Exhibit 10.01

 

SECURITIES PURCHASE AGREEMENT

 

by and between

 

WPCS AUSTRALIA PTY LTD

 

and

 

TURQUINO EQUITY LLC

 

 

 

dated as of September 19, 2013

 

 

 

 

Table of Contents

 

    Page       ARTICLE I Purchase and Sale of Shares; Closing     Section 1.01.
Purchase and Sale of the Shares; Payment 1   Section 1.02. Closing Date 2  
Section 1.03. Transactions to be Effected at the Closing 2 ARTICLE II
Representations and Warranties of Seller     Section 2.01. Organization 3  
Section 2.02. Capitalization 3   Section 2.03. Authority; Execution and
Delivery; Enforceability 4   Section 2.04. Title to Shares 4   Section 2.05. No
Conflicts; Consents 4   Section 2.06. Financial Information 4   Section 2.07.
Absence of Changes 5   Section 2.08. No Undisclosed Liabilities 5   Section
2.09. Litigation 5   Section 2.10. Condition of Assets 5   Section 2.11.
Compliance with Laws; Permits 5   Section 2.12. Tax Matters 6   Section 2.13.
Labor and Employee Benefit Matters 6   Section 2.14. Real Property 7   Section
2.15. Environmental 7   Section 2.16. Contracts 7   Section 2.17. Intellectual
Property 8   Section 2.18. Brokers and Finders 8   Section 2.19. Disclosure 8  
Section 2.20. Disclaimer of Other Representations and Warranties 8 ARTICLE III
Representations and Warranties of Purchaser     Section 3.01. Organization 9  
Section 3.02. Authority; Execution and Delivery; Enforceability 9   Section
3.03. No Conflicts; Consents 9   Section 3.04. Investment Representation 10

 

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Table of Contents

(continued)

 

      Page           Section 3.05. No Knowledge of Misrepresentation or Omission
10   Section 3.06. Brokers and Finders 10   Section 3.07. Solvency 10   Section
3.08. Certain Purchaser Acknowledgments 11 ARTICLE IV Covenants     Section
4.01. Access and Investigation 11   Section 4.02. Negative Covenant 11   Section
4.03. Required Approvals 12   Section 4.04. Confidentiality 12   Section 4.05.
Retention of Books and Records 12   Section 4.06. Certain Consents and Waivers
12   Section 4.07. Expenses; Transfer Taxes 12   Section 4.08. Post-Closing
Cooperation 13   Section 4.09. Publicity 13   Section 4.10. Further Assurances
13   Section 4.11. Survival and Right to Indemnification 13   Section 4.12.
Employment and Indemnification Agreement Assumptions 14 ARTICLE V Conditions to
Close     Section 5.01. Conditions to Obligations of Purchaser 14   Section
5.02. Conditions to Obligations of Seller 14 ARTICLE VI Termination     Section
6.01. Termination Events 15   Section 6.02. Effect of Termination 16 ARTICLE VII
General Provisions     Section 7.01. Statutes 16   Section 7.02. Non-Business
Days 16   Section 7.03. Amendments; Waivers 16   Section 7.04. Assignment 16  
Section 7.05. No Third-Party Beneficiaries 16   Section 7.06. Notices 17

 

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Table of Contents

(continued)

 

      Page           Section 7.07. Interpretation; Exhibits and Sections;
Certain Definitions 17   Section 7.08. Counterparts 23   Section 7.09. Entire
Agreement; Survival 24   Section 7.10. Severability 24   Section 7.11. Governing
Law 24   Section 7.12. Waiver of Jury Trial 24   Section 7.13. Consent to
Jurisdiction 24

 

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securities PURCHASE AGREEMENT

 

SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of September 19, 2013,
by and between WPCS Australia Pty Ltd, an Australian corporation (“Seller”), and
Turquino Equity LLC, a Delaware limited liability company (“Purchaser”).
Capitalized terms used but not otherwise defined herein shall have the meanings
set forth in Section 7.07 hereof unless the context clearly provides otherwise.

 

WHEREAS, Seller owns all of the issued and outstanding capital stock of The
Pride Group (QLD) Pty Ltd, an Australian corporation (the “Company”), which as
of the date hereof consists of 97,939 shares of A Class Ordinary Shares (the
“Shares”); and

 

WHEREAS, subject to the terms and conditions set forth herein, Purchaser desires
to purchase from Seller all of the Shares and Seller desires to sell to
Purchaser all of the Shares.

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties hereby agree as follows:

 

ARTICLE I

PURCHASE AND SALE OF SHARES; CLOSING

 

Section 1.01. Purchase and Sale of the Shares; Payment.

 

(a) On the terms and subject to the conditions of this Agreement, at the
Closing, Seller shall sell, transfer and deliver to Purchaser, and Purchaser
shall purchase from Seller, the Shares for an aggregate cash purchase price (the
“Purchase Price”) of One Million Four Hundred Thousand Dollars ($1,400,000),
subject to adjustment as set forth herein. An amount equal to Eight Hundred
Fifteen Thousand One Hundred Ninety-Two Dollars and Fifty Cents ($815,192.50)
(the “Net Severance Amount”), which represents the full net amount due to Andrew
Hidalgo pursuant to the Severance Agreement, shall be credited against the
Purchase Price and Purchaser shall send, by wire of immediately available funds,
an amount equal to Five Hundred Eighty-Four Eight Hundred Seven Dollars and
Fifty Cents ($584,807.50) (the “Cash Component”) pursuant to the written
instruction to be delivered by the Seller to the Purchaser prior to the Closing
Date. Notwithstanding the foregoing, in the event that the Closing occurs on a
date that is not November 1, 2013, the Net Severance Amount and Cash Component
will be adjusted accordingly to reflect the revised net amount due to Andrew
Hidalgo pursuant to the Severance Agreement and the corresponding change to the
Cash Component due at Closing.

 

(b) Within ninety (90) days after the Closing Date, the Purchaser shall cause to
be prepared and delivered to Seller a calculation of the Company’s net tangible
asset value as of the Closing Date. Net tangible asset value is defined as total
assets minus total liabilities minus intangible assets (“NTAV”). The Seller
shall have a period of sixty (60) days to review the NTAV calculation. In the
event the Seller and the Purchaser are unable to agree upon the NTAV after good
faith negotiations for a period of 20 days, the Seller and the Purchaser shall
submit such dispute for resolution to CohnReznick LLP (the “Independent
Accounting Firm”), which shall determine and report to the parties and such
report shall be final, binding and conclusive on the parties hereto. If the
Independent Accounting Firm determines that the NTAV is within five percent
(5%), whether greater or less, below the NTAV determined by the Purchaser, then
the parties shall equally share the cost of the Independent Accounting Firm. If
the Independent Accounting Firm determines that the NTAV is more than five
percent (5%) above the NTAV determined by the Purchaser, then the Seller shall
pay the fees and expenses of the Independent Accounting Firm. If the Independent
Accounting Firm determines that the NTAV is more than five percent (5%) below
the NTAV determined by the Purchaser, then the Purchaser shall pay the fees and
expenses of the Independent Accounting Firm. The parties shall cooperate with
one another and provide reasonable access of all pertinent books and records to
the other party. In the event the NTAV as of the Closing Date shall be less than
AUD $1,400,000, the Seller shall be required to pay the Purchaser the amount of
the shortfall. In the event the NTAV as of the Closing Date shall be greater
than AUD $1,500,000, the Purchaser shall be required to pay the Seller the
amount of such excess. Any payments required to be made pursuant to this Section
shall be paid within five (5) days after determination of the NTAV.

 

 

 

 

(c) The purchase and sale of the Shares is referred to in this Agreement as the
“Acquisition.”

 

Section 1.02. Closing Date. The closing of the Acquisition and the other
transactions contemplated hereby (the “Closing”) shall take place at the offices
of Sichenzia Ross Friedman Ference LLP, 61 Broadway, 32nd Floor, New York, New
York 10006, at 10:00 a.m. on November 1, 2013 or on such other date as mutually
agreed to by the parties (the “Closing Date”). The Closing shall be deemed to be
effective as of 12:01 a.m. on the Closing Date.

 

Section 1.03. Transactions to be Effected at the Closing. At the Closing:

 

(a) Seller shall deliver to Purchaser:

 

(i) A cross-receipt in the form of Exhibit A hereto executed by Seller;

 

(ii) certificates representing the Shares, duly endorsed in blank or accompanied
by stock powers duly endorsed in blank in proper form for transfer; and

 

(iii) with the exception to Stephen Mullane, a duly executed resignation,
effective as at the Closing, of each director of the Company set forth on
Section 1.03(a)(iii) of the Company Disclosure Letter.

 

(b) Purchaser shall deliver to Seller:

 

(i) A cross-receipt in the form of Exhibit A hereto executed by Purchaser;

 

(ii) The Purchase Price; and

 

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(iii) an assignment and assumption agreement for each Lease set forth on Section
1.03(b)(iii) of the Company Disclosure Letter in a form mutually acceptable to
Seller, Purchaser and the applicable landlord transferring any related
guarantees or obligations of Seller to Purchaser, executed by Purchaser.

 

ARTICLE II

Representations and Warranties OF Seller

 

Except as set forth in (i) the WPCS SEC Documents filed during the period
beginning on November 1, 2009 and ending on the date of this Agreement (the
“Filed WPCS SEC Documents”), to the extent reasonably apparent from the
disclosure therein, or (ii) the disclosure letter, dated the date of this
Agreement and delivered by Seller to Purchaser prior to the execution of this
Agreement, together with any supplements delivered by Seller to Purchaser at or
prior to the Closing Date to reflect any necessary changes between the date of
execution of this Agreement and the Closing Date (the “Company Disclosure
Letter”), which Company Disclosure Letter identifies the Section (or, if
applicable, subsection) to which such exception relates (it being understood
that disclosure in one section shall also apply to other sections to the extent
it is reasonably apparent from the face of the disclosure that such disclosure
would also apply to such other sections), Seller hereby represents and warrants
to Purchaser as of the date hereof as follows:

 

Section 2.01. Organization.

 

(a) Except as would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect, each of the Seller and the
Company (i) has been duly organized and is validly existing in good standing (to
the extent such concept is applicable) under the Laws of its jurisdiction of
organization, with all requisite corporate power and authority to own its
properties and conduct its business as currently conducted and (ii) is duly
qualified as a foreign corporation for the transaction of business, and is in
good standing (to the extent such concept is applicable) under the Laws of each
other jurisdiction in which it owns or leases properties, or conducts any
business so as to require such qualification.

 

(b) Neither the Seller nor the Company is in breach or violation of any of its
certificate of incorporation, bylaws or other Organizational Documents, except
for any breach or violation that would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect. Prior to the
Closing Date, Seller will deliver or make available to Purchaser true and
complete copies of the Company’s certificate of incorporation, bylaws or other
Organizational Documents, each as amended to date.

 

Section 2.02. Capitalization. The Shares are all of the issued and outstanding
equity interests in the Company. All of the Shares have been duly authorized and
validly issued, are fully paid and nonassessable and free of preemptive rights,
with no personal liability attaching to the ownership thereof, and are owned of
record and beneficially by Seller. All of the Shares were issued in compliance
with applicable Laws. None of the Shares were issued in violation of any
agreement, arrangement or commitment to which Seller or the Company is a party
or is subject to or in violation of any preemptive or similar rights of any
Person. There are no outstanding or authorized options, warrants or other rights
of any kind relating to the sale, issuance or voting of any Shares or any
securities convertible into or evidencing the right to purchase any Shares. The
Company does not own any shares of capital stock of or equity interests in
(including any securities exercisable or exchangeable for or convertible into
capital stock of or other voting or equity interests in) any other Person.

 

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Section 2.03. Authority; Execution and Delivery; Enforceability. Seller has full
power and authority to execute this Agreement and to consummate the Acquisition
and the other transactions contemplated hereby. The execution and delivery by
Seller of this Agreement and the consummation by Seller of the Acquisition and
the other transactions contemplated hereby have been duly authorized by all
necessary corporate action, except for WPCS Shareholder Approval. Seller has
duly executed and delivered this Agreement and, assuming that this Agreement is
the valid and binding agreement of Purchaser, this Agreement constitutes a
legal, valid and binding obligation of Seller, enforceable against Seller in
accordance with its terms, subject to bankruptcy, insolvency, reorganization and
other Laws affecting creditors’ rights generally, and to general principles of
equity.

 

Section 2.04. Title to Shares. Except as set forth on Section 2.04 of the
Company Disclosure Letter, Seller has good and valid title to the Shares, free
and clear of all Liens other than Permitted Liens. Upon Seller’s receipt of the
Purchase Price, good and valid title to the Shares will pass to Purchaser, free
and clear of all Liens, other than those arising from acts of Purchaser and
other than Permitted Liens.

 

Section 2.05. No Conflicts; Consents.

 

(a) Except as set forth in Section 2.05(a) of the Company Disclosure Letter, the
execution and delivery by Seller of this Agreement do not, and the performance
of this Agreement, including the consummation of the Acquisition and the other
transactions contemplated hereby and compliance by Seller with the terms hereof
will not, (1) conflict with, constitute or result in any violation or breach of
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to loss of a material benefit under, or result in the creation of any Lien
(other than Permitted Liens) upon any of the properties or assets of the Company
under, any provision of (i) the certificate of incorporation, bylaws or other
Organizational Documents of Seller or the Company, (ii) any Material Contract to
which the Company is a party or by which any of its properties or assets is
bound, or (iii) any Law applicable to the Company or its properties or assets,
other than in each case any such items that, individually or in the aggregate,
have not had and would not reasonably be expected to have a Company Material
Adverse Effect, or (2) result in the creation or imposition of any Lien other
than Permitted Liens on any properties or assets of the Company.

 

(b) Except as set forth on Section 2.05(b) of the Company Disclosure Letter, no
notice to, or Consent of, any Person, or registration, declaration or filing
with, any Governmental Entity is required to be obtained or made by Seller or
the Company in connection with Seller’s execution, delivery and performance of
this Agreement or Seller’s consummation of the Acquisition or the other
transactions contemplated hereby except for such Consents, registrations,
declarations or filings which, individually or in the aggregate, have not had
and would not reasonably be expected to have a Company Material Adverse Effect.

 

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Section 2.06. Financial Information. The (i) consolidated financial statements
of Seller and its consolidated Subsidiaries included or incorporated by
reference in the WPCS 2013 10-K, and (ii) the unaudited July 31, 2013 financial
statements of the Company included in Section 2.06 of the Company Disclosure
Letter, are based on the books and records of the Company, and fairly present in
all material respects the consolidated financial position of Seller as they
relate to the Company, as of the dates indicated therein and the consolidated
results of their operations and cash flows for the periods specified therein,
and, except as stated therein, such financial statements were prepared in
conformity with GAAP applied on a consistent basis.

 

Section 2.07. Absence of Changes. Since April 30, 2013 until the date hereof, no
event or circumstance has occurred that, individually, or in the aggregate, has
had or would reasonably be expected to have a Company Material Adverse Effect.

 

Section 2.08. No Undisclosed Liabilities. Except as and to the extent disclosed
in the Filed WPCS SEC Documents, the Company has not had any liabilities or
obligations of any nature, whether or not accrued, absolute, contingent,
unliquidated or otherwise, whether due or to become due and whether or not
required to be disclosed, reserved against or otherwise provided for which is
required by GAAP to be set forth on a consolidated balance sheet of WPCS and its
consolidated Subsidiaries or in the notes thereto, other than liabilities or
obligations (i) in the amounts reflected on or reserved against in WPCS’
consolidated balance sheet as of April 30, 2013 including in WPCS’ financial
statements or (ii) that are incurred in the ordinary course of business since
April 30, 2013.

 

Section 2.09. Litigation. There is no pending, or to Seller’s Knowledge,
threatened in writing action, claim, suit, proceeding or investigation against
the Company, or to which any property, assets or rights of the Company is
subject, nor is the Company subject to any Order that remains outstanding or
unsatisfied, in each case, except as would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.

 

Section 2.10. Condition of Assets. The buildings, plants, structures, furniture,
fixtures, machinery, equipment, vehicles and other items of tangible personal
property of the Company are operational and in a condition adequate and
sufficient for use in the Company’s business as it has been conducted to date
and as it shall be conducted in the future by Purchaser, ordinary wear and tear
excepted.

 

Section 2.11. Compliance with Laws; Permits.

 

(a) The Company has all permits, licenses, franchises, authorizations, Orders
and approvals of, and has made all filings, applications and registrations with,
all Governmental Entities that are required in order to permit it to own, lease
or license their properties, assets and rights, and to carry on their business
as presently conducted, except where the failure to have such permits, licenses,
franchises, authorizations, Orders and approvals or the failure to make such
filings, applications and registrations would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect. All
such permits, licenses, certificates of authority, Orders and approvals are in
full force and effect and, to Seller’s Knowledge, no suspension or cancellation
of any of them is threatened in writing, and all such filings, applications and
registrations are current, except where such absence, suspension or cancellation
would not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect.

 

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(b) The Company is in compliance with all applicable Laws, except where the
failure to so comply would not result in a Company Material Adverse Effect. This
Section 2.10(b) does not relate to matters with respect to the compliance of the
financial statements with the Securities Act, the Exchange Act or SOX (which are
the subject of Section 2.06), Taxes (which are the subject of Section 2.11),
Company Benefit Plans (which are the subject of Section 2.12) and environmental
matters (which are the subject of Section 2.14).

 

Section 2.12. Tax Matters. Except as would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect, (i)
there has been filed by or on behalf of the Company all material Tax Returns
required to be filed by the applicable Company, (ii) all Taxes of the Company
(whether or not shown on such Tax Returns) have been or will be paid in a timely
fashion or, where payment is not yet due, have been adequately provided for in
the financial statements of the Company in accordance with GAAP, and (iii) no
audit or other proceeding by any Governmental Entity is pending with respect to
any Taxes due from the Company, except with respect to matters for which
adequate reserves have been established in accordance with GAAP. Notwithstanding
the above, Seller agrees to fully indemnify Purchaser in any amount for any Tax
payments Purchaser ultimately has to make with respect to any time period prior
to the date hereof as a result of findings by a Governmental Entity that Seller
has violated applicable Law.

 

Section 2.13. Labor and Employee Benefit Matters.

 

(a) Except as would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect, (i) the Company is in
compliance in all material respects with all applicable Laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, (ii) there is no unfair labor practice complaint against the
Company pending before any Governmental Entity, (iii) there is no labor strike,
dispute, slowdown or stoppage actually pending or, to the Knowledge of the
Seller, threatened against the Company, (iv) there are no unpaid dues,
assessments, fines or other expenses regarding the Company relating to any union
violation, audit and/or issue, and (v) except as set forth on Section 2.12(a)(v)
of the Company Disclosure Letter, there are no collective bargaining or other
labor union Contracts to which the Company is a party or by which the Company is
bound.

 

(b) Section 2.12(b) of the Company Disclosure Letter sets forth a list as of the
date of this Agreement of each material Employee Program sponsored, maintained,
or contributed to by the Company in which present or former employees of the
Company participate or for which the Company has any material liability
(collectively, the “Benefit Plans”). Except as set forth in Section 2.12(b) of
the Company Disclosure Letter, no Benefit Plan is a (pension or non-pension)
employee benefit plan to which more than one employer contributes and which is
maintained pursuant to one or more collective bargaining agreements.

 

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(c) Except as would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect, the Benefit Plans are in
compliance with all applicable requirements of applicable Laws and have been
administered in accordance with their terms and such Laws.

 

(d) There are no pending or, to the Knowledge of the Seller, threatened, claims
with respect to any Benefit Plans, other than ordinary and usual claims for
benefits by participants and beneficiaries, that would, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.

 

Section 2.14. Real Property. The Company does not own any real property. Section
2.13 of the Company Disclosure Letter sets forth a complete and correct list in
all material respects of the real property leased by the Company (the “Leased
Real Property,” and the leases, together with any amendments and modifications
thereto, pursuant to which such real property is leased, the “Leases”), which
list sets forth each Lease and the address, landlord and tenant for each Lease.
The Company is not a lessor, sublessor or grantor under any lease, sublease or
other instrument granting to any other Person any right to the possession,
lease, occupancy or enjoyment of any Leased Real Property. To Seller’s
Knowledge, the Company has valid leasehold interest in all of the Leased Real
Property, subject to no Liens other than Permitted Liens. The Company is in
compliance with the terms of all leases relating to the Leased Real Property to
which it is a party, except such compliance which has not had or would not
reasonable be expect to have, individually or in the aggregate, a Company
Material Adverse Effect. To Seller’s Knowledge, all such material Leases
relating to the Leased Real Property are in full force and effect, and the
Company enjoys peaceful and undisturbed possession under all such applicable
leases.

 

Section 2.15. Environmental.

 

(a) The Company is in compliance with all applicable Environmental Laws and has
obtained and is in compliance with all applicable permits, licenses and
authorizations required under applicable Environmental Laws, except, in each
case, as would not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect.

 

(b) The Company has not received a notice in writing of violation or
notification in writing of liability or potential liability arising out of any
Environmental Law, and there is no Litigation or claim pending or, to Seller’s
Knowledge, overtly threatened in writing under any Environmental Law, except in
each case, with respect to any violation or liability that would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.

 

(c) Except for matters that would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect, no Release of
Hazardous Substances has occurred at, on, above, under or from any real property
currently or formerly owned, leased, operated or used by the Company that has
resulted or would reasonably be expected to result in a material investigation
or remedial action.

 

Section 2.16. Contracts. Each written contract to which the Company is a party
or by which it is bound, which is material to the business of such Company (each
a “Material Contract”), is valid and binding on the Company in accordance with
its terms and is in full force and effect, except to the extent that the
invalidity or non-binding nature of any Material Contract would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect, and none of the Company or, to the Seller’s Knowledge,
any other party thereto is in breach or of default under (or received any
written notice alleging to be in breach of or default under) of any such
Material Contract, or has provided or received any written notice of any
intention to terminate, any Material Contract, except for defaults which would
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.

 

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Section 2.17. Intellectual Property.

 

(a) Except as would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect, the Company owns, or possess
sufficient and legally enforceable licenses or other rights to use, any and all
Intellectual Property necessary for the conduct of the businesses and operations
of the Company as currently conducted.

 

(b) To Seller’s Knowledge, the conduct of the business of the Company does not
infringe, conflict with or otherwise violate any Intellectual Property of any
Person, and the Company has not received written notice or has knowledge of any
such infringement, conflict or other violation, except as would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.

 

Section 2.18. Brokers and Finders. Neither the Company nor its Affiliates have
retained any agent, broker, investment banker, financial advisor or other firm
or Person that is or will be entitled to any brokers’ or finder’s fee or any
other commission or similar fee in connection with any of the transactions
contemplated by this Agreement.

 

Section 2.19. Disclosure. No representation or warranty of Seller or the Company
in this Agreement and no statement in the Company Disclosure Letter contains any
material untrue statement or omits to state a material fact necessary to make
the statements herein or therein, in light of the circumstances in which they
were made, not misleading. No notice given pursuant to Section 7.06 will contain
any untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances in which
they were made, not misleading. To the Seller’s Knowledge, there is no fact that
has specific application to the Company (other than general economic or industry
conditions) that could have a Company Material Adverse Effect on the financial
or other condition, results of operations, assets, liabilities, equity, business
or prospects of the Company that has not been set forth in this Agreement.

 

Section 2.20. Disclaimer of Other Representations and Warranties. Except as
otherwise expressly set forth in this Article II, Seller makes no other
representations or warranties and expressly disclaims any other representations
or warranties of any kind or nature, express or implied, as to the condition,
value or quality of the business of the Company or the assets of the Company,
and Seller specifically disclaims any implied representation or warranty of
merchantability, usage, suitability or fitness for any particular purpose with
respect to the assets of the Company, or any part thereof.

 

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ARTICLE III

Representations and Warranties of Purchaser

 

Purchaser hereby represents and warrants to Seller as follows as of the date
hereof:

 

Section 3.01. Organization.

 

(a) Purchaser has been duly incorporated and is validly existing as a limited
liability company in good standing under the Laws of the State of Delaware, with
all requisite corporate power and authority to own its properties and conduct
its business as currently conducted, and, except as would not, individually or
in the aggregate, reasonably be expected to have a Purchaser Material Adverse
Effect, is duly qualified as a foreign limited liability company for the
transaction of business, and is in good standing (to the extent such concept is
applicable) under the Laws of each other jurisdiction in which it owns or leases
properties, or conducts any business so as to require such qualification.

 

(b) Purchaser is not in breach or violation of its articles of incorporation,
bylaws, or other Organizational Documents.

 

Section 3.02. Authority; Execution and Delivery; Enforceability. Purchaser has
full power and authority to execute this Agreement and to consummate the
Acquisition and the other transactions contemplated hereby. The execution and
delivery by Purchaser of this Agreement and the consummation by Purchaser of the
Acquisition and the other transactions contemplated hereby have been duly
authorized by all necessary corporate action. Purchaser has duly executed and
delivered this Agreement and, assuming that this Agreement is the valid and
binding agreement of Seller, this Agreement constitutes a legal, valid and
binding obligation of Purchaser, enforceable against Purchaser in accordance
with its terms, subject to bankruptcy, insolvency, reorganization and other Laws
affecting creditors’ rights generally, and to general principles of equity.

 

Section 3.03. No Conflicts; Consents.

 

(a) The execution and delivery by Purchaser of this Agreement do not, and the
consummation of the Acquisition and the other transactions contemplated hereby
and compliance by Purchaser with the terms hereof will not, (i) have a Purchaser
Material Adverse Effect or (ii) conflict with, constitute or result in any
violation or breach of or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or result
in the creation of any Lien upon any of the properties or assets of Purchaser
under, any provision of (A) its articles of incorporation, bylaws, other
governing instrument or comparable Organizational Documents of Purchaser, (B)
any contract to which Purchaser is a party or by which any of its properties or
assets is bound, (C) any Law applicable to Purchaser or its properties or
assets, other than, in the case of clauses (B) and (C) above, any such items
that, individually or in the aggregate, have not had and would not reasonably be
expected to have a Purchaser Material Adverse Effect.

 

- 9 -

 

 

(b) No Consent of, or registration, declaration or filing with, any Governmental
Entity is required to be obtained or made by Purchaser in connection with the
execution, delivery and performance of this Agreement or the consummation of the
Acquisition or the other transactions contemplated hereby.

 

Section 3.04. Investment Representation. Purchaser acknowledges that Seller has
made (or caused to be made) available to Purchaser and its representatives the
opportunity to ask questions of the officers and management of the Company as
well as access to the documents, information and records of the Company, and
Purchaser confirms that it has made an independent investigation, analysis and
evaluation of the Company and its assets, liabilities, business and financial
condition. Purchaser has such knowledge and experience in financial and business
matters that it is capable of evaluating the Company and the merits and risks of
an investment in the Shares. Purchaser is acquiring the Shares for its own
account and for investment and not with a view toward or for sale in connection
with any distribution (as such term in used in Section 2(a)(11) of the
Securities Act) thereof in violation of the Securities Act. Purchaser is an
“accredited investor” (as such term is defined in Rule 501 of Regulation D
promulgated under the Securities Act) and understands that the Shares have not
been registered under the Securities Act or registered or qualified under any
applicable state securities laws. Purchaser understands and agrees that the
Shares may not be sold, transferred, offered for sale or otherwise disposed of
without registration under the Securities Act, except pursuant to an exemption
from such registration available under the Securities Act, and without
compliance with state, local and foreign securities laws, in each case, to the
extent applicable.

 

Section 3.05. No Knowledge of Misrepresentation or Omission. To the Knowledge of
the Purchaser, the representations and warranties of Seller made in this
Agreement are true and correct. Purchaser does not have any actual knowledge of
any material errors in, or material omissions from, any Section of the Company
Disclosure Letter.

 

Section 3.06. Brokers and Finders. Neither Purchaser nor its Affiliates has
retained any agent, broker, investment banker, financial advisor or other firm
or Person that is or will be entitled to any brokers’ or finder’s fee or any
other commission or similar fee in connection with any of the transactions
contemplated by this Agreement.

 

Section 3.07. Solvency. Assuming Seller’s representations and warranties
contained in Article II are true and correct immediately after giving effect to
the transactions contemplated by this Agreement and Seller has complied with its
covenants hereunder, as of the Closing Date, the Company shall be able to pay
its debts as they become due and shall own property which has a fair saleable
value greater than the amounts required to pay its debts (including a reasonable
estimate of the amount of all contingent liabilities). Assuming Seller’s
representations and warranties contained in Article II are true and correct
immediately after giving effect to the transactions contemplated by this
Agreement and Seller has complied with its covenants hereunder, as of the
Closing Date, the Company shall have adequate capital to carry on its
businesses. No transfer of property is being made and no obligation is being
incurred in connection with the transactions contemplated by this Agreement with
the intent to hinder, delay or defraud either present or future creditors of the
Company.

 

- 10 -

 

 

Section 3.08. Certain Purchaser Acknowledgments.

 

(a) Purchaser acknowledges that neither Seller nor the Company, nor any other
Person acting on behalf of Seller or the Company or any of their Affiliates has
made any representation or warranty, express or implied, as to the accuracy or
completeness of any information regarding Seller or the Company or their
respective businesses or assets, except as expressly set forth in Article II.
Purchaser further agrees that neither Seller nor any other Person shall have or
be subject to any liability to Purchaser or any other Person resulting from the
distribution to Purchaser, or Purchaser’s use of, any such information and any
information, document or material made available to Purchaser or Purchaser’s
representatives in certain “data rooms,” management presentations or any other
form in expectation of the transactions contemplated by this Agreement.

 

(b) In connection with Purchaser’s investigation of the Company, Purchaser or
Purchaser’s representatives have received from or on behalf of Seller and the
Company certain projections, including projected statements of operating
revenues and income from operations of the Company and certain business plan
information. Purchaser acknowledges that there are uncertainties inherent in
attempting to make such estimates, projections and other forecasts and plans,
that Purchaser is familiar with such uncertainties, that Purchaser is taking
full responsibility for making its own evaluation of the adequacy and accuracy
of all estimates, projections and other forecasts and plans so furnished to it
(including the reasonableness of the assumptions underlying such estimates,
projections and forecasts), and that Purchaser shall have no claim against
Seller or any other Person with respect thereto. Accordingly, neither Seller nor
any other Person makes any representations or warranties whatsoever with respect
to such estimates, projections and other forecasts and plans (including the
reasonableness of the assumptions underlying such estimates, projections and
forecasts).

 

ARTICLE IV

Covenants

 

Section 4.01. Access and Investigation. Between the date of this Agreement and
the Closing Date and upon reasonable advance notice from Purchaser, Seller will,
and will cause the Company and its representatives to, (a) afford Purchaser and
its representatives and prospective lenders and their representatives full and
free access to the Company’s personnel, properties (including subsurface
testing), Contracts, books and records, and other documents and data, (b)
furnish such Persons with copies of all such Contracts, books and records, and
other documents and data as Purchaser may reasonably request, and (c) furnish
such Persons with such additional financial, operating and other data and
information as Purchaser may reasonably request.

 

Section 4.02. Negative Covenant. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Seller will
not, and will not cause or permit the Company to, without the prior consent of
Purchaser, (a) make any modifications to any Material Contract or Permit except
in the ordinary course of business and consistent with past business practices,
or (b) enter into any compromise or settlement of any pending or threatened
Litigation.

 

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Section 4.03. Required Approvals. As promptly as practicable after the date of
this Agreement, Seller will, and will cause the Company to, (i) submit this
Agreement to the shareholders of WPCS for their approval of the Agreement, the
Acquisition and all the transactions contemplated hereby, (ii) obtain such
consents set forth on Section 2.05(b) of the Company Disclosure Letter (each a
“Material Consent”) and (iii) obtain a fairness opinion that the Purchase Price
being paid by Purchaser to Seller for the Company is fair (the “Fairness
Opinion”). Between the date of this Agreement and the Closing Date, Seller will,
and will cause the Company to cooperate with Purchaser with respect to all
filings that Purchaser elects to make or that Purchaser is required by Law to
make in connection with the Acquisition.

 

Section 4.04. Confidentiality. Purchaser acknowledges that the information being
provided to it in connection with the Acquisition and the consummation of the
other transactions contemplated by this Agreement is subject to the terms of
that certain confidentiality agreement between Purchaser and Seller, dated as of
September 3, 2013 (the “Confidentiality Agreement”), the terms of which are
incorporated in this Agreement by reference. Effective upon, and only upon, the
Closing, the Confidentiality Agreement shall terminate with respect to
information relating solely to the Company; provided, however, that Purchaser
acknowledges that any and all other information provided to it by Seller,
Seller’s Affiliates or Seller’s representatives concerning Seller and its
Affiliates shall remain subject to the terms and conditions of the
Confidentiality Agreement after the Closing Date.

 

Section 4.05. Retention of Books and Records. For a period of seven (7) years
following the Closing, Purchaser shall retain the books and records of the
Company, and upon reasonable notice, afford the officers, employees, agents and
representatives of Seller reasonable access (including the right to make
photocopies, at the expense of Seller), during normal business hours, to such
books and records.

 

Section 4.06. Certain Consents and Waivers. Notwithstanding the items disclosed
in Section 2.05(b) of the Company Disclosure Letter, Purchaser acknowledges that
only the Material Consents shall have been obtained prior to the Closing Date
and certain consents and waivers other than the Material Consents with respect
to the transactions contemplated by this Agreement may be required from parties
to the Contracts, Governmental Entities or other Persons and that such consents
and waivers have not been obtained. Except for the Material Consents, Seller
shall not have any liability to Purchaser or the Company arising out of or
relating to the failure to obtain any consents or waivers that may be required
in connection with the transactions contemplated by this Agreement or because of
the termination of any Contract or revocation, suspension or termination of any
Permit as a result thereof.

 

Section 4.07. Expenses; Transfer Taxes.

 

(a) Except as otherwise set forth in this Agreement, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the Party incurring such expense, including all costs
and expenses incurred pursuant to this Section 4.04.

 

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(b) Notwithstanding anything to the contrary contained herein, Purchaser shall
pay the amount of any documentary, sales, use, real property transfer, real
property gains, registration, value-added, transfer, stamp, recording and other
similar Taxes, fees, and costs together with any interest thereon, penalties,
fines, costs, fees, additions to tax or additional amounts with respect thereto
incurred in connection with this Agreement and the transactions contemplated
hereby. Each Party shall use commercially reasonable efforts to avail itself of
any available exemptions from any Taxes, and to cooperate with the other Parties
in providing any information and documentation that may be necessary to obtain
such exemptions.

 

Section 4.08. Post-Closing Cooperation. Seller and Purchaser shall cooperate
with each other, and shall cause their Affiliates and their officers, employees,
agents, auditors and representatives to cooperate with each other, for a
reasonable period after the Closing to ensure the orderly transition of the
Company from Seller to Purchaser and to minimize any disruption to the Company
and the other respective businesses of Seller and Purchaser that may result from
the transactions contemplated by this Agreement. After the Closing, upon
reasonable written notice, Seller and Purchaser shall furnish or cause to be
furnished to each other and their Affiliates and their respective employees,
counsel, auditors and representatives access, during normal business hours, to
such information and assistance relating to the Company (to the extent within
the control of such Party) as is reasonably necessary for financial reporting
and accounting matters.

 

Section 4.09. Publicity. No public release or announcement concerning the
Acquisition and the other transactions contemplated by this Agreement shall be
issued by any Party following the Closing Date without the prior consent of the
other Parties (which consent shall not be unreasonably withheld), except as such
release or announcement may be required by Law or the rules or regulations of
any securities exchange, in which case the Party required to make the release or
announcement shall allow the other Party reasonable time to comment on such
release or announcement in advance of such issuance.

 

Section 4.10. Further Assurances. From time to time, as and when requested by
any Party, each Party shall execute and deliver, or cause to be executed and
delivered, all such documents and instruments and shall take, or cause to be
taken, all such further or other actions, as such other Party may reasonably
deem necessary or desirable to complete the Acquisition and to consummate the
transactions contemplated by this Agreement.

 

Section 4.11. Survival and Right to Indemnification.

 

(a) All of Seller’s representations, warranties, covenants, and/or obligations
in this Agreement, and any other certificate or document delivered pursuant to
this Agreement will survive the Closing and the consummation of the transactions
contemplated herein for a one year period from the Closing; however, that
representations and warranties with respect to tax and securities law matters
shall survive for the applicable statute of limitations.

 

- 13 -

 

 

(b) Seller will indemnify and hold harmless Purchaser and its employees,
officers, directors and shareholders (collectively, the “Turquino Indemnified
Persons”) and will pay to the Turquino Indemnified Persons the amount of any
damages arising, directly or indirectly, from any breach in any respect of any
representation, warranty, covenant and /or obligation made by Seller in this
Agreement or in any other certificate or document delivered pursuant to this
Agreement; provided, however, that in no event shall Seller’s liability under
this Agreement or in connection with any certificate or document delivered
pursuant to this Agreement exceed an aggregate amount of One Hundred Thousand
Dollars ($100,000).

 

Section 4.12. Employment and Indemnification Agreement Assumptions. Purchaser
hereby agrees to assume the obligations of WPCS under the existing employment
agreement with Matthew Hidalgo and the existing indemnification agreements
between WPCS and each of Stephen Mullane and Mark Eaton.

 

ARTICLE V

 

CONDITIONS TO CLOSE

 

Section 5.01. Conditions to Obligations of Purchaser. The obligations of
Purchaser to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment or Purchaser’s waiver, at or prior to the Closing, of
each of the following conditions:

 

(a) All of Seller’s and Company’s representations and warranties in this
Agreement (considered both collectively and individually) must have been
accurate in all material respects as of the date of this Agreement, and must be
accurate in all material respects as of the Closing Date as if then made;

 

(b) All of the covenants and obligations that the Seller is required to perform
or to comply with under this Agreement on or before the Closing Date (considered
both collectively and individually) must have been duly performed and complied
with in all material respects at Purchaser’s reasonable satisfaction;

 

(c) Since the date of this Agreement, no event or circumstance shall have
occurred that, individually, or in the aggregate, has had or would reasonably be
expected to have a Company Material Adverse Effect;

 

(d) There must not have been made or threatened by any Person who is not a party
to this Agreement any claim asserting that such Person (a) is the holder or the
beneficial owner of, or has the right to acquire or to obtain beneficial
ownership of, any stock of or any other voting, equity or ownership interest in
the Company, or (b) is entitled to all or any portion of the Purchase Price; and

 

(e) There must not be in effect any Law or Order that (a) prohibits the
Acquisition or consummation of the transactions contemplated under this
Agreement and (b) has been adopted or issued, or has otherwise become effective,
since the date of this Agreement.

 

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Section 5.02. Conditions to Obligations of Seller. The obligations of Seller to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment or Seller’s waiver, at or prior to the Closing, of each of the
following conditions:

 

(a) All of Purchaser’s representations and warranties in this Agreement
(considered both collectively and individually) must have been accurate in all
material respects as of the date of this Agreement and must be accurate in all
material respects as of the Closing Date as if then made;

 

(b) All of the covenants and obligations that Purchaser is required to perform
or to comply with under this Agreement on or before the Closing Date (considered
both collectively and individually) must have been duly performed and complied
with in all material respects at Seller’s reasonable satisfaction;

 

(c) WPCS Shareholder Approval has been obtained,

 

(d) The Fairness Opinion has been obtained, and

 

(e) There must not be in effect any Law or Order that (a) prohibits the
Acquisition or consummation of the transactions contemplated under this
Agreement and (b) has been adopted or issued, or has otherwise become effective,
since the date of this Agreement.

 

ARTICLE VI

 

TERMINATION

 

Section 6.01. Termination Events. Subject to Section 6.02, this Agreement may,
by notice given before or at the Closing, be terminated:

 

(a) by mutual consent of Purchaser and Seller;

 

(b) by Purchaser or Seller if (i) WPCS Shareholder Approval is not obtained at a
shareholder meeting duly called where such proposal is submitted to the vote of
the shareholders of WPCS or (ii) the Fairness Opinion is not obtained;

 

(c) by Purchaser if Seller has committed a material breach of any provision of
this Agreement, Purchaser has not waived such material breach and Seller has not
cure such material breach within 30 days of receipt of written notice (with
specificity) of such;

 

(d) by Seller if Purchaser has committed a material breach of any provision of
this Agreement, Seller has not waived such material breach and Purchaser has not
cure such material breach within 30 days of receipt of written notice (with
specificity) of such;

 

(e) by Purchaser if the satisfaction of any condition in Section 5.01 is or
becomes impossible (other than through the failure of Purchaser to comply with
its obligations under this Agreement) and Purchaser has not waived such
condition; or

 

- 15 -

 

 

(f) by Seller if the satisfaction of any condition in Section 5.02 is or becomes
impossible (other than through the failure of Seller to comply with its
obligations under this Agreement) and Seller has not waived such condition.

 

Section 6.02. Effect of Termination. Each Party’s right of termination under
Section 6.01 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of such right of termination will not be an
election of remedies. If this Agreement is terminated pursuant to Section 6.01,
all obligations of the Parties under this Agreement will terminate, except that
the obligations in Sections 7.09, 7.10, 7.11, 7.12, and 7.13 will survive;
provided, however, that if this Agreement is terminated by a Party because of
the breach of the Agreement by another Party or because one or more of the
conditions to the terminating Party’s obligations under this Agreement is not
satisfied as a result of any other Party’s failure to comply with its
obligations under this Agreement, the terminating Party’s right to pursue all
legal remedies, including the right to an immediate refund of any amounts paid
to the other Party under this Agreement, will survive such termination
unimpaired.

 

ARTICLE VII

General Provisions

 

Section 7.01. Statutes. Except as otherwise provided in this Agreement, any
reference in this Agreement to a statute refers to such statute and all rules
and regulations made under it, as it or they may have been amended or
re-enacted.

 

Section 7.02. Non-Business Days. Whenever payments are to be made or an action
is to be taken on a day which is not a Business Day, such payment shall be made
or such action shall be taken on or not later than the next succeeding Business
Day.

 

Section 7.03. Amendments; Waivers. This Agreement may only be amended,
supplemented or otherwise modified by written agreement signed by Seller and
Purchaser. By an instrument in writing, Purchaser or Seller may waive compliance
by the other with any term or provision of this Agreement that such other Party
was or is obligated to comply with or perform. No waiver by a party of any
default, misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent occurrence.
No failure or delay by a party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.

 

Section 7.04. Assignment. This Agreement and the rights and obligations under
this Agreement shall not be assignable or transferable by any Party (including
by operation of law in connection with a merger or consolidation of such Party)
without the prior written consent of the other Party, such consent not to be
unreasonably withheld. Any attempted assignment in violation of this Section
5.04 shall be void.

 

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Section 7.05. No Third-Party Beneficiaries. This Agreement is for the sole
benefit of the parties hereto and their respective successors and permitted
assigns and nothing herein, express or implied, is intended to or shall confer
upon any other Person or entity any legal or equitable right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement.

 

Section 7.06. Notices. All notices, requests, consents, claims, demands, waivers
and other communications hereunder shall be in writing and shall be deemed to
have been given (a) when delivered by hand (with written confirmation of
receipt), (b) when received by the addressee if sent by a nationally recognized
overnight courier (receipt requested), (c) on the date sent by facsimile (with
confirmation of transmission) if sent during normal business hours of the
recipient, and on the next Business Day if sent after normal business hours of
the recipient, or (d) on the third (3rd) Business Day after the date mailed, by
certified or registered mail, return receipt requested, postage prepaid. Such
communications must be sent to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a notice given in
accordance with this Section 5.06):

 

If to Purchaser, to:   Turquino Equity LLC
10 East Kentucky Avenue
Long Beach Township, NJ 08008
Phone: (610) 564-5574
Attention: Andrew Hidalgo, Managing Partner       with a copy (which will not
constitute notice) to:   Miller, Canfield, Paddock, and Stone, P.L.C.
500 Fifth Avenue, 43rd Floor
New York, New York 10110
Fax no: (212) 704-4410
Phone: (212) 704-4414
Attention: Gurinder J. Singh       If to Seller, to:   WPCS Australia Pty Ltd
c/o WPCS International Incorporated
One East Uwchlan Avenue
Suite 301
Exton, Pennsylvania, 19341
Facsimile: (610) 903-0401
Attention: Chief Executive Officer       with a copy (which will not constitute
notice) to:   Sichenzia Ross Friedman Ference LLP
61 Broadway, 32nd Floor
New York, New York 10006
Facsimile: (212) 930-9725
Attention:  Thomas A. Rose

 

or to such other Persons, addresses or facsimile numbers as may be designated in
writing by the Person entitled to receive such communication as provided above.

 

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Section 7.07. Interpretation; Exhibits and Sections; Certain Definitions.

 

(a) The table of contents and headings herein are for convenience of reference
only, do not constitute part of this Agreement and shall not be deemed to limit
or otherwise affect any of the provisions hereof. Where a reference in this
Agreement is made to a Section or Exhibit, such reference shall be to a Section
of or Exhibit to this Agreement unless otherwise indicated. Whenever the words
“include,” “includes” or “including” are used in this Agreement, they shall be
deemed to be followed by the words “without limitation.” A reference in this
Agreement to $ or dollars is to U.S. dollars, except any reference to AUD $
refers to Australian dollars. The words “hereof”, “herein” and “hereunder” and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
References to “this Agreement” shall include all Exhibits hereto and the Company
Disclosure Letter.

 

(b) The parties have participated jointly in negotiating and drafting this
Agreement. In the event that an ambiguity or a question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provision of this
Agreement.

 

(c) For all purposes of this Agreement:

 

“Affiliate” means, with respect to any Person, any other Person that directly or
indirectly controls, is controlled by or is under common control with, such
Person. For the purposes of this definition, “control” (including, the terms
“controlling,” “controlled by” and “under common control with”), as applied to
any Person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of that Person, whether
through the ownership of voting securities, by Contract or otherwise.

 

“Business Day” means any day, other than Saturday, Sunday or any day on which
banking institutions located in New York City are authorized or required by Law
or other governmental action to close.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

- 18 -

 

 

“Company Material Adverse Effect” means any event, change, development, effect
or occurrence (an “Effect”) that, individually or together with any other
Effect, is materially adverse to the business, assets, liabilities, results of
operations or condition (financial or otherwise) of the Company, taken as a
whole; provided, however, that in determining whether a Company Material Adverse
Effect has occurred, there shall be excluded any Effect to the extent resulting
from the following: (a) any Effect affecting the businesses or industries in
which the Company operates (including general pricing changes), (b) any change
in general economic or business conditions, including changes in the financial,
securities or credit markets (including changes in interest rates and currency
rates), or changes in such conditions in any area in which the Company operates,
(c) any change in global or national political conditions, (d) the negotiation,
execution, announcement, pendency or performance of this Agreement and the
transactions contemplated by this Agreement, (e) any failure, in and of itself,
of the Company to meet any estimates, expectations, forecasts or projections,
including revenues, earnings or other measures of financial performance, for any
period; provided, however, that the facts and circumstances underlying any such
failure may, except as may be provided in subsections (a), (b), (c), (d), (f),
(g), (h), (i) or (j) of this definition, be considered in determining whether a
Company Material Adverse Effect has occurred, (f) any change in GAAP or other
accounting standards or any change in any Laws or interpretations thereof, in
each case, after the date of this Agreement, (g) any act of God or any change
that is the result of any outbreak or escalation of acts of war, material armed
hostilities or other material international or national calamity, acts of
terrorism or natural disasters, (h) any loss of or adverse change in the
business relationship between the Company, on the one hand, and Purchaser or any
of its Affiliates, on the other hand, (i) any fees, expenses or change of
control payments incurred in connection with this Agreement and the transactions
contemplated by this Agreement or (j) any action expressly required or permitted
by this Agreement, including actions required to be taken by this Agreement upon
the specific request of Purchaser, or the failure to take any actions due to the
restrictions set forth in this Agreement; except, with respect to clauses (a),
(b), (c), (f) or (g), so long as such changes do not have a disproportionate
adverse impact on the Company, taken as a whole, relative to other businesses of
similar size operating in the same industry in which the Company operates.

 

“Consent” means any consent, approval, authorization, permit, clearances,
exemption and notice.

 

“Contracts” means any contracts, agreements, licenses, notes, bonds, mortgages,
deeds, undertakings, indentures, leases or other binding instruments or binding
commitments, whether written or oral.

 

“Employee Program” means (a) all employee share or benefit plans within the
meaning of Division 13 of the Income Tax Assessment Act 1997 (Cth), including,
but not limited to multiple employer welfare arrangements, plans to which more
than one unaffiliated employer contributes, and employee benefit plans (such as
foreign or excess benefit plans) which do not qualify under the aforementioned
Division 13; and (b) all share and stock option plans, bonus or incentive award
plans, severance pay policies or agreements, deferred compensation agreements,
supplemental income arrangements, vacation plans, and all other employee benefit
plans, agreements, and arrangements not described in (a) above.

 

“Environmental Law” means any Law regulating or relating to the protection of
human health, safety, natural resources or the environment.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“GAAP” means generally accepted accounting principles in the United States in
effect from time to time.

 

“Governmental Entity” means any international, national, federal, state,
provincial or local governmental, regulatory or administrative authority,
agency, commission, court, tribunal, arbitral body, self-regulated entity or
similar body, whether domestic or foreign.

 

- 19 -

 

 

“Hazardous Substance” shall mean (a) any material, substance, chemical, waste,
product, derivative, compound, mixture, solid, liquid, mineral or gas, in each
case, whether naturally occurring or manmade, that is hazardous, acutely
hazardous, toxic, or words of similar import or regulatory effect under
Environmental Laws, and (b) any petroleum or petroleum-derived products, radon,
radioactive materials or wastes, asbestos in any form, lead or lead-containing
materials, urea formaldehyde foam insulation and polychlorinated biphenyls.

 

“Intellectual Property” means all intellectual property and other similar
proprietary rights in any jurisdiction, whether owned or held for use under
license, whether registered or unregistered, including such rights in and to:
(a) patents and applications therefor and all reissues, divisions, renewals,
extensions, provisionals, continuations and continuations-in-part thereof,
continuing patent applications, reexaminations, and extensions thereof, any
counterparts claiming priority therefrom, utility models, patents of
importation/confirmation, certificates of invention, certificates of
registration and like rights (“Patents”); inventions, invention disclosures,
discoveries and improvements, whether or not patentable; (b) copyrights and all
other similar rights throughout the world; (c) design rights; (d) trade names,
logos, trademarks and service marks, trade dress, certification marks and the
goodwill associated with the foregoing; (e) trade secrets (including, those
trade secrets defined in the Uniform Trade Secrets Act or under similar foreign
statutory and common law), business, technical and know-how information,
databases, data collections and other confidential and proprietary information
and all rights therein; (f) software, including data files, source code, object
code, application programming interfaces, architecture, documentation, files,
records, schematics, computerized databases and other software-related
specifications and documentation; and (g) Internet domain names; and in each
case of (a) to (g) above, including any registrations of, applications to
register, and renewals and extensions of, any of the foregoing with or by any
Governmental Entity in any jurisdiction.

 

“Laws” means any domestic or foreign laws, common law, statutes, ordinances,
rules, regulations, codes, Orders or legally enforceable requirements enacted,
issued, adopted, promulgated, enforced, ordered or applied by any Governmental
Entity.

 

“Liens” means, with respect to any property or asset, all pledges, liens,
mortgages, charges, encumbrances, hypothecations, options, rights of first
refusal, rights of first offer and security interests of any kind or nature
whatsoever.

 

“Litigation” means any action, cause of action, claim, cease and desist letter,
demand, suit, arbitration proceeding, citation, summons, subpoena or
investigation or proceeding of any nature, civil, criminal, regulatory or
otherwise, at law or in equity.

 

“Order” means order, writ, assessment, decision, injunction, decree, ruling or
judgment of a Governmental Entity.

 

“Organizational Documents” means the articles of incorporation, certificate of
incorporation, charter, bylaws, articles of formation, certificate of formation,
regulations, operating agreement, certificate of limited partnership,
partnership agreement, and all other similar documents, instruments or
certificates executed, adopted, or filed in connection with the creation,
formation, or organization of a Person, including any amendments thereto.

 

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“Party” means any of Purchaser or Seller, and “Parties” means both of them
collectively.

 

“Permitted Liens” means (a) statutory Liens for current Taxes or other
governmental charges or assessments not yet due and payable or the amount or
validity of which is being contested in good faith (provided appropriate
reserves required pursuant to GAAP have been made in respect thereof), (b)
mechanics’, carriers’, workers’, repairers’ and similar statutory Liens arising
or incurred in the ordinary course of business for amounts which are not
delinquent or which are being contested by appropriate proceedings (provided
appropriate reserves required pursuant to GAAP have been made in respect
thereof), (c) zoning, entitlement, building and other land use regulations
imposed by Governmental Entities having jurisdiction over such Person’s owned or
leased real property, which are not violated by the current use and operation of
such real property, (d) covenants, conditions, restrictions, easements and other
similar non-monetary matters of record affecting title to such Person’s owned or
leased real property, which do not materially impair the occupancy or use of
such real property for the purposes for which it is currently used in connection
with such Person’s businesses, (e) any right of way or easement related to
public roads and highways, and (f) Liens arising under workers’ compensation,
unemployment insurance, social security, retirement and similar legislation.

 

“Permits” means any material certificates, licenses, permits, authorizations and
approvals required by Law in connection with the operation of the business of
either Company as presently conducted.

 

“Person” means any individual, corporation, limited or general partnership,
limited liability company, limited liability partnership, trust, association,
joint venture, Governmental Entity and other entity and group (which term will
include a “group” as such term is defined in Section 13(d)(3) of the Exchange
Act).

 

“Purchaser Material Adverse Effect” means a material adverse effect on the
ability of Purchaser to perform its obligations under this Agreement or on the
ability of Purchaser to consummate the Acquisition and the other transactions
contemplated hereby.

 

“Purchaser’s Knowledge” or “Knowledge of the Purchaser” means the actual
knowledge of the managing member of Purchaser.

 

“Release” means any releasing, disposing, discharging, injecting, spilling,
leaking, leaching, pumping, dumping, emitting, escaping, emptying, seeping,
dispersal, migration, transporting, placing and the like, including without
limitation, the moving of any materials through, into or upon, any land, soil,
surface water, groundwater or air, or otherwise entering into the indoor or
outdoor environment.

 

“SEC” means the Securities and Exchange Commission.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Seller’s Knowledge” or “Knowledge of the Seller” means the actual knowledge of
the directors of Seller.

 

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“Subsidiary” means, when used with respect to any party, any corporation or
other organization, whether incorporated or unincorporated, a majority of the
securities or other interests of which having by their terms ordinary voting
power to elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party or by any one or more of its
subsidiaries, or by such party and one or more of its subsidiaries.

 

“Taxes” means all federal, state, local, foreign and other income, gross
receipts, sales, use, production, ad valorem, transfer, franchise, registration,
profits, license, lease, service, service use, withholding, payroll, employment,
unemployment, estimated, excise, severance, environmental, stamp, occupation,
premium, property (real or personal), real property gains, windfall profits,
customs, duties or other taxes, fees, assessments or charges of any kind
whatsoever, together with any interest, additions or penalties with respect
thereto and any interest in respect of such additions or penalties.

 

“Tax Returns” means any return, declaration, report, claim for refund,
information return or statement or other document required to be filed with or
provided to any taxing authority in respect of Taxes, including any schedule or
attachment thereto, and including any amendment thereof.

 

“WPCS” means WPCS International Incorporated, a Delaware corporation and the
parent company of the Seller.

 

“WPCS 2013 10-K” means WPCS’ Annual Report on Form 10-K for the fiscal year
ended April 30, 2013 filed with the SEC.

 

“WPCS SEC Documents” means all forms, statements, reports and documents,
together with any required amendments thereto, that WPCS was required to file or
furnish with the SEC pursuant to the Securities Act and the Exchange Act.

 

“WPCS Shareholder Approval” means the consent from the shareholders of WPCS
approving the Agreement, the Acquisition and all the transactions contemplated
hereby at a duly called meeting of WPCS’ shareholders.

 

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(d) Index of Defined Terms.

 

Defined Term Section Page Agreement Preamble 1 Acquisition 1.01(c) 2 Benefit
Plans 2.12(b) 6 Closing 1.02 2 Closing Date 1.02 2 Company Preamble 1 Company
Disclosure Letter Article II 3 Confidentiality Agreement 4.01 11 Effect
Definition of “Company Material Adverse Effect” 15 Filed WPCS SEC Documents
Article II 3 Independent Accounting Firm 1.01(b) 1 Leased Real Property 2.13 7
Leases 2.13 7 Material Contract 2.16 8 NTAV 1.01(b) 1 Purchase Price 1.01(a) 1
Purchaser Preamble 1 Shares Preamble 1 Seller Preamble 1 Turquino Indemnified
Persons 4.08(b) 13

 

Section 7.08. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the Parties and delivered to the other Parties. In the event that any
signature is delivered by facsimile transmission or by an e-mail which contains
a portable document format (.pdf) file of an executed signature page, such
signature page shall create a valid and binding obligation of the party
executing (or on whose behalf such signature is executed) with the same force
and effect as if such signature page were an original thereof.

 

Section 7.09. Entire Agreement; Survival. This Agreement (including the Exhibits
to this Agreement), the Company Disclosure Letter and the Confidentiality
Agreement constitute the entire agreement among the Parties with respect to the
subject matter of this Agreement and supersede all other prior agreements and
understandings, both written and oral, among the parties to this Agreement with
respect to the subject matter of this Agreement. In the event of any
inconsistency between the statements in the body of this Agreement, the
Confidentiality Agreement and the Company Disclosure Letter (other than an
exception expressly set forth as such in the Company Disclosure Letter), the
statements in the body of this Agreement will control. The Confidentiality
Agreement will survive the Closing Date in accordance with its terms.

 

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Section 7.10. Severability. If any term or provision of this Agreement is
invalid, illegal or unenforceable in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other term or provision of
this Agreement or invalidate or render unenforceable such term or provision in
any other jurisdiction. Upon such determination that any term or other provision
is invalid, illegal or unenforceable, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the greatest extent possible.

 

Section 7.11. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Delaware without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Delaware or any other jurisdiction) that would cause the application of Laws
of any jurisdiction other than those of the State of Delaware.

 

Section 7.12. Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY TO THIS AGREEMENT
CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO
ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS
CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER
VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION
5.12.

 

Section 7.13. Consent to Jurisdiction. Each Party hereby irrevocably and
unconditionally submits, for itself and its property, to the exclusive
jurisdiction of the United States District Court for the Southern District of
New York, or, if (and only if) such court lacks subject matter jurisdiction, the
Federal court of the United States of America sitting in New York, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the agreements delivered in connection herewith or
the transactions contemplated hereby or thereby or for recognition or
enforcement of any judgment relating thereto, and each of the parties hereby
irrevocably and unconditionally (a) agrees not to commence any such action or
proceeding except in the United States District Court for the Southern District
of New York, or, if (and only if) such court lacks subject matter jurisdiction,
the Federal court of the United States of America sitting in New York, and any
appellate court from any thereof, (b) agrees that any claim in respect of any
such action or proceeding may be heard and determined in the United States
District Court for the Southern District of New York, or, if (and only if) such
court lacks subject matter jurisdiction, the Federal court of the United States
of America sitting in New York, and any appellate court from any thereof, (c)
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any such
action or proceeding in the United States District Court for the Southern
District of New York, or, if (and only if) such court lacks subject matter
jurisdiction, the Federal court of the United States of America sitting in New
York, and any appellate court from any thereof and (d) waives, to the fullest
extent permitted by Law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in the United States District Court for the
Southern District of New York, or, if (and only if) such court lacks subject
matter jurisdiction, the Federal court of the United States of America sitting
in New York, and any appellate court from any thereof. Each Party agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by Law. Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 5.13. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by Law.

 

[signature page follows]

 

 

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IN WITNESS WHEREOF, Seller and Purchaser have duly executed this Agreement as of
the date first written above.

 

  WPCS AUSTRALIA PTY LTD                   By: /s/ JOSEPH HEATER       Name:
Joseph Heater       Title: Director                     TURQUINO EQUITY LLC    
              By: /s/ ANDREW HIDALGO       Name: Andrew Hidalgo       Title:
Managing Member  

 

 

Signature Page to Securities Purchase Agreement