REGISTRATION RIGHTS AGREEMENT
THIS
REGISTRATION RIGHTS AGREEMENT, is by and between WPCS International
Incorporated, a Delaware corporation (the "Company"), and Xxxxxx X. Xxxxxx,
Xxxxxxxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxx, Xxxxxx X. Xxxxxx, Xxxx X. Xxxxxxxxxx
and Xxxxxxx Xxxxxxxxx (individually a "Holder" and collectively the
"Holders").
WHEREAS,
pursuant to a Stock Purchase Agreement between the Company, Southeastern
Communication Service, Inc., a Florida corporation, and the Holders, dated
as of
the date hereof (the “Acquisition Agreement”), the Company issued to the Holders
an aggregate of 10,000 shares of class A common stock, $.01 par value and 40,000
shares of class B common stock, $.01 par value of the Company (the “Common
Stock”); and
WHEREAS,
pursuant to the terms of and in order to induce the Holders to enter into the
Acquisition Agreement, the Company and the Holders have agreed to enter into
this Agreement;
NOW,
THEREFORE, in consideration of the premises and the mutual covenants contained
herein, the Company and the Holders hereby agree as follows:
1. Mandatory
Registration.
The
Company shall file a registration statement with the Securities and Exchange
Commission (the “SEC”) which seeks to register the shares of Common Stock
issuable to the Holders upon consummation of the Acquisition Agreement (the
"Registerable Securities") under the Securities Act of 1933 (the “1933 Act”), no
later than thirty (30) days after the final closing date of the Acquisition
Agreement. The Company will use its best efforts to cause such registration
statement to be declared effective by the SEC within one hundred twenty (120)
days after the initial filing with the SEC.
2. Cooperation
with Company.
The
Holders will cooperate with the Company in all respects in connection with
this
Agreement, including, timely supplying all information reasonably requested
by
the Company and executing and returning all documents reasonably requested
in
connection with the registration and sale of the Registerable Securities, at
no
expense to the Holders.
3. Registration
Procedures.
If and
whenever the Company is required by any of the provisions of this Agreement
to
use its best efforts to effect the registration of any of the Registerable
Securities under the 1933 Act, the Company shall (except as otherwise provided
in this Agreement), as expeditiously as possible:
a. prepare
and file with the SEC a registration statement and shall use its best efforts
to
cause such registration statement to become effective and remain effective
until
all the Registerable Securities are sold or become capable of being publicly
sold without registration under the 1933 Act.
b. prepare
and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary
to
keep such registration statement effective and to comply with the provisions
of
the 1933 Act with respect to the sale or other disposition of all securities
covered by such registration statement whenever the Holder or Holders of such
securities shall desire to sell or otherwise dispose of the same (including
prospectus supplements with respect to the sales of securities from time to
time
in connection with a registration statement pursuant to Rule 415 of the SEC);
c. furnish
to each Holder such numbers of copies of a summary prospectus or other
prospectus, including a preliminary prospectus or any amendment or supplement
to
any prospectus, in conformity with the requirements of the 1933 Act, and such
other documents, as such Holder may reasonably request in order to facilitate
the public sale or other disposition of the securities owned by such
Holder;
d. use
its
best efforts to register and qualify the securities covered by such registration
statement under such other securities or blue sky laws of such jurisdictions
as
each Holder shall reasonably request, and do any and all other acts and things
which may be necessary or advisable to enable such Holder to consummate the
public sale or other disposition in such jurisdiction of the securities owned
by
such Holder, except that the Company shall not for any such purpose be required
to qualify to do business as a foreign corporation in any jurisdiction wherein
it is not so qualified or to file therein any general consent to service of
process;
e. use
its
best efforts to list such securities on any securities exchange on which any
securities of the Company is then listed, if the listing of such securities
is
then permitted under the rules of such exchange;
f. enter
into and perform its obligations under an underwriting agreement, if the
offering is an underwritten offering, in usual and customary form, with the
managing underwriter or underwriters of such underwritten offering;
g. notify
each Holder of Registerable Securities covered by such registration statement,
at any time when a prospectus relating thereto covered by such registration
statement is required to be delivered under the 1933 Act, of the happening
of
any event of which it has knowledge as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing; and
h. furnish,
at the request of any Holder on the date such Registerable Securities are
delivered to the underwriters for sale pursuant to such registration or, if
such
Registerable Securities are not being sold through underwriters, on the date
the
registration statement with respect to such Registerable Securities becomes
effective, (i) an opinion, dated such date, of the counsel representing the
Company for the purpose of such registration, addressed to the underwriters,
if
any, and to the Holder making such request, covering such legal matters with
respect to the registration in respect of which such opinion is being given
as
the Holder of such Registerable Securities may reasonably request and are
customarily included in such an opinion and (ii) letters, dated, respectively,
(1) the effective date of the registration statement and (2) the date such
Registerable Securities are delivered to the underwriters, if any, for sale
pursuant to such registration from a firm of independent certified public
accountants of recognized standing reasonably selected by the Company, addressed
to the underwriters, if any, and to the Holder making such request, covering
such financial, statistical and accounting matters with respect to the
registration in respect of which such letters are being given as the Holder
of
such Registerable Securities may reasonably request and are customarily included
in such letters.
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4. Expenses.
All
expenses incurred in any registration of the Holders' Registerable Securities
under this Agreement shall be paid by the Company, including, without
limitation, printing expenses, fees and disbursements of counsel for the
Company, expenses of any audits to which the Company shall agree or which shall
be necessary to comply with governmental requirements in connection with any
such registration, all registration and filing fees for the Holders'
Registerable Securities under federal and State securities laws, and expenses
of
complying with the securities or blue sky laws of any jurisdictions pursuant
to
Section 3(h)(i); provided, however, the Company shall not be liable for (a)
any
discounts or commissions to any underwriter; (b) any stock transfer taxes
incurred with respect to Registerable Securities sold in the Offering or (c)
the
fees and expenses of counsel for any Holder, provided that the Company will
pay
the costs and expenses of Company counsel when the Company's counsel is
representing any or all selling security holders.
5. Indemnification.
In the
event any Registerable Securities are included in a registration statement
pursuant to this Agreement:
a. Company
Indemnity.
Without
limitation of any other indemnity provided to any Holder, to the extent
permitted by law, the Company shall indemnify and hold harmless each Holder,
the
affiliates, officers, directors and partners of each Holder, any underwriter
(as
defined in the 0000 Xxx) for such Holder, and each person, if any, who controls
such Holder or underwriter (within the meaning of the 1933 Act or the Securities
Exchange Act of 1934 (the "Exchange Act"), against any losses, claims, damages
or liabilities (joint or several) to which they may become subject under the
1933 Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out
of or are based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any alleged untrue statement of a material
fact contained in such registration statement including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the alleged omission to state therein a material
fact
required to be stated therein, or necessary to make the statements therein
not
misleading, or (iii) any violation or alleged violation by the Company of the
1933 Act, the Exchange Act, or any state securities law or any rule or
regulation promulgated under the 1933 Act, the Exchange Act or any state
securities law, and the Company shall reimburse each such Holder, affiliate,
officer or director or partner, underwriter or controlling person for any legal
or other expenses incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that
the
Company shall not be liable to any Holder in any such case for any such loss,
claim, damage, liability or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Holder or any other officer, director or controlling
person thereof.
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x. Xxxxxx
Indemnity.
Each
Holder shall indemnify and hold harmless the Company, its affiliates, its
counsel, officers, directors and representatives, any underwriter (as defined
in
the 0000 Xxx) and each person, if any, who controls the Company or the
underwriter (within the meaning of the 1933 Act or the Exchange Act, against
any
losses, claims, damages or liabilities (joint or several) to which they may
become subject under the 1933 Act, the Exchange Act or any state securities
law,
and the Company shall reimburse each such Holder, affiliate, officer or director
or partner, underwriter or controlling person for any legal or other expenses
incurred by them in connection with investigating or defending any loss, claim,
damage, liability or action; insofar as such losses, claims, damages or
liabilities (or actions and respect thereof) arise out of or are based upon
any
statements or information provided by such Holder to the Company expressly
for
use in connection with the offer or sale of Registerable
Securities.
c. Notice;
Right to Defend.
Promptly after receipt by an indemnified party under this Section 5 of notice
of
the commencement of any action (including any governmental action), such
indemnified party shall, if a claim in respect thereof is to be made against
any
indemnifying party under this Section 5 deliver to the indemnifying party a
written notice of the commencement thereof and the indemnifying party shall
have
the right to participate in and if the indemnifying party agrees in writing
that
it will be responsible for any costs, expenses, judgments, damages and losses
incurred by the indemnified party with respect to such claim, jointly with
any
other indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the
fees
and expenses to be paid by the indemnifying party, if the indemnified party
reasonably believes that representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other
party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement
of
any such action shall relieve such indemnifying party of any liability to the
indemnified party under this Agreement only if and to the extent that such
failure is prejudicial to its ability to defend such action, and the omission
so
to deliver written notice to the indemnifying party will not relieve it of
any
liability that it may have to any indemnified party otherwise than under this
Agreement.
d. Contribution.
If the
indemnification provided for in this Agreement is held by a court of competent
jurisdiction to be unavailable to an indemnified party with respect to any
loss,
liability, claim, damage or expense referred to therein, then the indemnifying
party, in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by such indemnified party as a result
of such loss, liability, claim, damage or expense in such proportion as is
appropriate to reflect the responsibility of the indemnifying party on the
one
hand and the indemnified party on the other hand in connection with the
statements or omissions which resulted in such loss, liability, claim, damage
or
expense as well as any other relevant equitable considerations. The relevant
fault of the indemnifying party and the indemnified party shall be determined
by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party
and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. Notwithstanding the foregoing,
the amount any Holder shall be obligated to contribute pursuant to this
Agreement shall be limited to an amount equal to the proceeds to such Holder
of
the Registerable Securities sold pursuant to the registration statement which
gives rise to such obligation to contribute (less the aggregate amount of any
damages which the Holder has otherwise been required to pay in respect of such
loss, claim, damage, liability or action or any substantially similar loss,
claim, damage, liability or action arising from the sale of such Registerable
Securities).
e. Survival
of Indemnity.
The
indemnification provided by this Agreement shall be a continuing right to
indemnification and shall survive the registration and sale of any Registerable
Securities by any person entitled to indemnification hereunder and the
expiration or termination of this Agreement.
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6. Remedies.
a. Time
is of Essence.
The
Company agrees that time is of the essence of each of the covenants contained
herein and that, in the event of a dispute hereunder, this Agreement is to
be
interpreted and construed in a manner that will enable the Holders to sell
their
Registerable Securities as quickly as possible after such Holders have indicated
to the Company that they desire their Registerable Securities to be registered.
Any delay on the part of the Company not expressly permitted under this
Agreement, whether material or not, shall be deemed a material breach of this
Agreement.
b. Remedies
Upon Default or Delay.
The
Company acknowledges the breach of any part of this Agreement may cause
irreparable harm to a Holder and that monetary damages alone may be inadequate.
The Company therefore agrees that the Holder shall be entitled to injunctive
relief or such other applicable remedy as a court of competent jurisdiction
may
provide. Nothing contained herein will be construed to limit a Holder's right
to
any remedies at law, including recovery of damages for breach of any part of
this Agreement.
7. Notices.
a. All
communications under this Agreement shall be in writing and shall be mailed
by
first class mail, postage prepaid, or telegraphed or telexed with confirmation
of receipt or delivered by hand or by overnight delivery service,
b. If
to the
Company, at:
WPCS
International Incorporated
Xxx
Xxxx
Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx,
Xxxxxxxxxxxx 00000
Attn:
Xxxxxx Xxxxxxx, President
or
at
such other address as it may have furnished in writing to the Holders of
Registerable Securities at the time outstanding, or
c. if
to any
Holder of any Registerable Securities, to 0000 Xxxxxxxxx Xxxx, Xxxxxxxx, Xxxxxxx
00000.
d. Any
notice so addressed, when mailed by registered or certified mail shall be deemed
to be given three (3) days after so mailed, when telegraphed or telexed shall
be
deemed to be given when transmitted, or when delivered by hand or overnight
shall be deemed to be given when delivered.
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8. Successors
and Assigns.
Except
as otherwise expressly provided herein, this Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of the
Company and each of the Holders.
9. Amendment
and Waiver.
This
Agreement may be amended, and the observance of any term of this Agreement
may
be waived, but only with the written consent of the Company and the Holders
of
securities representing a majority of the Registerable Securities; provided,
however, that no such amendment or waiver shall take away any registration
right
of any Holder of Registerable Securities or reduce the amount of reimbursable
costs to any Holder of Registerable Securities in connection with any
registration hereunder without the consent of such Holder; further provided,
however, that without the consent of any other Holder of Registerable
Securities, any Holder may from time to time enter into one or more agreements
amending, modifying or waiving the provisions of this Agreement if such action
does not adversely affect the rights or interest of any other Holder of
Registerable Securities. No delay on the part of any party in the exercise
of
any right, power or remedy shall operate as a waiver thereof, nor shall any
single or partial exercise by any party of any right, power or remedy preclude
any other or further exercise thereof, or the exercise of any other right,
power
or remedy.
10. Counterparts;
Attorney’s Fees.
One or
more counterparts of this Agreement may be signed by the parties, each of which
shall be an original but all of which together shall constitute one and the
same
instrument. The prevailing party in any action or proceeding relating to or
arising out of this Agreement shall recover its reasonable attorney’s fees and
other costs from the non-prevailing party, in addition to any other relief
to
which such prevailing party is entitled.
11. Governing
Law.
This
Agreement shall be construed in accordance with and governed by the internal
laws of the State of New York, without giving effect to conflicts of law
principles.
12. Invalidity
of Provisions.
If any
provision of this Agreement is or becomes invalid, illegal or unenforceable
in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not be affected thereby.
13. Headings.
The
headings in this Agreement are for convenience of reference only and shall
not
be deemed to alter or affect the meaning or interpretation of any provisions
hereof.
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IN
WITNESS WHEREOF, the undersigned has executed this Agreement as of the 19th
day
of July, 2006.
WPCS
INTERNATIONAL INCORPORATED
By: /s/
XXXXXX XXXXXXX
Xxxxxx Xxxxxxx,
President
|
/s/ XXXXXX X. XXXXXX
|
/s/ XXXXXXXXXXX X. XXXXXX
Xxxxxxxxxxx X. Xxxxxx |
|
/s/ XXXXXXX X. XXXXXX
Xxxxxxx X. Xxxxxx |
|
/s/ XXXXXX X. XXXXXX
Xxxxxx X. Xxxxxx |
|
/s/ XXXX X. XXXXXXXXXX
Xxxx X. Xxxxxxxxxx |
|
/s/ XXXXXXX XXXXXXXXX
Xxxxxxx Xxxxxxxxx |
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