Exhibit 10.01
 

 

 

 

 
LOAN AND SECURITY AGREEMENT
 

 

 

 

 
WPCS INTERNATIONAL INCORPORATED
 
WPCS INTERNATIONAL – SUISUN CITY, INC.
 
WPCS INTERNATIONAL – SEATTLE, INC.
 
WPCS INTERNATIONAL – PORTLAND, INC.
 
WPCS INTERNATIONAL – HARTFORD, INC.
 
WPCS INTERNATIONAL – LAKEWOOD, INC.
 
WPCS INTERNATIONAL – TRENTON, INC.
 
and
 
SOVEREIGN BANK, N.A.
 
Dated as of January 27, 2012
 
 
 
 
 
 
 
 
 

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TABLE OF CONTENTS
 

     
Page
SECTION I.  DEFINITIONS AND INTERPRETATION
1
 
1.1
Terms Defined
1
 
1.2
Accounting Principles
13
 
1.3
Construction
13
SECTION II.  THE LOANS
13
 
2.1
Revolving Credit – Description.
13
 
2.2
Letters of Credit.
14
 
2.3
Reserved.
17
 
2.4
Advances and Payments.
17
 
2.5
Interest
18
 
2.6
Additional Interest Provisions.
19
 
2.7
Fees and Charges.
19
 
2.8
Prepayments
20
 
2.9
Use of Proceeds
20
 
2.10
Capital Adequacy
20
SECTION III.  COLLATERAL
21
 
3.1
Collateral
21
 
3.2
Lien Documents
22
 
3.3
Other Actions.
22
 
3.4
Searches, Certificates.
23
 
3.5
Landlord’s and Warehouseman’s Waivers
23
 
3.6
Filing Security Agreement
23
 
3.7
Accounts
23
 
3.8
Power of Attorney
24
SECTION IV.  CLOSING AND CONDITIONS PRECEDENT TO ADVANCES
24
 
4.1
Resolutions, Opinions, and Other Documents
24
 
4.2
Due Diligence
25
 
4.3
Undrawn Availability
25
 
4.4
Absence of Certain Events
25
 
4.5
Warranties and Representations at Closing
25
 
4.6
Compliance with this Agreement
26
 
4.7
Officers' Certificate
26
 
4.8
Closing
26
 
4.9
Waiver of Rights
26
 
4.10
Conditions for Future Advances
26

 
 
 
 
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    SECTION V.  REPRESENTATIONS AND WARRANTIES
26
 
5.1
Corporate Organization and Validity.
27
 
5.2
Places of Business
27
 
5.3
Pending Litigation
27
 
5.4
Title to Properties
28
 
5.5
Governmental Consent
28
 
5.6
Taxes
28
 
5.7
Financial Statements
28
 
5.8
Full Disclosure
28
 
5.9
Subsidiaries
28
 
5.10
Investments, Guarantees, Contracts, etc.
28
 
5.11
Government Regulations, etc.
29
 
5.12
Business Interruptions
30
 
5.13
Names and Intellectual Property.
30
 
5.14
Other Associations
30
 
5.15
Environmental Matters
30
 
5.16
Regulation O
31
 
5.17
Capital Stock
31
 
5.18
Solvency
31
 
5.19
Perfection and Priority
31
 
5.20
Commercial Tort Claims
31
 
5.21
Letter of Credit Rights
31
 
5.22
Deposit Accounts
31
 
5.23
Inactive Subsidiary
31
 
5.24
Anti-Terrorism Laws.
31
SECTION VI.  BORROWER'S AFFIRMATIVE COVENANTS
32
 
6.1
Payment of Taxes and Claims
32
 
6.2
Maintenance of Properties and Corporate Existence.
33
 
6.3
Business Conducted
33
 
6.4
Litigation
33
 
6.5
Issue Taxes
33
 
6.6
Bank Accounts
33
 
6.7
Employee Benefit Plans
33
 
6.8
Financial Covenants
33
 
6.9
Financial and Business Information
33
 
6.10
Officers' Certificates
34
 
6.11
Audits and Inspection
35
 
6.12
Tax Returns, Financial Statements and Other Reports
35
 
6.13
Information to Participant
35
 
6.14
Material Adverse Developments
35
 
6.15
Places of Business
35
 
6.16
Commercial Tort Claims
35
 
6.17
Letter of Credit Rights
35
 
6.18
Lost Documents
35
 
6.19
Additional Borrower
35

 
 
 
 
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6.20
Remote deposit
36
 
6.21
Post Closing Covenants.
36
SECTION VII.  BORROWER'S NEGATIVE COVENANTS.
36
 
7.1
Merger, Consolidation, Dissolution or Liquidation.
36
 
7.2
Acquisitions
36
 
7.3
Liens and Encumbrances
36
 
7.4
Transactions With Affiliates or Subsidiaries.
36
 
7.5
Guarantees
37
 
7.6
Distributions, Bonuses and Other Indebtedness
37
 
7.7
Loans and Investments
37
 
7.8
Use of Lenders' Name
37
 
7.9
Miscellaneous Covenants.
37
 
7.10
Jurisdiction of Organization
37
SECTION VIII.  DEFAULT
37
 
8.1
Events of Default
37
 
8.2
Cure
39
 
8.3
Rights and Remedies on Default.
39
 
8.4
Nature of Remedies
40
 
8.5
Set Off.
40
SECTION IX.  MISCELLANEOUS
40
 
9.1
Governing Law
40
 
9.2
Integrated Agreement
40
 
9.3
Waiver
40
 
9.4
Indemnity.
40
 
9.5
Time
41
 
9.6
Expenses of Lender
41
 
9.7
Brokerage
41
 
9.8
Notices.
41
 
9.9
Headings
42
 
9.10
Survival
42
 
9.11
Successors and Assigns.
42
 
9.12
Duplicate Originals
43
 
9.13
Modification
43
 
9.14
Signatories
43
 
9.15
Third Parties
43
 
9.16
Discharge of Taxes, Borrower's Obligations, Etc
43
 
9.17
Withholding and Other Tax Liabilities
43
 
9.18
Consent to Jurisdiction
44
 
9.19
Additional Documentation
44
 
9.20
Advertisement.
44
 
9.21
Waiver of Jury Trial
44
 
9.22
Consequential Damages
44

 
 
 
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LOAN AND SECURITY AGREEMENT
 
This Loan and Security Agreement ("Agreement") is dated this 27th day of
January, 2012, by and among WPCS International Incorporated, a Delaware
corporation ("WPCS"), WPCS International – Suisun City, Inc., a California
corporation (“WPCS Suisun City”),  WPCS International – Seattle, Inc., a
Washington corporation (“WPCS Seattle”), WPCS International – Portland, Inc., an
Oregon corporation (“WPCS Portland”), WPCS International – Hartford, Inc., a
Connecticut corporation (“WPCS Hartford”), WPCS International – Lakewood, Inc.,
a New Jersey corporation (“WPCS Lakewood”), and WPCS International – Trenton,
Inc., a New Jersey corporation (“WPCS Trenton,” and collectively with WPCS, WPCS
Suisun City, WPCS Seattle, WPCS Portland, WPCS Hartford and WPCS Lakewood, the
“Borrower”) and Sovereign Bank, N.A., a national banking association ("Lender").
 
BACKGROUND
 
A.           Borrower desires to establish financing arrangements with Lender
and Lender is willing to make loans and extensions of credit to Borrower under
the terms and provisions hereinafter set forth.
 
B.           The parties desire to define the terms and conditions of their
relationship in writing.
 
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree
as follows:
 
SECTION I. DEFINITIONS AND INTERPRETATION
 
1.1 Terms Defined.  As used in this Agreement, the following terms have the
following respective meanings:
 
Account – All of the "accounts" (as that term is defined in the UCC) of
Borrower, whether now existing or hereafter arising.
 
Account Debtor – Any Person obligated on any Account owing to Borrower.
 
Advance(s) – Any monies advanced or credit extended to Borrower by Lender under
the Revolving Credit, including without limitation, cash advances and the
issuance of Letters of Credit.
 
Advance Request – Section 2.4(c)(iii).
 
Affiliate – With respect to any Person, (a) any Person which, directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, such Person, or (b) any Person who is a director
or officer (i) of such Person, (ii) of any Subsidiary of such Person, or (iii)
any person described in clause (a) above.  For purposes of this definition,
control of a Person shall mean the power, direct or indirect, (x) to vote 10% or
more of the Capital Stock having ordinary voting power for the election of
directors (or comparable equivalent) of such Person, or (y) to direct or cause
the direction of the management and policies of such Person whether by contract
or otherwise.  Control may be by ownership, contract, or otherwise.
 
 
 
 
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Anti-Terrorism Laws – Any statute, treaty, law (including common law),
ordinance, regulation, rule, order, opinion, release, injunction, writ, decree
or award of any Governmental Authority relating to terrorism or money
laundering, including Executive Order No. 13224 and the USA Patriot Act.
 
Asset Sale – The sale, transfer, lease, license or other disposition by
Borrower, or by any Subsidiary of Borrower, to any Person other than Borrower,
of any Property now owned, or hereafter acquired, of any nature whatsoever in
any transaction or series of related transactions other than the sale of
Inventory in the ordinary course of business.  An Asset Sale includes, but is
not limited to, a merger, consolidation, division, conversion, dissolution or
liquidation of Borrower and any sale, lease, license or transfer of a division
of Borrower.
 
Assignment of Claims Act – The Federal Assignment of Claims Act, 31 U.S.C. §
3727 et seq., as amended from time to time.
 
Authorized Officer – Any officer (or comparable equivalent) of Borrower
authorized by specific resolution of Borrower to request Advances or execute
Quarterly Compliance Certificates as set forth in the authorization certificate
delivered to Lender substantially in the form of Exhibit “A” attached hereto.
 
Bank Affiliate – Any bank that is controlled by Lender.  A bank shall be
deemed  controlled by Lender if (i) Lender, directly or indirectly, or acting
through one or more other Persons, owns, controls or has power to vote
twenty-five percent (25%) or more of any class of voting securities of the bank;
or (ii) Lender controls in any manner the election of a majority of the
directors or trustees of the bank.
 
Billings in Excess of Cost - Any amounts billed to Account Debtors (including
milestone payments) with respect to goods and/or services that have not yet been
delivered or performed.
 
Blocked Person – Section 5.23.
 
Blue Chip Customer – Each of Verizon, Motorola, Johnson Controls, Genentech,
Siemens, Simplex Grinnell, ATT, Honeywell and Sprint/Nextel.
 
Borrowing Base – As of the date of determination thereof, an amount equal to the
lesser of (i) the Maximum Revolving Credit Amount less the Letter of Credit
Amount, or (ii) the sum of (A) eighty percent (80%) of Eligible Accounts plus
(B) the lesser of (1) Seven Hundred and Fifty Thousand Dollars ($750,000) or (2)
forty percent (40%) of Eligible Inventory minus (C) the Letter of Credit Amount
minus (D) such reserves, in such amounts and with respect to such matters, as
Lender may deem reasonably proper and necessary from time to time at its own
discretion (including, without limitation, (i) the Subcontractor Reserve, (ii) a
reserve relating to the Tax and Judgment Liens in the aggregate amount of
$54,946.44 and (iii) any amounts paid by Borrower in connection with any Hedging
Agreements).
 
Borrowing Certificate – Section 6.9(a)(vi).
 
 
 
 
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Business Day – A day other than Saturday or Sunday when Lender is open for
business in Philadelphia, Pennsylvania.
 
Capitalized Lease Obligations – Any Indebtedness represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP, consistently applied.
 
Capital Expenditures – For any period, the aggregate of all expenditures
(including that portion of Capitalized Lease Obligations attributable to that
period) made in respect of the purchase, construction or other acquisition of
fixed or capital assets, determined in accordance with GAAP.
 
Capital Stock – Any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
other ownership interests in a Person (other than a corporation), whether voting
or non-voting, and any and all warrants, options or other rights to purchase any
of the foregoing.
 
Cash Collateral Account – Section 2.4(b).
 
Change of Control – The occurrence of any of the following: (a) 100% of the
Capital Stock of any Borrower (other than WPCS) is no longer owned or controlled
by WPCS (including for the purposes of the calculation of percentage ownership,
any Capital Stock into which any Capital Stock of any Borrower held by WPCS are
convertible or for which any such Capital Stock of any Borrower or of any other
Person may be exchanged and any Capital Stock issuable to WPCS upon exercise of
any warrants, options or similar rights which may at the time of calculation be
held by WPCS), (b) (i) any person or group of persons (within the meaning of
Section 13(d) or 14(a) of the Exchange Act) shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 promulgated by the United States
Securities and Exchange Commission under the Exchange Act) of 20% or more of the
voting Capital Stock of WPCS or (ii) from and after the date hereof, individuals
who on the date hereof constitute the Board of Directors of WPCS (together with
any new directors whose election by such Board of Directors or whose nomination
for election by the shareholders of WPCS was approved by a vote of a majority of
the directors then still in office who were either directors on the date hereof
or whose election or nomination for election was previously approved) cease for
any reason to constitute a majority of the board of directors of WPCS then in
office; or (c) any merger, consolidation or sale of substantially all of the
property or assets of any Borrower or any direct or indirect Subsidiary of any
Borrower except as permitted by Section 7.1.
 
Closing – Section 4.8.
 
Closing Date – Section 4.8.
 
Collateral – All of the Property and interests in Property described in Section
3.1 of this Agreement and all other Property, and interests in Property that now
or hereafter secure payment of the Obligations and satisfaction by Borrower of
all covenants and undertakings contained in this Agreement and the other Loan
Documents.
 
Collateral Pledge Agreement – That certain Collateral Pledge Agreement dated as
of the date hereof, between WPCS, as Pledgor (as defined therein), and Lender,
as Secured Party (as defined therein), as same may be amended, supplemented,
restated, replaced or otherwise modified from time to time.
 
 
 
 
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Consolidated Amortization Expense – For any period, the aggregate consolidated
amount of amortization expenses of Borrower and its Subsidiaries, as determined
in accordance with GAAP.
 
Consolidated Cash Flow – For any period, the Consolidated Net Income (or
deficit) of Borrower and its Subsidiaries plus (a) Consolidated Interest
Expense, plus (b) Consolidated Depreciation Expense, plus (c) Consolidated
Amortization Expense, plus (d) Consolidated Tax Expense, plus (e) extraordinary
non-cash losses, minus (f) extraordinary gains, all as determined in accordance
with GAAP.
 
Consolidated Depreciation Expense – For any period, the aggregate, consolidated
amount of depreciation expenses of Borrower and its Subsidiaries, as determined
in accordance with GAAP.
 
Consolidated Interest Expense – For any period (without duplication), the
aggregate, consolidated amount of interest expense required to be paid or
accrued during such period on all Indebtedness of Borrower and its Subsidiaries
outstanding during all or any part of such period, as determined in accordance
with GAAP.
 
Consolidated Net Income – For any period, consolidated net income after taxes of
Borrower and its Subsidiaries as such would appear on the consolidated statement
of income of Borrower and its Subsidiaries, prepared in accordance with GAAP.
 
Consolidated Tax Expense – For any period, the aggregate consolidated amount of
income tax expenses of Borrower and its Subsidiaries, as determined in
accordance with GAAP.
 
Default – Any event, act, condition or occurrence which with notice, or lapse of
time or both, would constitute an Event of Default hereunder.
 
Disqualified Stock – Any Capital Stock which by its terms (or by the terms of
any security into which it is convertible or for which it is exchangeable) or
upon the happening of any event (i) matures or is mandatorily redeemable for any
reason, (ii) is convertible or exchangeable for Indebtedness or Capital Stock
that meets the requirements of clauses (i) and (ii), or (iii) is redeemable at
the option of the holder thereof, in whole or in part, in each case on or prior
to the Revolving Credit Maturity Date.
 
Distribution –
 
a. Cash dividends or other cash distributions on any now or hereafter
outstanding Capital Stock of Borrower;
 
b. The redemption, repurchase, defeasance or acquisition of such Capital Stock
or of warrants, rights or other options to purchase such Capital Stock; and
 
c. Any loans or advances (other than salaries), to any shareholder(s),
partner(s) or member(s) of Borrower.
 
 
 
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Eligible Accounts – All Accounts of Borrower meeting all of the following
specifications: (i) the Account is lawfully and exclusively owned by Borrower
and subject to a first priority Lien in favor of Lender and subject to no other
Lien (other than Permitted Liens, if applicable, and Liens granted under this
Agreement) and Borrower has the right of assignment thereof and the power to
grant a security interest therein; (ii) the Account does not represent a
rebilling and is valid and enforceable representing the undisputed indebtedness
of an Account Debtor not more than ninety (90) days past the original invoice
date (other than with respect to Accounts owing by any Blue Chip Customer, which
shall not be more than one hundred and twenty (120) days past the original
invoice date); (iii) not more than fifty percent (50%) of the aggregate balance
of all Accounts owing from an Account Debtor obligated on the Account are
outstanding more than sixty (60) days past their original due dates or ninety
(90) days past their original invoice dates; (iv) the amount of the Account,
when aggregated with all other Accounts of such Account Debtor, is less than
fifteen percent (15%) of the face value of all Accounts of Borrower then
outstanding; (v) the Account is not a contra Account and is not subject to any
defense, set-off, or counterclaim, deduction, discount, credit, chargeback,
freight claim, allowance or adjustment of any kind; (vi) the Account is net of
any portion thereof attributable to the sale of goods that have been returned,
rejected, lost or damaged; (vii) if the Account arises from the sale of goods by
Borrower, such sale was an absolute sale and not on consignment or on approval
or on a sale-or-return basis nor subject to any other repurchase or return
agreement, and such goods have been shipped to the Account Debtor or its
designee; (viii) if the Account arises from the performance of services, such
services have actually been performed and have been approved by the Account
Debtor; (ix) the Account arose in the ordinary course of Borrower's business;
(x) no notice of the bankruptcy, receivership, reorganization, liquidation,
dissolution, or insolvency of the Account Debtor has been received by Lender or
Borrower; (xi) the Account is an Account for which Lender believes that the
validity, enforceability or collection of the Account is not invalid or
otherwise impaired; (xii) the Account Debtor is not a Subsidiary or Affiliate of
Borrower; (xiii) the sale does not represent a sale pursuant to a government
contract unless Borrower has complied, for the benefit of Lender, with the
Assignment of Claims Act; (xiv) the Account is not an Account of an Account
Debtor having its principal place of business or executive office outside the
United States, unless the payment of such Account is guaranteed by an
irrevocable letter of credit satisfactory to Lender or by credit insurance,
satisfactory to Lender; (xv) the Account is not an Account on which the Account
Debtor is obligated to Borrower under any Instrument; (xvi) the transaction
which gave rise to the Account complies in all respects with all applicable
laws, rules and regulations of any Governmental Authority; (xvii) the
transaction which gave rise to the Account did not involve the issuance of a
performance bond; and (xviii) the Account meets such other reasonable
specifications and requirements which may from time to time be established by
Lender.  Eligible Accounts shall not include that portion of an Account
representing (i) interest or finance charges for past due balances or debit
memos and (ii) Billings in Excess of Cost.
 
Eligible Inventory – Any and all raw material and finished goods Inventory of
Borrower valued at the lower of cost (determined on a first-in/first-out basis)
or market value located at Borrower's places of business shown on Schedule "5.2"
attached hereto and made part hereof (and for which location Lender has received
a landlord, warehouse or mortgagee waiver as determined by, and in form and
substance satisfactory to, Lender), which (i) is not subject to any Lien (other
than Liens granted under this Agreement and Permitted Liens, if applicable);
(ii) is not slow moving, damaged, obsolete or unmerchantable, as determined by
Lender in its sole discretion; (iii) meets all standards, if any, imposed by any
Governmental Authority; (iv) is not Inventory held on consignment; (v) is not
Inventory in-transit unless such Inventory (A) is in transit to one of
Borrower's places of business shown on Schedule "5.2", (B) is owned by Borrower,
(C) is insured to the full value thereof, and (D) is subject to negotiable bills
of lading endorsed to, or non-negotiable bills of lading issued in the name of
Lender, and covered by a Letter of Credit issued under the Revolving Credit;
(vi) is situated at a location not owned by Borrower, provided that (x) the
owner or occupier of such location has executed in favor of Lender a Lien Waiver
Agreement or (y) Lender has instituted a reserve to the Borrowing Base in an
amount equal to three (3) months’ rent under the lease for such location and
(vii) meets such other reasonable specifications and requirements which may from
time to time be established by Lender.
 
Environmental Laws – Any and all Federal, foreign, state, local or municipal
laws, rules, orders, regulations, statutes, ordinances, codes, decrees and any
and all common law requirements, rules and bases of liability regulating,
relating to or imposing liability or standards of conduct concerning pollution,
protection of the environment, or the impact of pollutants, contaminants or
toxic or hazardous substances on human health or the environment, as now or may
at any time hereafter be in effect.
 
 
 
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ERISA – The Employee Retirement Income Security Act of 1974, as the same may be
amended, from time to time.
 
Event of Default – Section 8.1.
 
Exchange Act – The Securities Exchange Act of 1934, as amended.
 
Executive Order No. 13224 – The Executive Order No. 13224 on Terrorist
Financing, effective September 24, 2001, as the same has been, or shall
hereafter be, renewed, extended, amended or replaced.
 
Expenses – Section 9.6.
 
Fixed Charge Coverage Ratio – For any period, the ratio of (i) Consolidated Cash
Flow minus unfunded Capital Expenditures minus Distributions minus Consolidated
Tax Expenses paid in cash to (ii) principal payments on account of long term
Indebtedness (excluding the Revolving Credit) plus Consolidated Interest Expense
paid in cash, all as determined in accordance with GAAP.
 
GAAP – Generally accepted accounting principles as in effect on the Closing Date
applied in a manner consistent with the most recent audited financial statements
of Borrower furnished to Lender and described in Section 5.7 herein.
 
Government Acts – Section 2.2(f).
 
Governmental Authority – Any federal, state or local government or political
subdivision, or any agency, authority, bureau, central bank, commission,
department or instrumentality of either, or any court, tribunal, grand jury, or
arbitration.
 
Guarantor – any Person who may hereafter guaranty, as surety, all of the
Obligations.
 
Hazardous Substances – Any substances defined or designated as hazardous or
toxic waste, hazardous or toxic material, hazardous or toxic substance or
similar term, under any Environmental Law.
 
 
 
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Hedging Agreements – Any Interest Hedging Instrument or any other interest rate
protection agreement, foreign currency exchange agreement, commodity purchase or
option agreement, or any other interest rate hedging device or swap agreement
(as defined in 11 U.S.C. § 101 et. seq.).
 
Inactive Subsidiary – WPCS Incorporated, a Delaware corporation.
 
Indebtedness – Of any Person at any date, without duplication, (i) all
indebtedness of such Person for borrowed money (including with respect to
Borrower, the Obligations) or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (ii) any other
indebtedness of such Person which is evidenced by a note, bond, debenture or
similar instrument, (iii) all Capitalized Lease Obligations of such Person, (iv)
the face amount of all letters of credit issued for the account of such Person
and all drafts drawn thereunder, (v) all obligations of other Persons which such
Person has guaranteed, (vi) Disqualified Stock, (vii) all Obligations of such
Person under Hedging Agreements, and (viii) all liabilities secured by any Lien
on any property owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof.
 
Interest Hedging Instrument – Any documentation evidencing any interest rate
swap, interest "cap" or "collar" or any other interest rate hedging device or
swap agreement (as defined in 11 U.S.C. § 101 et. seq.) between Borrower and
Lender (or any Affiliate of Lender).
 
Inventory – All of the "inventory" (as that term is defined in the UCC) of
Borrower, whether now existing or hereafter acquired or created.
 
IRS – Internal Revenue Service.
 
L/C Commitment – The sum of Two Million Dollars ($2,000,000).
 
L/C Fees – Section 2.7(c).
 
Letters of Credit – Standby letters of credit issued or to be issued by Lender
for the account of Borrower pursuant to Section 2.2 herein.
 
Letter of Credit Amount – The sum of (i) the aggregate undrawn amount of all
Letters of Credit outstanding at any time plus (ii) the aggregate amount of all
drawings under Letters of Credit for which Lender has not been reimbursed at
such time.
 
Letter of Credit Documents – Any Letter of Credit, any amendment thereto, any
documents delivered in connection therewith, any application therefor, or any
other documents (all in form and substance satisfactory to Lender), governing or
providing for (i) the rights and obligations on the parties concerned or at
risk, or (ii) any collateral security for such obligations.
 
 
 
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Leverage Ratio – At any time, the ratio of Borrower's (i) Indebtedness to (ii)
Tangible Net Worth.
 
LIBOR Applicable Margin – As of the Closing Date, two and three quarters percent
(2.75%) per annum.  Thereafter, effective as of the first Business Day following
receipt by the Lender of the annual financial statements required under Section
6.9(a)(iii) (each day of such delivery, an “Adjustment Date”), the LIBOR
Applicable Margin shall be adjusted, if necessary, to the applicable percent per
annum set forth in the pricing table set forth below corresponding to the Fixed
Charge Coverage Ratio measured on a trailing twelve month basis as of the last
day of the most recently completed fiscal year prior to the applicable
Adjustment Date (each such period, a “Calculation Period”):
 
FIXED CHARGE COVERAGE RATIO
LIBOR APPLICABLE MARGIN
Greater than or equal to 1.20 to 1.00, but less than 1.50 to 1.00
2.75%
Greater than or equal to 1.50 to 1.00 but less than 1.75 to 1.00
2.50%
Greater than or equal to 1.75 to 1.00
2.25%

 
If the Borrower shall fail to deliver the financial statements, certificates
and/or other information required under Section 6.9(a)(iii) by the dates
required pursuant to such section, each LIBOR Applicable Margin shall be
conclusively presumed to equal the highest LIBOR Applicable Margin specified in
the pricing table set forth above until the date of delivery of such financial
statements, certificates and/or other information, at which time the rate will
be adjusted based upon the Fixed Charge Coverage Ratio reflected in such
statements.
 
If, as a result of any restatement of, or other adjustment to, the foregoing
financial statements or for any other reason, the Lender determines that (a) the
Fixed Charge Coverage Ratio as previously calculated as of any applicable date
was inaccurate, and (b) a proper calculation of the Fixed Charge Coverage Ratio
would have resulted in different pricing for any period, then (i) if the proper
calculation of the Fixed Charge Coverage Ratio would have resulted in higher
pricing for such period, the Borrower shall automatically and retroactively be
obligated to pay to the Lender, promptly upon demand by the Lender, an amount
equal to the excess of the amount of interest that should have been paid for
such period over the amount of interest actually paid for such period; and (ii)
if the proper calculation of the Fixed Charge Coverage Ratio would have resulted
in lower pricing for such period, Lender shall have no obligation to repay
interest to the Borrower; provided, that, if as a result of any restatement or
other event a proper calculation of the Fixed Charge Coverage Ratio would have
resulted in higher pricing for one or more periods and lower pricing for one or
more other periods (due to the shifting of income or expenses from one period to
another period or any similar reason), then the amount payable by the Borrower
pursuant to clause (i) above shall be based upon the excess, if any, of the
amount of interest  that should have been paid for all applicable periods over
the amounts of interest actually paid for such periods.
 
 
 
 
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Notwithstanding the foregoing, at all times after the occurrence and during the
continuance of a Default or Event of Default, the LIBOR Applicable Margin shall
be two and three quarters percent (2.75%).
 
LIBOR Based Rate – The LIBOR Rate plus the LIBOR Applicable Margin.
 
LIBOR Interest Period – A period of one month duration during which the LIBOR
Based Rate is applicable.
 
LIBOR Rate – The London Interbank Offered Rate (LIBOR) for a one-month period as
published in the "Money Rates" Section of The Wall Street Journal on the
applicable date as such rate may change from time to time.  If The Wall Street
Journal ceases to be published or goes on strike or is otherwise not published,
Lender may use a similar published one-month LIBOR Rate.
 
Lien – Any interest of any kind or nature in property securing an obligation
owed to, or a claim of any kind or nature in property by, a Person other than
the owner of the Property, whether such interest is based on the common law,
statute, regulation or contract, and including, but not limited to, a security
interest or lien arising from a mortgage, encumbrance, pledge, conditional sale
or trust receipt, a lease, consignment or bailment for security purposes, a
trust, or an assignment.  For the purposes of this Agreement, Borrower shall be
deemed to be the owner of any Property which it has acquired or holds subject to
a conditional sale agreement or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person for security
purposes.
 
Lien Waiver Agreement – Section 3.5.
 
Loans – The unpaid balance of Advances under the Revolving Credit.
 
Loan Documents – Collectively, this Agreement, the Note(s), the Surety and
Guaranty Agreement, the Collateral Pledge Agreement, the Motorola Subordination
Agreement, the Letter of Credit Documents, the Perfection Certificate, and all
agreements, instruments and documents executed and/or delivered in connection
therewith, all as may be supplemented, restated, superseded, amended or replaced
from time to time.
 
Lockbox – Section 2.3(b).
 
Material Adverse Effect – A material adverse effect with respect to (a) the
business, assets, properties, financial condition, stockholders' equity,
contingent liabilities, prospects, material agreements or results of operations
of Borrower, taken as a whole, or (b) Borrower's ability to pay the Obligations
in accordance with the terms hereof, or (c) the validity or enforceability of
this Agreement or any of the other Loan Documents or the rights and remedies of
Lender hereunder or thereunder.
 
Maximum Revolving Credit Amount – The sum of Twelve Million Dollars
($12,000,000).
 
 
 
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Motorola Subordination Agreement – A duly executed subordination agreement
between Motorola Solutions, Inc. (formerly known as Motorola, Inc.) and Lender,
which subordination agreement shall be in form and substance satisfactory to
Lender in its sole discretion.
 
Note(s) – The Revolving Credit Note.
 
Obligations – All existing and future debts, liabilities and obligations of
every kind or nature at any time owing by Borrower to Lender or any other
subsidiary or Affiliate of Lender, whether under this Agreement, or any other
existing or future instrument, document or agreement, between Borrower or Lender
or any other subsidiary or Affiliate of Lender, whether joint or several,
related or unrelated, primary or secondary, matured or contingent, due or to
become due (including debts, liabilities and obligations obtained by
assignment), and whether principal, interest, fees, indemnification obligations
hereunder or Expenses (specifically including interest accruing after the
commencement of any bankruptcy, insolvency or similar proceeding with respect to
Borrower, whether or not a claim for such post-commencement interest is
allowed), including, without limitation, debts, liabilities and obligations in
respect of the Revolving Credit, Reimbursement Obligations and any extensions,
modifications, substitutions, increases and renewals thereof; any amount payable
by Borrower or any Subsidiary of Borrower pursuant to an Interest Hedging
Instrument; the payment of all amounts advanced by Lender or any other
subsidiary or Affiliate of Lender to preserve, protect and enforce rights
hereunder and in the Collateral; and all Expenses incurred by Lender or any
other subsidiary or Affiliate of Lender.  Without limiting the generality of the
foregoing, Obligations shall include any other debts, liabilities or obligations
owing to Lender or any other subsidiary or Affiliate of Lender in connection
with any Lockbox, cash management, or other services (including electronic funds
transfers or automated clearing house transactions) provided by Lender or any
other subsidiary or Affiliate of Lender to Borrower, as well as any other loan,
advances or extension of credit, under any existing or future loan agreement,
promissory note, or other instrument, document or agreement between Borrower and
Lender or any other subsidiary or Affiliate of Lender.
 
Overadvance – Section 2.1(a)(i).
 
PBGC – The Pension Benefit Guaranty Corporation.
 
Perfection Certificate – The Perfection Certificate provided by Borrower to
Lender on or prior to the Closing Date in form and substance satisfactory to
Lender.
 
Permitted Acquisitions - shall mean acquisitions of the assets or Capital Stock
of another Person so long as: (a) the total costs and liabilities (including
without limitation, all assumed liabilities, all earn-out payments, deferred
payments and the value of any other stock or assets transferred, assigned or
encumbered with respect to such acquisitions) of all such acquisitions do not
exceed (i) $1,000,000 in the aggregate for any individual transaction and (ii)
$2,500,000 in the aggregate during any fiscal year; (c) with respect to the
acquisition of Capital Stock, such acquired company shall (i) have a positive
EBITDA and tangible net worth, calculated in accordance with GAAP immediately
prior to such acquisition, (ii) such acquired company shall be added as a
Borrower to this Agreement pursuant to Section 6.19 hereof and be jointly and
severally liable for all Obligations, and (iii) Lender shall be granted a first
priority lien in all assets of such acquired company; (d) the acquired company
or property is used or useful in the same or a similar line of business as
Borrower was engaged in on the Closing Date (or any reasonable extensions or
expansions thereof); (e) Lender shall have received a first-priority security
interest in all acquired assets or Capital Stock, subject to documentation
satisfactory to Lender; (f) the board of directors (or other comparable
governing body) of such company shall have duly approved the transaction; (g)
Borrower shall have delivered to Lender (i) a pro forma balance sheet and pro
forma financial statements and a Quarterly Compliance Certificate demonstrating
that, upon giving effect to such acquisition on a pro forma basis, Borrower
would be in compliance with the financial covenants set forth in Section 6.8 as
of the most recent fiscal quarter end and (ii)  financial statements of the
acquired entity for the two most recent fiscal years then ended, in form and
substance reasonably acceptable to Lender; (h) if such acquisition includes
general partnership interests or any other Capital Stock that does not have a
corporate (or similar) limitation on liability of the owners thereof, then such
acquisition shall be effected by having such Capital Stock acquired by a
corporate holding company directly or indirectly wholly-owned by a Borrower and
newly formed for the sole purpose of effecting such acquisition; (i) no assets
acquired in any such transaction(s) shall be included in the Borrowing Base
until Lender has received a field examination and/or appraisal of such assets,
in form and substance acceptable to Lender; and (j) no Default or Event of
Default shall have occurred or will occur after giving pro forma effect to such
acquisition.
 
 
 
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Permitted Indebtedness – (a) Indebtedness to Lender in connection with the
Revolving Credit and Letters of Credit or otherwise pursuant to the Loan
Documents; (b) trade payables incurred in the ordinary course of Borrower's
business; (c) purchase money Indebtedness (including Capitalized Lease
Obligations) hereafter incurred by Borrower to finance the purchase of fixed
assets; provided that, (i) such Indebtedness incurred in any fiscal year shall
not exceed $500,000, (ii) such Indebtedness shall not exceed the purchase price
of the assets funded and (iii) no such Indebtedness may be refinanced for a
principal amount in excess of the principal amount outstanding at the time of
such refinancing and (d) Indebtedness existing on the Closing Date that is
identified and described on Schedule "1.1(a)" attached hereto and made part
hereof.
 
Permitted Investments – (a) investments and advances existing on the Closing
Date that are disclosed on Schedule "5.10(a)" and (b) (i) obligations issued or
guaranteed by the United States of America or any agency thereof, (ii)
commercial paper with maturities of not more than 180 days and a published
rating of not less than A-1 or P-1 (or the equivalent rating) by a nationally
recognized investment rating agency, (iii) certificates of time deposit and
bankers’ acceptances having maturities of not more than 180 days and repurchase
agreements backed by United States government securities of a commercial bank if
(A) such bank has a combined capital and surplus of at least $500,000,000, or
(B) its debt obligations, or those of a holding company of which it is a
Subsidiary, are rated not less than A (or the equivalent rating) by a nationally
recognized investment rating agency, (iv) U.S. money market funds that invest
solely in obligations issued or guaranteed by the United States of America or an
agency thereof and (v) loans to WPCS Australia in an aggregate amount not to
exceed $1,000,000, which loan(s) shall be evidenced by a promissory note, the
original of which shall, upon the request of Lender, be delivered to Lender,
together with a collateral assignment of such promissory note executed by
Borrower in favor of Lender.
 
Permitted Liens – (a)  Liens securing taxes, assessments or governmental charges
or levies or the claims or demands of materialmen, mechanics, carriers,
warehousemen, and other like persons not yet due; (b) Liens incurred or deposits
made in the ordinary course of business in connection with workers'
compensation, unemployment insurance, social security and other like laws; (c)
Liens on fixed assets security purchase money Indebtedness permitted under
Section 7.6; provided that, (i) such Lien attached to such assets concurrently,
or within 20 days of the acquisition thereof, and only to the assets so
acquired, and (ii) a description of the asset acquired is furnished to Lender;
(d) Liens existing on the Closing Date and shown on Schedule "1.1(b)" attached
hereto and made part hereof; and (e) Liens in favor of Lender.
 
Person – An individual, partnership, corporation, trust, limited liability
company, limited liability partnership, unincorporated association or
organization, joint venture or any other entity.
 
Property – Any interest of Borrower in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
 
Quarterly Compliance Certificate – Section 6.10.
 
 
 
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Regulation D – Regulation D of the Board of Governors of the Federal Reserve
System comprising Part 204 of Title 12, Code of Federal Regulations, as amended,
and any successor thereto.
 
Reimbursement Obligations – Section 2.2(c).
 
Revolving Credit – Section 2.1(a).
 
Revolving Credit Closing Fee – Section 2.7(a).
 
Revolving Credit Maturity Date – January 26, 2015, or such later date as Lender
may, in its sole and absolute discretion, designate in writing to Borrower.
 
Revolving Credit Note – Section 2.1(b).
 
Subcontractor Reserve – A reserve to the Borrowing Base in an amount equal to
the aggregate amount owing by the Borrower to all of its subcontractors.
 
Subsidiary – With respect to any Person at any time, (i) any corporation more
than fifty percent (50%) of whose voting stock is legally and beneficially owned
by such Person or owned by a corporation more than fifty percent (50%) of whose
voting stock is legally and beneficially owned by such Person; (ii) any trust of
which a majority of the beneficial interest is at such time owned directly or
indirectly, beneficially or of record, by such Person or one or more
Subsidiaries of such Person; and (iii) any partnership, joint venture, limited
liability company or other entity of which ownership interests having ordinary
voting power to elect a majority of the board of directors or other Persons
performing similar functions are at such time owned directly or indirectly,
beneficially or of record, by, or which is otherwise controlled directly,
indirectly or through one or more intermediaries by, such Person or one or more
Subsidiaries of such Person.
 
Subsidiary Stock – All of the issued and outstanding Capital Stock of any
Subsidiary owned by any Borrower.
 
Surety and Guaranty Agreement – Any surety and guaranty agreement to be executed
by any Guarantor in favor of Lender, in form and substance satisfactory to
Lender, after the Closing Date.
 
 
 
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Tangible Net Worth – At any time, the amount by which all of Borrower's
consolidated assets (less (i) trademarks, copyrights, goodwill, covenants not to
compete, and all other assets which would be classified as intangible assets
under GAAP; and (ii) assets owing from Affiliates, officers, directors,
shareholders and employees), exceed all of Borrower's consolidated liabilities,
all as would be shown on Borrower's consolidated balance sheet prepared in
accordance with GAAP.
 
Tax and Judgment Liens – Collectively, that certain (i) state tax lien filed
against Walker Communications, Inc. in Solano County, California on December 23,
2011 with respect to unpaid taxes in the amount of $6,164.03, (ii) state tax
lien filed against Clayborn Contracting Group, Inc. in Placer County, California
on March 30, 2011 with respect to unpaid taxes in the amount of $1,046.54 and
(iii) judgment lien filed in the New Jersey Central Database on July 8, 2010
against Voacolo Electric Incorporated in favor of Dennis M. Doyle in the amount
of $47,735.87.
 
UCC – The Uniform Commercial Code as adopted in the Commonwealth of
Pennsylvania, as the same may be amended from time to time.
 
Undrawn Availability – At a particular date, an amount equal to (a) the
Borrowing Base minus (b) the sum of (i) the outstanding amount of Advances plus
(ii) all amounts due and owing to Borrower’s trade creditors which are
outstanding more than sixty (60) days past their due date, plus (iii) fees and
expenses for which Borrower is liable to Lender but which have not been paid by
Borrower.
 
WPCS Australia – WPCS Australia Pty Ltd., an entity organized under the laws of
Australia.
 
Other Capitalized Terms – Any other capitalized terms used without further
definition herein shall have the respective meaning set forth in the UCC.
 
1.2 Accounting Principles.  Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, this shall be done in accordance with GAAP,
consistently applied, to the extent applicable, except as otherwise expressly
provided in this Agreement.
 
1.3 Construction.  No doctrine of construction of ambiguities in agreements or
instruments against the interests of the party controlling the drafting shall
apply to any Loan Documents.  A Default or Event of Default shall be deemed to
exist and be “continuing” at all times during the period commencing on the date
that such Default or Event of Default occurs to the date on which such Default
or Event of Default is waived in writing by Lender pursuant to this Agreement
or, in the case of a Default, is cured within any period of cure expressly
provided for in this Agreement.
 
SECTION II. THE LOANS
 
2.1 Revolving Credit – Description.
 
 
 
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a. i.           Subject to the terms and conditions of this Agreement, Lender
hereby establishes for the benefit of Borrower a revolving credit facility
(collectively, the "Revolving Credit") which shall include cash Advances
extended by Lender to or for the benefit of Borrower as well as Letters of
Credit issued for the account of Borrower from time to time hereunder.  The
aggregate principal amount of unpaid cash Advances, plus the Letter of Credit
Amounts, shall not at any time exceed the Borrowing Base.  Subject to such
limitation, the outstanding balance of Advances under the Revolving Credit may
fluctuate from time to time, to be reduced by repayments made by Borrower, to be
increased by future Advances which may be made by Lender, to or for the benefit
of Borrower, and, subject to the provisions of Section 8 below, shall be due and
payable on the Revolving Credit Maturity Date.  If the aggregate principal
amount of unpaid cash Advances, plus the Letter of Credit Amounts at any time
exceeds the Borrowing Base (such excess referred to as "Overadvance"), Borrower
shall immediately repay the Overadvance in full.
 
ii. Lender may, at all times, be entitled to reduce or increase the advance
rates and standards of eligibility under this Agreement.
 
b. At Closing, Borrower shall execute and deliver a promissory note to Lender
for the Maximum Revolving Credit Amount ("Revolving Credit Note").  The
Revolving Credit Note shall evidence Borrower's unconditional obligation to
repay Lender for all Advances made under the Revolving Credit, with interest as
herein provided.  Each Advance under the Revolving Credit shall be deemed
evidenced by the Revolving Credit Note, which is deemed incorporated herein by
reference and made part hereof.  The Revolving Credit Note shall be in form and
substance satisfactory to Lender.
 
c. The term of the Revolving Credit shall expire on the Revolving Credit
Maturity Date.  On such date, unless having been sooner accelerated by Lender
pursuant to the terms hereof, and without impairing any rights under Section
3.1, all sums owing under the Revolving Credit shall be due and payable in full,
and as of and after such date Borrower shall not request and Lender shall not
make any further Advances under the Revolving Credit.
 
2.2 Letters of Credit.
 
a. As a part of the Revolving Credit and subject to its terms and conditions
(including, without limitation, the Borrowing Base), Lender shall make available
to Borrower Letters of Credit which shall not exceed, in the aggregate at any
one time outstanding, the L/C Commitment. Notwithstanding the foregoing, all
Letters of Credit shall be in form and substance reasonably satisfactory to
Lender.  No Letter of Credit shall be issued with an expiry date later than the
earlier of (i) three hundred sixty five (365) days from the date of issuance for
a stand-by letter of credit or (ii) ten (10) Business Days prior to the
Revolving Credit Maturity Date.  Borrower shall execute and deliver to Issuer
all Letter of Credit Documents required by Lender for such purposes.  Each
Letter of Credit shall comply with the Letter of Credit Documents.
 
b. Each Letter of Credit issued from time to time under the Revolving Credit
which remains undrawn (and the amounts of draws on Letters of Credit prior to
payment as hereinafter set forth) shall reduce, dollar for dollar, the amount
available to be borrowed by Borrower under the Revolving Credit.
 
 
 
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c. In the event of any request for drawing under any Letter of Credit by the
beneficiary thereof, Lender shall promptly notify Borrower and Borrower shall
immediately reimburse Lender on the day when such drawing is honored, by either
a cash payment by Borrower or, so long as no Event of Default has occurred and
is continuing, in the absence of such payment by Borrower, and at Lender's
option, by Lender automatically making or having been deemed to have made
(without further request or approval of Borrower) a cash Advance under the
Revolving Credit on such date to reimburse Lender.  Borrower's reimbursement
obligation for draws under Letters of Credit along with the obligation to pay
L/C Fees shall herein be referred to collectively as Borrower's "Reimbursement
Obligations."  All of Borrower's Reimbursement Obligations hereunder with
respect to Letters of Credit shall apply unconditionally and absolutely to
Letters of Credit issued hereunder on behalf of Borrower.
 
d. The obligation of Borrower to reimburse Lender for drawings made (or for cash
Advances made to cover drawings made) under the Letters of Credit shall be
unconditional and irrevocable and shall be paid strictly in accordance with the
terms of this Agreement under all circumstances including, without limitation,
the following circumstances:
 
i. any lack of validity or enforceability of any Letter of Credit;
 
ii. the existence of any claim, setoff, defense or other right that Borrower or
any other Person may have at any time against a beneficiary or any transferee of
any Letter of Credit (or any persons or entities for whom any such beneficiary
or transferee may be acting), Lender or any other Person, whether in connection
with this Agreement, the transactions contemplated herein or any unrelated
transaction;
 
iii. any draft, demand, certificate or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect;
 
iv. payment by Lender under any Letter of Credit against presentation of a
demand, draft or certificate or other document that does not comply with the
terms of such Letter of Credit unless Lender shall have acted with willful
misconduct or gross negligence in issuing such payment;
 
v. any other circumstances or happening whatsoever that is similar to any of the
foregoing; or
 
vi. the fact that a Default or Event of Default shall have occurred and be
continuing.
 
e. If by reason of (i) any change after the Closing Date in applicable law,
regulation, rule, decree or regulatory requirement or any change in the
interpretation or application by any judicial or regulatory authority of any
law, regulation, rule, decree or regulatory requirement or (ii) compliance by
Lender with any direction, reasonable request or requirement (whether or not
having the force of law) of any governmental or monetary authority including,
without limitation, Regulation D:
 
 
 
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i. Lender shall be subject to any tax or other levy or charge of any nature or
to any variation thereof (except for changes in the rate of any tax on the net
income of Lender or its applicable lending office) or to any penalty with
respect to the maintenance or fulfillment of its obligations under this Section
2.2, whether directly or by such being imposed on or suffered by Lender;
 
ii. any reserve, deposit or similar requirement is or shall be applicable,
imposed or modified in respect of any Letter of Credit issued by Lender; or
 
iii. there shall be imposed on Lender any other condition regarding this Section
2.2 or any Letter of Credit; and the result of the foregoing is to directly or
indirectly increase the cost to Lender of issuing, creating, making or
maintaining any Letter of Credit or to reduce the amount receivable in respect
thereof by Lender, then and in any such case, Lender shall, after the additional
cost is incurred or the amount received is reduced, notify Borrower and Borrower
shall pay on demand such amounts as may be necessary to compensate Lender for
such additional cost or reduced receipt, together with interest on such amount
from the date demanded until payment in full thereof at a rate per annum equal
at all times to the applicable interest rate under the Revolving Credit.  A
certificate signed by an officer of Lender as to the amount of such increased
cost or reduced receipt showing in reasonable detail the basis for the
calculation thereof, submitted to Borrower by Lender shall, except for manifest
error and absent written notice from Borrower to Lender within ten (10) days
from submission, be final, conclusive and binding for all purposes.
 
f. i.           In addition to amounts payable as elsewhere provided in this
Section 2.2, without duplication, Borrower hereby agrees to protect, indemnify,
pay and save Lender harmless from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
attorneys' fees) which Lender may incur or be subject to as a consequence,
direct or indirect, of (A) the issuance of the Letters of Credit or (b) the
failure of Lender to honor a drawing under any Letter of Credit as a result of
any such act or omission, whether rightful or wrongful, of any present or future
de jure or de facto government or Governmental Authority (all such acts or
omissions herein called "Government Acts") in each case except for claims,
demands, liabilities, damages, losses, costs, charges and expenses arising
solely from acts or conduct of Lender constituting gross negligence or willful
misconduct.
 
ii. As between Borrower and Lender, Borrower assumes all risks of the acts and
omissions of or misuse of the Letters of Credit issued by Lender by the
respective beneficiaries of such Letters of Credit.  In furtherance and not in
limitation of the foregoing, Lender shall not be responsible: (A) for the form,
validity, sufficiency, accuracy, genuineness or legal effects of any document
submitted by any party in connection with the application for and issuance if
such Letters of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (B) for the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, that may prove to
be invalid or ineffective for any reason; (C) for failure of the beneficiary of
any such Letter of Credit to comply fully with conditions required in order to
draw upon such Letter of Credit; (D) for errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they are in cipher, unless any of the
foregoing are caused by Lender's gross negligence or willful misconduct; (E) for
errors in interpretation of technical terms; (F) for any loss or delay in the
transmission of any document or required in order to make a drawing under such
Letter of Credit or of the proceeds thereof, unless caused by Lender's gross
negligence or willful misconduct; (G) for the misapplication by the beneficiary
of any such Letter of Credit of the proceeds of any drawing under such Letter of
Credit; and (H) for any consequences arising from causes beyond the control of
Issuer, including, without limitation, any Government Acts.  None of the above
shall affect, impair or prevent the vesting of any of Lender's rights or powers
hereunder
 
 
 
 
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iii. In furtherance and extension and not in limitation of the specific
provisions hereinabove set forth, any action taken or omitted by Lender in
connection with the Letters of Credit issued by it or the related certificates,
if taken or omitted in good faith, shall not create any liability on the part of
Lender to Borrower.
 
2.3 Reserved.
 
2.4 Advances and Payments.
 
a. Except to the extent otherwise set forth in this Agreement (or in the case of
an Interest Hedging Instrument under the applicable agreements), all payments of
principal and of interest on the Revolving Credit, Reimbursement Obligations and
all Expenses, fees, indemnification obligations and all other charges and any
other Obligations of Borrower, shall be made to Lender at its main banking
office, 1500 Market Street, 25th floor, Centre Square West, Philadelphia,
Pennsylvania 19102, in United States dollars, in immediately available
funds.  Lender shall have the unconditional right and discretion (and Borrower
hereby authorizes Lender) to charge Borrower's checking, operating and/or
deposit account(s) for all of Borrower's Obligations as they become due from
time to time under this Agreement including, without limitation, interest,
principal, fees, indemnification obligations and reimbursement of Expenses.
Alternatively, Lender may in its discretion (and Borrower hereby authorizes
Lender to) make a cash Advance under the Revolving Credit in a sum sufficient to
pay all interest accrued and payable on the Obligations and to pay all costs,
fees and Expenses owing hereunder.  Borrower acknowledges that Borrower’s
failure to maintain sufficient funds in any checking, operating or deposit
account for payment of any of the Obligations, or Lender’s failure to charge any
such account shall not relieve Borrower of any payment obligation under this
Agreement or any other Loan Document.  Any payments received prior to 3:00 p.m.
Eastern time on any Business Day shall be deemed received on such Business
Day.  Any payments (including any payment in full of the Obligations), received
after 3:00 p.m. Eastern time on any Business Day shall be deemed received on the
immediately following Business Day.
 
b. Borrower shall establish and maintain a lockbox account ("Lockbox") with
Lender (on terms and conditions satisfactory to Lender) and a depository
account(s) ("Cash Collateral Account") subject to the provisions of this
subparagraph.  Borrower shall instruct all Account Debtors to make all payments
on Accounts through the Lockbox.  Borrower shall then cause (and Lender is
hereby irrevocably authorized to cause) the transfer of such collections from
the Lockbox into the Cash Collateral Account.  Deposits into the Cash Collateral
Account shall be applied by Lender daily, subject to Lender's standard clearing
procedures and clearing periods for deposited funds, to reduce the outstanding
principal amount under the Revolving Credit.  All collections of Accounts and
proceeds of other Collateral to the extent received by Borrower shall be held in
trust for the benefit of Lender and remitted, in specie, to Lender for deposit
in the Cash Collateral Account immediately upon receipt by Borrower.  Borrower
shall have no right of access to or withdrawal from the Cash Collateral Account;
provided that if there are no outstanding Advances and no Default or Event of
Default has occurred and is continuing, then all collections of Accounts shall
be, subject to Lender's standard clearing procedures and clearing periods for
deposited funds, transferred to Borrower's operating account with Lender.  All
funds deposited into the Lock Box Account and Cash Collateral Account shall
immediately become the property of Lender.
 
c. i.           Cash Advances which may be made by Lender from time to time
under the Revolving Credit shall be made available by crediting such proceeds to
Borrower's operating account with Lender.
 
 
 
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ii. All cash Advances under the Revolving Credit must be requested by 2:00 p.m.
Eastern time, on the date such cash Advance is to be made.
 
iii. All requests for an Advance are to be in writing pursuant to a written
request executed by an Authorized Officer in the form of Exhibit “B” (“Advance
Request”) attached hereto and made part hereof.  Such request may be sent by
telecopy, facsimile transmission or attachment to e-mail, provided that Lender
shall have the right to require that receipt of such request not be effective
unless confirmed via telephone with Lender.
 
iv. Upon receiving a request for an Advance in accordance with subparagraph (ii)
above, and subject to the conditions set forth in this Agreement, Lender shall
make the requested Advance available to Borrower as soon as is reasonably
practicable thereafter on the day the requested Advance is to be made.
 
d. The balance of the Advances and availability under the Revolving Credit will
be determined as follows:
 
i. Domestic checks received by Lender on or before 3:00 p.m. Eastern time of any
Business Day are to be deemed received by Lender on such Business Day;
 
ii. Domestic checks received by Lender after 3:00 p.m. Eastern time of any
Business Day are to be deemed received by Lender on the following Business Day;
 
iii. Any other form of proceeds received by Lender is to be deemed received by
Lender when the Lender has received notification of collection (if notice of
collection is received on or before 3:00 p.m. Eastern time of any such Business
Day, such proceeds are to be deemed to have been received by the Lender on such
Business Day; if notice of collection is received after 3:00 p.m. Eastern time
of any such Business Day, such proceeds are to be deemed to have been received
by the Lender on the following Business Day);
 
iv. Any credit(s) to the account of Borrower are conditioned upon final payment
to Lender at its office in cash or solvent credits;
 
v. Any item(s) not collected or not paid are to be charged as a debit against
the Advances or any account of Borrower maintained with Lender.
 
e. Interest will continue to accrue on the amount of any funds or other proceeds
received by Lender for a period of one (1) Business Day after receipt thereof.
 
 
 
 
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2.5 Interest.  The unpaid principal balance of cash Advances under the Revolving
Credit shall bear interest, subject to the terms hereof, at the per annum rate
equal to the LIBOR Based Rate.  Changes in the interest rate applicable to the
Revolving Credit shall become effective on the same day that there is a change
in the LIBOR Rate.  Interest on the Revolving Credit shall be payable monthly,
in arrears, on the first day of each calendar month, beginning on the first day
of the first full calendar month after the Closing Date.
 
2.6 Additional Interest Provisions.
 
a. Interest on the Loans shall be calculated on the basis of a year of three
hundred sixty (360) days but charged for the actual number of days elapsed.
 
b. After the occurrence and during the continuance of an Event of Default
hereunder, the per annum effective rate of interest on all outstanding principal
under the Loans, shall be increased by four hundred (400) basis points.  All
such increases may be applied retroactively to the date of the occurrence of the
Event of Default.  Borrower agrees that the default rate payable to Lender is a
reasonable estimate of Lender's damages and is not a penalty.
 
c. All contractual rates of interest chargeable on outstanding principal under
the Loans shall continue to accrue and be paid even after Default, an Event of
Default, maturity, acceleration, judgment, bankruptcy, insolvency proceedings of
any kind or the happening of any event or occurrence similar or dissimilar.
 
d. In no contingency or event whatsoever shall the aggregate of all amounts
deemed interest hereunder and charged or collected pursuant to the terms of this
Agreement exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable
hereto.  In the event that such court determines Lender has charged or received
interest hereunder in excess of the highest applicable rate, Lender shall apply,
in its sole discretion, and set off such excess interest received by Lender
against other Obligations due or to become due and such rate shall automatically
be reduced to the maximum rate permitted by such law.
 
e. Borrower hereby authorizes Lender to automatically deduct from any deposit
account of Borrower the amount of any applicable loan payment including all
payments of interest, principal and other sums due (“Automatic Payment”), from
time to time, under this Agreement and/or any Note.  If the funds in the account
are insufficient to cover any payment due, Lender is not obligated to advance
funds to cover the payment; however, Lender has the sole and absolute discretion
to make such an advance to cover the payment and may charge Borrower's loan
account for such advance.  The failure of Lender so to charge any account or to
give any such notice does not affect the obligation of Borrower or Guarantor to
pay interest, principal or other sums as provided herein, in any Note or in any
Guaranty executed by a Guarantor. At any time and for any reason, the Lender may
terminate the Automatic Payment.
 
2.7 Fees and Charges.
 
a. At Closing, Lender shall have fully earned and Borrower shall unconditionally
pay to Lender, a non-refundable fee with respect to the Revolving Credit
("Revolving Credit Closing Fee") of Sixty Thousand Dollars ($60,000), less
amounts previously paid thereon.
 
 
 
 
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b. Borrower shall pay to Lender a fee in the amount of two and one quarter
percent (2.25%) per annum of the face amount of each Letter of Credit issued by
Lender.  Such fee shall be payable quarterly in arrears on the first day of each
calendar quarter and at the expiration or termination of the Letter of
Credit.  In addition, Borrower shall pay to Lender, upon billing therefor, all
of Lender's standard commissions for the issuance of banker's acceptances and
standard charges for issuance, amendment, extension and cancellation of the
Letter of Credit.  All such fees and charges are referred to herein collectively
as the "L/C Fees."
 
c. If, for any calendar month during the term of this Agreement, the average
daily unpaid balance of the Advances for each day of such calendar month does
not equal the Maximum Revolving Credit Amount, then Borrower shall pay to Lender
a fee at a rate equal to .375% per annum on the amount by which the Maximum
Revolving Credit Amount exceeds such average daily unpaid balance.  Such fee
shall be payable to Lender in arrears on the first day of each calendar month
with respect to the previous calendar month.
 
d. Borrower shall unconditionally pay to Lender a collateral monitoring fee
equal to $1,000 per month commencing on the first day of the calendar month
following the Closing Date and on the first day of each calendar month
thereafter.  The collateral monitoring fee shall be deemed earned in full on the
date when same is due and payable hereunder and shall not be subject to rebate
or proration upon termination of this Agreement for any reason.
 
e. Borrower shall unconditionally pay to Lender, on demand, a field examination
fee in an amount equal to $900 per day for each person employed to perform such
examination, plus all costs and disbursements incurred by Lender in the
performance of such examination or analysis, relating to any field examination,
collateral analysis or other business analysis, the need for which is to be
determined by Lender and which evaluation is undertaken by Lender or for
Lender’s benefit.
 
f. Borrower shall unconditionally pay to Lender a late charge equal to the
greater of (i) three percent (3%) of any and all payments of principal or
interest on the Loans that are not paid or (ii) $25.00 within fifteen (15) days
of the due date.  Such late charge shall be due and payable regardless of
whether Lender has accelerated the Obligations.  Borrower agrees that any late
fee payable to Lender is a reasonable estimate of Lender's damages and is not a
penalty.
 
2.8 Prepayments.  Borrower may prepay the Revolving Credit in whole or in part
at any time or from time to time, and may terminate this Agreement at any time
upon ninety (90) days’ prior written notice upon payment in full of the
Obligations.  In the event the Obligations are prepaid in full and this
Agreement is terminated in accordance with the foregoing sentence prior to the
Revolving Credit Maturity Date (the date of such prepayment hereinafter referred
to as the “Early Termination Date”), Borrower shall pay to Lender an early
termination fee in an amount equal to (i) three percent (3%) of the Maximum
Revolving Credit Amount if the Early Termination Date occurs on or after the
Closing Date to and including the date immediately preceding the first
anniversary of the Closing Date, (ii) one percent (1%) of the Maximum Revolving
Credit Amount if the Early Termination Date occurs on or after the first
anniversary of the Closing Date to and including the date immediately preceding
the third anniversary of the Closing Date and (iii) zero dollars ($0.00) at all
times thereafter.
 
 
 
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2.9 Use of Proceeds.  The extensions of credit under and proceeds of the
Revolving Credit shall be used to refinance certain existing Indebtedness owing
to Bank of America, for working capital and for general corporate purposes.
 
2.10 Capital Adequacy.  If Lender reasonably determines that (i) the adoption of
or change in any law, rule, regulation or guideline regarding capital
requirements for banks or bank holding companies which occurs after the date
hereof, or any change in the interpretation or application thereof by any
governmental authority charged with the administration thereof, which occurs
after the date hereof, or (ii) compliance by Lender or its parent bank holding
company with any guideline, request, or directive of any such entity regarding
capital adequacy generally (whether or not having the force of law) issued after
the date hereof, has the effect of reducing the return on  Lender’s or such
holding company's capital as a consequence of the Lender’s obligations hereunder
to a level below that which Lender or such holding company could have achieved
but for such adoption, change, or compliance (taking into consideration Lender’s
or such holding company's then existing policies with respect to capital
adequacy and assuming the full utilization of such entity's capital) by any
amount reasonably deemed by Lender to be material, then  Lender may notify
Borrower thereof.  Following receipt of such notice, Borrower agrees to pay
Lender on demand the amount of such reduction of return of capital as and when
such reduction is determined, payable within ninety (90) days after presentation
by Lender of a statement in the amount and setting forth in reasonable detail
Lender’s calculation thereof and the assumptions upon which such calculation was
based (which statement is to be deemed true and correct absent manifest error).
In determining such amount, Lender may use any reasonable averaging and
attribution methods.
 
SECTION III. COLLATERAL
 
3.1 Collateral.  As security for the payment of the Obligations, and
satisfaction by Borrower of all covenants and undertakings contained in this
Agreement and the other Loan Documents:
 
a. Personal Property.  Borrower hereby assigns and grants to Lender, a
continuing Lien on and security interest in, upon and to all assets of Borrower,
including but not limited to the following Property, all whether now owned or
hereafter acquired, created or arising and wherever located:
 
i. Accounts – All Accounts;
 
ii. Chattel Paper – All Chattel Paper;
 
iii. Documents – All Documents;
 
iv. Instruments – All Instruments;
 
v. Inventory – All Inventory;
 
vi. General Intangibles – All General Intangibles;
 
 
 
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vii. Equipment – All Equipment,
 
viii. Fixtures – All Fixtures;
 
 ix. Deposit Accounts – All Deposit Accounts (including any Permitted
Investments that constitute Deposit Accounts);
 
 x. Goods – All Goods;
 
xi. Letter of Credit Rights – All Letter of Credit Rights;
 
xii. Supporting Obligations – All Supporting Obligations;
 
xiii. Investment Property – All Investment Property (including any Permitted
Investments that constitute Investment Property, and excluding any Subsidiary
Stock in excess of 65% of the Capital Stock of any such Subsidiary that is not
organized or incorporated in the United States or any State or territory
thereof);
 
xiv. Commercial Tort Claims – All Commercial Tort Claims identified and
described on Schedule "5.20" (as amended or supplemented from time to time);
 
xv. Property in Lender's Possession – All Property of Borrower, now or hereafter
in Lender's possession; and
 
xvi. Proceeds – The Proceeds (including, without limitation, insurance
proceeds), whether cash or non-cash, of all of the foregoing property described
in clauses (i) through (xv).
 
3.2 Lien Documents.  At Closing and thereafter as Lender deems necessary,
Borrower shall execute and/or deliver to Lender, or have executed and delivered
(all in form and substance satisfactory to Lender and its counsel):
 
a. Financing statements pursuant to the UCC, which Lender may file in the
jurisdiction where Borrower is organized and in any other jurisdiction that
Lender deems appropriate;
 
b. Any other agreements, documents, instruments and writings, including, without
limitation, intellectual property security agreements, required by Lender to
evidence, perfect or protect the Liens and security interests in the Collateral
or as Lender may reasonably request from time to time.
 
3.3 Other Actions.
 
a. In addition to the foregoing,  Borrower shall do anything further that may be
reasonably required by Lender to secure Lender and effectuate the intentions and
objects of this Agreement, including, without limitation, the execution and
delivery of security agreements, contracts and any other documents required
hereunder and the delivery of motor titles with Lender’s lien noted thereon.  At
Lender's reasonable request, Borrower shall also immediately deliver (with
execution by Borrower of all necessary documents or forms to reflect, implement
or enforce the Liens described herein), or cause to be delivered to Lender all
items for which Lender must receive possession to obtain a perfected security
interest, including without limitation, all notes, stock powers, letters of
credit, certificates and documents of title, Chattel Paper, Warehouse Receipts,
Instruments, and any other similar instruments constituting Collateral.
 
 
 
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b. Lender is hereby authorized to file financing statements and amendments to
financing statements without Borrower's signature, in accordance with the
UCC.  Borrower hereby authorizes Lender to file all such financing statements
and amendments to financing statements describing the Collateral in any filing
office as Lender, in its sole discretion may determine, including financing
statements listing "All Assets" in the collateral description therein.  Borrower
agrees to comply with the requests of Lender in order for Lender to have and
maintain a valid and perfected first security interest in the Collateral
including, without limitation, immediately discharging all Liens other than
Permitted Liens, executing and causing any other Person to execute such
documents as Lender may require to obtain Control (as defined in the UCC) over
all Deposit Accounts, Letter of Credit Rights and Investment Property.
 
3.4 Searches, Certificates.
 
a. Lender shall, prior to or at Closing, and thereafter as Lender may determine
from time to time, at Borrower's expense, obtain the following searches (the
results of which are to be consistent with the warranties made by Borrower in
this Agreement):
 
i. UCC searches with the Secretary of State and local filing office of each
state where Borrower is organized, maintains its executive office, a place of
business, or assets; and
 
ii. Judgment, state and federal tax lien and corporate tax lien searches, in all
applicable filing offices of each state searched under subparagraph (i) above.
 
b. Borrower shall, prior to or at Closing and at its expense, obtain and deliver
to Lender good standing certificates showing Borrower to be in good standing in
its state of organization and in each other state in which it is doing and
presently intends to do business for which qualification is required.
 
3.5 Landlord’s and Warehouseman’s Waivers.  Upon request by Lender, Borrower
will cause each owner of any premises occupied by Borrower or to be occupied by
Borrower and each warehouseman of any warehouse, where, in either event
Collateral is held, to execute and deliver to Lender an instrument, in form and
substance satisfactory to Lender, under which such owner(s) or warehouseman
subordinates its/his/their interests in and waives its/his/their right to
distrain on or foreclose against the Collateral and agrees to allow Lender to
remain on such premises to dispose of or deal with any Collateral located
thereon (a “Lien Waiver Agreement”).
 
3.6 Filing Security Agreement.  A carbon, photographic or other reproduction or
other copy of this Agreement or of a financing statement is sufficient as and
may be filed in lieu of a financing statement.
 
3.7 Accounts.  Each of the Accounts shall be a bona fide and valid Account
representing a bona fide indebtedness incurred by the Account Debtor therein
named, for a fixed sum as set forth in the invoice relating thereto with respect
to an absolute sale or lease and delivery of goods upon stated terms of
Borrower, or work, labor or services theretofore rendered by Borrower as of the
date each Account is created.  Same shall be due and owing in accordance with
the Borrower’s standard terms of sale without dispute, setoff or counterclaim
except as may be stated on the accounts receivable schedules delivered by
Borrower to Lender.  Each Account Debtor, to the best of Borrower’s knowledge,
as of the date each Account is created, is and will be solvent and able to pay
all Accounts on which the Account Debtor is obligated in full when due or with
respect to such Account Debtors of Borrower who are not solvent such Borrower
has set up on its books and in its financial records bad debt reserves adequate
to cover such Accounts.  Borrower will not, without Lender’s consent, compromise
or adjust any material amount of the Accounts (or extend the time for payment
thereof) or accept any material returns of merchandise or grant any additional
discounts, allowances or credits thereon except for those compromises,
adjustments, returns, discounts, credits and allowances as have been heretofore
customary in the business of Borrower.
 
 
 
 
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3.8 Power of Attorney.  Each of the officers of Lender is hereby irrevocably
made, constituted and appointed the true and lawful attorney for Borrower
(without requiring any of them to act as such) with full power of substitution
to do the following:  (i) at any time (a) endorse the name of Borrower upon any
and all checks, drafts, money orders and other instruments for the payment of
monies that are payable to Borrower and constitute collections on Borrower's
Accounts or proceeds of other Collateral; (b) execute and/or file in the name of
Borrower any financing statements, schedules, assignments, instruments,
documents and statements that Borrower is obligated to give Lender hereunder or
is necessary to perfect (or continue or evidence the perfection of such security
interest or Lien) Lender's security interest or Lien in the Collateral; (c) send
verifications of Accounts to any Account Debtor; and (d) notify Account Debtors
of Lender’s security interest in the Collateral; and (ii) at any time following
the occurrence of an Event of Default: (1) demand payment of the Accounts; (2)
enforce payment of the Accounts by legal proceedings or otherwise; (3) exercise
all of Borrower’s rights and remedies with respect to the collection of the
Accounts and any other Collateral; (4) settle, adjust, compromise, extend or
renew the Accounts; (5) settle, adjust or compromise any legal proceedings
brought to collect Accounts; (6) prepare, file and sign Borrower’s name on a
proof of claim in bankruptcy or similar document against any Account Debtor; (7)
prepare, file and sign Borrower’s name on any notice of Lien, assignment or
satisfaction of Lien or similar document in connection with the Accounts; (8)
receive, open and dispose of all mail addressed to Borrower and (9) do such
other and further acts and deeds in the name of Borrower that Lender may
reasonably deem necessary or desirable to enforce any Account or other
Collateral.  All acts of said attorney or designee are hereby ratified and
approved, and said attorney or designee shall not be liable for any acts of
omission or commission nor for any error of judgment or mistake of fact or of
law, unless done maliciously or with gross (not mere) negligence (as determined
by a court of competent jurisdiction in a final non-appealable judgment); this
power being coupled with an interest is irrevocable while any of the Obligations
remain unpaid.  Lender shall have the right at any time during the continuance
of an Event of Default to change the address for delivery of mail addressed to
Borrower.
 
SECTION IV. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES
 
Closing under this Agreement is subject to the following conditions precedent
(all instruments, documents and agreements to be in form and substance
satisfactory to Lender and Lender's counsel):
 
4.1 Resolutions, Opinions, and Other Documents.  Borrower shall have delivered,
or caused to be delivered to Lender the following:
 
a. this Agreement, the Notes and each of the other Loan Documents all properly
executed;
 
 
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b. financing statements and each of the other documents to be executed and/or
delivered by Borrower or any other Person pursuant to this Agreement;
 
c. certified copies of (i) resolutions of Borrower's board of directors' or
managing members (as applicable) authorizing the execution, delivery and
performance of this Agreement, the Notes to be issued hereunder and each of the
other Loan Documents required to be delivered by any Section hereof and (ii)
Borrower's articles or certificate of incorporation and by-laws or certificate
of formation and operating agreement, as applicable;
 
d. an incumbency certificate for Borrower identifying all Authorized Officers,
with specimen signatures;
 
e. a written opinion of Borrower's independent counsel addressed to Lender and
opinions of such other counsel as Lender deems reasonably necessary;
 
f. a collateral audit of Borrower's assets, liabilities, books and records,
satisfactory in all respects to Lender;
 
g. such financial statements, reports, certifications and other operational
information as Lender may reasonably require, satisfactory in all respects to
Lender;
 
h. certification by the Chief Financial Officer of Borrower that there has not
occurred any material adverse change in the operations and condition (financial
or otherwise) of Borrower since April 30, 2011;
 
i. payment by Borrower of all fees including, without limitation, Revolving
Credit Closing Fee and Expenses associated with the Loans;
 
j. searches and certificates required under Section 3.4;
 
k. the Motorola Subordination Agreement;
 
l. an initial Borrowing Certificate dated the Closing Date (including, without
limitation, a calculation of Borrower’s Undrawn Availability); and
 
m. such other documents reasonably required by Lender.
 
4.2 Due Diligence.  Lender and/or its agents or representatives shall have
completed due diligence with respect to Borrower’s financial condition and
operations, including, without limitation, credit and field examinations,
appraisals of the Collateral, inspections of Borrower’s premises and personal
background, business and credit history investigations on all members of senior
management of Borrower, with all of the foregoing to be in form and substance
satisfactory to Lender.
 
 
 
 
 
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4.3 Undrawn Availability.  At the Closing Date (after giving effect to the
initial Advances), Borrower shall have Undrawn Availability of at least
$2,000,000.
 
4.4 Absence of Certain Events.  At the Closing Date, no Default or Event of
Default hereunder shall have occurred and be continuing.
 
4.5 Warranties and Representations at Closing.  The warranties and
representations contained in Section 5 as well as any other Section of this
Agreement shall be true and correct in all respects on the Closing Date with the
same effect as though made on and as of that date.  Borrower shall not have
taken any action or permitted any condition to exist which would have been
prohibited by any Section hereof.
 
4.6 Compliance with this Agreement.  Borrower shall have performed and complied
with all agreements, covenants and conditions contained herein including,
without limitation, the provisions of Sections 6 and 7 hereof, which are
required to be performed or complied with by Borrower before or at the Closing
Date.
 
4.7 Officers' Certificate.  Lender shall have received a certificate dated the
Closing Date and signed by the President or Chief Financial Officer of Borrower
certifying that all of the conditions specified in this Section have been
fulfilled.
 
4.8 Closing.  Subject to the conditions of this Section, the Loans shall be made
available on such date (the "Closing Date") and at such time as may be mutually
agreeable to the parties contemporaneously with the execution hereof
("Closing").
 
4.9 Waiver of Rights.  By completing the Closing hereunder, or by making
Advances hereunder, Lender does not thereby waive a breach of any warranty or
representation made by Borrower hereunder or under any agreement, document, or
instrument delivered to Lender or otherwise referred to herein, and any claims
and rights of Lender resulting from any breach or misrepresentation by Borrower
are specifically reserved by Lender.
 
4.10 Conditions for Future Advances.  The making of Advances under the Revolving
Credit in any form following the Closing Date is subject to the following
conditions precedent (all instruments, documents and agreements to be in form
and substance satisfactory to Lender and its counsel) following the Closing
Date:
 
a. This Agreement and each of the other Loan Documents shall be effective;
 
b. No event or condition shall have occurred or become known to Borrower, or
would result from the making of any requested Advance, which could have a
Material Adverse Effect;
 
c. No Default or Event of Default then exists or after giving effect to the
making of the Advance would exist;
 
d. Each Advance is within and complies with the terms and conditions of this
Agreement including, without limitation, the notice provisions contained in
Section 2.4 hereof;
 
e. No Lien (other than a Permitted Lien) has been imposed on Borrower; and
 
 
 
 
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f. Each representation and warranty set forth in Section 5 and any other Loan
Document in effect at such time (as amended or modified from time to time) is
then true and correct in all material respects as if made on and as of such date
except to the extent such representations and warranties are made only as of a
specific earlier date.
 
SECTION V. REPRESENTATIONS AND WARRANTIES
 
To induce Lender to complete the Closing and make the initial Advances under the
Revolving Credit and Loans to Borrower, Borrower warrants and represents to
Lender that:
 
5.1 Corporate Organization and Validity.
 
a. Each Borrower (i) is a corporation, duly organized and validly existing under
the laws of (a) in the case of WPCS, the State of Delaware, (b) in the case of
WPCS Suisun City, the State of California, (c) in the case of WPCS Seattle, the
State of Washington, (d) in the case of WPCS Portland, the State of Oregon, (e)
in the case of WPCS Hartford, the State of Connecticut, and (f) in the case of
WPCS Lakewood and WPCS Trenton, the State of New Jersey, (ii) has the
appropriate power and authority to operate its business and to own its Property
and (iii) is duly qualified, is validly existing and in good standing and has
lawful power and authority to engage in the business it conducts in each state
where the nature and extent of its business requires qualification, except where
the failure to so qualify does not and could not have a Material Adverse
Effect.  A list of all states and other jurisdictions where Borrower is
qualified to do business is shown on Schedule "5.1" attached hereto and made
part hereof.
 
b. The making and performance of this Agreement and the other Loan Documents
will not violate any law, government rule or regulation, court or administrative
order or other such order, or the charter, minutes or bylaw provisions of
Borrower, or of Borrower's operating agreement or partnership agreement, as
applicable, or violate or result in a default (immediately or with the passage
of time) under any contract, agreement or instrument to which Borrower is a
party, or by which Borrower is bound.  Borrower is not in violation of any term
of any agreement or instrument to which it is a party or by which it may be
bound which violation has or could have a Material Adverse Effect, or of its
charter, minutes or bylaw provisions, or of Borrower's operating agreement or
partnership agreement, as applicable.
 
c. Borrower has all requisite power and authority to enter into and perform this
Agreement and to incur the obligations herein provided for, and has taken all
proper and necessary action to authorize the execution, delivery and performance
of this Agreement, and the other Loan Documents as applicable.
 
d. This Agreement, the Notes to be issued hereunder, and all of the other Loan
Documents, when delivered, will be valid and binding upon Borrower, and
enforceable in accordance with their respective terms except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles.
 
5.2 Places of Business.  The only places of business of  Borrower, and the
places where Borrower keeps and intends to keep its Property, are at the
addresses shown on Schedule "5.2" attached hereto and made part hereof.
 
 
 
 
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5.3 Pending Litigation.  There are no judgments or judicial or administrative
orders or proceedings pending, or to the knowledge of Borrower, threatened in
writing, against Borrower in any court or before any Governmental Authority
except as shown on Schedule "5.3" attached hereto and made part hereof.  To the
knowledge of Borrower, there are no investigations (civil or criminal) pending
or threatened in writing against Borrower in any court or before any
Governmental Authority.  Borrower is not in default with respect to any order of
any Governmental Authority.  To the knowledge of Borrower, no director or
executive officer of Borrower has been indicted in connection with or convicted
of engaging in any criminal conduct, or is currently subject to any lawsuit or
proceeding or under investigation in connection with any anti-racketeering or
other conduct or activity which may result in the forfeiture of any property to
any Governmental Authority.
 
5.4 Title to Properties.  Borrower has good and marketable title in fee simple
(or its equivalent under applicable law) to all the Property it purports to own,
free from Liens and free from the claims of any other Person, except for
Permitted Liens.
 
5.5 Governmental Consent.  Neither the nature of Borrower or of its business or
Property, nor any relationship between Borrower and any other Person, nor any
circumstance affecting Borrower in connection with the issuance or delivery of
this Agreement, the Notes or any other Loan Documents is such as to require a
consent, approval or authorization of, or filing, registration or qualification
with, any Governmental Authority on the part of Borrower.
 
5.6 Taxes.  All tax returns required to be filed by Borrower in any jurisdiction
have been filed, and all taxes, assessments, fees and other governmental charges
upon Borrower, or upon any of its Property, income or franchises, which are
shown to be due and payable on such returns have been paid, except for those
taxes being contested in good faith with due diligence by appropriate
proceedings for which appropriate reserves have been maintained under GAAP and
as to which no Lien has been entered. Borrower is not aware of any proposed
additional tax assessment or tax to be assessed against or applicable to
Borrower.
 
5.7 Financial Statements.  The annual audited consolidated and consolidating
balance sheet of Borrower as of April 30, 2011, and the related statements of
profit and loss, stockholder's equity and cash flow as of such date accompanied
by reports thereon from Borrower's independent certified public accountants
(complete copies of which have been delivered to Lender), and the interim
consolidated and consolidating balance sheet of Borrower as of October 31, 2011,
and the related statements of profit and loss, stockholder's equity and cash
flow as of such date have been prepared in accordance with GAAP and present
fairly the financial position of Borrower as of such dates and the results of
its operations for such periods.  The fiscal year for Borrower currently ends on
April 30.  Borrower's federal tax identification number and state organizational
identification number for UCC purposes are as shown on Schedule "5.7" attached
hereto and made part hereof.
 
5.8 Full Disclosure.  The financial statements referred to in Section 5.7 of
this Agreement do not, nor does any other written statement of Borrower to
Lender in connection with the negotiation of the Loans, contain any untrue
statement of a material fact.  Such statements do not omit a material fact, the
omission of which  would make the statements contained
therein  misleading.  There is no fact known to Borrower which has not been
disclosed in writing to Lender which has or could have a Material Adverse
Effect.
 
 
 
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5.9 Subsidiaries.  Borrower does not have any Subsidiaries or Affiliates, except
as shown on Schedule "5.9" attached hereto and made part hereof.
 
5.10 Investments, Guarantees, Contracts, etc.
 
a. Borrower does not own or hold equity or long term debt investments in, or
have any outstanding advances to, any other Person, except as shown on  Schedule
"5.10(a)," attached hereto and made part hereof.
 
b. Borrower has not entered into any leases for real or personal Property
(whether as landlord or tenant or lessor or lessee), except as shown on Schedule
"5.10(b)," attached hereto and made part hereof.
 
c. Borrower is not a party to any contract or agreement, or subject to any
charter or other corporate restriction, which has or could have a Material
Adverse Effect.
 
d. Except as otherwise specifically provided in this Agreement, Borrower has not
agreed or consented to cause or permit any of its Property whether now owned or
hereafter acquired to be subject in the future (upon the happening of a
contingency or otherwise), to a Lien not permitted by this Agreement.
 
5.11 Government Regulations, etc.
 
a. The use of the proceeds of and Borrower's issuance of the Notes will not
directly or indirectly violate or result in a violation of Section 7 of the
Securities Exchange Act of 1934, as amended, or any regulations issued pursuant
thereto, including, without limitation, Regulations U, T and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R., Chapter II.  Borrower does
not own or intend to carry or purchase any "margin stock" within the meaning of
said Regulation U.
 
b. Borrower has obtained all licenses, permits, franchises or other governmental
authorizations necessary for the ownership of its Property and for the conduct
of its business.
 
c. As of the date hereof, no employee benefit plan ("Pension Plan"), as defined
in Section 3(2) of ERISA, maintained by Borrower or under which Borrower could
have any liability under ERISA (i) has failed to meet the minimum funding
standards established in Section 302 of ERISA, (ii) has failed to comply in a
material respect with all applicable requirements of ERISA and of the Internal
Revenue Code, including all applicable rulings and regulations thereunder, (iii)
has engaged in or been involved in a prohibited transaction under Section 406 of
ERISA or Section 4975 of the Internal Revenue Code which would subject Borrower
to any material liability, or (iv) has been terminated if such termination would
subject Borrower to any material liability.  Borrower has not assumed, or
received notice of a claim asserted against Borrower for, withdrawal liability
(as defined in Section 4207 of ERISA) with respect to any multi employer pension
plan and is not a member of any Controlled Group (as defined in
ERISA).  Borrower has timely made all contributions when due with respect to any
multi employer pension plan in which it participates and no event has occurred
triggering a claim against Borrower for withdrawal liability with respect to any
multi employer pension plan in which Borrower participates.  All Employee
Benefit Plans and multi employer pension plans in which Borrower participates
are shown on Schedule "5.11(c)" attached hereto and made part hereof.
 
d. Borrower is not in violation of or receipt of written notice that it is in
violation of any applicable statute, regulation or ordinance of the United
States of America, or of any state, city, town, municipality, county or of any
other jurisdiction, or of any agency, or department thereof, (including, without
limitation, Environmental Laws or government procurement regulations), a
violation of which causes or could cause a Material Adverse Effect.
 
e. Borrower is current with all reports and documents required to be filed with
any state or federal securities commission or similar agency and is in full
compliance in all material respects with all applicable rules and regulations of
such commissions.
 
 
 
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5.12 Business Interruptions.  Within five (5) years prior to the date hereof,
none of the business, Property or operations of Borrower have been materially
and adversely affected in any way by any casualty, strike, lockout, combination
of workers, order of the United States of America, or any state or local
government, or any political subdivision or agency thereof, directed against
Borrower.  There are no pending or, to Borrower's knowledge, threatened labor
disputes, strikes, lockouts or similar occurrences or grievances affecting
Borrower.  Except as shown on Schedule “5.12”, no labor contract of Borrower is
scheduled to expire prior to the Revolving Credit Maturity Date.
 
5.13 Names and Intellectual Property.
 
a. Within five (5) years prior to the Closing Date, Borrower has not conducted
business under or used any other name (whether corporate or assumed) except for
the names shown on Schedule "5.13(a)" attached hereto and made part
hereof.  Borrower is the sole owner of all names listed on such Schedule
"5.13(a)" and any and all business done and all invoices issued in such trade
names are Borrower's sales, business and invoices.  Each trade name of Borrower
represents a division or trading style of Borrower and not a separate Subsidiary
or Affiliate or independent entity.
 
b. All trademarks, service marks, patents or copyrights which Borrower uses,
plans to use or has a right to use are shown on Schedule "5.13(b)" attached
hereto and made part hereof and Borrower is the sole owner of such Property
except to the extent any other Person has claims or rights in such Property, as
such claims and rights are shown on Schedule “5.13(b)”.  Borrower is not in
violation of any rights of any other Person with respect to such Property.
 
c. Except as shown on Schedule "5.13(c)" attached hereto and made part hereof,
(i) Borrower does not require any copyrights, patents, trademarks or other
intellectual property, or any license(s) to use any patents, trademarks or other
intellectual property in order to provide services to its customers in the
ordinary course of business; and (ii) Lender will not require any copyrights,
patents, trademarks or other intellectual property or any licenses to use the
same in order to provide such services after the occurrence of an Event of
Default.
 
5.14 Other Associations.  Borrower is not engaged and has no interest in any
joint venture or partnership with any other Person except as shown on Schedule
"5.14," attached hereto and made part hereof.
 
5.15 Environmental Matters.  Except as shown on Schedule "5.15," attached hereto
and made part hereof:
 
a. To the best of Borrower's knowledge, no Property presently owned, leased or
operated by Borrower contains, or has previously contained, any Hazardous
Substances in amounts or concentrations which (i) constitute or constituted a
violation of, or (ii) could give rise to liability under, any Environmental Law.
 
b. To the best of Borrower's knowledge, Borrower is in compliance, and, for the
duration of all applicable statutes of limitations periods, has been in
compliance with all applicable Environmental Laws, and there is no contamination
at, under or about any properties presently owned, leased, or operated by
Borrower or violation of any Environmental Law with respect to such properties
which could reasonably be expected to interfere with any of their continued
operations.
 
c. Borrower has not received any notice of violation, alleged violation,
non-compliance, liability or potential liability regarding environmental matters
or compliance assessment with Environmental Laws and Borrower has no knowledge
that any such notice will be received or is being threatened.
 
d. Hazardous Substances have not been transported or disposed of by Borrower or,
to the best of Borrower’s knowledge, by any other Person, in a manner or to a
location which are reasonably likely to give rise to liability of Borrower under
any Environmental Law.
 
e. No judicial proceeding or governmental or administrative action is pending ,
or to the knowledge of Borrower, threatened under any Environmental Law to which
Borrower is, or to Borrower's knowledge will be, named as a party, nor are there
any consent decrees or other decrees, consent orders, administrative orders or
other orders, or other administrative or judicial requirements outstanding, the
implementation of which is reasonably likely to have a Material Adverse Effect
on any natural resources or on Borrower's business, financial condition,
Property or prospects under any Environmental Law.
 
 
 
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5.16 Regulation O.  No director, executive officer or principal shareholder of
Borrower is a director, executive officer or principal shareholder of
Lender.  For the purposes hereof the terms "director" "executive officer" and
"principal shareholder" (when used with reference to Lender), have the
respective meanings assigned thereto in Regulation O issued by the Board of
Governors of the Federal Reserve System.
 
5.17 Capital Stock.  The authorized and outstanding Capital Stock of Borrower is
as shown on Schedule "5.17" attached hereto and made part hereof.  All of the
Capital Stock of Borrower has been duly and validly authorized and issued and is
fully paid and non-assessable and has been sold and delivered to the holders
thereof in compliance with, or under valid exemption from, all Federal and state
laws and the rules and regulations of all Governmental Authorities governing the
sale and delivery of securities.  Except for the rights and obligations shown on
Schedule "5.17," there are no subscriptions, warrants, options, calls,
commitments, rights or agreements by which Borrower or any of the shareholders
of Borrower is bound relating to the issuance, transfer, voting or redemption of
shares of its Capital Stock or any pre emptive rights held by any Person with
respect to the shares of Capital Stock of Borrower.  Except as shown on Schedule
"5.17," Borrower has not issued any securities convertible into or exchangeable
for shares of its Capital Stock or any options, warrants or other rights to
acquire such shares or securities convertible into or exchangeable for such
shares.
 
5.18 Solvency.  After giving effect to the transactions contemplated under this
Agreement, Borrower is solvent, is able to pay its debts as they become due, and
has capital sufficient to carry on its business and all businesses in which it
is about to engage, and now owns Property having a value both at fair valuation
and at present fair salable value greater than the amount required to pay
Borrower's debts.  Borrower will not be rendered insolvent by the execution and
delivery of this Agreement or any of the other Loan Documents executed in
connection with this Agreement or by the transactions contemplated hereunder or
thereunder.
 
5.19 Perfection and Priority.  This Agreement and the other Loan Documents are
effective to create in favor of Lender legal, valid and enforceable Liens in all
right, title and interest of Borrower in the Collateral, and when financing
statements have been filed in the offices of the jurisdictions shown on Schedule
"5.19," attached hereto and made part hereof under Borrower's name, Borrower
will have granted to Lender first priority Liens in the Collateral, superior in
right to any and all other Liens, existing or future.
 
5.20 Commercial Tort Claims.  As of the Closing Date, Borrower is not a party to
any Commercial Tort Claims, except as shown on Schedule "5.20" attached hereto
and made part hereof.
 
5.21 Letter of Credit Rights.  As of the Closing Date, Borrower has no Letter of
Credit Rights, except as shown on Schedule "5.21," attached hereto and made part
hereof.
 
5.22 Deposit Accounts.  All Deposit Accounts of Borrower are shown on Schedule
"5.22," attached hereto and made part hereof.
 
5.23 Inactive Subsidiary.  The Inactive Subsidiary does not conduct any business
or maintain any assets, and does not have any Indebtedness owing to any Person
except certain Indebtedness owing to WPCS in the aggregate amount of $295,410.
 
5.24 Anti-Terrorism Laws.
 
a. General.  Neither Borrower nor any Affiliate of Borrower is in violation of
any Anti-Terrorism Law or engages in or conspires to engage in any transaction
that evades or avoids, or has the purpose of evading or avoiding, or attempts to
violate, any of the prohibitions set forth in any Anti-Terrorism Law.
 
b. Executive Order No. 13224.  Neither Borrower nor any Affiliate of Borrower,
or to Borrower’s knowledge, any of its respective agents acting or benefiting in
any capacity in connection with the Loans, Letters of Credit or other
transactions hereunder, is any of the following (each a “Blocked Person”):
 
i. a Person that is listed in the annex to, or is otherwise subject to the
provisions of, the Executive Order No. 13224;
 
ii. a Person owned or controlled by, or acting for or on behalf of, any Person
that is listed in the annex to, or is otherwise subject to the provisions of,
the Executive Order No. 13224;
 
iii. a Person with which Lender is prohibited from dealing or otherwise engaging
in any transaction by any Anti-Terrorism Law;
 
 
 
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iv. a Person that commits, threatens or conspires to commit or supports
“terrorism” as defined in the Executive Order No. 13224;
 
v. a Person that is named as a “specially designated national” on the most
current list published by the U.S. Treasury Department Office of Foreign Asset
Control at its official website or any replacement website or other replacement
official publication of such list; or
 
vi. a Person who is affiliated with a Person listed above.
 
SECTION VI. BORROWER'S AFFIRMATIVE COVENANTS
 
Borrower covenants that until all of the Obligations are paid and satisfied in
full and the Revolving Credit has been terminated, that:
 
6.1 Payment of Taxes and Claims.  Borrower shall pay, before they become
delinquent, all taxes, assessments and governmental charges, or levies imposed
upon it, or upon Borrower's Property, and all claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other Persons, entitled to the
benefit of statutory or common law Liens which, in any case, if unpaid, would
result in the imposition of a Lien upon its Property; provided however, that
Borrower shall not be required to pay any such tax, assessment, charge, levy,
claim or demand if the amount, applicability or validity thereof, shall at the
time, be contested in good faith and by appropriate proceedings by Borrower, and
if  Borrower shall have set aside on its books adequate reserves in respect
thereof, if so required in accordance with GAAP; which deferment of payment is
permissible so long as no Lien other than a Permitted Lien has been entered and
Borrower's title to, and its right to use, its Property are not materially
adversely affected thereby.
 
6.2 Maintenance of Properties and Corporate Existence.
 
a. Property – Borrower shall maintain its Property in good condition (normal
wear and tear excepted) make all necessary renewals, replacements, additions,
betterments and improvements thereto and will pay and discharge when due the
cost of repairs and maintenance to its Property, and will pay all rentals when
due for all real estate leased by Borrower.
 
b. Property Insurance, Public and Products Liability Insurance – Borrower shall
maintain insurance (i) on all insurable tangible Property against fire, flood,
casualty and such other hazards (including, without limitation, extended
coverage, workmen's compensation, boiler and machinery, with inflation coverage
by endorsement) and (ii) against public liability, product liability and
business interruption, in each case in such amounts, with such deductibles and
with such insurers as are customarily used by companies operating in the same
industry as Borrower.  At or prior to Closing, Borrower shall furnish Lender
with duplicate original policies of insurance or such other evidence of
insurance as Lender may require, and any certificates of insurance shall be
issued on Acord Form-27.  In the event Borrower fails to procure or cause to be
procured any such insurance or to timely pay or cause to be paid the premium(s)
on any such insurance, Lender may do so for Borrower, but Borrower shall
continue to be liable for the same. The policies of all such casualty insurance
shall contain standard Lender's Loss Payable Clauses (and, with respect to
liability and interruption insurance, additional insured clauses) issued in
favor of Lender under which all losses thereunder shall be paid to Lender as
Lender's interest may appear.  Such policies shall expressly provide that the
requisite insurance cannot be altered or canceled without thirty (30) days prior
written notice to Lender and shall insure Lender notwithstanding the act or
neglect of Borrower.  Borrower hereby appoints Lender as Borrower's attorney
in-fact, exercisable at Lender's option to endorse any check  which may be
payable to Borrower in order to collect the proceeds of such insurance and any
amount or amounts collected by Lender pursuant to the provisions of this Section
may be applied by Lender, in its sole discretion, to any Obligations or to
repair, reconstruct or replace the loss of or damage to Collateral as Lender in
its discretion may from time to time determine.  Borrower further covenants that
all insurance premiums owing under its current policies have been
paid.  Borrower shall notify Lender, immediately, upon Borrower's receipt of a
notice of termination, cancellation, or non-renewal from its insurance company
of any such policy.
 
c. Financial Records – Borrower shall keep current and accurate books of records
and accounts in which full and correct entries will be made of all of its
business transactions, and will reflect in its financial statements adequate
accruals and appropriations to reserves, all in accordance with GAAP.  Borrower
shall not change its fiscal year end date without the prior written consent of
Lender, which consent shall not be unreasonably withheld (it being acknowledged
and agreed by Borrower that such consent may be conditioned upon Lender’s
receipt of a fully executed amendment to this Agreement modifying certain of the
measurement dates, calculation periods and dates for delivery of financial
statements so as to conform to the revised fiscal year end date, which amendment
shall be in form and substance satisfactory to Lender in its reasonable
discretion).
 
d. Corporate Existence and Rights – Borrower shall do (or cause to be done) all
things necessary to preserve and keep in full force and effect its existence,
good standing, rights and franchises.
 
e. Compliance with Laws – Borrower shall be in compliance with any and all laws,
ordinances, governmental rules and regulations, and court or administrative
orders or decrees to which it is subject, whether federal, state or local,
(including, without limitation, Environmental Laws and government procurement
regulations) and shall obtain any and all licenses, permits, franchises or other
governmental authorizations necessary to the ownership of its Property or to the
conduct of its businesses, which violation or failure to obtain causes or could
cause a Material Adverse Effect.  Borrower shall timely satisfy all assessments,
fines, costs and penalties imposed (after exhaustion of all appeals, provided a
stay has been put in effect during such appeal) by any Governmental Authority
against Borrower or any Property of Borrower.
 
 
 
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6.3 Business Conducted.  Borrower shall continue in the business presently
operated by it using its best efforts to maintain its customers and
goodwill.  Borrower shall not engage, directly or indirectly, in any material
respect in any line of business substantially different from the businesses
conducted by Borrower immediately prior to the Closing Date.
 
6.4 Litigation.  Borrower shall give prompt notice to Lender of any litigation
claiming in excess of Two Hundred Fifty Thousand Dollars ($250,000) from
Borrower, or which may otherwise have a Material Adverse Effect.
 
6.5 Issue Taxes.  Borrower shall pay all taxes (other than taxes based upon or
measured by any Lender's income or revenues or any personal property tax), if
any, in connection with the issuance of the Notes and the recording of any lien
documents.  The obligations of Borrower hereunder shall survive the payment of
Borrower's Obligations hereunder and the termination of this Agreement.
 
6.6 Bank Accounts.  Borrower shall maintain its major depository and
disbursement account(s) with Lender.
 
6.7 Employee Benefit Plans.  Borrower shall (a) fund all of its Pension Plan(s)
in a manner that will satisfy the minimum funding standards of Section 302 of
ERISA, (b) furnish Lender, promptly upon Lender's request, with copies of all
reports or other statements filed with the United States Department of Labor,
the PBGC or the IRS with respect to all Pension Plan(s), or which Borrower, or
any member of a Controlled Group, may receive from the United States Department
of Labor, the IRS or the PBGC, with respect to all such Pension Plan(s), and (c)
promptly advise Lender of the occurrence of any reportable event (as defined in
Section 4043 of ERISA, other than a reportable event for which the thirty (30)
day notice requirement has been waived by the PBGC) or prohibited transaction
(under Section 406 of ERISA or Section 4975 of the Internal Revenue Code) with
respect to any such Pension Plan(s) and the action which Borrower proposes to
take with respect thereto.  Borrower will make all contributions when due with
respect to any multi employer pension plan in which it participates and will
promptly advise Lender upon (x) its receipt of notice of the assertion against
Borrower of a claim for withdrawal liability, (y) the occurrence of any event
which, to the best of Borrower's knowledge, would trigger the assertion of a
claim for withdrawal liability against Borrower, and (z) upon the occurrence of
any event which, to the best of Borrower's knowledge, would place Borrower in a
Controlled Group as a result of which any member (including Borrower) thereof
may be subject to a claim for withdrawal liability, whether liquidated or
contingent.
 
6.8 Financial Covenants.   Borrower shall maintain and comply with the following
financial covenants:
 
a. Fixed Charge Coverage Ratio – Borrower shall maintain a Fixed Charge Coverage
Ratio of not less than 1.2 to 1.0, measured as of April 30, 2012 and as of each
fiscal quarter end thereafter, in each such case on a trailing two (2) quarter
basis.
 
b. Leverage Ratio – Borrower shall maintain a Leverage Ratio of not more than
1.75 to 1.0, measured as of each fiscal quarter end.
 
6.9 Financial and Business Information.  Borrower shall deliver or cause to be
delivered to Lender the following:
 
a. Financial Statements and Collateral Reports:  such data, reports, statements
and information, financial or otherwise, as Lender may reasonably request,
including, without limitation:
 
i. within forty (40) days after the end of each calendar month, the consolidated
and consolidating income and cash flow statements of Borrower and its
Subsidiaries for such month and for the expired portion of the fiscal year
ending with the end of such month, setting forth in comparative form the
corresponding figures for the corresponding periods of the previous fiscal year,
and the consolidated and consolidating balance sheet of Borrower and its
Subsidiaries as at the end of such month, setting forth in comparative form the
corresponding figures as at the end of the corresponding periods of the previous
fiscal year, all in reasonable detail and certified by Borrower's chief
financial officer to have been prepared from the books and records of Borrower;
 
ii. within fifty (50) days after the end of each fiscal quarter, the
consolidated and consolidating income and cash flow statements of Borrower and
its Subsidiaries for such quarter and for the expired portion of the fiscal year
ending with the end of such quarter, setting forth in comparative form the
corresponding figures for the corresponding periods of the previous fiscal year,
and the consolidated and consolidating balance sheet of Borrower and its
Subsidiaries as at the end of such quarter, setting forth in comparative form
the corresponding figures as at the end of the corresponding periods of the
previous fiscal year, all in reasonable detail and certified by Borrower's chief
financial officer to have been prepared from the books and records of Borrower;
 
 
 
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iii. within one hundred five (105) days after the end of each fiscal year of
Borrower, the consolidated and consolidating income and cash flow statements of
Borrower and its Subsidiaries for such year, and the consolidated and
consolidating balance sheet of Borrower and its Subsidiaries as at the end of
such fiscal year, setting forth in each case in comparative form the
corresponding figures as at the end of and for the previous fiscal year, all in
reasonable detail, including all supporting schedules, and audited by an
independent public accounting firm acceptable to Lender, and unqualifiedly
certified to have been prepared in accordance with GAAP, and such independent
public accountants shall also unqualifiedly certify that in making the
examinations necessary to their certification mentioned above they have reviewed
the terms of this Agreement and the accounts and conditions of Borrower during
the accounting period covered by the certificate and that such review did not
disclose the existence of any condition or event which constitutes a Default or
an Event of Default (or if such conditions or events existed, describing them)
together with copies of any management letters provided by such accountants to
management of Borrower;
 
iv. within twenty (20) days of the end of each calendar month, Borrower's
accounts receivable aging report (including a detail of Billings in Excess of
Cost), accounts payable aging report (including a specific line item for any
amounts owing to Borrower’s subcontractors), inventory reports and such other
reports as Lender reasonably deems necessary, certified by Borrower's chief
financial officer as true and correct, all in form and substance satisfactory to
Lender;
 
v. no later than the last calendar day of each fiscal year-end, Borrower's
annual consolidated and consolidating financial statement projections for the
upcoming fiscal year on a monthly basis, including income, cash flow statements
and Undrawn Availability projections of Borrower and its Subsidiaries for each
such month, and the consolidated and consolidating balance sheet of Borrower and
its Subsidiaries as at the end of each such month, all in reasonable detail and
certified by Borrower's chief financial officer to have been prepared on the
basis of sound financial planning practice consistent with past budgets and
financial statements and that such officer has no reason to question the
reasonableness of any material assumptions on which such projections were
prepared; and
 
vi. (A) at the time of each Advance and (B) on a monthly basis within twenty
(20) days of each month-end, or more frequently if requested by Lender, a
borrowing certificate prepared as of the close of business on the Business Day
immediately preceding Borrower’s transmittal thereof, in the form of Exhibit "C"
attached hereto and made part hereof ("Borrowing Certificate"), as such Exhibit
may change from time to time at Lender’s discretion.  So long as any Borrowing
Certificate shall be required to be delivered on a monthly basis in accordance
with the foregoing sentence, the value of the Eligible Accounts and Eligible
Inventory evidenced by such Borrowing Certificate shall not be reduced based on
collections received until the delivery of a Borrowing Certificate in the
immediately succeeding month.
 
b. Notice of Event of Default – promptly upon becoming aware of the existence of
any condition or event which constitutes a Default or an Event of Default under
this Agreement, a written notice specifying the nature and period of existence
thereof and what action Borrower is taking (and proposes to take) with respect
thereto;
 
c. Notice of Claimed Default – promptly upon receipt by Borrower, written notice
of default, given to Borrower by any creditor for Indebtedness for borrowed
money, otherwise holding long term Indebtedness of Borrower; and
 
d. Securities and Other Reports – all reports filed by the Borrower with the
Securities and Exchange Commission pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended, promptly upon its becoming
available, one copy of each financial statement, report, notice or proxy
statement sent by Borrower to stockholders generally, and, a copy of each
regular or periodic report, and any registration statement, or prospectus in
respect thereof, filed by Borrower with any securities exchange or with federal
or state securities and exchange commissions or any successor agency.
 
6.10 Officers' Certificates.  Along with the set of financial statements
delivered to Lender at the end of each fiscal quarter pursuant to Section
6.9(a)(ii) hereof and the annual financial statements delivered pursuant to
Section 6.9(a)(iii) hereof, Borrower shall deliver to Lender a certificate
("Quarterly Compliance Certificate") (in the form of Exhibit "D," attached
hereto and made part hereof) from the chief financial officer, chief executive
officer or president of Borrower (and as to certificates accompanying the annual
financial statements of Borrower, also certified by Borrower's independent
certified public accountant) setting forth:
 
a. Event of Default – that the signer has reviewed the relevant terms of this
Agreement, and has made (or caused to be made under his/her supervision) a
review of the transactions and conditions of Borrower from the beginning of the
accounting period covered by the financial statements being delivered therewith
to the date of the certificate, and that such review has not disclosed the
existence during such period of any condition or event which constitutes a
Default or an Event of Default or, if any such condition or event exists,
specifying the nature and period of existence thereof and what action Borrower
has taken or proposes to take with respect thereto.
 
 
 
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b. Covenant Compliance – the information (including detailed calculations)
required in order to establish that Borrower is in compliance with the
requirements of Section 6.8 of this Agreement, as of the end of the period
covered by the financial statements delivered.
 
6.11 Audits and Inspection.  Borrower shall permit any of Lender's officers or
other representatives to visit and inspect upon reasonable notice during
business hours any of the locations of Borrower (provided that, while an Event
of Default exists, Lender may make such visits and inspections during business
hours without prior notice), to examine and audit all of Borrower's books of
account, records, reports and other papers, to make copies and extracts
therefrom and to discuss its affairs, finances and accounts with its officers,
employees and independent certified public accountants all at Borrower's expense
at the standard rates charged by Lender for such activities, plus Lender's
out-of-pocket expenses (including, without limitation, any amounts due under
Section 2.7(f) of this Agreement, all of which amounts shall be Expenses).
 
6.12 Tax Returns, Financial Statements and Other Reports.  Promptly after each
fiscal year of WPCS (but in any event no later than August 1, or February 1 if
Borrower files an extension), Borrower shall promptly furnish, or shall cause to
be furnished, to Lender copies of (a) the annual federal and state income tax
returns of Borrower for the immediately preceding year, (b) the income tax
return of Guarantor for the immediately preceding year and (c) personal
financial statement (on Lender's form) for Guarantor, if an
individual.  Borrower further agrees that, if requested by Lender, it shall
promptly furnish Lender with copies of all reports filed with any federal, state
or local Governmental Authority.
 
6.13 Information to Participant.  Lender may divulge to any participant,
assignee or co-lender or prospective participant, assignee or co lender it may
obtain in the Revolving Credit or any portion thereof, all information, and
furnish to such Person copies of any reports, financial statements,
certificates, and documents obtained under any provision of this Agreement, or
related agreements and documents.
 
6.14 Material Adverse Developments.  Borrower agrees that immediately upon
becoming aware of any development or other information outside the ordinary
course of business and excluding matters of a general economic, financial or
political nature which would reasonably be expected to have a Material Adverse
Effect it shall give to Lender telephonic notice specifying the nature of such
development or information and such anticipated effect.  In addition, such
verbal communication shall be confirmed by written notice thereof to Lender on
the same day such verbal communication is made or the next Business Day
thereafter.
 
6.15 Places of Business.  Borrower shall give thirty (30) days prior written
notice to Lender of any changes in the location of any of its respective places
of business, of the places where records concerning its Accounts or where its
Inventory are kept, or the establishment of any new places of business (and in
connection therewith, deliver to Lender a fully executed waiver described and
required by Section 3.5 hereof), or the discontinuance of any existing place of
business; provided that Borrower may not establish any place of business outside
of the United States except as exists on the Closing Date, and otherwise in the
ordinary course of business so long as no Property of any Borrower is maintained
at such location.
 
6.16 Commercial Tort Claims.  Borrower will immediately notify Lender in writing
in the event that Borrower becomes a party to or obtains any rights with respect
to any Commercial Tort Claim.  Such notification shall include information
sufficient to describe such Commercial Tort Claim, including, but not limited
to, the parties to the claim, the court in which the claim was commenced, the
docket number assigned to such claim, if any, and a detailed explanation of the
events that gave rise to the claim.  Borrower shall execute and deliver to
Lender all documents and/or agreements necessary to grant Lender a security
interest in such Commercial Tort Claim to secure the Obligations.  Borrower
authorizes Lender to file (without Borrower's signature) initial financing
statements or amendments, as Lender deems necessary to perfect its security
interest in the Commercial Tort Claim.
 
6.17 Letter of Credit Rights.  Borrower shall provide Lender with written notice
of any Letters of Credit for which Borrower is the beneficiary.  Borrower shall
execute and deliver (or cause to be executed or delivered) to Lender, all
documents and agreements as Lender may require in order to obtain and perfect
its security interest in such Letter of Credit Rights.
 
6.18 Lost Documents.  Upon receipt of an affidavit of an officer of Lender as to
the loss, theft, destruction or mutilation of the Note or any other security
document(s) which is not of public record and, in the case of any such
destruction or mutilation, upon surrender and cancellation of such Note or other
document(s), Borrower will issue, in lieu thereof, a replacement Note or other
document(s) in the same principal amount thereof and otherwise of like tenor.
 
6.19 Additional Borrower.  Upon any entity becoming a direct or indirect
Subsidiary of Borrower, Borrower will provide Lender with written notice thereof
setting forth information in reasonable detail describing all of the assets of
such entity and shall (a) if required by Lender, cause such entity to execute a
joinder agreement to this Agreement, (b) cause such entity to pledge all of its
assets to Lender pursuant to this Agreement or otherwise in form and substance
acceptable to Lender in its sole discretion, (c) cause such entity to execute a
promissory note in favor of Lender, if required, and (d) deliver such other
documentation as Lender may reasonably request in connection with the foregoing,
including, without limitation, appropriate UCC-1 financing statements, certified
resolutions and other organizational and authorizing documents of such entity
and favorable opinions of counsel to such entity (which shall cover, among other
things, the legality, validity, binding effect and enforceability of the
documentation referred to above), all in form and substance reasonably
satisfactory to Lender.  Nothing herein shall be deemed to permit the creation
of a Subsidiary of Borrower otherwise prohibited under Section 7.4 hereof.
 
 
 
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6.20 Remote deposit.  Upon the installation of remote deposit systems at certain
of the Borrower locations, (i) any Borrower that has a remote deposit system
installed at its location shall irrevocably deposit all checks in a deposit
account maintained with (and as determined by) Lender via remote deposit on the
date of receipt thereof and (ii) any Borrower that does not have a remote
deposit system installed at its location shall deposit all checks in a
depository account maintained at a local retail branch of Lender on the date of
receipt thereof.
 
6.21 Post Closing Covenants.
 
a. Bank of America Deposit Accounts.  On or before the 60th day following the
Closing Date, Borrower shall deliver evidence to Lender that all of the deposit
accounts of Borrower maintained at Bank of America, N.A. have been closed.
 
b. Tax and Judgment Liens.  On or before the 60th day following the Closing
Date, Borrower shall deliver evidence of the payment in full of the obligations
related to each of the Tax and Judgment Liens and (ii) the release of each of
the Tax and Judgment Liens filed with the relevant Governmental Authorities, in
each case which evidence shall be satisfactory to Lender in its sole discretion.
 
c. Daily Transfer of Funds.  Effective January 30, 2012 and until such time that
all of the deposit accounts of Borrower maintained at Bank of America have been
closed pursuant to Section 6.21(a) above, Borrower shall cause all funds held in
all depository accounts maintained with Bank of America, N.A. in excess of
$1,500,000 in the aggregate to be transferred on a daily basis to a deposit
account maintained with (and as determined by) Lender.
 
d. WPCS Australia Certificate.  On or before the 5th Business Day following the
Closing Date, Borrower shall deliver (i) a certificate evidencing 65% of the
shares of Capital Stock of WPCS Australia and (ii) a transfer document relating
thereto executed in blank, which shall be in form and substance satisfactory to
Lender in its sole discretion.
 
SECTION VII. BORROWER'S NEGATIVE COVENANTS.
 
Borrower covenants that until all of the Obligations are paid and satisfied in
full and the Revolving Credit has been terminated, that:
 
7.1 Merger, Consolidation, Dissolution or Liquidation.
 
a. Borrower shall not engage in any Asset Sale other than equipment that is
replaced by other equipment of comparable or superior quality and value within
ninety (90) days of such Asset Sale.
 
b. Borrower shall not merge or consolidate with any other Person, except for a
merger or consolidation with or into any other Borrower, or commence a
dissolution or liquidation.
 
7.2 Acquisitions.  Borrower shall not acquire all or a material portion of the
Capital Stock or assets of any Person in any transaction or in any series of
related transactions or enter into any sale and leaseback transaction, other
than in connection with a Permitted Acquisition.
 
7.3 Liens and Encumbrances.  Borrower shall not: (i) execute a negative pledge
agreement with any Person covering any of its Property, or (ii) cause or permit
or agree or consent to cause or permit in the future (upon the happening of a
contingency or otherwise), its Property (including, without limitation, the
Collateral), whether now owned or hereafter acquired, to be subject to a Lien or
be subject to any claim except for Permitted Liens.
 
7.4 Transactions With Affiliates or Subsidiaries.
 
 
 
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a. Borrower shall not enter into any transaction with any Subsidiary or other
Affiliate, including, without limitation, the purchase, sale, or exchange of
Property, or the loaning or giving of funds to any Affiliate or any Subsidiary
unless:  (i) such Subsidiary or Affiliate is engaged in a business substantially
related to the business conducted by Borrower, is a Borrower hereunder and the
transaction is in the ordinary course of and pursuant to the reasonable
requirements of Borrower's business and upon terms substantially the same and no
less favorable to Borrower as it would obtain in a comparable arm's length
transactions with any Person not an Affiliate or a Subsidiary, and so long as
such transaction is not prohibited hereunder; or (ii) such transaction is
intended for incidental administrative purposes.
 
b. Borrower shall not create or acquire any Subsidiary other than a Subsidiary
that is organized or incorporated in the United States or any State or territory
thereof and is joined as a Borrower hereto pursuant to Section 6.19 hereof.
 
c. Borrower shall not permit the Inactive Subsidiary to incur any Indebtedness,
acquire any assets or conduct any business.
 
7.5 Guarantees.  Excepting the endorsement in the ordinary course of business of
negotiable instruments for deposit or collection, Borrower shall not become or
be liable, directly or indirectly, primary or secondary, matured or contingent,
in any manner, whether as guarantor, surety, accommodation maker, or otherwise,
for the existing or future Indebtedness of any kind of any Person.
 
7.6 Distributions, Bonuses and Other Indebtedness.  Borrower shall not:  (a)
declare or pay or make any forms of Distribution to holders of Borrower's
Capital Stock; except for Distributions payable in stock or other equity
interest, as the case may be, as required pursuant to the Rights Agreement,
dated February 24, 2010 by and between WPCS and Interwest Transfer Co., Inc.,
(b) declare or pay any bonus compensation to its officers if an Event of Default
exists or would result from the payment thereof; (c) hereafter incur or become
liable for any Indebtedness other than Permitted Indebtedness; or (d) make any
prepayments on any existing or future Indebtedness (other than the Obligations).
 
7.7 Loans and Investments.  Borrower shall not make or have outstanding loans,
advances, extensions of credit or capital contributions to, or investments in,
any Person other than Permitted Investments.
 
7.8 Use of Lenders' Name.  Borrower shall not use Lender's name in connection
with any of its business operations.  Nothing herein contained is intended to
permit or authorize Borrower to make any contract on behalf of Lender.
 
7.9 Miscellaneous Covenants.
 
a. Borrower shall not become or be a party to any contract or agreement which at
the time of becoming a party to such contract or agreement materially impairs
Borrower's ability to perform under this Agreement, or under any other
instrument, agreement or document to which Borrower is a party or by which it is
or may be bound.
 
b. Borrower shall not carry or purchase any "margin stock" within the meaning of
Regulations U, T or X of the Board of Governors of the Federal Reserve System,
12 C.F.R., Chapter II.
 
7.10 Jurisdiction of Organization.  If a Registered Organization, Borrower shall
not change its jurisdiction of organization.
 
SECTION VIII. DEFAULT
 
8.1 Events of Default.  Each of the following events shall constitute an event
of default ("Event of Default"):
 
a. Payments – if Borrower fails to make any payment of principal or interest,
including any Overadvance, under the Obligations on the date such payment is due
and payable; or
 
b. Other Charges – if Borrower fails to pay any other charges, fees, Expenses or
other monetary obligations owing to Lender arising out of or incurred in
connection with this Agreement within five (5) Business Days of the date such
payment is due and payable; or
 
c. Particular Covenant Defaults – if Borrower fails to perform, comply with or
observe any covenant or undertaking contained in this Agreement and (other than
with respect to the covenants contained in Section 6.2(b), 6.8, 6.9, 6.10, 6.11
and Section 7 for which no cure period shall exist), such failure continues for
fifteen (15) days after the occurrence thereof; or
 
 
 
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d. Financial Information - if any statement, report, financial statement, or
certificate made or delivered by Borrower or any of its officers, employees or
agents, to Lender is not true and correct, in all material respects, when made;
or
 
e. Uninsured Loss – if there shall occur any uninsured damage to or loss, theft,
or destruction in excess of Five Hundred Thousand Dollars ($500,000) in the
aggregate with respect to any portion of any Property of Borrower; or
 
f. Warranties or Representations – if any warranty, representation or other
statement by or on behalf of Borrower contained in or pursuant to this
Agreement, the other Loan Documents or in any document, agreement or instrument
furnished in compliance with, relating to, or in reference to this Agreement, is
false, erroneous, or misleading in any material respect when made; or
 
g. Agreements with Others – (i) if Borrower shall default beyond any grace
period in the payment of principal or interest of any Indebtedness of Borrower
in excess of One Hundred Thousand Dollars ($100,000) in the aggregate; or (ii)
if Borrower otherwise defaults under the terms of any such Indebtedness if the
effect of such default is to enable the holder of such Indebtedness to
accelerate the payment of Borrower's obligations, which are the subject thereof,
prior to the maturity date or prior to the regularly scheduled date of payment;
 
h. Other Agreements with Lender – if Borrower breaches or violates the terms of,
or if a default (and expiration of any applicable cure period), or an Event of
Default, occurs under, any Interest Hedging Instrument or any other existing or
future agreement (related or unrelated) (including, without limitation, the
other Loan Documents) between Borrower and Lender; or
 
i. Judgments – if any final judgment for the payment of money in excess of One
Hundred Thousand Dollars ($100,000) in the aggregate (i) which is not fully and
unconditionally covered by insurance or (ii) for which Borrower has not
established a cash or cash equivalent reserve in the full amount of such
judgment, shall be rendered by a court of record against Borrower and such
judgment shall continue unsatisfied and in effect for a period of thirty (30)
consecutive days without being vacated, discharged, satisfied or bonded pending
appeal; or
 
j. Assignment for Benefit of Creditors, etc. – if Borrower makes or proposes in
writing, an assignment for the benefit of creditors generally, offers a
composition or extension to creditors, or makes or sends notice of an intended
bulk sale of any business or assets now or hereafter owned or conducted
by  Borrower; or
 
k. Bankruptcy, Dissolution, etc. – upon the commencement of any action for the
dissolution or liquidation of Borrower, or the commencement of any proceeding to
avoid any transaction entered into by Borrower, or the commencement of any case
or proceeding for reorganization or liquidation of Borrower's debts under the
Bankruptcy Code or any other state or federal law, now or hereafter enacted for
the relief of debtors, whether instituted by or against Borrower; provided
however, that Borrower shall have thirty (30) days to obtain the dismissal or
discharge of involuntary proceedings filed against it, it being understood that
during such thirty (30) day period, Lender shall not be obligated to make
Advances hereunder and Lender may seek adequate protection in any bankruptcy
proceeding; or
 
l. Receiver – upon the appointment of a receiver, liquidator, custodian, trustee
or similar official or fiduciary for any Borrower or for Borrower's Property; or
 
m. Execution Process, etc. – the issuance of any execution or distraint process
against any Property of Borrower; or
 
n. Termination of Business – if Borrower ceases any material portion of its
business operations as presently conducted; or
 
o. Pension Benefits, etc. – if Borrower fails to comply with ERISA so that
proceedings are commenced to appoint a trustee under ERISA to administer
Borrower's employee plans or the PBGC institutes proceedings to appoint a
trustee to administer such plan(s), or a Lien is entered to secure any
deficiency or claim or a "reportable event" as defined under ERISA occurs; or
 
p. Investigations – any indication or evidence received by Lender that
reasonably leads it to believe Borrower may have directly or indirectly been
engaged in any type of activity which, would be reasonably likely to result in
the forfeiture of any material property of Borrower to any governmental entity,
federal, state or local; or
 
q. Change of Control – if there shall occur a Change of Control; or
 
r. Surety and Guaranty Agreement –  if any breach or default occurs under the
Surety and Guaranty Agreement, if any Guarantor dies, or if any Surety and
Guaranty Agreement, or any obligation to perform thereunder is terminated; or
 
s. Liens – if any Lien in favor of Lender shall cease to be valid, enforceable
and perfected and prior to all other Liens other than Permitted Liens or if
Borrower or any Governmental Authority shall assert any of the foregoing; or
 
 
 
 
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t. Material Adverse Effect – if there is any change in Borrower's financial
condition which, in Lender's reasonable opinion, has or would be reasonably
likely to have a Material Adverse Effect, or
 
u. Other Loan Documents – if any other Person (other than Lender) party to a
Loan Document, breaches or violates any term, provision or condition of such
Loan Document.
 
v. Management Changes – if (i) Andrew Hidalgo, as Chief Executive Officer of
WPCS, or (ii) Joseph Heater, as Chief Financial Officer of WPCS, shall cease to
be employed in either of such capacities.
 
w. WPCS Australia and Subsidiaries – (i) if WPCS Australia or any of its
Subsidiaries fails to perform, comply with or observe any covenant or
undertaking contained in Sections 6.1, 6.2, 6.3, 6.4, 6.5, 6.8 (it being
understood that the financial covenants are calculated on a consolidated basis
with Borrower), 6.13 or 6.14 of this Agreement as if each covenant contained in
such Sections applied to WPCS Australia and each of its Subsidiaries
individually and such failure continues for fifteen (15) days after the
occurrence thereof (other than with respect to the covenants contained in
Sections 6.2(b) and 6.8 for which no cure period shall exist); or (ii) any of
the events listed in Sections 8.1(e), 8.1(g), 8.1(i), 8.1(j), 8.1(k), 8.1(l),
8.1(m), 8.1(n), 8.1(o), 8.1(p) or 8.1(t) occur with respect to WPCS Australia or
any of its Subsidiaries, or any other Subsidiary hereafter formed or acquired
with the prior written consent of Lender as herein provided.
 
8.2 Cure.  Nothing contained in this Agreement or the Loan Documents shall be
deemed to compel Lender to accept a cure of any Event of Default hereunder.
 
8.3 Rights and Remedies on Default.
 
a. In addition to all other rights, options and remedies granted or available to
Lender under this Agreement or the Loan Documents (each of which is also then
exercisable by Lender), or otherwise available at law or in equity, upon or at
any time after the occurrence and during the continuance of a Default or an
Event of Default, Lender may, in its discretion, withhold or cease making
Advances under the Revolving Credit.
 
b. In addition to all other rights, options and remedies granted or available to
Lender under this Agreement or the Loan Documents (each of which is also then
exercisable by Lender), or otherwise available at law or in equity, upon or at
any time after the occurrence and during the continuance of an Event of Default
Lender may, in its discretion, terminate the Revolving Credit and declare the
Obligations immediately due and payable, all without demand, notice, presentment
or protest or further action of any kind (it also being understood that the
occurrence of any of the events or conditions set forth in Sections 8.1(j),(k)
or (l) shall automatically cause an acceleration of the Obligations).
 
c. In addition to all other rights, options and remedies granted or available to
Lender, under this Agreement or the Loan Documents (each of which is also then
exercisable by Lender), upon or at any time after the occurrence and during the
continuance of an Event of Default, Borrower shall be obligated to deliver and
pledge to Lender, cash collateral in the amount of 110% of the aggregate undrawn
amount of all Letters of Credit outstanding at any time.
 
d. In addition to all other rights, options and remedies granted or available to
Lender under this Agreement or the Loan Documents (each of which is also then
exercisable by Lender), or otherwise available at law or in equity, upon or at
any time after the acceleration of the Obligations following the occurrence of
an Event of Default (other than the rights with respect to clause (iv) below
which Lender may exercise at any time after an Event of Default and regardless
of whether there is an acceleration), Lender may, in its discretion, exercise
all rights under the UCC and any other applicable law or in equity, and under
all Loan Documents permitted to be exercised after the occurrence of an Event of
Default, including the following rights and remedies (which list is given by way
of example and is not intended to be an exhaustive list of all such rights and
remedies):
 
i. The right to take possession of, send notices regarding and collect directly
the Collateral, with or without judicial process (including without limitation
the right to notify the United States postal authorities to redirect mail
addressed to Borrower to an address designated by Lender); or
 
ii. By its own means or with judicial assistance, enter Borrower's premises and
take possession of the Collateral, or render it unusable, or dispose of the
Collateral on such premises in compliance with subsection (e) below, without any
liability for rent, storage, utilities or other sums, and Borrower shall not
resist or interfere with such action; or
 
iii. Require Borrower at Borrower's expense to assemble all or any part of the
Collateral (other than real estate or fixtures) and make it available to Lender
at any place designated by Lender; or
 
iv. The right to reduce or modify the Borrowing Base or to modify the terms and
conditions upon which Lender may be willing to consider making Advances under
the Revolving Credit or to take additional reserves against the Revolving
Credit; or
 
v. The right to enjoin any violation of Section 7.1, it being agreed that
Lender's remedies at law are inadequate.
 
 
 
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e. Borrower hereby agrees that a notice received by it at least seven (7) days
before the time of any intended public sale or of the time after which any
private sale or other disposition of the Collateral is to be made, shall be
deemed to be reasonable notice of such sale or other disposition.  If permitted
by applicable law, any perishable inventory or Collateral which threatens to
speedily decline in value or which is sold on a recognized market may be sold
immediately by Lender without prior notice to Borrower.  Borrower covenants and
agrees not to interfere with or impose any obstacle to Lender's exercise of its
rights and remedies with respect to the Collateral, after the occurrence of an
Event of Default hereunder.  Lender shall have no obligation to clean up or
prepare the Collateral for sale.  If Lender sells any of the Collateral upon
credit, Borrower will only be credited with payments actually made by the
purchaser thereof, that are received by Lender.  Lender may, in connection with
any sale of the Collateral specifically disclaim any warranties of title or the
like.
 
8.4 Nature of Remedies.  All rights and remedies granted Lender hereunder and
under the Loan Documents, or otherwise available at law or in equity, shall be
deemed concurrent and cumulative, and not alternative remedies, and Lender may
proceed with any number of remedies at the same time until all Obligations are
satisfied in full.  The exercise of any one right or remedy shall not be deemed
a waiver or release of any other right or remedy, and Lender, upon or at any
time after the occurrence of an Event of Default, may proceed against Borrower,
at any time, under any agreement, with any available remedy and in any order.
 
8.5 Set Off.
 
a. Borrower and any Guarantor hereby grant to Lender a lien, security interest
and a right of setoff as security for all liabilities and obligations to Lender,
including, but not limited to, the Obligations, whether now existing or
hereafter arising, upon and against all deposits, credits, collateral and
property, now or hereafter in the possession, custody, safekeeping or control of
Lender or any entity under the control of Lender, or in transit to any of them.
At any time, without demand or notice, Lender may set off the same or any part
thereof and apply the same to any liability or obligation of Borrower and any
Guarantor even though unmatured and regardless of the adequacy of any other
collateral securing the Loan
 
b. If any bank account of Borrower or Guarantor with Lender, any other
subsidiary or Affiliate of Lender or any participant is attached or otherwise
liened or levied upon by any third party, Lender (and such participant) shall
have and be deemed to have, without notice to Borrower or Guarantor, the
immediate right of set off and may apply the funds or amount thus set off
against any of Borrower's Obligations hereunder.
 
c. Any and all rights to require Lender to exercise its rights or remedies with
respect to any other Collateral which secures the Obligations, prior to
exercising its right of setoff with respect to such deposits, credits or other
property of Borrower or any Guarantor, are hereby knowingly, voluntarily and
irrevocably waived.  Lender is not required to marshal any present or future
security for, or guarantees of, the obligations or to resort to any such
security or guarantee in any particular order and Borrower and any Guarantor
waive, to the fullest extent that it lawfully can, (a) any right they might have
to require Lender to pursue any particular remedy before proceeding against them
and (b) any right to the benefit of, or to direct the application of the
proceeds of any Collateral until the Obligations  are paid in full.
 
SECTION IX. MISCELLANEOUS
 
9.1 Governing Law.  THIS AGREEMENT, AND ALL MATERS ARISING OUT OF OR RELATING TO
THIS AGREEMENT, AND ALL RELATED AGREEMENTS AND DOCUMENTS, SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA.  THE PROVISIONS OF THIS AGREEMENT AND ALL OTHER AGREEMENTS AND
DOCUMENTS REFERRED TO HEREIN ARE TO BE DEEMED SEVERABLE, AND THE INVALIDITY OR
UNENFORCEABILITY OF ANY PROVISION SHALL NOT AFFECT OR IMPAIR THE REMAINING
PROVISIONS WHICH SHALL CONTINUE IN FULL FORCE AND EFFECT.
 
9.2 Integrated Agreement.  The Notes, the other Loan Documents, all related
agreements, and this Agreement shall be construed as integrated and
complementary of each other, and as augmenting and not restricting Lender's
rights and remedies.  If, after applying the foregoing, an inconsistency still
exists, the provisions of this Agreement shall constitute an amendment thereto
and shall control.
 
9.3 Waiver.  No omission or delay by Lender in exercising any right or power
under this Agreement or any related agreements and documents will impair such
right or power or be construed to be a waiver of any Default, or Event of
Default or an acquiescence therein, and any single or partial exercise of any
such right or power will not preclude other or further exercise thereof or the
exercise of any other right, and as to Borrower no waiver will be valid unless
in writing and signed by Lender and then only to the extent specified.
 
9.4 Indemnity.
 
a. Borrower releases and shall indemnify, defend and hold harmless Lender and
its respective officers, employees and agents, of and from any claims, demands,
liabilities, obligations, judgments, injuries, losses, damages and costs and
expenses (including, without limitation, reasonable legal fees) resulting from
(i) acts or conduct of Borrower under, pursuant or related to this Agreement and
the other Loan Documents, (ii) Borrower's breach or violation of any
representation, warranty, covenant or undertaking contained in this Agreement or
the other Loan Documents, (iii) Borrower's failure to comply with any or all
laws, statutes, ordinances, governmental rules, regulations or standards,
whether federal, state or local, or court or administrative orders or decrees,
(including without limitation Environmental Laws, etc.), and (iv) any claim by
any other creditor of Borrower against Lender arising out of any transaction
whether hereunder or in any way related to  the Loan Documents and all costs,
expenses, fines, penalties or other damages resulting therefrom, unless
resulting solely from acts or conduct of Lender constituting willful misconduct
or gross negligence.
 
b. Promptly after receipt by an indemnified party under subsection (a) above of
notice of the commencement of any action by a third party, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof.  The omission so to notify the indemnifying
party shall relieve the indemnifying party from any liability which it may have
to any indemnified party under such subsection only if the indemnifying party is
unable to defend such actions as a result of such failure to so notify.  In case
any such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnified party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation.
 
 
 
 
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9.5 Time.  Whenever Borrower shall be required to make any payment, or perform
any act, on a day which is not a Business Day, such payment may be made, or such
act may be performed, on the next succeeding Business Day.  Time is of the
essence in Borrower's performance under all provisions of this Agreement and all
related agreements and documents.
 
9.6 Expenses of Lender.  At Closing and from time to time thereafter, Borrower
will pay upon demand of Lender all reasonable costs, fees and expenses of Lender
in connection with (i) the analysis, negotiation, preparation, execution,
administration, delivery and termination of this Agreement, and other Loan
Documents and the documents and instruments referred to herein and therein, and
any amendment, amendment and restatement, supplement, waiver or consent relating
hereto or thereto, whether or not any such amendment, amendment and restatement,
supplement, waiver or consent is executed or becomes effective, search costs,
the reasonable fees, expenses and disbursements of counsel for Lender, any fees
or expenses incurred by Lender under Section 6.11 for which Borrower is
obligated thereunder, and reasonable charges of any expert consultant to Lender,
(ii) the enforcement of Lender’s rights hereunder, or the collection of any
payments owing from, Borrower under this Agreement and/or the other Loan
Documents or the protection, preservation or defense of the rights of Lender
hereunder and under the other Loan Documents, and (iii) any refinancing or
restructuring of the credit arrangements provided under this Agreement and other
Loan Documents in the nature of a "work-out" or of any insolvency or bankruptcy
proceedings, or otherwise (including the reasonable fees and disbursements of
counsel for Lender and, with respect to clauses (ii) and (iii), reasonable
allocated costs of internal counsel) (collectively, the "Expenses");
 
9.7 Brokerage.  This transaction was brought about and entered into by Lender
and Borrower acting as principals and, except as disclosed on Schedule “9.7”,
without any brokers, agents or finders being the effective procuring cause
hereof.  Borrower represents that it has not committed Lender to the payment of
any brokerage fee, commission or charge in connection with this transaction.  If
any such claim is made on Lender by any broker, finder or agent or other person,
Borrower hereby indemnifies, defends and saves such party harmless against such
claim and further will defend, with counsel satisfactory to Lender, any action
or actions to recover on such claim, at Borrower's own cost and expense,
including such party's reasonable counsel fees.  Borrower further agrees that
until any such claim or demand is adjudicated in such party's favor, the amount
demanded shall be deemed an Obligation of Borrower under this Agreement.
 
9.8 Notices.
 
a. Any notices or consents required or permitted by this Agreement shall be in
writing and shall be deemed given if delivered in person to the person listed
below or if sent by telecopy or by nationally recognized overnight courier, as
follows, unless such address is changed by written notice hereunder:
 
 
If to Lender to:
Sovereign Bank, N.A.

 
 
1500 Market Street, 25th floor

 
 
Centre Square West

 
 
Philadelphia, PA 19102

 
 
Attention: Robert Bushey, SVP

 
 
Telecopy No.: 215-568-9587

 
 
With copies to Bank Counsel:
Blank Rome LLP

 
 
130 N. 18th Street

 
 
Philadelphia, PA 19103

 
 
Attention: Michael C. Graziano, Esquire

 
 
Telecopy No.: 215-832-5387

 
 
If to Borrower to:
WPCS International Incorporated

 
 
One East Uwchlan Avenue, Suite 301

 
 
Exton, Pennsylvania 19341

 
 
Attention: Andrew Hidalgo, CEO

 
 
 
 
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Telecopy No.: (610) 903-0401

 
 
With copies to Borrower's Counsel:
Sichenzia Ross Friedman Ference LLP

 
 
61 Broadway, 32nd Floor

 
 
New York, New York 10006

 
 
Attention: Thomas A. Rose, Esq.

 
 
Telecopy No.: (212) 930-9725

Borrower by any of the above methods shall be deemed to be given when so
received.
 
c. Lender shall be fully entitled to rely upon any telecopy transmission or
other writing purported to be sent by any Authorized Officer (whether requesting
an Advance or otherwise) as being genuine and authorized.
 
9.9 Headings.  The headings of any paragraph or Section of this Agreement are
for convenience only and shall not be used to interpret any provision of this
Agreement.
 
9.10 Survival.  All warranties, representations, and covenants made by Borrower
herein, or in any agreement referred to herein or on any certificate, document
or other instrument delivered by it or on its behalf under this Agreement, shall
be considered to have been relied upon by Lender, and shall survive the delivery
to Lender of the Notes, regardless of any investigation made by Lender or on its
behalf.  All statements in any such certificate or other instrument prepared
and/or delivered for the benefit of Lender shall constitute warranties and
representations by Borrower hereunder.  Except as otherwise expressly provided
herein, all covenants made by Borrower hereunder or under any other agreement or
instrument shall be deemed continuing until all Obligations are satisfied in
full.  All indemnification obligations under this Agreement, including under
Section 2.2, 6.5, 9.4, 9.6 and 9.7, shall survive the termination of this
Agreement and payment of the Obligations for a period of one (1) year.
 
9.11 Successors and Assigns.
 
a. This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties.  Borrower may not transfer,
assign or delegate any of its duties or obligations hereunder.
 
b. Borrower and Guarantor agree to pay and perform, when due, all other debts,
liabilities, duties, representations, covenants and warranties to any Affiliate
or Participant of Lender, whether now or in the future existing, direct,
indirect or acquired by negotiation, or the result of any derivative
transaction, purchase, discount or assignment, primary or secondary, joint or
several, fixed or contingent, (regardless of form, existence of collateral
therefor, whether guaranteed, or subject to a participation agreement) secured
or unsecured, whether arising from an extension of credit, funds transfers,
letter of credit, deposit relationship, or otherwise, and any amendments,
extensions or renewals thereof, together with all costs, taxes, expenses and
attorneys' fees (whether or not charged by outside counsel) incurred in
connection therewith.
 
c. Lender has the unrestricted right at any time and from time to time, and
without the consent of or notice to Borrower (or any Guarantor), to grant to one
or more institutions or other persons (each a “Participant”) participating
interests in Lender’s obligations to lend hereunder and/or any or all of the
loans held by Lender hereunder. In the event of any such grant by Lender of a
participating interest to a Participant, whether or not upon notice to Borrower,
Lender remains responsible for the performance of its obligations hereunder and
Borrower is to continue to deal solely and directly with Lender in connection
with Lender’s rights and obligations hereunder. Lender may furnish any
information concerning Borrower or Guarantor in its possession from time to time
to any prospective assignees and Participants, provided that Lender requires any
such prospective assignee or Participant to maintain the confidentiality of such
information.
 
d. Lender may at any time pledge, endorse, assign or transfer all or any portion
of its rights under this Agreement or related Loan Documents including any
portion thereof to any of the twelve (12) Federal Reserve Banks organized under
Section 4 of the Federal Reserve Act. 12. U.S.C. Section 341.  No such pledge or
enforcement thereof releases Lender
b. Any notice sent by Lender, or from its obligations under any of the Loan
Documents.  Such rights exist without the need for Borrower’s (or any
Guarantor's) consent.
 
 
 
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e. Lender has the unrestricted right at any time or from time to time, and
without the Borrower’s (or Guarantor’s) consent, to sell, assign, endorse, or
transfer all or any portion of its rights and obligations hereunder to one or
more banks or other entities (each, an “Assignee”) and Borrower (and Guarantor)
agrees that it will execute, or cause to be executed such documents including
without limitation, amendments to this Agreement and to any other documents,
instruments and agreements executed in connection herewith as Lender  deems
necessary to effect the foregoing. In addition, at the request of Lender and any
such Assignee, Borrower will issue one or more new promissory notes, as
applicable, to any such Assignee and, if Lender has retained any of its rights
and obligations hereunder following such assignment, to Lender, which new
promissory notes are issued in replacement of, but not in discharge of, the
liability evidenced by the Notes held by Lender prior to such assignment and is
to reflect the amount of the respective commitments and loans held by such
Assignee and Lender after giving effect to such assignment. Upon the execution
and delivery of appropriate assignment documentation, amendments and any other
documentation required by Lender in connection with such assignment, and the
payment by Assignee of the purchase price agreed to by Lender and such Assignee,
such Assignee is a party to this Agreement and has all of the rights and
obligations of Lender hereunder (and under any and all other guaranties,
documents, instruments and agreements executed in connection herewith) to the
extent that such rights and obligations have been assigned by Lender pursuant to
the assignment documentation between Lender and Assignee, and Lender is to be
released from its obligations hereunder and thereunder to a corresponding
extent.
 
9.12 Duplicate Originals.  Two or more duplicate originals of this Agreement may
be signed by the parties, each of which shall be an original but all of which
together shall constitute one and the same instrument.
 
9.13 Modification.  No modification hereof or any agreement referred to herein
shall be binding or enforceable unless in writing and signed by Borrower and
Lender.
 
9.14 Signatories.  Each individual signatory hereto represents and warrants that
he is duly authorized to execute this Agreement on behalf of his principal and
that he executes the Agreement in such capacity and not as a party.
 
9.15 Third Parties.  No rights are intended to be created hereunder, or under
any related agreements or documents for the benefit of any third party donee,
creditor or incidental beneficiary of Borrower.  Nothing contained in this
Agreement shall be construed as a delegation to Lender of Borrower's duty of
performance, including, without limitation, Borrower's duties under any account
or contract with any other Person.
 
9.16 Discharge of Taxes, Borrower's Obligations, Etc.  Lender, in its sole
discretion, shall have the right at any time, and from time to time, with at
least ten (10) days prior notice to Borrower if Borrower fail to do so, to: (a)
pay for the performance of any of Borrower's obligations hereunder, and (b)
discharge taxes or Liens, at any time levied or placed on Borrower's Property in
violation of this Agreement unless Borrower is in good faith with due diligence
by appropriate proceedings contesting such taxes or Liens and maintaining proper
reserves therefor in accordance with GAAP.  Expenses and advances shall be added
to the Revolving Credit, and bear interest at the rate applicable to the
Revolving Credit, until reimbursed to Lender.  Such payments and advances made
by Lender shall not be construed as a waiver by Lender of a Default or Event of
Default under this Agreement.
 
9.17 Withholding and Other Tax Liabilities.  Lender shall have the right to
refuse to make any Advances from time to time unless Borrower shall, at Lender's
request, have given to Lender evidence, reasonably satisfactory to Lender, that
Borrower has properly deposited or paid, as required by law, all withholding
taxes and all federal, state, city, county or other taxes due up to and
including the date of the requested Advance.   Copies of deposit slips showing
payment shall constitute satisfactory evidence for such purpose.  In the event
that any Lien, assessment or tax liability against Borrower shall arise in favor
of any taxing authority, whether or not notice thereof shall be filed or
recorded as may be required by law, Lender shall have the right (but shall not
be obligated, nor shall Lender hereby assume the duty) to pay any such Lien,
assessment or tax liability by virtue of which such charge shall have arisen;
provided, however, that Lender shall not pay any such tax, assessment or Lien if
the amount, applicability or validity thereof is being contested in good faith
and by appropriate proceedings by Borrower.  In order to pay any such Lien,
assessment or tax liability, Lender shall not be obliged to wait until such
lien, assessment or tax liability is filed before taking such action as
hereinabove set forth.  Any sum or sums which Lender shall have paid for the
discharge of any such Lien shall be added to the Revolving Credit and shall be
paid by Borrower to Lender with interest thereon at the rate applicable to the
Revolving Credit, upon demand, and Lender shall be subrogated to all rights of
such taxing authority against Borrower.
 
 
 
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9.18 Consent to Jurisdiction.  Borrower and Lender each hereby irrevocably
consent to the non-exclusive jurisdiction of the Courts of the Commonwealth of
Pennsylvania or the United States District Court for the Eastern District of
Pennsylvania in any and all actions and proceedings whether arising hereunder or
under any other agreement or undertaking.  Borrower waives any objection which
Borrower may have based upon lack of personal jurisdiction, improper venue or
forum non conveniens.  Borrower irrevocably agrees to service of process by
certified mail, return receipt requested to the address of the appropriate party
set forth herein.
 
9.19 Additional Documentation.  Borrower shall execute and/or re-execute, and
cause any Guarantor or other Person party to any Loan Document, to execute
and/or re-execute and to deliver to Lender or Lender’s counsel, as may be deemed
appropriate, any document or instrument signed in connection with this Agreement
which was incorrectly drafted and/or signed, as well as any document or
instrument which should have been signed at or prior to the Closing, but which
was not so signed and delivered.  Borrower agrees to comply with any written
request by Lender within ten (10) days after receipt by Borrower of such
request.
 
9.20 Advertisement.
 
a. Lender, in its sole discretion, shall have the right to announce and
publicize the financing established hereunder, as it deems appropriate, by means
and media selected by Lender.  Such publication shall include all pertinent
information relating to such financing, including without limitation, the term,
purpose, pricing, loan amount, name of Borrower and location of any Real
Property.
 
b. The form and content of the published information shall be in the sole
discretion of Lender and shall be considered the sole and exclusive property of
Lender.  All expenses related to publicizing the financing shall be the sole
responsibility of Lender.
 
9.21 Waiver of Jury Trial.  BORROWER AND LENDER EACH HEREBY WAIVE ANY AND ALL
RIGHTS IT MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION, PROCEEDING
OR COUNTERCLAIM ARISING WITH RESPECT TO RIGHTS AND OBLIGATIONS OF THE PARTIES
HERETO OR UNDER THE LOAN DOCUMENTS OR WITH RESPECT TO ANY CLAIMS ARISING OUT OF
ANY DISCUSSIONS, NEGOTIATIONS OR COMMUNICATIONS INVOLVING OR RELATED TO ANY
PROPOSED RENEWAL, EXTENSION, AMENDMENT, MODIFICATION, RESTRUCTURE, FORBEARANCE,
WORKOUT, OR ENFORCEMENT OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS.
 
9.22 Consequential Damages.  Neither Lender nor agent or attorney of Lender,
shall be liable for any consequential damages arising from any breach of
contract, tort or other wrong relating to the establishment, administration or
collection of the Obligations.
 
[SIGNATURES TO FOLLOW ON SEPARATE PAGE]
 
 
 
 
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 IN WITNESS WHEREOF, the undersigned parties have executed this Agreement the
day and year first above written.
 
WPCS INTERNATIONAL INCORPORATED
 
By: /s/ JOSEPH HEATER
Name: Joseph Heater
Title: Chief Financial Officer
 
WPCS INTERNATIONAL – SUISUN CITY, INC.
 
By: /s/ JOSEPH HEATER
Name: Joseph Heater
Title: Authorized Signatory
 
WPCS INTERNATIONAL – SEATTLE, INC.
 
By: /s/ JOSEPH HEATER
Name: Joseph Heater
Title: Authorized Signatory
 
WPCS INTERNATIONAL – PORTLAND, INC.
 
By: /s/ JOSEPH HEATER
Name: Joseph Heater
Title: Authorized Signatory
 
WPCS INTERNATIONAL – HARTFORD, INC.
 
By: /s/ JOSEPH HEATER
Name: Joseph Heater
Title: Authorized Signatory
 
WPCS INTERNATIONAL – LAKEWOOD, INC.
 
By: /s/ JOSEPH HEATER
Name: Joseph Heater
Title: Authorized Signatory
 
WPCS INTERNATIONAL – TRENTON, INC.
 
By: /s/ JOSEPH HEATER
Name: Joseph Heater
Title: Authorized Signatory
 
SOVEREIGN BANK, N.A.
 
By: /s/ ROBERT BUSHEY
Name: Robert Bushey
Title: Senior Vice President
 
 
 
 
 
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EXHIBIT “A”
 
FORM OF AUTHORIZATION CERTIFICATE
 
(Borrower Letterhead)
 
Date: _______________
 
Sovereign Bank, N.A.
 
1500 Market Street, 25th floor
 
Centre Square West
 
Philadelphia, PA 19102
 
Attention: Robert Bushey, SVP
 
Telecopy No.: 215-568-9587
 
Dear _____________:
 
The following individuals are authorized to request loan advances against
(Borrower’s Name) (“Borrower”) line of credit and transfer funds from any of
Borrower’s accounts per written instructions received via fax:
 
Authorized Person
Title
Signature
1.           _________________
_____________________
_______________________
2.           __________________
_____________________
_______________________
3.           __________________
_____________________
_______________________
     

The following personnel are authorized to sign all Borrowing Base Certificates:
 
Authorized Person
Title
Signature
1.           _________________
_____________________
_______________________
2.           __________________
_____________________
_______________________
3.           __________________
_____________________
_______________________
     

 
Acknowledged and approved:
 
By:   ______________________________
                                                                        
Name:  ____________________________
                                                                         
Title:   _____________________________                                                                        
 
 
 
 
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EXHIBIT “B”
 
FORM OF REVOLVING CREDIT ADVANCE REQUEST
 
[BORROWER NAME]
 
[Address]
 
_______________________
 
_______________________
 
_______________________
 
(“Borrower”)
 
To:
 
Sovereign Bank, N.A.
 
1500 Market Street, 25th floor
 
Centre Square West
 
Philadelphia, PA 19102
 
Attention: Robert Bushey, SVP
 
Telecopy No.: 215-568-9587
 
(“Lender”)
 
Borrower hereby requests an Advance in the amount of $___________ pursuant to
Section Section 2.1 of that certain Loan and Security agreement by and among
Borrower and Lender dated January ___, 2012 (the “Loan Agreement”).
 
Borrower hereby represents and warrants to Lender as follows:
 
a. There exists no Default or Event of Default under the Loan Agreement.
 
b. All representations, warranties and covenants made in the Loan Agreement are
true and correct as of the date hereof.
 
c. The aggregate principal amount of all Advances outstanding under the
Revolving Credit are $_____________.
 
 

    [BORROWER]               By:   _________________________________            
  Name: ________________________________              Date:  _____________,
200_       Title  _________________________________          

 
 
 
                                                             
 
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EXHIBIT “C”
 
FORM OF BORROWING BASE CERTIFICATE
 
[To be provided by Lender]
 
 
 
 
 
 
 
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EXHIBIT “D”
 
QUARTERLY COMPLIANCE CERTIFICATE
 
_____________, 200_
 
Sovereign Bank, N.A.
 
1500 Market Street, 25th floor
 
Centre Square West
 
Philadelphia, PA 19102
 
Attention: Robert Bushey, SVP
 
Telecopy No.: 215-568-9587
 
The undersigned, the President of Borrower (as defined in the Loan Agreement
referenced below), gives this certificate to Sovereign Bank, N.A. ("Lender"), in
accordance with the requirements of Section 6.10 of that certain Loan and
Security Agreement dated January __, 2012, by and between Borrower and Lender
("Loan Agreement").  Capitalized terms used in this Certificate, unless
otherwise defined herein, shall have the meanings ascribed to them in the Loan
Agreement.
 
1.           Based upon my review of the consolidated balance sheets and
statements of income of Borrower for the fiscal period ending
__________________, 200_, copies of which are attached hereto, I hereby certify
that:
 
a. The Fixed Charge Coverage Ratio of Borrower is ___________________; and
 
b. The Leverage Ratio of Borrower is ___________________.
 
Attached as Schedule "A" are the details underlying such financial covenant
calculations.
 
2.           No Default exists on the date hereof, other than:
____________________  [if none, so state]; and
 
3.           No Event of Default exists on the date hereof, other than:
__________________ [if none, so state].
 
 

    Very truly yours,               By: _______________________              
Name: _____________________               Title: ______________________  

 
 

 
 
 
 
 
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