UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported):
June 30, 2015
WPCS INTERNATIONAL INCORPORATED
(Exact name of registrant as specified in
its charter)
| Delaware |
|
001-34643 |
|
98-0204758 |
| (State or Other Jurisdiction |
|
(Commission File Number) |
|
(IRS Employer |
| Of Incorporation) |
|
|
|
Identification No.) |
521 Railroad Avenue
Suisun City, California 94585
(Address of principal executive offices
and zip code)
Registrant’s telephone number, including
area code: (707) 421-1300
(Former Name or Former Address if Changed
Since Last Report)
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the
Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the
Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b)
under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c)
under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 1.01 | Entry Into a Material Definitive Agreement. |
On June 30, 2015, WPCS International Incorporated
(the “Company”) entered into Amendment, Waiver and Exchange Agreements (the “Exchange Agreements”) with
HS Contrarian Investments, LLC, Barry Honig, AIG Capital LLC, Richard Molinsky, Alpha Capital Anstalt, Iroquois Master Fund Ltd.
and American Capital Management LLC (collectively, the “Holders”), who held $1,299,000 in principal amount of unsecured
promissory notes of the Company. Pursuant to the terms of the Exchange Agreements, the Holders agreed to exchange all of the existing
indebtedness for, and the Company agreed to issue to the Holders, an aggregate of 8,435 shares of the Company’s newly designated
Series H Convertible Preferred Stock, par value $0.0001 per share (“Series H Preferred Stock”), of which 5,805 shares
are eligible, for purposes of Rule 144 under the Securities Act of 1933, as amended, to tack the holding period back to the acquisition
date of the exchanged promissory note.
In addition, pursuant to the Exchange Agreements,
a provision in the Securities Purchase Agreement, dated as of December 17, 2013, entered into by Company and the investors party
thereto (some of which are also Holders), that required the Company to receive consent of certain holders of its preferred stock
for future equity issuances was deleted.
The foregoing description of the Exchange
Agreements is not complete and is qualified in its entirety by reference to the full text of the form of Exchange Agreement, a
copy of which is attached hereto as Exhibit 10.1.
| Item 3.02 | Unregistered Sales of Equity Securities. |
The disclosure set forth in the first paragraph
of Item 1.01 of this Form 8-K is incorporated by reference into this Item 3.02.
The Series H Preferred Stock were issued
in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended.
| Item 5.03 | Amendments to Articles of Incorporation or Bylaws; Change
in Fiscal Year. |
On June 30, 2015, the Company filed with
the Secretary of State of the State of Delaware a Certificate of Designations, Preferences and Rights of Series H Convertible Preferred
Stock (the “Series H Certificate of Designation”).
Under the terms of the Series H Certificate
of Designation, each share of Series H Preferred Stock has a stated value of $154 and is convertible into shares of the Company’s
common stock, par value $0.0001 per share (“Common Stock”), equal to the stated value divided by the conversion price
of $1.54 per share (subject to adjustment in the event of stock splits and dividends). The Company is prohibited from effecting
the conversion of the Series H Preferred Stock to the extent that, as a result of such conversion, the holder beneficially owns
more than 9.99%, in the aggregate, of the issued and outstanding shares of the Company’s Common Stock calculated immediately
after giving effect to the issuance of shares of Common Stock upon the conversion of the Series H Preferred Stock.
The foregoing description of the Series
H Preferred Stock and the Series H Certificate of Designation is not complete and is qualified in its entirety by reference to
the full text of the Series H Certificate of Designation, a copy of which is attached hereto as Exhibit 3.1.
A copy of the press release that discusses
this matter is filed as Exhibit 99.1 to this report.
| Item 9.01 | Financial Statements and Exhibits. |
The exhibits listed in the following Exhibit
Index are filed as part of this Current Report on Form 8-K.
| Exhibit Number |
|
Description |
| |
|
|
| 3.1 |
|
Certificate of Designations, Preferences and Rights of the Series H Convertible Preferred Stock, filed with the Secretary of State of the State of Delaware on June 30, 2015 |
| 10.1 |
|
Form of Amendment, Waiver and Exchange Agreement, dated June 30, 2015 |
| 99.1 |
|
Press Release, dated July 1, 2015 |
SIGNATURE
Pursuant to the requirement
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
| |
WPCS INTERNATIONAL INCORPORATED |
| |
|
| Date: July 1, 2015 |
By: |
/s/ Sebastian Giordano |
| |
Name: Sebastian Giordano |
| |
Title: Interim Chief Executive Officer |
Exhibit 3.1
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF THE
SERIES H CONVERTIBLE PREFERRED STOCK OF
WPCS INTERNATIONAL INCORPORATED
I, Sebastian Giordano,
hereby certify that I am the Interim Chief Executive Officer of WPCS International Incorporated (the “Company”),
a corporation organized and existing under the Delaware General Corporation Law (the “DGCL”), and further do
hereby certify:
That pursuant to the
authority expressly conferred upon the Board of Directors of the Company (the “Board”) by the Company’s
Certificate of Incorporation, as amended (the “Certificate of Incorporation”), the Board on April 23, 2015 adopted
the following resolutions creating a series of 8,500 shares of Preferred Stock designated as Series H Convertible Preferred Stock,
none of which shares have been issued:
RESOLVED, that the
Board designates the Series H Convertible Preferred Stock and the number of shares constituting such series, and fixes the rights,
powers, preferences, privileges and restrictions relating to such series in addition to any set forth in the Certificate of Incorporation
as follows:
TERMS OF SERIES H CONVERTIBLE PREFERRED STOCK
| 1. | Designation and Number of Shares. There shall hereby be created and established a series
of preferred stock of the Company designated as “Series H Convertible Preferred Stock” (the “Preferred Shares”).
The authorized number of Preferred Shares shall be 8,500 shares. Each Preferred Share shall have a par value of $0.0001. Capitalized
terms not defined herein shall have the meaning as set forth in Section 18 below. |
| 2. | Ranking. The Preferred Shares shall be of pari passu rank to the Common Stock with respect
to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company. |
| 3. | Conversion. Each Preferred Share shall be convertible into validly issued, fully paid and
non-assessable shares of Common Stock (as defined below) on the terms and conditions set forth in this Section 3. |
| (a) | Holder’s Conversion Right. Subject to the provisions of Section 3(e)), at any time
or times on or after the Initial Issuance Date, each holder of a Preferred Share (each, a “Holder” and collectively,
the “Holders”) shall be entitled to convert any whole number of Preferred Shares into validly issued, fully
paid and non-assessable shares of Common Stock in accordance with Section 3(c) at the Conversion Rate (as defined below). |
| (b) | Conversion Rate. The number of validly issued, fully paid and non-assessable shares of Common
Stock issuable upon conversion of each Preferred Share pursuant to Section 3(a) shall be determined according to the following
formula (the “Conversion Rate”): |
Conversion Amount
Conversion Price
No fractional
shares of Common Stock are to be issued upon the conversion of any Preferred Shares. If the issuance would result in the issuance
of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole
share.
| (c) | Mechanics of Conversion. The conversion of each Preferred Share shall be conducted in the
following manner: |
| (i) | Holder’s Conversion. To convert a Preferred Share into validly issued, fully paid
and non-assessable shares of Common Stock on any date (a “Conversion Date”), a Holder shall deliver (whether
via facsimile or otherwise), for receipt on or prior to 11:59 p.m., New York time, on such date, a copy of an executed notice of
conversion of the share(s) of Preferred Shares subject to such conversion in the form attached hereto as Exhibit I
(the “Conversion Notice”) to the Company. If required by Section 3(c)(vi), within five (5) Trading Days following
a conversion of any such Preferred Shares as aforesaid, such Holder shall surrender to a nationally recognized overnight delivery
service for delivery to the Company the original certificates representing the share(s) of Preferred Shares (the “Preferred
Share Certificates”) so converted as aforesaid. |
| (ii) | Company’s Response. On or before the first (1st) Trading Day following
the date of receipt of a Conversion Notice, the Company shall transmit by facsimile an acknowledgment of confirmation, in the form
attached hereto as Exhibit II, of receipt of such Conversion Notice to such Holder and the Company’s transfer
agent (the “Transfer Agent”), which confirmation shall constitute an instruction to the Transfer Agent to process
such Conversion Notice in accordance with the terms herein. On or before the second (2nd) Trading Day following the
date of receipt by the Company of such Conversion Notice, the Company shall (1) provided that (x) the Transfer Agent is participating
in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program and (y) Common Stock shares
to be so issued are otherwise eligible for resale pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended,
credit such aggregate number of shares of Common Stock to which such Holder shall be entitled to such Holder’s or its designee’s
balance account with DTC through its Deposit/Withdrawal at Custodian system, or (2) if either of the immediately preceding clauses
(x) or (y) are not satisfied, issue and deliver (via reputable overnight courier) to the address as specified in such Conversion
Notice, a certificate, registered in the name of such Holder or its designee, for the number of shares of Common Stock to which
such Holder shall be entitled. If the number of Preferred Shares represented by the Preferred Share Certificate(s) submitted for
conversion pursuant to Section 3(c)(vi) is greater than the number of Preferred Shares being converted, then the Company shall
if requested by such Holder, as soon as practicable and in no event later than three (3) Trading Days after receipt of the Preferred
Share Certificate(s) and at its own expense, issue and deliver to such Holder (or its designee) a new Preferred Share Certificate
representing the number of Preferred Shares not converted. |
| (iii) | Record Holder. The Person or Persons entitled to receive the shares of Common Stock issuable
upon a conversion of Preferred Shares shall be treated for all purposes as the record holder or holders of such shares of Common
Stock on the Conversion Date. |
| (iv) | Company’s Failure to Timely Convert. If the Company shall fail, for any reason or
for no reason, to issue to a Holder within three (3) Trading Days after the Company’s receipt of a Conversion Notice (whether
via facsimile or otherwise) (the “Share Delivery Deadline”), a certificate for the number of shares of Common
Stock to which such Holder is entitled and register such shares of Common Stock on the Company’s share register or to credit
such Holder’s or its designee’s balance account with DTC for such number of shares of Common Stock to which such Holder
is entitled upon such Holder’s conversion of any Preferred Shares (as the case may be) (a “Conversion Failure”),
then, in addition to all other remedies available to such Holder, such Holder, upon written notice to the Company, may void its
Conversion Notice with respect to, and retain or have returned (as the case may be) any Preferred Shares that have not been converted
pursuant to such Holder’s Conversion Notice, provided that the voiding of a Conversion Notice shall not affect the Company’s
obligations to make any payments which have accrued prior to the date of such notice pursuant to the terms of this Certificate
of Designations or otherwise. In addition to the foregoing, if within three (3) Trading Days after the Company’s receipt
of a Conversion Notice (whether via facsimile or otherwise), the Company shall fail to issue and deliver a certificate to such
Holder and register such shares of Common Stock on the Company’s share register or credit such Holder’s or its designee’s
balance account with DTC for the number of shares of Common Stock to which such Holder is entitled upon such Holder’s conversion
hereunder (as the case may be), and if on or after such third (3rd) Trading Day such Holder (or any other Person in
respect, or on behalf, of such Holder) purchases (in an open market transaction or otherwise) shares of Common Stock to deliver
in satisfaction of a sale by such Holder of all or any portion of the number of shares of Common Stock, or a sale of a number of
shares of Common Stock equal to all or any portion of the number of shares of Common Stock, issuable upon such conversion that
such Holder so anticipated receiving from the Company, then, in addition to all other remedies available to such Holder, the Company
shall, within three (3) Business Days after such Holder’s request, which request shall include reasonable documentation of
all fees, costs and expenses, and in such Holder’s discretion, either (i) pay cash to such Holder in an amount equal to such
Holder’s total purchase price (including brokerage commissions and other out-of-pocket expenses, if any) for the shares of
Common Stock so purchased (including, without limitation, by any other Person in respect, or on behalf, of such Holder) (the “Buy-In
Price”), at which point the Company’s obligation to so issue and deliver such certificate or credit such Holder’s
balance account with DTC for the number of shares of Common Stock to which such Holder is entitled upon such Holder’s conversion
hereunder (as the case may be) (and to issue such shares of Common Stock) shall terminate, or (ii) promptly honor its obligation
to so issue and deliver to such Holder a certificate or certificates representing such shares of Common Stock or credit such Holder’s
balance account with DTC for the number of shares of Common Stock to which such Holder is entitled upon such Holder’s conversion
hereunder (as the case may be) and pay cash to such Holder in an amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of shares of Common Stock multiplied by (B) the lowest Closing Sale Price of the Common Stock on any
Trading Day during the period commencing on the date of the applicable Conversion Notice and ending on the date of such issuance
and payment under this clause (ii). Immediately following the voiding of a Conversion Notice as aforesaid, the Conversion Price
of any Preferred Shares returned or retained by such Holder for failure to timely convert shall be adjusted to the lesser of (I)
the Conversion Price relating to the voided Conversion Notice and (II) the lowest Closing Bid Price of the Common Stock during
the period beginning on the Conversion Date and ending on the date such Holder voided the Conversion Notice, subject to further
adjustment as provided in this Certificate of Designations. |
| (v) | Pro Rata Conversion; Disputes. In the event the Company receives a Conversion Notice from
more than one Holder for the same Conversion Date and the Company can convert some, but not all, of such Preferred Shares submitted
for conversion, the Company shall convert from each Holder electing to have Preferred Shares converted on such date a pro rata
amount of such Holder’s Preferred Shares submitted for conversion on such date based on the number of Preferred Shares submitted
for conversion on such date by such Holder relative to the aggregate number of Preferred Shares submitted for conversion on such
date. In the event of a dispute as to the number of shares of Common Stock issuable to a Holder in connection with a conversion
of Preferred Shares, the Company shall issue to such Holder the number of shares of Common Stock not in dispute and resolve such
dispute in accordance with Section 17. |
| (vi) | Book-Entry. Notwithstanding anything to the contrary set forth in this Section 3, upon conversion
of any Preferred Shares in accordance with the terms hereof, no Holder thereof shall be required to physically surrender the certificate
representing the Preferred Shares to the Company following conversion thereof unless (A) the full or remaining number of Preferred
Shares represented by the certificate are being converted (in which event such certificate(s) shall be delivered to the Company
as contemplated by this Section 3(c)(vi) or (B) such Holder has provided the Company with prior written notice (which notice may
be included in a Conversion Notice) requesting reissuance of Preferred Shares upon physical surrender of any Preferred Shares.
Each Holder and the Company shall maintain records showing the number of Preferred Shares so converted by such Holder and the dates
of such conversions or shall use such other method, reasonably satisfactory to such Holder and the Company, so as not to require
physical surrender of the certificate representing the Preferred Shares upon each such conversion. In the event of any dispute
or discrepancy, such records of such Holder establishing the number of Preferred Shares to which the record holder is entitled
shall be controlling and determinative in the absence of manifest error. A Holder and any transferee or assignee, by acceptance
of a certificate, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of any Preferred
Shares, the number of Preferred Shares represented by such certificate may be less than the number of Preferred Shares stated on
the face thereof. Each certificate for Preferred Shares shall bear the following legend: |
ANY TRANSFEREE OR ASSIGNEE OF THIS
CERTIFICATE SHOULD CAREFULLY REVIEW THE TERMS OF THE CORPORATION’S CERTIFICATE OF DESIGNATIONS RELATING TO THE SHARES OF
SERIES H PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE, INCLUDING SECTION 3(c)(vi) THEREOF. THE NUMBER OF SHARES OF SERIES H
PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE MAY BE LESS THAN THE NUMBER OF SHARES OF SERIES H PREFERRED STOCK STATED ON THE
FACE HEREOF PURSUANT TO SECTION 3(c)(vi) OF THE CERTIFICATE OF DESIGNATIONS RELATING TO THE SHARES OF SERIES H PREFERRED STOCK
REPRESENTED BY THIS CERTIFICATE.
| (d) | Taxes. The Company shall pay any and all documentary, stamp, transfer (but only in respect
of the registered holder thereof), issuance and other similar taxes that may be payable with respect to the issuance and delivery
of shares of Common Stock upon the conversion of Preferred Shares. |
| (e) | Limitation on Beneficial Ownership. |
| (i) | Notwithstanding anything to the contrary contained in this Certificate of Designations, the Preferred
Shares held by a Holder shall not be convertible by such Holder, and the Company shall not effect any conversion of any Preferred
Shares held by such Holder, to the extent (but only to the extent) that such Holder or any of its affiliates would beneficially
own in excess of 9.99% (the “Maximum Percentage”) of the Common Stock. To the extent the above limitation applies,
the determination of whether the Preferred Shares held by such Holder shall be convertible (vis-à-vis other convertible,
exercisable or exchangeable securities owned by such Holder or any of its affiliates) and of which such securities shall be convertible,
exercisable or exchangeable (as among all such securities owned by such Holder and its affiliates) shall, subject to such Maximum
Percentage limitation, be determined on the basis of the first submission to the Company for conversion, exercise or exchange (as
the case may be). No prior inability of a Holder to convert Preferred Shares, or of the Company to issue shares of Common Stock
to such Holder, pursuant to this Section 3(e) shall have any effect on the applicability of the provisions of this Section 3(e)
with respect to any subsequent determination of convertibility or issuance (as the case may be). For purposes of this Section 3(e),
beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage
ownership) shall be determined in accordance with Section 13(d) of the 1934 Act and the rules and regulations promulgated thereunder.
The provisions of this Section 3(e) shall be implemented in a manner otherwise than in strict conformity with the terms of this
Section 3(e) to correct this Section 3(e) (or any portion hereof) which may be defective or inconsistent with the intended Maximum
Percentage beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly
give effect to such Maximum Percentage limitation. The limitations contained in this Section 3(e) shall apply to a successor holder
of Preferred Shares. The holders of Common Stock shall be third party beneficiaries of this Section 3(e) and the Company may not
waive this Section 3(e) without the consent of holders of a majority of its Common Stock. For any reason at any time, upon the
written or oral request of a Holder, the Company shall within one (1) Business Day confirm orally and in writing to such Holder
the number of shares of Common Stock then outstanding, including by virtue of any prior conversion or exercise of convertible or
exercisable securities into Common Stock, including, without limitation, pursuant to this Certificate of Designations or securities
issued pursuant to the other Transaction Documents. By written notice to the Company, any Holder may increase or decrease the Maximum
Percentage to any other percentage not in excess of 9.99% specified in such notice; provided that (i) any such increase will not
be effective until the 61st day after such notice is delivered to the Company, and (ii) any such increase or decrease will apply
only to such Holder sending such notice and not to any other Holder. |
| 4. | Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. Without
limiting any provision of Section 8, if the Company at any time on or after the Initial Issuance Date subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater
number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. Without
limiting any provision of Section 8, if the Company at any time on or after the Initial Issuance Date combines (by combination,
reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares,
the Conversion Price in effect immediately prior to such combination will be proportionately increased. Any adjustment pursuant
to this Section 4 shall become effective immediately after the effective date of such subdivision or combination. If any event
requiring an adjustment under this Section 4 occurs during the period that a Conversion Price is calculated hereunder, then the
calculation of such Conversion Price shall be adjusted appropriately to reflect such event. |
| (a) | Reservation. The Company shall initially reserve out of its authorized and unissued Common
Stock a number of shares of Common Stock equal to 100% of the Conversion Rate with respect to the Conversion Amount of each Preferred
Share as of the Initial Issuance Date (assuming for purposes hereof, that all the Preferred Shares issuable pursuant to the Exchange
Agreements have been issued, such Preferred Shares are convertible at the Conversion Price and without taking into account any
limitations on the conversion of such Preferred Shares set forth in herein). So long as any of the Preferred Shares are outstanding,
the Company shall take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock,
solely for the purpose of effecting the conversion of the Preferred Shares, as of any given date, 100% of the number of shares
of Common Stock as shall from time to time be necessary to effect the conversion of all of the Preferred Shares issued or issuable
pursuant to the Exchange Agreements, assuming for purposes hereof, that all the Preferred Shares issuable pursuant to the Exchange
Agreement have been issued and without taking into account any limitations on the issuance of securities set forth herein), provided
that at no time shall the number of shares of Common Stock so available be less than the number of shares required to be reserved
by the previous sentence (without regard to any limitations on conversions contained in this Certificate of Designations) (the
“Required Amount”). The initial number of shares of Common Stock reserved for conversions of the Preferred Shares
and each increase in the number of shares so reserved shall be allocated pro rata among the Holders based on the number of Preferred
Shares held by each Holder on the Initial Issuance Date or increase in the number of reserved shares (as the case may be) (the
“Authorized Share Allocation”). In the event a Holder shall sell or otherwise transfer any of such Holder’s
Preferred Shares, each transferee shall be allocated a pro rata portion of such Holder’s Authorized Share Allocation. Any
shares of Common Stock reserved and allocated to any Person which ceases to hold any Preferred Shares shall be allocated to the
remaining Holders of Preferred Shares, pro rata based on the number of Preferred Shares then held by such Holders. |
| (b) | Insufficient Authorized Shares. If, notwithstanding Section 5(a) and not in limitation thereof,
at any time while any of the Preferred Shares remain outstanding the Company does not have a sufficient number of authorized and
unissued shares of Common Stock to satisfy its obligation to have available for issuance upon conversion of the Preferred Shares
at least a number of shares of Common Stock equal to the Required Amount (an “Authorized Share Failure”), then
the Company shall immediately take all action necessary to increase the Company’s authorized shares of Common Stock to an
amount sufficient to allow the Company to reserve and have available the Required Amount for all of the Preferred Shares then outstanding.
Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized
Share Failure, but in no event later than ninety (90) days after the occurrence of such Authorized Share Failure, the Company shall
hold a meeting of its stockholders for the approval of an increase in the number of authorized shares of Common Stock. In connection
with such meeting, the Company shall provide each stockholder with a proxy statement and shall use its best efforts to solicit
its stockholders’ approval of such increase in authorized shares of Common Stock and to cause its Board to recommend to the
stockholders that they approve such proposal. Nothing contained in this Section 5 shall limit any obligations of the Company under
any provision of the Exchange Agreements. |
| 6. | Voting Rights. Holders of Preferred Shares shall have no voting rights, except as required
by law (including without limitation, the DGCL) and as expressly provided in this Certificate of Designations. To the extent that
under the DGCL the vote of the holders of the Preferred Shares, voting separately as a class or series as applicable, is required
to authorize a given action of the Company, the affirmative vote or consent of the holders of all of the shares of the Preferred
Shares, voting together in the aggregate and not in separate series unless required under the DGCL, represented at a duly held
meeting at which a quorum is presented or by written consent of all of the Preferred Shares (except as otherwise may be required
under the DGCL), voting together in the aggregate and not in separate series unless required under the DGCL, shall constitute the
approval of such action by both the class or the series, as applicable. Subject to Section 3(e), to the extent that under the DGCL
holders of the Preferred Shares are entitled to vote on a matter with holders of shares of Common Stock, voting together as one
class, each Preferred Share shall entitle the holder thereof to cast that number of votes per share as is equal to the number of
shares of Common Stock into which it is then convertible (subject to the ownership limitations specified in Section 3(e) hereof)
using the record date for determining the stockholders of the Company eligible to vote on such matters as the date as of which
the Conversion Price is calculated. Holders of the Preferred Shares shall be entitled to written notice of all stockholder meetings
or written consents (and copies of proxy materials and other information sent to stockholders) with respect to which they would
be entitled by vote, which notice would be provided pursuant to the Company’s bylaws and the DGCL). |
| 7. | Liquidation, Dissolution, Winding-Up. In the event of a Liquidation Event, the Holders shall
be entitled to receive in cash out of the assets of the Company, whether from capital or from earnings available for distribution
to its stockholders (the “Liquidation Funds”), pari passu with any amounts which shall be paid to the holders
of Common Stock, an amount per Preferred Share equal to the amount per share such Holder would receive if such Holder converted
such Preferred Shares into Common Stock immediately prior to the date of such payment, provided that if the Liquidation Funds are
insufficient to pay the full amount due to the Holders and holders of shares of Common Stock, then each Holder and each holder
of Common Stock shall receive a percentage of the Liquidation Funds equal to the full amount of Liquidation Funds payable to such
Holder and such holder of Common Stock as a liquidation preference, in accordance with their respective certificate of designations
(or equivalent), as a percentage of the full amount of Liquidation Funds payable to all holders of Preferred Shares and all holders
of shares of Common Stock. To the extent necessary, the Company shall cause such actions to be taken by each of its Subsidiaries
so as to enable, to the maximum extent permitted by law, the proceeds of a Liquidation Event to be distributed to the Holders in
accordance with this Section 7. |
| 8. | Participation. In addition to any adjustments pursuant to Section 4, the Holders shall,
as holders of Preferred Shares, be entitled to receive such dividends paid and distributions made to the holders of shares of Common
Stock to the same extent as if such Holders had converted each Preferred Share held by each of them into shares of Common Stock
(without regard to any limitations on conversion herein or elsewhere) and had held such shares of Common Stock on the record date
for such dividends and distributions. Payments under the preceding sentence shall be made concurrently with the dividend or distribution
to the holders of shares of Common Stock (provided, however, to the extent that a Holder’s right to participate in any such
dividend or distribution would result in such Holder exceeding the Maximum Percentage, then such Holder shall not be entitled to
participate in such dividend or distribution to such extent (or the beneficial ownership of any such shares of Common Stock as
a result of such dividend or distribution to such extent) and such dividend or distribution to such extent shall be held in abeyance
for the benefit of such Holder until such time, if ever, as its right thereto would not result in such Holder exceeding the Maximum
Percentage). |
| 9. | Vote to Change the Terms of or Issue Preferred Shares. In addition to any other rights provided
by law, except where the vote or written consent of the holders of a greater number of shares is required by law or by another
provision of the Certificate of Incorporation, without first obtaining the affirmative vote at a meeting duly called for such purpose
or the written consent without a meeting of the Required Holders, voting together as a single class, the Company shall not: (a)
amend or repeal any provision of, or add any provision to, its Certificate of Incorporation or bylaws, or file any certificate
of designations or articles of amendment of any series of shares of preferred stock, if such action would adversely alter or change
in any respect the preferences, rights, privileges or powers, or restrictions provided for the benefit, of the Preferred Shares,
regardless of whether any such action shall be by means of amendment to the Certificate of Incorporation or by merger, consolidation
or otherwise; provided, however, the Company shall be entitled, without the consent of the Required Holders unless such consent
is otherwise required by the DGCL, to amend the Certificate of Incorporation to effectuate one or more reverse stock splits of
its issued and outstanding Common Stock for purposes of maintaining compliance with the rules and regulations of the Principal
Market; or (b) without limiting any provision of Section 12, whether or not prohibited by the terms of the Preferred Shares, circumvent
a right of the Preferred Shares. |
| 10. | Lost or Stolen Certificates. Upon receipt by the Company of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of any certificates representing Preferred Shares (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 an indemnification undertaking by the applicable Holder to the Company in customary and reasonable form and, in the case of
mutilation, upon surrender and cancellation of the certificate(s), the Company shall execute and deliver new certificate(s) of
like tenor and date. |
| 11. | Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies
provided in this Certificate of Designations shall be cumulative and in addition to all other remedies available under this Certificate
of Designations and any of the other Transaction Documents, at law or in equity (including a decree of specific performance and/or
other injunctive relief), and no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise
to such remedy. Nothing herein shall limit any Holder’s right to pursue actual and consequential damages for any failure
by the Company to comply with the terms of this Certificate of Designations. The Company covenants to each Holder that there shall
be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein
with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by a 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 Holders 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, each 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,
to the extent permitted by applicable law. The Company shall provide all information and documentation to a Holder that is requested
by such Holder to enable such Holder to confirm the Company’s compliance with the terms and conditions of this Certificate
of Designations. |
| 12. | Noncircumvention. The Company hereby covenants and agrees that the Company will not, by
amendment of its Certificate of Incorporation, bylaws or through any reorganization, transfer of assets, consolidation, merger,
scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Certificate of Designations, and will at all times in good faith carry out all the provisions
of this Certificate of Designations and take all action as may be required to protect the rights of the Holders. Without limiting
the generality of the foregoing or any other provision of this Certificate of Designations, the Company (i) shall not increase
the par value of any shares of Common Stock receivable upon the conversion of any Preferred Shares above the Conversion Price then
in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally
issue fully paid and non-assessable shares of Common Stock upon the conversion of Preferred Shares and (iii) shall, so long as
any Preferred Shares are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued
shares of Common Stock, solely for the purpose of effecting the conversion of the Preferred Shares, the maximum number of shares
of Common Stock as shall from time to time be necessary to effect the conversion of the Preferred Shares then outstanding (without
regard to any limitations on conversion contained herein). |
| 13. | Failure or Indulgence Not Waiver. No failure or delay on the part of a 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. This Certificate of Designations
shall be deemed to be jointly drafted by the Company and all Holders and shall not be construed against any Person as the drafter
hereof. |
| 14. | Notices. The Company shall provide each Holder of Preferred Shares with prompt written notice
of all actions taken pursuant to the terms of this Certificate of Designations, including in reasonable detail a description of
such action and the reason therefor. Whenever notice is required to be given under this Certificate of Designations, unless otherwise
provided herein, such notice must be in writing and shall be given in accordance with Section 6.8 of the applicable Exchange Agreement.
Without limiting the generality of the foregoing, the Company shall give written notice to each Holder (i) promptly following any
adjustment of the Conversion Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and
(ii) at least fifteen (15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any
dividend or distribution upon the Common Stock, (B) with respect to any grant, issuances, or sales of any Options, Convertible
Securities or rights to purchase stock, warrants, securities or other property to all holders of shares of Common Stock as a class
or (C) for determining rights to vote with respect to any dissolution or liquidation, provided, in each case, that such information
shall be made known to the public prior to, or simultaneously with, such notice being provided to any Holder. |
| 15. | Preferred Shares Register. The Company shall maintain at its principal executive offices
(or such other office or agency of the Company as it may designate by notice to the Holders), a register for the Preferred Shares,
in which the Company shall record the name, address and facsimile number of the Persons in whose name the Preferred Shares have
been issued, as well as the name and address of each transferee. The Company may treat the Person in whose name any Preferred Shares
is registered on the register as the owner and holder thereof for all purposes, notwithstanding any notice to the contrary, but
in all events recognizing any properly made transfers. |
| 16. | Stockholder Matters; Amendment. |
| (a) | Stockholder Matters. Any stockholder action, approval or consent required, desired or otherwise
sought by the Company pursuant to the DGCL, the Certificate of Incorporation, this Certificate of Designations or otherwise with
respect to the issuance of Preferred Shares may be effected by written consent of the Company’s stockholders or at a duly
called meeting of the Company’s stockholders, all in accordance with the applicable rules and regulations of the DGCL. This
provision is intended to comply with the applicable Sections of the DGCL permitting stockholder action, approval and consent affected
by written consent in lieu of a meeting. |
| (b) | Amendment. This Certificate of Designations or any provision hereof may be amended by obtaining
the affirmative vote at a meeting duly called for such purpose, or written consent without a meeting in accordance with the DGCL,
of the Required Holders, voting separate as a single class, and with such other stockholder approval, if any, as may then be required
pursuant to the DGCL and the Certificate of Incorporation. |
| a. | Submission to Dispute Resolution. |
| (i) | In the case of a dispute relating to a Closing Bid Price, a Closing Sale Price, a Conversion Price
or a fair market value or the arithmetic calculation of a Conversion Rate (as the case may be) (including, without limitation,
a dispute relating to the determination of any of the foregoing), the Company or the applicable Holder (as the case may be) shall
submit the dispute to the other party via facsimile (A) if by the Company, within two (2) Business Days after the occurrence of
the circumstances giving rise to such dispute or (B) if by such Holder at any time after such Holder learned of the circumstances
giving rise to such dispute. If such Holder and the Company are unable to promptly resolve such dispute relating to such Bid Price,
such Closing Bid Price, such Closing Sale Price, such Conversion Price, such fair market value, or the arithmetic calculation of
such Conversion Rate (as the case may be), at any time after the second (2nd) Business Day following such initial notice by the
Company or such Holder (as the case may be) of such dispute to the Company or such Holder (as the case may be), then such Holder
may, at its sole option, select an independent, reputable investment bank to resolve such dispute. |
| (ii) | Such Holder and the Company shall each deliver to such investment bank (A) a copy of the initial
dispute submission so delivered in accordance with the first sentence of this Section 17 and (B) written documentation supporting
its position with respect to such dispute, in each case, no later than 5:00 p.m. (New York time) by the fifth (5th)
Business Day immediately following the date on which such Holder selected such investment bank (the “Dispute Submission
Deadline”) (the documents referred to in the immediately preceding clauses (A) and (B) are collectively referred to herein
as the “Required Dispute Documentation”) (it being understood and agreed that if either such Holder or the Company
fails to so deliver all of the Required Dispute Documentation by the Dispute Submission Deadline, then the party who fails to so
submit all of the Required Dispute Documentation shall no longer be entitled to (and hereby waives its right to) deliver or submit
any written documentation or other support to such investment bank with respect to such dispute and such investment bank shall
resolve such dispute based solely on the Required Dispute Documentation that was delivered to such investment bank prior to the
Dispute Submission Deadline). Unless otherwise agreed to in writing by both the Company and such Holder or otherwise requested
by such investment bank, neither the Company nor such Holder shall be entitled to deliver or submit any written documentation or
other support to such investment bank in connection with such dispute (other than the Required Dispute Documentation) . |
| (iii) | The Company and such Holder shall cause such investment bank to determine the resolution of such
dispute and notify the Company and such Holder of such resolution no later than ten (10) Business Days immediately following the
Dispute Submission Deadline. The fees and expenses of such investment bank shall be borne solely by the Company, and such investment
bank’s resolution of such dispute shall be final and binding upon all parties absent manifest error. |
| (b) | Miscellaneous. The Company expressly acknowledges and agrees that (i) this Section 17
constitutes an agreement to arbitrate between the Company and such Holder (and constitutes an arbitration agreement) under §
5701, et seq. of Title 10, Chapter 57 of the Delaware Code (the “Uniform Arbitration Act”) and that each party
shall be entitled to compel arbitration pursuant to the Uniform Arbitration Act in order to compel compliance with this Section
17, (ii) the terms of this Certificate of Designations and each other applicable Transaction Document shall serve as the basis
for the selected investment bank’s resolution of the applicable dispute, such investment bank shall be entitled (and is hereby
expressly authorized) to make all findings, determinations and the like that such investment bank determines are required to be
made by such investment bank in connection with its resolution of such dispute and in resolving such dispute such investment bank
shall apply such findings, determinations and the like to the terms of this Certificate of Designations and any other applicable
Transaction Documents, (iii) such Holder (and only such Holder), in its sole discretion, shall have the right to submit any dispute
described in this Section 17 to any state or federal court sitting in New York, New York in lieu of utilizing the procedures set
forth in this Section 17 and (iv) nothing in this Section 17 shall limit such Holder from obtaining any injunctive relief or other
equitable remedies (including, without limitation, with respect to any matters described in this Section 17) . |
| 18. | Certain Defined Terms. For purposes of this Certificate of Designations, the following terms
shall have the following meanings: |
| (a) | “1934 Act” means the Securities Exchange Act of 1934, as amended. |
| (b) | “Bloomberg” means Bloomberg, L.P. |
| (c) | “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. |
| (d) | “Closing Bid Price” and “Closing Sale Price” means, for any
security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal
Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate
the closing bid price or the closing trade price (as the case may be) then the last bid price or last trade price, respectively,
of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal
securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such
security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg,
or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter
market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price,
respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any
market makers for such security as reported in the “pink sheets” by OTC Markets Group Inc. (formerly Pink Sheets LLC).
If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing
bases, the Closing Bid Price or the Closing Sale Price (as the case may be) of such security on such date shall be the fair market
value as mutually determined by the Company and the applicable Holder. If the Company and such Holder are unable to agree upon
the fair market value of such security, then such dispute shall be resolved in accordance with the procedures in Section 17. All
such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction
during such period. |
| (e) | “Common Stock” means (i) the Company’s shares of common stock, $0.0001
par value per share, and (ii) any capital stock into which such common stock shall have been changed or any share capital resulting
from a reclassification of such common stock. |
| (f) | “Conversion Amount” means, with respect to each Preferred Share, as of the applicable
date of determination, the Stated Value thereof, |
| (g) | “Conversion Price” means, with respect to each Preferred Share, as of any Conversion
Date or other applicable date of determination, $1.54, subject to adjustment as provided herein. |
| (h) | “Convertible Securities” means any stock or other security (other than Options)
that is at any time and under any circumstances, directly or indirectly, convertible into, exercisable or exchangeable for, or
which otherwise entitles the holder thereof to acquire, any shares of Common Stock. |
| (i) | “Eligible Market” means The New York Stock Exchange, the NYSE MKT, the Nasdaq
Global Select Market, the Nasdaq Global Market or the Principal Market. |
| (j) | “Exchange Agreements” means those certain Amendment, Waiver and Exchange Agreements,
dated as of June 30, 2015, by and among the Company and the Buyers signatory thereto. |
| (k) | “Initial Issuance Date” means June 30, 2015. |
| (l) | “Liquidation Event” means, whether in a single transaction or series of transactions,
the voluntary or involuntary liquidation, dissolution or winding up of the Company or such Subsidiaries the assets of which constitute
all or substantially all of the assets of the business of the Company and its Subsidiaries, taken as a whole. |
| (m) | “Options” means any rights, warrants or options to subscribe for or purchase
shares of Common Stock or Convertible Securities. |
| (n) | “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. |
| (o) | “Principal Market” means the Nasdaq Capital Market. |
| (p) | “Required Holders” means the holders of at least 2/3rds of the outstanding Preferred
Shares. |
| (q) | “Securities” means, collectively, the Preferred Shares and the shares of Common
Stock issuable upon conversion of the Preferred Shares. |
| (r) | “Stated Value” shall mean $154 per share, subject to adjustment for stock splits,
stock dividends, recapitalizations, reorganizations, reclassifications, combinations, subdivisions or other similar events occurring
after the Initial Issuance Date with respect to the Preferred Shares. |
| (s) | “Subsidiary” means any Person in which the Company, directly or indirectly,
(i) owns a majority of the outstanding capital stock or holds a majority of equity or similar interest of such Person or (ii) controls
or operates all or any part of the business, operations or administration of such Person. |
| (t) | “Trading Day” means any day on which the Common Stock is traded on the Principal
Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities
exchange or securities market on which the Common Stock is then traded, provided that “Trading Day” shall not include
any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the
Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market
does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m.,
New York time) unless such day is otherwise designated as a Trading Day in writing by the Required Holders. |
| (u) | “Transaction Documents” means this Certificate of Designations, the Exchange
Agreements and each of the other agreements and instruments entered into or delivered by the Company or any of the Holders in connection
with the transactions contemplated thereby, all as may be amended from time to time in accordance with the terms hereof or thereof. |
| 19. | Disclosure. Upon receipt or delivery by the Company of any notice in accordance with the
terms of this Certificate of Designations, 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 simultaneously
with 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 each Holder contemporaneously with delivery of such notice, and in the absence
of any such indication, each 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. |
[signature page follows]
IN WITNESS WHEREOF,
the Corporation has caused this Certificate of Designations of Series H Convertible Preferred Stock of WPCS International Incorporated
to be signed by its Interim Chief Executive Officer on this 30th day of June, 2015.
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WPCS INTERNATIONAL INCORPORATED |
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By: |
/s/ Sebastian Giordano |
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Name: |
Sebastian Giordano |
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Title: |
Interim Chief Executive Officer |
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EXHIBIT I
WPCS INTERNATIONAL INCORPORATED
CONVERSION NOTICE
Reference is made to
the Certificate of Designations, Preferences and Rights of the Series H Convertible Preferred Stock of WPCS International Incorporated
(the “Certificate of Designations”). In accordance with and pursuant to the Certificate of Designations, the
undersigned hereby elects to convert the number of shares of Series H Convertible Preferred Stock, $0.0001 par value per share
(the “Preferred Shares”), of WPCS International Incorporated, a Delaware corporation (the “Company”),
indicated below into shares of common stock, $0.0001 value per share (the “Common Stock”), of the Company, as
of the date specified below.
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Number of Preferred Shares to be
converted: |
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Share certificate no(s). of Preferred Shares to be
converted: |
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Tax ID Number (If applicable): |
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Number of shares of Common Stock to be issued: |
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Please issue the shares of Common Stock
into which the Preferred Shares are being converted in the following name and to the following address:
Issue to: _________________________________________
_________________________________________
Address: _________________________________________
Telephone Number: ________________________________
Facsimile Number: _________________________________
Holder: __________________________________________
By: _____________________________________________
Title: ___________________________________________
Dated:_____________________________
Account Number (if electronic book entry
transfer): __________________________________
Transaction Code Number (if electronic book
entry transfer): __________________________
EXHIBIT II
ACKNOWLEDGMENT
The Company hereby
acknowledges this Conversion Notice and hereby directs [ ] to issue the above indicated number of shares of Common Stock in accordance
with the Irrevocable Transfer Agent Instructions dated __________, 20____ from the Company and acknowledged and agreed to by [
].
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WPCS INTERNATIONAL INCORPORATED |
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By: |
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Name: |
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Title: |
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Exhibit 10.1
AMENDMENT, WAIVER AND EXCHANGE AGREEMENT
This Amendment, Waiver
and Exchange Agreement (the “Agreement”), dated as of June 30, 2015, is by and between WPCS International
Incorporated, a Delaware corporation with offices located at 521 Railroad Avenue, Suisun City, California 94585 (the “Company”),
and the holder identified on the signature page hereto (the “Holder”).
RECITALS
A. Prior to the date
hereof, the Company has issued to the Holder a Promissory Note with such aggregate outstanding principal as set forth on the signature
page of the Holder attached hereto (as amended, modified, waived or exchanged prior to the date hereof, the “Existing
Note”), pursuant to that certain Securities Purchase Agreement, dated as of December 17, 2013 and entered into by and
among the Company, the Holder and certain other investors signatory thereto entered (as amended, modified or waived prior to the
date hereof, the “Securities Purchase Agreement”).
B. The Company has
authorized a new series of preferred stock designated as Series H Convertible Preferred Stock (the “Series H Preferred
Stock”), the rights, preferences and other terms and provisions of which are set forth in the Certificate of Designations,
Preferences and Rights of Series H Preferred Stock, in the form attached hereto as Exhibit A (the “Series H Certificate
of Designations”), which Series H Preferred Stock shall be convertible into shares of the Company’s Common Stock
(as defined below), in accordance with the terms of the Series H Certificate of Designations (the “Conversion Shares”).
C. The Company and
the Holder desire to enter into this Agreement, pursuant to which (i) certain provisions of the Securities Purchase Agreement
shall be amended and waived and (ii) the Company and the Holder shall exchange the Existing Note for such aggregate number
of Series H Preferred Stock as set forth on the signature page of the Holder (the “Series H Exchange Shares”
and such transaction is referred to as the “Exchange”).
D. The Existing Note
will be exchanged for the Series H Exchange Shares in an exchange made in reliance upon the exemption from registration provided
by Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”).
AGREEMENT
1. EXCHANGE.
On the Closing Date (as defined below), the Holder shall, and the Company shall, pursuant to Section 3(a)(9) of the Securities
Act, exchange the Existing Note for the Series H Exchange Shares (and the Existing Note shall be cancelled).
1.1 Delivery.
On or before the Closing Date, the Holder shall deliver, (i) the Existing Note, (ii) an executed IRS Form W-9 (the “Form
W-9”) and (iii) written instructions for delivery of the stock certificate evidencing the Series H Exchange Shares (the
“Delivery Instructions”), to the Company’s counsel at K&L Gates LLP, 599 Lexington Avenue, New York,
NY 10022, Attention: Robert S. Matlin, Esq. Following the Closing Date and the Company’s counsel’s receipt of the Existing
Note, the Form W-9 and the Delivery Instructions, the Company shall cancel the Existing Note and issue, and instruct its transfer
agent to deliver, a stock certificate evidencing the Series H Exchange Shares to the Holder in accordance with the Delivery Instructions.
1.2 Legend. The
Holder understands that the Series H Exchange Shares will be issued pursuant to an exemption from registration or qualification
under the Securities Act and applicable state securities laws, and except as set forth below, any certificates evidencing the Series
H Exchange Shares shall bear any legend as required by the “blue sky” laws of any state and a restrictive legend in
substantially the following form (and a stop-transfer order may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE
COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD
OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
1.3 Book-Entry.
The Holder consents to the Series H Exchange Shares being held in book-entry form by the Company’s transfer agent.
1.4 Other Documents.
The Company and the Holder shall execute and/or deliver such other documents and agreements as are customary and reasonably necessary
to effectuate the Exchange.
1.5 No Additional
Consideration. The parties acknowledge and agree that the Series H Exchange Shares shall be issued to the Holder in exchange
for the Existing Note without the payment of any additional consideration by the Holder.
1.6
Closing Date. The closing of the Exchange shall occur two (2) business days following the Company’s receipt of duly
executed copies of this Agreement from (i) holders of two-thirds (2/3) of the issued
and outstanding shares of the Company’s Series F convertible preferred stock, par value $0.0001 per share (“Series
F Preferred Stock”) and the Company’s Series G convertible preferred stock, par value $0.0001 per share (“Series
G Preferred Stock”) (together as a single series) and (ii) holders of two-thirds (2/3) of the issued and outstanding
shares of the Company’s Series F-1 convertible preferred stock, par value $0.0001 per share (“Series F-1 Preferred
Stock”) and the Company’s Series G-1 convertible preferred stock, par value $0.0001 per share (“Series
G-1 Preferred Stock”) (together as a single series).
1.7 Certificate of
Designations. The Company shall file the Series H Certificate of Designations with the Secretary of State of the State of Delaware
on or prior to the Closing Date.
2.
AMENDMENT AND WAIVER TO securities purchase agreement.
2.1
Amendment. Effective as of the Closing Date, Section 4(k) of the Securities
Purchase Agreement is deleted in its entirety and replaced with “Intentionally Omitted.”
2.2 Waiver. The
Holder hereby waives, solely with respect to the Exchange, all requirements of notice and the compliance by the Company with any
time periods set forth in Section 4(o) of the Securities Purchase Agreement.
3.
Representations and Warranties OF THE COMPANY. Subject to such disclosures set forth in the Company’s filings
with the Securities and Exchange Commission prior to the date hereof and in the 8-K Filing (as defined below), the Company represents
and warrants to the Holder, as of the date hereof, as follows:
3.1 Organization and
Qualification. The Company and each of its subsidiaries are duly incorporated or otherwise organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power
and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company
nor any of its subsidiaries are in violation of any of the provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents except, with respect to the subsidiaries, for violations which would not, individually
or in the aggregate, have or reasonably be expected to result in a material adverse effect. The Company and each of its subsidiaries
are duly qualified to conduct its respective businesses and are in good standing as a foreign corporation or other entity in each
jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where
the failure to be so qualified or in good standing, as the case may be, would not, individually or in the aggregate, have or reasonably
be expected to result in a material adverse effect.
3.2 Authorization
and Binding Obligation. The Company has the requisite power and authority to enter into and perform its obligations under this
Agreement and to issue the Series H Exchange Shares in accordance with the terms hereof. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions contemplated hereby, including, without limitation, the
issuance of the Series H Exchange Shares, have been duly authorized by the Board of Directors of the Company and, other than (i) such
filings required under applicable securities or “Blue Sky” laws of the states of the United States and (ii) the
filing of the Series H Certificate of Designations with the Secretary of State of the State of Delaware, no further filing, consent,
or authorization is required by the Company or of its board of directors or its shareholders. This Agreement has been duly executed
and delivered by the Company and constitutes the legal, valid and binding obligations of the Company enforceable against the Company
in accordance with its terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies.
3.3
No Conflict; Required Filings and Consents.
(i) The execution,
delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated
hereby will not (A) result in a violation of the Company’s Certificate of Incorporation, the terms of any share capital of
the Company or any of its subsidiaries, the bylaws of the Company or any of the organizational documents of the Company or any
of its subsidiaries or (B) conflict with, or constitute a default (or an event which with notice or lapse of time or both would
become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its subsidiaries is a party, or (C) result in a violation of any law, rule,
regulation, order, judgment or decree (including U.S. federal and state securities laws, rules, and regulations, and the rules
and regulations of the Nasdaq Stock Market applicable to the Company or any of its subsidiaries or by which any property or asset
of the Company or any of its subsidiaries is bound or affected.
(ii) Except for
the filing of the Series H Certificate of Designations with the Secretary of State of the State of Delaware, neither the Company
nor any of its subsidiaries is required to obtain any consent, authorization or order of, or, make any filing or registration with,
any court, governmental agency or any regulatory or self-regulatory agency or any other person in order for it to execute, deliver
or perform any of its obligations under or contemplated by this Agreement, in accordance with the terms hereof. All consents, authorizations,
orders, filings and registrations (which the Company is required to obtain pursuant to the preceding sentence) have been obtained
or effected, or will have been obtained or effected, on or prior to the date hereof, and the Company and its subsidiaries are unaware
of any facts or circumstances that might prevent the Company from obtaining or effecting any of the registration, application or
filings pursuant to the preceding sentence.
3.4 No Integration.
None of the Company, its subsidiaries, any of their affiliates, or any person acting on their behalf has, directly or indirectly,
made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration
of any of the Series H Exchange Shares under the Securities Act, or cause this offering of the Series H Exchange Shares to be integrated
with prior offerings by the Company for purposes of the Securities Act or any applicable shareholder approval provisions, including,
without limitation, under the rules and regulations of any exchange or automated quotation system on which any of the securities
of the Company are listed or designated. None of the Company, its subsidiaries, their affiliates or any person acting on their
behalf will take any action or steps referred to in the preceding sentence that would require registration of any of Series H Exchange
Shares under the Securities Act or cause the offering of the Series H Exchange Shares to be integrated with other offerings.
3.5 Securities Law
Exemptions. Assuming the accuracy of the representations and warranties of the Holder contained herein, the offer and issuance
by the Company of the Series H Exchange Shares is exempt from registration under the Securities Act and all applicable state securities
laws.
3.6 Issuance of
Series H Exchange Shares and Conversion Shares. The issuance of the Series H Exchange Shares is duly authorized and upon the
filing of the Series H Certificate of Designations with the Secretary of State of the State of Delaware and the issuance in accordance
with the terms of this Agreement, the Series H Exchange Shares shall be validly issued, fully paid and non-assessable and free
from all taxes, liens, charges and other encumbrances with respect to the issue thereof. Upon conversion in accordance with the
Series H Certificate of Designations, the Conversion Shares, when issued, shall be validly issued, fully paid and non-assessable
and free from all taxes, liens, charges and other encumbrances with respect to the issue thereof.
3.7 No Consideration
Paid. No commission or other remuneration has been paid by Company for soliciting the exchange of the Existing Note for the
Series H Exchange Shares as contemplated hereby.
4.
Representations and Warranties OF THE HOLDER. The Holder represents and warrants to the Company as of the date hereof,
as follows:
4.1 Organization
and Authority. The Holder has the requisite power and authority to enter into and perform its obligations under this Agreement.
The execution and delivery of this Agreement by the Holder and the consummation by Holder of the transactions contemplated hereby
has been duly authorized by Holder’s board of directors or other governing body. This Agreement has been duly executed and
delivered by Holder and constitutes the legal, valid and binding obligation of Holder, enforceable against Holder in accordance
with its terms.
4.2 Ownership
of Existing Note. The Holder owns the Existing Note free and clear of any liens (other than the obligations pursuant to this
Agreement and applicable securities laws).
4.3 Ownership
of Preferred Stock. The Holder is the owner of record of the numbers of shares of Series F Preferred Stock, Series G Preferred
Stock, Series F-1 Preferred Stock and Series G-1 Preferred Stock set forth on the Holder’s signature page attached hereto.
4.4 Reliance
on Exemptions. The Holder understands that the Series H Exchange Shares are being offered and exchanged in reliance on specific
exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying
in part upon the truth and accuracy of, and the Holder’s compliance with, the representations, warranties, agreements, acknowledgments
and understandings of the Holder set forth herein in order to determine the availability of such exemptions and the eligibility
of the Holder to acquire the Series H Exchange Shares.
4.5 Validity;
Enforcement. This Agreement to which the Holder is a party has been duly and validly authorized, executed and delivered on
behalf of the Holder and shall constitute the legal, valid and binding obligations of the Holder enforceable against the Holder
in accordance with its respective terms, except as such enforceability may be limited by general principles of equity or to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors’ rights and remedies.
4.6 No Conflicts.
The execution, delivery and performance by the Holder of this Agreement to which the Holder is a party, and the consummation by
the Holder of the transactions contemplated hereby will not (i) result in a violation of the organizational documents of the Holder
or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument
to which the Holder is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws) applicable to the Holder, except in the case of clauses (ii) and (iii) above, for such conflicts,
defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse
effect on the ability of the Holder to perform its obligations hereunder.
4.7 No Consideration
Paid. No commission or other remuneration has been paid by the Holder for soliciting the exchange of the Existing Note for
the Series H Exchange Shares as contemplated hereby.
4.8 Not a 20%
Owner. After giving effect to the Exchange and the issuance of the Series H Exchange Shares to the Holder, the Holder will
be a “beneficial owner” (as defined for purposes of Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)) of less than 20% of the shares of the Company’s common stock, par value $0.0001 per share,
then issued and outstanding.
5. Covenants.
5.1 Disclosure of
Transactions and Other Material Information. On or before the fourth (4th) Business Day following the Closing Date, the Company
shall file a Current Report on Form 8-K describing all the material terms of the transaction contemplated by the Agreement in the
form required by the Exchange Act and attaching all the material agreements (including, without limitation, this Agreement) (including
all attachments, the “8-K Filing”). From and after the 8-K Filing, the Company shall have disclosed all material,
non-public information (if any) delivered to the Holder by the Company or any of its subsidiaries, or any of their respective officers,
directors, employees or agents in connection with the transactions contemplated by this Agreement.
5.2 Holding Period.
For the purposes of Rule 144, the Company acknowledges that the holding period of the Series H Exchange Shares may be tacked onto
the holding period of each of the Existing Note, and the Company agrees not to take a position contrary to this Section 5.2.
6. MISCELLANEOUS.
6.1 Effective Time.
This Agreement shall be effective upon the date each of the Company and the Holder shall have executed this Agreement.
6.2. No Third Party
Beneficiaries. This Amendment is intended for the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
6.3 Governing
Law; Jurisdiction; Jury Trial. All questions concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict
of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees
not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court,
that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be
deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
6.4 Counterparts.
This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event that
any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an
executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) with the same force and effect as if such signature page were an original thereof.
6.5 Headings;
Gender. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation
of, this Agreement. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine,
feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include”
and words of like import shall be construed broadly as if followed by the words “without limitation.” The terms “herein,”
“hereunder,” “hereof” and words of like import refer to this entire Agreement instead of just the provision
in which they are found.
6.6
Severability. If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable
by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed
amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified
continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations
or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the
parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s)
with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
6.7 Entire Agreement;
Amendments. This Agreement supersedes all other prior oral or written agreements between the Holder, the Company, its subsidiaries,
their affiliates and persons acting on their behalf solely with respect to the matters contained herein, and this Agreement, contains
the entire understanding of the parties solely with respect to the matters covered herein. No provision of this Agreement may be
amended other than by an instrument in writing signed by the Company and the Holder.
6.8 Notices.
Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must
be in writing and will be deemed to have been delivered: (i) upon receipt, if delivered personally; (ii) when sent by facsimile
(if sent during the recipient’s normal business hours, or the next business day if sent after such normal business hours),
provided that confirmation of transmission is mechanically or electronically generated and kept on file by the sending party; (iii)
when sent by e-mail (if sent during the recipient’s normal business hours, or the next business day if sent after such normal
business hours), provided that such sent e-mail is kept on file (whether electronically or otherwise) by the sending party and
the sending party does not receive an automatically generated message from the recipient’s e-mail server that such e-mail
could not be delivered to such recipient) and (iv) if sent by overnight courier service, one (1) business day after deposit with
an overnight courier service with next day delivery specified, in each case, properly addressed to the party to receive the same.
The addresses, facsimile numbers, and e-mail addresses for such communications shall be:
If to the Company:
521 Railroad
Avenue
Suisun City,
CA 94585
Telephone:
(707) 421-1300
Facsimile:
(707) 421-1359
Email: sebastian.giordano@wpcs.com
Attention:
Interim Chief Executive Officer
With a copy (for informational
purposes only) to:
K&L Gates LLP
599 Lexington Avenue
New York, NY 10022
Telephone: (212) 536-3900
Facsimile: (212) 536-3901
Email: robert.matlin@klgates.com
Attention: Robert S. Matlin, Esq.
If to the Holder:
With a copy (for informational
purposes only) to:
6.9 Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of any of the securities.
6.10 Survival.
The representations, warranties, agreements and covenants shall survive the date hereof.
6.11 Further
Assurances. Each party shall use its reasonable best efforts to do and perform, or cause to be done and performed, all such
further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any
other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation
of the transactions contemplated hereby.
6.12 Construction.
The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and
no rules of strict construction will be applied against any party. No specific representation or warranty shall limit the generality
or applicability of a more general representation or warranty.
[The remainder of the page is intentionally
left blank]
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the day and year first above written.
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COMPANY: |
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WPCS INTERNATIONAL INCORPORATED |
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By: |
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Name: Sebastian Giordano
Title: Interim Chief Executive Officer |
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the day and year first above written.
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HOLDER: |
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[_________________] |
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By: |
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Name: |
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Title: |
| Exchange |
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| Aggregate Principal Amount of Existing Note: |
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[_________] |
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| Aggregate Number of Series H Exchange Shares: |
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[_________] |
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| Amendment and Waiver |
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| Aggregate Number of Series F Preferred Shares Owned of Record: |
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[_________] |
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| Aggregate Number of Series G Preferred Shares Owned of Record: |
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[_________] |
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| Aggregate Number of Series F-1 Preferred Shares Owned of Record: |
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[_________] |
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| Aggregate Number of Series G-1 Preferred Shares Owned of Record: |
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[_________] |
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Exhibit 99.1
WPCS Eliminates
All $1.7 Million of
Unsecured
Promissory Notes
Majority
of Short-Term Debt Converted to Equity
SUISUN, CA
- (Marketwired – July 1, 2015) - WPCS International Incorporated (NASDAQ: WPCS), which specializes in contracting services
for communications infrastructure, today announced that it has completed a series of transactions resulting in the elimination
of all of its $1,703,000 principal amount of Unsecured Promissory Notes (“Notes”), which were originally due to be
paid on September 30, 2015.
According to Sebastian Giordano,
Interim CEO of WPCS, “Not only does this eradicate our most pressing short-term cash
obligation, but it also generates a corresponding equity increase, a critical factor as we continue working on our plan to regain
compliance with the NASDAQ minimum equity requirement.”
The $1,703,000
of Notes previously outstanding were eliminated as follows: on June 30, 2015, (i) holders of $1,299,000 principal amount of Notes
each converted their respective Notes into 8,435 shares of a new Series H preferred stock with each share of Series H preferred
stock currently convertible into 100 shares of the Company’s common stock; and (ii) two holders cancelled the aggregate
of $400,000 principal amount of Notes as part of a Section 16 settlement. Then, on July 1, 2015, the Company paid the only remaining
holder $4,000 in cash to retire such Note. 5,805 of the newly issued Series H preferred stock
shares are eligible, for purposes of Rule 144 under the Securities Act of 1933, as amended, to tack the holding period back to
the acquisition date of the exchanged Notes.
About
WPCS International Incorporated
WPCS provides
contracting services to the public services, healthcare, energy and corporate enterprise markets in the United States. For more
information, please visit www.wpcs.com.
Cautionary
Note Regarding Forward-Looking Statements
This
press release contains "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private
Securities Litigation Reform Act of 1995, including, but not limited to, statements with respect to the Company’s future
growth opportunities and strategic plan. Forward-looking statements are neither historical facts nor assurances of future performance.
Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future
plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. Because forward-looking
statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult
to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from
those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements.
Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks
only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether
written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.
INVESTOR
CONTACT:
WPCS International Incorporated
David Allen
Chief Financial
Officer
Phone: 707.759.6008
Email:
david.allen@wpcs.com
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