REGISTRATION RIGHTS AGREEMENT
Exhibit
10.7
THIS
REGISTRATION RIGHTS AGREEMENT, is
by and between WPCS International Incorporated, a Delaware corporation (the
"Company"), Xxx-Xxxx Ma and Xxxxxx Xxxxxxxxxxxx (individually a "Holder" and
collectively the "Holders").
WHEREAS,
pursuant to a Membership
Interest Purchase Agreement between the Company, Max Engineering LLC, a Texas
limited liability company, and the Holders, dated as of the date hereof (the
“Acquisition Agreement”), (i) the Company issued to the Holders an aggregate of
17,007 shares of common stock, $.0001 par value of the Company (the “Initial
Shares”), and (ii) after the first and second anniversary of the Closing
thereunder the Company may issue to the Holders additional shares of common
stock, $.0001 par value of the Company (the “Additional Shares”)(the
shares of stock issued under (i) and (ii) are collectively, 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 forty-five (45) days after the date of
receipt of written demand of the Holders. 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. In the event the Company intends to file a registration
statement under the 1933 Act (other than on Form X-0, X-0 or other inapplicable
form), the Company shall provide written notice to the Holders of such
intent. The Holders shall have a period of five (5) business days to
notify the Company in writing if the Holders wish to have their Registrable
Securities included in such registration statement, in which case the
Registrable Securities shall be included. It is agreed and understood
that the Company may only be able to register the Initial Shares until such
time
as the Additional Shares have been issued, at which time they may also be
registered.
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
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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.
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.
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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.
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.
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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,
CEO
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 XX Xxxxxxx, Xxxxx 000,
Xxxxxxx, XX 00000, or at such other address as he or she may have furnished
in
writing to the Company at the time outstanding.
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.
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.
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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 Pennsylvania, 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.
IN
WITNESS WHEREOF, the undersigned
has executed or caused to be duly executed this Registration Rights Agreement
as
of the 2nd day
of August, 2007.
WPCS
INTERNATIONAL INCORPORATED
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/s/
XXXXXX
XXXXXXX
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/s/
XXX-XXXX
MA
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Xxxxxx
Xxxxxxx,
Chief
Executive Officer
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Xxx-Xxxx
Ma
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/s/ XXXXXX XXXXXXXXXXXX | |
| Xxxxxx Xxxxxxxxxxxx | |||
