UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest reported): August 22, 2003
WPCS INTERNATIONAL INCORPORATED
(Exact name of registrant as specified in charter)
Delaware 0-26277 98-0204758
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number Identification No.)
140 South Village Avenue, Suite 20, Exton, Pennsylvania 19341
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (610) 903-0400
ITEM 1. ACQUISITION OR DISPOSITION OF ASSETS
Acquisition of Clayborn Contracting Group, Inc.
On August 22, 2003, WPCS International Incorporated, a Delaware corporation (the
"Company"), entered into and completed an Agreement and Plan of Merger with
Clayborn Contracting Acquisition Corp. a California corporation wholly-owned by
the Company (the "Subsidiary"), Clayborn Contracting Group, Inc., a California
corporation ("Clayborn"), David G. Gove, as trustee ("D. Gove") and Sharon Gove,
as trustee ("S. Gove" and together with D. Gove, the "Clayborn Shareholders").
Pursuant to the terms of the Agreement and Plan of Merger (the "Acquisition"),
the Company acquired all of the issued and outstanding shares of capital stock
of Clayborn from the Clayborn Shareholders in exchange for an aggregate of
826,446 newly issued shares of the Company's common stock (the "Shares") and
$2,000,000 total cash consideration. As part of the Acquisition, the Company's
Board of Directors entered into employment contracts with D. Gove, Charles H.
Madenford, and Marilyn Engelking to serve as President, Area Manager, and
Controller, respectively, of Clayborn.
Clayborn is a diversified project services firm that operates primarily on the
west coast. Clayborn's services extend to both the public and private sector.
Clayborn holds A, B and C10 licenses with the Contractors State Licensing Board.
As a diverse services engineering company, Clayborn has designed and installed
smart highway systems and substations for state and local municipalities in
California. In addition, Clayborn has performed structured cabling, underground
and utility work. Recently, Clayborn has expanded its services to include
wireless SCADA design and deployment for water treatment facilities.
The 826,446 shares of common stock issued in the merger were not registered
under the Securities Act of 1933, as amended (the "Act") and were issued in the
reliance upon the exemption from registration provided by section 4(2) of the
Act, on the basis that the Acquisition is a transaction not involving a public
offering. All certificates evidencing the Shares bear a customary form of
investment legend and may not be sold, pledged, hypothecated or otherwise
transferred unless first registered under the Act or pursuant to an available
exemption from such registration requirements.
As part of the Acquisition, the Company caused the Subsidiary and Clayborn to be
merged pursuant to an Agreement of Merger filed with the California Secretary of
State on August 22, 2003. Clayborn survived the merger and the Company intends
to continue to hold the surviving company as a wholly owned subsidiary and to
continue its operations.
The amount of consideration paid to the Clayborn Shareholders for Clayborn was
determined through arm's-length negotiations between these parties and the
Company. Other than as disclosed herein, there are no material relationships
between the Clayborn Shareholders and the Company or any of its affiliates, any
directors or officers of the Company, or any associate of such directors or
officers.
Following the closing of the merger, the Company had 20,135,690 shares of its
common stock issued and outstanding.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of businesses acquired.
1. Audited Financial Statements of Clayborn for the years ended
September 30, 2001 and Speptember 30, 2002 (to be filed by
amendment).
2. Unaudited Financial Statements of Clayborn for the nine month
period ended June 30, 2003 (to be filed by amendment).
(b) Proforma Financial Information
Proforma Financial Information will be filed by amendment.
(c) Exhibits.
3. Agreement and Plan of Merger by and among WPCS International
Incorporated, Clayborn Contracting Acquisition Corp., Clayborn
Contracting Group, Inc., David G. Gove and Sharon Gove made as of the
22nd day of August, 2003.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WPCS INTERNATIONAL INCORPORATED
Date: August 29, 2003 /s/ ANDREW HIDALGO
-------------------- ---------------------------
Andrew Hidalgo, President
Exhibit 3
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made as of the 22nd day of August, 2003
AMONG:
WPCS INTERNATIONAL INCORPORATED, a corporation formed pursuant to the
laws of the State of Delaware and having an office for business
located at 140 South Village Avenue, Suite 20, Exton, Pennsylvania
19341
("WPCS")
AND:
CLAYBORN CONTRACTING ACQUISITION CORP., a corporation formed pursuant
to the laws of the State of California and a wholly owned subsidiary
of WPCS
(the "Acquirer")
AND:
CLAYBORN CONTRACTING GROUP, INC., a corporation formed pursuant to the
laws of the State of California and having an office for business
located at 10101 Streeter Road, Auburn, California 95602
("Clayborn")
AND:
DAVID G. GOVE, as trustee of the David G. Gove and Sharon K. Gove
Revocable Trust, dated July 7, 1995 (the "Trust"), having an address
at 23341 Sun Terrace Court, Auburn, California 95602
("D. Gove")
AND:
SHARON GOVE, as trustee of the Trust, having an address at 23341 Sun
Terrace Court, Auburn, California 95602
(together with D. Gove, the "Clayborn Shareholders")
WHEREAS:
A. Clayborn is a California corporation engaged in the business of
providing general contracting and electrical services;
B. The Clayborn Shareholders own one thousand (1,000) Clayborn Shares,
being 100% of the presently issued and outstanding Clayborn Shares;
C. WPCS is a reporting company whose common stock is quoted on the OTC
Bulletin Board and which is engaged in the business of providing wireless
solutions and structured cabling services; and
D. The respective Boards of Directors of WPCS, Clayborn and the Acquirer
deem it advisable and in the best interests of WPCS, Clayborn and the Acquirer
that the Acquirer merge with and into Clayborn (the "Merger")
pursuant to this Agreement and the Certificate of Merger, and the applicable
provisions of the laws of the State of California.
NOW THEREFORE, WITNESSETH THAT in consideration of the premises and the mutual
covenants, agreements, representations and warranties contained herein, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
Definitions
1.1 In this Agreement the following terms will have the following meanings:
(a) "Acquisition Shares" means such number of WPCS Common Shares
equal in value to One Million Dollars ($1,000,000) based upon the
closing price per share of the WPCS Common Shares as reported by
the OTC Bulletin Board on the third day prior to the Closing
Date, which shares are to be issued and delivered to the Clayborn
Shareholders at Closing pursuant to the terms of the Merger;
(b) "Agreement" means this agreement and plan of merger among WPCS,
the Acquirer, Clayborn, and the Clayborn Shareholders;
(c) "CGCL" means the California General Corporation Law;
(d) "Closing" means the completion, on the Closing Date, of the
transactions contemplated hereby in accordance with Article 9
hereof;
(e) "Closing Date" means the day on which all conditions precedent to
the completion of the transaction as contemplated hereby have
been satisfied or waived and which shall occur no later than
September 30, 2003, unless such date is extended by written
agreement of the parties;
(f) "Commission" means the Securities and Exchange Commission;
(g) Intentionally Omitted;
(h) "Effective Time" means the date of the filing of an appropriate
Certificate of Merger in the form required by the State of
California provided that the Merger shall become effective as
provided in the CGCL;
(i) "Employment Agreements" means the employment agreements to be
entered into on the Closing Date between Clayborn and D. Gove,
Charles Madenford and Marilyn Engelking in the forms attached
hereto as Schedule "K";
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended;
(k) "Merger" means the merger, at the Effective Time, of Clayborn and
the Acquirer pursuant to this Agreement;
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(l) "Place of Closing" means such place as WPCS and Clayborn may
mutually agree upon;
(m) "Registration Rights Agreement" means the registration rights
agreement to be entered into on the Closing Date between WPCS and
the Clayborn Shareholders in respect of the Acquisition Shares in
the form attached hereto as Schedule "L";
(n) "SEC Reports" means all forms, reports and documents filed and
required to be filed by WPCS with the Commission under the
Exchange Act from June 7, 2002 through the date hereof;
(o) "Securities Act" means the Securities Act of 1933, as amended;
(p) "Surviving Company" means Clayborn following the merger with the
Acquirer;
(q) "Clayborn Accounts Payable and Liabilities" means all accounts
payable and liabilities of Clayborn, due and owing or otherwise
constituting a binding obligation of Clayborn (other than a
Clayborn Material Contract) as of March 31, 2003 as set forth in
Schedule "A" hereto;
(r) "Clayborn Accounts Receivable" means all accounts receivable and
other amounts owing to Clayborn, as of March 31, 2003 as set
forth in Schedule "B" hereto;
(s) "Clayborn Assets" means all the property and assets of the
Clayborn Business of every kind and description wherever situated
including, without limitation, Clayborn Equipment, Clayborn
Inventory, Clayborn Material Contracts, Clayborn Accounts
Receivable, Clayborn Cash, Clayborn Intangible Assets and
Clayborn Goodwill, and all credit cards, charge cards and banking
cards issued to Clayborn;
(t) "Clayborn Bank Accounts" means all of the bank accounts, lock
boxes and safety deposit boxes of Clayborn or relating to the
Clayborn Business as set forth in Schedule "C" hereto;
(u) "Clayborn Business" means all aspects of the business conducted
by Clayborn;
(v) "Clayborn Cash" means all cash on hand or on deposit to the
credit of Clayborn on the Closing Date, subject to reduction
pursuant to Section 7.1(f) below;
(w) "Clayborn Debt to Related Parties" means the debts owed by
Clayborn to any of the Clayborn Shareholders or to any family
member thereof, or to any affiliate, director or officer of
Clayborn or the Clayborn Shareholders as described in Schedule
"D";
(x) "Clayborn Equipment" means all machinery, equipment, furniture,
and furnishings used in the Clayborn Business, including, without
limitation, the items more particularly described in Schedule "E"
hereto;
(y) "Clayborn Financial Statements" means collectively, the financial
statements of Clayborn for the years ended December 31, 2001 and
2002, and the three months ended March 31, 2003, all of which
were prepared in accordance with United States generally accepted
accounting principles and the requirements of Item 310 of
Regulation SB as promulgated by the Securities and Exchange
Commission, true copies of which are attached as Schedule "F"
hereto;
(z) "Clayborn Goodwill" means the goodwill of the Clayborn Business
together with the exclusive right of WPCS to represent itself as
carrying on the Clayborn Business in succession of Clayborn
subject to the terms hereof, and the right to use any words
indicating that the Clayborn Business is so carried on including
the right to use the name "Clayborn" or any variation thereof as
part of the name of or in connection with the Clayborn Business
or any part thereof carried on or to be carried on by Clayborn,
the right to all corporate, operating and trade names associated
with the Clayborn Business, or any variations of such names as
part of or in connection with the Clayborn Business, all
telephone listings and telephone advertising contracts, all lists
of customers, books and records and other information relating to
the Clayborn Business, all necessary licenses and authorizations
and any other rights used in connection with the Clayborn
Business;
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(aa) "Clayborn Insurance Policies" means the public liability
insurance and insurance against loss or damage to Clayborn Assets
and the Clayborn Business as described in Schedule "G" hereto;
(bb) "Clayborn Intangible Assets" means all of the intangible assets
of Clayborn, including, without limitation, Clayborn Goodwill,
all trademarks, logos, copyrights, designs, and other
intellectual and industrial property of Clayborn;
(cc) "Clayborn Inventory" means all inventory and supplies of the
Clayborn Business as of March 31, 2003 as set forth in Schedule
"H" hereto as increased or decreased in the ordinary course of
business;
(dd) "Clayborn Material Contracts" means the burden and benefit of and
the right, title and interest of Clayborn in, to and under all
trade and non-trade contracts, engagements or commitments,
whether written or oral, to which Clayborn is entitled in
connection with the Clayborn Business under which Clayborn is
obligated to pay or entitled to receive the sum of Ten Thousand
Dollars ($10,000) or more annually including, without limitation,
any pension plans, profit sharing plans, bonus plans, loan
agreements, security agreements, indemnities and guarantees, any
agreements with employees, lessees, licensees, managers,
accountants, suppliers, agents, distributors, officers,
directors, attorneys or others which cannot be terminated without
liability on not more than one month's notice, and those
contracts listed in Schedule "I" hereto; and
(ee) "Clayborn Shares" means all of the issued and outstanding shares
of Clayborn's equity stock;
(ff) "WPCS Business" means all aspects of any business conducted by
WPCS and its subsidiaries;
(gg) "WPCS Common Shares" means the shares of common stock in the
capital of WPCS; and
(hh) "WPCS Financial Statements" means, collectively, the audited
consolidated financial statements of WPCS for the fiscal years
ended April 30, 2002 and 2003, true copies of which are attached
as Schedule "J" hereto.
Any other terms defined within the text of this Agreement will have the meanings
so ascribed to them.
Captions and Section Numbers
1.2 The headings and section references in this Agreement are for
convenience of reference only and do not form a part of this Agreement and are
not intended to interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof.
Section References and Schedules
1.3 Any reference to a particular "Article", "section", "paragraph",
"clause" or other subdivision is to the particular Article, section, clause or
other subdivision of this Agreement and any reference to a Schedule by letter
will mean the appropriate Schedule attached to this Agreement and by such
reference the appropriate Schedule is incorporated into and made part of this
Agreement. The Schedules to this Agreement are as follows:
Information concerning Clayborn:
Schedule "A" Clayborn Accounts Payable and Liabilities
Schedule "B" Clayborn Accounts Receivable
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Schedule "C" Clayborn Bank Accounts
Schedule "D" Clayborn Debts to Related Parties
Schedule "E" Clayborn Equipment
Schedule "F" Clayborn Financial Statements
Schedule "G" Clayborn Insurance Policies
Schedule "H" Clayborn Inventory
Schedule "I" Clayborn Material Contracts
Information concerning WPCS:
Schedule "J" WPCS Financial Statements
Schedule "K" Form of Employment Agreements
Schedule "L" Form of Registration Rights Agreement
Severability of Clauses
1.4 If any part of this Agreement is declared or held to be invalid for any
reason, such invalidity will not affect the validity of the remainder which will
continue in full force and effect and be construed as if this Agreement had been
executed without the invalid portion, and it is hereby declared the intention of
the parties that this Agreement would have been executed without reference to
any portion which may, for any reason, be hereafter declared or held to be
invalid.
ARTICLE 2
THE MERGER
The Merger
2.1 At Closing, the Acquirer shall be merged with and into Clayborn
pursuant to this Agreement and the separate corporate existence of the Acquirer
shall cease and Clayborn, as it exists from and after the Closing, shall be the
Surviving Company.
Effect of the Merger
2.2 The Merger shall have the effect provided therefore by the CGCL.
Without limiting the generality of the foregoing, and subject thereto, at
Closing (i) all the rights, privileges, immunities, powers and franchises, of a
public as well as of a private nature, and all property, real, personal and
mixed, and all debts due on whatever account, including without limitation
subscriptions to shares, and all other choices in action, and all and every
other interest of or belonging to or due to Clayborn or the Acquirer, as a
group, subject to the terms hereof, shall be taken and deemed to be transferred
to, and vested in, the Surviving Company without further act or deed; and all
property, rights and privileges, immunities, powers and franchises and all and
every other interest shall be thereafter as effectually the property of the
Surviving Company, as they were of Clayborn and the Acquirer, as a group, and
(ii) all debts, liabilities, duties and obligations of Clayborn and the
Acquirer, as a group, subject to the terms hereof, shall become the debts,
liabilities and duties of the Surviving Company and the Surviving Company shall
thenceforth be responsible and liable for all debts, liabilities, duties and
obligations of Clayborn and the Acquirer, as a group, and neither the rights of
creditors nor any liens upon the property of Clayborn or the Acquirer, as a
group, shall be impaired by the Merger, and may be enforced against the
Surviving Company.
Articles of Incorporation; Bylaws; Directors and Officers
2.3 The Articles of Incorporation of the Surviving Company from and after
the Closing shall be the Articles of Incorporation of Clayborn as in effect
immediately prior to the Closing until thereafter amended in accordance with the
provisions therein and as provided by the applicable provisions of the CGCL. The
Bylaws of the Surviving Company from and after the Closing shall be the Bylaws
of Clayborn as in effect immediately prior to the Closing, continuing until
thereafter amended in accordance with their terms, the Articles of Incorporation
of the
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Surviving Company and as provided by the CGCL. The sole director of the Acquirer
at the Effective Time shall be the sole director of the Surviving Company.
Conversion of Securities
2.4 At the Effective Time, by virtue of the Merger and without any action
on the part of the Acquirer, Clayborn or the Clayborn Shareholders, the shares
of capital stock of each of Clayborn and the Acquirer shall be converted as
follows:
(a) Capital Stock of the Acquirer. Each issued and outstanding share
of the Acquirer's capital stock shall continue to be issued and
outstanding and shall be converted into one share of validly
issued, fully paid, and non-assessable common stock of the
Surviving Company. Each stock certificate of the Acquirer
evidencing ownership of any such shares shall continue to
evidence ownership of such shares of capital stock of the
Surviving Company.
(b) Conversion of Clayborn Shares. Each Clayborn Share that is issued
and outstanding at the Effective Time shall automatically be
cancelled and extinguished and converted, without any action on
the part of the holder thereof, into the right to receive at the
time and in the amounts described in this Agreement an amount of
Acquisition Shares equal to the number of Acquisition Shares
divided by the number of the Clayborn Shares outstanding
immediately prior to Closing. All such Clayborn Shares, when so
converted, shall no longer be outstanding and shall automatically
be cancelled and retired and shall cease to exist, and each
holder of a certificate representing any such shares shall cease
to have any rights with respect thereto, except the right to
receive the Acquisition Shares paid in consideration therefor
upon the surrender of such certificate in accordance with this
Agreement.
Additional Consideration
2.5 In addition to the Acquisition Shares, WPCS shall pay the Clayborn
Shareholders additional consideration in the amount of Two Million Dollars
($2,000,000) ("Cash Consideration"). The Cash Consideration shall be paid as
follows:
(a) On the Closing Date, WPCS shall pay the Clayborn Shareholders an
aggregate of Nine Hundred Thousand Dollars ($900,000) by
certified check, bank check or wire transfer. Such amount shall
be paid to the Clayborn Shareholders in proportion to their
ownership of Clayborn immediately prior to the Merger.
(b) The One Million One Hundred Thousand Dollars ($1,100,000) of
remaining Cash Consideration shall be paid through quarterly
distributions equal to fifty percent (50%) of the post-tax net
income of Clayborn as calculated by Clayborn ("Clayborn Net
Distribution"). In determining the amount of the post-tax net
income of Clayborn, neither (i) expenses of WPCS or any person or
entity affiliated with WPCS, nor (ii) any funds transferred from
Clayborn, shall be deducted or allocated to Clayborn in any
manner. If the Clayborn Shareholders dispute the calculation of
the Clayborn Net Distribution, they shall so notify Clayborn
within twenty (20) days after receipt of such calculation. The
parties shall then attempt in good faith to resolve any
differences. If the parties are unable to reach agreement
themselves, the calculation of the Clayborn Net Distribution
shall be determined pursuant to Section 11.1 below. Commencing
with each fiscal quarter of WPCS occurring after the Closing
Date, the Clayborn Shareholders shall be paid an amount equal to
the Clayborn Net Distribution within fifty (50) days after each
WPCS quarterly period and within ninety (90) days after the WPCS
fiscal year end . Such amounts shall be paid to the Clayborn
Shareholders in proportion to their ownership of Clayborn
immediately prior to the Merger. Such payments will be made until
an aggregate of One Million One Hundred Thousand Dollars
($1,100,000) shall have been paid to the Clayborn Shareholders
pursuant to this Section 2.5(b); provided, however, that if the
full amount has not been paid to the Clayborn Shareholders on or
before September
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30, 2007, the remaining balance shall be paid by Clayborn (or
WPCS, as appropriate) to the Clayborn Shareholders on or before
December 31, 2007. The foregoing payments shall be paid by
Clayborn. In the event Clayborn does not have sufficient cash to
make any or all of the foregoing payments, the payments shall be
made by WPCS at such time as such payments were otherwise payable
by Clayborn.
Adherence with Applicable Securities Laws
2.6 The Clayborn Shareholders agree that they are acquiring the Acquisition
Shares for investment purposes and will not offer, sell or otherwise transfer,
pledge or hypothecate any of the Acquisition Shares issued to them (other than
pursuant to an effective registration statement under the Securities Act)
directly or indirectly unless:
(a) the sale is to WPCS;
(b) the sale is made pursuant to the exemption from registration
under the Securities Act, provided by Rule 144 thereunder; or
(c) the Acquisition Shares are sold in a transaction that does not
require registration under the Securities Act, or any applicable
United States state laws and regulations governing the offer and
sale of securities, and the seller has furnished to WPCS an
opinion of counsel to that effect or such other written opinion
as may be reasonably required by WPCS.
The Clayborn Shareholders acknowledge that the certificates representing
the Acquisition Shares shall bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT. THEY MAY NOT BE MORTGAGED, PLEDGED,
HYPOTHECATED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT
OF 1933 AND OTHER APPLICABLE SECURITIES LAWS OR AN OPINION OF
COUNSEL FOR THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER
SUCH ACT AND OTHER APPLICABLE SECURITIES LAWS. THE HOLDER MAY BE
REQUIRED TO PROVIDE AN OPINION AT THE HOLDER'S COST TO THE
COMPANY THAT SUCH TRANSFER IS PERMITTED WITHOUT REGISTRATION
UNDER APPLICABLE STATE SECURITIES LAWS, WHICH OPINION MUST BE
REASONABLY ACCEPTABLE TO THE COMPANY'S COUNSEL.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF WPCS
Representations and Warranties
3.1 WPCS and the Acquirer jointly and severally represent and warrant in
all material respects to the Clayborn Shareholders, with the intent that the
Clayborn Shareholders will rely thereon in entering into this Agreement and in
approving and completing the transactions contemplated hereby, that:
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WPCS - Corporate Status and Capacity
(a) Incorporation. WPCS is a corporation duly incorporated and
validly existing under the laws of the State of Delaware, and is
in good standing with the office of the Secretary of State for
the State of Delaware and is duly qualified as a foreign
corporation in the state of California;
(b) Carrying on Business. WPCS carries on business primarily in the
Commonwealth of Pennsylvania and the state of California and does
not carry on any material business activity in any other
jurisdiction. The nature of the WPCS Business does not require
WPCS to register or otherwise be qualified to carry on business
in any other jurisdiction ;
(c) Corporate Capacity. WPCS has the corporate power, capacity and
authority to own its assets and to enter into and complete this
Agreement;
(d) Reporting Status; Listing. WPCS' common stock is registered under
Section 12(b) or 12(g) of the Exchange Act and WPCS is required
to file current reports with the Commission pursuant to section
13(a) of the Exchange Act. The WPCS Common Shares are quoted on
the OTC Bulletin Board under the symbol "WPCS";
(e) SEC Reports. WPCS has timely filed all SEC Reports with the
Commission under the Exchange Act. The SEC Reports, at the time
filed, complied as to form in all material respects with the
requirements of the Exchange Act. None of the SEC Reports,
including without limitation any financial statements or
schedules included therein, contains any untrue statements of a
material fact or omits to state a material fact necessary in
order to make the statements made, in light of the circumstances
under which they were made, not misleading;
Acquirer - Corporate Status and Capacity
(f) Incorporation. The Acquirer is a corporation duly incorporated
and validly existing under the laws of the State of California,
and is in good standing with the office of the Secretary of State
for the State of California;
(g) Carrying on Business. Other than corporate formation and
organization, the Acquirer has not carried on business activities
to date.
(h) Corporate Capacity. The Acquirer has the corporate power,
capacity and authority to enter into and complete this Agreement;
WPCS - Capitalization
(i) Authorized Capital. The authorized capital of WPCS consists of
30,000,000 WPCS Common Shares, $0.0001 par value and 5,000,000
shares of preferred stock. $0.0001 par value, of which 14,864,844
WPCS Common Shares are presently issued and outstanding;
(j) No Option. No person, firm or corporation has any agreement or
option or any right capable of becoming an agreement or option
for the acquisition of WPCS Common Shares or for the purchase,
subscription or issuance of any of the unissued shares in the
capital of WPCS;
Acquirer - Capitalization
(k) Authorized Capital. The authorized capital of the Acquirer
consists of 100 shares of common stock, of which one share of
common stock is presently issued and outstanding and which is
owned by WPCS;
(l) No Option. No person, firm or corporation has any agreement or
option or any right capable of becoming an agreement or option
for the acquisition of any common or preferred shares in Acquirer
or for the purchase, subscription or issuance of any of the
unissued shares in the capital of Acquirer;
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WPCS - Records and Financial Statements
(m) Charter Documents. The charter documents of WPCS and the Acquirer
have not been altered since the incorporation of each,
respectively, except as filed in the record books of WPCS or the
Acquirer, as the case may be;
(n) Corporate Minute Books. The corporate minute books of WPCS and
its subsidiaries are complete and each of the minutes contained
therein accurately reflect the actions that were taken at a duly
called and held meeting or by consent without a meeting. All
actions by WPCS and its subsidiaries which required director or
shareholder approval are reflected on the corporate minute books
of WPCS and its subsidiaries. WPCS and its subsidiaries are not
in violation or breach of, or in default with respect to, any
term of their respective Certificates of Incorporation (or other
charter documents) or by-laws;
(o) WPCS Financial Statements. The WPCS Financial Statements present
fairly, in all material respects, the assets and liabilities
(whether accrued, absolute, contingent or otherwise) of WPCS, on
a consolidated basis, as of the respective dates thereof, and the
results of operations and changes in financial position of WPCS
during the periods covered thereby, in all material respects and
have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods
indicated;
(p) WPCS Accounts Payable and Liabilities. There are no material
liabilities, contingent or otherwise, of WPCS or its subsidiaries
which are not reflected in the WPCS Financial Statements except
those incurred in the ordinary course of business since the date
of said schedule and the WPCS Financial Statements, and neither
WPCS nor its subsidiaries have guaranteed or agreed to guarantee
any debt, liability or other obligation of any person, firm or
corporation;
(q) WPCS Accounts Receivable. All the accounts receivable of WPCS
result from bona fide business transactions and services actually
rendered without, to the knowledge and belief of WPCS, any claim
by the obligor for set-off or counterclaim;
(r) No Debt to Related Parties. Neither WPCS nor its subsidiaries
are, and on Closing will not be, materially indebted to any
affiliate, director or officer of WPCS except for accounts
payable on account of bona fide business transactions of WPCS
incurred in the normal course of the WPCS Business, including
employment agreements, none of which are more than thirty (30)
days in arrears;
(s) No Related Party Debt to WPCS. No director or officer or
affiliate of WPCS is now indebted to or under any financial
obligation to WPCS or its subsidiaries on any account whatsoever,
except for advances on account of travel and other expenses not
exceeding Five Thousand Dollars ($5,000) in total;
(t) No Dividends. No dividends or other distributions on any shares
in the capital of WPCS have been made, declared or authorized
since the date of the WPCS Financial Statements;
(u) No Payments. No payments of any kind have been made or authorized
since the date of the WPCS Financial Statements to or on behalf
of officers, directors, shareholders or employees of WPCS or its
subsidiaries or under any management agreements with WPCS or its
subsidiaries, except payments made in the ordinary course of
business and at the regular rates of salary or other remuneration
payable to them;
9
(v) No Pension Plans. There are no pension, profit sharing, group
insurance or similar plans or other deferred compensation plans
affecting WPCS or its subsidiaries;
(w) No Adverse Events. Since April 30, 2003,
(i) there has not been any material adverse change in the properties,
results of operations, financial position or condition (financial
or otherwise) of WPCS, its subsidiaries, its assets or
liabilities or any damage, loss or other change in circumstances
materially affecting WPCS, the WPCS Business or WPCS' right to
carry on the WPCS Business, other than non-material changes in
the ordinary course of business,
(ii) there has not been any damage, destruction, loss or other event
(whether or not covered by insurance) materially and adversely
affecting WPCS, its subsidiaries, or the WPCS Business,
(iii)there has not been any material increase in the compensation
payable or to become payable by WPCS to any of WPCS' officers,
employees or agents or any bonus, payment or arrangement made to
or with any of them,
(iv) the WPCS Business has been and continues to be carried on in the
ordinary course,
(v) WPCS has not waived or surrendered any right of material value,
(vi) Neither WPCS nor its subsidiaries have discharged, satisfied or
paid any lien or encumbrance or obligation or liability other
than current liabilities in the ordinary course of business, and
(vii)no capital expenditures in excess of Ten Thousand Dollars
($10,000) individually or Thirty Thousand Dollars ($30,000) in
total have been authorized or made by WPCS.
WPCS - Income Tax Matters
(x) Tax Returns. All tax returns and reports of WPCS and its
subsidiaries required by law to be filed have been filed and are
true, complete and correct, and any taxes payable in accordance
with any return filed by WPCS and its subsidiaries or in
accordance with any notice of assessment or reassessment issued
by any taxing authority have been so paid;
(y) Current Taxes. Adequate provisions have been made for taxes
payable for the current period for which tax returns are not yet
required to be filed and there are no agreements, waivers, or
other arrangements providing for an extension of time with
respect to the filing of any tax return by, or payment of, any
tax, governmental charge or deficiency by WPCS or its
subsidiaries. WPCS is not aware of any contingent tax liabilities
or any grounds which would prompt a reassessment including
aggressive treatment of income and expenses in filing earlier tax
returns;
WPCS - Applicable Laws and Legal Matters
(z) Licenses. WPCS and its subsidiaries hold all licenses and permits
as may be requisite for carrying on the WPCS Business in the
manner in which it has heretofore been carried on, which licenses
and permits have been maintained and continue to be in good
standing except where the failure to obtain or maintain such
licenses or permits would not have a material adverse effect on
the WPCS Business;
(aa) Applicable Laws. Neither WPCS nor its subsidiaries have been
charged with or received notice of breach of any laws,
ordinances, statutes, regulations, by-laws, orders or decrees to
which they
10
are subject or which apply to them the violation of which would
have a material adverse effect on the WPCS Business, and to WPCS'
knowledge, neither WPCS nor its subsidiaries are in breach of any
laws, ordinances, statutes, regulations, bylaws, orders or
decrees the contravention of which would result in a material
adverse impact on the WPCS Business;
(bb) Pending or Threatened Litigation. There is no material litigation
or administrative or governmental proceeding pending or
threatened against or relating to WPCS, its subsidiaries, or the
WPCS Business nor does WPCS have any knowledge of any act or
omission of WPCS or its subsidiaries that would form any material
basis for any such action or proceeding;
(cc) No Bankruptcy. Neither WPCS nor its subsidiaries have made any
voluntary assignment or proposal under applicable laws relating
to insolvency and bankruptcy and no bankruptcy petition has been
filed or presented against WPCS or its subsidiaries and no order
has been made or a resolution passed for the winding-up,
dissolution or liquidation of WPCS or its subsidiaries;
(dd) Labor Matters. Neither WPCS nor its subsidiaries are party to any
collective agreement relating to the WPCS Business with any labor
union or other association of employees and no part of the WPCS
Business has been certified as a unit appropriate for collective
bargaining or, to the knowledge of WPCS, has made any attempt in
that regard;
(ee) Finder's Fees. Neither WPCS nor its subsidiaries are party to any
agreement which provides for the payment of finder's fees,
brokerage fees, commissions or other fees or amounts which are or
may become payable to any third party in connection with the
execution and delivery of this Agreement and the transactions
contemplated herein;
Execution and Performance of Agreement
(ff) Authorization and Enforceability. The execution and delivery of
this Agreement, and the completion of the transactions
contemplated hereby, have been duly and validly authorized by all
necessary corporate action on the part of WPCS and the Acquirer;
(gg) No Violation or Breach. The execution and performance of this
Agreement will not:
(i) violate the charter documents of WPCS or the Acquirer
or result in any breach of, or default under, any loan
agreement, mortgage, deed of trust, or any other
agreement to which WPCS or its subsidiaries are party,
(ii) give any person any right to terminate or cancel any
agreement or any right or rights enjoyed by WPCS or its
subsidiaries,
(iii)result in any alteration of WPCS' or its subsidiaries'
obligations under any agreement to which WPCS or its
subsidiaries are party,
(iv) result in the creation or imposition of any lien,
encumbrance or restriction of any nature whatsoever in
favor of a third party upon or against the assets of
WPCS,
(v) result in the imposition of any tax liability to WPCS
or its subsidiaries relating to the assets of WPCS, or
(vi) violate any court order or decree to which either WPCS
or its subsidiaries is subject;
11
The WPCS Business
(hh) Maintenance of Business. Since the date of the WPCS Financial
Statements, WPCS and its subsidiaries have not entered into any
material agreement or commitment except in the ordinary course
and except as disclosed herein or in the WPCS SEC Reports;
(ii) Subsidiaries. Except for the Acquirer, WPCS does not own any
subsidiaries and does not otherwise own, directly or indirectly,
any shares or interest in any other corporation, partnership,
joint venture or firm other than WPCS Incorporated, a Delaware
corporation, Invisinet, Inc., a Delaware corporation and Walker
Comm, Inc., a California corporation;
WPCS - Acquisition Shares
(jj) Acquisition Shares. The Acquisition Shares when delivered to the
holders of Clayborn Shares pursuant to the Merger shall be
validly issued and outstanding as fully paid and non-assessable
shares and the Acquisition Shares shall be transferable upon the
books of WPCS, in all cases subject to the provisions and
restrictions of all applicable securities laws; and
(kk) Securities Law Compliance. Except as set forth in the SEC
Reports, WPCS has not issued any shares of its common stock (or
securities convertible into or exercisable for shares of common
stock). Neither WPCS nor any person acting on its behalf has
taken or will take any action (including, without limitation, any
offering of any securities of WPCS under circumstances which
would require the integration of such offering with the offering
of the Acquisition Shares issued to the Clayborn Shareholders)
which subject the issuance or sale of such shares to the Clayborn
Shareholders to the registration requirements of Section 5 of the
Securities Act.
Non-Merger and Survival
3.2 The representations and warranties of WPCS and the Acquirer contained
herein are true and correct as of the date of this Agreement and will be true at
and as of Closing in all material respects as though such representations and
warranties were made as of such time. Notwithstanding the completion of the
transactions contemplated hereby, the waiver of any condition contained herein
(unless such waiver expressly releases a party from any such representation or
warranty) or any investigation made by the Clayborn Shareholders, the
representations and warranties of WPCS shall survive the Closing for a period of
two (2) years.
Indemnity
3.3 WPCS shall defend, indemnify and save harmless the Clayborn
Shareholders from and against any and all claims, demands, actions, suits,
proceedings, assessments, judgments, damages, costs, losses and expenses,
including any payment made in good faith in settlement of any claim (subject to
the right of WPCS to defend any such claim), resulting from the breach by it of
any representation or warranty made under this Agreement or from any
misrepresentation in or omission from any certificate or other instrument
furnished or to be furnished by WPCS and/or the Acquirer to the Clayborn
Shareholders hereunder provided that each individual claim or series of related
claims exceeds Five Thousand Dollars ($5,000).
ARTICLE 4
COVENANTS OF WPCS
Covenants
4.1 WPCS covenants and agrees with Clayborn and the Clayborn Shareholders
that WPCS will:
12
(a) Conduct of Business. Until the Closing, conduct its business
diligently and in the ordinary course consistent with the manner
in which it generally has been operated up to the date of
execution of this Agreement;
(b) Access. Until the Closing, give the Clayborn Shareholders and
their representatives full access to all of the properties,
books, contracts, commitments and records of WPCS, and furnish to
the Clayborn Shareholders and their representatives all such
information as they may reasonably request;
(c) Procure Consents. Until the Closing, take all reasonable steps
required to obtain, prior to Closing, any and all third party
consents required to permit the Merger;
(d) Public Information. Make and keep public information available,
as those terms are understood and defined in Rule 144; and
(e) SEC Filings. File with the Commission in a timely manner, all
reports and other documents required of WPCS under either the
Securities Act or the Exchange Act.
(f) Employment Agreement. On the Closing Date, WPCS will cause
Clayborn to enter into the Employment Agreements.
(g) Delivery of Registration Rights Agreement. On the Closing Date,
WPCS will deliver the executed Registration Rights Agreement to
the Clayborn Shareholders.
(h) Release of Guarantees. WPCS and Acquirer shall use their
reasonable best efforts to obtain the release of the Clayborn
Shareholders from any personal guarantees of Clayborn obligations
which are in effect as of the Closing Date.
(i) Control of Clayborn. Until the Cash Consideration is paid in full
by WPCS, D. Gove (or his designated successor) shall have sole
authority, using reasonable business judgment, to accept or
reject work projects on behalf of Clayborn. It is expressly
agreed and understood that Clayborn will continue to accept
projects in its historical line of business.
(j) Working Capital. Until the Cash Consideration is paid in full by
WPCS, WPCS shall, if necessary, provide sufficient working
capital for Clayborn to operate its business as presently
conducted. To the extent either WPCS or Clayborn provides capital
to the other through debt, the debt shall bear interest at
reasonable rates and be repaid on reasonable terms.
Authorization
4.2 WPCS hereby agrees to authorize and direct any and all federal, state,
municipal, foreign and international governments and regulatory authorities
having jurisdiction respecting WPCS and its subsidiaries to release any and all
information in their possession respecting WPCS and its subsidiaries to
Clayborn. WPCS shall promptly execute and deliver to Clayborn any and all
consents to the release of information and specific authorizations which
Clayborn reasonably requires to gain access to any and all such information.
Reports Under the Exchange Act
4.3 With a view to making available to the Clayborn Shareholders the
benefits of Rule 144 promulgated under the Securities Act or any other similar
rule or regulation of the Commission that may at any time permit the Clayborn
Shareholders to sell securities of WPCS to the public without registration and
without imposing restrictions arising under the federal securities laws on the
purchases thereof ("Rule 144"), and provided that the one year holding period
imposed by paragraph d of Rule 144 has been met, WPCS agrees to furnish to each
13
Clayborn Shareholder, so long as such Clayborn Shareholder owns WPCS Common
Shares, promptly upon request, (i) a written statement by WPCS that it has
complied with the reporting requirements of Rule 144, the Securities Act and the
Exchange Act, (ii) a copy of the most recent annual or quarterly report of WPCS
and such other reports and documents so filed by WPCS, and (iii) such other
information as may be reasonably requested to permit the Clayborn Shareholders
to sell such securities pursuant to Rule 144 without registration.
Survival
4.4 The covenants set forth in this Article shall survive the Closing for
the benefit of the Clayborn Shareholders.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF
THE CLAYBORN SHAREHOLDERS
Representations and Warranties
5.1 The Clayborn Shareholders jointly and severally represent and warrant
in all material respects to WPCS, with the intent that it will rely thereon in
entering into this Agreement and in approving and completing the transactions
contemplated hereby, that:
Clayborn - Corporate Status and Capacity
(a) Incorporation. Clayborn is a corporation duly incorporated and
validly existing under the laws of the State of California, and
is in good standing with the office of the Secretary of State for
the State of California;
(b) Carrying on Business. Clayborn carries on business primarily in
the State of California and does not carry on any material
business activity in any other jurisdiction. Clayborn has an
office in Auburn, California and in no other locations. The
nature of the Clayborn Business does not require Clayborn to
register or otherwise be qualified to carry on business in any
other jurisdiction;
(c) Corporate Capacity. Clayborn has the corporate power, capacity
and authority to own the Clayborn Assets and to carry on the
Clayborn Business and Clayborn has the corporate power, capacity
and authority to enter into and complete this Agreement;
Clayborn - Capitalization
(d) Authorized Capital. The authorized capital of Clayborn consists
of 50,000 shares of common stock, no par value per share;
(e) Ownership of Clayborn Shares. The issued and outstanding share
capital of Clayborn will on Closing consist of 1,000 common
shares (being the Clayborn Shares), which shares on Closing shall
be validly issued and outstanding as fully paid and
non-assessable shares. The Clayborn Shareholders will be at
Closing the registered and beneficial owner of the Clayborn
Shares. The Clayborn Shares owned by the Clayborn Shareholders
will on Closing be free and clear of any and all liens, charges,
pledges, encumbrances, restrictions on transfer and adverse
claims whatsoever not created by or through WPCS and/or the
Acquirer;
(f) No Option. No person, firm or corporation has any agreement,
option, warrant, preemptive right or any other right capable of
becoming an agreement or option for the acquisition of Clayborn
Shares held by the Clayborn Shareholders or for the purchase,
subscription or issuance of any of
14
the unissued shares in the capital of Clayborn;
(g) No Restrictions. There are no restrictions on the transfer, sale
or other disposition of Clayborn Shares contained in the charter
documents of Clayborn or under any agreement;
Clayborn - Records and Financial Statements
(h) Charter Documents. The charter documents of Clayborn have not
been altered since its incorporation date, except as filed in the
record books of Clayborn;
(i) Corporate Minute Books. The corporate minute books of Clayborn
are complete and each of the minutes contained therein accurately
reflect the actions that were taken at a duly called and held
meeting or by consent without a meeting. All actions by Clayborn
which required director or shareholder approval are reflected on
the corporate minute books of Clayborn. Clayborn is not in
violation or breach of, or in default with respect to, any term
of its Articles of Incorporation (or other charter documents) or
by-laws;
(j) Clayborn Financial Statements. The Clayborn Financial Statements
present fairly, in all material respects, the assets and
liabilities (whether accrued, absolute, contingent or otherwise)
of Clayborn as of the respective dates thereof, and the results
of operations and changes in financial position of Clayborn
during the periods covered thereby, and will be prepared in
accordance with generally accepted accounting principles
consistently applied throughout the periods indicated;
(k) Clayborn Accounts Payable and Liabilities. There are no material
liabilities, contingent or otherwise, of Clayborn which are not
disclosed in Schedule "A" hereto or reflected in the Clayborn
Financial Statements except those incurred in the ordinary course
of business since the date of said schedule and the Clayborn
Financial Statements, and Clayborn has not guaranteed or agreed
to guarantee any debt, liability or other obligation of any
person, firm or corporation. Without limiting the generality of
the foregoing, all accounts payable and liabilities of Clayborn
as of March 31, 2003 are described in Schedule "A" hereto;
(l) Clayborn Accounts Receivable. All Clayborn Accounts Receivable
result from bona fide business transactions and services actually
rendered without, to the knowledge and belief of Clayborn, any
claim by the obligor for set-off or counterclaim;
(m) Clayborn Bank Accounts. All of the Clayborn Bank Accounts, their
location, numbers and the authorized signatories thereto are as
set forth in Schedule "C" hereto;
(n) No Debt to Related Parties. Except as disclosed in Schedule "D"
hereto, Clayborn is not, and on Closing will not be, materially
indebted to the Clayborn Shareholders nor to any family member
thereof, nor to any affiliate, director or officer of Clayborn or
the Clayborn Shareholders except accounts payable on account of
bona fide business transactions of Clayborn incurred in normal
course of Clayborn Business, including employment agreements with
the Clayborn Shareholders and attached to Schedule "D" hereto is
an accounts payable aging ledger;
(o) No Related Party Debt to Clayborn. Neither the Clayborn
Shareholders nor any director, officer or affiliate of Clayborn
are now indebted to or under any financial obligation to Clayborn
on any account whatsoever, except for advances on account of
travel and other expenses not exceeding Five Thousand Dollars
($5,000) in total;
(p) No Dividends. No dividends or other distributions on any shares
in the capital of Clayborn have been made, declared or authorized
since the date of the Clayborn Financial Statements;
(q) No Payments. No payments of any kind have been made or authorized
since the date of the
15
Clayborn Financial Statements to or on behalf of the Clayborn
Shareholders or to or on behalf of officers, directors,
shareholders or employees of Clayborn, except payments made in
the ordinary course of business and at the regular rates of
salary or other remuneration payable to them;
(r) No Pension Plans. Except as otherwise disclosed, there are no
pension, profit sharing, group insurance or similar plans or
other deferred compensation plans affecting Clayborn;
(s) No Adverse Events. Since the date of the Clayborn Financial
Statements, except as described in Schedule "A" hereto:
(i) there has not been any material adverse change in the
properties, results of operations, financial position
or condition of Clayborn, its liabilities or the
Clayborn Assets or any damage, loss or other change in
circumstances materially affecting Clayborn, the
Clayborn Business or the Clayborn Assets or Clayborn's
right to carry on the Clayborn Business, other than
changes in the ordinary course of business,
(ii) there has not been any damage, destruction, loss or
other event (whether or not covered by insurance)
materially and adversely affecting Clayborn, the
Clayborn Business or the Clayborn Assets,
(iii)there has not been any material increase in the
compensation payable or to become payable by Clayborn
to the Clayborn Shareholders or to any of Clayborn's
officers, employees or agents or any bonus, payment or
arrangement made to or with any of them except in the
ordinary course, or as required by written agreement;
(iv) the Clayborn Business has been and continues to be
carried on in the ordinary course,
(v) Clayborn has not waived or surrendered any right of
material value,
(vi) Clayborn has not discharged or satisfied or paid any
lien or encumbrance or obligation or liability other
than current liabilities in the ordinary course of
business, and
(vii)no capital expenditures in excess of Ten Thousand
Dollars ($10,000) individually or Thirty Thousand
Dollars ($30,000) in total have been authorized or made
other than the purchase of a 2003 Ford F-250 pick up
truck;
Clayborn - Income Tax Matters
(t) Tax Returns. All tax returns and reports of Clayborn required by
law to be filed have been filed and to the best of Clayborn's
knowledge and belief are true, complete and correct, and any
taxes payable in accordance with any return filed by Clayborn or
in accordance with any notice of assessment or reassessment
issued by any taxing authority have been so paid;
(u) Current Taxes. Adequate provisions have been made for taxes
payable for the current period for which tax returns are not yet
required to be filed and there are no agreements, waivers, or
other arrangements providing for an extension of time with
respect to the filing of any tax return by, or payment of, any
tax, governmental charge or deficiency by Clayborn. Clayborn is
not aware of any contingent tax liabilities or any grounds which
would prompt a reassessment including aggressive treatment of
income and expenses in filing earlier tax returns;
Clayborn - Applicable Laws and Legal Matters
(v) Licenses. Clayborn holds all licenses and permits as may be
requisite for carrying on the Clayborn Business in the manner in
which it has heretofore been carried on, which licenses and
16
permits have been maintained and continue to be in good standing
except where the failure to obtain or maintain such licenses or
permits would not have a material adverse effect on the Clayborn
Business;
(w) Applicable Laws. Clayborn has not been charged with or received
notice of breach of any laws, ordinances, statutes, regulations,
by-laws, orders or decrees to which it is subject or which
applies to it the violation of which would have a material
adverse effect on the Clayborn Business, and, to Clayborn's
knowledge and belief, Clayborn is not in breach of any laws,
ordinances, statutes, regulations, by-laws, orders or decrees the
contravention of which would result in a material adverse impact
on the Clayborn Business;
(x) Pending or Threatened Litigation. Except as described in Schedule
"A" attached hereto, there is no material litigation or
administrative or governmental proceeding pending or threatened
against or relating to Clayborn, the Clayborn Business, or any of
the Clayborn Assets, nor does Clayborn have any knowledge of any
deliberate act or omission of Clayborn that would form any
material basis for any such action or proceeding;
(y) No Bankruptcy. Clayborn has not made any voluntary assignment or
proposal under applicable laws relating to insolvency and
bankruptcy and no bankruptcy petition has been filed or presented
against Clayborn and no order has been made or a resolution
passed for the winding-up, dissolution or liquidation of
Clayborn;
(z) Labor Matters. Clayborn is not a party to any collective
agreement relating to the Clayborn Business with any labor union
or other association of employees and no part of the Clayborn
Business has been certified as a unit appropriate for collective
bargaining or, to the knowledge of Clayborn, has made any attempt
in that regard and Clayborn has no reason to believe that any
current employees will leave Clayborn's employ as a result of
this Merger;
(aa) Finder's Fees. Clayborn is not a party to any agreement which
provides for the payment of finder's fees, brokerage fees,
commissions or other fees or amounts which are or may become
payable to any third party in connection with the execution and
delivery of this Agreement and the transactions contemplated
herein;
Execution and Performance of Agreement
(bb) Authorization and Enforceability. The execution and delivery of
this Agreement, and the completion of the transactions
contemplated hereby, have been duly and validly authorized by all
necessary corporate action on the part of Clayborn and the
Clayborn Shareholders;
(cc) No Violation or Breach. The execution and performance of this
Agreement will not
(i) violate the charter documents of Clayborn or result in
any breach of, or default under, any loan agreement,
mortgage, deed of trust, or any other agreement to
which Clayborn is a party,
(ii) give any person any right to terminate or cancel any
agreement including, without limitation, Clayborn
Material Contracts, or any right or rights enjoyed by
Clayborn,
(iii)result in any material alteration of Clayborn's
obligations under any agreement to which Clayborn is a
party including, without limitation, the Clayborn
Material Contracts,
(iv) result in the creation or imposition of any lien,
encumbrance or restriction of any nature whatsoever in
favor of a third party upon or against the Clayborn
Assets,
(v) result in the imposition of any tax liability to
Clayborn relating to Clayborn Assets
17
or the Clayborn Shares, or
(vi) violate any court order or decree to which Clayborn is
subject;
Clayborn Assets - Ownership and Condition
(dd) Business Assets. The Clayborn Assets comprise all of the property
and assets of the Clayborn Business, and neither the Clayborn
Shareholders nor any other person, firm or corporation owns any
assets used by Clayborn in operating the Clayborn Business,
whether under a lease, rental agreement or other arrangement,
other than as disclosed in Schedules "E" or "I" hereto;
(ee) Title. Clayborn is the legal and beneficial owner of the Clayborn
Assets, free and clear of all mortgages, liens, charges, pledges,
security interests, encumbrances or other claims whatsoever, save
and except as disclosed in Schedules "E" or "I" hereto;
(ff) No Option. No person, firm or corporation has any agreement or
option or a right capable of becoming an agreement for the
purchase of any of the Clayborn Assets;
(gg) Clayborn Insurance Policies. Clayborn maintains the public
liability insurance and insurance against loss or damage to the
Clayborn Assets and the Clayborn Business as described in
Schedule "G" hereto;
(hh) Clayborn Material Contracts. The Clayborn Material Contracts
listed in Schedule "I" constitute all of the material contracts
of Clayborn;
(ii) No Default. There has not been any default in any material
obligation of Clayborn or any other party to be performed under
any of Clayborn Material Contracts, each of which is in good
standing and in full force and effect and unamended (except as
specifically disclosed in Schedule "I"), and Clayborn is not
aware of any default in the obligations of any other party to any
of the Clayborn Material Contracts;
(jj) No Compensation on Termination. To the best of the Clayborn
Shareholders' knowledge, there are no agreements, commitments or
understandings relating to severance pay or separation allowances
on termination of employment of any employee of Clayborn.
Clayborn is not obliged to pay benefits or share profits with any
employee after termination of employment except as required by
law;
Clayborn Assets - Clayborn Equipment
(kk) Clayborn Equipment. The Clayborn Equipment has been maintained in
a manner consistent with that of a reasonably prudent owner and
such equipment is in good working condition, reasonable wear and
tear excepted;
Clayborn Assets - Clayborn Goodwill and Other Assets
(ll) Clayborn Goodwill. Clayborn carries on the Clayborn Business only
under the name "Clayborn Contracting Group, Inc." and variations
thereof and under no other business or trade names. Clayborn does
not have any knowledge of any infringement by Clayborn of any
patent, trademark, copyright or trade secret;
The Business of Clayborn
(mm) Maintenance of Business. Since the date of the Clayborn Financial
Statements, the Clayborn Business has been carried on in the
ordinary course and Clayborn has not entered into any
18
material agreement or commitment except in the ordinary course;
and
(nn) Subsidiaries. Clayborn does not have any subsidiaries and does
not otherwise own, directly or indirectly, any shares or interest
in any other corporation, partnership, joint venture or firm.
Non-Merger and Survival
5.2 The representations and warranties of the Clayborn Shareholders
contained herein will be true at and as of Closing in all material respects as
though such representations and warranties were made as of such time.
Notwithstanding the completion of the transactions contemplated hereby, the
waiver of any condition contained herein (unless such waiver expressly releases
a party from any such representation or warranty) or any investigation made by
WPCS, the representations and warranties of the Clayborn Shareholders shall
survive the Closing for a period of two (2) years.
Indemnity
5.3 The Clayborn Shareholders jointly and severally agree to indemnify and
save harmless WPCS from and against any and all claims, demands, actions, suits,
proceedings, assessments, judgments, damages, costs, losses and expenses,
including any payment made in good faith in settlement of any claim (subject to
the right of the Clayborn Shareholders to defend any such claim), resulting from
the breach by any of them of any representation or warranty of such party made
under this Agreement or from any misrepresentation in or omission from any
certificate or other instrument furnished or to be furnished by Clayborn or the
Clayborn Shareholders to WPCS hereunder provided that each individual claim or
series of related claims exceeds Five Thousand Dollars ($5,000). Without
limiting the foregoing, it is expressly agreed and understood that with respect
to the current legal action against Clayborn by Pablo Zamora, the Clayborn
Shareholders shall indemnify WPCS with regard to any judgment incurred or
settlement paid. Neither Clayborn nor WPCS shall enter into any settlement
agreement with respect to the Zamora matter without the consent of the Clayborn
Shareholders, which consent shall not be unreasonably withheld. Legal fees and
other costs of defending and prosecuting this action shall be borne by Clayborn.
To the extent Clayborn prevails in this action, the recovery shall be applied
first to reimburse Clayborn for expenses incurred in such action, and any
remaining balance shall be split between Clayborn and the Clayborn Shareholders.
ARTICLE 6
COVENANTS OF CLAYBORN AND
THE CLAYBORN SHAREHOLDERS
Covenants
6.1 Clayborn and the Clayborn Shareholders covenant and agree with WPCS
that they will:
(a) Conduct of Business. Until the Closing, conduct the Clayborn
Business diligently and in the ordinary course consistent with
the manner in which the Clayborn Business generally has been
operated up to the date of execution of this Agreement;
(b) Preservation of Business. Until the Closing, use their best
efforts to preserve the Clayborn Business and the Clayborn Assets
and, without limitation, preserve for WPCS Clayborn's
relationships with their suppliers, customers and others having
business relations with them;
(c) Access. Until the Closing, give WPCS and its representatives full
access to all of the properties, books, contracts, commitments
and records of Clayborn relating to Clayborn, the Clayborn
Business and the Clayborn Assets, and furnish to WPCS and its
representatives all such information as they may reasonably
request;
(d) Procure Consents. Until the Closing, take all reasonable steps
required to obtain, prior to Closing, any and all third party
consents required to permit the Merger and to preserve and
maintain the
19
Clayborn Assets, including the Clayborn Material Contracts,
notwithstanding the change in control of Clayborn arising from
the Merger; and
(e) Reporting and Internal Controls. From and after the Effective
Time, forthwith take all required actions to implement internal
controls on the business of the Surviving Company to ensure that
the Surviving Company complies with Section 13(b)(2) of the
Exchange Act.
(f) Delivery of Registration Rights Agreement. On the Closing Date,
the Clayborn Shareholders will deliver the executed Registration
Rights Agreement to WPCS.
(g) Employment Agreement. On the Closing Date, Clayborn will deliver
the executed Employment Agreements to WPCS.
Authorization
6.2 Clayborn hereby agrees to authorize and direct any and all federal,
state, municipal, foreign and international governments and regulatory
authorities having jurisdiction respecting Clayborn to release any and all
information in their possession respecting Clayborn to WPCS. Clayborn shall
promptly execute and deliver to WPCS any and all consents to the release of
information and specific authorizations which WPCS reasonably require to gain
access to any and all such information.
Survival
6.3 The covenants set forth in this Article shall survive the Closing for
the benefit of WPCS.
ARTICLE 7
CONDITIONS PRECEDENT
Conditions Precedent in favor of WPCS
7.1 WPCS' obligations to carry out the transactions contemplated hereby are
subject to the fulfillment (or waiver by WPCS) of each of the following
conditions precedent on or before the Closing:
(a) all documents or copies of documents required to be executed and
delivered to WPCS hereunder will have been so executed and
delivered;
(b) all of the terms, covenants and conditions of this Agreement to
be complied with or performed by Clayborn or the Clayborn
Shareholders at or prior to the Closing will have been complied
with or performed;
(c) WPCS shall have completed its review and inspection of the books
and records of Clayborn and shall be reasonably satisfied with
same in all material respects;
(d) title to the Clayborn Shares held by the Clayborn Shareholders
and to the Clayborn Assets will be free and clear of all
mortgages, liens, charges, pledges, security interests,
encumbrances or other claims whatsoever not created by or through
WPCS and/or the Acquirer;
(e) the Certificate of Merger shall be executed by Clayborn in form
acceptable for filing with the California Secretary of State;
(f) On the Closing Date, Clayborn will have working capital (current
assets minus current liabilities) of at least Six Hundred
Thousand Dollars ($600,000). Any cash constituting working
capital in excess of Six Hundred Thousand Dollars ($600,000) may
be distributed to the Clayborn Shareholders prior to the Closing.
20
(g) subject to Article 8 hereof, there will not have occurred:
(i) any material adverse change in the financial position
or condition of Clayborn, its liabilities or the
Clayborn Assets or any damage, loss or other change in
circumstances materially and adversely affecting the
Clayborn Business or the Clayborn Assets or Clayborn's
right to carry on the Clayborn Business, other than (i)
changes described in Schedule "A" hereto and (ii)
changes in the ordinary course of business, none of
which has been materially adverse, or
(ii) any damage, destruction, loss or other event, including
changes to any laws or statutes applicable to Clayborn
or the Clayborn Business (whether or not covered by
insurance) materially and adversely affecting Clayborn,
the Clayborn Business or the Clayborn Assets;
(h) the transactions contemplated hereby shall have been approved by
all other regulatory authorities having jurisdiction over the
subject matter hereof, if any; and
(i) all representations and warranties of Clayborn and the Clayborn
Shareholders contained herein shall be true and correct as of the
Closing Date.
Waiver by WPCS
7.2 The conditions precedent set out in the preceding section are inserted
for the exclusive benefit of WPCS and any such condition may be waived in whole
or in part by WPCS at or prior to Closing by delivering to Clayborn and the
Clayborn Shareholders a written waiver to that effect signed by WPCS. In the
event that the conditions precedent set out in the preceding section are not
satisfied on or before the Closing, WPCS shall be released from all obligations
under this Agreement.
Conditions Precedent in Favor of Clayborn and the Clayborn Shareholders
7.3 The obligations of Clayborn and the Clayborn Shareholders to carry out
the transactions contemplated hereby are subject to the fulfillment of each of
the following conditions precedent on or before the Closing:
(a) all documents or copies of documents required to be executed and
delivered to Clayborn or the Clayborn Shareholders hereunder will
have been so executed and delivered;
(b) all of the terms, covenants and conditions of this Agreement to
be complied with or performed by WPCS or the Acquirer at or prior
to the Closing will have been complied with or performed;
(c) Clayborn shall have completed its review and inspection of the
books and records of WPCS and its subsidiaries and shall be
reasonably satisfied with same in all material respects;
(d) WPCS will have delivered the Acquisition Shares to be issued
pursuant to the terms of the Merger to the Clayborn Shareholders
at the Closing and the Acquisition Shares will be registered on
the books of WPCS in the name of the Clayborn Shareholders at the
Effective Time;
(e) title to the Acquisition Shares will be free and clear of all
mortgages, liens, charges, pledges, security interests,
encumbrances or other claims whatsoever;
(f) payment of the Cash Consideration required to be paid as of the
Closing Date shall have been made;
(g) the Certificate of Merger shall be executed by the Acquirer in
form acceptable for filing with the
21
California Secretary of State;
(h) subject to Article 8 hereof, there will not have occurred
(i) any material adverse change in the financial position
or condition of WPCS, its subsidiaries, their assets of
liabilities or any damage, loss or other change in
circumstances materially and adversely affecting WPCS
or the WPCS Business or WPCS' right to carry on the
WPCS Business, other than changes in the ordinary
course of business, none of which has been materially
adverse, or
(ii) any damage, destruction, loss or other event, including
changes to any laws or statutes applicable to WPCS or
the WPCS Business (whether or not covered by insurance)
materially and adversely affecting WPCS, its
subsidiaries or its assets;
(j) the transactions contemplated hereby shall have been approved by
all other regulatory authorities having jurisdiction over the
subject matter hereof, if any; and
(k) all representations and warranties of WPCS and the Acquirer
contained herein shall be true and correct as of the Closing
Date.
Waiver by Clayborn and the Clayborn Shareholders
7.4 The conditions precedent set out in the preceding section are inserted
for the exclusive benefit of Clayborn and the Clayborn Shareholders and any such
condition may be waived in whole or in part by Clayborn or the Clayborn
Shareholders at or prior to the Closing by delivering to WPCS a written waiver
to that effect signed by Clayborn and the Clayborn Shareholders. In the event
that the conditions precedent set out in the preceding section are not satisfied
on or before the Closing Clayborn and the Clayborn Shareholders shall be
released from all obligations under this Agreement.
Nature of Conditions Precedent
7.5 The conditions precedent set forth in this Article are conditions of
completion of the transactions contemplated by this Agreement and are not
conditions precedent to the existence of a binding agreement. Each party
acknowledges receipt of the sum of $1.00 and other good and valuable
consideration as separate and distinct consideration for agreeing to the
conditions precedent in favor of the other party or parties set forth in this
Article.
Termination
7.6 Notwithstanding any provision herein to the contrary, if the Closing
does not occur on or before September 30, 2003, this Agreement will be at an end
and will have no further force or effect, unless otherwise agreed upon by the
parties in writing.
Confidentiality
7.7 Notwithstanding any provision herein to the contrary, the parties
hereto agree that the existence and terms of this Agreement are confidential and
that if this Agreement is terminated pursuant to the preceding section the
parties agree to return to one another any and all financial, technical and
business documents delivered to the other party or parties in connection with
the negotiation and execution of this Agreement and shall keep the terms of this
Agreement and all information and documents received from Clayborn and WPCS and
the contents thereof confidential and not utilize nor reveal or release same,
provided, however, that WPCS may be required to issue news releases regarding
the execution and consummation of this Agreement and file a Current Report on
Form 8-K with the Securities and Exchange Commission respecting the proposed
Merger contemplated hereby together with such other documents as are required to
maintain the currency of WPCS' filings with the Securities and Exchange
Commission.
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No-Shop Provision
7.8 From the date hereof until the close of business on September 30, 2003,
the parties hereto agree that they shall not, nor will they cause their
directors, officers, employees, agents and representatives to, directly or
indirectly, solicit or entertain offers from, hold meetings or discussions with,
or in any manner encourage, accept or consider any proposal of, any other person
relating to the acquisition of Clayborn, shares of Clayborn's capital stock,
securities convertible into or exchangeable for shares of Clayborn's capital
stock, or Clayborn's assets or business, in whole or in part, whether directly
or indirectly, through purchase, merger, consolidation, original issuance, or
otherwise. Clayborn and the Clayborn Shareholders will immediately notify WPCS
in writing regarding any such contact from the date hereof until the first to
occur of the Closing and the close of business on September 30, 2003.
ARTICLE 8
RISK
Material Change in the Business of Clayborn
8.1 If any material loss or damage to the Clayborn Business occurs prior to
Closing and such loss or damage, in WPCS' reasonable opinion, cannot be
substantially repaired or replaced within sixty (60) days, WPCS shall, within
two (2) days following any such loss or damage, by notice in writing to
Clayborn, at its option, either:
(a) terminate this Agreement, in which case no party will be under
any further obligation to any other party; or
(b) elect to complete the Merger and the other transactions
contemplated hereby, in which case the proceeds and the rights to
receive the proceeds of all insurance covering such loss or
damage will, as a condition precedent to WPCS' obligations to
carry out the transactions contemplated hereby, be vested in
Clayborn or otherwise adequately secured to the satisfaction of
WPCS on or before the Closing Date.
Material Change in the WPCS Business
8.2 If any material loss or damage to the WPCS Business occurs prior to
Closing and such loss or damage, in Clayborn's reasonable opinion, cannot be
substantially repaired or replaced within sixty (60) days, Clayborn shall,
within two (2) days following any such loss or damage, by notice in writing to
WPCS, at its option, either:
(a) terminate this Agreement, in which case no party will be under
any further obligation to any other party; or
(b) elect to complete the Merger and the other transactions
contemplated hereby, in which case the proceeds and the rights to
receive the proceeds of all insurance covering such loss or
damage will, as a condition precedent to Clayborn's obligations
to carry out the transactions contemplated hereby, be vested in
WPCS or otherwise adequately secured to the satisfaction of
Clayborn on or before the Closing Date.
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ARTICLE 9
CLOSING
Closing
9.1 The Merger and the other transactions contemplated by this Agreement
will be closed at the Place of Closing in accordance with the closing procedure
set out in this Article.
Documents to be Delivered by Clayborn
9.2 On or before the Closing, Clayborn and the Clayborn Shareholders will
deliver or cause to be delivered to WPCS:
(a) the original or certified copies of the charter documents of
Clayborn and all corporate records documents and instruments of
Clayborn, the corporate seal of Clayborn, if one exists, and all
books and accounts of Clayborn;
(b) all reasonable consents or approvals required to be obtained by
Clayborn for the purposes of completing the Merger and preserving
and maintaining the interests of Clayborn under any and all
Clayborn Material Contracts and in relation to Clayborn Assets;
(c) certified copies of such resolutions of the shareholders and
directors of Clayborn as are required to be passed to authorize
the execution, delivery and implementation of this Agreement;
(d) an acknowledgement from Clayborn and the Clayborn Shareholders of
the satisfaction of the conditions precedent set forth in section
7.3 hereof;
(e) an Officer's Certificate executed by a duly authorized officer of
Clayborn stating that the working capital of Clayborn at the
Closing Date is not less that Six Hundred Thousand Dollars
($600,000);
(f) The Employment Agreements;
(g) the Certificate of Merger, duly executed by Clayborn;
(h) the Registration Rights Agreement, duly executed by the Clayborn
Shareholders; and
(i) such other documents as WPCS may reasonably require to give
effect to the terms and intention of this Agreement.
Documents to be Delivered by WPCS
9.3 On or before the Closing, WPCS and the Acquirer shall deliver or cause
to be delivered to Clayborn and the Clayborn Shareholders:
(a) share certificates representing the Acquisition Shares duly
registered in the names of the Clayborn Shareholders;
(b) the Cash Consideration due to be paid on the Closing Date;
(c) certified copies of such resolutions of the directors of WPCS and
the Acquirer as are required to be passed to authorize the
execution, delivery and implementation of this Agreement;
(d) a certified copy of a resolution of the directors of Clayborn
dated as of the Closing Date, approving the Employment
Agreements;
24
(e) an acknowledgement from WPCS of the satisfaction of the
conditions precedent set forth in section 7.1 hereof;
(f) the Employment Agreements, duly executed by WPCS on behalf of
Clayborn:
(g) the Registration Rights Agreement, duly executed by WPCS;
(h) the Certificate of Merger, duly executed by the Acquirer;
(i) such other documents as Clayborn or the Clayborn Shareholders may
reasonably require to give effect to the terms and intention of
this Agreement; and
(j) A release of the Clayborn Shareholders from Clayborn, WPCS and
the Acquirer.
ARTICLE 10
POST-CLOSING MATTERS
General
10.1 Forthwith after the Closing, WPCS, Clayborn and the Clayborn
Shareholders agree to use all their best efforts to:
(a) file the Certificate of Merger with the Secretary of State of
California;
(b) remove the present directors of Clayborn from office and appoint
Andrew Hidalgo as the sole director of Clayborn;
(c) issue a news release reasonably acceptable to each party
reporting the Closing;
(d) file a Form 8-K with the Securities and Exchange Commission
disclosing the terms of this Agreement and, not more than sixty
(60) days following the filing of such Form 8-K, to file and
amended Form 8-K which includes audited financial statements of
Clayborn as well as pro forma financial information of Clayborn
and WPCS as required by Regulation SB as promulgated by the
Securities and Exchange Commission (all at no cost to the
Clayborn Shareholders); and
(e) file reports on Form 3 (and Form 13D, where applicable) with the
Securities and Exchange Commission disclosing the acquisition of
the Acquisition Shares by the Clayborn Shareholders. (f) WPCS
will ensure that there will be sufficient working capital in
Clayborn to operate the Clayborn Business effectively.
Option Pool
10.2 WPCS shall reserve one hundred fifty thousand (150,000) options under
its employee stock option plan for issuance to employees of Clayborn. All of
such options shall be issued no later than January 31, 2004. The recipients of
such options and the number of options issued to each recipient shall be jointly
made by WPCS and D. Gove, or his assignee.
25
Cal Trans Payments
10.3 Notwithstanding anything else to the contrary contained in this
Agreement, in the event that Clayborn shall receive any payments after the
Closing Date from Cal Trans with respect to Clayborn contract numbers 01-345104
or 02-383704, Clayborn shall pay such amounts to the Clayborn Shareholders, net
of any payments required to made to others, including but not limited to
sub-contractors, suppliers, taxes, charges or other customary deductions.
Payments shall only be made to the Clayborn Shareholders in the event the
working capital of Clayborn at the Closing Date is not less that Six Hundred
Thousand Dollars ($600,000).
ARTICLE 11
GENERAL PROVISIONS
Arbitration
11.1 The parties hereto shall attempt to resolve any dispute, controversy,
difference or claim arising out of or relating to this Agreement by negotiation
in good faith. If such good negotiation fails to resolve such dispute,
controversy, difference or claim within thirty (30) days after any party
delivers to any other party a notice of its intent to submit such matter to
arbitration, then any party to such dispute, controversy, difference or claim
may submit such matter to arbitration.
Any action or proceeding seeking to enforce any provision of, or based upon
any right arising out of, this Agreement shall be settled by binding arbitration
by a panel of three (3) arbitrators in accordance with the Commercial
Arbitration Rules of the American Arbitration Association and governed by the
laws of the State of Delaware (without regard to the choice-of-law rules or
principles of that jurisdiction). Judgment upon the award may be entered in any
court located in the State of Delaware, and all the parties hereto hereby
expressly waive any objections or defense based upon lack of personal
jurisdiction.
Each of the plaintiff and defendant party to the arbitration shall select
one (1) arbitrator (or where multiple plaintiffs and/or defendants exist, one
(1) arbitrator shall be chosen collectively by such parties comprising the
plaintiffs and one (1) arbitrator shall be chosen collectively by those parties
comprising the defendants) and then the two (2) arbitrators shall mutually agree
upon the third arbitrator. Where no agreement can be reached on the selection of
either a third arbitrator or an arbitrator to be named by either a group of
plaintiffs or a group of defendants, any implicated party may apply to a judge
of the courts of the State of Delaware, to name an arbitrator. Process in any
such action or proceeding may be served on any party anywhere in the world.
Indemnification Provisions
11.2 Notice to Indemnifying Party. If any party (the "Indemnitee") receives
notice of any claim or the commencement of any action or proceeding with respect
to which the other party (or parties) is obligated to provide indemnification
(the "Indemnifying Party") pursuant to Sections 3.3 or 5.3 hereof, the
Indemnitee shall give the Indemnifying Party written notice thereof within a
reasonable period of time following the Indemnitee's receipt of such notice.
Such notice shall describe the claim in reasonable detail and shall indicate the
amount (estimated if necessary) of the losses that have been or may be sustained
by the Indemnitee. The Indemnifying Party may, subject to the other provisions
of this Section 11.2, compromise or defend, at such Indemnifying Party's own
expense and by such Indemnifying Party's own counsel, any such matter involving
the asserted liability of the Indemnitee in respect of a third-party claim. If
the Indemnifying Party elects to compromise or defend such asserted liability,
it shall within thirty (30) days (or sooner, if the nature of the asserted
liability so requires) notify the Indemnitee of its intent to do so, and the
Indemnitee, shall reasonably cooperate, at the request and reasonable expense of
the Indemnifying Party, in the compromise of, or defense against, such asserted
liability. The Indemnifying Party will not be released from any obligation to
indemnify the Indemnitee hereunder with respect to a claim without the prior
written consent of the Indemnitee, unless the Indemnifying Party delivers to the
Indemnitee a duly executed agreement settling or compromising such claim with no
monetary liability to or injunctive relief against the Indemnitee and a complete
release of the Indemnitee with respect thereto. The Indemnifying Party shall
have the right to conduct and control the defense of any third-party claim made
for which it has been provided notice hereunder. All costs and fees incurred
with respect to any such claim will be borne by the Indemnifying Party. The
Indemnitee will have the right to participate, but not control, at its own
expense, the defense or settlement of any such claim; provided, that if the
Indemnitee and the Indemnifying Party shall have conflicting claims or defenses,
the Indemnifying Party shall not have control of such conflicting claims or
defenses and the Indemnitee shall be entitled to appoint a separate counsel for
such claims and defenses at the cost and expense of the Indemnifying Party. If
the Indemnifying Party chooses to defend any claim, the Indemnitee shall make
26
available to the Indemnifying Party any books, records or other documents within
its control that are reasonably required for such defense.
Notice
11.3 Any notice required or permitted to be given by any party will be
deemed to be given when in writing and delivered to the address for notice of
the intended recipient by personal delivery, prepaid certified or registered
mail, or Facsimile. Any notice delivered by mail shall be deemed to have been
received on the fourth business day after and excluding the date of mailing,
except in the event of a disruption in regular postal service in which event
such notice shall be deemed to be delivered on the actual date of receipt. Any
notice delivered personally or by Facsimile shall be deemed to have been
received on the actual date of delivery.
Addresses for Service
11.4 The address for service of notice of each of the parties hereto is as
follows:
(a) WPCS or the Acquirer:
WPCS International Incorporated
140 South Village Avenue, Suite 20
Exton, Pennsylvania 19341
Attn: Andrew Hidalgo, President
Phone: (610) 903-0400
Facsimile: (610) 903-0401
Copy to:
Marc J. Ross, Esq.
Thomas A. Rose, Esq.
Sichenzia Ross Friedman Ference LLP
1065 Avenue of the Americas
New York, New York 10018
Phone: (212) 930-9700
Facsimile: (212) 930-9725
(b) Clayborn:
Clayborn Contracting Group, Inc.
10101 Streeter Road
Auburn, CA 95602
Attn: David G. Gove, President
Phone: (530) 268-9512
Facsimile: (530) 268-9524
Copy to:
Gary L. Bradus, Esq.
Weintraub Genshlea Chediak Sproul
400 Capitol Mall, Suite 1100
Sacramento, CA 95814
Phone: (916) 558-6000
Facsimile: (916) 446-1611
(c) Clayborn Shareholders:
c/o David G. Gove
23341 Sun Terrace Court
Auburn, California 95602
Phone: (530) 268-9044
Facsimile: N/A
Copy to:
Gary L. Bradus, Esq.
Weintraub Genshlea Chediak Sproul
400 Capitol Mall, Suite 1100
Sacramento, CA 95814
Phone: (916) 558-6000
Facsimile: (916) 446-1611
27
Change of Address
11.5 Any party may, by notice to the other parties change its address for
notice to some other address in North America and will so change its address for
notice whenever the existing address or notice ceases to be adequate for
delivery by hand. A post office box may not be used as an address for service.
Further Assurances
11.6 Each of the parties will execute and deliver such further and other
documents and do and perform such further and other acts as any other party may
reasonably require to carry out and give effect to the terms and intention of
this Agreement.
Time of the Essence
11.7 Time is expressly declared to be the essence of this Agreement.
Entire Agreement
11.8 The provisions contained herein constitute the entire agreement among
Clayborn, the Clayborn Shareholders, the Acquirer and WPCS respecting the
subject matter hereof and supersede all previous communications, representations
and agreements, whether verbal or written, among Clayborn, the Clayborn
Shareholders, the Acquirer and WPCS with respect to the subject matter hereof,
including without limitation the letter of intent between the parties dated June
24, 2003.
Enurement
11.9 This Agreement will enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators, successors
and permitted assigns.
28
Assignment
11.10 This Agreement is not assignable without the prior written consent of
the parties hereto.
Expenses
11.11 Each party agrees to pay, without right of reimbursement from any
other party and regardless of whether or not the transaction is consummated, the
costs incurred by it in connection with this transaction, including legal fees
and other costs incidental to the negotiation of the terms of the transaction
and the preparation of related documentation.
Counterparts
11.12 This Agreement may be executed in counterparts, each of which when
executed by any party will be deemed to be an original and all of which
counterparts will together constitute one and the same Agreement. Delivery of
executed copies of this Agreement by Facsimile will constitute proper delivery,
provided that originally executed counterparts are delivered to the parties
within a reasonable time thereafter.
Applicable Law
11.13 This Agreement is subject to the laws of the State of Delaware.
[Remainder of page intentionally left blank.]
29
IN WITNESS WHEREOF the parties have executed this Agreement
effective as of the day and year first above written.
WPCS INTERNATIONAL INCORPORATED
By:/s/ Andrew Hidalgo
-----------------------
Andrew Hidalgo, President
CLAYBORN CONTRACTING
ACQUISITION CORP.
By:/s/ Andrew Hidalgo
----------------------
Andrew Hidalgo, President
CLAYBORN CONTRACTING GROUP, INC.
By:/s/ David G. Gove
-------------------------
David G. Gove, President
/s/ David G. Gove
------------------------
David G. Gove, Trustee
/s/ Sharon Gove
------------------------
Sharon Gove, Trustee
30