SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1 to
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
May 24, 2002
(Date of report)
WPCS INTERNATIONAL INCORPORATED
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-26277 98-0204758
(State of Incorporation) (Commission File Number) (IRS Employer ID)
140 South Village Avenue
Suite 20
Exton, Pennsylvania 19341
(Address of Principal Executive Offices)
(610) 903-0400
(Registrant's telephone number, including area code)
ITEM 1. Changes in Control of Registrant.
On May 17, 2002, the Company entered into an Agreement and Plan of Merger
with WPCS Acquisition Corp., a Delaware corporation wholly-owned by the Company
("Subsidiary"), WPCS Holdings, Inc., a Delaware corporation ("WPCS"), and Andy
Hidalgo. Pursuant to the terms of the Agreement and Plan of Merger which closed
on May 24, 2002, Subsidiary acquired all of the issued and outstanding shares of
capital stock of WPCS from Mr. Hidalgo in exchange for an aggregate of 5,500,000
newly issued shares of the Company's common stock (the "Acquisition").
Concurrently with the Acquisition, WPCS was merged with and into Subsidiary. As
a condition to the Acquisition, the Company's director prior to the transaction
was required to appoint Mr. Hidalgo as a member of the Company's Board of
Directors. Stephen C. Jackson, the Company's current member of the Board of
Directors, will resign effective as of the appointment of Mr. Hidalgo.
Concurrently with the Acquisition, and as a condition thereof, a principal
stockholder of the Company returned shares of the Company's common stock to the
Company, without compensation. Century Capital Management Ltd. returned an
aggregate of 500,000 shares of Common Stock to the Company. In addition, the
Company changed its name to WPCS International Incorporation.
Voting Securities
The Common Stock is the only class of voting securities of the Company
outstanding. As of May 24, 2002, there were 9,025,632 shares outstanding and
entitled to one vote per share.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock immediately after the
Acquisition, by:
o each person known to beneficially own more than five percent of the Common
Stock; o each director of the Company (including proposed directors); and o all
directors and executive officers as a group.
Name and Address Shares of Percent
of Beneficial Owner Common Stock of Class
Andy Hidalgo 5,500,000 60.9%
140 South Village Avenue
Suite 20
Exton, Pennsylvania 19341
All officers and directors, after
completion of the Acquisition (1 person) 5,500,000 60.9%
- ----------------------
Appointment of New Directors
The Agreement and Plan of Merger provides that, subject to compliance with
applicable law, the Company will take all action necessary to cause Andy Hidalgo
to be appointed to the Board of Directors. Set forth below is certain
information with respect to Mr. Hidalgo:
Mr. Hidalgo has been Chairman and Chief Executive Officer of WPCS, a fixed
wireless services provider, responsible for the development and implementation
of the company's business plan. From September 2000 until December 2001, Mr.
Hidalgo was President of Wireless Professional Communication Services
Incorporated, a technology distribution company. From November 1999 until
September 2000, Mr. Hidalgo was Chairman and Chief Executive Officer of CommSpan
Incorporated, a holding company for the communications infrastructure
subsidiaries acquired from Applied Digital Solutions. From December 1997 until
September 1999, Mr. Hidalgo was Senior Vice President for Applied Digital
Solutions, a telecommunications company, where he was responsible for the core
business group that represented five divisions, 30 subsidiaries and $200 million
in annual revenue. From December 1995 until December 1997, Mr. Hidalgo was
Divisional Director of Bentley Systems Incorporated, a privately held
engineering software company, where he developed and implemented the sales and
marketing strategies for the manufacturing market sector.
ITEM 7. Exhibits
1. Agreement and Plan of Merger by and among Phoenix Star Ventures, Inc.,
WPCS Acquisition Corp., a Delaware corporation, WPCS Holdings, Inc.,
a Delaware corporation, and Andy Hidalgo, dated as of May 17, 2002.
2. Financial statements of WPCS Holdings, Inc., together with pro forma
financial information, will be filed by amendment.
[remainder intentionally blank]
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 INCORPORATION
By:/s/ ANDY HIDALGO
Andy Hidalgo,
President and
Chief Executive Officer
Dated: June 10, 2002
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made as of the 17th day of May, 2002
AMONG:
PHOENIX STAR VENTURES, INC., a corporation formed
pursuant to the laws of the State of Delaware and having an
office for business located at #1650 - 200 Burrard Street,
Vancouver, BC V6C3L6
("Phoenix")
AND:
WPCS ACQUISITION CORP., a body corporate formed
pursuant to the laws of the State of Delaware and a wholly
owned subsidiary of Phoenix
(the "Acquirer")
AND:
WPCS HOLDINGS INC., a body corporate 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:
ANDY HIDALGO, an individual having an address at 140
South Village Avenue, Suite 20, Exton, Pennsylvania 19341
(the "WPCS Shareholder")
WHEREAS:
A. WPCS is a Delaware corporation engaged in the business of providing
fixed wireless telecommunications services;
B. The WPCS Shareholder owns 3,000,000 WPCS Shares, being 100% of the
presently issued and outstanding WPCS Shares;
C. Phoenix is a reporting company whose common stock is quoted on the NASD
"Bulletin Board" and which is not presently engaged in any business;
D. The respective Boards of Directors of Phoenix, WPCS and the Acquirer
deem it advisable and in the best interests of Phoenix, WPCS and the Acquirer
that WPCS merge with and into the Acquirer (the "Merger") pursuant to this
Agreement and the Certificate of Merger, and the applicable provisions of the
laws of the State of Delaware; and
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E. It is intended that the Merger shall qualify for United States federal
income tax purposes as a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended.
NOW THEREFORE THIS AGREEMENT 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 the 5,500,000 Phoenix Common
Shares to be issued to the WPCS Shareholder at
Closing pursuant to the terms of the Merger;
(b) "Agreement" means this agreement and plan of merger among
Phoenix, the Acquirer, WPCS, and the WPCS Shareholder;
(c) "Phoenix Accounts Payable and Liabilities" means all accounts
payable and liabilities of Phoenix, on a consolidated basis,
due and owing or otherwise constituting a binding obligation
of Phoenix and its subsidiaries (other than a Phoenix Material
Contract) as of January 31, 2002 as set forth is Schedule "B"
hereto;
(d) "Phoenix Accounts Receivable" means all accounts receivable
and other debts owing to Phoenix, on a consolidated basis, as
of January 31, 2002 as set forth in Schedule "C" hereto;
(e) "Phoenix Assets" means the undertaking and all the property
and assets of the Phoenix Business of every kind and
description wheresoever situated including, without
limitation, Phoenix Equipment, Phoenix Inventory, Phoenix
Material Contracts, Phoenix Accounts Receivable, Phoenix Cash,
Phoenix Intangible Assets and Phoenix Goodwill, and all credit
cards, charge cards and banking cards issued to Phoenix;
(f) "Phoenix Bank Accounts" means all of the bank accounts, lock
boxes and safety deposit boxes of Phoenix and its subsidiaries
or relating to the Phoenix Business as set forth in Schedule
"D" hereto;
(g) "Phoenix Business" means all aspects of any business conducted
by Phoenix and its subsidiaries;
(h) "Phoenix Cash" means all cash on hand or on deposit to the
credit of Phoenix and its subsidiaries on the Closing Date;
(i) "Phoenix Common Shares" means the shares of common stock in the
capital of Phoenix;
(j) "Phoenix Debt to Related Parties" means the debts owed by
Phoenix and its subsidiaries to any affiliate, director or
officer of Phoenix as described in Schedule "E" hereto;
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(k) "Phoenix Equipment" means all machinery, equipment, furniture,
and furnishings used in the Phoenix Business, including,
without limitation, the items more particularly described in
Schedule "F" hereto;
(l) "Phoenix Financial Statements" means, collectively, the
audited consolidated financial statements of Phoenix for the
fiscal year ended April 30, 2001, together with the
unqualified auditors' report thereon, and the unaudited
consolidated financial statements of Phoenix for the nine
month period ended January 31, 2002, true copies of which are
attached as Schedule "A" hereto;
(m) "Phoenix Goodwill" means the goodwill of the Phoenix Business
including the right to all corporate, operating and trade
names associated with the Phoenix Business, or any variations
of such names as part of or in connection with the Phoenix
Business, all books and records and other information relating
to the Phoenix Business, all necessary licenses and
authorizations and any other rights used in connection with
the Phoenix Business;
(n) "Phoenix Insurance Policies" means the public liability
insurance and insurance against loss or damage to the Phoenix
Assets and the Phoenix Business as described in Schedule "G"
hereto;
(o) "Phoenix Intangible Assets" means all of the intangible assets
of Phoenix and its subsidiaries, including, without
limitation, Phoenix Goodwill, all trademarks, logos,
copyrights, designs, and other intellectual and industrial
property of Phoenix and its subsidiaries;
(p) "Phoenix Inventory" means all inventory and supplies of
the Phoenix Business as of January 31, 2002,
as set forth in Schedule "H" hereto;
(q) "Phoenix Material Contracts" means the burden and
benefit of and the right, title and interest of Phoenix and
its subsidiaries in, to and under all trade and non-trade
contracts, engagements or commitments, whether written or
oral, to which Phoenix or its subsidiaries are entitled
whereunder Phoenix or its subsidiaries are obligated to pay
or entitled to receive the sum of $10,000 or more 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;
(r) "Closing" means the completion, on the Closing Date, of
the transactions contemplated hereby in
accordance with Article 9 hereof;
(s) "Closing Date" means the day on which all conditions
precedent to the completion of the transaction as
contemplated hereby have been satisfied or waived;
(t) "Effective Time" means the date of the filing of an
appropriate Certificate of Merger in the form required by the
State of Delaware, which certificate shall provide that the
Merger shall become effective upon such filing;
(u) "Merger" means the merger, at the Effective Time, of WPCS
and the Acquirer pursuant to this Agreement
and Plan of Merger;
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(v) "Merger Consideration" means the Acquisition Shares;
(w) "Place of Closing" means the offices of Sichenzia Ross
Friedman Ference LLP, or such other place as Phoenix and WPCS
may mutually agree upon;
(x) "State Corporation Law" means the General Corporation Law of
the State of Delaware;
(y) "Surviving Company" means the Acquirer following the merger
with WPCS;
(z) "WPCS Accounts Payable and Liabilities" means all accounts
payable and liabilities of WPCS, due and owing or otherwise
constituting a binding obligation of WPCS (other than a WPCS
Material Contract) as of April 30, 2002 as set forth in
Schedule "K" hereto;
(aa) "WPCS Accounts Receivable" means all accounts receivable and
other debts owing to WPCS, as of April 30, 2002 as set forth
in Schedule "L" hereto;
(bb) "WPCS Assets" means the undertaking and all the property and
assets of the WPCS Business of every kind and description
wheresoever situated including, without limitation, WPCS
Equipment, WPCS Inventory, WPCS Material Contracts, WPCS
Accounts Receivable, WPCS Cash, WPCS Intangible Assets and
WPCS Goodwill, and all credit cards, charge cards and banking
cards issued to WPCS;
(cc) "WPCS Bank Accounts" means all of the bank accounts, lock
boxes and safety deposit boxes of WPCS or relating to the WPCS
Business as set forth in Schedule "M" hereto;
(dd) "WPCS Business" means all aspects of the business conducted by
WPCS;
(ee) "WPCS Cash" means all cash on hand or on deposit to the credit
of WPCS on the Closing Date;
(ff) "WPCS Debt to Related Parties" means the debts owed by WPCS
and its subsidiaries to the WPCS Shareholder or to any family
member thereof, or to any affiliate, director or officer of
WPCS or the WPCS Shareholder as described in Schedule "N";
(gg) "WPCS Equipment" means all machinery, equipment, furniture,
and furnishings used in the WPCS Business, including, without
limitation, the items more particularly described in Schedule
"O" hereto;
(hh) "WPCS Financial Statements" means collectively, the audited
consolidated financial statements of WPCS for the five month
period from inception through April 30, 2002, together with
the unqualified auditors' report thereon, true copies of which
are attached as Schedule "J" hereto. Subject to the consent of
Phoenix, unaudited financial statements for the same period
shall be acceptable;
(ii) "WPCS Goodwill" means the goodwill of the WPCS Business
together with the exclusive right of Phoenix to represent
itself as carrying on the WPCS Business in succession of
WPCS subject to the terms hereof, and the right to use any
words indicating that the WPCS Business is so carried on
including the right to use the name "WPCS" or "WPCS
International" or any variation thereof as part of the name
of or in connection with the WPCS Business or any part
thereof carried on or to be carried on by WPCS, the right to
all corporate, operating and trade names associated with the
WPCS Business, or any variations of such names as part of or
in connection with the WPCS Business, all telephone listings
and telephone advertising contracts, all lists of customers,
books and records and other information relating to the WPCS
Business, all necessary licenses and authorizations and any
other rights used in connection with the WPCS Business;
(jj) "WPCS Insurance Policies" means the public liability insurance
and insurance against loss or damage to WPCS Assets and the
WPCS Business as described in Schedule "P" hereto;
(kk) "WPCS Intangible Assets" means all of the intangible assets of
WPCS, including, without limitation, WPCS Goodwill, all
trademarks, logos, copyrights, designs, and other intellectual
and industrial property of WPCS and its subsidiaries;
(ll) "WPCS Inventory" means all inventory and supplies of
the WPCS Business as of April 30, 2002 as set forth in
Schedule "Q" hereto;
(mm) "WPCS Material Contracts" means the burden and benefit
of and the right, title and interest of WPCS in, to and
under all trade and non-trade contracts, engagements or
commitments, whether written or oral, to which WPCS is
entitled in connection with the WPCS Business whereunder
WPCS is obligated to pay or entitled to receive the sum of
$10,000 or more 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 "R" hereto; and
(nn) "WPCS Shares" means all of the issued and outstanding
shares of WPCS's equity stock.
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 thereof.
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 Phoenix
Schedule "A" Phoenix Financial Statements
Schedule "B" Phoenix Accounts Payable and Liabilities
Schedule "C" Phoenix Accounts Receivable
Schedule "D" Phoenix Bank Accounts
Schedule "E" Phoenix Debts to Related Parties
Schedule "F" Phoenix Equipment
Schedule "G" Phoenix Insurance Policies
Schedule "H" Phoenix Inventory
Schedule "I" Phoenix Material Contracts
Information concerning WPCS
Schedule "J" WPCS Financial Statements
Schedule "K" WPCS Accounts Payable and Liabilities
Schedule "L" WPCS Accounts Receivable
Schedule "M" WPCS Bank Accounts
Schedule "N" WPCS Debts to Related Parties
Schedule "O" WPCS Equipment
Schedule "P" WPCS Insurance Policies
Schedule "Q" WPCS Inventory
Schedule "R" WPCS Material Contracts
Agreements
Schedule "S" Form of Subscription Agreement for Series B
Preferred Stock
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, WPCS shall be merged with and into the Acquirer pursuant to this
Agreement and Plan of Merger and the separate corporate existence of WPCS shall
cease and the Acquirer, 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 therefor by the State Corporation
Law. 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 choses in action, and all and every other
interest of or belonging to or due to WPCS 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 WPCS and the Acquirer, as a group, and (ii) all debts,
liabilities, duties and obligations of WPCS 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 WPCS and the
Acquirer, as a group, and neither the rights of creditors nor any liens upon the
property of WPCS or the Acquirer, as a group, shall be impaired by the Merger,
and may be enforced against the Surviving Company.
Certificate of Incorporation; Bylaws; Directors and Officers
2.3 The Certificate of Incorporation of the Surviving Company from and after the
Closing shall be the Certificate of Incorporation of the Acquirer until
thereafter amended in accordance with the provisions therein and as provided by
the applicable provisions of the State Corporation Law. The Bylaws of the
Surviving Company from and after the Closing shall be the Bylaws of WPCS as in
effect immediately prior to the Closing, continuing until thereafter amended in
accordance with their terms, the Certificate of Incorporation of the Surviving
Company and as provided by the State Corporation Law. The Directors of the
Acquirer at the Effective Time shall continue to be the Directors of WPCS.
Conversion of Securities
2.4 At the Effective Time, by virtue of the Merger and without any action on the
part of the Acquirer, WPCS or the WPCS Shareholder, the shares of capital stock
of each of WPCS 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 WPCS Shares. Each WPCS 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 WPCS Shares outstanding immediately prior to
Closing. All such WPCS 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.
Adherence with Applicable Securities Laws
2.5 The WPCS Shareholder agrees that he is 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 of 1933, as
amended) directly or indirectly unless:
(a) the sale is to Phoenix;
(b) the sale is made pursuant to the exemption from
registration under the Securities Act of 1933,as amended,
provided by Rule 144 thereunder; or
(c) the Acquisition Shares are sold in a transaction that
does not require registration under the Securities Act of
1933, as amended, or any applicable United States state laws
and regulations governing the offer and sale of securities,
and the vendor has furnished to Phoenix an opinion of
counsel to that effect or such other written opinion as may
be reasonably required by Phoenix.
The WPCS Shareholder acknowledges that the certificates representing
the Acquisition Shares shall bear the following legend:
NO SALE, OFFER TO SELL, OR TRANSFER OF THE SHARES REPRESENTED
BY THIS CERTIFICATE SHALL BE MADE UNLESS A REGISTRATION
STATEMENT UNDER THE FEDERAL SECURITIES ACT OF 1933, AS
AMENDED, IN RESPECT OF SUCH SHARES IS THEN IN EFFECT OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SAID ACT IS
THEN IN FACT APPLICABLE TO SAID SHARES.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF PHOENIX
Representations and Warranties
3.1 Phoenix represents and warrants in all material respects to WPCS, with the
intent that WPCS will rely thereon in entering into this Agreement and in
approving and completing the transactions contemplated hereby, that:
Phoenix - Corporate Status and Capacity
(a) Incorporation. Phoenix is a corporation duly incorporated and
validly subsisting 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;
(b) Carrying on Business. Phoenix does not currently conduct
business, except for the actual operations of the corporation which
are carried on in Vancouver, BC, Canada and does carry on any other
material business activity in any other jurisdictions. Phoenix is duly
authorized to carry on such business in Vancouver, BC, Canada. The
nature of the Phoenix Business does not require Phoenix to register or
otherwise be qualified to carry on business in any other
jurisdictions;
(c) Corporate Capacity. Phoenix has the corporate power, capacity and
authority to own the Phoenix Assets and to enter into and complete
this Agreement;
(d) Reporting Status; Listing. Phoenix is required to file current
reports with the Securities and Exchange Commission pursuant to
section 15(d) of the Securities Exchange Act of 1934, the Phoenix
Common Shares are quoted on the NASD "Bulletin Board", and all reports
required to be filed by Phoenix with the Securities and Exchange
Commission or NASD have been timely filed;
Acquirer - Corporate Status and Capacity
(e) Incorporation. The Acquirer is a corporation duly incorporated
and validly subsisting 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;
(f) Carrying on Business. Other than corporate formation and
organization, the Acquirer has not carried on business activities to
date.
(g) Corporate Capacity. The Acquirer has the corporate power,
capacity and authority to enter into and complete this Agreement;
Phoenix - Capitalization
(h) Authorized Capital. The authorized capital of Phoenix consists of
30,000,000 Phoenix Common Shares, $0.0001 par value and 5,000,000
shares of preferred stock. $0.0001 par value, of which 1,025,632
Phoenix Common Shares, and 250 shares of Series A Convertible
Preferred Stock are presently issued and outstanding;
(i) 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 Phoenix Common Shares or for the purchase, subscription
or issuance of any of the unissued shares in the capital of Phoenix,
except for an option to purchase 11,111 Phoenix Common Shares at $2.75
per share;
(j) Capacity. Phoenix has the full right, power and authority to
enter into this Agreement on the terms and conditions contained
herein;
Acquirer Capitalization
(k) Authorized Capital. The authorized capital of the Acquirer
consists of 200 shares of common stock, $0.0001 par value, of which
one share of common stock is presently issued and outstanding;
(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;
(m) Capacity. The Acquirer has the full right, power and authority to
enter into this Agreement on the terms and conditions contained
herein;
Phoenix - Records and Financial Statements
(n) Charter Documents. The charter documents of Phoenix and the
Acquirer have not been altered since the incorporation of each,
respectively, except as filed in the record books of Phoenix or the
Acquirer, as the case may be;
(o) Corporate Minute Books. The corporate minute books of Phoenix 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 Phoenix and its subsidiaries which required director or shareholder
approval are reflected on the corporate minute books of Phoenix and
its subsidiaries. Phoenix 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.
(p) Phoenix Financial Statements. The Phoenix Financial Statements
present fairly, in all material respects, the assets and liabilities
(whether accrued, absolute, contingent or otherwise) of Phoenix, on a
consolidated basis, as of the respective dates thereof, and the sales
and earnings of the Phoenix Business during the periods covered
thereby, in all material respects and have been prepared in
substantial accordance with generally accepted accounting principles
consistently applied;
(q) Phoenix Accounts Payable and Liabilities. There are no material
liabilities, contingent or otherwise, of Phoenix or its subsidiaries
which are not disclosed in Schedule "B" hereto or reflected in the
Phoenix Financial Statements except those incurred in the ordinary
course of business since the date of the said schedule and the Phoenix
Financial Statements, and neither Phoenix nor its subsidiaries have
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
Phoenix and its subsidiaries as of January 31, 2002 are described in
Schedule "B" hereto;
(r) Phoenix Accounts Receivable. All the Phoenix Accounts Receivable
result from bona fide business transactions and services actually
rendered without, to the knowledge and belief of Phoenix, any claim by
the obligor for set-off or counterclaim;
(s) Phoenix Bank Accounts. All of the Phoenix Bank Accounts, their
location, numbers and the authorized signatories thereto are as set
forth in Schedule "D" hereto;
(t) No Debt to Related Parties. Except as disclosed in Schedule "E"
hereto, neither Phoenix nor its subsidiaries are, and on Closing will
not be, materially indebted to any affiliate, director or officer of
Phoenix except accounts payable on account of bona fide business
transactions of Phoenix incurred in normal course of the Phoenix
Business, including employment agreements, none of which are more than
30 days in arrears;
(u) No Related Party Debt to Phoenix. No director or officer or
affiliate of Phoenix is now indebted to or under any financial
obligation to Phoenix or its subsidiaries on any account whatsoever,
except for advances on account of travel and other expenses not
exceeding $5,000 in total;
(v) No Dividends. No dividends or other distributions on any shares
in the capital of Phoenix have been made, declared or authorized since
the date of Phoenix Financial Statements;
(w) No Payments. No payments of any kind have been made or authorized
since the date of the Phoenix Financial Statements to or on behalf of
officers, directors, shareholders or employees of Phoenix or its
subsidiaries or under any management agreements with Phoenix 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;
(x) No Pension Plans. There are no pension, profit sharing, group
insurance or similar plans or other deferred compensation plans
affecting Phoenix or its subsidiaries;
(y) No Adverse Events. Since the date of the Phoenix Financial Statements
(i) there has not been any material adverse change in the financial
position or condition of Phoenix, its subsidiaries, its liabilities or the
Phoenix Assets or any damage, loss or other change in circumstances
materially affecting Phoenix, the Phoenix Business or the Phoenix Assets or
Phoenix' right to carry on the Phoenix 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
Phoenix, its subsidiaries, the Phoenix Business or the Phoenix Assets,
(iii) there has not been any material increase in the compensation
payable or to become payable by Phoenix to any of Phoenix' officers,
employees or agents or any bonus, payment or arrangement made to or with
any of them,
(iv) the Phoenix Business has been and continues to be carried on in
the ordinary course,
(v) Phoenix has not waived or surrendered any right of material value,
(vi) Neither Phoenix nor its subsidiaries have 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 $10,000 individually or
$30,000 in total have been authorized or made.
Phoenix - Income Tax Matters
(z) Tax Returns. All tax returns and reports of Phoenix 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 Phoenix and its
subsidiaries or in accordance with any notice of assessment or
reassessment issued by any taxing authority have been so paid;
(aa) 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 Phoenix or its
subsidiaries. Phoenix 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;
Phoenix - Applicable Laws and Legal Matters
(bb) Licenses. Phoenix and its subsidiaries hold all licenses and
permits as may be requisite for carrying on the Phoenix
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 Phoenix Business;
(cc) Applicable Laws. Neither Phoenix 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 are subject or which apply to them the violation
of which would have a material adverse effect on the Phoenix
Business, and to Phoenix' knowledge, neither Phoenix 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 Phoenix
Business;
(dd) Pending or Threatened Litigation. There is no material
litigation or administrative or governmental proceeding
pending or threatened against or relating to Phoenix, its
subsidiaries, the Phoenix Business, or any of the Phoenix
Assets nor does Phoenix have any knowledge of any deliberate
act or omission of Phoenix or its subsidiaries that would form
any material basis for any such action or proceeding;
(ee) No Bankruptcy. Neither Phoenix 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 Phoenix or its
subsidiaries and no order has been made or a resolution passed
for the winding-up, dissolution or liquidation of Phoenix or
its subsidiaries;
(ff) Labor Matters. Neither Phoenix nor its subsidiaries are party
to any collective agreement relating to the Phoenix Business
with any labor union or other association of employees and no
part of the Phoenix Business has been certified as a unit
appropriate for collective bargaining or, to the knowledge of
Phoenix, has made any attempt in that regard;
(gg) Finder's Fees. Neither Phoenix 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
(hh) 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
Phoenix and the Acquirer;
(ii) No Violation or Breach. The execution and performance
of this Agreement will not:
(i) violate the charter documents of Phoenix 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 Phoenix or its subsidiaries are party,
(ii) give any person any right to terminate or cancel
any agreement including, without limitation, the Phoenix
Material Contracts, or any right or rights enjoyed by
Phoenix or its subsidiaries,
(iii) result in any alteration of Phoenix' or its
subsidiaries' obligations under any agreement to which
Phoenix or its subsidiaries are party including, without
limitation, the Phoenix 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 Phoenix Assets,
(v) result in the imposition of any tax liability to
Phoenix or its subsidiaries relating to the Phoenix Assets,
or
(vi) violate any court order or decree to which either
Phoenix or its subsidiaries are subject;
The Phoenix Assets - Ownership and Condition
(jj) Business Assets. The Phoenix Assets comprise all of the
property and assets of the Phoenix Business, and no other
person, firm or corporation owns any assets used by Phoenix or
its subsidiaries in operating the Phoenix Business, whether
under a lease, rental agreement or other arrangement, other
than as disclosed in Schedules "F" or "I" hereto;
(kk) Title. Phoenix or its subsidiaries are the legal and
beneficial owner of the Phoenix Assets, free and clear of all
mortgages, liens, charges, pledges, security interests,
encumbrances or other claims whatsoever, save and except as
disclosed in Schedules "F" or "I" hereto;
(ll) 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 Phoenix Assets;
(mm) Phoenix Insurance Policies. Phoenix and its
subsidiaries maintain the public liability insurance and
insurance against loss or damage to the Phoenix Assets and
the Phoenix Business as described in Schedule "G" hereto;
(nn) Phoenix Material Contracts. The Phoenix Material
Contracts listed in Schedule "I" constitute all of the
material contracts of Phoenix and its subsidiaries;
(oo) No Default. There has not been any default in any material
obligation of Phoenix or any other party to be performed under
any of the Phoenix Material Contracts, each of which is in
good standing and in full force and effect and unamended
(except as disclosed in Schedule "I" hereto), and Phoenix is
not aware of any default in the obligations of any other party
to any of the Phoenix Material Contracts;
(pp) No Compensation on Termination. There are no
agreements, commitments or understandings relating to
severance pay or separation allowances on termination of
employment of any employee of Phoenix or its subsidiaries.
Neither Phoenix nor its subsidiaries are obliged to pay
benefits or share profits with any employee after
termination of employment except as required by law;
Phoenix Assets - Phoenix Equipment
(qq) Phoenix Equipment. The Phoenix Equipment has been
maintained in a manner consistent with that of a reasonably
prudent owner and such equipment is in good working
condition;
Phoenix Assets - Phoenix Goodwill and Other Assets
(rr) Phoenix Goodwill. Phoenix and its subsidiaries does not
carry on the Phoenix Business under any other business or
trade names. Phoenix does not have any knowledge of any
infringement by Phoenix or its subsidiaries of any patent,
trademarks, copyright or trade secret;
The Phoenix Business
(ss) Maintenance of Business. Since the date of the Phoenix
Financial Statements, Phoenix and its subsidiaries have not
entered into any material agreement or commitment except in
the ordinary course and except as disclosed herein;
(tt) Subsidiaries. Except for the Acquirer, Phoenix 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; and
Phoenix - Acquisition Shares
(uu) Acquisition Shares. The Acquisition Shares when delivered to
the holders of WPCS 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 Phoenix, in all cases subject
to the provisions and restrictions of all applicable
securities laws.
Non-Merger and Survival
3.2 The representations and warranties of Phoenix 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 or the WPCS Shareholder, the
representations and warranties of Phoenix shall survive the Closing.
Indemnity
3.3 Phoenix agrees to indemnify and save harmless WPCS and the WPCS Shareholder
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
Phoenix 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 Phoenix to WPCS or the WPCS Shareholder
hereunder.
ARTICLE 4
COVENANTS OF PHOENIX
Covenants
4.1 Phoenix covenants and agrees with WPCS that it will:
(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) Preservation of Business. Until the Closing, use its best
efforts to preserve the Phoenix Business and the Phoenix
Assets and, without limitation, preserve for WPCS Phoenix' and
its subsidiaries' relationships with any third party having
business relations with them;
(c) Access. Until the Closing, give WPCS, the WPCS Shareholder,
and their representatives full access to all of the
properties, books, contracts, commitments and records of
Phoenix, and furnish to WPCS, the WPCS Shareholder and their
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 Phoenix Assets
notwithstanding the change in control of WPCS arising from
the Merger; and
(e) Name Change. Forthwith after the Closing, take such
steps are required to change the name of Phoenix to "WPCS
Incorporated" or such similar name as may be acceptable to
the board of directors of WPCS.
Authorization
4.2 Phoenix hereby agrees to authorize and direct any and all federal, state,
municipal, foreign and international governments and regulatory authorities
having jurisdiction respecting Phoenix and its subsidiaries to release any and
all information in their possession respecting Phoenix and its subsidiaries to
WPCS. Phoenix shall promptly execute and deliver to WPCS any and all consents to
the release of information and specific authorizations which WPCS reasonably
requires to gain access to any and all such information.
Survival
4.3 The covenants set forth in this Article shall survive the Closing for the
benefit of WPCS and the WPCS Shareholder.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF
WPCS AND THE WPCS SHAREHOLDER
Representations and Warranties
5.1 WPCS and the WPCS Shareholder jointly and severally represent and warrant in
all material respects to Phoenix, with the intent that it will rely thereon in
entering into this Agreement and in approving and completing the transactions
contemplated hereby, that:
WPCS - Corporate Status and Capacity
(a) Incorporation. WPCS is a corporation duly incorporated
and validly subsisting 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;
(b) Carrying on Business. WPCS carries on business primarily in
the Commonwealth of Pennsylvania and does not carry on any
material business activity in any other jurisdiction. WPCS has
an office in Exton, Pennsylvania and in no other locations.
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 WPCS Assets, to carry on the
Business of WPCS and to enter into and complete this
Agreement;
WPCS - Capitalization
(d) Authorized Capital. The authorized capital of WPCS
consists of 20,000,000 shares of common stock, $.001 par
value per share;
(e) Ownership of WPCS Shares. The issued and outstanding share
capital of WPCS will on Closing consist of 3,000,000 common
shares (being the WPCS Shares), which shares on Closing shall
be validly issued and outstanding as fully paid and
non-assessable shares. The WPCS Shareholder will be at Closing
the registered and beneficial owner of 3,000,000 WPCS Shares.
The WPCS Shares owned by the WPCS Shareholder will on Closing
be free and clear of any and all liens, charges, pledges,
encumbrances, restrictions on transfer and adverse claims
whatsoever;
(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 WPCS Shares held by the WPCS Shareholder or
for the purchase, subscription or issuance of any of the
unissued shares in the capital of WPCS;
(g) No Restrictions. There are no restrictions on the
transfer, sale or other disposition of WPCS Shares contained
in the charter documents of WPCS or under any agreement;
WPCS - Records and Financial Statements
(h) Charter Documents. The charter documents of WPCS have
not been altered since its incorporation date, except as
filed in the record books of WPCS;
(i) Corporate Minute Books. The corporate minute books of WPCS 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
which required director or shareholder approval are reflected
on the corporate minute books of WPCS. WPCS is not in
violation or breach of, or in default with respect to, any
term of its Certificates of Incorporation (or other charter
documents) or by-laws.
(j) 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 consolidated basis, as of the
respective dates thereof, and the sales and earnings of the
WPCS Business during the periods covered thereby, in all
material respects, and have been prepared in substantial
accordance with generally accepted accounting principles
consistently applied;
(k) WPCS Accounts Payable and Liabilities. There are no material
liabilities, contingent or otherwise, of WPCS which are not
disclosed in Schedule "K" hereto or reflected in the WPCS
Financial Statements except those incurred in the ordinary
course of business since the date of the said schedule and the
WPCS Financial Statements, and WPCS 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 WPCS as of April 30, 2002 are described in
Schedule "K" hereto;
(l) WPCS Accounts Receivable. All WPCS Accounts Receivable
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;
(m) WPCS Bank Accounts. All of the WPCS Bank Accounts,
their location, numbers and the authorized signatories
thereto are as set forth in Schedule "M" hereto;
(n) No Debt to Related Parties. Except as disclosed in Schedule
"N" hereto, WPCS is not, and on Closing will not be,
materially indebted to the WPCS Shareholder nor to any family
member thereof, nor to any affiliate, director or officer of
WPCS or the WPCS Shareholder except accounts payable on
account of bona fide business transactions of WPCS incurred in
normal course of WPCS Business, including employment
agreements with the WPCS Shareholder, none of which are more
than 30 days in arrears;
(o) No Related Party Debt to WPCS. Neither the WPCS
Shareholder nor any director, officer or affiliate of WPCS
are now indebted to or under any financial obligation to
WPCS on any account whatsoever, except for advances on
account of travel and other expenses not exceeding $5,000 in
total;
(p) 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;
(q) 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 the WPCS Shareholder or to or on behalf of
officers, directors, shareholders or employees of WPCS or
under any management agreements with WPCS, 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. There are no pension, profit sharing,
group insurance or similar plans or other deferred
compensation plans affecting WPCS;
(s) No Adverse Events. Since the date of the WPCS Financial
Statements:
(i) there has not been any material adverse change in
the consolidated financial position or condition of WPCS,
its liabilities or the WPCS Assets or any damage, loss or
other change in circumstances materially affecting WPCS, the
WPCS Business or the WPCS Assets or WPCS's right to carry on
the WPCS 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 WPCS, the WPCS Business
or the WPCS Assets,
(iii) there has not been any material increase in the
compensation payable or to become payable by WPCS to the
WPCS Shareholder or to any of WPCS's 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) WPCS 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 $10,000
individually or $30,000 in total have been authorized or
made;
WPCS - Income Tax Matters
(t) Tax Returns. All tax returns and reports of WPCS 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 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 WPCS. 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
(v) Licenses. WPCS holds 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;
(w) Applicable Laws. WPCS 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 WPCS Business, and, to WPCS's
knowledge, WPCS 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 WPCS Business;
(x) Pending or Threatened Litigation. There is no material
litigation or administrative or governmental proceeding
pending or threatened against or relating to WPCS, the WPCS
Business, or any of the WPCS Assets, nor does WPCS have any
knowledge of any deliberate act or omission of WPCS that would
form any material basis for any such action or proceeding;
(y) No Bankruptcy. WPCS 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 WPCS and no order has been
made or a resolution passed for the winding-up, dissolution
or liquidation of WPCS;
(z) Labor Matters. WPCS is not a 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 and WPCS has no reason to believe that any current
employees will leave WPCS's employ as a result of this Merger.
(aa) Finder's Fees. WPCS 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
WPCS;
(cc) No Violation or Breach. The execution and performance
of this Agreement will not
(i) violate the charter documents of WPCS or result in
any breach of, or default under, any loan agreement,
mortgage, deed of trust, or any other agreement to which
WPCS is a party,
(ii) give any person any right to terminate or cancel
any agreement including, without limitation, WPCS Material
Contracts, or any right or rights enjoyed by WPCS,
(iii) result in any alteration of WPCS's obligations
under any agreement to which WPCS is a party including,
without limitation, the WPCS 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 WPCS Assets,
(v) result in the imposition of any tax liability to
WPCS relating to WPCS Assets or the WPCS Shares, or
(vi) violate any court order or decree to which either
WPCS is subject;
WPCS Assets - Ownership and Condition
(dd) Business Assets. The WPCS Assets comprise all of the property
and assets of the WPCS Business, and neither the WPCS
Shareholder nor any other person, firm or corporation owns any
assets used by WPCS in operating the WPCS Business, whether
under a lease, rental agreement or other arrangement, other
than as disclosed in Schedules "O" or "R" hereto;
(ee) Title. WPCS is the legal and beneficial owner of the WPCS
Assets, free and clear of all mortgages, liens, charges,
pledges, security interests, encumbrances or other claims
whatsoever, save and except as disclosed in Schedules "O" or
"R" 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 WPCS Assets;
(gg) WPCS Insurance Policies. WPCS maintains the public
liability insurance and insurance against loss or
damage to the WPCS Assets and the
WPCS Business as described in Schedule "P" hereto;
(hh) WPCS Material Contracts. The WPCS Material Contracts
listed in Schedule "R" constitute all of the material
contracts of WPCS;
(ii) No Default. There has not been any default in any material
obligation of WPCS or any other party to be performed under
any of WPCS Material Contracts, each of which is in good
standing and in full force and effect and unamended (except as
disclosed in Schedule "R"), and WPCS is not aware of any
default in the obligations of any other party to any of the
WPCS Material Contracts;
(jj) No Compensation on Termination. There are no
agreements, commitments or understandings relating to
severance pay or separation allowances on termination of
employment of any employee of WPCS. WPCS is not obliged to
pay benefits or share profits with any employee after
termination of employment except as required by law;
WPCS Assets - WPCS Equipment
(kk) WPCS Equipment. The WPCS Equipment has been maintained
in a manner consistent with that of a reasonably prudent
owner and such equipment is in good working condition;
WPCS Assets - WPCS Goodwill and Other Assets
(ll) WPCS Goodwill. WPCS carries on the WPCS Business only under
the name "WPCS Incorporated" and variations thereof and under
no other business or trade names. WPCS does not have any
knowledge of any infringement by WPCS of any patent,
trademark, copyright or trade secret;
The Business of WPCS
(mm) Maintenance of Business. Since the date of the WPCS
Financial Statements, the WPCS Business has been carried on
in the ordinary course and WPCS has not entered into any
material agreement or commitment except in the ordinary
course; and
(nn) Subsidiaries. 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
and WPCS does not own any subsidiary 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 WPCS and the WPCS Shareholder
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
Phoenix, the representations and warranties of WPCS and the WPCS Shareholder
shall survive the Closing.
Indemnity
5.3 WPCS and the WPCS Shareholder jointly and severally agree to indemnify and
save harmless Phoenix 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 and the WPCS Shareholder 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 WPCS or the WPCS
Shareholder to Phoenix hereunder.
ARTICLE 6
COVENANTS OF WPCS AND
THE WPCS SHAREHOLDER
Covenants
6.1 WPCS and the WPCS Shareholder covenant and agree with Phoenix that they
will:
(a) Conduct of Business. Until the Closing, conduct the
WPCS Business diligently and in the ordinary course
consistent with the manner in which the WPCS 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 WPCS Business and the WPCS Assets and,
without limitation, preserve for Phoenix WPCS's relationships
with their suppliers, customers and others having business
relations with them;
(c) Access. Until the Closing, give Phoenix and its
representatives full access to all of the properties, books,
contracts, commitments and records of WPCS relating to WPCS,
the WPCS Business and the WPCS Assets, and furnish to Phoenix
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 WPCS Assets, including the WPCS Material
Contracts, notwithstanding the change in control of WPCS
arising from the Merger;
(e) Reporting and Internal Controls. From and after the Effective
Time, the WPCS Shareholder shall forthwith take all required
actions to implement internal controls on the business of the
Surviving Company to ensure that the Surviving Company and
Phoenix comply with Section 13(b)(2) of the Securities and
Exchange Act of 1934;
(f) Audited Financial Statements. Immediately upon execution of
this Agreement, cause to be prepared audited financial
statements of WPCS in compliance with the requirements of
Regulation SB as promulgated by the Securities and Exchange
Commission, such audited financial statements to be provided
no later than 74 days after the Closing Date; and
(g) Name Change. Forthwith after the Closing, take such
steps are required to change the name of Phoenix to "WPCS
Incorporated" or such similar name as may be acceptable to
the board of directors of Phoenix.
Authorization
6.2 WPCS hereby agrees to authorize and direct any and all federal, state,
municipal, foreign and international governments and regulatory authorities
having jurisdiction respecting WPCS to release any and all information in their
possession respecting WPCS to Phoenix. WPCS shall promptly execute and deliver
to Phoenix any and all consents to the release of information and specific
authorizations which Phoenix 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 Phoenix.
ARTICLE 7
CONDITIONS PRECEDENT
Conditions Precedent in favor of Phoenix
7.1 Phoenix' obligations 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 Phoenix 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 WPCS
Shareholder at or prior to the Closing will have been complied
with or performed;
(c) Phoenix shall have completed its review and inspection
of the books and records of WPCS and shall be satisfied with
same in all material respects;
(d) title to the WPCS Shares held by the WPCS Shareholder and to
the WPCS Assets will be free and clear of all mortgages,
liens, charges, pledges, security interests, encumbrances or
other claims whatsoever, save and except as disclosed herein;
(e) the Certificate of Merger shall be executed by WPCS in form
acceptable for filing with the Delaware
Secretary of State;
(f) subject to Article 8 hereof, there will not have occurred
(i) any material adverse change in the financial
position or condition of WPCS, its liabilities or the WPCS
Assets or any damage, loss or other change in circumstances
materially and adversely affecting the WPCS Business or the
WPCS Assets or WPCS's 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, the WPCS Business
or the WPCS Assets;
(g) Phoenix' issued and outstanding common share capital shall be
reduced to 525,632 Phoenix Common Shares (prior to the
conversion of outstanding shares of series A preferred stock,
$0.001 par value per share ("Series A Preferred Stock")), by
the return to treasury of 500,000 Phoenix Common Shares and
Phoenix shall have received a release in form satisfactory to
WPCS from the persons returning such shares in that regard;
(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) the closing of a private placement by Phoenix of not less than
250 shares of non-voting series B convertible preferred stock
("Series B Preferred Stock") at a price of $1,000 per share.
Waiver by Phoenix
7.2 The conditions precedent set out in the preceding section are inserted for
the exclusive benefit of Phoenix and any such condition may be waived in whole
or in part by Phoenix at or prior to Closing by delivering to WPCS a written
waiver to that effect signed by Phoenix. In the event that the conditions
precedent set out in the preceding section are not satisfied on or before the
Closing, Phoenix shall be released from all obligations under this Agreement.
Conditions Precedent in Favor of WPCS and the WPCS Shareholder
7.3 The obligation of WPCS and the WPCS Shareholder to carry out the
transactions contemplated hereby is 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 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 Phoenix 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 Phoenix and its subsidiaries and
shall be satisfied with same in all material respects;
(d) Phoenix will have delivered the Acquisition Shares to be
issued pursuant to the terms of the Merger to WPCS at the
Closing and the Acquisition Shares will be registered on the
books of Phoenix in the name of the holder of WPCS Shares 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) the Certificate of Merger shall be executed by the
Acquirer in form acceptable for filing with the Delaware
Secretary of State;
(g) subject to Article 8 hereof, there will not have occurred
(i) any material adverse change in the financial
position or condition of Phoenix, its subsidiaries, their
liabilities or the Phoenix Assets or any damage, loss or
other change in circumstances materially and adversely
affecting Phoenix, the Phoenix Business or the Phoenix
Assets or Phoenix' right to carry on the Phoenix 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
Phoenix or the Phoenix Business (whether or not covered by
insurance) materially and adversely affecting Phoenix, its
subsidiaries, the Phoenix Business or the Phoenix Assets;
(h) Phoenix' issued and outstanding common share capital shall be
reduced to 525,632 Phoenix Common Shares (prior to the
conversion of outstanding shares of Series A Preferred Stock,
by the return to treasury of 500,000 Phoenix Common Shares and
Phoenix shall have received a release in form satisfactory to
WPCS from the persons returning such shares in that regard;
(i) the transactions contemplated hereby shall have been approved
by all other regulatory authorities having jurisdiction over
the subject matter hereof, if any;
(j) the closing of a private placement by Phoenix of not
less than 250 shares of Series B Preferred Stock at a price
of $1,000 per share;
(k) the satisfaction of all liabilities of Phoenix on or
prior to the Closing Date; and
(l) the conversion of all outstanding shares of Series A
Preferred Stock into 3,000,000 Phoenix Common Shares.
Waiver by WPCS and the WPCS Shareholder
7.4 The conditions precedent set out in the preceding section are inserted for
the exclusive benefit of WPCS and the WPCS Shareholder and any such condition
may be waived in whole or in part by WPCS or the WPCS Shareholder at or prior to
the Closing by delivering to Phoenix a written waiver to that effect signed by
WPCS and the WPCS Shareholder. In the event that the conditions precedent set
out in the preceding section are not satisfied on or before the Closing WPCS and
the WPCS Shareholder 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 of 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 May 31, 2002, 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 WPCS and Phoenix and
the contents thereof confidential and not utilize nor reveal or release same,
provided, however, that Phoenix will 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 Phoenix' filings with the Securities and
Exchange Commission.
ARTICLE 8
RISK
Material Change in the Business of WPCS
8.1 If any material loss or damage to the WPCS Business occurs prior to Closing
and such loss or damage, in Phoenix' reasonable opinion, cannot be substantially
repaired or replaced within sixty (60) days, Phoenix 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 Phoenix' obligations
to carry out the transactions contemplated hereby, be vested
in WPCS or otherwise adequately secured to the satisfaction of
Phoenix on or before the Closing Date.
Material Change in the Phoenix Business
8.2 If any material loss or damage to the Phoenix Business occurs prior to
Closing and such loss or damage, in WPCS's 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 Phoenix,
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's obligations to
carry out the transactions contemplated hereby, be vested in
Phoenix or otherwise adequately secured to the satisfaction of
WPCS on or before the Closing Date.
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 WPCS
9.2 On or before the Closing, WPCS and the WPCS Shareholder will deliver or
cause to be delivered to Phoenix:
(a) the original or certified copies of the charter documents of
WPCS and all corporate records documents and instruments of
WPCS, the corporate seal of WPCS and all books and accounts of
WPCS;
(b) all reasonable consents or approvals required to be obtained
by WPCS for the purposes of completing the Merger and
preserving and maintaining the interests of WPCS under any and
all WPCS Material Contracts and in relation to WPCS Assets;
(c) certified copies of such resolutions of the shareholder
and director of WPCS as are required to be passed to
authorize the execution, delivery and implementation of this
Agreement;
(d) an acknowledgement from WPCS and the WPCS Shareholder
of the satisfaction of the conditions precedent set forth in
section 7.3 hereof;
(e) the Certificate of Merger, duly executed by WPCS; and
(f) such other documents as Phoenix may reasonably require
to give effect to the terms and intention of this Agreement.
Documents to be Delivered by Phoenix
9.3 On or before the Closing, Phoenix shall deliver or cause to be
delivered to WPCS and the WPCS Shareholder:
(a) share certificates representing the Acquisition Shares
duly registered in the names of the holders of shares of
WPCS Common Stock;
(b) certified copies of such resolutions of the directors
of Phoenix as are required to be passed to authorize the
execution, delivery and implementation of this Agreement;
(c) a certified copy of a resolution of the directors of
Phoenix dated as of the Closing Date appointing the nominees
of WPCS as officers of WPCS;
(d) an undated resolution of the directors of Phoenix
appointing the nominee of the WPCS Shareholder listed below
in Article 10 to the board of directors of Phoenix;
(e) undated resignation of Stephen C. Jackson as a director of
Phoenix;
(f) an acknowledgement from Phoenix of the satisfaction of
the conditions precedent set forth in section 7.1 hereof;
(g) documentation evidencing the return to treasury of 500,000
Phoenix Common Shares and release in form satisfactory to WPCS
from the persons returning such shares;
(h) the Certificate of Merger, duly executed by the Acquirer;
(i) executed subscription agreements for a minimum of 250 shares
of Series B Preferred Stock;
(j) documentation evidencing the conversion of all outstanding
shares of Series A Preferred Stock into 3,000,000 Phoenix
Common Shares, in form satisfactory to WPCS; and
(k) such other documents as WPCS may reasonably require to give
effect to the terms and intention of this Agreement.
ARTICLE 10
POST-CLOSING MATTERS
Forthwith after the Closing, Phoenix, WPCS and the WPCS Shareholder
agree to use all their best efforts to:
(a) file the Certificate of Merger with Secretary of State of the
State of Delaware;
(b) issue a news release reporting the Closing;
(c) file with the Securities and Exchange Commission a report on
Form 14f1 disclosing the change in control of Phoenix and, 10
days after such filing, date the resolutions appointing to the
board of directors of Phoenix Andy Hidalgo, and forthwith date
and accept the resignation of Stephen C. Jackson as a director
of Phoenix;
(d) file a Form 8-K with the Securities and Exchange Commission
disclosing the terms of this Agreement and, not more than 60
days following the filing of such Form 8-K, to file and
amended Form 8-K which includes audited financial statements
of WPCS as well as pro forma financial information of WPCS and
Phoenix as required by Regulation SB as promulgated by the
Securities and Exchange Commission;
(e) file reports on Forms 13D and 3 with the Securities and
Exchange Commission disclosing the acquisition
of the Acquisition Shares by the WPCS Shareholder; and
(f) take such steps are required to change the name of Phoenix to
"WPCS Incorporated" or such similar name as may be acceptable
to the board of directors of Phoenix.
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 fifteen (15) 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 in the City of New York, New York.
Notice
11.2 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 single certified or registered mail, or
telecopier. 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 telecopier shall be deemed to have been received on
the actual date of delivery.
Addresses for Service
11.3 The address for service of notice of each of the parties hereto is as
follows:
(a) Phoenix or the Acquirer:
Phoenix Star Ventures, Inc.
1650 - 200 Burrard Street
Vancouver, BC V6C 3L6
Attn: Stephen C. Jackson, President
Phone: (604) 689-3355
Telecopier: (604) 689-5320
(b) WPCS or the WPCS Shareholder
WPCS Incorporated
140 South Village Avenue
Suite 20
Exton, Pennsylvania 19341
Attn: Andy Hidalgo, President
Phone: (610) 903-0400
Telecopier: (610) 903-0401
Change of Address
11.4 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
11.5 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
11.6 Time is expressly declared to be the essence of this Agreement.
Entire Agreement
11.7 The provisions contained herein constitute the entire agreement among WPCS,
the WPCS Shareholder, the Acquirer and Phoenix respecting the subject matter
hereof and supersede all previous communications, representations and
agreements, whether verbal or written, among WPCS, the WPCS Shareholder, the
Acquirer and Phoenix with respect to the subject matter hereof.
Enurement
11.8 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.
Assignment
11.9 This Agreement is not assignable without the prior written consent of
the parties hereto.
Counterparts
11.10 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 telecopier will constitute proper delivery,
provided that originally executed counterparts are delivered to the parties
within a reasonable time thereafter.
Applicable Law
11.11 This Agreement is subject to the laws of the State of New York.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF the parties have executed this Agreement effective as of the
day and year first above written.
PHOENIX STAR VENTURES, INC.
/s/ RICK JACKSON By: /s/ STEPHEN C. JACKSON
- -------------------------------------------- ----------------------------------------------
Witness Stephen C. Jackson, President
Rick Jackson
- --------------------------------------------
Name
PO Box 111
- --------------------------------------------
Address
Gabriola BC VORIXO
WPCS ACQUISITION CORP.
/s/ RICK JACKSON By: /s/ STEPHEN C. JACKSON
- -------------------------------------------- ----------------------------------------------
Witness Stephen C. Jackson, President
Rick Jackson
- --------------------------------------------
Name
PO Box 111
- --------------------------------------------
Address
Gabriola BC VORIXO
WPCS HOLDINGS INC.
/s/ ANDREW H. SHOFFNER By: /s/ ANDY HIDALGO
- -------------------------------------------- ----------------------------------------------
Witness Andy Hidalgo, President
Andrew Shoffner
Name
537 South Franklin St.
Address
West Chester, PA 19382
/s/ ANDY HIDALGO
----------------------------
/s/ RYAN ANDERSEN ___________________________________
- -----------------
Witness Andy Hidalgo
Ryan Andersen
- -------------
Name
802 S. Severgn Drive
- --------------------
Address
Exton, PA 19341
- ---------------