisfied by the Sellers as required under the Purchase Agreement prior to the Escrow
Termination Date, either Party (the “Requesting Party”) is entitled to a distribution of all or a part of the Escrowed
Funds by delivering an instruction to the Escrow Agent to distribute to such Requesting Party the applicable portion of the Escrowed
Funds (each, a “Distribution Request”). Upon receipt of a Distribution Request, the Escrow Agent shall send a copy
of such Distribution Request to the other party (the “Recipient Party”). Additionally, the Requesting Party agrees
that upon the delivery of a Distribution Request to the Escrow Agent, the Requesting Party will simultaneously deliver a copy of
such Distribution Request to the Recipient Party in the manner for notices provided in Section 2.2 hereof. Such Recipient Party
shall have seven (7) Business Days (as defined in this Agreement) following receipt of such Distribution Request within which to
notify the Escrow Agent of its objection to such Distribution Request (the “Objection Period”). If such Recipient Party
objects to such Distribution Request within such seven (7) Business Day period, then there will be deemed to be a conflict (a “Conflict”)
between the Requesting Party and the Recipient Party, and the Escrow Agent shall proceed in accordance with the terms and conditions
of Section 2.15 of this Agreement. If the Recipient Party fails to timely deliver an objection to the Escrow Agent pursuant to
this Section 1.4(A), the Escrow Agent shall pay to the Requesting Party a portion of the Escrowed Funds equal to the amount requested
in the Distribution Request, not to exceed $250,000 (less the amount of any distributions previously made under this Section 1.4(A)).
Any such payment shall be made within two (2) Business Days following the expiration of the Objection Period. The Purchaser, as
the Recipient Party, is entitled to require that any distribution to the Sellers, as the Requesting Party, under this Section 1.4(A)
be made directly to any third-party to satisfy any Other Obligations of Sellers.

    	2

    	 

    

 

(B)            Out of the Escrowed Funds, the
Parties intend to set aside sufficient funds to satisfy the Payroll Liabilities. Within thirty (30) days of the Closing Date, the
Sellers shall deliver a calculation of the Payroll Liabilities on the Closing Date to Purchaser who shall have five (5) days from
receipt of such calculation to object to such calculation of the Payroll Liabilities. If the Purchaser does not object to such
calculation within such 5-day period, the Sellers may direct the Escrow Agent to make payments out of the Escrowed Funds to satisfy
the Payroll Liabilities; provided, that not less than $250,000 of the Escrowed Funds (less the amount of any distributions previously
made under Section 1.4(A) above) shall remain in the Escrow Account until the Escrow Termination Date to satisfy any Other Obligations
of Sellers under Section 1.4(A) above. The Purchaser is entitled to require that any distribution to the Sellers under this Section
1.4(B) be made directly to any third-party to satisfy any Payroll Obligations of Sellers.

 

In the event that the
amount necessary to satisfy the Payroll Liabilities exceeds the amount deposited into Escrow to pay such liabilities, the Sellers
shall pay such amount directly so that not less than $250,000 remains in Escrow (less the amount of any distribution made pursuant
to a Distribution Request under Section 1.4(A) above).

 

(C)            The Escrow Agent shall continue
to hold any remaining Escrowed Funds following the payment of any Distribution Request in accordance with the terms of this Agreement.

 

(D)            The balance of any Escrowed
Funds remaining after the delivery of payments required pursuant to Section 1.4(A) and Section 1.4(B), respectively, which are
not subject to a Conflict or dispute, shall be delivered to the Sellers or their designee, in proportions as shall be determined
by the Sellers, within two (2) Business Days following the later of (i) the expiration of the final Objection Period; (ii)
the Escrow Termination Date; (iii) the date that the Sellers have provided sufficient evidence to the Purchaser to allow the Purchaser
to determine that the Payroll Liabilities have been paid in full; or (iv) the date that the Post Closing Adjustment Amount, if
any, due and payable by the Sellers to the Purchaser has been paid.

 

(E)            The Escrow Agent may also disburse
the Escrowed Funds pursuant to the joint written instruction of the Purchaser and the Sellers.

 

    	3

    	 

    

 

ARTICLE II

 

MISCELLANEOUS

 

2.1            No waiver or
any breach of any covenant or provision herein contained shall be deemed a waiver of any preceding or succeeding breach thereof,
or of any other covenant or provision herein contained. No extension of time for performance of any obligation or act shall be
deemed an extension of the time for performance of any other obligation or act.

 

2.2            Unless otherwise
provided in this Agreement, any agreement, notice, request, instruction or other communication to be given hereunder by any party
to another must be in writing and (a) delivered personally (such delivered notice to be effective on the date it is delivered),
(b) mailed by certified mail, postage prepaid (such mailed notice to be effective three (3) Business Days after the date it
is mailed), (c) deposited with a reputable overnight courier service (such couriered notice to be effective one (1) Business
Day after the date it is sent by courier) or (d) sent by electronically confirmed facsimile or email transmission (such facsimile
or email transmission notice to be effective on the date that confirmation of such facsimile or email transmission is received),
as follows:

 

If to the Sellers or
WPCS, addressed to:

 

Sebastian Giordano

c/o WPCS International Incorporated

600 Eagleview Boulevard, Suite 300

Exton, Pennsylvania 19341

Telephone: (484) 359-7229

Facsimile: (484) 359- 7215

Email: Giordano.sebastian@gmail.com

 

With a copy to:

 

Sichenzia Ross Friedman
Ference LLP

61 Broadway, 32nd
Floor

New York, New York
10006

Attention: Harvey Kesner

Telephone: (212) 930-9700

Facsimile: (212) 930-9725

Email: hkesner@srff.com

 

If to the Purchasers,
addressed to:

 

EC COMPANY

2121 NW Thurman Street

Portland, Oregon 97201

Attention: Joel Scroggy,
CFO

Telephone: (503) 220-3525 

Facsimile:

Email: JOELS@e-c-co.com

 

    	4

    	 

    

 

With a copy to:

 

Ball Janik LLP

15 SW Colorado Avenue,
Suite 3

Bend, Oregon 97702

Attn: Kyle D. Wuepper

Telephone: (541) 693-0062

Facsimile: (541) 617-8824

Email: kwuepper@balljanik.com

 

If to Escrow Agent:

 

Sichenzia Ross Friedman Ference LLP

61 Broadway, 32nd Floor

New York, NY 10006

Attention: Harvey Kesner, Esq.

Telephone: (212) 930-9700

Facsimile: (212) 930-9725

Email: hkesner@srff.com

 

Any party may designate
in a writing to any other party any other address, facsimile number or email address to which, and any other Person to whom or
which, a copy of any such notice, request, instruction or other communication should be sent.

 

 

2.3            This Agreement
shall be binding upon and shall inure to the benefit of the respective successors and assigns of the parties hereto.

 

2.4            This Agreement
is the final expression of, and contains the entire agreement between, the parties with respect to the subject matter hereof and
supersedes all prior understandings with respect thereto. This Agreement may not be modified, changed, supplemented or terminated,
nor may any obligations hereunder be waived, except by written instrument signed by the parties to be charged or by its agent duly
authorized in writing or as otherwise expressly permitted herein; provided, however, that nothing herein shall be construed to
alter the obligations of the Purchaser and the Sellers under the Purchase Agreement.

 

2.5            Whenever required
by the context of this Agreement, the singular shall include the plural and masculine shall include the feminine. This Agreement
shall not be construed as if it had been prepared by one of the parties, but rather as if all parties had prepared the same.

    	5

    	 

    

  

2.6            The parties
hereto expressly agree that this Agreement shall be governed by, interpreted under and construed and enforced in accordance with
the laws of the State of Washington. Each party to this Agreement hereby (i) consents to submit himself, herself or itself to the
personal jurisdiction of the Federal courts of the United States located in the Western District of Washington or, if such courts
do not have jurisdiction over such matter, to the applicable courts of the State of Washington located in King County, (ii) irrevocably
agrees that all actions or proceedings arising out of or relating to this Agreement will be litigated in such courts and (iii)
irrevocably agrees that he, she or it will not institute any Proceeding relating to this Agreement or any of the transactions contemplated
hereby in any court other than such courts. Each party to this Agreement accepts for himself, herself or itself and in connection
with his, her or its properties, generally and unconditionally, the exclusive jurisdiction and venue of the aforesaid courts and
waives any defense of lack of personal jurisdiction or inconvenient forum or any similar defense, and irrevocably agrees to be
bound by any non-appealable judgment rendered thereby in connection with this Agreement.

 

2.7            The Escrow Agent’s
duties hereunder may be altered, amended, modified or revoked only by a writing signed by the Purchaser, the Sellers and the Escrow
Agent.

 

2.8            The Escrow Agent
shall act as such without compensation.

 

2.9            The Escrow Agent
shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected
in relying or refraining from acting on any instrument reasonably believed by the Escrow Agent to be genuine and to have been signed
or presented by the proper party or parties. The Escrow Agent shall not be personally liable for any act the Escrow Agent may do
or omit to do hereunder as the Escrow Agent while acting in good faith and in the absence of gross negligence, fraud and willful
misconduct, and any act done or omitted by the Escrow Agent pursuant to the advice of the Escrow Agent’s attorneys-at-law
shall be conclusive evidence of such good faith, in the absence of gross negligence, fraud and willful misconduct.

 

2.10            The Escrow
Agent is hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case the Escrow Agent
obeys or complies with any such order, judgment or decree, the Escrow Agent shall not be liable to any of the parties hereto or
to any other person, firm or corporation by reason of such decree being subsequently reversed, modified, annulled, set aside, vacated
or found to have been entered without jurisdiction.

 

2.11            The Escrow
Agent shall not be liable in any respect on account of the identity, authorization or rights of the parties executing or delivering
or purporting to execute or deliver any documents or papers deposited or called for thereunder in the absence of gross negligence,
fraud and willful misconduct.

 

2.12            The Escrow
Agent shall be entitled to employ such legal counsel and other experts as the Escrow Agent may deem necessary to advise the Escrow
Agent in connection with the Escrow Agent’s duties hereunder, may rely upon the advice of such counsel, and may pay such
counsel reasonable compensation; provided that the costs of such compensation shall be borne by the Escrow Agent.

 

    	6

    	 

    

 

2.13            It is understood
that the Escrow Agent reserves the right to resign as Escrow Agent at any time by giving written notice of its resignation, specifying
the effective date thereof, to each other party hereto. Within thirty (30) days after receiving the aforesaid notice, the other
party or parties hereto shall appoint a successor escrow agent to which the Escrow Agent may distribute the Escrowed Funds then
held hereunder. If a successor escrow agent has not been appointed and has not accepted such appointment by the end of such thirty
(30) day period, the Escrow Agent may apply to a court of competent jurisdiction for the appointment of a successor escrow agent
and the fees, costs and expenses (including counsel fees and expenses) which it incurs in connection with such a proceeding shall
be borne equally by the Purchaser, on the one hand, and the Sellers, on the other hand.

 

2.14            If the Escrow
Agent reasonably requires other or further instruments in connection with this Agreement or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.

 

2.15            It is understood
and agreed that should any dispute arise with respect to the delivery and/or payment of the Escrowed Funds held by the Escrow Agent
hereunder, the Escrow Agent is authorized and directed to deliver the Escrowed Funds and any other property and documents held
by the Escrow Agent hereunder to the Independent Accounting Firm for final determination as provided for in Section 2.5(c) of the
Purchase Agreement and the Escrow Termination Date shall be extended until such dispute has been resolved. Following such resolution
by the Independent Account Firm, the Independent Account Firm shall disburse such remaining Escrow Funds in accordance with such
determination.

 

2.16            The Purchaser
and the Sellers agree jointly and severally to indemnify and hold harmless the Escrow Agent and its partners, employees, agents
and representatives from any and all claims, liabilities, costs or expenses in any way arising from or relating to the duties or
performance of the Escrow Agent hereunder or the transactions contemplated hereby other than any such claim, liability, cost or
expense to the extent the same shall have been determined by final, unappealable judgment of a court of competent jurisdiction
to have resulted from the gross negligence, fraud or willful misconduct of the Escrow Agent.

 

2.17            The Escrow
Agent shall be permitted to act as counsel for the Sellers in any transaction and/or dispute including any dispute between Purchasers,
on one hand, and the Sellers, on the other, whether or not the Escrow Agent is then holding the escrow funds held by the Escrow
Agent hereunder.

 

2.18            This Agreement
may be executed in one or more counterparts (including by facsimile or emailed scanned signature), each of which will be deemed
to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.

 

2.19            Any provision
of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

2.20            This Agreement
shall terminate upon: (i) the distribution by the Escrow Agent of all of the Escrowed Funds as provided herein, (ii) in accordance
with Section 2.15 above, or (iii) upon the expiration of all periods of time for which a claim can be made against the Escrowed
Funds pursuant to the Purchase Agreement.

 

    	7

    	 

    

  

2.21            “Business
Day” shall mean a day on which commercial banks in the State of Washington are open for the general transaction of business.
If any action or time for performance pursuant to this Agreement is to occur on any Saturday, Sunday or holiday, such time for
action or performance shall be extended to the next Business Day.

 

[SIGNATURE PAGE FOLLOWS]

 

    	8

    	 

    

 

IN WITNESS WHEREOF,
the parties hereto have executed this Agreement as of date first written above.

 

	EC COMPANY	 
	 	 	 
	By:		 
	 	Name: Joel Scroggy	 
	 	Title: Chief Financial Officer	 
	 	 	 
	WPCS INTERNATIONAL-SEATTLE, INC.	 
	 	 	 
	By:	 	 
	 	Name: Sebastian Giordano	 
	 	Title:  Chairman	 
	 	 	 
	WPCS INTERNATIONAL INCORPORATED	 
	 	 	 
	By:	 	 
	 	Name: David Horin	 
	 	Title: Chief Financial Officer	 
	 	 	 
	ESCROW AGENT:
	 
	SICHENZIA ROSS FRIEDMAN FERENCE LLP
	 	 	 
	By:	 	 
	 	Name:	 
	 	Title:

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