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):
July 14, 2015
____________________
WPCS INTERNATIONAL INCORPORATED
(Exact name of registrant as specified in
its charter)
Delaware |
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001-34643 |
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98-0204758 |
(State or Other Jurisdiction |
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(Commission File Number) |
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(IRS Employer |
Of Incorporation) |
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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):
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
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 July 14, 2015, WPCS International Incorporated
(the “Company”), entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with
Iroquois Master Fund Ltd., Iroquois Capital Investment Group and American Capital Management, LLC (collectively, the “Investors”),
pursuant to which the Company issued to the Investors an aggregate of 8,119 shares of Series H-1 Preferred Convertible Stock of
the Company, par value $0.0001 per share (“Series H-1 Shares”), and warrants to purchase 1,217,861 shares of common
stock of the Company, par value $0.0001 per share (“Common Stock”), with an exercise price of $1.66 per share (the
“Warrants”). The purchase price for each Series H-1 Share was $166 and the purchase price for each warrant was $0.1250
per share of Common Stock, for an aggregate purchase price for the Series H-1 Shares and Warrants of $1,500,000. The foregoing
description of the Securities Purchase Agreement and Warrants is not complete and is qualified in its entirety by reference to
the full text of the Securities Purchase Agreement and form of Warrant attached hereto as Exhibits 10.1 and 10.2, respectively.
Simultaneously with the Securities Purchase
Agreement, the Company and the Investors entered into a Registration Rights Agreement (the “Registration Rights Agreement”),
pursuant to which the Company agreed to file with the Securities and Exchange Commission, on or before October 1, 2015, a registration
statement on Form S-3 covering the resale of the Common Stock issuable upon conversion of the Series H-1 Shares and exercise of
the Warrants. The foregoing description of the Registration Rights Agreement is not complete and is qualified in its entirety by
reference to the full text of the Registration Rights Agreement attached hereto as Exhibit 10.3.
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 Company sold the Series H-1 Shares
and Warrants in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933,
as amended (the “Securities Act”), and Rule 506 of Regulation D as promulgated under the Securities Act.
Item 5.03 |
Amendments to Articles of Incorporation
or Bylaws; Change in Fiscal Year.
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On July 14, 2015, the Company filed with
the Secretary of State of the State of Delaware a Certificate of Designations, Preferences and Rights of Series H-1 Convertible
Preferred Stock (the “Series H-1 Certificate of Designation”).
Under the terms of the Series H-1 Certificate
of Designation, each share of Series H-1 Preferred Stock has a stated value of $166 and is convertible into shares of Common Stock,
equal to the stated value divided by the conversion price of $1.66 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-1 Preferred Stock to the extent that, as
a result of such conversion, the holder or any of its affiliates 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-1 Preferred Stock.
The foregoing description of the Series
H-1 Preferred Stock and the Series H-1 Certificate of Designation is not complete and is qualified in its entirety by reference
to the full text of the Series H-1 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 |
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Description |
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3.1 |
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Certificate of Designations, Preferences and Rights of the Series H-1 Convertible Preferred Stock, filed with the Secretary of State of the State of Delaware on July 14, 2015 |
10.1 |
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Securities Purchase Agreement, dated July 14, 2015 |
10.2 |
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Form of Warrant |
10.3 |
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Registration Rights Agreement, dated July 14, 2015 |
99.1 |
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Press Release, dated July 15, 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.
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WPCS INTERNATIONAL INCORPORATED |
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Date: July 15, 2015 |
By: |
/s/ Sebastian Giordano |
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Name: Sebastian Giordano |
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Title: Interim Chief Executive Officer |
Exhibit 3.1
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF THE
SERIES H-1 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 July 9, 2015 adopted
the following resolutions creating a series of 9,488 shares of Preferred Stock designated as Series H-1 Convertible Preferred Stock,
none of which shares have been issued:
RESOLVED, that the
Board designates the Series H-1 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-1 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-1 Convertible Preferred Stock” (the “Preferred Shares”).
The authorized number of Preferred Shares shall be 9,488 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-1 PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE, INCLUDING SECTION 3(c)(vi) THEREOF. THE NUMBER OF SHARES OF SERIES
H-1 PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE MAY BE LESS THAN THE NUMBER OF SHARES OF SERIES H-1 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-1 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 Purchase
Agreement 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 Purchase Agreement, 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 Purchase Agreement. |
| 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, $1.66 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) | “Initial Issuance Date” means July 14, 2015. |
| (k) | “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. |
| (l) | “Options” means any rights, warrants or options to subscribe for or purchase
shares of Common Stock or Convertible Securities. |
| (m) | “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. |
| (n) | “Principal Market” means the Nasdaq Capital Market. |
| (o) | “Purchase Agreement” means that certain Securities Purchase Agreement, dated
as of July 14, 2015, by and among the Company and the purchasers signatory thereto. |
| (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 $166 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 Purchase
Agreement 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-1 Convertible Preferred Stock of WPCS International Incorporated
to be signed by its Interim Chief Executive Officer on this 14th day of July, 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 |
EXHIBIT I
WPCS INTERNATIONAL INCORPORATED
CONVERSION NOTICE
Reference is made to
the Certificate of Designations, Preferences and Rights of the Series H-1 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-1 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: |
|
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
Execution Version
SECURITIES PURCHASE AGREEMENT
This Securities Purchase
Agreement (this “Agreement”) is dated as of July 14, 2015, between WPCS International Incorporated, a Delaware
corporation (the “Company”), and each purchaser identified on the signature pages hereto (each, including its
successors and permitted assigns, a “Purchaser” and collectively, the “Purchasers”).
PREAMBLE
WHEREAS, subject to
the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended
(the “Securities Act”), and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Purchaser,
and each Purchaser, severally and not jointly, desires to purchase from the Company, securities of the Company as more fully described
in this Agreement (the “Offering”).
NOW, THEREFORE, IN
CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions.
In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms have the
meanings set forth in this Section 1.1:
“Accredited
Investor” shall have the meaning ascribed to it in Section 3.2(c).
“Acquiring
Person” shall have the meaning ascribed to such term in Section 4.17.
“Action”
shall have the meaning ascribed to such term in Section 3.1(j).
“Affiliate”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
“Beneficial
Ownership Limitation” shall have the meaning ascribed to such term in Section 4.24.
“Board
of Directors” means the board of directors of the Company.
“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to
close.
“Buy-In”
shall have the meaning ascribed to such term in Section 4.1(g).
“Closing”
means the closing of the purchase and sale of the Securities pursuant to Section 2.1.
“Closing
Date” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable
parties thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay the Subscription Amount at such Closing
and (ii) the Company’s obligations to deliver the Securities to be issued and sold at such Closing, in each case, have been
satisfied or waived, but in no event later than the third Trading Day following the date hereof in the case of such Closing.
“Commission”
means the United States Securities and Exchange Commission.
“Common
Stock” means the common stock of the Company, $0.0001 par value, and any other class of securities into which such securities
may hereafter be reclassified or changed.
“Common
Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to
acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument
that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.
“Company
Counsel” means K&L Gates LLP, 599 Lexington Avenue, New York, NY 10022, Attn: Robert S. Matlin, Esq., facsimile:
(212) 536-3901.
“Conversion
Shares” means the shares of Common Stock issuable upon conversion of the Shares.
“Disclosure
Letter” means that certain letter delivered by the Company to the Purchasers simultaneously with the execution and delivery
of this Agreement.
“Effective
Date” means the date that the initial Registration Statement has been declared effective by the Commission.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exempt
Issuance” means the issuance of (a) shares of Common Stock and options to officers, employees, directors or consultants
of the Company issued pursuant to plans approved by a majority of the stockholders and a majority of the independent members of
the board of directors of the Company, (b) securities upon the exercise or exchange of or conversion of any Securities issued hereunder
(subject to adjustment for forward and reverse stock splits and the like that occur after the date hereof) and/or other securities
exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Agreement,
provided that such securities and any term thereof have not been amended since the date of this Agreement to increase the number
of such securities or to decrease the issue price, exercise price, exchange price or conversion price of such securities and which
securities and the principal terms thereof are set forth on Section 3.1(g) of the Disclosure Letter, and described in the
SEC Reports filed not later than five (5) Business Days before the Closing Date, (c) full or partial consideration in connection
with a strategic merger (including a reverse merger), acquisition, consolidation or purchase of substantially all of the securities
or assets of a corporation or other entity which holders of such securities or debt are not at any time granted any registration
rights but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital
or to an entity whose primary business is investing in securities, (d) securities in connection with strategic license agreements
and other partnering arrangements so long as such issuances are not primarily for the purpose of raising capital and which holders
of such securities or debt are not at any time granted registration rights; and (e) securities as payment for investment banking
services provided to the Company.
“FCPA”
means the Foreign Corrupt Practices Act of 1977, as amended.
“FDCA”
shall have the meaning ascribed to such term in Section 3.1(nn).
“GAAP”
shall have the meaning ascribed to such term in Section 3.1(h).
“Indebtedness”
shall have the meaning ascribed to such term in Section 3.1(aa).
“Intellectual
Property Rights” shall have the meaning ascribed to such term in Section 3.1(o).
“Legend
Removal Date” shall have the meaning ascribed to such term in Section 4.1(c).
“Liens”
means a lien, charge pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.
“Listing
Default” shall have the meaning ascribed to such term in Section 4.9.
“Material
Adverse Effect” shall have the meaning assigned to such term in Section 3.1(b).
“Material
Permits” shall have the meaning ascribed to such term in Section 3.1(m).
“Maximum
Rate” shall have the meaning ascribed to such term in Section 5.21.
“Money
Laundering Laws” shall have the meaning ascribed to such term in Section 3.1(r).
“OFAC”
shall have the meaning ascribed to such term in Section 3.1(kk).
“Offering”
shall have the meaning ascribed to such term in the Preamble.
“Participation
Maximum” shall have the meaning ascribed to such term in Section 4.12(a).
“Permitted
Indebtedness” means (i) the accounts receivable factoring arrangement described in the SEC Reports; (ii) capital lease
obligations and purchase money indebtedness of up to $400,000, in the aggregate, incurred in connection with the acquisition of
capital assets and lease obligations with respect to newly acquired or leased assets; and (iii) any asset-backed credit line
or similar facility.
“Permitted
Lien” means the individual and collective reference to the following: (A) Liens for taxes, assessments and other governmental
charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good
faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Company)
have been established in accordance with GAAP, (B) Liens imposed by law which were incurred in the ordinary course of the Company’s
business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other
similar Liens arising in the ordinary course of the Company’s business, and which (x) do not individually or in the aggregate
materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business
of the Company and its consolidated Subsidiaries, or (y) are being contested in good faith by appropriate proceedings, which proceedings
have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien,
and (C) Liens incurred prior to or subsequent to the Closing Date in connection with Permitted Indebtedness.
“Per
Share Purchase Price” equals the product of (i) the closing price of the Common Stock on the principal Trading Market
for the Trading Day immediately preceding the day this Agreement is executed and delivered by the Company and all Purchasers, subject
to appropriate adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions
of the Common Stock that occur after the date of this Agreement multiplied by (ii) 100.
“Person”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
“Pre-Notice”
shall have the meaning ascribed to such term in Section 4.12(b).
“Pro-Rata
Portion” shall have the meaning ascribed to such term in Section 4.12(e).
“Protection
Period” shall mean the period during which any Purchaser holds ten percent (10%) or more of the aggregate number of Securities
issued to the Purchasers hereunder.
“Public
Information Failure” shall have the meaning ascribed to such term in Section 4.2(b).
“Public
Information Failure Payments” shall have the meaning ascribed to such term in Section 4.2(b).
“Purchaser
Party” shall have the meaning ascribed to such term in Section 4.7.
“Registration
Rights Agreement” means the Registration Rights Agreement, dated the date hereof, among the Company and the Purchasers,
in the form of Exhibit C attached hereto.
“Registration
Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement and
covering the resale of the Conversion Shares and Warrant Shares by each Purchaser as provided for in the Registration Rights Agreement.
“Required
Approvals” shall have the meaning ascribed to such term in Section 3.1(e).
“Rule
144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted
from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.
“SEC
Reports” shall mean all reports, schedules, forms, statements and other documents filed by the Company under the Securities
Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof, including
the exhibits thereto and documents incorporated by reference therein.
“Securities”
means the Shares, the Conversion Shares, the Warrants and the Warrant Shares.
“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Securities
Laws” means the securities laws of the United States or any state thereof and the rules and regulations promulgated thereunder.
“Series
H-1 Preferred Stock” means the Series H-1 Convertible Preferred Stock, par value $0.0001, of the Company.
“Share
Purchase Price” shall have the meaning ascribed to such term in Section 2.1.
“Shares”
means the shares of Series H-1 Preferred Stock issued to the Purchasers pursuant to this Agreement.
“Short
Sales” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall
not be deemed to include the location and/or reservation of borrowable shares of Common Stock).
“Stock
Option Plan” means the Stock Option Plan of the Company in effect as the date of this Agreement, the principal terms
of which have been disclosed in the SEC Reports.
“Subscription
Amount” means, as to each Purchaser at the Closing, the aggregate amount of cash consideration to be paid for Shares
and Warrants purchased hereunder at the Closing as specified below such Purchaser’s name on the signature page of this Agreement
and next to the heading “Subscription Amount,” in United States dollars and in immediately available funds.
“Subsequent
Financing” shall have the meaning ascribed to such term in Section 4.12(a).
“Subsequent
Financing Notice” shall have the meaning ascribed to such term in Section 4.12(b).
“Subsidiary”
means any subsidiary of the Company as set forth on Section 3.1(a) of the Disclosure Letter and shall, where applicable
and with regard to future events, also include any direct or indirect subsidiary of the Company formed or acquired after the date
hereof.
“Termination
Date” shall have the meaning ascribed to such term in Section 2.1(a).
“Trading
Day” means a day on which the principal Trading Market is open for trading; provided, that in the event that the Common
Stock is not listed or quoted for trading on a Trading Market on the date in question, then Trading Day shall mean a Business Day.
“Trading
Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on
the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New
York Stock Exchange, the OTC Bulletin Board, the OTCQB or the OTCQX (or any successors to any of the foregoing).
“Transaction
Documents” means this Agreement, the Registration Rights Agreement, the Warrants, all exhibits and schedules thereto
and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.
“Transfer
Agent” means Interwest Transfer Company, Inc., 1981 Murray Holladay Road, Suite 100, Salt Lake City, UT 84117, facsimile:
(801) 277-3147, and any successor transfer agent of the Company.
“Warrant
Purchase Price” shall have the meaning ascribed to such term in Section 2.1.
“Warrants”
means, collectively, the Common Stock purchase warrants delivered to the Purchasers at the Closing in the form of Exhibit A
attached hereto and upon the required issuance thereof, the Additional Warrants.
“Warrant
Shares” means the shares of Common Stock issuable upon exercise of the Warrants, provided that any share of Common Stock
issued upon exercise of the Warrants shall not constitute an issued Warrant Share for purposes of this Agreement after such share
has been irrevocably sold pursuant to an effective registration statement under the Securities Act or pursuant to Rule 144 without
further restrictions or conditions to transfer pursuant to Rule 144.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing.
On one or more Closing Dates, upon the terms and subject to the conditions set forth herein, substantially concurrent with the
execution and delivery of this Agreement by the parties hereto, the Company agrees to sell, and each of the Purchasers, severally
and not jointly, agrees to purchase the Shares for an aggregate purchase price up to a maximum of $1,575,000 (“Share
Purchase Price”), together with $0.1875 for each Warrant issuable on the applicable Closing Date pursuant to this Agreement
(“Warrant Purchase Price”) (in the aggregate, the Share Purchase Price and Warrant Purchase Price is the “Purchase
Price”) (such purchase and sale being the “Closing”). Prior to the Closing, each Purchaser shall deliver
to the Company, inter alia, such Purchaser’s Subscription Amount as set forth on the signature page hereto
executed by such Purchaser by a wire transfer of immediately available funds, and the Company shall, on the Closing Date, deliver
to each Purchaser, inter alia, a certificate representing the number of Shares and Warrants purchased by each such
Purchaser at the Closing as determined pursuant to Section 2.2(a). The Company and each Purchaser shall also deliver the other
items set forth in Section 2.2 deliverable at the Closing. Upon satisfaction of the covenants and conditions set forth in Sections
2.2 and 2.3, the Closings shall occur at the offices of Company Counsel or such other location as the parties shall mutually agree.
There may be more than one (1) Closing. Notwithstanding anything herein to the contrary, each Closing Date shall occur on or before
July 31, 2015 (such outside date, “Termination Date”). If any Closing is not held on or before the Termination
Date, (i) all subscription documents executed by the Company or a Purchaser shall be returned to the Company or such Purchaser,
as applicable, and (ii) each Subscription Amount shall be returned, without interest or deduction to the Purchaser who delivered
such Subscription Amount.
2.2 Deliveries.
(a) On
the applicable Closing Date, the Company shall deliver or cause to be delivered to the Purchasers the following:
(i) this
Agreement and the Registration Rights Agreement duly executed by the Company;
(ii) Intentionally
Omitted;
(iii) a
certificate evidencing a number of Shares of Series H-1 Preferred Stock equal to such Purchaser’s portion of the Share Purchase
Price divided by the Per Share Purchase Price registered in the name of such Purchaser;
(iv) Warrants
registered in the name of such Purchaser to purchase up to a number of shares of Common Stock equal to one hundred and fifty percent
(150%) of such Purchaser’s Conversion Shares (assuming the Shares calculated pursuant to clause (iii) above are fully converted
at the Closing), with an initial exercise price equal to the Per Share Purchase Price, subject to adjustment therein;
(v) The
Company shall have delivered a certificate, executed on behalf of the Company by its Interim Chief Executive Officer or its Chief
Financial Officer, dated as of the Closing Date, certifying to the fulfillment of the conditions specified in Sections 2.3(b);
and
(vi) 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 other Transaction Documents and the issuance of the Securities, certifying the current versions of the Articles of Incorporation
and Bylaws of the Company and certifying as to the signatures and authority of persons signing the Transaction Documents and related
documents on behalf of the Company.
(b) On
or prior to the applicable Closing Date, each Purchaser shall deliver or cause to be delivered to the Company the following:
(i) this
Agreement and the Registration Rights Agreement each duly executed by such Purchaser; and
(ii) such
Purchaser’s Subscription Amount by wire transfer to the account previously specified by the Company.
2.3 Closing
Conditions.
(a) The
obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:
(i) the
accuracy in all material respects (determined without regard to any materiality, Material Adverse Effect or other similar qualifiers
therein) when made and on the Closing Date of the representations and warranties of the Purchasers contained herein (unless as
of a specific date therein in which case they shall be accurate as of such date);
(ii) all
obligations, covenants and agreements of each Purchaser under this Agreement required to be performed at or prior to the Closing
Date shall have been performed in all material respects; and
(iii) the
delivery by each Purchaser of the items set forth in Section 2.2(b) of this Agreement.
(b) The
respective obligations of a Purchaser hereunder in connection with the Closing, unless waived by such Purchaser, are subject to
the following conditions being met:
(i) the
accuracy in all material respects (determined without regard to any materiality, Material Adverse Effect or other similar qualifiers
therein) when made and on the Closing Date of the representations and warranties of the Company contained herein (unless as of
a specific date therein in which case they shall be accurate as of such date);
(ii) all
Required Approvals, obligations, covenants and agreements of the Company under this Agreement required to be performed at or prior
to the Closing Date shall have been performed;
(iii) the
delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;
(iv) there
shall have been no Material Adverse Effect with respect to the Company since the date hereof; and
(v) from
the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or the Company’s
principal Trading Market and, at any time from the date hereof prior to the Closing Date, trading in securities generally as reported
by Bloomberg L.P. shall not have been suspended or limited, or minimum prices shall not have been established on securities whose
trades are reported by such service, or on any Trading Market, nor shall a banking moratorium have been declared either by the
United States or New York State authorities nor shall there have occurred any material outbreak or escalation of hostilities or
other national or international calamity of such magnitude in its effect on, or any material adverse change in, any financial market
which, in each case, in the reasonable judgment of such Purchaser, makes it impracticable or inadvisable to purchase the Securities
at the Closing.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations
and Warranties of the Company. Except as set forth in the Disclosure Letter, which Disclosure Letter shall be deemed a part
hereof, the Company hereby makes the following representations and warranties to each Purchaser as of the Closing Date:
(a) Subsidiaries.
All of the direct and indirect subsidiaries of the Company are set forth on Section 3.1(a) of the Disclosure Letter. The
Company owns, directly or indirectly, a majority of the capital stock or other equity interests of each Subsidiary free and clear
of any Liens, other than Permitted Liens, subject to restrictions under applicable laws, and all of the issued and outstanding
shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar
rights to subscribe for or purchase securities.
(b) Organization
and Qualification. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its incorporation or organization, 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 Subsidiary is in violation or default of any of the provisions of its respective certificate or articles of incorporation,
bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct
business and is 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, could not have or reasonably be expected to result in: (i) a material adverse effect on the legality, validity
or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects
or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect
on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document
(any of (i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.
(c) Authorization;
Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement and each of the other Transaction Documents and otherwise to carry out its obligations hereunder
and thereunder. The execution and delivery of each of this Agreement and the other Transaction Documents by the Company and
the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on
the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders
in connection herewith or therewith other than in connection with the Required Approvals. This Agreement and each other Transaction
Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in
accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other laws of general application affecting enforcement of creditors’ rights
generally, and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable
remedies.
(d) No
Conflicts. The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents
to which it is a party, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby
and thereby do not and will not: (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate
or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default
(or an event that with notice or lapse of time or both would become a default) by the Company or any Subsidiary under, result in
the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of
termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company
or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii)
subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including Securities
Laws), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses
(ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.
(e) Filings,
Consents and Approvals. Except as disclosed on Section 3.1(e) of the Disclosure Letter, the Company is not required
to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court
or other provincial or foreign or domestic federal, state, local or other governmental authority or other Person in connection
with the execution, delivery and performance by the Company of the Transaction Documents, other than: (i) the filings required
pursuant to Section 4.4 of this Agreement, (ii) the filing with the Commission pursuant to the Registration Rights Agreement, (iii)
the notice and/or application(s) to each applicable Trading Market for the issuance and sale of the Securities and the listing
of the Shares and Warrant Shares for trading thereon in the time and manner required thereby, all of which shall have been effectuated
prior to the Closing, and (iv) the filing of a Form D with the Commission (collectively, the “Required Approvals”).
(f) Issuance
of the Securities. The Securities are duly authorized and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens other than restrictions
on transfer provided for in the Transaction Documents and Liens resulting from the activities of any Purchaser. The Company has
reserved from its duly authorized capital stock the maximum stated number of Shares, Conversion Shares and Warrant Shares issuable
pursuant to this Agreement and the Warrants.
(g) Capitalization.
The capitalization of the Company is as set forth in Section 3.1(g) of the Disclosure Letter. The Company has not issued
any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of
employee stock options under the Stock Option Plans, the issuance of shares of Common Stock to employees pursuant to the Stock
Option Plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most
recently filed periodic report under the Exchange Act. No Person has any right of first refusal, preemptive right, right of participation,
or any similar right to participate in the transactions contemplated by the Transaction Documents except as disclosed on Section
3.1(e) of the Disclosure Letter, who each have the right to participate in the Offering. Except as disclosed on Section
3.1(g) of the Disclosure Letter, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments
of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for,
or giving any Person any right to subscribe for or acquire any shares of Common Stock, or material contracts, commitments, understandings
or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common
Stock Equivalents. Except as set forth on Section 3.1(g) of the Disclosure Letter, the issuance and sale of the Securities
will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchasers) and
will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under
any of such securities. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully
paid and nonassessable, have been issued in material compliance with all federal and state securities laws, and none of such outstanding
shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. No further approval
or authorization of any stockholder, the Board of Directors or others is required for the issuance and sale of the Securities.
Except as disclosed on Section 3.1(g) of the Disclosure Letter, there are no stockholders agreements, voting agreements
or other similar agreements with respect to the Company’s capital stock to which the Company is a party or, to the knowledge
of the Company, between or among any of the Company’s stockholders.
(h) Form
8-K; Financial Statements. Except as disclosed on Section 3.1(h) of the Disclosure Letter, the Company has filed all
reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the
Exchange Act, including pursuant to Section 12(g), 13(a) or 15(d) thereof, for the two years preceding the date hereof on a timely
basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any
such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities
Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading. The Form 8-K described in Section 4.4, upon its
filing, will comply in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and
will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The latest
audited financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a
consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial
statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP and
are subject to normal, immaterial, year-end audit adjustments, and fairly present in all material respects the financial position
of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.
(i) Material
Changes; Undisclosed Events, Liabilities or Developments. Except as disclosed on Section 3.1(i) of the Disclosure
Letter, since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed
in a subsequent SEC Report filed not later than five Trading Days prior to the date hereof: (i) there has been no event, occurrence
or development that has had or that could reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade payables, and accrued expenses incurred in the ordinary
course of business consistent with past practice, (B) transaction expenses incurred in connection with the Transaction Documents,
and (C) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP or disclosed in filings
made with the Commission, (iii) the Company has not altered its method of accounting, (iv) the Company has not declared or made
any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase
or redeem any shares of its capital stock and (v) the Company has not issued any equity securities to any officer, director or
Affiliate, except for the issuances set forth on Section 3.1(g) of the Disclosure Letter. The Company does not have pending
before the Commission any request for confidential treatment of information. Except for the issuance of the Securities contemplated
by this Agreement, no event, liability, fact, circumstance, occurrence or development has occurred or exists, or is reasonably
expected to occur or exist, with respect to the Company or its Subsidiaries or their respective businesses, properties, operations,
assets or financial condition, that would be required to be disclosed by the Company under applicable Securities Laws at the time
this representation is made or deemed made that has not been publicly disclosed at least one (1) Trading Day prior to the date
that this representation is made.
(j) Litigation.
Except as set forth in the SEC Reports or disclosed on Section 3.1(j) of the Disclosure Letter, there is no action, suit,
inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting
the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative
agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “Action”) that would,
if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect, nor to the knowledge
of the Company is there any reasonable basis for any such Action that would, if there were an unfavorable decision, have or reasonably
be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor, to the Company’s knowledge,
any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under
Securities Laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending
or contemplated, any investigation by the Commission involving the Company or, to the knowledge of the Company, any current or
former director or officer of the Company, nor any current or former officer, director, control person, principal shareholder,
or creditor with respect to the relationship of any of the foregoing to the Company, nor to the knowledge of the Company is there
any reasonable basis for any of the foregoing. The Commission has not issued any stop order or other order suspending the effectiveness
of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.
(k) Labor
Relations. No labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees
of the Company, which could reasonably be expected to result in a Material Adverse Effect. None of the Company’s or its Subsidiaries’
employees is a member of a union that relates to such employee’s relationship with the Company or such Subsidiary, and neither
the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe
that their relationships with their employees are good. To the knowledge of the Company, no executive officer of the Company or
any Subsidiary, is, or is now expected by the Company to be, in violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, which could reasonably be expected to result in a Material Adverse Effect and the continued
employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect
to any of the foregoing matters. The Company and its Subsidiaries are in compliance with all applicable U.S. federal, state, local
and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages
and hours, except where the failure to be in compliance could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
(l) Compliance.
Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture,
loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any
court, arbitrator or other governmental authority or (iii) is or has been in violation of any statute, rule, ordinance or regulation
of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as
could not have or reasonably be expected to result in a Material Adverse Effect.
(m) Regulatory
Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as actually conducted
and as described in the SEC Reports, except where the failure to possess such permits could not reasonably be expected to result
in a Material Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any
notice of proceedings relating to the revocation or modification of any Material Permit.
(n) Title
to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by
them and good and marketable title in all personal property owned by them that is material to the business of the Company and the
Subsidiaries, in each case free and clear of all Liens, except for Permitted Liens. Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company
and the Subsidiaries are in compliance, except where the non-compliance would not reasonably be expected to result in a Material
Adverse Effect.
(o) Intellectual
Property.
(i) The
term “Intellectual Property Rights” includes:
| 1. | the name of the Company, all fictional business names, trading names, registered and unregistered trademarks, service marks,
and applications (collectively, “Marks''); |
| 2. | all patents and patent applications (collectively, “Patents''); |
| 3. | all copyrights in both published works and unpublished works (collectively, “Copyrights”); |
| 4. | all rights in mask works (collectively, “Rights in Mask Works''); and |
| 5. | all know-how, trade secrets, confidential information, customer lists, software, technical information, data, process technology,
plans, drawings, and blue prints (collectively, “Trade Secrets''); owned, used, or licensed by the Company as licensee
or licensor. |
(ii) Agreements.
The SEC Reports contain a complete and accurate list of all material contracts relating to the Company’s Intellectual Property
Rights to which the Company is a party or by which the Company is bound, except for any license implied by the sale of a product
and perpetual, paid-up licenses for commonly available software programs with a value of less than $10,000 under which the Company
is the licensee. There are no outstanding and, to Company’s knowledge, no threatened disputes or disagreements with respect
to any such agreement.
(iii) Know-How
Necessary for the Business. To the Company’s knowledge: the Company’s Intellectual Property Rights are all those
necessary for the operation of the Company’s businesses as it is currently conducted or as represented, in writing, to the
Purchasers to be conducted. To the Company’s knowledge: the Company is the owner of all right, title, and interest in and
to each of the Intellectual Property Rights, free and clear of all liens, security interests, charges, encumbrances, equities,
and other adverse claims, and has the right to use all of the Intellectual Property Rights, subject in each case to Permitted Liens.
To the Company’s knowledge, no employee of the Company has entered into any contract that restricts or limits in any way
the scope or type of work in which the employee may be engaged or requires the employee to transfer, assign, or disclose information
concerning his work to anyone other than of the Company.
(iv) Know-How
Necessary for the Business. To the extent the Company owns any Patents: (A) the SEC Reports contain a complete and accurate
list of all of the Company’s Patents; (B) the Company is the owner of all right, title and interest in and to each of
the Patents, free and clear of all Liens and other adverse claims other than Permitted Liens; (C) all of the issued Patents are
currently in compliance with formal legal requirements (including payment of filing, examination, and maintenance fees and proofs
of working or use), are valid and enforceable, and, except as set forth on Section 3.1(o) of the Disclosure Letter, are
not subject to any maintenance fees or taxes or actions falling due within ninety days after the Closing Date; (D) no Patent has
been or is now involved in any interference, reissue, reexamination, or opposition proceeding; and (E) to the Company’s knowledge:
(1) there is no potentially interfering patent or patent application of any third party, and (2) no Patent is infringed or has
been challenged or threatened in any way. To the Company’s knowledge, none of the products manufactured and sold, nor any
process or know-how used, by the Company infringes or is alleged to infringe any patent or other proprietary right of any other
Person.
(v) Trademarks.
To the extent the Company owns any Marks: (A) the SEC Reports contain a complete and accurate list and summary description
of all Marks; (B) the Company is the owner of all right, title, and interest in and to each of the Marks, free and clear of
all Liens and other adverse claims other than Permitted Liens; (C) all Marks that have been registered with the United States
Patent and Trademark Office are currently in compliance with all formal legal requirements (including the timely post-registration
filing of affidavits of use and incontestability and renewal applications), are valid and enforceable, and are not subject to any
maintenance fees or taxes or actions falling due within ninety days after the Closing Date; (D) except as set forth in Section
3.1(o) of the Disclosure Letter, no Mark has been or is now involved in any opposition, invalidation, or cancellation and,
to the Company’s knowledge, no such action is threatened with respect to any of the Marks and (E) to the Company’s
knowledge: (1) there is no potentially interfering trademark or trademark application of any third party, and (2) no Mark is infringed
or has been challenged or threatened in any way. To the Company’s knowledge, none of the Marks used by the Company infringes
or is alleged to infringe any trade name, trademark, or service mark of any third party.
(vi) Copyrights.
To the extent the Company owns any Copyrights: (A) the SEC Reports contain a complete and accurate list of all Copyrights;
(B) the Company is the owner of all right, title, and interest in and to each of the Copyrights, free and clear of all Liens
and other adverse claims other than Permitted Liens; (C) except as set forth on Section 3.1(o) of the Disclosure Letter,
all the Copyrights have been registered and are currently in compliance with formal requirements, are valid and enforceable, and
are not subject to any maintenance fees or taxes or actions falling due within ninety days after the date of the Closing; (D) no
Copyright is infringed or, to the Company’s knowledge, has been challenged or threatened in any way; (E) to the Company’s
knowledge, none of the subject matter of any of the Copyrights infringes or is alleged to infringe any copyright of any third party
or is a derivative work based on the work of a third party; and (F) all works encompassed
by the Copyrights have been marked with the proper copyright notice.
(vii) Trade
Secrets. With respect to each Trade Secret of the Company, the documentation relating to such Trade Secret is current, accurate,
and sufficient in detail and content to identify and explain it and to allow its full and proper use without reliance on the knowledge
or memory of any individual. The Company has taken all reasonable precautions to protect the secrecy, confidentiality, and value
of its Trade Secrets. The Company has good title and an absolute (but not necessarily exclusive) right to use the Company’s
Trade Secrets subject to Permitted Liens. The Company’s Trade Secrets are not part of the public knowledge or literature,
and, to the Company’s knowledge, have not been used, divulged, or appropriated either for the benefit of any Person (other
than the Company) or to the detriment of the Company. Except as set forth on Section 3.1(o) of the Disclosure Letter, no
Trade Secret of the Company is subject to any adverse claim or has been challenged or threatened in any way.
(p) Insurance.
The Company and the Subsidiaries are currently insured by insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged.
A description of the principal terms of the Company’s directors and officers insurance policy and the name and contact information
for the issuer of such policy are set forth on Section 3.1(p) of the Disclosure Letter. Neither the Company nor any Subsidiary
believes that it will not be able to acquire insurance coverage at reasonable cost as may be necessary to continue its business.
(q) Transactions
With Affiliates and Employees. Except as set forth in the SEC Reports, none of the officers or directors of the Company
or any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party
to any transaction with the Company or any Subsidiary (other than 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, providing for the borrowing of money from or lending of money to or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director, trustee, stockholder, member or partner, in each case
in excess of $100,000 other than for: (i) payment of salary or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) other employee benefits, including stock option agreements under any stock option plan
of the Company except as disclosed on Section 3.1(g) of the Disclosure Letter.
(r) Money
Laundering. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance
with applicable financial record-keeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970,
as amended, applicable money laundering statutes and applicable rules and regulations thereunder (collectively, the “Money
Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body
or any arbitrator involving the Company or any Subsidiary with respect to the Money Laundering Laws is pending or, to the knowledge
of the Company or any Subsidiary, threatened, nor is there, to the knowledge of the Company or any Subsidiary, any reasonable basis
for any of the foregoing.
(s) Certain
Fees. No brokerage, finder’s fees, commissions or due diligence fees are or will be payable by the Company or any
Subsidiary to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with
respect to the transactions contemplated by the Transaction Documents. The Purchasers shall have no obligation with respect to
any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section 3.1(s)
that may be due in connection with the transactions contemplated by the Transaction Documents.
(t) Private
Placement. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2, registration
under the Securities Act is not required for the offer and sale of the Securities by the Company to the Purchasers as contemplated
hereby. The issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Trading Market.
(u) Investment
Company. The Company is not, and is not an Affiliate of, and immediately after receipt of payment for the Securities, will
not be or be an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as
amended. The Company shall conduct its business in a manner so that it will not become an “investment company”
subject to registration under the Investment Company Act of 1940, as amended.
(v) Registration
Rights. Except as set forth on Section 3.1(v) of the Disclosure Letter, and other than each of the Purchasers,
no Person has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company
or any Subsidiary.
(w) Listing
and Maintenance Requirements. The Common Stock is listed on the Nasdaq Capital Market under the symbol WPCS. Except as
set forth on Section 3.1(w) of the Disclosure Letter or disclosed in the SEC Reports, the Company has not, in the twenty-four
(24) months preceding the date hereof, received notice from any Trading Market on which the Common Stock is or has been listed
or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Trading Market.
(x) Application
of Takeover Protections. The Company’s Board of Directors has approved the Transaction Documents under Section
203(a)(1) of the General Corporation Law of the State of Delaware (the “DGCL”) in order to render the restrictions
on “business combinations” (as defined in Section 203 of the DGCL) inapplicable to the execution, delivery or performance
of the Transaction Documents, including without limitation as a result of the Company’s issuance of the Securities and the
Purchasers’ ownership of the Securities.
(y) Disclosure.
Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company
confirms that neither it nor any other Person acting on its behalf has provided any of the Purchasers or their agents or counsel
with any information that it believes constitutes or might constitute material, non-public information. The Company
understands and confirms that the Purchasers will rely on the foregoing representation in effecting transactions in securities
of the Company. All of the disclosure furnished by or on behalf of the Company to the Purchasers regarding the Company and
its Subsidiaries, their respective businesses and the transactions contemplated hereby, including the Disclosure Letter, taken
as a whole is true and correct and does 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 light of the circumstances under which they were made, not misleading.
For the avoidance of doubt, information disclosed in one section of the Disclosure Letter shall not be deemed disclosed in any
other section of the Disclosure Letter unless there is an explicit cross reference to such other section. The Company acknowledges
and agrees that no Purchaser makes or has made any representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 3.2 hereof.
(z) No
Integrated Offering. Assuming the accuracy of the Purchasers’ representations and warranties set forth in Section 3.2,
neither the Company, nor, to the knowledge of the Company, any of its Affiliates, nor any Person acting on its or, to the knowledge
of the Company, 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 cause this offering of the Securities by the Company to be integrated with prior offerings
by the Company for purposes of (i) the Securities Act which would require the registration of any such securities under the Securities
Act, or (ii) any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company
are listed or designated.
(aa) Solvency.
Based on the consolidated financial condition of the Company as of the Closing Date, after giving effect to the receipt by the
Company of the aggregate Subscription Amount from all the Purchasers: (i) the fair saleable value of the assets of the Company
and its Subsidiaries taken as a whole exceeds the amount that will be required to be paid on or in respect of the existing debts
and other liabilities (including known contingent liabilities) of the Company and its Subsidiaries as they mature, (ii) the assets
of the Company and its Subsidiaries do not constitute unreasonably small capital to carry on its business as now conducted and
as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business
conducted by the Company and its Subsidiaries consolidated and projected capital requirements and capital availability thereof,
and (iii) the current cash flow of the Company and its Subsidiaries together with the proceeds the Company would receive, were
they to liquidate all of their assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all
amounts on or in respect of their liabilities when such amounts are required to be paid. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on
or in respect of its debt). The Company has no knowledge of any facts or circumstances which lead it to believe that it will
file for reorganization or liquidation under the bankruptcy or reorganization laws of any jurisdiction within one year from the
Closing Date. The SEC Reports set forth all Liens and outstanding secured and unsecured Indebtedness of the Company or any Subsidiary,
or for which the Company or any Subsidiary has commitments. For the purposes of this Agreement, “Indebtedness”
means (x) any liabilities for borrowed money or amounts owed in excess of $400,000 (other than trade accounts payable incurred
in the ordinary course of business), (y) all guaranties, endorsements and other contingent obligations in respect of indebtedness
of others, whether or not the same are or should be reflected in the Company’s consolidated balance sheet (or the notes thereto),
except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course
of business; and (z) the present value of any lease payments in excess of $400,000 due under leases required to be capitalized
in accordance with GAAP. The Company is not in default with respect to any Indebtedness.
(bb) Tax
Status. Except as disclosed on Section 3.1(bb) of the Disclosure Letter and except for matters that would not,
individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect, the Company and its Subsidiaries
each (i) has made or filed all required United States federal, state and local income and all foreign income and franchise tax
returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations and
(iii) has set aside on its books provision reasonably adequate for the payment of all material taxes for periods subsequent to
the periods to which such returns, reports or declarations apply. Except as disclosed on Section 3.1(bb) of the Disclosure
Letter, there are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Company or of any Subsidiary know of no reasonable basis for any such claim.
(cc) No
General Solicitation. Neither the Company nor, to the knowledge of the Company, any person acting on behalf of the Company
has offered or sold any of the Securities by any form of general solicitation or general advertising. The Company has offered
the Securities for sale only to the Purchasers and certain other “accredited investors” within the meaning of Rule
501 under the Securities Act.
(dd) Foreign
Corrupt Practices. Neither the Company nor any Subsidiary, nor to the knowledge of the Company or any Subsidiary, any
agent or other person acting on behalf of the Company or any Subsidiary, has: (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any
unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns
from corporate funds, (iii) failed to disclose fully any contribution made by the Company or any Subsidiary (or made by any person
acting on its behalf of which the Company is aware) which is in violation of law or (iv) violated in any material respect any provision
of FCPA.
(ee) Accountants.
The Company’s accounting firm is set forth on Section 3.1(ee) of the Disclosure Letter of the Disclosure Letter. To
the knowledge and belief of the Company, such accounting firm is registered with the Public Company Accounting Oversight Board,
and shall express its opinion with respect to the financial statements to be included in the Company’s Annual Report for
the fiscal year ending April 30, 2015.
(ff) No
Disagreements with Accountants and Lawyers. Except as set forth on Section 3.1(ff) of the Disclosure Letter,
there are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company
and the accountants and lawyers formerly or presently employed by the Company and the Company is current with respect to any fees
owed to its accountants and lawyers which could affect the Company’s ability to perform any of its obligations under any
of the Transaction Documents.
(gg) Acknowledgment
Regarding Purchasers’ Purchase of Securities. The Company acknowledges and agrees that each of the Purchasers is
acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions
contemplated thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice
given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the
transactions contemplated thereby is merely incidental to the Purchasers’ purchase of the Securities. The Company further
represents to each Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents
has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.
(hh) Acknowledgment
Regarding Purchaser’s Trading Activity. Anything in this Agreement or elsewhere herein to the contrary notwithstanding
(except for Section 4.20 hereof), it is understood and acknowledged by the Company that: (i) none of the Purchasers has been asked
by the Company to agree, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short, securities of the
Company, or “derivative” securities based on securities issued by the Company or to hold the Securities for any specified
term, (ii) past or future open market or other transactions by any Purchaser, specifically including, without limitation, Short
Sales or “derivative” transactions, before or after the closing of this or future private placement transactions, may
negatively impact the market price of the Company’s publicly-traded securities, (iii) any Purchaser, and counter-parties
in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, may presently have a “short”
position in the Common Stock and (iv) each Purchaser shall not be deemed to have any affiliation with or control over any arm’s
length counter-party in any “derivative” transaction. The Company further understands and acknowledges that (y)
one or more Purchasers may engage in hedging activities in accordance with all applicable laws at various times during the period
that the Securities are outstanding, including, without limitation, during the periods that the value of the Warrant Shares deliverable
with respect to Securities are being determined, and (z) such hedging activities (if any) could reduce the value of the existing
stockholders' equity interests in the Company at and after the time that the hedging activities are being conducted. The
Company acknowledges that such aforementioned hedging activities do not constitute a breach of any of the Transaction Documents.
(ii) Regulation
M Compliance. The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly,
any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate
the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of,
any of the Securities, or (iii) paid or agreed to pay to any Person any compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii) and (iii), compensation paid to the Company’s placement
agent in connection with the placement of the Securities.
(jj) Stock
Option Plans. Except as set forth on Section 3.1(jj) of the Disclosure Letter or set forth in the SEC Reports, as of
the date hereof, no stock options have been granted, nor any commitments made to grant stock options, under the Stock Option Plan,
and neither the Company nor any Subsidiary has ever had an option plan, other than the Stock Option Plan and other stock option
plans which were described in the SEC Reports and are no longer in effect. The Company has not knowingly granted, and there is
no and has been no Company policy or practice to knowingly grant, stock options prior to, or otherwise knowingly coordinate the
grant of stock options with, the release or other public announcement of material information regarding the Company or its Subsidiaries
or their financial results or prospects.
(kk) Office
of Foreign Assets Control. Neither the Company nor any Subsidiary nor, to the Company's knowledge, any director,
officer, agent, employee or affiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered
by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”).
(ll) Reporting
Company/Shell Company. The Company is a publicly-held company subject to reporting obligations pursuant to Section 12(g) of
the Exchange Act. Pursuant to the provisions of the Exchange Act, except as disclosed on Section 3.1(ll) of the Disclosure
Letter, the Company has timely filed all reports and other materials required to be filed by the Company thereunder with the SEC
during the preceding twelve months. As of the Closing Date, the Company is not a “shell company” as those terms are
employed in Rule 144 under the Securities Act.
(mm) Sarbanes-Oxley;
Internal Accounting Controls. The Company and the Subsidiaries are in material compliance with any and all applicable requirements
of the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and all applicable rules and regulations promulgated
by the Commission thereunder that are effective as of the date hereof and as of the Closing Date. 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 and the Subsidiaries have established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the Company and the Subsidiaries and designed such disclosure controls and procedures to ensure that information
required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the Commission’s rules and forms. The Company’s certifying officers
have evaluated the effectiveness of the disclosure controls and procedures of the Company and the Subsidiaries as of the end of
the period covered by the most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”).
The Company presented in its most recently filed periodic report under the Exchange 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 changes in the internal control over financial reporting (as such term is defined in the Exchange
Act) of the Company and its Subsidiaries that have materially affected, or is reasonably likely to materially affect, the internal
control over financial reporting of the Company and its Subsidiaries.
(nn) No
Disqualification Events. With respect to the Securities to be offered and sold hereunder in reliance on Rule 506 under the
Securities Act, none of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer
of the Company participating in the offering hereunder, any beneficial owner of 20% or more of the Company’s outstanding
voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under
the Securities Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person”
and, together, “Issuer Covered Persons”) is subject to any of the “Bad Actor” disqualifications
described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”), except for a
Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any
Issuer Covered Person is subject to a Disqualification Event. The Company has complied, to the extent applicable, with its disclosure
obligations under Rule 506(e), and will furnish to the Purchasers a copy of any disclosures provided thereunder. A form of Rule
506 Bad Actor Disqualification Questionnaire is attached hereto as Exhibit F.
3.2 Representations
and Warranties of the Purchasers. Each Purchaser, for itself and for no other Purchaser, hereby represents and warrants
as of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein):
(a) Organization;
Authority. Such Purchaser is either an individual or an entity duly incorporated or formed, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited
liability company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents
and performance by such Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all
necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of such Purchaser. Each
Transaction Document to which it is a party has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance
with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance
with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification
and contribution provisions may be limited by applicable law. If such Purchaser is an entity, the address of its principal place
of business is as set forth on the signature page hereto, and if such Purchaser is an individual, the address of its principal
residence is as set forth on the signature page hereto.
(b) Understandings
or Arrangements. Such Purchaser understands that the Securities are “restricted securities” and have not been registered
under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account
and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act
or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities
Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to
distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities
law (this representation and warranty not limiting such Purchaser’s right to sell the Securities pursuant to a registration
statement or otherwise in compliance with applicable federal and state securities laws). Such Purchaser is acquiring the Securities
hereunder in the ordinary course of its business.
(c) Purchaser
Status. At the time such Purchaser was offered the Securities, it was, and as of the date hereof it is, and on each date
on which it exercises any Warrants it will be either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2),
(a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a)
under the Securities Act. Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act.
Such Purchaser has the authority and is duly and legally qualified to purchase and own the Securities. Such Purchaser is able to
bear the risk of such investment for an indefinite period and to afford a complete loss thereof. Such Purchaser has provided the
information in the Accredited Investor Questionnaire attached hereto as Exhibit E (the “Investor Questionnaire”).
The information set forth on the signature pages hereto and the Investor Questionnaire regarding such Purchaser is true and complete
in all respects. Except as disclosed in the Investor Questionnaire, such Purchaser has had no position, office or other material
relationship within the past three years with the Company or Persons (as defined below) known to such Purchaser to be affiliates
of the Company, and is not a member of the Financial Industry Regulatory Authority or an “associated person” (as such
term is defined under the FINRA Membership and Registration Rules Section 1011).
(d) Experience
of Such Purchaser. Such Purchaser, either alone or together with its representatives, has such knowledge, sophistication
and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such investment. Such Purchaser is able to bear the economic risk
of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.
(e) Information
on Company. Such Purchaser has been furnished with or has had access to the EDGAR Website of the Commission to the Company’s
filings made with the Commission during the period from the date that is two years preceding the date hereof through the tenth
business day preceding the Closing Date in which such Purchaser purchases Securities hereunder, including but not limited to the
Risk Factor section of the Company’s Annual Report on Form 10-K filed with the Commission for the fiscal year ended April
30, 2014 (hereinafter referred to collectively as the “SEC Reports”). Purchasers are not deemed to
have any knowledge of any information not included in the Reports unless such information is delivered in the manner described
in the next sentence. In addition, such Purchaser may have received in writing from the Company such other information
concerning its operations, financial condition and other matters as such Purchaser has requested, identified thereon as OTHER WRITTEN
INFORMATION (such other information is collectively, the “Other Written Information”), and considered all factors
such Purchaser deems material in deciding on the advisability of investing in the Securities. Such Purchaser was afforded
(i) the opportunity to ask such questions as such Purchaser deemed necessary of, and to receive answers from, representatives of
the Company concerning the merits and risks of acquiring the Securities; (ii) the right of access to information about the Company
and its financial condition, results of operations, business, properties, management and prospects sufficient to enable such Purchaser
to evaluate the Securities; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire
without unreasonable effort or expense that is necessary to make an informed investment decision with respect to acquiring the
Securities.
(f) Certain
Transactions and Confidentiality. Such Purchaser understands and agrees that the Securities have not been registered
under the Securities Act or any applicable state securities laws, by reason of their issuance in a transaction that does not require
registration under the Securities Act, and that such Securities must be held indefinitely unless a subsequent disposition is registered
under the Securities Act or any applicable state securities laws or is exempt from such registration. Such Purchaser understands
and agrees that the Securities are being offered and sold to such Purchaser in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and regulations and that the Company is relying in part upon the
truth and accuracy of, and such Purchaser’s compliance with, the representations, warranties, agreements, acknowledgments
and understandings of such Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility
of such Purchaser to acquire the Securities.
(g) Communication
of Offer. Such Purchaser is not purchasing the Securities as a result of any “general solicitation” or “general
advertising,” as such terms are defined in Regulation D, which includes, but is not limited to, any advertisement, article,
notice or other communication regarding the Securities published in any newspaper, magazine or similar media or on the internet
or broadcast over television, radio or the internet or presented at any seminar or any other general solicitation or general advertisement.
(h) No
Governmental Review. Such Purchaser understands that no United States federal or state agency or any other governmental or
state agency has passed on or made recommendations or endorsement of the Securities or the suitability of the investment in the
Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.
(i) No
Conflicts. The execution, delivery and performance of this Agreement and performance under the other Transaction Documents
and the consummation by such Purchaser of the transactions contemplated hereby and thereby or relating hereto or thereto do not
and will not (i) result in a violation of such Purchaser’s charter documents, bylaws or other organizational documents, if
applicable, (ii) conflict with nor constitute a default (or an event which with notice or lapse of time or both would become a
default) under any agreement to which such Purchaser is a party, nor (iii) result in a violation of any law, rule, or regulation,
or any order, judgment or decree of any court or governmental agency applicable to such Purchaser or its properties (except for
such conflicts, defaults and violations as would not, individually or in the aggregate, have a material adverse effect on such
Purchaser). Such Purchaser is not required to obtain any consent, authorization or order of, or make any filing or registration
with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement
or perform under the other Transaction Documents nor to purchase the Securities in accordance with the terms hereof, provided that
for purposes of the representation made in this sentence, such Purchaser is assuming and relying upon the accuracy of the relevant
representations and agreements of the Company herein.
(j) Certain
Transactions and Confidentiality. Other than consummating the transactions contemplated hereunder, such Purchaser has not directly
or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Purchaser, executed any purchases
or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that such Purchaser
first received a written term sheet of the Offering from the Company setting forth the material terms of the transactions contemplated
hereunder and ending immediately prior to the execution hereof. Notwithstanding the foregoing, in the case of a Purchaser that
is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of such Purchaser’s assets
and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions
of such Purchaser’s assets, the representation set forth above shall only apply with respect to the portion of assets managed
by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement. Other than to
other Persons party to this Agreement, such Purchaser has maintained the confidentiality of all disclosures made to it in connection
with this transaction (including the existence and terms of this transaction). Notwithstanding the foregoing, for avoidance of
doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to the identification
of the availability of, or securing of, available shares to borrow in order to effect Short Sales or similar transactions after
the Closing Date.
(k) Pre-Existing
Relationships. The Purchaser represents and warrants that: (i) the Purchaser has a prior substantial pre-existing relationship
with the Company, the Purchaser is not investing in the Offering in connection with or as a result of any registration statement
on Form S-1, filed with the SEC by the Company and (ii) no Securities were offered or sold to it by means of any form
of general solicitation or general advertising, and in connection therewith, the Purchaser did not (A) receive or review any advertisement,
article, notice or other communication published in a newspaper or magazine or similar media or broadcast over television or radio,
whether closed circuit, or generally available; or (B) attend any seminar meeting or industry investor conference whose attendees
were invited by any general solicitation or general advertising; or (C) observe any website or filing of the Company with the SEC
in which any offering of securities by the Company was described and as a result learned of any offering of securities by the Company.
(l) Non-Affiliate
Status. The Purchaser represents and warrants that: (i) it is not an “affiliate” of the Company as such term is
defined in Rule 405 promulgated under the Securities Act or Rule 12b-2 promulgated under the Exchange Act; (ii) during the
last six months the Purchaser has not engaged in any transactions in violation of Section 16 of the Exchange Act; and (iii) the
consummation of the transactions contemplated hereby will not result in any violation of Section 16 of the Exchange Act.
(m) Survival.
The foregoing representations and warranties shall survive the Closing Date.
The Company acknowledges and agrees that
the representations contained in Section 3.2 shall not modify, amend or affect such Purchaser’s right to rely on the Company’s
representations and warranties contained in this Agreement or any representations and warranties contained in any other Transaction
Document or any other document or instrument executed and/or delivered in connection with this Agreement or the consummation of
the transaction contemplated hereby.
ARTICLE
IV.
OTHER
AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) The
Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer
of Securities other than pursuant to an effective registration statement or Rule 144, to the Company or to an Affiliate of a Purchaser
or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to
the Company an opinion of counsel selected by the transferor and reasonably acceptable to the Company, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of
such transferred Securities under the Securities Act. As a condition of such transfer, any such transferee shall agree in
writing to be bound by the terms of this Agreement, and the Registration Rights Agreement, and shall have the rights and obligations
of a Purchaser under this Agreement and the other Transaction Documents.
(b) The
Purchasers agree to the imprinting, so long as is required by this Section 4.1, of a legend on any of the Securities in the following
form:
[NEITHER]
THIS SECURITY [NOR THE SECURITIES [FOR] WHICH THIS SECURITY IS EXERCISABLE] HAS [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”) AND APPLICABLE STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. TO THE EXTENT PERMITTED BY APPLICABLE SECURITIES LAWS, THIS SECURITY [AND THE SECURITIES ISSUABLE
UPON EXERCISE OF THIS SECURITY] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR
OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES
ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.
The Company
acknowledges and agrees that a Purchaser may from time to time pledge pursuant to a bona fide margin agreement with a registered
broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an “accredited
investor” as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement
and the Registration Rights Agreement and, if required under the terms of such arrangement, such Purchaser may transfer pledge
or secure Securities to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of the Company
and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further,
no notice shall be required of such pledge. At such Purchaser’s expense, the Company will execute and deliver such reasonable
documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the
Securities, including, if the Securities are subject to registration pursuant to the Registration Rights Agreement, the preparation
and filing of any required prospectus supplement under Rule 424(b)(3) under the Securities Act or other applicable provision of
the Securities Act to appropriately amend the list of selling stockholders thereunder.
(c) Certificates
evidencing the Conversion Shares and Warrant Shares shall not contain any legend (including the legend set forth in Section 4.1(b)
hereof): (i) while a registration statement (including the Registration Statement) covering the resale of such security is effective
under the Securities Act, (ii) following any sale of such Conversion Shares and Warrant Shares pursuant to Rule 144, or (iii) if
such legend is not required under applicable requirements of the Securities Act (including judicial interpretations and pronouncements
issued by the staff of the Commission). The Company shall cause its counsel to issue a legal opinion to the Transfer Agent promptly
after the Effective Date if required by the Transfer Agent to effect the removal of the legend hereunder. If all or any portion
of a Warrant is exercised, or Shares are converted, at a time when there is an effective registration statement to cover the resale
of the Warrant Shares or Conversion Shares, as applicable, or if such Warrant Shares or Conversion Shares, as applicable, may be
sold under Rule 144 or if such legend is not otherwise required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the staff of the Commission) then such Warrant Shares or Conversion Shares,
as applicable, shall be issued free of all legends. The Company agrees that following such time as such legend is no longer required
under this Section 4.1(c), it will, no later than five Trading Days following the delivery by a Purchaser to the Company or the
Transfer Agent of a certificate representing the Conversion Shares or Warrant Shares, as applicable, issued with a restrictive
legend (such fifth Trading Day, the “Legend Removal Date”), deliver or cause to be delivered to such Purchaser
a certificate representing such shares that is free from all restrictive and other legends (however, the Corporation shall use
reasonable best efforts to deliver such shares within three (3) Trading Days). The Company may not make any notation on its records
or give instructions to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section 4. In lieu of delivering
physical certificates representing the unlegended shares, upon request of a Purchaser, so long as the certificates therefor do
not bear a legend and the Purchaser is not obligated to return such certificate for the placement of a legend thereon, the Company
shall cause its transfer agent to electronically transmit the unlegended shares by crediting the account of Purchaser’s prime
broker with the Depository Trust Company through its Deposit Withdrawal At Custodian system, provided that the Company’s
Common Stock is DTC eligible and the Company’s transfer agent participates in the Deposit Withdrawal at Custodian system.
Such delivery must be made on or before the Legend Removal Date.
(d) Intentionally
Omitted.
(e) DWAC.
In lieu of delivering physical certificates representing the unlegended shares, upon request of a Purchaser, so long as the certificates
therefor do not bear a legend and the Purchaser is not obligated to return such certificate for the placement of a legend thereon,
the Company shall cause its transfer agent to electronically transmit the unlegended shares by crediting the account of Purchaser’s
prime broker with the Depository Trust Company through its Deposit Withdrawal At Custodian system, provided that the Company’s
Common Stock is DTC eligible and the Company’s transfer agent participates in the Deposit Withdrawal at Custodian system.
Such delivery must be made on or before the Legend Removal Date.
(f) Injunction.
In the event a Purchaser shall request delivery of Conversion Shares or Warrant Shares as described in this Section 4.1 and the
Company is required to deliver such Securities, the Company may not refuse to deliver such Securities based on any claim that such
Purchaser or anyone associated or affiliated with such Purchaser has not complied with Purchaser’s obligations under the
Transaction Documents, or for any other reason, unless, an injunction or temporary restraining order from a court, on notice, restraining
and or enjoining delivery of such unlegended Securities shall have been sought and obtained by the Company.
(g) Buy-In.
In addition to any other rights available to Purchaser, if the Company fails to deliver to a Purchaser Shares as required pursuant
to this Agreement and after the Legend Removal Date, the Purchaser, or a broker on the Purchaser’s behalf, purchases (in
an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by such Purchaser of the shares
of Common Stock which the Purchaser was entitled to receive in unlegended form from the Company (a “Buy-In”),
then the Company shall promptly pay in cash to the Purchaser (in addition to any remedies available to or elected by the Purchaser)
the amount, if any, by which (A) the Purchaser’s total purchase price (including brokerage commissions, if any) for the shares
of Common Stock so purchased exceeds (B) the aggregate purchase price of the shares of Common Stock delivered to the Company for
reissuance as unlegended Shares, together with interest thereon at a rate of 12% per annum accruing until such amount and any accrued
interest thereon is paid in full (which amount shall be paid as liquidated damages and not as a penalty). For example, if a Purchaser
purchases shares of Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase
price of shares of Common Stock delivered to the Company for reissuance as unlegended shares, the Company shall be required to
pay the Purchaser $1,000, plus interest, if any. The Purchaser shall provide the Company written notice indicating the amounts
payable to the Purchaser in respect of the Buy-In.
4.2 Furnishing
of Information; Public Information.
(a) Until
the earliest of the time that (i) no Purchaser owns any Securities, (ii) the Warrants have expired, or (iii) five (5) years after
the Closing Date, the Company covenants to maintain the registration of the Common Stock under Section 12(b) or 12(g) of the Exchange
Act and to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required
to be filed by the Company after the date hereof pursuant to the Exchange Act even if the Company is not then subject to the reporting
requirements of the Exchange Act.
(b) At
any time commencing on the Closing Date and ending at such time that all of the Securities may be sold without the requirement
for the Company to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, if
the Company shall fail for any reason to satisfy the current public information requirement under Rule 144(c) (a “Public
Information Failure”) then, in addition to such Purchaser’s other available remedies, the Company shall pay to
a Purchaser, in cash, as partial liquidated damages and not as a penalty, by reason of any such delay in or reduction of its ability
to sell the Securities, an amount in cash equal to 0.5% of the aggregate Subscription Amount and purchase price of Warrant Shares
(based on the exercise price paid for such Warrant Shares) of such Purchaser’s Securities held by such Purchaser on the day
of a Public Information Failure and on every thirtieth (30th) day (pro-rated for periods totaling less than thirty days) thereafter
until the earlier of (a) the date such Public Information Failure is cured and (b) such time that such public information is no
longer required for the Purchasers to transfer the Underlying Shares pursuant to Rule 144. The payments to which a Purchaser shall
be entitled pursuant to this Section 4.3(b) are referred to herein as “Public Information Failure Payments.”
Public Information Failure Payments shall be paid on the earlier of (i) the last day of the calendar month during which such Public
Information Failure Payments are incurred and (ii) the third (3rd) Business Day after the event or failure giving rise to the Public
Information Failure Payments is cured. In the event the Company fails to make Public Information Failure Payments in a timely manner,
such Public Information Failure Payments shall bear interest at the rate of 1% per month (prorated for partial months) until paid
in full. Nothing herein shall limit such Purchaser’s right to pursue actual damages for the Public Information Failure, and
such Purchaser shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief.
4.3 Integration.
The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined
in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities by the Company in a manner
that would require the registration under the Securities Act of the sale of the Securities or that would be integrated with the
offer or sale of the Securities for purposes of the rules and regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent
transaction.
4.4 Securities
Laws Disclosure; Publicity. The Company shall, by 9:00 a.m. (New York City time) on the first (1st) Trading Day immediately
following the Closing Date, issue a press release disclosing the material terms of the transactions contemplated hereby, and shall
file a Current Report on Form 8-K including the Transaction Documents as exhibits thereto within the time period required by the
Exchange Act. From and after the issuance of such press release and Form 8-K, the Company represents to the Purchasers that it
shall have publicly disclosed all material, non-public information delivered to any of the Purchasers 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 the Transaction Documents. The Company and each Purchaser shall consult with each other in issuing any other press releases
with respect to the transactions contemplated hereby, and neither the Company nor any Purchaser shall issue any such press release
nor otherwise make any such public statement without the prior consent of the Company, with respect to any press release of any
Purchaser, or without the prior consent of each Purchaser, with respect to any press release of the Company, which consent shall
not unreasonably be withheld or delayed, except if such disclosure is required by law, in which case the disclosing party shall
promptly provide the other party with prior notice of such public statement or communication. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission
or any regulatory agency or Trading Market unless the name of such Purchaser is already included in the body of the Transaction
Documents, without the prior written consent of such Purchaser, except: (a) as required by federal securities law in connection
with the filing of final Transaction Documents with the Commission and (b) to the extent such disclosure is required by law or
Trading Market regulations, in which case the Company shall provide the Purchasers with prior notice of such disclosure permitted
under this clause (b). The Company may file a Form 10-K instead of a Form 8-K, provided such form is filed within the stated time
periods.
4.5 Non-Public
Information. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction
Documents, the Company covenants and agrees that neither it, nor any other Person acting on its behalf, will provide any Purchaser
or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior
thereto such Purchaser shall have entered into a written agreement with the Company regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant in effecting
transactions in securities of the Company.
4.6 Use
of Proceeds. The Company will use the net proceeds to the Company from the sale of the Shares and Warrants hereunder
for general corporate purposes and working capital. The Company shall not use such proceeds: (a) for the satisfaction of any
portion of the Company’s debt (other than payment of trade payables in the ordinary course of the Company’s business
and prior practices), (b) for the redemption of any Common Stock or Common Stock Equivalents, (c) for the settlement of any outstanding
litigation (except for payments pursuant to settlement agreements entered into prior to the date hereof), or (d) in violation of
the law, including FCPA or OFAC.
4.7 Indemnification
of Purchasers. Subject to the provisions of this Section 4.7, the Company will indemnify and hold each Purchaser
and its directors, officers, shareholders, members, partners, employees and agents (and any other Persons with a functionally equivalent
role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser
(within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title) of such controlling persons (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Purchaser
Party may suffer or incur as a result of or relating to (a) any breach of any of the representations, warranties, covenants or
agreements made by the Company in this Agreement or in the other Transaction Documents or (b) any action instituted against the
Purchaser Parties in any capacity, or any of them or their respective Affiliates, by any stockholder of the Company who is not
an Affiliate of such Purchaser Party, with respect to any of the transactions contemplated by the Transaction Documents (unless
such action is based upon a breach of such Purchaser Party’s representations, warranties or covenants under the Transaction
Documents or any agreements or understandings such Purchaser Party may have with any such stockholder or any violations by such
Purchaser Party of Securities Laws or any conduct by such Purchaser Party which constitutes fraud, gross negligence, willful misconduct
or malfeasance). If any action shall be brought against any Purchaser Party in respect of which indemnity may be sought pursuant
to this Agreement, such Purchaser Party shall promptly notify the Company in writing, and the Company shall have the right to assume
the defense thereof with counsel of its own choosing reasonably acceptable to the Purchaser Party. Any Purchaser Party shall
have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Purchaser Party except to the extent that (i) the employment thereof has been specifically
authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and
to employ counsel or (iii) in such action there is, in the reasonable opinion of such Purchaser Party’s counsel, a material
conflict on any material issue between the position of the Company and the position of such Purchaser Party, in which case the
Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel for all Purchaser Parties.
The Company will not be liable to any Purchaser Party under this Agreement (iv) for any settlement by a Purchaser Party effected
without the Company’s prior written consent, which shall not be unreasonably withheld, conditioned or delayed; or (v) to
the extent, but only to the extent that a loss, claim, damage or liability is attributable to any Purchaser Party’s breach
of any of the representations, warranties, covenants or agreements made by such Purchaser Party in this Agreement or in the other
Transaction Documents. The indemnification required by this Section 4.7 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are received or are incurred. The indemnity agreements contained
herein shall be in addition to any cause of action or similar right of any Purchaser Party against the Company or others and any
liabilities the Company may be subject to pursuant to law.
4.8 Reservation
of Common Stock. As of the date hereof, the Company has reserved for each Purchaser and the Company shall continue to reserve
and keep available at all times, free of preemptive rights, a sufficient number of shares of Common Stock for each Purchaser for
the purpose of enabling the Company to issue the Conversion Shares issuable upon complete conversion of the Shares issued pursuant
to this Agreement and Warrant Shares issuable upon complete exercise of the Warrants (such amount being the “Required
Minimum”). If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is
less than the Required Minimum on such date (an “Authorized Share Failure”), then the Board of Directors shall
use commercially reasonable efforts to amend the Company’s certificate of incorporation to increase the number of authorized
but unissued shares of Common Stock to at least the Required Minimum at such time, as soon as possible and in any event not later
than the 60th day after such date. Without limiting the generality of the foregoing sentence, as soon as practicable
after the date of the occurrence of an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence
of such Authorized Share Failure, the Company shall hold a meeting of its stockholders for the approval of an increase in the number
of authorized shares of Common Stock. In connection with such meeting, the Company shall provide each stockholder with a proxy
statement and shall use its commercially reasonable efforts to solicit its stockholders' approval of such increase in authorized
shares of Common Stock and to cause its board of directors to recommend to the stockholders that they approve such proposal. Notwithstanding
the foregoing, if any such time of an Authorized Share Failure, the Company is able to obtain the written consent of a majority
of the shares of its issued and outstanding Common Stock to approve the increase in the number of authorized shares of Common Stock
without soliciting its stockholders, the Company may satisfy this obligation by obtaining such consent and submitting for filing
with the SEC an Information Statement on Schedule 14C. Calculations hereunder as of the date of this Agreement shall assume a Per
Share Purchase Price of not more than $166, and as of the Closing Date, the actual Per Share Purchase Price. Calculations hereunder
with reference to Warrant Shares will be made assuming exercise of the Warrants on a cash basis.
4.9 Listing
of Common Stock. The Company hereby agrees to use commercially reasonable efforts to maintain the listing or quotation of the
Common Stock on the Trading Market on which it is currently listed, and prior to the Closing, the Company shall apply to list or
quote all of the Conversion Shares and Warrant Shares on such Trading Market and use commercially reasonable efforts to secure
the listing of all of the Conversion Shares and Warrant Shares on such Trading Market. The Company further agrees, if the Company
applies to have the Common Stock traded on any other Trading Market, it will then include in such application all of the Conversion
Shares and Warrant Shares, and will take such other action as is necessary to cause all of the Conversion Shares and Warrant Shares
to be listed or quoted on such other Trading Market as promptly as possible. The Company will then use commercially reasonable
efforts to continue the listing or quotation and trading of its Common Stock on a Trading Market until the later of (i) the five
year anniversary of the Closing Date, (ii) the date no Shares or Warrants are outstanding and (iii) the end of the Protection Period,
and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the
Trading Market until such later date.
4.10 Reimbursement.
If any Purchaser becomes involved in any capacity in any Proceeding by or against any Person who is a stockholder of the Company
(except as a result of sales, pledges, margin sales and similar transactions by such Purchaser to or with any current stockholder),
solely as a result of such Purchaser’s acquisition of the Securities under this Agreement, the Company will reimburse such
Purchaser for its reasonable legal and other expenses (including the cost of any investigation preparation and travel in connection
therewith) incurred in connection therewith, as such expenses are incurred. The reimbursement obligations of the Company under
this paragraph shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and
conditions to any Affiliates of the Purchasers who are actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may be, of the Purchasers and any such Affiliate, and
shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Company, the
Purchasers and any such Affiliate and any such Person. The Company also agrees that neither the Purchasers nor any such Affiliates,
partners, directors, agents, employees or controlling persons shall have any liability to the Company or any Person asserting claims
on behalf of or in right of the Company solely as a result of acquiring the Securities under this Agreement.
4.11 Equal
Treatment of Purchasers. No consideration (including any modification of any Transaction Document) shall be offered or
paid to any Person to amend or consent to a waiver or modification of any provision of any of the Transaction Documents unless
the same consideration is also offered to all of the Purchasers that are parties to such Transaction Document. For clarification
purposes, this provision constitutes a separate right granted to each Purchaser by the Company and negotiated separately by each
Purchaser, and is intended for the Company to treat the Purchasers as a class and shall not in any way be construed as the Purchasers
acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.
4.12 Participation
in Future Financing.
(a) In
lieu of any and all existing participation rights granted by the Company to the Purchasers, which each Purchaser hereby waives
to the extent applicable, from the date hereof through the twelve (12) month anniversary of the Closing Date, upon any proposed
issuance by the Company or any of its Subsidiaries of Common Stock or Common Stock Equivalents for cash consideration, Indebtedness
or a combination of cash consideration and Indebtedness, other than (i) a rights offering to all holders of Common Stock, or (ii)
an Exempt Issuance, (a “Subsequent Financing”), the Purchasers that still own outstanding Securities shall have
the right to participate in up to an amount of the Subsequent Financing equal to 50% of the Subsequent Financing (the “Participation
Maximum”) on the same terms, conditions and price provided for in the Subsequent Financing.
(b) At
least five (5) Trading Days prior to the closing of the Subsequent Financing, the Company shall deliver to each Purchaser a written
notice of its intention to effect a Subsequent Financing (“Pre-Notice”), which Pre-Notice shall ask such Purchaser
if it wants to review the details of such financing (such additional notice, a “Subsequent Financing Notice”).
Upon the request of a Purchaser, and only upon a request by such Purchaser, for a Subsequent Financing Notice, the Company shall
promptly, but no later than one (1) Trading Day after such request, deliver a Subsequent Financing Notice to such Purchaser. The
requesting Purchaser shall be deemed to have acknowledged that the Subsequent Financing Notice may contain material non-public
information. The Subsequent Financing Notice shall describe in reasonable detail the proposed terms of such Subsequent Financing,
the amount of proceeds intended to be raised thereunder and the Person or Persons through or with whom such Subsequent Financing
is proposed to be effected and shall include a term sheet or similar document relating thereto as an attachment.
(c) Any
Purchaser desiring to participate in such Subsequent Financing must provide written notice to the Company by not later than 5:30
p.m. (New York City time) on the fifth (5th) Trading Day after all of the Purchasers have received the Pre-Notice that
such Purchaser is willing to participate in the Subsequent Financing, the amount of such Purchaser’s participation, and representing
and warranting that such Purchaser has such funds ready, willing, and available for investment on the terms set forth in the Subsequent
Financing Notice. If the Company receives no such notice from a Purchaser as of such fifth (5th) Trading Day, such Purchaser
shall be deemed to have notified the Company that it does not elect to participate.
(d) If
by 5:30 p.m. (New York City time) on the fifth (5th ) Trading Day after all of the Purchasers have received the Pre-Notice,
notifications by the Purchasers of their willingness to participate in the Subsequent Financing (or to cause their designees who
at the time are Accredited Investors to participate) is, in the aggregate, equal to or less than the aggregate amount of the Participation
Maximum, then the Company may effect the remaining portion of such Subsequent Financing on the terms and with the Persons set forth
in the Subsequent Financing Notice.
(e) If
by 5:30 p.m. (New York City time) on the fifth (5th) Trading Day after all of the Purchasers have received the Pre-Notice,
the Company receives responses to a Subsequent Financing Notice from Purchasers seeking to purchase more than the aggregate amount
of the Participation Maximum, each such Purchaser shall have the right to purchase its Pro Rata Portion (as defined below) of the
Participation Maximum. “Pro Rata Portion” means the ratio of (x) the Subscription Amount of Shares and
Warrants purchased hereunder by a Purchaser participating under this Section 4.12 and (y) the sum of the aggregate Subscription
Amounts of Securities purchased hereunder by all Purchasers participating under this Section 4.12.
(f) The
Company must provide the Purchasers with a second Subsequent Financing Notice, and the Purchasers will again have the right of
participation set forth above in this Section 4.12, if the Subsequent Financing subject to the initial Subsequent Financing Notice
is not consummated for any reason on the terms set forth in such Subsequent Financing Notice within forty-five (45) Trading Days
after the date of the initial Subsequent Financing Notice.
(g) The
Company and each Purchaser agree that if any Purchaser elects to participate in the Subsequent Financing, the transaction documents
related to the Subsequent Financing shall not include any term or provision whereby such Purchaser shall be required to agree to
any restrictions on trading as to any of the Securities purchased hereunder (for avoidance of doubt, the securities purchased in
the Subsequent Financing shall not be considered securities purchased hereunder) or be required to consent to any amendment to
or termination of, or grant any waiver, release or the like under or in connection with, this Agreement, without the prior written
consent of such Purchaser.
(h) Notwithstanding
anything to the contrary in this Section 4.12 and unless otherwise agreed to by such Purchaser, the Company shall either confirm
in writing to such Purchaser that the transaction with respect to the Subsequent Financing has been abandoned or shall publicly
disclose its intention to issue the securities in the Subsequent Financing, in either case in such a manner such that such Purchaser
will not be in possession of any material, non-public information, by the tenth (10th) Business Day following delivery of the Subsequent
Financing Notice. If by such tenth (10th) Business Day, no public disclosure regarding a transaction with respect to the Subsequent
Financing has been made, and no notice regarding the abandonment of such transaction has been received by such Purchaser, such
transaction shall be deemed to have been abandoned and such Purchaser shall not be deemed to be in possession of any material,
non-public information with respect to the Company or any of its Subsidiaries.
4.13 Acknowledgment
of Dilution. The Company acknowledges that the issuance of the Securities may result in dilution of the outstanding shares
of Common Stock, which dilution may be substantial under certain market conditions. The Company further acknowledges that its obligations
under the Transaction Documents, including, without limitation, its obligation to issue the Shares and Warrant Shares pursuant
to the Transaction Documents, are unconditional and absolute, but subject to the terms and conditions of the Transaction Documents,
and not subject to any right of set off, counterclaim, delay or reduction, regardless of the effect of any such dilution or any
claim the Company may have against any Purchaser and regardless of the dilutive effect that such issuance may have on the ownership
of the other stockholders of the Company.
4.14 Preservation
of Corporate Existence. The Company shall preserve and maintain its corporate existence, rights, privileges and franchises
in the jurisdiction of its incorporation, and qualify and remain qualified, as a foreign corporation in each jurisdiction in which
such qualification is necessary in view of its business or operations and where the failure to qualify or remain qualified might
reasonably have a Material Adverse Effect upon the financial condition, business or operations of the Company taken as a whole.
4.15 DTC
Program. At all times that the Shares or Warrants are outstanding, the Company will employ as the transfer agent for the Common
Stock and Warrant Shares a participant in the Depository Trust Company Automated Securities Transfer Program and cause the Common
Stock to be transferable pursuant to such program.
4.16 Form
D; Blue Sky Filings. The Company agrees to timely file a Form D with respect to the sale of the Securities by the Company
under this Agreement as required under Regulation D. The Company shall take such action as the Company shall reasonably determine
is necessary in order to obtain an exemption for, or to qualify the Securities for, sale to the Purchasers at the Closing under
applicable securities or “Blue Sky” laws of the states of the United States, and shall provide evidence of such actions
promptly upon request of any Purchaser.
4.17 Shareholder
Rights Plan. No claim will be made or enforced by the Company or, with the consent of the Company, any other Person, that any
Purchaser is an “Acquiring Person” under any control share acquisition, business combination, poison pill (including
any distribution under a rights agreement) or similar anti-takeover plan or arrangement in effect or hereafter adopted by the Company,
or that any Purchaser could be deemed to trigger the provisions of any such plan or arrangement, by virtue of receiving Securities
under the Transaction Documents or under any other agreement between the Company and the Purchasers.
4.18 Exercise
Procedure. The form of Notice of Exercise included in the Warrants sets forth the totality of the procedures required of the
Purchasers in order to exercise the Warrants. No additional legal opinion, other information or instructions shall be required
of the Purchasers to exercise their Warrants. The Company shall honor exercises of the Warrants and shall deliver Warrant Shares
in accordance with the terms, conditions and time periods set forth in the Transaction Documents.
4.19 Intentionally
Omitted.
4.20 Certain
Transactions and Confidentiality. Each Purchaser, severally and not jointly with the other Purchasers, covenants that neither
it, nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any purchases or sales, including
Short Sales, of any of the Company’s securities during the period commencing with the execution of this Agreement and ending
at such time that the transactions contemplated by this Agreement are first publicly disclosed or required to be disclosed, whichever
occurs first, in the Form 8-K described in Section 4.4. Each Purchaser, severally and not jointly with the other Purchasers,
covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed or required to be publicly
disclosed, whichever occurs first, by the Company in such Form 8-K, such Purchaser will maintain the confidentiality of the existence
and terms of this transaction and the information included in the Transaction Documents and the Disclosure Letter. Notwithstanding
the foregoing, and notwithstanding anything contained in this Agreement to the contrary, the Company expressly acknowledges and
agrees that (i) no Purchaser makes any representation, warranty or covenant hereby that it will not engage in effecting transactions
in any securities of the Company after the time that the transactions contemplated by this Agreement are required to be disclosed
in the Form 8-K described in Section 4.4, (ii) no Purchaser shall be restricted or prohibited from effecting any transactions in
any securities of the Company in accordance with applicable Securities Laws from and after the time that the transactions contemplated
by this Agreement are first disclosed or required to be disclosed, whichever occurs first, in the Form 8-K described in Section
4.4, and (iii) no Purchaser shall have any duty of confidentiality to the Company or its Subsidiaries after the filing of such
Form 8-K or after the date such Form 8-K is required to have been filed, whichever occurs first. Notwithstanding the foregoing,
in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions
of such Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio
managers managing other portions of such Purchaser’s assets, the covenant set forth above shall only apply with respect to
the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by
this Agreement.
4.21 Purchaser’s
Exercise Limitations. The Company shall not effect any exercise of the right granted to each Purchaser in Section and 4.12
of this Agreement, and a Purchaser shall not have the right to exercise any portion of such right, pursuant to Section 4.12, to
the extent that after giving effect to the issuance after application of such right, the Purchaser (together with the Purchaser’s
Affiliates, and any other Persons acting as a group together with the Purchaser or any of the Purchaser’s Affiliates), would
beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence,
the number of shares of Common Stock beneficially owned by the Purchaser and its Affiliates shall include the number of shares
of Common Stock issuable upon application of the rights set forth in Section 4.12 with respect to which such determination is being
made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) further application of such rights
by the Purchaser or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other
securities of the Company (including, without limitation, any Warrants or other Common Stock Equivalents) subject to a limitation
on conversion or exercise analogous to the limitation contained herein beneficially owned by the Purchaser or any of its Affiliates.
Except as set forth in the preceding sentence, for purposes of this Section 4.21, beneficial ownership shall be calculated in accordance
with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Purchaser
that the Company is not representing to the Purchaser that such calculation is in compliance with Section 13(d) of the Exchange
Act and the Purchaser is solely responsible for any schedules required to be filed in accordance therewith. To the extent that
the limitation contained in this Section 4.21 applies, the determination of whether the rights in Section 4.12 (in relation to
other securities owned by the Purchaser together with any Affiliates) and of which portion of such rights is exercisable shall
be in the sole discretion of the Purchaser, and the submission of an exercise notice or other demand shall be deemed to be the
Purchaser’s determination of which rights are exercisable (in relation to other securities owned by the Purchaser together
with any Affiliates) and of which portion of the rights are exercisable, in each case subject to the Beneficial Ownership Limitation.
To ensure compliance with this restriction, a Purchaser will be deemed to represent to the Company when it delivers an exercise
notice or other demand that such exercise notice or demand has not violated the restrictions set forth in this paragraph, and the
Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any
group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder. For purposes of this Section 4.21, in determining the number of outstanding shares of Common Stock, a Purchaser
may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual
report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent
written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon
the written or oral request of a Purchaser, the Company shall within two Trading Days confirm orally and in writing to the Purchaser
the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the conversion or exercise of securities of the Company, including the Warrants, by the Purchaser
or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial
Ownership Limitation” shall be 9.99%. The provisions of this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 4.21 to correct this paragraph (or any portion hereof) which
may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a
successor holder of the option right. In the event the limitations in this Section 4.21 would prevent the exercise of a Purchaser’s
rights under Section 4.12, then such Purchaser may exercise all such rights and comply with all obligations applicable thereto
except that the delivery of Common Stock will be deferred until such time as such Purchaser provides notice to the Company that
such Purchaser may receive or beneficially own such Common Stock which exceeds the Beneficial Ownership Limitation without exceeding
the Beneficial Ownership Limitation. In the event the Company’s compliance with Section 4.12 would cause the Purchaser to
exceed the Beneficial Ownership Limitation, then the requirement to deliver Additional Shares shall be deferred one or more times
until the Purchaser notifies the Company that such delivery will not cause the Purchaser to exceed the Beneficial Ownership Limitation.
4.22 Maintenance
of Property. The Company shall keep all of its property, which is necessary or useful to the conduct of its business, in good
working order and condition, ordinary wear and tear excepted.
ARTICLE V.
MISCELLANEOUS
5.1 Termination.
This Agreement may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder only and without any effect
whatsoever on the obligations between the Company and the other Purchasers, by written notice given at any time to the Company,
if the Closing has not been consummated on or before July ___, 2015; provided, however, that such
termination will not affect the right of any party to sue for any breach by any other party (or parties). In the event of any
termination by a Purchaser under this Section 5.1, the Company shall promptly (and in any event within two (2) Business Days of
such termination) refund all of such Purchaser’s subscription amount.
5.2 Fees
and Expenses. Except as expressly set forth in the Transaction Documents, each party shall pay the fees and expenses
of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement. Except as set forth in the Warrants, the
Company shall pay all Transfer Agent fees, stamp taxes and other similar taxes and duties levied in connection with the delivery
of any Securities to the Purchasers. At the Closing the Company agrees to pay reasonable legal fees of Olshan Frome Wolosky LLP
in the amount of $15,000, counsel to some of the Purchasers, incurred in connection with the negotiation, execution and delivery
of the Transaction Documents.
5.3 Entire
Agreement. The Transaction Documents, together with the exhibits and schedules thereto, and including the Disclosure
Letter, contain the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all
prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.
5.4 Notices.
All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted
by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine,
at the address or number designated below (if delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Company, to: WPCS International Incorporated, 521 Railroad Avenue, Suisun City, CA
94585, Attn: Sebastian Giordano, Interim Chief Executive Officer, facsimile: (707) 421-1359, with a copy by fax only to (which
shall not constitute notice): K&L Gates LLP, 599 Lexington Avenue, New York, NY 10022, Attn: Robert S. Matlin, Esq., facsimile:
(212) 536-3901, and (ii) if to the Purchasers, to: the addresses and fax numbers indicated on the signature pages hereto, with
an additional copy by fax only to (which shall not constitute notice): Olshan Frome Wolosky
LLP, 65 East 55th Street, New York, NY 10022, Attn: Kenneth A. Schlesinger, Esq., facsimile: (212) 451-2222.
5.5 Amendments;
Waivers. No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument
signed, in the case of an amendment, by the Company and the Purchasers holding at least a majority of the component of the affected
Securities then outstanding or, in the case of a waiver, by the party against whom enforcement of any such waived provision is
sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement
hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such
right. As employed herein, “consent” shall mean consent of the holders of the majority of the then outstanding effected
component of the Securities on the date such consent is requested or required.
5.6 Headings.
The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
5.7 Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent
of each Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this Agreement to any Person
to whom such Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect
to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchasers.”
5.8 No
Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise
set forth in Section 4.7.
5.9 Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents
shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought
against a party hereto or its respective affiliates, directors, officers, shareholders, partners, members, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the City 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 (including with
respect to the enforcement of any of the Transaction Documents), 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 improper or is an inconvenient venue for such proceeding. 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 via registered
or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under
this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law. If
either party shall commence an action or proceeding to enforce any provisions of the Transaction Documents, then in addition to
the obligations of the Company under Section 4.7, the prevailing party in such action, suit or proceeding shall be reimbursed by
the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation
and prosecution of such action or proceeding.
5.10 Survival.
The representations and warranties contained herein shall survive the Closing and the delivery of the Securities at the Closings
for the applicable statute of limitations.
5.11 Execution.
This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each party and delivered to each other party, it being
understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile
transmission or by e-mail delivery of a “.pdf” format data file, such signature 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 facsimile or “.pdf”
signature page were an original thereof.
5.12 Severability.
If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
5.13 Rescission
and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions
of) any of the other Transaction Documents, whenever any Purchaser exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within the periods therein provided, then such Purchaser
may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand
or election in whole or in part without prejudice to its future actions and rights; provided, however, that in the case of a rescission
of an exercise of a Warrant, the applicable Purchaser shall be required to return any shares of Common Stock subject to any such
rescinded exercise notice concurrently with the return to such Purchaser of the aggregate exercise price paid to the Company for
such shares and the restoration of such Purchaser’s right to acquire such shares pursuant to such Purchaser’s Warrant
(including, issuance of a replacement warrant certificate evidencing such restored right).
5.14 Replacement
of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the
Company shall issue or cause to be issued in exchange and substitution for and upon surrender and cancellation thereof (in the
case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft, destruction, or mutilation, and of the ownership of such Security.
The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including
customary indemnity and bonds) associated with the issuance of such replacement Securities.
5.15 Remedies.
In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of
the Purchasers and the Company will be entitled to specific performance under the Transaction Documents. The parties agree
that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in
the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.
5.16 Payment
Set Aside. To the extent that the Company makes a payment or payments to any Purchaser pursuant to any Transaction Document
or a Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from,
disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived
and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.
5.17 Independent
Nature of Purchasers’ Obligations and Rights. The obligations of each Purchaser under any Transaction Document
are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the
performance or non-performance of the obligations of any other Purchaser under any Transaction Document. Nothing contained
herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereof or thereto, shall be deemed to
constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption
that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated
by the Transaction Documents. Each Purchaser shall be entitled to independently protect and enforce its rights, including,
without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary
for any other Purchaser to be joined as an additional party in any proceeding for such purpose. Each Purchaser has been represented
by its own separate legal counsel in its review and negotiation of the Transaction Documents. It is expressly understood
and agreed that each provision contained in this Agreement and in each other Transaction Document is between the Company and a
Purchaser, solely, and not between the Company and the Purchasers collectively and not between and among the Purchasers. No Purchaser
shall act in concert, as a group, or together with any other Purchaser with regard to any vote of the stockholders of the Company.
5.18 Liquidated
Damages. The Company’s obligations to pay any partial liquidated damages or other amounts owing under the Transaction
Documents is a continuing obligation of the Company and shall not terminate until all unpaid partial liquidated damages and other
amounts due thereunder have been paid notwithstanding the fact that the instrument or security pursuant to which such partial liquidated
damages or other amounts are due and payable shall have been canceled.
5.19 Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration
of any right required or granted herein shall not be a Business Day, then such action may be taken or such right may be exercised
on the next succeeding Business Day.
5.20 Construction.
The parties agree that each of them and/or their respective counsel have reviewed and had an opportunity to revise the Transaction
Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of the Transaction Documents or any amendments thereto. In addition, each and
every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse
and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after
the date of this Agreement.
5.21 Usury.
To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and
will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any
time hereafter in force, in connection with any claim, action or proceeding that may be brought by any Purchaser in order to enforce
any right or remedy under any Transaction Document. Notwithstanding any provision to the contrary contained in any Transaction
Document, it is expressly agreed and provided that the total liability of the Company under the Transaction Documents for payments
in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the “Maximum Rate”),
and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated
with any other sums in the nature of interest that the Company may be obligated to pay under the Transaction Documents exceed such
Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Transaction Documents
is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract
rate of interest allowed by law will be the Maximum Rate applicable to the Transaction Documents from the Closing Date thereof
forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the
Maximum Rate is paid by the Company to any Purchaser with respect to indebtedness evidenced by the Transaction Documents, such
excess shall be applied by such Purchaser to the unpaid principal balance of any such indebtedness or be refunded to the Company,
the manner of handling such excess to be at such Purchaser’s election.
5.22 WAIVER
OF JURY TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY,
THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY,
IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.
5.23 Equitable
Adjustment. Trading volume amounts, price/volume amounts and similar figures in the Transaction Documents shall be equitably
adjusted (but without duplication) to offset the effect of stock splits, similar events and as otherwise described in this Agreement
and Warrants.
(Signature Pages Follow)
IN WITNESS WHEREOF, the parties hereto have
caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated
above.
WPCS INTERNATIONAL INCORPORATED |
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Address for Notice: |
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521 Railroad Avenue
Suisun City, CA 94585
Fax: (707) 421-1359 |
By: |
/s/ Sebastian Giordano |
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Name: |
Sebastian Giordano |
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Title: |
Interim Chief Executive Officer |
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With a copy to (which shall not constitute notice): |
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K&L Gates LLP
599 Lexington Avenue
New York, NY 10022
Attn: Robert S. Matlin, Esq.
Fax: (212) 536-3901 |
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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
[PURCHASER SIGNATURE PAGES TO WPCS INTERNATIONAL
INCORPORATED
SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF,
the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as
of the date first indicated above.
Name of Purchaser: Iroquois Master Fund Ltd
Signature of Authorized Signatory of Purchaser: /s/ Joshua
Silverman
Name of Authorized Signatory: Joshua Silverman
Title of Authorized Signatory: Director
Address for Delivery of Securities to Purchaser
(if not same as address for notice):
c/o Iroquois Capital Management LLC
205 East 42nd St- 20th Fl.
New York NY 10017
Subscription Amount: US$1,300,000
Preferred Stock: 7,037
Warrants 1,055,481
EIN Number, if applicable, will be provided
under separate cover.
[PURCHASER SIGNATURE PAGES TO WPCS INTERNATIONAL
INCORPORATED
SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF,
the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as
of the date first indicated above.
Name of Purchaser: Iroquois Capital Investment Group
Signature of Authorized Signatory of Purchaser: /s/ Joshua
Silverman
Name of Authorized Signatory: Joshua Silverman
Title of Authorized Signatory: Managing Member
Address for Delivery of Securities to Purchaser
(if not same as address for notice):
c/o Iroquois Capital Management LLC
205 East 42nd St- 20th Fl.
New York NY 10017
Subscription Amount: US$100,000
Preferred Stock: 541
Warrants 81,190
EIN Number, if applicable, will be provided
under separate cover.
[PURCHASER SIGNATURE PAGES TO WPCS INTERNATIONAL
INCORPORATED
SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF,
the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as
of the date first indicated above.
Name of Purchaser: American Capital Management, LLC
Signature of Authorized Signatory of Purchaser: /s/ Kimberly
Page
Name of Authorized Signatory: Kimberly Page
Title of Authorized Signatory: Manager
Address for Delivery of Securities to Purchaser
(if not same as address for notice):
c/o Iroquois Capital Management LLC
205 East 42nd St- 20th Fl.
New York NY 10017
Subscription Amount: US$100,000
Preferred Stock: 541
Warrants 81,190
EIN Number, if applicable, will be provided
under separate cover.
EXHIBITS
Exhibit A |
Form of Warrant |
Exhibit B |
Intentionally Omitted |
Exhibit C |
Registration Rights Agreement |
Exhibit D |
Intentionally Omitted |
Exhibit E |
Form of Investor Questionnaire |
Exhibit F |
Form of Rule 506 Bad Actor Disqualification Questionnaire |
EXHIBIT E
ACCREDITED INVESTOR QUESTIONNAIRE
IN CONNECTION WITH INVESTMENT IN COMMON
STOCK AND WARRANTS
OF WPCS INTERNATIONAL INCORPORATED,
A DELAWARE CORPORATION
PURSUANT TO SECURITIES PURCHASE AGREEMENT
DATED JULY ___, 2015
INSTRUCTIONS
PLEASE ANSWER ALL QUESTIONS.
If the appropriate answer is “None” or “Not Applicable”, so state. Please print or type your answers to
all questions. Attach additional sheets if necessary to complete your answers to any item.
Your answers will be
kept strictly confidential at all times. However, WPCS International Incorporated (the “Company”) may present this
Questionnaire to such parties as it deems appropriate in order to assure itself that the offer and sale of securities of the Company
will not result in a violation of the registration provisions of the Securities Act of 1933, as amended, or a violation of the
securities laws of any state.
1. Please
provide the following information:
Name of additional purchaser: |
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(Please complete information in Question 5) |
Date of birth, or if other than an individual, year of organization
or incorporation:
2. Residence
address, or if other than an individual, principal office address:
Taxpayer Identification Number: |
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Business telephone number: |
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4. Send mail to: |
Residence ______ |
Business _______ |
5. With
respect to tenants in common, joint tenants and tenants by the entirety, complete only if information differs from that above:
Taxpayer Identification Number: |
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Business telephone number: |
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Send Mail to: |
Residence _______ |
Business _______ |
6. Please
describe your present or most recent business or occupation and indicate such information as the nature of your employment, how
long you have been employed there, the principal business of your employer, the principal activities under your management or supervision
and the scope (e.g. dollar volume, industry rank, etc.) of such activities:
7. Please
state whether you (i) are associated with or affiliated with a member of the Financial Industry Regulatory Association, Inc. (“FINRA”),
(ii) are an owner of stock or other securities of FINRA member (other than stock or other securities purchased on the open market),
or (iii) have made a subordinated loan to any FINRA member:
If you answered yes to any of (i) –
(iii) above, please indicate the applicable answer and briefly describe the facts below:
8A. Applicable
to Individuals ONLY. Please answer the following questions concerning your financial condition as an “accredited investor”
(within the meaning of Rule 501 of Regulation D). If the purchaser is more than one individual, each individual must initial an
answer where the question indicates a “yes” or “no” response and must answer any other question fully,
indicating to which individual such answer applies. If the purchaser is purchasing jointly with his or her spouse, one answer may
be indicated for the couple as a whole:
8.1 Does
your net worth* (or joint net worth with your spouse) exceed $1,000,000?
8.2 Did
you have an individual income** in excess of $200,000 or joint income together with your spouse in excess of $300,000 in each of
the two most recent years and do you reasonably expect to reach the same income level in the current year?
8.3 Are
you an executive officer of the Company?
* For purposes hereof, net worth shall
be deemed to include ALL of your assets, liquid or illiquid MINUS any liabilities.
** For purposes hereof, the term “income”
is not limited to “adjusted gross income” as that term is defined for federal income tax purposes, but rather includes
certain items of income which are deducted in computing “adjusted gross income”. For investors who are salaried employees,
the gross salary of such investor, minus any significant expenses personally incurred by such investor in connection with earning
the salary, plus any income from any other source including unearned income, is a fair measure of “income” for purposes
hereof. For investors who are self-employed, “income” is generally construed to mean total revenues received during
the calendar year minus significant expenses incurred in connection with earning such revenues.
8.B Applicable to Corporations, Partnerships, Trusts, Limited
Liability Companies and other Entities ONLY:
The purchaser is an accredited investor
because the purchaser falls within at least one of the following categories (Check all appropriate lines):
| ¨ | (i) a bank as defined in Section 3(a)(2) of the Act or a savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; |
| ¨ | (ii) a broker-dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934,
as amended; |
| ¨ | (iii) an insurance company as defined in Section 2(13) of the Act; |
| ¨ | (iv) an investment company registered under the Investment Company Act of 1940, as amended (the
“Investment Act”) or a business development company as defined in Section 2(a)(48) of the Investment Act; |
| ¨ | (v) a Small Business Investment Company licensed by the U.S. Small Business Administration under
Section 301(c) or (d) of the Small Business Investment Act of 1958, as amended; |
| ¨ | (vi) a plan established and maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions, for the benefit of its employees, where such plan has total assets in
excess of $5,000,000; |
| ¨ | (vii) an employee benefit plan within the meaning of Title 1 of the Employee Retirement Income
Security Act of 1974, as amended (the “Employee Act”), where the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of the Employee Act, which is either a bank, savings and loan association, insurance company, or registered
investment adviser, or an employee benefit plan that has total assets in excess of $5,000,000, or a self-directed plan the investment
decisions of which are made solely by persons that are accredited investors; |
| ¨ | (viii) a private business development company, as defined in Section 202(a)(22) of the Investment
Advisers Act of 1940, as amended; |
| ¨ | (ix) an organization described in Section 501(c)(3) of the Internal Revenue Code,
a corporation, a Massachusetts or similar business trust, or a partnership, not formed for the specific purpose of acquiring the
securities offered, with total assets in excess of $5,000,000; |
| ¨ | (x) a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of
acquiring the securities offered, whose purchase is directed by a “sophisticated” person, as described in Rule 506(b)(2)(ii)
promulgated under the Act, who has such knowledge and experience in financial and business matters that he or she is capable of
evaluating the merits and risks of the prospective investment; |
| ¨ | (xi) an entity in which all of the equity investors are persons or entities described above (“accredited
investors”). ALL EQUITY OWNERS MUST COMPLETE “EXHIBIT A” ATTACHED HERETO. |
9.A Do you have sufficient knowledge
and experience in financial and business matters so as to be capable of evaluating the merits and risks associated with investing
in the Company?
ANSWER QUESTION 9B ONLY IF THE ANSWER TO QUESTION 9A WAS “NO.”
9.B If the answer to Question 9A was
“NO,” do you have a financial or investment adviser (a) that is acting in the capacity as a purchaser representative
and (b) who has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits
and risks associated with investing in the Company?
If you have a financial or investment adviser(s),
please identify each such person and indicate his or her business address and telephone number in the space below. (Each such person
must complete, and you must review and acknowledge, a separate Purchaser Representative Questionnaire which will be supplied at
your request).
10. You
have the right, will be afforded an opportunity, and are encouraged to investigate the Company and review relevant factors and
documents pertaining to the officers of the Company, and the Company and its business and to ask questions of a qualified representative
of the Company regarding this investment and the properties, operations, and methods of doing business of the Company.
Have you or has your purchaser representative,
if any, conducted any such investigation, sought such documents or asked questions of a qualified representative of the Company
regarding this investment and the properties, operations, and methods of doing business of the Company?
If so, have you completed your investigation
and/or received satisfactory answers to your questions?
11. Do
you understand the nature of an investment in the Company and the risks associated with such an investment?
12. Do
you understand that there is no guarantee of any financial return on this investment and that you will be exposed to the risk of
losing your entire investment?
13. Do
you understand that this investment is not liquid?
14. Do
you have adequate means of providing for your current needs and personal contingencies in view of the fact that this is not a liquid
investment?
15. Are
you aware of the Company’s business affairs and financial condition, and have you acquired all such information about the
Company as you deem necessary and appropriate to enable you to reach an informed and knowledgeable decision to acquire the Interests?
16. Do
you have a “pre-existing relationship” with the Company or any of the officers of the Company?
(For purposes hereof, “pre-existing
relationship” means any relationship consisting of personal or business contacts of a nature and duration such as would enable
a reasonably prudent investor to be aware of the character, business acumen, and general business and financial circumstances of
the person with whom such relationship exists.)
If so, please name the individual or other
person with whom you have a pre-existing relationship and describe the relationship:
17. Exceptions
to the representations and warranties made in Section 3.2 of the Securities Purchase Agreement (if no exceptions, write “none”
– if left blank, the response will be deemed to be “none”): _____________________
_____________________________________________________________________________
Dated: _______________, 2014
If purchaser is one or more individuals (all individuals must
sign):
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(Type or print name of prospective purchaser) |
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Signature of prospective purchaser |
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Social Security Number |
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(Type or print name of additional purchaser) |
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Signature of spouse, joint tenant, tenant in common or other signature, if required |
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Social Security Number |
Annex A
Definition of Accredited Investor
The securities will
only be sold to investors who represent in writing in the Securities Purchase Agreement that they are accredited investors, as
defined in Regulation D, Rule 501 under the Act which definition is set forth below:
1. A
natural person whose net worth, or joint net worth with spouse, at the time of purchase exceeds $1 million (excluding home); or
2. A
natural person whose individual gross income exceeded $200,000 or whose joint income with that person’s spouse exceeded $300,000
in each of the last two years, and who reasonably expects to exceed such income level in the current year; or
3. A
trust with total assets in excess of $5 million, not formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a sophisticated person described in Regulation D; or
4. A
director or executive officer of the Company; or
5. The
investor is an entity, all of the owners of which are accredited investors; or
6. (a)
bank as defined in Section 3(a)(2) of the Act, or any savings and loan association or other institution as defined in Section 3(a)(5)(A)
of the Act, (b) any broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, (c) an insurance
Company as defined in Section 2(13) of the Act, (d) an investment Company registered under the Investment Company Act of 1940 or
a business development Company as defined in Section 2(a)(48) of such Act, (e) a Small Business Investment Company licensed by
the United States Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958, (f) an
employee benefit plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a
state or its political subdivisions, if such plan has total assets in excess of $5 million, (g) an employee benefit plan within
the meaning of Title I of the Employee Retirement Income Securities Act of 1974, and the employee benefit plan has assets in excess
of $5 million, or the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such act, that is either
a bank, savings and loan institution, insurance Company, or registered investment advisor, or, if a self-directed plan, with an
investment decisions made solely by persons that are accredited investors, (h) a private business development company as defined
in Section 202(a)(22) of the Investment Advisers Act of 1940, or (i) an organization described in Section 501(c)(3) of the Internal
Revenue code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring
the securities offered, with assets in excess of $5 million.
EXHIBIT “A” TO ACCREDITED INVESTOR
QUESTIONNAIRE
ACCREDITED CORPORATIONS, PARTNERSHIPS,
LIMITED LIABILITY COMPANIES, TRUSTS OR OTHER ENTITIES INITIALING QUESTION 8B(xi) MUST PROVIDE THE FOLLOWING INFORMATION.
I hereby certify that set forth below is
a complete list of all equity owners in __________________ [NAME OF ENTITY], a
[TYPE OF ENTITY] formed pursuant to the laws of the State of
. I also certify that EACH SUCH OWNER HAS INITIALED THE SPACE OPPOSITE HIS OR HER NAME and that each such owner understands
that by initialing that space he or she is representing that he or she is an accredited individual investor satisfying the test
for accredited individual investors indicated under “Type of Accredited Investor.”
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signature of authorized corporate officer, general partner or trustee |
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Name of Equity Owner |
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Type of Accredited Investor1 |
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1 | | Indicate which Subparagraph of 8.1 - 8.3 the equity owner satisfies. |
EXHIBIT F
RULE 506 BAD ACTOR DISQUALIFICATION QUESTIONNAIRE
____________________________________ |
______________ ___, 2015 |
Name |
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WPCS International
Incorporated (the “Company”) is about to close a private placement of securities pursuant to the terms of a Securities
Purchase Agreement. Under an SEC Rule effective September 23, 2013, the Company is requesting each director and executive officer
to complete and execute this questionnaire. Please answer yes or no to all questions listed below.
DEFINITION OF PROMOTERS
Under the Securities Act of 1933 (the “Act”) Rule
405 defines a promoter as any person—individual or legal entity—that either alone or with others, directly or indirectly
takes initiative in founding the business or enterprise of the issuer, or, in connection with such founding or organization, directly
or indirectly receives 10% or more of any class of issuer securities or 10% or more of the proceeds from the sale of any class
of issuer securities (other than securities received solely as underwriting commissions or solely in exchange for property).
The test considers activities “alone or together with others, directly or indirectly”; therefore, the result does not
change if there are other legal entities (which may themselves be promoters) in the chain between that person and the issuer.
DEFINITION OF INVESTMENT MANAGERS AND PRINCIPALS OF POOLED
INVESTMENT FUND ISSUERS
For issuers that are pooled investment funds, the rule covers
investment advisers and other investment managers of the fund; the directors, general partners, managing members, executive officers
and other officers participating in the offering of such investment managers; and the directors, executive officers and other officers
participating in the offering of the investment managers’ general partners or managing members.
DEFINITION OF COMPENSATED SOLICITORS
Persons compensated for soliciting investors
as well as their directors, general partners, managing members, executive officers and officers participating in the offering.
This category covers any persons compensated for soliciting investors but will typically involve broker-dealers and other intermediaries.
DEFINITION OF DIRECTORS, GENERAL PARTNERS AND MANAGING MEMBERS
OF THE ISSUER
Members of the Board of Directors (for
issuers that are corporations), general partners (for issuers that are partnerships) and managing members (for issuers that are
limited liability companies).
DEFINITION OF EXECUTIVE OFFICERS AND
PARTICIPATING OFFICERS OF THE ISSUER
The term “executive officer”
means a company’s president, any vice president in charge of a principal business unit, division or function (such as sales,
administration or finance), any other officer who performs a policy-making function or any other person who performs similar policy-making
functions. The term “officer” means a president, vice president, secretary, treasurer or principal financial officer,
comptroller or principal accounting officer, as well as any person who routinely performs corresponding functions. Participation
in an offering would have to be more than transitory or incidental involvement, and could include activities such as participation
or involvement in due diligence activities, involvement in the preparation of disclosure documents, and communication with the
issuer, prospective investors or other offering participants.
DEFINITION OF 20% BENEFICIAL OWNERS OF THE ISSUER
Beneficial owners of 20% or more of the
issuer’s outstanding equity securities, calculated on the basis of total voting power rather than on the basis of ownership
of any single class of securities.
NOTE ON REFERENCES TO THE COMPANY
All references to the Company made herein
include its predecessors and affiliated issuers.
1. Criminal
Convictions: Within the past 10 years (or five years, in the of case the Company), have you or the Company been convicted of
any felony or misdemeanor
(a) In
connection with the purchase or sale of a security
(b) Involving
the making of a false filing with the Securities and Exchange Commission (the “SEC”)
(c) Arising
out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser or paid solicitor
of purchasers of securities.
2. Court
injunctions and restraining orders: Within the past five years, have you or the Company been the subject of a court
injunction or restraining order
(a) In
connection with the purchase or sale of a security
(b) Involving
the making of a false filing with the SEC
(c) Arising
out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser or paid solicitor
of purchasers of securities.
3. Final
orders of certain state and federal regulators: Have you or the Company been the subject of any final orders of state regulators
of securities, insurance, banking, savings associations or credit unions; federal banking agencies; the Commodity Futures Trading
Commission and the National Credit Union Administration that
(a) Bar
you or the Company from associating with a regulated entity, engaging in the business of securities, insurance or banking, or engaging
in savings association or credit union activities or
(b) Are based on a
violation of a law or regulation that prohibits fraudulent, manipulative, or deceptive conduct and were issued within the last
10 years
4. SEC
disciplinary orders: Are you or the Company currently the subject of any SEC disciplinary orders relating to brokers, dealers,
municipal securities dealers, investment companies, and investment advisers and their associated persons under Section 15(b) or
15B(c) of the Securities Exchange Act of 1934, or Section 203(e) or (f) of the Investment Advisers Act that
(a) Suspends or revokes your or the Company’s registration as a broker, dealer, municipal securities dealer or investment adviser
(1)
Places limitations on your or the Company’s activities, functions or operations
(2) Bars you or the
Company from being associated with any entity or from participating in the offering of any penny stock
5. SEC
cease-and-desist orders: Within the last five years, have you or the Company been the subject of SEC orders to cease and desist
from committing or causing a violation or future violations of
(a) The scienter-based
anti-fraud provisions of the federal securities laws
(b) Section 5 of the
Act
6. Suspension
or expulsion from membership in an SRO or from association with an SRO member: Have you or the Company been suspended or expelled
from membership in, or suspended or barred from association with a member of, a securities self-regulatory organization or “SRO”
(i.e., a registered national securities exchange or national securities association, such as FINRA) for any act or omission
to act constituting conduct inconsistent with just and equitable principles of trade.
7. SEC
stop orders:
(a) Within the last
five years, have you, as an officer or director of an issuer, or the Company filed a registration statement or Regulation A offering
statement that was the subject of a SEC refusal order, stop order or order suspending the Regulation A exemption, or are you now
the subject of an investigation or proceeding to determine whether such an order should be issued.
(b) Within the
last five years, have you or the Company been, or been named as, an underwriter of securities under a registration statement or
Regulation A offering statement that was the subject of a Commission refusal order, stop order or order suspending the Regulation
A exemption, or are you now the subject of an investigation or proceeding to determine whether such an order should be issued.
8. U.S.
Postal Service false representation orders: Within the last five years have you or the Company been subject to a U. S Postal
Service false representation order, temporary restraining order or preliminary injunction with respect to conduct alleged by the
U.S. Postal Service to constitute a scheme or device for obtaining money or property through the mail by means of false representations.
The foregoing answers
are true and correct in all respects. I understand that a “yes” answer will disqualify the issuer from relying on exemption
under Rule 506 under the Securities Act of 1933.
Dated:_________, 201_ |
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Signature |
Exhibit 10.2
Execution Version
[FORM OF WARRANT]
NEITHER THE ISSUANCE AND SALE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL SELECTED BY THE HOLDER, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING,
THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.
WPCS
International Incorporated
Warrant
To Purchase Common Stock
Warrant No.: ______
Number of Shares of Common Stock:_____________
Date of Issuance: July 14, 2015 ("Issuance Date")
WPCS International Incorporated,
a Delaware corporation (the "Company"), hereby certifies that, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, [BUYER], the registered holder
hereof or its permitted assigns (the "Holder"), is entitled, subject to the terms set forth below, to purchase
from the Company, at the Exercise Price (as defined below) then in effect, at any time or times on or after the Issuance Date,
but not after 11:59 p.m., New York time, on the Expiration Date, (as defined below), ______________ (_____________)1
fully paid nonassessable shares of Common Stock, subject to adjustment as provided herein (the "Warrant Shares").
Except as otherwise defined herein, capitalized terms in this Warrant to Purchase Common Stock (including any Warrants to Purchase
Common Stock issued in exchange, transfer or replacement hereof, this "Warrant") shall have the meanings set forth
in Section 17. This Warrant is one of the Warrants to purchase Common Stock (the "SPA Warrants") issued pursuant
to Section 2 of that certain Securities Purchase Agreement, dated as of July 14, 2015 (the "Subscription Date"),
by and among the Company and the investors (the "Buyers") referred to therein (the "Securities Purchase
Agreement"). Capitalized terms used herein and not otherwise defined shall have the definitions ascribed to such terms
in the Securities Purchase Agreement.
1
Insert 150% of the number of shares of Common Stock (on a fully diluted basis) purchased by the Holder pursuant to the Securities
Purchase Agreement.
1. EXERCISE
OF WARRANT.
(a)
Mechanics of Exercise. Subject to the terms and conditions hereof (including, without limitation, the limitations set forth
in Section 1(f)), this Warrant may be exercised by the Holder at any time or times on or after the Issuance Date, in whole or in
part, by (i) delivery of this Warrant and a written notice, in the form attached hereto as Exhibit A (the "Exercise
Notice"), of the Holder's election to exercise this Warrant and (ii) (A) payment to the Company of an amount equal
to the applicable Exercise Price multiplied by the number of Warrant Shares as to which this Warrant is being exercised (the "Aggregate
Exercise Price") in cash by wire transfer of immediately available funds or (B) if the provisions of Section 1(d) are
applicable, by notifying the Company that this Warrant is being exercised pursuant to a Cashless Exercise (as defined in Section
1(d)). Execution and delivery of the Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect
as cancellation of the original Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of
Warrant Shares. On or before the first (1st) Trading Day following the date on which the Company has received the Exercise
Notice and this Warrant, the Company shall transmit by facsimile an acknowledgment of confirmation of receipt of the Exercise Notice
and this Warrant to the Holder. On or before the third (3rd) Trading Day following the date on which the Company has received the
Exercise Notice and this Warrant, so long as the Holder delivers the Aggregate Exercise Price (or notice of a Cashless Exercise)
on or prior to the second (2nd) Trading Day following the date on which the Company has received the Exercise Notice and this Warrant
(the "Share Delivery Date") (provided that if the Aggregate Exercise Price (or notice of a Cashless Exercise)
has not been delivered by such date, the Share Delivery Date shall be extended one (1) Trading Day after the Aggregate Exercise
Price (or notice of a Cashless Exercise) is delivered), the Company shall (X) provided that the Company’s transfer agent
(“Transfer Agent”) is participating in The Depository Trust Company ("DTC") Fast Automated
Securities Transfer Program and the Warrant Shares are eligible to be issued without a restrictive legend, credit such aggregate
number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the Holder's or its designee's balance account
with DTC through its Deposit/Withdrawal At Custodian system, or (Y) if the Transfer Agent is not participating in the DTC Fast
Automated Securities Transfer Program or the Warrant Shares are not eligible to be issued without a restrictive legend, issue and
dispatch by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company's share
register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to
such exercise. The Company shall be responsible for all fees and expenses of the Transfer Agent and all fees and expenses with
respect to the issuance of Warrant Shares via DTC, if any. Upon delivery of this Warrant, the Exercise Notice and the Aggregate
Exercise Price (or notice of a Cashless Exercise) (such date of delivery being the “Exercise Date”), the Holder
shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this
Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder's DTC account or the date of
delivery of the certificates evidencing such Warrant Shares, as the case may be. If this Warrant is submitted in connection with
any exercise pursuant to this Section 1(a) and the number of Warrant Shares represented by this Warrant submitted for exercise
is greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as practicable and
in no event later than three (3) Trading Days after any exercise and at its own expense, issue a new Warrant (in accordance with
Section 7(d)) representing the right to purchase the number of Warrant Shares issuable immediately prior to such exercise under
this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised. No fractional Warrant Shares are
to be issued upon the exercise of this Warrant, but rather the number of Warrant Shares to be issued shall be rounded up to the
nearest whole number. The Company shall pay any and all taxes which may be payable with respect to the issuance and delivery of
Warrant Shares upon exercise of this Warrant; provided,
that the Company shall not be required to pay any tax or governmental charge that may be imposed with respect to any applicable
withholding or the issuance or delivery of the Warrant Shares to any Person other than the Holder, and no such issuance or delivery
shall be made unless and until such Person other than the Holder requesting such issuance has paid to the Company the amount of
any such tax, or has established to the satisfaction of the Company that such tax has been paid. The Company's obligations to issue
and deliver Warrant Shares in accordance with the terms and subject to the conditions hereof are absolute and unconditional, irrespective
of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery
of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination.
(b) Exercise
Price. For purposes of this Warrant, "Exercise Price" means $1.66, subject to adjustment as provided herein.
(c) Company's
Failure to Timely Deliver Securities. If (I) the Company shall fail for any reason or for no reason on or prior to the Share
Delivery Date either (a) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program and the
Warrant Shares are eligible to be issued without a restrictive legend, to issue to the Holder a certificate without any restrictive
legend for the number of shares of Common Stock to which the Holder is entitled and register such shares of Common Stock on the
Company's share register or (b) if the Transfer Agent is participating in the DTC Fast Automated Securities Transfer Program and
the Warrant Shares are eligible to be issued without a restrictive legend, to credit the Holder's balance account with DTC, for
such number of shares of Common Stock to which the Holder is entitled upon the Holder's exercise of this Warrant the Warrant Shares
are not eligible to be issued without a restrictive legend to issue and dispatch by overnight courier to the address as specified
in the Exercise Notice for delivery on or before the Share Delivery Date a certificate, registered in the Company’s share
register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to
such exercise, or (II) after the Initial Effective Date (as defined in the Registration Statement) and during the Registration
Period (as defined in the Registration Rights Agreement), (x) the Registration Statement (as defined in the Registration Rights
Agreement) covering the resale of all of the Warrant Shares that are the subject of the Exercise Notice (the "Unavailable
Warrant Shares") is not available for the resale of such Unavailable Warrant Shares, (y) the Company fails to promptly,
but in no event later than as required pursuant to the Registration Rights Agreement so notify the Holder and (z) the Company fails
to, on or prior to the Share Delivery Date, deliver the Warrant Shares electronically without any restrictive legend by crediting
such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the Holder's or its designee's
balance account with DTC through its Deposit/Withdrawal At Custodian system (the event described in the immediately foregoing clause
(II) is hereinafter referred as a "Notice Failure") and either a Notice Failure or an event described in clause
(I) above (referred to herein as an "Exercise Failure") occurs, then, in addition to all other remedies available
to the Holder, (X) the Company shall pay in cash to the Holder on each day after the Share Delivery Date and during such Notice
Failure or Exercise Failure an amount equal to 1.0% of the product of (A) the sum of the number of shares of Common Stock not issued
to the Holder on or prior to the Share Delivery Date and to which the Holder is entitled, and (B) any trading price of the Common
Stock selected by the Holder in writing as in effect at any time during the period beginning on the applicable Exercise Date and
ending on the applicable Share Delivery Date, and (Y) the Holder, upon written notice to the Company, may void its Exercise Notice
with respect to, and retain or have returned, as the case may be, any portion of this Warrant that has not been exercised pursuant
to such Exercise Notice; provided that the voiding of an Exercise Notice shall not affect the Company's obligations to make any
payments which have accrued prior to the date of such notice pursuant to this Section 1(c) or otherwise. If the Company is required
to pay liquidated damages hereunder solely as a result of a Notice Failure, the liquidated damages related thereto will cease to
accrue upon delivery of a written notice to the Holder specifying the correct status of the applicable Registration Statement.
For the avoidance of doubt, the Company acknowledges that the Company may be liable for Registration Delay Payments pursuant to
the Registration Rights Agreement in the event of an Exercise Failure or Notice Failure. In addition to the foregoing, if an Exercise
Failure or Notice Failure occurs, and if on or after the Share Delivery Date the Holder purchases (in an open market transaction
or otherwise) shares of Common Stock to deliver in satisfaction of a sale through a broker by the Holder of shares of Common Stock
issuable upon such exercise that the Holder anticipated receiving from the Company (a "Buy-In"), then the Company
shall, within three (3) Trading Days after the Holder's request and in the Holder's discretion, either (i) pay cash to the Holder
in an amount equal to the Holder's total purchase price (including brokerage commissions and other out-of-pocket expenses, if any)
for the shares of Common Stock so purchased (the "Buy-In Price"), at which point the Company's obligation to deliver
such certificate (and to issue such shares of Common Stock) or credit such Holder's balance account with DTC for such shares of
Common Stock shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing
such shares of Common Stock or credit such Holder's balance account with DTC, as applicable, and pay cash to the Holder in an amount
equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) any trading
price of the Common Stock selected by the Holder in writing as in effect at any time during the period beginning on the applicable
Exercise Date and ending on the applicable Share Delivery Date. Nothing shall limit the Holder's right to pursue any other remedies
available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive
relief with respect to the Company's failure to timely deliver certificates representing shares of Common Stock (or to electronically
deliver such shares of Common Stock) upon the exercise of this Warrant as required pursuant to the terms hereof.
(d) Cashless
Exercise. Notwithstanding anything contained herein to the contrary (other than Section 1(f) below), the Holder may, in
its sole discretion (and without limiting the Holder’s rights and remedies contained herein), exercise this Warrant in whole
or in part and, subject to the provisions of Section 1(a), in lieu of making the cash payment otherwise contemplated to be
made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to receive the number of Warrant
Shares as is computed using the following formula:
X =Y(A - B) ÷ A
Where:
X = the number of Warrant Shares
to be issued to the Holder.
Y = the total number of Warrant
Shares for which the Holder has elected to exercise this Warrant pursuant to Section 1(a).
A = the Closing Bid Price of the
Company’s Common Stock as of the applicable Exercise Date.
B = the Exercise Price in effect
under this Warrant as of the applicable Exercise Date.
For purposes of Rule 144(d) promulgated
under the 1933 Act, as in effect on the date hereof, it is intended that the Warrant Shares issued in a Cashless Exercise shall
be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced,
on the date this Warrant was originally issued pursuant to the Securities Purchase Agreement.
(e) Disputes.
In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the
Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute in accordance
with Section 12.
(f) Limitations
on Exercises. Notwithstanding anything to the contrary contained herein, the Company shall not effect the exercise of any portion
of this Warrant, and the Holder shall not have the right to exercise any portion of this Warrant, pursuant to the terms and conditions
of this Warrant and any such exercise shall be null and void and treated as if never made, to the extent that after giving effect
to such exercise, the Holder together with the other Attribution Parties collectively would beneficially own in excess of 9.99%
(the "Maximum Percentage") of the number of shares of Common Stock outstanding immediately after giving effect
to such exercise. For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by
the Holder and the other Attribution Parties shall include the number of shares of Common Stock held by the Holder and all other
Attribution Parties plus the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which the
determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon
(A) exercise of the remaining, unexercised portion of this Warrant beneficially owned by the Holder or any of the other Attribution
Parties and (B) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company (including,
without limitation, any convertible notes or convertible preferred stock or warrants, including the other SPA Warrants) beneficially
owned by the Holder or any other Attribution Party subject to a limitation on conversion or exercise analogous to the limitation
contained in this Section 1(f). For purposes of this Section 1(f), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act"). For purposes of this Warrant,
in determining the number of outstanding shares of Common Stock the Holder may acquire upon the exercise of this Warrant without
exceeding the Maximum Percentage, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the
Company's most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other public filing
with the Securities and Exchange Commission (the "SEC"), as the case may be, (y) a more recent public announcement
by the Company or (3) any other written notice by the Company or the Transfer Agent setting forth the number of shares of Common
Stock outstanding (the "Reported Outstanding Share Number"). If the Company receives an Exercise Notice from the
Holder at a time when the actual number of outstanding shares of Common Stock is less than the Reported Outstanding Share Number,
the Company shall (i) notify the Holder in writing of the number of shares of Common Stock then outstanding and, to the extent
that such Exercise Notice would otherwise cause the Holder's beneficial ownership, as determined pursuant to this Section 1(f),
to exceed the Maximum Percentage, the Holder must notify the Company of a reduced number of Warrant Shares to be purchased pursuant
to such Exercise Notice (the number of shares by which such purchase is reduced, the "Reduction Shares") and (ii)
as soon as reasonably practicable, the Company shall return to the Holder any exercise price paid by the Holder for the Reduction
Shares. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day
confirm orally and in writing or by electronic mail to the Holder the number of shares of Common Stock then outstanding. In any
case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of
securities of the Company, including this Warrant, by the Holder and any other Attribution Party since the date as of which the
Reported Outstanding Share Number was reported. In the event that the issuance of shares of Common Stock to the Holder upon exercise
of this Warrant results in the Holder and the other Attribution Parties being deemed to beneficially own, in the aggregate, more
than the Maximum Percentage of the number of outstanding shares of Common Stock (as determined under Section 13(d) of the 1934
Act), the number of shares so issued by which the Holder's and the other Attribution Parties' aggregate beneficial ownership exceeds
the Maximum Percentage (the "Excess Shares") shall be deemed null and void and shall be cancelled ab initio, and
the Holder shall not have the power to vote or to transfer the Excess Shares. As soon as reasonably practicable after the issuance
of the Excess Shares has been deemed null and void, the Company shall return to the Holder the exercise price paid by the Holder
for the Excess Shares. Upon delivery of a written notice to the Company, the Holder may from time to time increase (with such increase
not effective until the sixty-first (61st) day after delivery of such notice) or decrease the Maximum Percentage to
any other percentage not in excess of 9.99% as specified in such notice; provided that (i) any such increase in the Maximum Percentage
will not be effective until the sixty-first (61st) day after such notice is delivered to the Company and (ii) any such
increase or decrease will apply only to the Holder and the other Attribution Parties and not to any other holder of SPA Warrants
that is not an Attribution Party of the Holder. For purposes of clarity, the shares of Common Stock issuable pursuant to the terms
of this Warrant in excess of the Maximum Percentage shall not be deemed to be beneficially owned by the Holder for any purpose
including for purposes of Section 13(d) or Rule 16a-1(a)(1) of the 1934 Act. No prior inability to exercise this Warrant pursuant
to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent
determination of exercisability. The provisions of this paragraph shall be construed and implemented in a manner otherwise than
in strict conformity with the terms of this Section 1(f) to the extent necessary to correct this paragraph or any portion of this
paragraph which may be defective or inconsistent with the intended beneficial ownership limitation contained in this Section 1(f)
or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitation contained in
this paragraph may not be waived and shall apply to a successor holder of this Warrant.
(g) Insufficient
Authorized Shares. If at any time while this Warrant remains outstanding the Company does not have a sufficient number of authorized
and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon exercise of this Warrant at least
a number of shares of Common Stock equal to the number of shares of Common Stock as shall from time to time be necessary to effect
the exercise of all of this Warrant then outstanding (the "Required Reserve Amount" and the failure to have such
sufficient number of authorized and unreserved shares of Common Stock, an "Authorized Share Failure"), then the
Company shall immediately take all action necessary to increase the Company's authorized shares of Common Stock to an amount sufficient
to allow the Company to reserve the Required Reserve Amount for this Warrant then outstanding. Without limiting the generality
of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event
later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its stockholders
for the approval of an increase in the number of authorized shares of Common Stock. In connection with such meeting, the Company
shall provide each stockholder with a proxy statement and shall use its commercially reasonable efforts to solicit its stockholders'
approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the stockholders
that they approve such proposal. Notwithstanding the foregoing, if any such time of an Authorized Share Failure, the Company is
able to obtain the written consent of a majority of the shares of its issued and outstanding Common Stock to approve the increase
in the number of authorized shares of Common Stock without soliciting its stockholders, the Company may satisfy this obligation
by obtaining such consent and submitting for filing with the SEC an Information Statement on Schedule 14C. In the event that upon
any exercise of this Warrant, the Company does not have sufficient authorized shares to deliver in satisfaction of such exercise,
then unless the Holder elects to void such attempted exercise, the Holder may require the Company to pay to the Holder within three
(3) Trading Days of the applicable exercise, cash in an amount equal to the product of (i) the quotient determined by dividing
(x) the number of Warrant Shares that the Company is unable to deliver pursuant to this Section 1(g), by (y) the total number of
Warrant Shares issuable upon exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant)
and (ii) the Black Scholes Value; provided, that (x) references to "the day immediately following the public announcement
of the applicable Fundamental Transaction" in the definition of "Black Scholes Value" shall instead refer to "the
date the Holder exercises this Warrant and the Company cannot deliver the required number of Warrant Shares because of an Authorized
Share Failure" and (y) clause (iii) of the definition of "Black Scholes Value" shall instead refer to "the
underlying price per share used in such calculation shall be the highest Weighted Average Price during the period beginning on
the date of the applicable date of exercise and the date that the Company makes the applicable cash payment."
2. ADJUSTMENT
OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and the number of Warrant Shares shall be adjusted from
time to time as follows:
(a) Intentionally
Omitted.
(b) Adjustment
Upon Subdivision or Combination of Shares of Common Stock. If the Company at any time on or after the Subscription Date subdivides
(by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock
into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced
and the number of Warrant Shares will be proportionately increased. If the Company at any time on or after the Subscription Date
combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into
a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased
and the number of Warrant Shares will be proportionately decreased. Any adjustment under this Section 2(b) shall become effective
at the close of business on the date the subdivision or combination becomes effective.
3. RIGHTS
UPON DISTRIBUTION OF ASSETS. If the Company shall declare or make any dividend or other distribution of its assets (or rights
to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation,
any distribution of cash, stock or other securities, property, options, evidence of indebtedness or any other assets by way of
a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a "Distribution"),
at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled, and the Company shall reserve
the Holder’s pro rata share of the Distribution pending complete exercise of this Warrant, to participate in such Distribution
to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock
acquirable upon complete exercise of this Warrant (without regard to any limitations or restrictions on exercise of this Warrant,
including without limitation, the Maximum Percentage) immediately before the date of which a record is taken for such Distribution,
or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the
participation in such Distribution (provided, however, that to the extent that the Holder's right to participate
in any such Distribution would result in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the
Holder shall not be entitled to participate in such Distribution to such extent (and shall not be entitled to beneficial ownership
of such shares of Common Stock as a result of such Distribution (and beneficial ownership) to such extent).
4. PURCHASE
RIGHTS; FUNDAMENTAL TRANSACTIONS.
(a) Purchase
Rights. In addition to any adjustments pursuant to Section 2 above, if at any time the Company grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to all of the record
holders of any class of Common Stock (the "Purchase Rights"), then the Holder will be entitled, and the Company
shall reserve the Holder’s pro rata share of the Purchase Rights pending complete exercise of this Warrant, to acquire, upon
the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder
had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations
or restrictions on exercise of this Warrant, including without limitation, the Maximum Percentage) immediately before the date
on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as
of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights
(provided, however, that to the extent that the Holder's right to participate in any such Purchase Right would result
in the Holder and the other Attribution Parties exceeding the Maximum Percentage, then the Holder shall not be entitled to participate
in such Purchase Right to such extent (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result
of such Purchase Right (and beneficial ownership) to such extent).
(b) Fundamental
Transactions. In the event of any Fundamental Transaction, this Warrant shall, immediately after such Fundamental Transaction,
remain outstanding and shall thereafter, be exercisable for the number of Warrant Shares then exercisable under this Warrant, subject
to appropriate adjustment (in form and substance satisfactory to the Holder) in the Exercise Price to the value per share for the
Common Stock reflected by the terms of such Fundamental Transaction, and a corresponding immediate adjustment to the number of
Warrant Shares acquirable upon exercise of this Warrant without regard to any limitations or restrictions on exercise, if the value
so reflected is less than the Exercise Price in effect immediately prior to such consolidation, merger, sale or similar transaction).
The provisions of this Section 4(b) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers,
sales or similar transactions. The Company shall not effect any such Fundamental Transaction unless, prior to the consummation
thereof, the successor Person (if other than the Company) resulting from such Fundamental Transaction, shall assume, by written
instrument substantially similar in form and substance to this Warrant and satisfactory to the Holder, the obligation to deliver
to the Holder the number of Warrant Shares then exercisable under this Warrant, subject to adjustment, in accordance with the foregoing
provisions. Notwithstanding anything to the contrary contained herein, with respect to any Fundamental Transaction, the Holder
shall have the right to elect prior to the consummation of such Fundamental Transaction, to give effect to the exercise rights
contained in Section 1 instead of giving effect to the provisions contained in this Section 4(b) with respect to this Warrant.
5. NONCIRCUMVENTION.
The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation or Bylaws, or
through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities,
or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will
at all times in good faith carry out all of the provisions of this Warrant and take all action as may be required to protect the
rights of the Holder. Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of
any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall
take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the proper exercise of this Warrant by the Holder, and (iii) shall, so long as any of
the SPA Warrants are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares
of Common Stock, solely for the purpose of effecting the exercise of the SPA Warrants, the number of shares of Common Stock as
shall from time to time be necessary to effect the exercise of the SPA Warrants then outstanding (without regard to any limitations
on exercise).
6. WARRANT
HOLDER NOT DEEMED A STOCKHOLDER. Except as otherwise specifically provided herein, the Holder, solely in such Person's capacity
as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the
Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in such Person's
capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger,
conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance
to the Holder of the Warrant Shares which such Person is then entitled to receive upon the due exercise of this Warrant. In addition,
nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon
exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company
or by creditors of the Company. Notwithstanding this Section 6, the Company shall provide the Holder with copies of the same notices
and other information given to the stockholders of the Company generally, contemporaneously with the giving thereof to the stockholders.
7. REISSUANCE
OF WARRANTS.
(a) Transfer
of Warrant. If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company
will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the
Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less
than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section
7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.
(b) Lost,
Stolen or Mutilated Warrant. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant, and, in the case of loss, theft or destruction, of any indemnification undertaking by
the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Warrant, the
Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing the right to purchase
the Warrant Shares then underlying this Warrant.
(c) Exchangeable
for Multiple Warrants. This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the
Company, for a new Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the
number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion
of such Warrant Shares as is designated by the Holder at the time of such surrender; provided, however, that no SPA
Warrants for fractional Warrant Shares shall be given.
(d) Issuance
of New Warrants. Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant
(i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to
purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a)
or Section 7(c), the Warrant Shares designated by the Holder which, when added to the number of shares of Common Stock underlying
the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this
Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date,
and (iv) shall have the same rights and conditions as this Warrant.
8. NOTICES.
Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance
with Section 9.4 of the Securities Purchase Agreement. The Company shall provide the Holder with prompt written notice of all actions
taken pursuant to this Warrant, including in reasonable detail a description of such action and the reason therefor. Without limiting
the generality of the foregoing, the Company will give written notice to the Holder (i) immediately upon any adjustment of the
Exercise Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least fifteen
(15) days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution
upon the shares of Common Stock, (B) with respect to any grants, issuances or sales of any Options, Convertible Securities or rights
to purchase stock, warrants, securities or other property to holders of shares of Common Stock or (C) for determining rights to
vote with respect to any Fundamental Transaction, dissolution or liquidation; provided in each case that such information
shall be made known to the public prior to or in conjunction with such notice being provided to the Holder. It is expressly understood
and agreed that the time of exercise specified by the Holder in each Exercise Notice shall be definitive and may not be disputed
or challenged by the Company.
9. AMENDMENT
AND WAIVER. Except as otherwise provided herein, the provisions of this Warrant may be amended or waived and the Company may
take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company has obtained
the written consent of the Required Holders, and with respect to any amendment, the amendment is in writing and signed by the Company,
except that any Holder may waive the Company’s performance hereunder or provide consent as the only such Holder.
10. GOVERNING
LAW; JURISDICTION; JURY TRIAL. This Warrant shall be governed by and construed and enforced in accordance with, and all questions
concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of
the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of
New York. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City
of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is improper. The Company hereby irrevocably waives
personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof
to the Company at the address set forth in Section 9.4 of the Securities Purchase Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any manner permitted by law. Nothing contained herein shall be deemed or operate to preclude
the Holder from bringing suit or taking other legal action against the Company in any other jurisdiction to collect on the Company's
obligations to the Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or
other court ruling in favor of the Holder. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST,
A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
11. CONSTRUCTION;
HEADINGS. This Warrant shall be deemed to be jointly drafted by the Company and all the Buyers and shall not be construed against
any Person as the drafter hereof. The headings of this Warrant are for convenience of reference and shall not form part of, or
affect the interpretation of, this Warrant.
12. DISPUTE
RESOLUTION. In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant
Shares, the Company shall submit the disputed determinations or arithmetic calculations via facsimile within two (2) Business Days
of receipt of the Exercise Notice giving rise to such dispute, as the case may be, to the Holder. If the Holder and the Company
are unable to agree upon such determination or calculation of the Exercise Price or the Warrant Shares within three (3) Business
Days of such disputed determination or arithmetic calculation being submitted to the Holder, then the Company shall, within two
(2) Business Days submit via facsimile (a) the disputed determination of the Exercise Price to an independent, reputable investment
bank selected by the Company and approved by the Holder or (b) the disputed arithmetic calculation of the Warrant Shares to the
Company's independent, outside accountant. The Company shall cause at its expense the investment bank or the accountant, as the
case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than ten
(10) Business Days from the time it receives the disputed determinations or calculations. Such investment bank's or accountant's
determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.
13. REMEDIES,
OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies provided in this Warrant shall be cumulative and in addition
to all other remedies available under this Warrant and the other Transaction Documents, at law or in equity (including a decree
of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder to pursue actual
damages for any failure by the Company to comply with the terms of this Warrant. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate.
The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled,
in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic
loss and without any bond or other security being required.
14. TRANSFER. This
Warrant and the Warrant Shares may be offered for sale, sold, transferred, pledged or assigned without the consent of the Company.
15. SEVERABILITY. If
any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the
broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect
the validity of the remaining provisions of this Warrant so long as this Warrant as so modified continues to express, without material
change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability
of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties
or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good
faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which
comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).
16. DISCLOSURE.
Upon receipt or delivery by the Company of any notice in accordance with the terms of this Warrant, unless the Company has in good
faith determined that the matters relating to such notice do not constitute material, nonpublic information relating to the Company
or its Subsidiaries (as defined in the Securities Purchase Agreement), the Company shall within four (4) Business Days after any
such receipt or delivery publicly disclose such material, nonpublic information on a Current Report on Form 8-K or otherwise. In
the event that the Company believes that a notice contains material, nonpublic information relating to the Company or its Subsidiaries,
the Company so shall indicate to such Holder contemporaneously with delivery of such notice, and in the absence of any such indication,
the Holder shall be allowed to presume that all matters relating to such notice do not constitute material, nonpublic information
relating to the Company or its Subsidiaries.
17. CERTAIN
DEFINITIONS. For purposes of this Warrant, the following terms shall have the following meanings:
(a) "1933
Act" means the Securities Act of 1933, as amended.
(b) "Affiliate"
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
(a) "Attribution
Parties" means, collectively, the following Persons and entities: (i) any investment vehicle, including, any funds, feeder
funds or managed accounts, currently, or from time to time after the Issuance Date, directly or indirectly managed or advised by
the Holder's investment manager or any of its Affiliates or principals, (ii) any direct or indirect Affiliates of the Holder or
any of the foregoing, (iii) any Person acting or who could be deemed to be acting as a Group together with the Holder or any of
the foregoing and (iv) any other Persons whose beneficial ownership of the Company's Common Stock would or could be aggregated
with the Holder's and the other Attribution Parties for purposes of Section 13(d) of the 1934 Act. For clarity, the purpose of
the foregoing is to subject collectively the Holder and all other Attribution Parties to the Maximum Percentage.
(b) "Black
Scholes Value" means the value of this Warrant based on the Black-Scholes Option Pricing Model obtained from the "OV"
function on Bloomberg determined as of the day immediately following the public announcement of the applicable Fundamental Transaction,
or, if the Fundamental Transaction is not publicly announced, the date the Fundamental Transaction is consummated, for pricing
purposes and reflecting (i) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining
term of this Warrant as of such date of request, (ii) an expected volatility equal to the greater of 100% and the 100 day volatility
obtained from the HVT function on Bloomberg as of the day immediately following the public announcement of the applicable Fundamental
Transaction, or, if the Fundamental Transaction is not publicly announced, the date the Fundamental Transaction is consummated,
(iii) the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if
any, plus the value of any non-cash consideration, if any, being offered in the Fundamental Transaction, (iv) a zero cost of borrow
and (v) a 360 day annualization factor.
(c) "Bloomberg"
means Bloomberg Financial Markets.
(d) "Business
Day" means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any
day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
(e) "Closing
Bid Price" and "Closing Sale Price" means, for any security as of any date, the last closing bid price
and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal
Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price, as
the case may be, then the last bid price or the last trade price, respectively, of such security prior to 4:00:00 p.m., New York
time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such
security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or
trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing
bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security
by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported
in the OTC Link or "pink sheets" by OTC Markets Group Inc. (formerly Pink OTC Markets Inc.). If the Closing Bid Price
or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid
Price or the Closing Sale Price, as the case may be, of such security on such date shall be the fair market value as mutually determined
by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then
such dispute shall be resolved pursuant to Section 12. All such determinations to be appropriately adjusted for any stock dividend,
stock split, stock combination, reclassification or other similar transaction during the applicable calculation period.
(f) "Common
Stock" means (i) the Company's shares of Common Stock, par value $0.0001 per share, and (ii) any share capital
into which such Common Stock shall have been changed or any share capital resulting from a reclassification of such Common Stock.
(g) "Convertible
Securities" means any stock or securities (other than Options) directly or indirectly convertible into or exercisable
or exchangeable for shares of Common Stock.
(h) "Eligible
Market" means the Principal Market, the NYSE MKT LLC, The NASDAQ Capital Market, The NASDAQ Global Market, The NASDAQ
Global Select Market, or The New York Stock Exchange, Inc.
(i) “Equity
Conditions” means: (i) the Company shall have complied in all material respects with all applicable securities
laws and regulations and all rules and regulations of the Eligible Markets in respect of the offer, sale and issuance of the Securities,
(ii) the Common Stock (including all shares of Common Stock to be received by Holder) shall be listed or designated for quotation
(as applicable) on an Eligible Market and no Trading Market Event (or event which with notice or passage of time would be a Trading
Market Event) has occurred, nor shall delisting or suspension by any Eligible Market be pending or threatened, unless upon the
occurrence of such Trading Market Event, delisting or suspension, the Common Stock would be eligible for listing or for quotation
(as applicable) on another Eligible Market, (iii) the Company shall be in compliance in all material respects with all of
its obligations under this Warrant, (iv) each of the Registration Statement (as defined in the Securities Purchase Agreement)
and the prospectus contained therein shall be effective and fully available for use with respect to the resale of all of the Registrable
Securities (as defined in the Registration Rights Agreement), including, without limitation, any Warrant Shares issued pursuant
to a cash exercise hereof, (v) all Warrant Shares (including any Warrant Shares to be received upon exercise or exchange of
this Warrant and including any Warrant Shares to be issued in a cash exercise, but taking into account the limitations of Section 1(f))
shall be then (or upon such issuance (as the case may be)) freely tradable by the Holder without restriction of any kind or nature
(and the Company shall have no knowledge of any fact which would reasonably be expected to negate the foregoing in the foreseeable
future), (vi) no limitation shall be applicable with respect to the issuance of any Warrant Shares hereunder (other than under
Section 1(f)), and (vii) the Company is fully reporting under the 1934 Act and Rule 144 (as defined in the Securities
Purchase Agreement). For purposes hereof, a “Trading Market Event” shall mean if the Company or the Common Stock
or any shares of Common Stock issued or issuable hereunder shall cease or fail to be listed for trading or quoted on any Eligible
Market or shall fall below any dollar threshold for listing or qualification or the Company shall then not be in compliance with
any applicable listing or qualification standard (or will be with the passage of time).
(j) "Expiration
Date" means the date sixty (60) months after the Issuance Date or, if such date falls on a day other than a Business Day
or on which trading does not take place on the Principal Market (a "Holiday"), the next day that is not a Holiday.
(k) "Fundamental
Transaction" means (A) that the Company shall, directly or indirectly, including through Subsidiaries, Affiliates or otherwise,
in one or more related transactions, (i) consolidate or merge with or into (whether or not the Company is the surviving corporation)
another Subject Entity, or (ii) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties
or assets of the Company or any of its "significant subsidiaries" (as defined in Rule 1-02 of Regulation S-X) to one
or more Subject Entities, or (iii) make, or allow one or more Subject Entities to make, or allow the Company to be subject to or
have its Common Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that
is accepted by the holders of at least either (x) 50% of the outstanding shares of Common Stock, (y) 50% of the outstanding shares
of Common Stock calculated as if any shares of Common Stock held by all Subject Entities making or party to, or Affiliated with
any Subject Entities making or party to, such purchase, tender or exchange offer were not outstanding; or (z) such number of shares
of Common Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such
purchase, tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of
at least 50% of the outstanding shares of Common Stock, or (iv) consummate a stock purchase agreement or other business combination
(including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more Subject
Entities whereby all such Subject Entities, individually or in the aggregate, acquire, either (x) at least 50% of the outstanding
shares of Common Stock, (y) at least 50% of the outstanding shares of Common Stock calculated as if any shares of Common Stock
held by all the Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such stock purchase
agreement or other business combination were not outstanding; or (z) such number of shares of Common Stock such that the Subject
Entities become collectively the beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of at least 50% of the outstanding
shares of Common Stock, or (v) reorganize, recapitalize or reclassify its Common Stock, (B) that the Company shall, directly or
indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions, allow any Subject Entity
individually or the Subject Entities in the aggregate to be or become the "beneficial owner" (as defined in Rule 13d-3
under the 1934 Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer,
exchange, reduction in outstanding shares of Common Stock, merger, consolidation, business combination, reorganization, recapitalization,
spin-off, scheme of arrangement, reorganization, recapitalization or reclassification or otherwise in any manner whatsoever, of
either (x) at least 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock, (y) at least
50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock not held by all such Subject Entities
as of the date of this Warrant calculated as if any shares of Common Stock held by all such Subject Entities were not outstanding,
or (z) a percentage of the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other
equity securities of the Company sufficient to allow such Subject Entities to effect a statutory short form merger or other transaction
requiring other stockholders of the Company to surrender their shares of Common Stock without approval of the stockholders of the
Company or (C) directly or indirectly, including through subsidiaries, Affiliates or otherwise, in one or more related transactions,
the issuance of or the entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents,
the intent of this definition in which case this definition shall be construed and implemented in a manner otherwise than in strict
conformity with the terms of this definition to the extent necessary to correct this definition or any portion of this definition
which may be defective or inconsistent with the intended treatment of such instrument or transaction.
(l) "Group"
means a "group" as that term is used in Section 13(d) of the 1934 Act and as defined in Rule 13d-5 thereunder.
(m) "Options"
means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.
(n) "Parent
Entity" of a Person means an entity that, directly or indirectly, controls the applicable Person, including such entity
whose common shares or common stock or equivalent equity security is quoted or listed on an Eligible Market (or, if so elected
by the Required Holders, any other market, exchange or quotation system), or, if there is more than one such Person or such entity,
the Person or such entity designated by the Required Holders or in the absence of such designation, such Person or entity with
the largest public market capitalization as of the date of consummation of the Fundamental Transaction.
(o) "Person"
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
(p) "Principal
Market" means the Nasdaq Capital Market.
(q) "Registration
Rights Agreement" means that certain Registration Rights Agreement dated as of the date of the Securities Purchase Agreement
by and among the Company and the Buyers.
(r) "Required
Holders" means the holders of the SPA Warrants representing at least a majority of the shares of Common Stock underlying
the SPA Warrants then outstanding.
(s) "Subject
Entity" means any Person, Persons or Group or any Affiliate or associate of any such Person, Persons or Group.
(t) "Successor
Entity" means one or more Person or Persons (or, if so elected by the Holder, the Company or Parent Entity) formed by,
resulting from or surviving any Fundamental Transaction or one or more Person or Persons (or, if so elected by the Holder, the
Company or the Parent Entity) with which such Fundamental Transaction shall have been entered into.
(u) "Trading
Day" means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the
principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common
Stock is then traded; provided that "Trading Day" shall not include any day on which the Common Stock is scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the
final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time
of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time).
(v) "Weighted
Average Price" means, for any security as of any date, the dollar volume-weighted average price for such security on the
Principal Market during the period beginning at 9:30:01 a.m., New York time (or such other time as the Principal Market publicly
announces is the official open of trading), and ending at 4:00:00 p.m., New York time (or such other time as the Principal Market
publicly announces is the official close of trading), as reported by Bloomberg through its "Volume at Price" function
or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on
the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time (or such other time
as such market publicly announces is the official open of trading), and ending at 4:00:00 p.m., New York time (or such other time
as such market publicly announces is the official close of trading), as reported by Bloomberg, or, if no dollar volume-weighted
average price is reported for such security by Bloomberg for such hours, the average of the highest Closing Bid Price and the lowest
closing ask price of any of the market makers for such security as reported in the OTC Link or "pink sheets" by OTC Markets
Group Inc. (formerly Pink OTC Markets Inc.). If the Weighted Average Price cannot be calculated for a security on a particular
date on any of the foregoing bases, the Weighted Average Price of such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value
of such security, then such dispute shall be resolved pursuant to Section 12 with the term "Weighted Average Price" being
substituted for the term "Exercise Price." All such determinations shall be appropriately adjusted for any stock dividend,
stock split, stock combination, reclassification or other similar transaction during the applicable calculation period.
[Signature Page Follows]
IN WITNESS WHEREOF,
the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.
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WPCS INTERNATIONAL INCORPORATED |
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By: |
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Name: |
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Title: |
EXHIBIT A
EXERCISE NOTICE
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THIS
WARRANT TO PURCHASE COMMON STOCK
WPCS
INTERNATIONAL INCORPORATED
The undersigned holder
hereby exercises the right to purchase _________________ of the shares of Common Stock ("Warrant Shares") of WPCS
International Incorporated, a Delaware corporation (the "Company"), evidenced by the attached Warrant to Purchase
Common Stock (the "Warrant"). Capitalized terms used herein and not otherwise defined shall have the respective
meanings set forth in the Warrant.
1. Form of Exercise
Price. The Holder intends that payment of the Exercise Price shall be made as:
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a "Cash Exercise" with respect to _________________ Warrant Shares; and/or |
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a "Cashless Exercise" with respect to _______________ Warrant Shares. |
2. Payment of Exercise
Price. In the event that the holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issued
pursuant hereto, the holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance
with the terms of the Warrant.
3. Delivery of Warrant
Shares. The Company shall deliver to the holder __________ Warrant Shares in accordance with the terms of the Warrant.
_______ Electronic Delivery |
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DTC Participant: |
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DTC Number: |
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Account Name: |
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Account Number: |
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_______ Physical Delivery |
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Address: |
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Date: _______________ __, ______
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Name of Registered Holder |
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ACKNOWLEDGMENT
The Company hereby
acknowledges this Exercise Notice and hereby directs Interwest Transfer Company, Inc. to issue the above indicated number of shares
of Common Stock in accordance with the Exercise Notice.
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WPCS INTERNATIONAL INCORPORATED |
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By: |
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Name: |
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Title: |
Exhibit 10.3
Execution Version
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS
AGREEMENT (this "Agreement"), dated as of July 14, 2015, by and among WPCS International Incorporated, a Delaware
corporation, with headquarters located at 521 Railroad Avenue, Suisun City, CA 94585 (the "Company"), and the
investors listed on the Schedule of Purchasers attached hereto (each, a "Purchaser" and collectively, the "Purchasers").
WHEREAS:
A. In
connection with the Securities Purchase Agreement by and among the parties hereto of even date herewith (the "Securities
Purchase Agreement"), the Company has agreed, upon the terms and subject to the conditions of the Securities Purchase
Agreement, to issue and sell to each Purchaser, (i) shares of the Company's Series H-1 Preferred Convertible Stock, par value $0.0001
per share (the "Series H-1 Preferred Stock"), which will be convertible into shares of the Company's common stock,
par value $0.0001 per share (the "Common Stock") (the shares of Common Stock issuable upon conversion of the Series
H-1 Preferred Stock, collectively, the "Common Shares") and (ii) warrants (the "Warrants") which
will be exercisable to purchase shares of Common Stock (as exercised, collectively, the "Warrant Shares") in accordance
with the terms of the Warrants.
B. In
accordance with the terms of the Securities Purchase Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively,
the "1933 Act"), and applicable state securities laws.
NOW, THEREFORE,
in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company and each of the Purchasers hereby agree as follows:
1. Definitions.
Capitalized terms used
herein and not otherwise defined herein shall have the respective meanings set forth in the Securities Purchase Agreement. As used
in this Agreement, the following terms shall have the following meanings:
(a) "Additional
Effective Date" means the date the Additional Registration Statement is declared effective by the SEC.
(b) "Additional
Effectiveness Deadline" means the date which is the earlier of (x) (i) in the event that the Additional Registration Statement
is not subject to a full review by the SEC, twenty (20) calendar days after the earlier of the Additional Filing Date and the Additional
Filing Deadline or (ii) in the event that the Additional Registration Statement is subject to a full review by the SEC, fifty (50)
calendar days after the earlier of the Additional Filing Date and the Additional Filing Deadline and (y) the fifth (5th)
Business Day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such Additional
Registration Statement will not be reviewed or will not be subject to further review; provided, however, that if the Additional
Effectiveness Deadline falls on a Saturday, Sunday or other day that the SEC is closed for business, the Additional Effectiveness
Deadline shall be extended to the next Business Day on which the SEC is open for business.
(c) "Additional
Filing Date" means the date on which the Additional Registration Statement is filed with the SEC.
(d) "Additional
Filing Deadline" means if Cutback Shares are required to be included in any Additional Registration Statement, thirty
(30) days after the date substantially all of the Registrable Securities registered under the immediately preceding Registration
Statement are sold.
(e) "Additional
Registrable Securities" means, (i) any Cutback Shares not previously included on a Registration Statement and (ii) any
capital stock of the Company issued or issuable with respect to the Common Shares, the Warrants, the Warrant Shares, or the Cutback
Shares, as applicable, as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise
without regard to any limitations on exercise of the warrants.
(f) "Additional
Registration Statement" means a registration statement or registration statements of the Company filed under the 1933
Act covering the resale of any Additional Registrable Securities.
(g) "Additional
Required Registration Amount" means (I) any Cutback Shares not previously included on a Registration Statement, all subject
to adjustment as provided in Section 2(f) or (II) such other amount as may be permitted by the staff of the SEC pursuant to Rule
415, without regard to any limitations on exercise of the Warrants.
(h) "Business
Day" means any day other than Saturday, Sunday or any other day on which commercial banks in the City of New York are
authorized or required by law to remain closed.
(i) "Closing
Date" shall have the meaning set forth in the Securities Purchase Agreement.
(j) "Cutback
Shares" means any of the Initial Required Registration Amount or the Additional Required Registration Amount (without
regard to clause (II) in the definition thereof) of Registrable Securities not included in all Registration Statements previously
declared effective as contemplated hereunder as a result of a limitation on the maximum number of shares of Common Stock of the
Company permitted to be registered by the staff of the SEC pursuant to Rule 415. For the purpose of determining the Cutback Shares,
in order to determine any applicable Required Registration Amount, unless an Investor gives written notice to the Company to the
contrary with respect to the allocation of its Cutback Shares, first the Warrant Shares shall be excluded on a pro rata basis among
the Investors until all of the Warrant Shares have been excluded, and second the Common Shares shall be excluded on a pro rata
basis among the Investors until all of the Common Shares have been excluded.
(k) "Effective
Date" means the Initial Effective Date and the Additional Effective Date, as applicable.
(l) "Effectiveness
Deadline" means the Initial Effectiveness Deadline and the Additional Effectiveness Deadline, as applicable.
(m) "Eligible
Market" means the Principal Market, The New York Stock Exchange, Inc., the NYSE MKT LLC, The NASDAQ Capital Market, The
NASDAQ Global Select Market or The Nasdaq Global Market.
(n) "Filing
Deadline" means the Initial Filing Deadline and the Additional Filing Deadline, as applicable.
(o) "Initial
Effective Date" means the date that the Initial Registration Statement has been declared effective by the SEC.
(p) "Initial
Effectiveness Deadline" means the date which is the earlier of (x) (i) in the event that the Initial Registration Statement
is not subject to a full review by the SEC, sixty (60) calendar days after October 1, 2015 or (ii) in the event that the Initial
Registration Statement is subject to a full review by the SEC, ninety (90) calendar days after October 1, 2015 and (y) the fifth
(5th) Business Day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that
such Initial Registration Statement will not be reviewed or will not be subject to further review; provided, however, that if the
Initial Effectiveness Deadline falls on a Saturday, Sunday or other day that the SEC is closed for business, the Initial Effectiveness
Deadline shall be extended to the next Business Day on which the SEC is open for business.
(q) "Initial
Filing Date" means the date on which the Initial Registration Statement is filed with the SEC.
(r) "Initial
Filing Deadline" means October 1, 2015.
(s) "Initial
Registrable Securities" means (i) the Common Shares issued or issuable upon exercise of the Series H-1 Preferred Stock
issued pursuant to the terms of the Securities Purchase Agreement, (ii) the Warrant Shares issued or issuable upon exercise of
the Warrants and (iii) any capital stock of the Company issued or issuable with respect to the Common Shares, the Warrant Shares
or the Warrants as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise without
regard to any limitations on exercise of the Warrants.
(t) "Initial
Registration Statement" means a registration statement or registration statements of the Company filed under the 1933
Act covering the resale of the Initial Registrable Securities.
(u) "Initial
Required Registration Amount" means (I) the sum of (i) the number of Common Shares and (ii) the maximum number of Warrant
Shares issued and issuable pursuant to the Warrants, without regard to any limitations on exercise of the Warrants or (II) such
other amount as may be permitted by the staff of the SEC pursuant to Rule 415.
(v) "Investor"
means a Purchaser or any transferee or assignee thereof to whom a Purchaser assigns its rights under this Agreement and who agrees
to become bound by the provisions of this Agreement in accordance with Section 9 and any transferee or assignee thereof to whom
a transferee or assignee assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement
in accordance with Section 9.
(w) "Person"
means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization
and a government or any department or agency thereof.
(x) "Principal
Market" means The OTC QB.
(y) "register,"
"registered," and "registration" refer to a registration effected by preparing and filing one
or more Registration Statements (as defined below) in compliance with the 1933 Act and pursuant to Rule 415, and the declaration
or ordering of effectiveness of such Registration Statement(s) by the SEC.
(z) "Registrable
Securities" means the Initial Registrable Securities and the Additional Registrable Securities.
(aa) "Registration
Statement" means the Initial Registration Statement and the Additional Registration Statement, as applicable.
(bb) "Required
Holders" means holders of at least a majority of the Registrable Securities.
(cc) "Required
Registration Amount" means either the Initial Required Registration Amount or the Additional
Required Registration Amount, as applicable.
(dd) "Rule
415" means Rule 415 promulgated under the 1933 Act or any successor rule providing for offering securities on a continuous
or delayed basis.
(ee) "SEC"
means the United States Securities and Exchange Commission.
(ff) "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).
2. Registration.
(a) Initial
Mandatory Registration. Promptly following the Closing Date, the Company shall prepare, and, as soon as practicable but in
no event later than the Initial Filing Deadline, file with the SEC the Initial Registration Statement on Form S-3 covering the
resale of all of the Initial Registrable Securities. In the event that Form S-3 is unavailable for such a registration, the Company
shall use Form S-1 or such other form as is available for such a registration on another appropriate form reasonably acceptable
to the Required Holders, subject to the provisions of Section 2(e). The Initial Registration Statement prepared pursuant hereto
shall register for resale at least the number of shares of Common Stock equal to the Initial Required Registration Amount determined
as of the date the Initial Registration Statement is initially filed with the SEC, subject to adjustment as provided in Section
2(f). The Initial Registration Statement shall contain (except if otherwise directed by the Required Holders) the "Plan
of Distribution" and "Selling Shareholders" sections in substantially the form attached hereto as Exhibit
B. The Company shall use its commercially reasonable efforts to have the Initial Registration Statement declared effective
by the SEC as soon as practicable, but in no event later than the Initial Effectiveness Deadline. By 9:30 a.m. New York time on
the Business Day following the Initial Effective Date, the Company shall file with the SEC in accordance with Rule 424 under the
1933 Act the final prospectus to be used in connection with sales pursuant to such Initial Registration Statement.
(b) Additional
Mandatory Registrations. The Company shall prepare, and, as soon as practicable but in no event later than the Additional Filing
Deadline, file with the SEC an Additional Registration Statement on Form S-3 covering the resale of all of the Additional Registrable
Securities not previously registered on an Additional Registration Statement hereunder. To the extent the staff of the SEC does
not permit the Additional Required Registration Amount to be registered on an Additional Registration Statement, the Company shall
file Additional Registration Statements successively trying to register on each such Additional Registration Statement the maximum
number of remaining Additional Registrable Securities until the Additional Required Registration Amount has been registered with
the SEC; provided that after two rejections by the SEC of Additional Registration Statements, the Company shall not be required
to file Additional Registration Statements more frequently than once per sixty day period commencing subsequent to the second rejection.
In the event that Form S-3 is unavailable for such a registration, the Company shall use Form S-1 or such other form as is available
for such a registration on another appropriate form reasonably acceptable to the Required Holders, subject to the provisions of
Section 2(e). Each Additional Registration Statement prepared pursuant hereto shall register for resale at least that number of
shares of Common Stock equal to the Additional Required Registration Amount determined as of the date such Additional Registration
Statement is initially filed with the SEC, subject to adjustment as provided in Section 2(f). Each Additional Registration
Statement shall contain (except if otherwise directed by the Required Holders) the "Plan of Distribution" and
"Selling Shareholders" sections in substantially the form attached hereto as Exhibit B. The Company shall
use its commercially reasonable efforts to have each Additional Registration Statement declared effective by the SEC as soon as
practicable, but in no event later than the Additional Effectiveness Deadline. By 9:30 a.m. New York time on the Business Day following
the Additional Effective Date, the Company shall file with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus
to be used in connection with sales pursuant to such Additional Registration Statement.
(c) Allocation
of Registrable Securities. The initial number of Registrable Securities included in any Registration Statement and any increase
or decrease in the number of Registrable Securities included therein shall be allocated pro rata among the Investors based on the
number of Registrable Securities held by each Investor at the time the Registration Statement covering such initial number of Registrable
Securities or increase or decrease thereof is declared effective by the SEC. In the event that an Investor sells or otherwise transfers
any of such Investor's Registrable Securities, each transferee shall be allocated a pro rata portion of the then remaining number
of Registrable Securities included in such Registration Statement for such transferor. Any shares of Common Stock included in a
Registration Statement and which remain allocated to any Person which ceases to hold any Registrable Securities covered by such
Registration Statement shall be allocated to the remaining Investors, pro rata based on the number of Registrable Securities then
held by such Investors which are covered by such Registration Statement. In no event shall the Company include any securities other
than Registrable Securities on any Registration Statement without the prior written consent of the Required Holders.
(d) Legal
Counsel. Subject to Section 5 hereof, the Required Holders shall have the right to select one legal counsel to review and oversee
any registration pursuant to this Section 2 ("Legal Counsel"), which shall be Olshan Frome Wolosky LLP, or such
other counsel as thereafter designated by the Required Holders. The Company and Legal Counsel shall reasonably cooperate with each
other in performing the Company's obligations under this Agreement.
(e) Ineligibility
for Form S-3. In the event that Form S-3 is not available for the registration of the resale of Registrable Securities hereunder,
the Company shall (i) register the resale of the Registrable Securities on Form S-1 or another appropriate form reasonably acceptable
to the Required Holders and (ii) undertake to register the Registrable Securities on Form S-3 as soon as such form is available,
provided that the Company shall maintain the effectiveness of the Registration Statement then in effect until such time as any
such Registration Statement on Form S-3 filed by the Company covering the Registrable Securities has been declared effective by
the SEC.
(f) Sufficient
Number of Shares Registered. In the event the number of shares available under a Registration Statement filed pursuant to Section
2(a) or Section 2(b) is insufficient to cover the Required Registration Amount of Registrable Securities required to be covered
by such Registration Statement or an Investor's allocated portion of the Registrable Securities pursuant to Section 2(c), the Company
shall amend the applicable Registration Statement, or file a new Registration Statement (on the short form available therefor,
if applicable), or both, so as to cover at least the Required Registration Amount as of the Trading Day immediately preceding the
date of the filing of such amendment or new Registration Statement, in each case, as soon as practicable, but in any event not
later than fifteen (15) days after the necessity therefor arises. The Company shall use its commercially reasonable efforts to
cause such amendment and/or new Registration Statement to become effective as soon as practicable following the filing thereof.
For purposes of the foregoing provision, the number of shares available under a Registration Statement shall be deemed "insufficient
to cover all of the Registrable Securities" if at any time the number of shares of Common Stock available for resale under
the Registration Statement is less than the Required Registration Amount. The calculation set forth in the foregoing sentence shall
be made without regard to any limitations on the exercise of the Warrants and such calculation shall assume the Warrants are then
exercisable in full into shares of Common Stock at the then prevailing Exercise Price (as defined in the Warrants).
(g) Effect
of Failure to File and Obtain and Maintain Effectiveness of Registration Statement. If (i) the Initial Registration Statement
when declared effective fails to register the Initial Required Registration Amount of Initial Registrable Securities (a "Registration
Failure"), (ii) a Registration Statement covering all of the Registrable Securities required
to be covered thereby and required to be filed by the Company pursuant to this Agreement is (A) not filed with the SEC on or before
the applicable Filing Deadline (a "Filing Failure") or (B) not declared effective
by the SEC on or before the applicable Effectiveness Deadline, (an "Effectiveness Failure")
or (iii) on any day after the applicable Effective Date, sales of all of the Registrable Securities
required to be included on such Registration Statement cannot be made (other than during an Allowable Grace Period (as defined
in Section 3(r))) pursuant to such Registration Statement or otherwise (including, without limitation, because of the suspension
of trading or any other limitation imposed by an Eligible Market, a failure to keep such Registration Statement effective, a failure
to disclose such information as is necessary for sales to be made pursuant to such Registration Statement, a failure to register
a sufficient number of shares of Common Stock or a failure to maintain the listing of the Common Stock) (a "Maintenance
Failure" and collectively with a Registration Failure, a Filing Failure, and an Effectiveness
Failure, the “Failures” and each a “Failure”),
then, as partial relief for the damages to any holder by reason of a Failure (which remedy shall not be exclusive of any other
remedies available at law or in equity, including, without limitation, specific performance or the additional obligation of the
Company to register any Cutback Shares), the Company shall pay to each holder of Registrable Securities relating to such Registration
Statement an amount in cash equal to one percent (1.0%) of the aggregate Subscription Amount (as defined in the Securities Purchase
Agreement) of such Investor's Registrable Securities whether or not included in such Registration Statement, on each of the following
dates: (i) the day of a Registration Failure, (ii) the day of a Filing Failure; (iii) the day of an Effectiveness Failure; (iv)
the initial day of a Maintenance Failure; (v) on the thirtieth day after the date of a Registration Failure and every thirtieth
day thereafter (pro rated for periods totaling less than thirty days) until such Registration Failure is cured; (vi) on the thirtieth
day after the date of a Filing Failure and every thirtieth day thereafter (pro rated for periods totaling less than thirty days)
until such Filing Failure is cured; (vii) on the thirtieth day after the date of an Effectiveness Failure and every thirtieth day
thereafter (pro rated for periods totaling less than thirty days) until such Effectiveness Failure is cured; and (viii) on the
thirtieth day after the initial date of a Maintenance Failure and every thirtieth day thereafter (pro rated for periods totaling
less than thirty days) until such Maintenance Failure is cured; provided however, in the event that there shall be more than one
Failure occurring simultaneously, the 1.0% shall apply in the aggregate (e.g., during any single or multiple Failure, 1% shall
be due, however 1% shall not be due “per Failure” if the Failures are simultaneous and for so long as such Failures
are simultaneous). The payments to which a holder shall be entitled pursuant to this Section 2(g) are referred to herein as "Registration
Delay Payments." Registration Delay Payments shall be paid on the earlier of (I) the dates
set forth above and (II) the third Business Day after the event or failure giving rise to the Registration Delay Payments is cured.
In the event the Company fails to make Registration Delay Payments in a timely manner, such Registration Delay Payments shall bear
interest at the rate of one percent (1%) per month (prorated for partial months) until paid in full. Notwithstanding anything to
the contrary contained herein, Registration Delay Payments shall (i) not, in the aggregate, exceed five percent (5.0%) of the aggregate
Purchase Price, (ii) cease to accrue when all of the Registrable Securities may be sold pursuant to Rule 144 without any restrictions
or limitations and (iii) cease to accrue upon the termination of the Registration Period (as defined below).
(h) Limitation
on Other Registration Statements. The Company shall not file another registration statement under the 1933 Act prior to the
earlier of (i) date that the Initial Registration Statement is declared effective by the SEC and (ii) the end of the
Registration Period (as defined in Section 3(a); provided that, this Section 2(h) shall not prevent the Company from filing
a registration statement on Form S-4 or Form S-8 with the SEC at any time beginning thirty (30) days after the initial filing of
the Initial Registration Statement with the SEC.
3. Related
Obligations.
At such time as the Company
is obligated to file a Registration Statement with the SEC pursuant to Section 2(a), 2(b), 2(e) or 2(f), the Company will use its
commercially reasonable efforts to effect the registration of the Registrable Securities in accordance with the intended method
of disposition thereof and, pursuant thereto, the Company shall have the following obligations:
(a) The
Company shall promptly prepare and file with the SEC a Registration Statement with respect to the Registrable Securities and use
its commercially reasonable efforts to cause such Registration Statement relating to the Registrable Securities to become effective
as soon as practicable after such filing (but in no event later than the Effectiveness Deadline). The Company shall keep each Registration
Statement effective pursuant to Rule 415 at all times until the earlier of (i) the date that is two (2) years and six (6) months
after the Closing Date or (ii) the date on which the Investors shall have sold all of the Registrable Securities required to be
covered by such Registration Statement (the "Registration Period"). The Company shall ensure that each Registration
Statement (including any amendments or supplements thereto and prospectuses contained therein) shall 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
(in the case of prospectuses, in the light of the circumstances in which they were made) not misleading. The term "commercially
reasonable efforts" shall mean, among other things, that the Company shall submit to the SEC, within two (2) Business Days
after the later of the date that (i) the Company learns that no review of a particular Registration Statement will be made by the
staff of the SEC or that the staff has no further comments on a particular Registration Statement, as the case may be, and (ii)
the approval of Legal Counsel pursuant to Section 3(c) (which approval is immediately sought), a request for acceleration of effectiveness
of such Registration Statement to a time and date not later than two (2) Business Days after the submission of such request. The
Company shall respond in writing to comments made by the SEC in respect of a Registration Statement as soon as practicable, but
in no event later than fifteen (15) days after the receipt of comments by or notice from the SEC that an amendment is required
in order for a Registration Statement to be declared effective.
(b) The
Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant to Rule
424 promulgated under the 1933 Act, as may be necessary to keep such Registration Statement effective at all times during the Registration
Period, and, during such period, comply with the provisions of the 1933 Act with respect to the disposition of all Registrable
Securities of the Company covered by such Registration Statement until such time as all of such Registrable Securities shall have
been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such Registration
Statement. In the case of amendments and supplements to a Registration Statement which are required to be filed pursuant to this
Agreement (including pursuant to this Section 3(b)) by reason of the Company filing a report on Form 10-K, Form 10-Q, Form 8-K
or any analogous report under the Securities Exchange Act of 1934, as amended (the "1934 Act"), the Company shall
have incorporated such report by reference into such Registration Statement, if applicable, or shall file such amendments or supplements
with the SEC on the same day on which the 1934 Act report is filed which created the requirement for the Company to amend or supplement
such Registration Statement.
(c) The
Company shall (A) permit Legal Counsel to review and comment upon (i) a Registration Statement at least three (3) Business Days
prior to its filing with the SEC and (ii) all amendments and supplements to all Registration Statements (except for those filed
by reason of the Company filing Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any
similar or successor reports) within a reasonable number of days prior to their filing with the SEC, (B) permit each Investor to
review and comment on the “Plan of Distribution” and “Selling Shareholders” sections of the Registration
Statement and all amendments and supplements to the Registration Statement to the extent any changes are made to those sections,
and (C) not file any Registration Statement or amendment or supplement thereto in a form to which Legal Counsel reasonably objects;
provided however, that if the delay in filing the Registration Statement is due to Legal Counsel’s or an Investor’s
unreasonable objections (and unreasonable refusal to allow the Company to file the Registration Statement) then in such event,
no Registration Failure (or similar event that triggers a Registration Delay Payment) shall be deemed to have occurred with such
delay arising from Legal Counsel’s unreasonable objections, or solely with respect to an Investor, arising from such Investor’s
unreasonable objections. The Company shall not submit a request for acceleration of the effectiveness of a Registration Statement
or any amendment or supplement thereto without the prior approval of Legal Counsel, which consent shall not be unreasonably withheld;
provided however, that if the delay in filing the effectiveness of the Registration Statement is due to Legal Counsel’s unreasonable
objections (and unreasonable refusal to allow the Registration Statement to become effective) then in such event, no Effectiveness
Failure (or similar event that triggers a Registration Delay Payment) shall be deemed to have occurred. The Company shall furnish
to Legal Counsel, without charge, copies of any correspondence from the SEC or the staff of the SEC to the Company or its representatives
relating to any Registration Statement. The Company shall reasonably cooperate with Legal Counsel in performing the Company's obligations
pursuant to this Section 3.
(d) Intentionally
Omitted.
(e) The
Company shall use its commercially reasonable efforts to (i) register and qualify, unless an exemption from registration and qualification
applies, the resale by Investors of the Registrable Securities covered by a Registration Statement under such other securities
or "blue sky" laws of all applicable jurisdictions in the United States, (ii) prepare and file in those jurisdictions
such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary
to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain
such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably
necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company
shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where
it would not otherwise be required to qualify but for this Section 3(e), (y) subject itself to general taxation in any such jurisdiction,
or (z) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify Legal Counsel of
the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or "blue sky" laws of any jurisdiction in the United States or its
receipt of actual notice of the initiation or threatening of any proceeding for such purpose.
(f) The
Company shall notify Legal Counsel in writing of the happening of any event, as promptly as practicable but not later than the
first Business Day after becoming aware of such event, (i) as a result of which the prospectus included in a Registration Statement,
as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided
that in no event shall such notice contain any material, nonpublic information), or (ii) that results in the lack of effectiveness
of any Registration Statement, and, subject to Section 3(r), promptly prepare a supplement or amendment to such Registration Statement
to correct such untrue statement or omission, or lack of effectiveness of any Registration Statement. The Company shall also promptly
notify Legal Counsel in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed,
and when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall
be delivered to Legal Counsel by facsimile or email on the same day of such effectiveness and by overnight mail), (ii) of any request
by the SEC for amendments or supplements to a Registration Statement or related prospectus or related information, and (iii) of
the Company's reasonable determination that a post-effective amendment to a Registration Statement would be appropriate. By 9:30
a.m. New York City time on the date following the date any post-effective amendment has become effective, the Company shall file
with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection with sales pursuant to
such Registration Statement.
(g) The
Company shall use its commercially reasonable efforts to prevent the issuance of any stop order or other suspension of effectiveness
of a Registration Statement, or the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction
and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment
and to notify Legal Counsel of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation
or threat of any proceeding for such purpose.
(h) If
any Investor is required by the SEC to be described in the Registration Statement as an underwriter or the Company and an Investor
agree that it should be identified as an underwriter of Registrable Securities in the Registration Statement and the Registration
Statement is so modified, the Company shall furnish to such Investor, on the date of the effectiveness of the Registration Statement
and thereafter from time to time on such dates as an Investor may reasonably request (i) a letter, dated such date, from the Company's
independent certified public accountants in form and substance as is customarily given by independent certified public accountants
to underwriters in an underwritten public offering, addressed to the Investors, and (ii) an opinion, dated as of such date, of
counsel representing the Company for purposes of such Registration Statement, in form, scope and substance as is customarily given
in an underwritten public offering, addressed to the Investors.
(i) If
any Investor is required under applicable securities laws to be described in the Registration Statement as an underwriter or the
Company and an Investor agrees that it could reasonably be deemed to be an underwriter of Registrable Securities, the Company shall
make available for inspection by (i) such Investor, (ii) Legal Counsel and (iii) one firm of accountants or other agents retained
by the Investors (collectively, the "Inspectors"), all pertinent financial and other records, and pertinent corporate
documents and properties of the Company (collectively, the "Records"), as shall be reasonably deemed necessary
by each Inspector, and cause the Company's officers, directors and employees to supply all information which any Inspector may
reasonably request; provided, however, that each Inspector shall agree to hold in strict confidence and shall not make any disclosure
(except to an Investor) or use of any Record or other information which the Company determines in good faith to be confidential,
and of which determination the Inspectors are so notified, unless (a) the disclosure of such Records is necessary to avoid or correct
a misstatement or omission in any Registration Statement or is otherwise required under the 1933 Act, (b) the release of such Records
is ordered pursuant to a final, non-appealable subpoena or order from a court or government body of competent jurisdiction, or
(c) the information in such Records has been made generally available to the public other than by disclosure in violation of this
Agreement. Each Investor agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or governmental
body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at its expense,
to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed confidential.
Nothing herein (or in any other confidentiality agreement between the Company and any Investor) shall be deemed to limit the Investors'
ability to sell Registrable Securities in a manner which is otherwise consistent with applicable laws and regulations.
(j) The
Company shall hold in confidence and not make any disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information
is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of such information
is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction,
or (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement
or any other agreement. The Company agrees that it shall, upon learning that disclosure of such information concerning an Investor
is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to
such Investor and allow such Investor a reasonable period of time, at the Investor's expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, such information.
(k) The
Company shall use its commercially reasonable efforts either to (i) cause all of the Registrable Securities covered by a Registration
Statement to be listed on each securities exchange on which securities of the same class or series issued by the Company are then
listed, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange or (ii) secure
the inclusion for quotation of all of the Registrable Securities on the Principal Market or (iii) if, despite the Company's commercially
reasonable efforts, the Company is unsuccessful in satisfying the preceding clauses (i) and (ii), to secure the inclusion for quotation
on another Eligible Market for such Registrable Securities and, without limiting the generality of the foregoing, to use its commercially
reasonable efforts to arrange for at least two market makers to register with the Financial Industry Regulatory Authority, Inc.
("FINRA") as such with respect to such Registrable Securities. The Company shall pay all fees and expenses in
connection with satisfying its obligation under this Section 3(k).
(l) The
Company shall cooperate with the Investors who hold Registrable Securities being offered and, to the extent applicable, facilitate
the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities
to be offered pursuant to a Registration Statement and enable such certificates to be in such denominations or amounts, as the
case may be, as the Investors may reasonably request and registered in such names as the Investors may request.
(m) If
reasonably requested by an Investor, the Company shall as soon as practicable (i) incorporate in a prospectus supplement or post-effective
amendment such information as an Investor reasonably requests to be included therein relating to the sale and distribution of Registrable
Securities, including, without limitation, information with respect to the number of Registrable Securities being offered or sold,
the purchase price being paid therefor and any other terms of the offering of the Registrable Securities to be sold in such offering;
(ii) make all required filings of such prospectus supplement or post-effective amendment after being notified of the matters to
be incorporated in such prospectus supplement or post-effective amendment; and (iii) supplement or make amendments to any Registration
Statement if reasonably requested by an Investor holding any Registrable Securities.
(n) The
Company shall use its commercially reasonable efforts to cause the Registrable Securities covered by a Registration Statement to
be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition
of such Registrable Securities.
(o) Intentionally
Omitted.
(p) The
Company shall otherwise use its commercially reasonable efforts to comply in all material respects with all applicable rules and
regulations of the SEC in connection with any registration hereunder.
(q) Within
two (2) Business Days after a Registration Statement which covers Registrable Securities is ordered effective by the SEC, the Company
shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities
(with copies to the Investors whose Registrable Securities are included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the SEC in the form attached hereto as Exhibit A.
(r) Notwithstanding
anything to the contrary herein, at any time after the Effective Date, the Company may delay the disclosure of material, non-public
information concerning the Company the disclosure of which at the time is not, in the good faith opinion of the Board of Directors
of the Company and its counsel, in the best interest of the Company and, in the opinion of counsel to the Company, otherwise required
(a "Grace Period"); provided, that the Company shall promptly (i) notify the Investors in writing of the existence
of material, non-public information giving rise to a Grace Period (provided that in each notice the Company will not disclose the
content of such material, non-public information to the Investors) and the date on which the Grace Period will begin, and (ii)
notify the Investors in writing of the date on which the Grace Period ends; and, provided further, that no Grace Period shall exceed
ten (10) consecutive Trading Days and during any three hundred sixty five (365) day period such Grace Periods shall not exceed
an aggregate of twenty (20) Trading Days and the first day of any Grace Period must be at least five (5) Trading Days after the
last day of any prior Grace Period (each, an "Allowable Grace Period"). For purposes of determining the length
of a Grace Period above, the Grace Period shall begin on and include the date the Investors receive the notice referred to in clause
(i) and shall end on and include the later of the date the Investors receive the notice referred to in clause (ii) and the date
referred to in such notice. The provisions of Section 3(g) hereof shall not be applicable during the period of any Allowable Grace
Period. Upon expiration of the Grace Period, the Company shall again be bound by the first sentence of Section 3(f) with respect
to the information giving rise thereto unless such material, non-public information is no longer applicable. Notwithstanding anything
to the contrary, the Company shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of an
Investor in accordance with the terms of the Securities Purchase Agreement in connection with any sale of Registrable Securities
with respect to which an Investor has entered into a contract for sale, prior to the Investor's receipt of the notice of a Grace
Period and for which the Investor has not yet settled.
(s) Except
as required by applicable law, neither the Company nor any Subsidiary or affiliate thereof shall identify any Investor as an underwriter
in any public disclosure or filing with the SEC, the Principal Market or any Eligible Market and any Purchaser being deemed an
underwriter by the SEC shall not relieve the Company of any obligations it has under this Agreement or any other Transaction Document
(as defined in the Securities Purchase Agreement); provided, however, that the foregoing shall not prohibit the Company
from including the disclosure found in the "Plan of Distribution" section attached hereto as Exhibit B in the
Registration Statement. If the Company is required by law to identify any Investor as an underwriter in any public disclosure or
filing with the SEC, the Principal Market or any Eligible Market, prior to so identifying any such Investor, the Company shall
promptly notify each such Investor of the legal requirement and give each such Investor a reasonable opportunity to persuade the
applicable regulator that said disclosure is not required. If the applicable Investors are unable to eliminate the legal requirement
to be identified as an underwriter, the applicable Investor shall have five (5) Business Days, or such shorter time as required
by the applicable regulator or applicable law, to consent to such disclosure or to agree to withdraw as a selling shareholder under
the Registration Statement. If an Investor agrees to withdraw as a selling shareholder under the Registration Statement, the Company
shall not be responsible for any such Failures with respect to any such Investor.
(t) Neither
the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on
or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of preventing
the Company from performing its obligations hereunder.
4. Obligations
of the Investors.
(a) At
least five (5) Business Days prior to the first anticipated Filing Date of a Registration Statement, the Company shall notify each
Investor in writing of the information the Company requires from each such Investor if such Investor elects to have any of such
Investor's Registrable Securities included in such Registration Statement. It shall be a condition precedent to the obligations
of the Company to complete any registration pursuant to this Agreement with respect to the Registrable Securities of a particular
Investor that such Investor shall timely furnish to the Company such information regarding itself, the Registrable Securities held
by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required by the Company
to effect and maintain the effectiveness of the registration of such Registrable Securities and shall timely execute such documents
in connection with such registration as the Company may reasonably request.
(b) Each
Investor, by such Investor's acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested
by the Company in connection with the preparation and filing of any Registration Statement hereunder, unless such Investor has
notified the Company in writing of such Investor's election to exclude all of such Investor's Registrable Securities from such
Registration Statement.
(c) Each
Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section
3(g) or the first sentence of 3(f) (a “No Sale Notice”), such Investor will immediately discontinue disposition
of Registrable Securities pursuant to any Registration Statement(s) covering such Registrable Securities until such Investor's
receipt of copies of the supplemented or amended prospectus as contemplated by Section 3(g) or the first sentence of 3(f) or receipt
of notice that no supplement or amendment is required. Notwithstanding anything to the contrary, the Company shall cause its transfer
agent to deliver unlegended shares of Common Stock to a transferee of an Investor in accordance with the terms of the Securities
Purchase Agreement in connection with any sale of Registrable Securities with respect to which an Investor has entered into a contract
for sale prior to the Investor's receipt of a notice from the Company of the happening of any event of the kind described in Section
3(g) or the first sentence of 3(f) and for which the Investor has not yet settled.
(d) Each
Investor covenants and agrees that it will comply with the prospectus delivery requirements of the 1933 Act as applicable to it
or an exemption therefrom in connection with sales of Registrable Securities pursuant to the Registration Statement.
5. Expenses
of Registration.
All reasonable expenses,
other than underwriting discounts and commissions, incurred in connection with registrations, filings or qualifications pursuant
to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printers and accounting
fees, and fees and disbursements of counsel for the Company shall be paid by the Company.
6. Indemnification.
In the event any Registrable
Securities are included in a Registration Statement under this Agreement:
(a) To
the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend each Investor, the
directors, officers, partners, members, employees, agents, representatives of, and each Person, if any, who controls any Investor
within the meaning of the 1933 Act or the 1934 Act (each, an "Indemnified Person"), against any losses, claims,
damages, liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys' fees, amounts paid in settlement or expenses,
joint or several (collectively, "Claims"), incurred in investigating, preparing or defending any action, claim,
suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative
or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a
party thereto ("Indemnified Damages"), to which any of them may reasonably become subject insofar as such Claims
(or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration Statement or any post-effective amendment thereto or
in any filing made in connection with the qualification of the offering under the securities or other "blue sky" laws
of any jurisdiction in which Registrable Securities are offered ("Blue Sky Filing"), or the omission or alleged
omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final prospectus (as amended or supplemented, if the Company
files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made,
not misleading, (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any other law, including,
without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement or (iv) any violation of this Agreement (the matters in the foregoing clauses (i)
through (iv) being, collectively, "Violations"). Subject to Section 6(c), the Company shall reimburse the Indemnified
Persons, promptly as such expenses are incurred and are due and payable, for any legal fees or other reasonable expenses incurred
by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein,
the indemnification agreement contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising out
of or based upon a Violation which occurs in reliance upon and in conformity with information furnished to the Company by such
Indemnified Person for such Indemnified Person expressly for use in connection with the preparation of the Registration Statement
or any such amendment thereof or supplement thereto; and (ii) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld or delayed.
Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person
and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 9.
(b) In
connection with any Registration Statement in which an Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the Company,
each of its directors, each of its officers who signs the Registration Statement and each Person, if any, who controls the Company
within the meaning of the 1933 Act or the 1934 Act (each, an "Indemnified Party"), against any Claim or Indemnified
Damages to which any of them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified
Damages arise out of or are based upon any Violation, in each case to the extent, and only to the extent, that such Violation occurs
in reliance upon and in conformity with information furnished to the Company by such Investor expressly for use in connection with
such Registration Statement; and, subject to Section 6(c), such Investor shall reimburse the Indemnified Party for any legal or
other expenses reasonably incurred by an Indemnified Party in connection with investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution contained in
Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent
of such Investor, which consent shall not be unreasonably withheld or delayed; provided, further, however, that the Investor shall
be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to
such Investor as a result of the sale of Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer
of the Registrable Securities by the Investors pursuant to Section 9.
(c) Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall,
if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party
a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires and has acknowledged its indemnification obligations hereunder in writing, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying
party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an Indemnified Person or
Indemnified Party shall have the right to retain its own counsel with the fees and expenses of not more than one counsel for all
such Indemnified Person or Indemnified Party to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained
by the Indemnified Person or Indemnified Party, as applicable, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to differing interests between such Indemnified Person
or Indemnified Party and any other party represented by such counsel in such proceeding. In the case of an Indemnified Person,
legal counsel referred to in the immediately preceding sentence shall be selected by the Investors holding at least a majority
in interest of the Registrable Securities included in the Registration Statement to which the Claim relates. The Indemnified Party
or Indemnified Person shall reasonably cooperate with the indemnifying party in connection with any negotiation or defense of any
such action or Claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available
to the Indemnified Party or Indemnified Person which relates to such action or Claim. The indemnifying party shall keep the Indemnified
Party or Indemnified Person fully apprised at all times as to the status of the defense or any settlement negotiations with respect
thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its prior
written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent.
No indemnifying party shall, without the prior written consent of the Indemnified Party or Indemnified Person, consent to entry
of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all liability in respect to such
Claim or litigation and such settlement shall not include any admission as to fault on the part of the Indemnified Party. Following
indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or
Indemnified Person with respect to all third parties, firms or corporations relating to the matter for which indemnification has
been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this
Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such action.
(d) Intentionally
Omitted.
(e) The
indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party
or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject
to pursuant to the law.
7. Contribution.
To the extent any indemnification
by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect
to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however,
that: (i) no Person involved in the sale of Registrable Securities which Person is guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) in connection with such sale shall be entitled to contribution from any Person involved
in such sale of Registrable Securities who was not guilty of fraudulent misrepresentation; and (ii) contribution by any seller
of Registrable Securities shall be limited in amount to the amount of net proceeds received by such seller from the sale of such
Registrable Securities pursuant to such Registration Statement.
8. Reports
Under the 1934 Act.
With a view to making
available to the Investors the benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Investors to sell securities of the Company to the public without registration ("Rule
144"), the Company agrees to:
(a) make
and keep public information available, as those terms are understood and defined in Rule 144;
(b) file
with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act so
long as the Company remains subject to such requirements and the filing of such reports and other documents is required for the
applicable provisions of Rule 144; and
(c) furnish
to each Investor so long as such Investor owns Registrable Securities, promptly upon request, a written statement by the Company,
if true, that it has complied with the reporting requirements of the 1933 Act and the 1934 Act and that it has satisfied the current
public information provisions set forth in Rule 144.
9. Assignment
of Registration Rights.
The rights under this
Agreement shall be automatically assignable by the Investors to any transferee of all or any portion of such Investor's Registrable
Securities if: (i) the Investor agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement
is furnished to the Company within a reasonable time after such assignment; (ii) the Company is, within a reasonable time after
such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee, and (b)
the securities with respect to which such registration rights are being transferred or assigned; (iii) immediately following such
transfer or assignment the further disposition of such securities by the transferee or assignee is restricted under the 1933 Act
or applicable state securities laws; (iv) at or before the time the Company receives the written notice contemplated by clause
(ii) of this sentence the transferee or assignee agrees in writing with the Company to be bound by all of the provisions contained
herein; and (v) such transfer shall have been made in accordance with the applicable requirements of the Securities Purchase Agreement.
10. Amendment
of Registration Rights.
Provisions of this Agreement
may be amended and the observance thereof 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 Required Holders; provided that any such amendment or waiver
that complies with the foregoing but that disproportionately, materially and adversely affects the rights and obligations of any
Investor relative to the comparable rights and obligations of the other Investors shall require the prior written consent of such
adversely affected Investor. Any amendment or waiver effected in accordance with this Section 10 shall be binding upon each Investor
and the Company. No such amendment shall be effective to the extent that it applies to less than all of the holders of the Registrable
Securities. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision
of this Agreement unless the same consideration (other than the reimbursement of legal fees) also is offered to all of the parties
to this Agreement.
11. Miscellaneous.
(a) A
Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the
same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from such record
owner of such Registrable Securities.
(b) 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, when delivered personally; (ii) upon receipt, when sent
by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending
party); (iii) when sent, if sent by electronic mail; or (iv) one Business Day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the same. The addresses, facsimile numbers and email
addresses for such communications shall be:
If to the Company:
WPCS International Incorporated
521 Railroad Avenue
Suisun City, CA 94585
Attn: Sebastian Giordano, Interim Chief Executive Officer
Fax: (707) 421-1359
With a copy (for informational
purposes only) to:
K&L Gates LLP
599 Lexington Avenue
New York, NY 10022
Attn: Robert S. Matlin, Esq.
Fax: (212) 536-3901
If to the Transfer Agent:
Interwest Transfer Company, Inc.
1981 Murray Holladay Road, Suite 100
Salt Lake City, UT 84117
Fax: (801) 277-3147
If to Legal Counsel:
Olshan Frome Wolosky LLP
65 East 55th Street
New York, NY 10022
Attn: Kenneth A. Schlesinger, Esq.
Fax: (212) 451-2222
If to a Purchaser, to its address, facsimile
number and/or email address set forth on the Schedule of Purchasers attached hereto or on the signature pages of the Securities
Purchase Agreement, with copies to such Purchaser's representatives as set forth on the Schedule of Purchasers, or to such other
address, facsimile number and/or email address to the attention of such other Person as the recipient party has specified by written
notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given
by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's
facsimile machine or email containing the time, date, recipient facsimile number and an image of the first page of such transmission
or (C) provided by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.
(c) Failure
of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
(d) 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, AND AGREES NOT
TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT
OR ANY TRANSACTION CONTEMPLATED HEREBY.
(e) 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).
(f) This
Agreement, the other Transaction Documents (as defined in the Securities Purchase Agreement) and the instruments referenced herein
and therein constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There
are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement,
the other Transaction Documents and the instruments referenced herein and therein supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.
(g) Subject
to the requirements of Section 9, this Agreement shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.
(h) The
headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
(i) This
Agreement may be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute
one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission
of a copy of this Agreement bearing the signature of the party so delivering this Agreement.
(j) Each
party shall 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.
(k) All
consents and other determinations required to be made by the Investors pursuant to this Agreement shall be made, unless otherwise
specified in this Agreement, by the Required Holders, determined as if the outstanding Warrants then held by Investors have been
exercised for Registrable Securities without regard to any limitations on exercise of the Warrants.
(l) 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.
(m) This
Agreement 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.
(n) The
obligations of each Investor hereunder are several and not joint with the obligations of any other Investor, and no provision of
this Agreement is intended to confer any obligations on any Investor vis-à-vis any other Investor. Nothing contained herein,
and no action taken by any Investor pursuant hereto, 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 herein.
(o) Legal
Counsel may resign as Legal Counsel on five (5) calendar days’ prior notice to the Company and Iroquois Master Fund Ltd.
Legal Counsel will not be required to consult with any Purchaser nor obtain instructions nor follow any instructions or orders
made or given by any Purchaser other than Iroquois Master Fund Ltd.
* * * * * *
[Signature Page Follows]
IN WITNESS WHEREOF, the
parties have executed this Registration Rights Agreement as of the date first written above.
|
COMPANY: |
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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 |
[SIGNATURE PAGE OF HOLDERS FOLLOWS]
[SIGNATURE
PAGE OF PURCHASERS TO
WPCS
INTERNATIONAL INCORPORATED RRA]
Name of Purchaser: Iroquois Master Fund
Ltd
Signature of Authorized Signatory of
Purchaser: /s/ Joshua Silverman
Name of Authorized Signatory: Joshua Silverman
Title of Authorized Signatory: Director
Email Address of Authorized Signatory:
JSilverman@icfund.com
Facsimile Number of Authorized Signatory:
(347) 408-0969
Address for Notice to Purchaser:
c/o Iroquois Capital Management LLC
205 East 42nd St- 20th Fl.
New York NY 10017
[SIGNATURE PAGES CONTINUE]
[SIGNATURE
PAGE OF PURCHASERS TO
WPCS
INTERNATIONAL INCORPORATED RRA]
Name of Purchaser: Iroquois Capital Investment
Group
Signature of Authorized Signatory of
Purchaser: /s/ Joshua Silverman
Name of Authorized Signatory: Joshua Silverman
Title of Authorized Signatory: Director
Email Address of Authorized Signatory:
JSilverman@icfund.com
Facsimile Number of Authorized Signatory:
(347) 408-0969
Address for Notice to Purchaser:
c/o Iroquois Capital Management LLC
205 East 42nd St- 20th Fl.
New York NY 10017
[SIGNATURE
PAGE OF PURCHASERS TO
WPCS
INTERNATIONAL INCORPORATED RRA]
Name of Purchaser: American Capital Management,
LLC
Signature of Authorized Signatory of
Purchaser: /s/ Kimberly Page
Name of Authorized Signatory: Kimberly
Page
Title of Authorized Signatory: Manager
Email Address of Authorized Signatory:
KPage@icfund.com
Facsimile Number of Authorized Signatory:
(347) 408-0969
Address for Notice to Purchaser:
c/o Iroquois Capital Management LLC
205 East 42nd St- 20th Fl.
New York NY 10017
SCHEDULE OF PURCHASERS
Iroquois Master Fund Ltd
c/o Iroquois Capital Management LLC
205 East 42nd St- 20th Fl.
New York NY 10017
Attn: Joshua Silverman
Fax: 347-408-0969
Iroquois Capital Investment Group
c/o Iroquois Capital Management LLC
205 East 42nd St- 20th Fl.
New York NY 10017
Attn: Joshua Silverman
Fax: 347-408-0969
American Capital Management, LLC
c/o Iroquois Capital Management LLC
205 East 42nd St- 20th Fl.
New York NY 10017
Attn: Kimberly Page
Fax: 347-408-0969
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
Interwest Transfer Company, Inc.
1981 Murray Holladay Road, Suite 100
Salt Lake City, UT 84117
Fax: (801) 277-3147
| Re: | WPCS International Incorporated |
Ladies and Gentlemen:
[We are][I am] counsel
to WPCS International Incorporated, a Delaware corporation (the "Company"), and have represented the Company in
connection with that certain Securities Purchase Agreement, dated as of July ___, 2015 (the "Securities Purchase
Agreement"), entered into by and among the Company and the purchasers named therein (collectively, the "Holders")
pursuant to which the Company issued to the Holders shares of the Company's Series H-1 Preferred Convertible Stock, par value $0.0001
per share (the "Series H-1 Preferred Stock"), which are convertible into shares of the Company's common stock,
par value $0.0001 per share (the "Common Stock") (the shares of Common Stock issuable upon conversion of the Series
H-1 Preferred Stock, collectively, the "Common Shares") and warrants exercisable for shares of Common Stock (the
"Warrants"). Pursuant to the Securities Purchase Agreement, the Company also has entered into a Registration Rights
Agreement with the Holders (the "Registration Rights Agreement") pursuant to which the Company agreed, among other
things, to register the resale of the Registrable Securities (as defined in the Registration Rights Agreement), including the Common
Shares issuable pursuant to the Securities Purchase Agreement and the shares of Common Stock issuable upon exercise of the Warrants
under the Securities Act of 1933, as amended (the "1933 Act"). The description of the Registrable Securities are
set forth on Schedule A hereto [Selling Shareholder Table]. In connection with the Company's obligations under the Registration
Rights Agreement, on July 14, 2015, the Company filed a Registration Statement on Form S-3 (File No. 333-_____________) (the "Registration
Statement") with the Securities and Exchange Commission (the "SEC") relating to the Registrable Securities
which names each of the Holders as a selling shareholder thereunder.
In connection with the
foregoing, [we][I] advise you that a member of the SEC's staff has advised [us][me] by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER
DATE OF EFFECTIVENESS]. [We][I] have no knowledge, subsequent to such telephonic conversation with the SEC's staff, that
any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened
by, the SEC. Based on the foregoing, the Registrable Securities set forth on Schedule A hereto are available for resale
under the 1933 Act pursuant to the Registration Statement.
This letter, unless and
until subsequently revoked or modified in writing from any member of this firm (which writing may include email correspondence),
shall serve as our standing instruction to you that the Registrable Securities set forth on Schedule A hereto are freely
transferable by the Holders pursuant to the Registration Statement. You need not require further letters from us to effect any
future legend-free issuance or reissuance of Registrable Securities to the Holders as contemplated by the Company's Irrevocable
Transfer Agent Instructions dated [______].
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Very truly yours, |
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[ISSUER'S COUNSEL] |
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By: |
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CC: |
Purchasers |
Iroquois Master Fund Ltd |
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Iroquois Capital Investment Group |
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American Capital Management, LLC |
EXHIBIT B
SELLING SHAREHOLDERS
The shares of common
stock being offered by the selling shareholders are those issued to the selling shareholders pursuant to the Securities Purchase
Agreement and upon exercise of the warrants. For additional information regarding the issuance of that common stock and warrants,
see "Private Placement of Common Stock and Warrants" above. We are registering the shares of common stock in order to
permit the selling shareholders to offer the shares for resale from time to time. Except for the ownership of the shares of common
stock and the warrants issued pursuant to the Securities Purchase Agreement, the selling shareholders have not had any material
relationship with us within the past three years.
The table below lists
the selling shareholders and other information regarding the beneficial ownership of the shares of common stock by each of the
selling shareholders. The second column lists the number of shares of common stock beneficially owned by each selling shareholder,
based on its ownership of the common stock and warrants, as of ________, 2015, assuming exercise of all warrants held by the selling
shareholders on that date, without regard to any limitations on exercise.
The third column lists
the shares of common stock being offered by this prospectus by the selling shareholders.
In accordance with
the terms of a registration rights agreement with the selling shareholders, this prospectus generally covers the resale of at least
the sum of (i) the number of shares of common stock issued pursuant to the Securities Purchase Agreement as of the Trading Day
immediately preceding the date the registration statement is initially filed with the SEC, and (ii) the maximum number of shares
of common stock issued and issuable upon exercise of the related warrants as of the Trading Day immediately preceding the date
the registration statement is initially filed with the SEC. The fourth column assumes the sale of all of the shares offered
by the selling shareholders pursuant to this prospectus.
Under the terms of
the warrants, a selling shareholder may not exercise the warrants to the extent such exercise would cause such selling shareholder,
together with its affiliates, to beneficially own a number of shares of common stock which would exceed 9.99% of our then outstanding
shares of common stock following such exercise, excluding for purposes of such determination shares of common stock issuable upon
exercise of the warrants which have not been exercised. The number of shares in the second column does not reflect this limitation.
The selling shareholders may sell all, some or none of their shares in this offering. See "Plan of Distribution."
Name of Selling Shareholder | |
Number of Shares of Common Stock Owned Prior to Offering | | |
Maximum Number of Shares of Common Stock to be Sold Pursuant to this Prospectus | | |
Number of Shares of Common Stock Owned After Offering | |
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PLAN OF DISTRIBUTION
We are registering
the shares of common stock issued pursuant to the terms of the securities purchase agreement and upon exercise of the warrants
to permit the resale of these shares of common stock by the holders of such shares and warrants from time to time after the date
of this prospectus. We will not receive any of the proceeds from the sale by the selling shareholders of the shares of common stock.
We will bear all fees and expenses incident to our obligation to register the shares of common stock.
The selling shareholders
may sell all or a portion of the shares of common stock beneficially owned by them and offered hereby from time to time directly
or through one or more underwriters, broker-dealers or agents. If the shares of common stock are sold through underwriters or broker-dealers,
the selling shareholders will be responsible for underwriting discounts or commissions or agent's commissions. The shares of common
stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying
prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may involve
crosses or block transactions,
| · | on any national securities exchange or quotation service on which the securities may be listed
or quoted at the time of sale; |
| · | in the over-the-counter market; |
| · | in transactions otherwise than on these exchanges or systems or in the over-the-counter market; |
| · | through the writing of options, whether such options are listed on an options exchange or otherwise; |
| · | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
| · | block trades in which the broker-dealer will attempt to sell the shares as agent but may position
and resell a portion of the block as principal to facilitate the transaction; |
| · | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
| · | an exchange distribution in accordance with the rules of the applicable exchange; |
| · | privately negotiated transactions; |
| · | sales pursuant to Rule 144; |
| · | broker-dealers may agree with the selling securityholders to sell a specified number of such shares
at a stipulated price per share; |
| · | a combination of any such methods of sale; and |
| · | any other method permitted pursuant to applicable law. |
If the selling shareholders
effect such transactions by selling shares of common stock to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling shareholders
or commissions from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal
(which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with sales of the shares of common stock or otherwise, the selling
shareholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of
common stock in the course of hedging in positions they assume. The selling shareholders may also sell shares of common stock short
and deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed shares in connection
with such short sales. The selling shareholders may also loan or pledge shares of common stock to broker-dealers that in turn may
sell such shares.
The selling shareholders
may pledge or grant a security interest in some or all of the shares of common stock or warrants owned by them and, if they default
in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock
from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision
of the Securities Act of 1933, as amended, amending, if necessary, the list of selling shareholders to include the pledgee, transferee
or other successors in interest as selling shareholders under this prospectus. The selling shareholders also may transfer and donate
the shares of common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest
will be the selling beneficial owners for purposes of this prospectus.
The selling shareholders
and any broker-dealer participating in the distribution of the shares of common stock may be deemed to be "underwriters"
within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer
may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the shares
of common stock is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of
shares of common stock being offered and the terms of the offering, including the name or names of any broker-dealers or agents,
any discounts, commissions and other terms constituting compensation from the selling shareholders and any discounts, commissions
or concessions allowed or reallowed or paid to broker-dealers.
Under the securities
laws of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers.
In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for
sale in such state or an exemption from registration or qualification is available and is complied with.
There can be no assurance
that any selling shareholder will sell any or all of the shares of common stock registered pursuant to the registration statement,
of which this prospectus forms a part.
The selling shareholders
and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act,
which may limit the timing of purchases and sales of any of the shares of common stock by the selling shareholders and any other
participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common
stock to engage in market-making activities with respect to the shares of common stock. All of the foregoing may affect the marketability
of the shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the
shares of common stock.
We will pay all expenses
of the registration of the shares of common stock pursuant to the registration rights agreement, estimated to be $[ ]
in total, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state securities
or "blue sky" laws; provided, however, that a selling shareholder will pay all underwriting discounts and selling commissions,
if any. We will indemnify the selling shareholders against liabilities, including some liabilities under the Securities Act, in
accordance with the registration rights agreements, or the selling shareholders will be entitled to contribution. We may be indemnified
by the selling shareholders against civil liabilities, including liabilities under the Securities Act, that may arise from any
written information furnished to us by the selling shareholder specifically for use in this prospectus, in accordance with the
related registration rights agreement, or we may be entitled to contribution.
Once sold under the
registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands
of persons other than our affiliates.
Exhibit 99.1
WPCS Closes $1.5 Million Financing
Private
Placement Raises Stockholders’ Equity
Above
NASDAQ Minimum Requirement
SUISUN CITY, CA - (Marketwired – July 15, 2015) - WPCS
International Incorporated (NASDAQ: WPCS), which specializesin contracting services for communications infrastructure, announced
today that on July 14, 2015 it closed a $1,500,000 equity financing. As a result, the Company believes that, as of the date of
this transaction, its stockholders’ equity now exceeds $2,500,000.
According to Interim CEO Sebastian Giordano, "Not only
have we further increased our stockholders’ equity, but having recently secured a $1 million line of credit and eliminated
$1.7 million in notes that were originally due to be paid on September 30, 2015, this $1.5 million financing significantly improves
our liquidity.”
Under the terms of a Securities Purchase
Agreement, the Company issued to certain accredited investors in a private placement an aggregate of 8,119 shares of Series H-1
Preferred Convertible Stock of the Company, par value $0.0001 per share (“Series H-1 Shares”), and warrants to purchase
1,217,861 shares of common stock of the Company, par value $0.0001 per share (“Common Stock”), with an exercise price
of $1.66 per share (“Warrants”) based upon closing price of the Company’s common stock on July 14, 2015. The
purchase price for each Series H-1 Share was $166 and the purchase price for each warrant was $0.125 per share of Common Stock,
for an aggregate purchase price for the Series H-1 Shares and Warrants of $1,500,000.
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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