Exhibit
10.1
PURCHASE
AGREEMENT
THIS PURCHASE
AGREEMENT (“Agreement”) is made as of the 11th day of April, 2006 by and among
WPCS International Incorporated, a Delaware corporation (the “Company”), and the
Investors set forth on the signature pages affixed hereto (each an “Investor”
and collectively the “Investors”).
Recitals
A. The Investors wish to purchase from
the Company, and the Company wishes to sell and issue to the Investors, upon
the
terms and conditions stated in this Agreement, an aggregate of 876,931 shares
of
the Company’s Common Stock, par value $0.0001 per share (together with any
securities into which such shares may be reclassified the “Common Stock”), at
purchase price of $7.00 per share; and
In
consideration of the mutual promises made herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the
parties hereto agree as follows:
1.
Definitions. In addition to those terms defined above and elsewhere
in this Agreement, for the purposes of this Agreement, the following terms
shall
have the meanings set forth below:
“Affiliate” means, with respect to any Person, any other Person which
directly or indirectly through one or more intermediaries Controls, is
controlled by, or is under common control with, such Person.
“Business
Day” means a day, other than a Saturday or Sunday, on which banks in New
York City are open for the general transaction of business.
“Control” (including the terms “controlling”, “controlled by” or “under
common control with”) means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or
otherwise.
“Person” means an individual, corporation, partnership, limited liability
company, trust, business trust, association, joint stock company, joint venture,
sole proprietorship, unincorporated organization, governmental authority or
any
other form of entity not specifically listed herein.
"Purchase
Price"
means
Six Million One Hundred Thirty-Eight Thousand Five Hundred Seventeen Dollars
($6,138,517).
“Registration Rights Agreement” means the Registration Rights Agreement,
dated November 16, 2004, among the Company and the investors party thereto,
as
the same may be amended, modified or supplemented from time to
time.
“SEC”
means the Securities and Exchange Commission and any successor agency
performing
similar functions.
“SEC
Filings” has the meaning set forth in Section 4.6.
“Shares” means the shares of Common Stock being purchased by the
Investors hereunder.
“Subsidiary” of any Person means another Person, an amount of the voting
securities, other voting ownership or voting partnership interests of which
is
sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first
Person.
“1933
Act” means the Securities Act of 1933, as amended, or any successor statute,
and the rules and regulations promulgated thereunder.
“1934
Act” means the Securities Exchange Act of 1934, as amended, or any successor
statute, and the rules and regulations promulgated thereunder.
2. Purchase
and Sale of the Shares. Subject to the terms and conditions of this
Agreement, on the Closing Date, each of the Investors shall severally, and
not
jointly, purchase, and the Company shall sell and issue to the Investors, the
Shares in the respective amounts set forth opposite the Investors’ names on the
signature pages attached hereto in exchange for the Purchase Price as specified
in Section 3 below.
3.
Closing. Upon confirmation that the other conditions to closing
specified herein have been satisfied or duly waived by the Investors, the
Company shall deliver to Lowenstein Sandler PC, in trust, a certificate or
certificates, registered in such name or names as the Investors may designate,
representing the Shares, with instructions that such certificates are to be
held
for release to the Investors only upon payment in full of the Purchase Price
to
the Company by all the Investors. Upon such receipt by Lowenstein Sandler
PC of the certificates, each Investor shall promptly, but no more than one
Business Day thereafter, cause a wire transfer in same day funds to be sent
to
the account of the Company as instructed in writing by the Company, in an amount
representing such Investor’s pro rata portion of the Purchase Price as set forth
on the signature pages to this Agreement. On the date (the “Closing Date”)
the Company receives the Purchase Price, the certificates evidencing the Shares
shall be released to the Investors (the “Closing”). The Closing of the
purchase and sale of the Shares shall take place at the offices of Lowenstein
Sandler PC, 1251 Avenue of the Americas, 18th Floor, New York, New York 10020,
or at such other location and on such other date as the Company and the
Investors shall mutually agree.
4.
Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investors that, except as set forth in the
schedules delivered herewith (collectively, the “Disclosure
Schedules”):
4.
1
Organization, Good Standing and Qualification. Each of the Company
and its Subsidiaries is a corporation duly organized, validly existing and
in
good standing under the laws of the jurisdiction of its incorporation and has
all requisite corporate power and authority to carry on its business as now
conducted and to own its properties. Each of the Company and its
Subsidiaries is duly qualified to do business as a foreign corporation and
is in
good standing in each jurisdiction in which the conduct of its business or
its
ownership or leasing of property makes such qualification or leasing necessary
unless the failure to so qualify has not had and could not reasonably be
expected to have a Material Adverse Effect. The Company’s Subsidiaries are
listed on Schedule 4.1 hereto.
4.2
Authorization. The Company has full power and authority and has
taken all requisite action on the part of the Company, its officers, directors
and stockholders necessary for (i) the authorization, execution and delivery
of
this Agreement, (ii) the authorization of the performance of all obligations
of
the Company hereunder, and (iii) the authorization, issuance (or reservation
for
issuance) and delivery of the Shares. This Agreement
constitutes the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws
of
general applicability, relating to or affecting creditors’ rights
generally.
4.3
Capitalization. Schedule 4.3 sets forth (a) the authorized
capital stock of the Company on the date hereof; (b) the number of shares of
capital stock issued and outstanding; (c) the number of shares of capital stock
issuable pursuant to the Company’s stock plans; and (d) the number of shares of
capital stock issuable and reserved for issuance pursuant to securities (other
than the Shares) exercisable for, or convertible into or exchangeable for any
shares of capital stock of the Company. All of the issued and outstanding
shares of the Company’s capital stock have been duly authorized and validly
issued and are fully paid, nonassessable and free of pre-emptive rights and
were
issued in full compliance with applicable state and federal securities law
and
any rights of third parties. Except as described on Schedule 4.3,
all of the issued and outstanding shares of capital stock of each Subsidiary
have been duly authorized and validly issued and are fully paid, nonassessable
and free of pre-emptive rights, were issued in full compliance with applicable
state and federal securities law and any rights of third parties and are owned
by the Company, beneficially and of record, subject to no lien, encumbrance
or
other adverse claim. Except as described on Schedule 4.3, no Person
is entitled to pre-emptive or similar statutory or contractual rights with
respect to any securities of the Company. Except as described on
Schedule 4.3, there are no outstanding warrants, options, convertible
securities or other rights, agreements or arrangements of any character under
which the Company or any of its Subsidiaries is or may be obligated to issue
any
equity securities of any kind and except as contemplated by this Agreement,
neither the Company nor any of its Subsidiaries is currently in negotiations
for
the issuance of any equity securities of any kind. Except as described on
Schedule 4.3 and except for the Registration Rights Agreement, there are
no voting agreements, buy-sell agreements, option or right of first purchase
agreements or other agreements of any kind among the Company and any of the
securityholders of the Company relating to the securities of the Company held
by
them. Except as described on Schedule 4.3 and except as provided in
the Registration Rights Agreement, no Person has the right to require the
Company to register any securities of the Company under the 1933 Act, whether
on
a demand basis or in connection with the registration of securities of the
Company for its own account or for the account of any other Person.
Except as
described on Schedule 4.3, the issuance and sale of the Shares hereunder
will not obligate the Company to issue shares of Common Stock or other
securities to any other Person (other than the Investors) and will not result
in
the adjustment of the exercise, conversion, exchange or reset price of any
outstanding security.
Except as
described on Schedule 4.3, the Company does not have outstanding
stockholder purchase rights or “poison pill” or any similar arrangement in
effect giving any Person the right to purchase any equity interest in the
Company upon the occurrence of certain events.
4.4 Valid
Issuance. The Shares have been duly and validly authorized and, when
issued and paid for pursuant to this Agreement, will be validly issued, fully
paid and nonassessable, and shall be free and clear of all encumbrances and
restrictions (other than those created by the Investors).
4.5
Consents. The execution, delivery and performance by the
Company of this Agreement and the offer, issuance and sale of the Shares require
no consent of, action by or in respect of, or filing with, any Person,
governmental body, agency, or official other than filings that have been made
or
will be made within the applicable time periods pursuant to applicable state
securities laws. The Company has taken all action necessary to exempt (i)
the issuance and sale of the Shares from the provisions of any stockholder
rights plan or other “poison pill” arrangement, any anti-takeover, business
combination or control share law or statute binding on the Company or to which
the Company or any of its assets and properties may be subject and any provision
of the Company’s Certificate of Incorporation or Bylaws that is or could
reasonably be expected to become applicable to the Investors as a result of
the
transactions contemplated hereby, including without limitation, the issuance
of
the Shares and the ownership, disposition or voting of the Shares by the
Investors or the exercise of any right granted to the Investors pursuant to
this
Agreement.
4.6
Delivery of SEC Filings; Business. The Company has made available
to the Investors through the EDGAR system, true and complete copies of the
Company’s most recent Annual Report on Form 10-KSB for the fiscal year ended
April 30, 2005 (the “10-KSB”), and all other reports filed by the Company
pursuant to the 1934 Act since the filing of the 10-KSB and prior to the date
hereof (collectively, the “SEC Filings”). The SEC Filings are the only
filings required of the Company pursuant to the 1934 Act for such period.
The Company and its Subsidiaries are engaged in all material respects only
in
the business described in the SEC Filings and the SEC Filings contain a complete
and accurate description in all material respects of the business of the Company
and its Subsidiaries, taken as a whole.
4.7 Use of
Proceeds. The net proceeds of the sale of the Shares hereunder shall
be used by the Company for general corporate purposes, which may include
potential strategic acquisitions and/or investments or repayment of all or
a
portion of our existing bank debt, and for working capital.
4.8 No
Material Adverse Change. Since April 30, 2005, except as identified
and described in the SEC Filings or as described on Schedule 4.8, there
has not been:
(i) any change
in the consolidated assets, liabilities, financial condition or operating
results of the Company from that reflected in the financial statements included
in the Company’s Quarterly Report on Form 10-QSB for the quarter ended January
31, 2006, except for changes in the ordinary course of business which have
not
had and could not reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate;
(ii) any
declaration or payment of any dividend, or any authorization or payment of
any
distribution, on any of the capital stock of the Company, or any redemption
or
repurchase of any securities of the Company;
(iii) any
material damage, destruction or loss, whether or not covered by insurance to
any
assets or properties of the Company or its Subsidiaries;
(iv) any
waiver, not in the ordinary course of business, by the Company or any Subsidiary
of a material right or of a material debt owed to it;
(v) any
satisfaction or discharge of any lien, claim or encumbrance or payment of any
obligation by the Company or a Subsidiary, except in the ordinary course of
business and which is not material to the assets, properties, financial
condition, operating results or business of the Company and its Subsidiaries
taken as a whole (as such business is presently conducted and as it is proposed
to be conducted);
(vi) any
change or amendment to the Company's Certificate of Incorporation or Bylaws,
or
material change to any material contract or arrangement by which the Company
or
any Subsidiary is bound or to which any of their respective assets or properties
is subject;
(vii) any
material labor difficulties or labor union organizing activities with respect
to
employees of the Company or any Subsidiary;
(viii) any
material transaction entered into by the Company or a Subsidiary other than
in
the ordinary course of business;
(ix) the loss
of the services of any key employee, or material change in the composition
or
duties of the senior management of the Company or any Subsidiary;
(x) the loss
or threatened loss of any customer which has had or could reasonably be expected
to have a Material Adverse Effect; or
(xi) any other
event or condition of any character that has had or could reasonably be expected
to have a Material Adverse Effect.
4.9 SEC
Filings.
(a) At the
time of filing thereof, the SEC Filings complied as to form in all material
respects with the requirements of the 1934 Act and did not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
(b) Each
registration statement and any amendment thereto filed by the Company since
January 1, 2003 pursuant to the 1933 Act and the rules and regulations
thereunder, as of the date such statement or amendment became effective,
complied as to form in all material respects with the 1933 Act and did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein not misleading; and each prospectus filed pursuant to Rule 424(b)
under the 1933 Act, as of its issue date and as of the closing of any sale
of
securities pursuant thereto did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(c) The
Company meets the requirements for use of Form SB-2 under the 1933 Act, and
has
filed with the SEC a registration statement on such Form (Registration File
No.
333-131650), which became effective as of April 11, 2006, for the registration
under the 1933 Act of the Shares. Such registration statement meets the
requirements set forth in Rule 415(a)(1)(x) under the 1933 Act and complies
in
all other material respects with said Rule. The Company will file with SEC
pursuant to Rule 424(b) under the 1933 Act, and the rules and regulations (the
“Rules and Regulations”) of SEC promulgated thereunder, a supplement to the form
of prospectus included in such registration statement relating to a placement
of
the Shares and the plan of distribution thereof and has advised the Investors
of
all further information (financial and other) with respect to the Company to
be
set forth therein. Such registration statement, including the exhibits
thereto, as amended at the date of this Agreement, is hereinafter called the
“Registration Statement”; such prospectus in the form in which it appears in the
Registration Statement is hereinafter called the “Base Prospectus”; and the
supplemented form of prospectus, in the form in which it will be filed with
SEC
pursuant to Rule 424(b) (including the Base Prospectus as so supplemented)
is
hereinafter called a “Prospectus Supplement.” No stop order suspending the
effectiveness of the Registration Statement or the use of the Base Prospectus
or
the Prospectus Supplement has been issued, and no proceeding for any such
purpose is pending or has been initiated or, to the Company's knowledge, is
threatened by SEC.
(d) The
Registration Statement (and any further documents to be filed with SEC) contains
all exhibits and schedules as required by the 1933 Act. Each of the Registration
Statement and any post-effective amendment thereto, at the time it became
effective, complied in all material respects with the 1933 Act and the 1934
Act
and the applicable Rules and Regulations and did not and, as amended or
supplemented, if applicable, will not, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or
necessary to make the statements therein not misleading. The Base Prospectus
and
the Prospectus Supplement, as of its respective date, comply in all material
respects with the 1933 Act and the 1934 Act and the applicable Rules and
Regulations. Each of the Base Prospectus and the Prospectus Supplement, as
amended or supplemented, did not and will not contain as of the effective date
thereof any untrue statement of a material fact or omit to state a material
fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. No post-effective amendment to
the Registration Statement reflecting any facts or events arising after the
date
hereof which represent, individually or in the aggregate, a fundamental change
in the information set forth therein is required to be filed with SEC.
There are no documents required to be filed with SEC in connection with the
transaction contemplated hereby that have not been filed as required pursuant
to
the 1933 Act or will not be filed within the requisite time period. There are
no
contracts or other documents required to be described in the Base Prospectus
or
Prospectus Supplement, or to be filed as exhibits or schedules to the
Registration Statement, which have not been described or filed as
required.
4.10 No
Conflict, Breach, Violation or Default. The execution, delivery and
performance of this Agreement by the Company and the issuance and sale of the
Shares will not conflict with or result in a breach or violation of any of
the
terms and provisions of, or constitute a default under (i) the Company’s
Certificate of Incorporation or the Company’s Bylaws, both as in effect on the
date hereof (true and complete copies of which have been made available to
the
Investors through the EDGAR system), or (ii)(a) any statute, rule, regulation
or
order of any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company, any Subsidiary or any of their respective
assets or properties, or (b) any agreement or instrument to which the Company
or
any Subsidiary is a party or by which the Company or a Subsidiary is bound
or to
which any of their respective assets or properties is subject.
4.11
Financial Statements. The financial statements included in each SEC
Filing present fairly, in all material respects, the consolidated financial
position of the Company as of the dates shown and its consolidated results
of
operations and cash flows for the periods shown, and such financial statements
have been prepared in conformity with United States generally accepted
accounting principles applied on a consistent basis (“GAAP”) (except as may be
disclosed therein or in the notes thereto, and, in the case of quarterly
financial statements, as permitted by Form 10-QSB under the 1934 Act).
Except as set forth in the financial statements of the Company included in
the
SEC Filings filed prior to the date hereof or as described on Schedule
4.11, neither the Company nor any of its Subsidiaries has incurred any
liabilities, contingent or otherwise, except those incurred in the ordinary
course of business, consistent (as to amount and nature) with past practices
since the date of such financial statements, none of which, individually or
in
the aggregate, have had or could reasonably be expected to have a Material
Adverse Effect.
4.12
Compliance with Nasdaq Continued Listing Requirements. The Company
is in compliance with applicable Nasdaq continued listing requirements.
There are no proceedings pending or, to the Company’s Knowledge, threatened
against the Company relating to the continued listing of the Common Stock on
Nasdaq and the Company has not received any notice of, nor to the Company’s
Knowledge is there any basis for, the delisting of the Common Stock from
Nasdaq.
4.13
Brokers and Finders. No Person will have, as a result of the
transactions contemplated hereby, any valid right, interest or claim against
or
upon the Company, any Subsidiary or an Investor for any commission, fee or
other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Company, other than as described in Schedule
4.13.
4.14
Questionable Payments. Neither the Company
nor any of its Subsidiaries nor, to the Company’s Knowledge, any of their
respective current or former stockholders, directors, officers, employees,
agents or other Persons acting on behalf of the Company or any Subsidiary,
has
on behalf of the Company or any Subsidiary or in connection with their
respective businesses: (a) used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity;
(b) made any direct or indirect unlawful payments to any governmental officials
or employees from corporate funds; (c) established or maintained any unlawful
or
unrecorded fund of corporate monies or other assets; (d) made any false or
fictitious entries on the books and records of the Company or any Subsidiary;
or
(e) made any unlawful bribe, rebate, payoff, influence payment, kickback or
other unlawful payment of any nature.
4.15
Transactions with Affiliates. Except as disclosed in the SEC
Filings or as disclosed on Schedule 4.15, none of the officers or
directors of the Company and, to the Company’s Knowledge, none of the employees
of the Company is presently a party to any transaction with the Company or
any
Subsidiary (other than as holders of stock options and/or warrants, and for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to
or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to
the
Company’s Knowledge, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
4.16
Internal Controls. The Company is in material compliance with
the provisions of the Sarbanes-Oxley Act of 2002 currently applicable to the
Company. The Company and the Subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that
(i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
The
Company has established disclosure controls and procedures (as defined in 1934
Act Rules 13a-14 and 15d-14) for the Company and designed such disclosure
controls and procedures to ensure that material information relating to the
Company, including the Subsidiaries, is made known to the certifying officers
by
others within those entities, particularly during the period in which the
Company’s most recently filed period report under the 1934 Act, as the case may
be, is being prepared. The Company's certifying officers have evaluated
the effectiveness of the Company's controls and procedures as of the end of
the
period covered by the most recently filed periodic report under the 1934 Act
(such date, the "Evaluation Date"). The Company presented in its most
recently filed periodic report under the 1934 Act the conclusions of the
certifying officers about the effectiveness of the disclosure controls and
procedures based on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no significant changes in the Company's
internal controls (as such term is defined in Item 308 of Regulation S-B) or,
to
the Company's Knowledge, in other factors that could significantly affect the
Company's internal controls. The Company maintains and will continue to
maintain a standard system of accounting established and administered in
accordance with GAAP and the applicable requirements of the 1934
Act.
4.17
Disclosures. Neither the Company nor any Person acting on its
behalf has provided the Investors or their agents or counsel with any
information that constitutes or might constitute material, non-public
information. The written materials delivered to the Investors in
connection with the transactions contemplated hereby do not contain any untrue
statement of a material fact or omit to state a material fact necessary in
order
to make the statements contained therein, in light of the circumstances under
which they were made, not misleading.
5.
Representations and Warranties of the Investors. Each of the
Investors hereby severally, and not jointly, represents and warrants to the
Company that:
5.1
Organization and Existence. Such Investor is a validly existing
corporation, limited partnership or limited liability company and has all
requisite corporate, partnership or limited liability company power and
authority to invest in the Shares pursuant to this Agreement.
5.2
Authorization. The execution, delivery and performance by such
Investor of this Agreement have been duly authorized and will each constitute
the valid and legally binding obligation of such Investor, enforceable against
such Investor in accordance with their respective terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws
of
general applicability, relating to or affecting creditors’ rights
generally.
5.3 Brokers
and Finders. No Person will have, as a result of the transactions
contemplated hereby, any valid right, interest or claim against or upon the
Company, any Subsidiary or an Investor for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of such Investor.
6. Conditions to Closing.
6.1
Conditions to the Investors’ Obligations. The obligation of each Investor
to purchase the Shares at the Closing is subject to the fulfillment to such
Investor’s satisfaction, on or prior to the Closing Date, of the following
conditions, any of which may be waived by such Investor (as to itself
only):
(a) The
representations and warranties made by the Company in Section 4 hereof qualified
as to materiality shall be true and correct at all times prior to and on the
Closing Date, except to the extent any such representation or warranty expressly
speaks as of an earlier date, in which case such representation or warranty
shall be true and correct as of such earlier date, and, the representations
and
warranties made by the Company in Section 4 hereof not qualified as to
materiality shall be true and correct in all material respects at all times
prior to and on the Closing Date, except to the extent any such representation
or warranty expressly speaks as of an earlier date, in which case such
representation or warranty shall be true and correct in all material respects
as
of such earlier date. The Company shall have performed in all material
respects all obligations and covenants herein required to be performed by it
on
or prior to the Closing Date.
(b) The
Company shall have obtained any and all consents, permits, approvals,
registrations and waivers necessary or appropriate for consummation of the
purchase and sale of the Shares and the consummation of the other transactions
contemplated hereby, all of which shall be in full force and
effect.
(c) The
Company shall have received confirmation from Nasdaq to the effect that (i)
the
issuance and sale of the Shares as contemplated hereby will not require
stockholder approval pursuant to the requirements of Nasdaq Marketplace Rule
4350(i), and (ii) that the Shares have been approved for inclusion in The Nasdaq
Capital Market upon official notice of issuance.
(d) No
judgment, writ, order, injunction, award or decree of or by any court, or judge,
justice or magistrate, including any bankruptcy court or judge, or any order
of
or by any governmental authority, shall have been issued, and no action or
proceeding shall have been instituted by any governmental authority, enjoining
or preventing the consummation of the transactions contemplated
hereby.
(e) The
Company shall have delivered a Certificate, executed on behalf of the Company
by
its Chief Executive Officer or its Chief Financial Officer, dated as of the
Closing Date, certifying to the fulfillment of the conditions specified in
subsections (a), (b), (c), (d) and (g) of this Section 6.1.
(f) The
Company shall have delivered a Certificate, executed on behalf of the Company
by
its Secretary, dated as of the Closing Date, certifying the resolutions adopted
by the Board of Directors of the Company approving the transactions contemplated
by this Agreement and the issuance of the Shares, certifying the current
versions of the Certificate of Incorporation and Bylaws of the Company and
certifying as to the signatures and authority of persons signing this Agreement
and related documents on behalf of the Company.
(g) The
Investors shall have received an opinion from Sichenza Ross Friedman Ference
LLP, the Company's counsel, dated as of the Closing Date, in form and substance
reasonably acceptable to the Investors and addressing such legal matters as
the
Investors may reasonably request.
(h) No stop
order suspending the effectiveness of the Registration Statement shall have
been
issued and no proceedings for that purpose shall have been initiated or
threatened by the SEC, and any request for additional information on the part
of
the SEC (to be included in the Registration Statement, the Base Prospectus
or
the Prospectus Supplement or otherwise) shall have been complied with to the
reasonable satisfaction of the Investors.
6.2
Conditions to Obligations of the Company. The Company's obligation to
sell and issue the Shares at the Closing is subject to the fulfillment to the
satisfaction of the Company on or prior to the Closing Date of the following
conditions, any of which may be waived by the Company:
(a) The
representations and warranties made by the Investors in Section 5 hereof shall
be true and correct in all material respects when made, and shall be true and
correct in all material respects on the Closing Date with the same force and
effect as if they had been made on and as of said date. The Investors
shall have performed in all material respects all obligations and covenants
herein required to be performed by them on or prior to the Closing
Date.
(c) The
Investors shall have delivered the Purchase Price to the Company.
6.3
Termination of Obligations to Effect Closing; Effects.
(a) The
obligations of the Company, on the one hand, and the Investors, on the other
hand, to effect the Closing shall terminate as follows:
(i) Upon the
mutual written consent of the Company and the Investors;
(ii) By the
Company if any of the conditions set forth in Section 6.2 shall have become
incapable of fulfillment, and shall not have been waived by the
Company;
(iii) By an
Investor (with respect to itself only) if any of the conditions set forth in
Section 6.1 shall have become incapable of fulfillment, and shall not have
been
waived by the Investor; or
(iv) By either
the Company or any Investor (with respect to itself only) if the Closing has
not
occurred on or prior to April 30, 2006;
provided,
however, that, except in the case of clause (i) above, the party seeking to
terminate its obligation to effect the Closing shall not then be in breach
of
any of its representations, warranties, covenants or agreements contained in
this Agreement if such breach has resulted in the circumstances giving rise
to
such party’s seeking to terminate its obligation to effect the
Closing.
(b)
In the event of termination by the Company or any Investor of its obligations
to
effect the Closing pursuant to this Section 6.3, written notice thereof shall
forthwith be given to the other Investors and the other Investors shall have
the
right to terminate their obligations to effect the Closing upon written notice
to the Company and the other Investors. Nothing in this Section 6.3 shall
be deemed to release any party from any liability for any breach by such party
of the terms and provisions of this Agreement or to impair the right of any
party to compel specific performance by any other party of its obligations
under
this Agreement.
7.
[Reserved]
8. Survival
and Indemnification.
8.1
Survival. The representations, warranties, covenants and agreements
contained in this Agreement shall survive the Closing of the transactions
contemplated by this Agreement.
8.2
Indemnification. The Company agrees to indemnify and hold harmless
each Investor and its Affiliates and their respective directors, officers,
employees and agents from and against any and all losses, claims, damages,
liabilities and expenses (including without limitation reasonable attorney
fees
and disbursements and other expenses incurred in connection with investigating,
preparing or defending any action, claim or proceeding, pending or threatened
and the costs of enforcement thereof) (collectively, “Losses”) to which such
Person may become subject as a result of any breach of representation, warranty,
covenant or agreement made by or to be performed on the part of the Company
under this Agreement, and will reimburse any such Person for all such amounts
as
they are incurred by such Person.
8.3 Conduct of Indemnification
Proceedings. Promptly after receipt by any
Person (the “Indemnified Person”) of notice of any demand,
claim or circumstances which would or might give rise to a claim or the
commencement of any action, proceeding or investigation in respect of which
indemnity may be sought pursuant to Section 8.2, such Indemnified Person shall
promptly notify the Company in writing and the Company shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to such
Indemnified Person, and shall assume the payment of all fees and expenses;
provided, however,that the failure of any Indemnified Person so to
notify the Company shall not relieve the Company of its obligations hereunder
except to the extent that the Company is materially prejudiced by such failure
to notify. In any such proceeding, any Indemnified Person shall have the
right to retain its own counsel, but the fees and expenses of such counsel
shall
be at the expense of such Indemnified Person unless: (i) the Company and the
Indemnified Person shall have mutually agreed to the retention of such counsel;
or (ii) in the reasonable judgment of counsel to such Indemnified Person
representation of both parties by the same counsel would be inappropriate due
to
actual or potential differing interests between them. The Company shall
not be liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld, but if settled with
such consent, or if there be a final judgment for the plaintiff, the Company
shall indemnify and hold harmless such Indemnified Person from and against
any
loss or liability (to the extent stated above) by reason of such settlement
or
judgment. Without the prior written consent of the Indemnified Person,
which consent shall not be unreasonably withheld, the Company shall not effect
any settlement of any pending or threatened proceeding in respect of which
any
Indemnified Person is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Party, unless such settlement includes
an
unconditional release of such Indemnified Person from all liability arising
out
of such proceeding.
9.
Miscellaneous.
9.1
Successors and Assigns. This Agreement may not be assigned by a
party hereto without the prior written consent of the Company or the Investors,
as applicable, provided, however, that an Investor may assign its rights and
delegate its duties hereunder in whole or in part to an Affiliate or to a third
party acquiring some or all of its Shares without the prior written consent
of
the Company or the other Investors, after notice duly given by such Investor
to
the Company provided, that no such assignment or obligation shall affect the
obligations of such Investor hereunder. The provisions of this Agreement
shall inure to the benefit of and be binding upon the respective permitted
successors and assigns of the parties. Nothing in this Agreement, express
or implied, is intended to confer upon any party other than the parties hereto
or their respective successors and assigns any rights, remedies, obligations,
or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
9.2
Counterparts; Faxes. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may
also be executed via facsimile, which shall be deemed an original.
9.3 Titles
and Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.
9.4
Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given as hereinafter described (i) if given by personal delivery,
then such notice shall be deemed given upon such delivery, (ii) if given by
telex or telecopier, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (iii) if given by mail, then such notice
shall be deemed given upon the earlier of (A) receipt of such notice by the
recipient or (B) three days after such notice is deposited in first class mail,
postage prepaid, and (iv) if given by an internationally recognized overnight
air courier, then such notice shall be deemed given one Business Day after
delivery to such carrier. All notices shall be addressed to the party to
be notified at the address as follows, or at such other address as such party
may designate by ten days’ advance written notice to the other
party:
If to the
Company:
WPCS
International Incorporated
One
East
Uwchlan Avenue
Suite
301
Exton,
Pennsylvania 19341
Attention:
Joseph Heater
Fax:
(610) 903-0401
With a copy
to:
Sichenza
Ross Friedman Ference LLP
1065
Avenue of the Americas
New
York,
New York 10010
Attention:
Thomas A. Rose, Esq.
Fax:
(212) 930-9725
If to the
Investors:
to
the
addresses set forth on the signature pages hereto.
9.5
Expenses. The parties hereto shall pay their own costs and expenses
in connection herewith In the event that legal proceedings are commenced
by any party to this Agreement against another party to this Agreement in
connection with this Agreement, the party or parties which do not prevail in
such proceedings shall severally, but not jointly, pay their pro rata share
of
the reasonable attorneys’ fees and other reasonable out-of-pocket costs and
expenses incurred by the prevailing party in such proceedings.
9.6
Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the Investors. Any amendment
or waiver effected in accordance with this paragraph shall be binding upon
each
holder of any Shares purchased under this Agreement at the time outstanding,
each future holder of all such Shares, and the Company.
9.7
Publicity. Except as set forth below, no public release or
announcement concerning the transactions contemplated hereby shall be issued
by
the Company or the Investors without the prior consent of the Company (in the
case of a release or announcement by the Investors) or the Investors (in the
case of a release or announcement by the Company) (which consents shall not
be
unreasonably withheld), except as such release or announcement may be required
by law or the applicable rules or regulations of any securities exchange or
securities market, in which case the Company or the Investors, as the case
may
be, shall allow the Investors or the Company, as applicable, to the extent
reasonably practicable in the circumstances, reasonable time to comment on
such
release or announcement in advance of such issuance. By 8:30 a.m. (New
York City time) on the trading day immediately following the Closing Date,
the
Company shall issue a press release disclosing the consummation of the
transactions contemplated by this Agreement. No later than the third
trading day following the Closing Date, the Company will file a Current Report
on Form 8-K attaching the press release described in the foregoing sentence
as
well as copies of this Agreement. In addition, the Company will make such
other filings and notices in the manner and time required by the SEC or
Nasdaq. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Investor, or include the name of any Investor in any
filing with the SEC or any regulatory agency or Nasdaq, without the prior
written consent of such Investor, except to the extent such disclosure is
required by law or trading market regulations, in which case the Company shall
provide the Investors with prior notice of such disclosure.
9.8
Severability. Any provision of this Agreement that 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 but shall be interpreted as if it were written
so as
to be enforceable to the maximum extent permitted by applicable law, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or
render unenforceable such provision in any other jurisdiction. To the
extent permitted by applicable law, the parties hereby waive any provision
of
law which renders any provision hereof prohibited or unenforceable in any
respect.
9.9 Entire
Agreement. This Agreement, including the Disclosure Schedules,
constitutes the entire agreement among the parties hereof with respect to the
subject matter hereof and thereof and supersedes all prior agreements and
understandings, both oral and written, between the parties with respect to
the
subject matter hereof and thereof.
9.10
Further Assurances. The parties shall execute and deliver all such
further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and
to
evidence the fulfillment of the agreements herein contained.
9.11
Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York without regard to the choice of law principles
thereof. Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the courts of the State of New York located in New York County
and the United States District Court for the Southern District of New York
for
the purpose of any suit, action, proceeding or judgment relating to or arising
out of this Agreement and the transactions contemplated hereby. Service of
process in connection with any such suit, action or proceeding may be served
on
each party hereto anywhere in the world by the same methods as are specified for
the giving of notices under this Agreement. Each of the parties hereto
irrevocably consents to the jurisdiction of any such court in any such suit,
action or proceeding and to the laying of venue in such court. Each party
hereto irrevocably waives any objection to the laying of venue of any such
suit,
action or proceeding brought in such courts and irrevocably waives any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum. EACH OF THE PARTIES HERETO
WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT
TO
THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY
AS TO
THIS WAIVER.
9.12
Independent Nature of Investors' Obligations and Rights. The obligations
of each Investor hereunder are several and not joint with the obligations of
any
other Investor, and no Investor shall be responsible in any way for the
performance of the obligations of any other Investor hereunder. The
decision of each Investor to purchase Shares pursuant hereto has been made
by
such Investor independently of any other Investor. Nothing contained
herein, and no action taken by any Investor pursuant thereto, shall be deemed
to
constitute the Investors as a partnership, an association, a joint venture
or
any other kind of entity, or create a presumption that the Investors are in
any
way acting in concert or as a group with respect to such obligations or the
transactions contemplated hereby. Each Investor acknowledges that no other
Investor has acted as agent for such Investor in connection with making its
investment hereunder and that no Investor will be acting as agent of such
Investor in connection with monitoring its investment in the Shares or enforcing
its rights hereunder. Each Investor shall be entitled to independently
protect and enforce its rights, including, without limitation, the rights
arising out of this Agreement, and it shall not be necessary for any other
Investor to be joined as an additional party in any proceeding for such
purpose. The Company acknowledges that each of the Investors has been
provided with the same Agreement for the purpose of closing a transaction with
multiple Investors and not because it was required or requested to do so by
any
Investor.
[signature
page follows]
IN WITNESS
WHEREOF, the parties have executed this Agreement or caused their duly
authorized officers to execute this Agreement as of the date first above
written.
| |
|
|
|
The
Company:
|
WPCS
INTERNATIONAL INCORPORATED
|
|
|
|
| Date: |
By: |
/s/ ANDREW
HIDALGO |
| |
Name:
Andrew Hidalgo |
| |
Title:
Chief Executive Officer
|
| |
|
|
|
The
Investors:
|
SPECIAL
SITUATIONS FUND III QP, L.P.
|
|
|
|
| Date: |
By: |
/s/
AUSTIN
W. MARXE |
| |
Name:
Austin W. Marxe |
| |
Title:
General Partner
|
Aggregate
Purchase Price: $2,639,560
Number
of
Shares: 377,080
| Address for Notice: |
527
Madison Avenue
|
| |
Suite 2600 |
| |
New
York, NY 10022
|
| |
|
| |
with a copy to: |
| |
|
| |
Lowenstein Sandler PC |
| |
65 Livingston Avenue |
| |
Roseland, NJ 07068 |
| |
Attn: John D. Hogoboom,
Esq. |
| |
Telephone: 973.597.2500 |
| |
Facsimile:
973.597.2400 |
| |
|
| |
|
|
| |
SPECIAL
SITUATIONS
FUND III, L.P. |
|
|
|
| |
By: |
/s/ AUSTIN
W.
MARXE |
| |
Name:
Austin W. Marxe |
| |
Title:
General Partner |
Aggregate
Purchase Price: $245,539
Number
of
Shares: 35,077
| Address for Notice: |
527
Madison Avenue
|
| |
Suite 2600 |
| |
New
York, NY 10022
|
| |
|
| |
with a copy to: |
| |
|
| |
Lowenstein Sandler PC |
| |
65 Livingston Avenue |
| |
Roseland, NJ 07068 |
| |
Attn: John D. Hogoboom,
Esq. |
| |
Telephone: 973.597.2500 |
| |
Facsimile:
973.597.2400 |
| |
|
| |
|
|
| |
SPECIAL
SITUATIONS CAYMAN FUND, L.P.
|
|
|
|
|
|
By: |
/s/ AUSTIN
W.
MARXE |
| |
Name:
Austin W. Marxe |
| |
Title:
General Partner |
Aggregate
Purchase Price: $1,227,702
Number
of
Shares: 175,386
| Address for Notice: |
527
Madison Avenue
|
| |
Suite 2600 |
| |
New
York, NY 10022
|
| |
|
| |
with a copy to: |
| |
|
| |
Lowenstein Sandler PC |
| |
65 Livingston Avenue |
| |
Roseland, NJ 07068 |
| |
Attn: John D. Hogoboom,
Esq. |
| |
Telephone: 973.597.2500 |
| |
Facsimile:
973.597.2400 |
| |
|
| |
|
|
| |
SPECIAL
SITUATIONS
PRIVATE EQUITY FUND, L.P. |
|
|
|
| |
By: |
/s/ AUSTIN
W.
MARXE |
| |
Name:
Austin W. Marxe |
| |
Title:
General Partner |
Aggregate
Purchase Price: $2,025,716
Number
of
Shares: 289,388
| Address for Notice: |
527
Madison Avenue
|
| |
Suite 2600 |
| |
New
York, NY 10022
|
| |
|
| |
with a copy to: |
| |
|
| |
Lowenstein Sandler PC |
| |
65 Livingston Avenue |
| |
Roseland, NJ 07068 |
| |
Attn: John D. Hogoboom,
Esq. |
| |
Telephone: 973.597.2500 |
| |
Facsimile:
973.597.2400 |
| |
|