Exhibit 10.04

 

SECURITY AND PLEDGE AGREEMENT

 

SECURITY AND PLEDGE AGREEMENT, dated as of December __, 2012 (this “Agreement”)
made by WPCS International Incorporated, a Delaware corporation (the “Company”),
and each of the undersigned subsidiaries of the Company from time to time, if
any (each a “Grantor” and collectively and together with the Company the
“Grantors”), in favor of Worldwide Stock Transfer LLC, a New Jersey limited
liability company, in its capacity as collateral agent (in such capacity, the
“Collateral Agent”) for the “Buyers” (as defined below) party to the Securities
Purchase Agreement, dated as of December 4, 2012 (as amended, restated or
otherwise modified from time to time, the “Securities Purchase Agreement”).

 

WITNESSETH:

 

WHEREAS, the Company and each party listed as a “Buyer” on the Schedule of
Buyers attached thereto (collectively, the “Buyers”) are parties to the
Securities Purchase Agreement, pursuant to which the Company shall be required
to sell, and the Buyers shall purchase or have the right to purchase, the
“Notes” (as defined therein) issued pursuant thereto (as such Notes may be
amended, restated, replaced or otherwise modified from time to time in
accordance with the terms thereof, collectively, the “Notes”);

 

WHEREAS, certain Grantors from time to time (other than the Company)
(collectively, the “Guarantors”) may execute and deliver one or more guarantees
(each, a “Guaranty”) in form and substance acceptable to and in favor of the
Collateral Agent for the benefit of itself and the Buyers, with respect to the
Company’s obligations under the Securities Purchase Agreement, the Notes and the
Transaction Documents (as defined below);

 

WHEREAS, it is a condition precedent to the Buyers purchasing the Notes issued
pursuant to the Securities Purchase Agreement that the Grantors shall have
executed and delivered to the Collateral Agent this Agreement providing for the
grant to the Collateral Agent, for the benefit of the Buyers, of a security
interest in all personal property of each Grantor to secure all of the Company’s
obligations under the Securities Purchase Agreement, the Notes and the other
“Transaction Documents” (as defined in the Securities Purchase Agreement) (the
“Transaction Documents”) and the Guarantors’ obligations under any such
Guaranty, as applicable; and

 

WHEREAS, the Grantors have determined that the execution, delivery and
performance of this Agreement directly benefits, and is in the best interest of,
the Grantors.

 

NOW, THEREFORE, in consideration of the premises and the agreements herein and
in order to induce the Buyers to perform under the Securities Purchase
Agreement, each Grantor agrees with the Collateral Agent, for the benefit of the
Buyers, as follows:

 

Section 1.      Definitions.

 

(a)                Reference is hereby made to the Securities Purchase Agreement
and the Notes for a statement of the terms thereof. All terms used in this
Agreement and the recitals hereto which are defined in the Securities Purchase
Agreement, the Notes or in Articles 8 or 9 of the Uniform Commercial Code as in
effect from time to time in the State of Illinois (the “Code”), and which are
not otherwise defined herein shall have the same meanings herein as set forth
therein; provided that terms used herein which are defined in the Code as in
effect in the State of New York on the date hereof shall continue to have the
same meaning notwithstanding any replacement or amendment of such statute except
as the Collateral Agent may otherwise determine; provided, further that, if
perfection or the effect of perfection or non-perfection or the priority of any
security interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than the State of New York, “Code” means
the Uniform Commercial Code as in effect from time to time in such other
jurisdiction for purposes of the provisions hereof relating to such perfection,
effect of perfection or non-perfection or priority.

 

 

 

 

(b)               The following terms shall have the respective meanings
provided for in the Code: “Accounts”, “Cash Proceeds”, “Certificate of Title”,
“Chattel Paper”, “Commercial Tort Claim”, “Commodity Account”, “Commodity
Contracts”, “Deposit Account”, “Documents”, “Equipment”, “Fixtures”, “General
Intangibles”, “Goods”, “Instruments”, “Inventory”, “Investment Property”,
“Letter-of-Credit Rights”, “Noncash Proceeds”, “Payment Intangibles”,
“Proceeds”, “Promissory Notes”, “Security”, “Record”, “Security Account”,
“Software”, and “Supporting Obligations”.

 

(c)                As used in this Agreement, the following terms shall have the
respective meanings indicated below, such meanings to be applicable equally to
both the singular and plural forms of such terms:

 

“Capital Stock” means (i) with respect to any Person that is a corporation, any
and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, and (ii) with respect
to any Person that is not a corporation, any and all partnership, membership or
other equity interests of such Person.

 

“Cash Release Amount” has the meaning set forth in the Notes.

 

“Cash and Receivables Report” has the meaning set forth in the Notes.

 

“Collateral” has the meaning set forth in Section 2 of this Agreement.

 

“Collateral Agency Agreement” means that certain Collateral Agency Agreement
dated as of the date hereof by and among Collateral Agent, Buyers and Company.

 

“Collection Account Bank” has the meaning set forth in Section 5(i)(B) of this
Agreement.

 

“Controlled Account Agreement” means a control agreement, in form and substance
satisfactory to Collateral Agent, executed and delivered by a Grantor,
Collateral Agent either an applicable securities intermediary (with respect to a
Securities Account) or bank (with respect to a Deposit Account) with respect to
a Controlled Account, as may be amended, restated, supplemented, or otherwise
modified from time to time.

 

 

 

 

“Controlled Accounts” has the meaning set forth in Section 5(i)(A) of this
Agreement.

 

“Copyright Licenses” means all licenses, contracts or other agreements, whether
written or oral, naming any Grantor as licensee or licensor and providing for
the grant of any right to use or sell any works covered by any copyright
(including, without limitation, all Copyright Licenses set forth in Schedule II
hereto).

 

“Copyrights” means all domestic and foreign copyrights, whether registered or
not, including, without limitation, all copyright rights throughout the universe
(whether now or hereafter arising) in any and all media (whether now or
hereafter developed), in and to all original works of authorship fixed in any
tangible medium of expression, acquired or used by any Grantor (including,
without limitation, all copyrights described in Schedule II hereto), all
applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Copyright Office or in any similar office or agency of the United States or any
other country or any political subdivision thereof), and all reissues,
divisions, continuations, continuations in part and extensions or renewals
thereof.

 

“Event of Default” shall have the meaning set forth in the Notes.

 

“Foreign Currency Controlled Accounts” means any account of the Company or its
Subsidiaries holding non-United States dollar deposits.

 

“Foreign Subsidiary” has the meaning set forth in Section 2 of this Agreement.

 

“GAAP” has the meaning set forth in Section 4(c) of this Agreement.

 

“Governmental Authority” means any nation or government, any Federal, state,
city, town, municipality, county, local or other political subdivision thereof
or thereto and any department, commission, board, bureau, instrumentality,
agency or other entity exercising executive, legislative, judicial, taxing,
regulatory or administrative powers or functions of or pertaining to government.

 

“Insolvency Proceeding” means any proceeding commenced by or against any Person
under any provision of the Bankruptcy Code (Chapter 11 of Title 11 of the United
States Code) or under any other bankruptcy or insolvency law, assignments for
the benefit of creditors, formal or informal moratoria, compositions, or
extensions generally with creditors, or proceedings seeking reorganization,
arrangement, or other similar relief.

 

“Intellectual Property” means the Copyrights, Trademarks and Patents.

 

“Licenses” means the Copyright Licenses, the Trademark Licenses and the Patent
Licenses.

 

“Lien” means any mortgage, lien, pledge, charge, security interest or other
encumbrance upon or in any property or assets (including accounts and contract
rights).

 

“Lockbox, Cash & Receivables Balance” has the meaning set forth in the Notes.

 

 

 

 

“Master Collection Account” means account number 7675415108 held at Sovereign
Bank, N.A. subject to a Controlled Account Agreement in favor of the Collateral
Agent in the form attached hereto as Exhibit B-3 or such other form reasonably
acceptable to the Collateral Agent.

 

“Non-Public Certification” has the meaning set forth in Section 11 of this
Agreement.

 

“Obligations” has the meaning set forth in Section 3 of this Agreement.

 

“Operating Accounts” means, collectively, each of account number 7581049124,
7581049345, 7581049078, 7581049051, 7581050912, 7581049094, 7581049086,
7581050378 and 7581049108 held at Sovereign Bank, N.A. or such other operating
accounts as agreed to in writing by Collateral Agent, in each case, so long as
each such account is subject to a Controlled Account Agreement in favor of the
Collateral Agent in the form attached hereto as Exhibit B-1 or such other form
reasonably acceptable to the Collateral Agent.

 

“Patent Licenses” means all licenses, contracts or other agreements, whether
written or oral, naming any Grantor as licensee or licensor and providing for
the grant of any right to manufacture, use or sell any invention covered by any
Patent (including, without limitation, all Patent Licenses set forth in Schedule
II hereto).

 

“Patents” means all domestic and foreign letters patent, design patents, utility
patents, industrial designs, inventions, trade secrets, ideas, concepts,
methods, techniques, processes, proprietary information, technology, know-how,
formulae, rights of publicity and other general intangibles of like nature, now
existing or hereafter acquired (including, without limitation, all domestic and
foreign letters patent, design patents, utility patents, industrial designs,
inventions, trade secrets, ideas, concepts, methods, techniques, processes,
proprietary information, technology, know-how and formulae described in Schedule
II hereto), all applications, registrations and recordings thereof (including,
without limitation, applications, registrations and recordings in the United
States Patent and Trademark Office, or in any similar office or agency of the
United States or any other country or any political subdivision thereof), and
all reissues, divisions, continuations, continuations in part and extensions or
renewals thereof.

 

“Perfection Requirement” or “Perfection Requirements” has the meaning set forth
in Section 4(i) of this Agreement.

 

“Person” means an individual, corporation, limited liability company,
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture or other enterprise or entity or Governmental
Authority.

 

“Pledged Entity” means, each Person listed from time to time on Schedule IV
hereto as a “Pledged Entity,” together with each other Person all or a portion
of whose Capital Stock is acquired or otherwise owned by a Grantor after the
date hereof.

 

“Pledged Equity” means all of each Grantor’s right, title and interest in and to
all of the Securities and Capital Stock now or hereafter owned by such Grantor,
regardless of class or designation, including all substitutions therefor and
replacements thereof, all proceeds thereof and all rights relating thereto, also
including any certificates representing the Securities and/or Capital Stock, the
right to receive any certificates representing any of the Securities and/or
Capital Stock, all warrants, options, share appreciation rights and other
rights, contractual or otherwise, in respect thereof, and the right to receive
dividends, distributions of income, profits, surplus, or other compensation by
way of income or liquidating distributions, in cash or in kind, and cash,
instruments, and other property from time to time received, receivable, or
otherwise distributed in respect of or in addition to, in substitution of, on
account of, or in exchange for any or all of the foregoing.

 

 

 

 

“Pledged Operating Agreements” means all of each Grantor’s rights, powers, and
remedies under the limited liability company operating agreements of each
Pledged Entity that are limited liability companies, as may be amended,
restated, supplemented, or otherwise modified from time to time.

 

“Pledged Partnership Agreements” means all of each Grantor’s rights, powers, and
remedies under the partnership agreements of each Pledged Entity that are
partnerships, as may be amended, restated, supplemented, or otherwise modified
from time to time.

 

“Subsidiary” shall have the meaning set forth in the Notes.

 

“Sweep” shall have the meaning as set forth in Section 5(i)(A).

 

“Sweep Accounts” means, collectively, each of account number 7675413377,
7675414837, 7675414365 and 7675413849 held at Sovereign Bank, N.A. or such other
Controlled Accounts as agreed to in writing by Collateral Agent, in each case,
so long as each such account is subject to a Controlled Account Agreement in
favor of the Collateral Agent in the form attached hereto as Exhibit B-2 or such
other form reasonably acceptable to the Collateral Agent.

 

“Trademark Licenses” means all licenses, contracts or other agreements, whether
written or oral, naming any Grantor as licensor or licensee and providing for
the grant of any right concerning any Trademark, together with any goodwill
connected with and symbolized by any such trademark licenses, contracts or
agreements and the right to prepare for sale or lease and sell or lease any and
all Inventory now or hereafter owned by any Grantor and now or hereafter covered
by such licenses (including, without limitation, all Trademark Licenses
described in Schedule II hereto).

 

“Trademarks” means all domestic and foreign trademarks, service marks,
collective marks, certification marks, trade names, business names, d/b/a’s,
Internet domain names, trade styles, designs, logos and other source or business
identifiers and all general intangibles of like nature, now or hereafter owned,
adopted, acquired or used by any Grantor (including, without limitation, all
domestic and foreign trademarks, service marks, collective marks, certification
marks, trade names, business names, d/b/a’s, Internet domain names, trade
styles, designs, logos and other source or business identifiers described in
Schedule II hereto), all applications, registrations and recordings thereof
(including, without limitation, applications, registrations and recordings in
the United States Patent and Trademark Office or in any similar office or agency
of the United States, any state thereof or any other country or any political
subdivision thereof), and all reissues, extensions or renewals thereof, together
with all goodwill of the business symbolized by such marks and all customer
lists, formulae and other Records of any Grantor relating to the distribution of
products and services in connection with which any of such marks are used.

  

 

 

 

“WPCS Australia” means, collectively, WPCS Australia Pty Ltd and its direct and
wholly owned subsidiaries.

 

“WPCS China” means, collectively, Taian AGS Pipeline Construction Co. Ltd., WPCS
Asia Limited and their direct and wholly owned subsidiaries.

  

SECTION 2.      Grant of Security Interest. As collateral security for all of
the “Obligations” (as defined in Section 3 hereof), each Grantor hereby pledges
and assigns to the Collateral Agent for itself and for the benefit of the
Buyers, and grants to the Collateral Agent for itself and for the benefit of the
Buyers, a continuing security interest in all personal property and assets of
such Grantor, wherever located and whether now or hereafter existing and whether
now owned or hereafter acquired, of every kind and description, tangible or
intangible (collectively, the “Collateral”), including, without limitation, the
following:

 

(a)                all Accounts;

 

(b)               all Chattel Paper (whether tangible or electronic);

 

(c)                the Commercial Tort Claims specified on Schedule VI hereto;

 

(d)               all Deposit Accounts, all cash and other property from time to
time deposited therein and the monies and property in the possession or under
the control of the Collateral Agent or any Buyer or any affiliate,
representative, agent or correspondent of the Collateral Agent or any such
Buyer;

 

(e)               all Documents;

 

(f)                all Equipment;

 

(g)               all Fixtures;

 

(h)               all General Intangibles (including, without limitation, all
Payment Intangibles);

 

(i)                all Goods;

 

(j)                all Instruments (including, without limitation, Promissory
Notes and each certificated Security);

 

(k)               all Inventory;

 

 

 

 

(l)                all Investment Property (and, regardless of whether
classified as Investment Property under the Code, all Pledged Equity, Pledged
Operating Agreements and Pledged Partnership Agreements);

 

(m)             all Copyrights, Patents and Trademarks, and all Licenses;

 

(n)               all Letter-of-Credit Rights;

 

(o)               all Supporting Obligations;

 

(p)               all other tangible and intangible personal property of each
Grantor (whether or not subject to the Code), including, without limitation, all
bank and other accounts and all cash and all investments therein, all proceeds,
products, offspring, accessions, rents, profits, income, benefits, substitutions
and replacements of and to any of the property of any Grantor described in the
preceding clauses of this Section 2 (including, without limitation, any proceeds
of insurance thereon and all causes of action, claims and warranties now or
hereafter held by each Grantor in respect of any of the items listed above), and
all books, correspondence, files and other Records, including, without
limitation, all tapes, desks, cards, Software, data and computer programs in the
possession or under the control of any Grantor or any other Person from time to
time acting for any Grantor, in each case, to the extent of such Grantor’s
rights therein, that at any time evidence or contain information relating to any
of the property described in the preceding clauses of this Section 2 or are
otherwise necessary or helpful in the collection or realization thereof; and

 

(q)               all Proceeds, including all Cash Proceeds and Noncash
Proceeds, and products of any and all of the foregoing Collateral;

 

in each case howsoever any Grantor’s interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise).

 

Notwithstanding anything herein to the contrary, the term “Collateral” shall not
include, in the case of a Subsidiary of such Grantor organized under the laws of
a jurisdiction other than the United States, any of the states thereof or the
District of Columbia (a “Foreign Subsidiary”), more than (i) with respect to any
Subsidiary of such Grantor organized under the laws of The People’s Republic of
China, 60% of the total combined voting power of all classes of Capital Stock
entitled to vote, or (ii) with respect to any other Persons now or hereafter
existing that would constitute a Foreign Subsidiary of such Grantor, 100% of the
nonvoting Capital Stock and 66% of the total combined voting power of all
classes of Capital Stock entitled to vote if such action would result in
material adverse, incremental tax liabilities to such Grantor under Section 956
of the Internal Revenue Code; and (B) any assets owned as of the date hereof by
any Subsidiary organized under the laws of The People’s Republic of China or
Australia.

 

Each Grantor has agreed not to further encumber any of its Copyrights, Copyright
applications, Copyright registrations and like protections in each work of
authorship and derivative work, whether published or unpublished, any Licenses,
Patents, Patent applications and like protections, including improvements,
divisions, continuations, renewals, reissues, extensions, and
continuations-in-part of the same, Trademarks, service marks and, to the extent
permitted under applicable law, any applications therefor, whether registered or
not, and the goodwill of the business of such Grantor connected with and
symbolized thereby, know-how, operating manuals, trade secret rights, rights to
unpatented inventions, and any claims for damage by way of any past, present, or
future infringement of any of the foregoing, without the Collateral Agent’s
prior written consent (which consent may be withheld or given in Collateral
Agent’s sole discretion).

 

 

 

 

The Grantors agree that the pledge of the shares of Capital Stock acquired by a
Grantor of any and all Persons now or hereafter existing who is a Foreign
Subsidiary may be supplemented by one or more separate pledge agreements, deeds
of pledge, share charges, or other similar agreements or instruments, executed
and delivered by the relevant Grantors in favor of the Collateral Agent, which
pledge agreements will provide for the pledge of such shares of Capital Stock in
accordance with the laws of the applicable foreign jurisdiction. With respect to
such shares of Capital Stock, the Collateral Agent may, at any time and from
time to time, in its sole discretion, take actions in such foreign jurisdictions
that will result in the perfection of the Lien created in such shares of Capital
Stock.

 

In addition, to secure the prompt and complete payment, performance and
observance of the Obligations and in order to induce the Buyers as aforesaid,
each Grantor hereby grants to Collateral Agent for itself and for the ratable
benefit of the Buyers, a right of set-off against the property of such Grantor
held by the Collateral Agent for itself and for the ratable benefit of the
Buyers, consisting of property described above in Section 2 now or hereafter in
the possession or custody of or in transit to the Collateral Agent, for any
purpose, including safekeeping, collection or pledge, for the account of such
Grantor, or as to which such Grantor may have any right or power; provided that
such right shall only to be exercised after an Event of Default has occurred and
is continuing.

 

SECTION 3.      Security for Obligations. The security interest created hereby
in the Collateral constitutes continuing collateral security for all of the
following obligations, whether now existing or hereafter incurred (collectively,
the “Obligations”):

 

(a)                for so long as the Notes are outstanding, (i) the payment by
the Company, as and when due and payable (by scheduled maturity, required
prepayment, acceleration, demand or otherwise), of all amounts from time to time
owing by it in respect of the Securities Purchase Agreement, this Agreement, the
Notes and the other Transaction Documents, and (ii) in the case of any
Guarantors, the payment by such Guarantors, as and when due and payable of all
“Guaranteed Obligations” under (and as defined in) each Guaranty (if any), as
applicable, including, without limitation, in both cases, (A) all principal of
and interest on the Notes (including, without limitation, all interest that
accrues after the commencement of any Insolvency Proceeding of any Grantor,
whether or not the payment of such interest is unenforceable or is not allowable
due to the existence of such Insolvency Proceeding), and (B) all fees, interest,
premiums, penalties, contract causes of action, costs, commissions, expense
reimbursements, indemnifications and all other amounts due or to become due
under this Agreement or any of the Transaction Documents; and

 

(b)               for so long as the Notes are outstanding, the due performance
and observance by each Grantor of all of its other obligations from time to time
existing in respect of any of the Transaction Documents, including without
limitation, with respect to any conversion or redemption rights of the Buyers
under the Notes.

 

 

 

 

SECTION 4.      Representations and Warranties. Each Grantor represents and
warrants as of the date of this Agreement as follows:

 

(a)                Schedule I hereto sets forth (i) the exact legal name of each
Grantor, and (ii) the state of incorporation, organization or formation and the
organizational identification number of each Grantor in such state. The
information set forth in Schedule I hereto with respect to such Grantor is true
and accurate in all respects. Such Grantor has not previously changed its name,
jurisdiction of organization or organizational identification number from those
set forth in Schedule I hereto except as disclosed in Schedule I hereto.

 

(b)               There is no pending or, to its knowledge, written notice
threatening any action, suit, proceeding or claim affecting any Grantor before
any Governmental Authority or any arbitrator, or any order, judgment or award
issued by any Governmental Authority or arbitrator, in each case, that may
adversely affect the grant by any Grantor, or the perfection, of the security
interest purported to be created hereby in the Collateral, or the exercise by
the Collateral Agent of any of its rights or remedies hereunder.

 

(c)                All Federal, state and local tax returns and other reports
required by applicable law to be filed by any Grantor have been filed, or
extensions have been obtained, and all taxes, assessments and other governmental
charges imposed upon any Grantor or any property of any Grantor (including,
without limitation, all federal income and social security taxes on employees’
wages) and which have become due and payable on or prior to the date hereof have
been paid, except to the extent contested in good faith by proper proceedings
which stay the imposition of any penalty, fine or Lien resulting from the
non-payment thereof or for which the non-payment of such amounts would not have
a Material Adverse Effect and with respect to which adequate reserves have been
set aside for the payment thereof in accordance with generally accepted
accounting principles consistently applied (“GAAP”).

 

(d)               All Equipment, Fixtures, Goods and Inventory of each Grantor
now existing are, and all Equipment, Fixtures, Goods and Inventory of each
Grantor hereafter existing will be, located and/or based at the addresses
specified therefor in Schedule III hereto, except that each Grantor will give
the Collateral Agent written notice of any change in the location of any such
Collateral within 20 days of such change, other than to locations set forth on
Schedule III hereto (or a new Schedule III delivered by Grantors to Collateral
Agent from time to time) and with respect to which the Collateral Agent has
filed financing statements and otherwise fully perfected its Liens thereon or
will take such actions pursuant to Section 5(n). Each Grantor’s chief place of
business and chief executive office, the place where each Grantor keeps its
Records concerning Accounts and all originals of all Chattel Paper are located
at the addresses specified therefor in Schedule III hereto. None of the Accounts
is evidenced by Promissory Notes or other Instruments. Set forth in Schedule IV
hereto is a complete and accurate list, as of the date of this Agreement, of (i)
each Promissory Note, Security and other Instrument owned by each Grantor, (ii)
each Deposit Account, Securities Account and Commodities Account of each
Grantor, together with the name and address of each institution at which each
such account is maintained, the account number for each such account and a
description of the purpose of each such account and (iii) the name of each
Foreign Currency Controlled Account, together with the name and address of each
institution at which each such account is maintained and the amount of cash or
cash equivalents held in each such Foreign Currency Controlled Account. Set
forth in Schedule II hereto is a complete and correct list of each trade name
used by each Grantor and the name of, and each trade name used by, each person
from which each Grantor has acquired any substantial part of the Collateral.

 

 

 

 

(e)                Each Grantor has delivered to the Collateral Agent complete
and correct copies of each License described in Schedule II hereto, including
all schedules and exhibits thereto, which represent all of the Licenses existing
on the date of this Agreement. Each such License sets forth the entire agreement
and understanding of the parties thereto relating to the subject matter thereof,
and there are no other agreements, arrangements or understandings, written or
oral, relating to the matters covered thereby or the rights of such Grantor or
any of its affiliates in respect thereof. Each material License now existing is,
and any material License entered into in the future will be, the legal, valid
and binding obligation of the parties thereto, enforceable against such parties
in accordance with its terms. No default under any material License by any such
party has occurred, nor does any defense, offset, deduction or counterclaim
exist thereunder in favor of any such party.

 

(f)                Each Grantor owns and controls, or otherwise possesses
adequate rights to use, all Trademarks, Patents and Copyrights, which are the
only trademarks, patents, copyrights, inventions, trade secrets, proprietary
information and technology, know-how, formulae, and rights of publicity
necessary to conduct its business in substantially the same manner as conducted
as of the date hereof. Schedule II hereto sets forth a true and complete list of
all registered copyrights, issued Patents, Trademarks, and Licenses owned or
used by each Grantor as of the date hereof. To the best knowledge of each
Grantor, all such Intellectual Property of each Grantor is subsisting and in
full force and effect, has not been adjudged invalid or unenforceable, is valid
and enforceable and has not been abandoned in whole or in part. Except as set
forth in Schedule II, no such Intellectual Property is the subject of any
licensing or franchising agreement. Except as set forth in Schedule II, no
Grantor has any knowledge of any conflict with the rights of others to any such
Intellectual Property and, to the best knowledge of each Grantor, each Grantor
is not now infringing or in conflict with any such rights of others in any
material respect, and to the best knowledge of each Grantor, no other Person is
now infringing or in conflict in any material respect with any such properties,
assets and rights owned or used by each Grantor. Except as set forth in Schedule
II, no Grantor has received any notice that it is violating or has violated the
trademarks, patents, copyrights, inventions, trade secrets, proprietary
information and technology, know-how, formulae, rights of publicity or other
intellectual property rights of any third party.

 

(g)               Each Grantor is and will be at all times the sole and
exclusive owner of, or otherwise has and will have adequate rights in, the
Collateral free and clear of any Liens, except for Permitted Liens. No effective
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording or filing office except such
as (i) may have been filed in favor of the Collateral Agent and/or the Buyers
relating to this Agreement or the other Transaction Documents and (ii) are
securing Permitted Liens as of the date hereof and disclosed on Schedule 4(g).

 

 

 

 

(h)               The exercise by the Collateral Agent of any of its rights and
remedies hereunder will not contravene any law or any contractual restriction
binding on or otherwise affecting each Grantor or any of its properties and will
not result in or require the creation of any Lien, upon or with respect to any
of its properties.

 

(i)                 No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or other regulatory body,
is required for (i) the grant by each Grantor, or the perfection, of the
security interest purported to be created hereby in the Collateral, or (ii) the
exercise by the Collateral Agent of any of its rights and remedies hereunder,
except (A) for the filing under the Uniform Commercial Code as in effect in the
applicable jurisdiction of the financing statements described in Schedule V
hereto, all of which financing statements have been duly filed and are in full
force and effect, (B) with respect to Deposit Accounts, and all cash and other
property from time to time deposited therein, for the execution of a Controlled
Account Agreement with the depository institution with which such account is
maintained, as provided in Section 5(i), (C) with respect to Commodity
Contracts, for the execution of a control agreement with the commodity
intermediary with which such commodity contract is carried, as provided in
Section 5(i), (D) with respect to the perfection of the security interest
created hereby in the United States Intellectual Property and Licenses, for the
recording of the appropriate Assignment for Security, substantially in the form
of Exhibit A hereto in the United States Patent and Trademark Office or the
United States Copyright Office, as applicable, (E) with respect to the
perfection of the security interest created hereby in foreign Intellectual
Property and Licenses, for registrations and filings in jurisdictions located
outside of the United States and covering rights in such jurisdictions relating
to such foreign Intellectual Property and Licenses, (F) with respect to the
perfection of the security interest created hereby in any Letter-of-Credit
Rights, for the consent of the issuer of the applicable letter of credit to the
assignment of proceeds as provided in the Uniform Commercial Code as in effect
in the applicable jurisdiction, (G) with respect to Investment Property
constituting uncertificated securities, the applicable Grantor will cause the
issuer thereof either (i) to register the Collateral Agent as the registered
owner of such security or (ii) to agree in an authenticated record with such
Grantor and the Collateral Agent that such issuer will comply with instructions
with respect to such security originated by the Collateral Agent without further
consent of such Grantor, such authenticated record to be in form and substance
satisfactory to the Collateral Agent, (H) with respect to Investment Property
constituting certificated securities or instruments, such items shall be
delivered to and held by or on behalf of the Collateral Agent pursuant hereto
and shall be in suitable form for transfer by delivery, or shall be accompanied
by duly executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Collateral Agent, (I) with respect to any action
that may be necessary to obtain control of Collateral constituting Deposit
Accounts, Commodity Contracts, Electronic Chattel Paper, or Letter of Credit
Rights, the taking of such actions, and (J) the Collateral Agent having
possession of all Documents, Chattel Paper, Instruments and cash constituting
Collateral (subclauses (A), (B), (C), (D), (E), (F), (G), (H), (I) and (J) each
a “Perfection Requirement” and collectively, the “Perfection Requirements”).

 

(j)                 This Agreement creates in favor of the Collateral Agent a
legal, valid and enforceable security interest in the Collateral, as security
for the Obligations. The performance of the Perfection Requirements results in
the perfection of such security interests. Such security interests are, or in
the case of Collateral in which each Grantor obtains rights after the date
hereof, will be, perfected, first priority security interests, subject only to
Permitted Liens and the Perfection Requirements. Such recordings and filings and
all other action necessary to perfect and protect such security interest have
been duly taken or will be taken pursuant to Section 5(m), and, in the case of
Collateral in which any Grantor obtains rights after the date hereof, will be
duly taken, except for the Collateral Agent’s having possession of all
Documents, Chattel Paper, Instruments and cash constituting Collateral after the
date hereof and the other actions, filings and recordations described above,
including the Perfection Requirements.

 

 

 

 

(k)               As of the date hereof, no Grantor holds any Commercial Tort
Claims or has knowledge of any pending Commercial Tort Claims, except for such
Commercial Tort Claims described in Schedule VI.

 

(l)                 All of the Pledged Equity is presently owned by the
applicable Grantor as set forth in Schedule IV, and is presently represented by
the certificates listed on Schedule IV hereto. As of the date hereof, there are
no existing options, warrants, calls or commitments of any character whatsoever
relating to the Pledged Equity other than as contemplated and permitted by the
Transaction Documents. Each Grantor is the sole holder of record and the sole
beneficial owner of the Pledged Equity, as applicable. None of the Pledged
Equity has been issued or transferred in violation of the securities
registration, securities disclosure or similar laws of any jurisdiction to which
such issuance or transfer may be subject. The Pledged Equity constitutes 100% or
such other percentage as set forth of Schedule IV of the issued and outstanding
shares of Capital Stock of the applicable Pledged Entity.

 

(m)             Each Grantor hereby represents and warrants as of the date first
written above as follows:

 

(i)                 Such Grantor (A) is a corporation, limited liability company
or limited partnership duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization, (B) has all requisite
corporate, limited liability company or limited partnership power and authority
to conduct its business as now conducted and as presently contemplated and to
execute and deliver this Agreement and each other Transaction Document to which
such Grantor is a party, and to consummate the transactions contemplated hereby
and thereby and (C) is duly qualified to do business and is in good standing in
each jurisdiction in which the character of the properties owned or leased by it
or in which the transaction of its business makes such qualification necessary
except where the failure to be so qualified would not result in a Material
Adverse Effect.

 

(ii)               The execution, delivery and performance by each Grantor of
this Agreement and each other Transaction Document to which such Grantor is a
party (A) have been duly authorized by all necessary corporate, limited
liability company or limited partnership action, (B) do not and will not
contravene its charter or by-laws, its limited liability company or operating
agreement or its certificate of partnership or partnership agreement, as
applicable, or any applicable law or any contractual restriction binding on such
Grantor or its properties, (C) do not and will not result in or require the
creation of any lien (other than pursuant to any Transaction Document) upon or
with respect to any of its properties, and (D) do not and will not result in any
default, noncompliance, suspension, revocation, impairment, forfeiture or
nonrenewal of any material permit, license, authorization or approval applicable
to it or its operations or any of its properties.

 

 

 

 

(iii)             Each of this Agreement and the other Transaction Documents to
which any Grantor is or will be a party, when delivered, will be, a legal, valid
and binding obligation of the Grantor, enforceable against such Grantor in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, suretyship or
other similar laws and equitable principles (regardless of whether enforcement
is sought in equity or at law).

 

(iv)             There are no conditions precedent to the effectiveness of this
Agreement that have not been satisfied or waived.

 

SECTION 5.      Covenants as to the Collateral. So long as any of the
Obligations shall remain outstanding, unless the Collateral Agent shall
otherwise consent in writing:

 

(a)               Further Assurances. Each Grantor will at its expense, at any
time and from time to time, promptly execute and deliver all further instruments
and documents and take all further action that the Collateral Agent may
reasonably request in order to: (i) perfect and protect the security interest
purported to be created hereby; (ii) enable the Collateral Agent to exercise and
enforce its rights and remedies hereunder in respect of the Collateral,
including, without limitation, the Master Collection Account, the Sweep Accounts
and the Operating Accounts; or (iii) otherwise effect the purposes of this
Agreement, including, without limitation: (A) marking conspicuously all Chattel
Paper and each License and, at the request of the Collateral Agent, each of its
Records pertaining to the Collateral with a legend, in form and substance
satisfactory to the Collateral Agent, indicating that such Chattel Paper,
License or Collateral is subject to the security interest created hereby,
(B) delivering and pledging to the Collateral Agent each Promissory Note,
Security (subject to the limitations set forth in Section 2), Chattel Paper or
other Instrument, now or hereafter owned by any Grantor, duly endorsed and
accompanied by executed instruments of transfer or assignment, all in form and
substance satisfactory to the Collateral Agent, (C) executing and filing (to the
extent, if any, that any Grantor’s signature is required thereon) or
authenticating the filing of, such financing or continuation statements, or
amendments thereto, as may be necessary or that the Collateral Agent may
reasonably request in order to perfect and preserve the security interest
purported to be created hereby, (D) furnishing to the Collateral Agent from time
to time statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral in each case
as the Collateral Agent may reasonably request, all in reasonable detail, (E) if
any Collateral shall be in the possession of a third party, notifying such
Person of the Collateral Agent’s security interest created hereby and obtaining
a written acknowledgment from such Person that such Person holds possession of
the Collateral for the benefit of the Collateral Agent, which such written
acknowledgement shall be in form and substance reasonably satisfactory to the
Collateral Agent, (F) if at any time after the date hereof, any Grantor acquires
or holds any Commercial Tort Claim, promptly notifying the Collateral Agent in a
writing signed by such Grantor setting forth a brief description of such
Commercial Tort Claim and granting to the Collateral Agent a security interest
therein and in the proceeds thereof, which writing shall incorporate the
provisions hereof and shall be in form and substance satisfactory to the
Collateral Agent, (G) upon the acquisition after the date hereof by any Grantor
of any motor vehicle or other Equipment subject to a certificate of title or
ownership (other than a Motor Vehicle or Equipment that is subject to a purchase
money security interest), causing the Collateral Agent to be listed as the
lienholder on such certificate of title or ownership and delivering evidence of
the same to the Collateral Agent in accordance with Section 5(j)hereof; and
(H) taking all actions required by the Uniform Commercial Code or by other law,
as applicable, in any relevant Uniform Commercial Code jurisdiction, or by other
law as applicable in any foreign jurisdiction.

 

 

 

 

(b)               Location of Equipment and Inventory. Each Grantor will keep
the Equipment and Inventory (i) at the locations specified therefor on Schedule
III hereto, or (ii) at such other locations set forth on Schedule III and with
respect to which the Collateral Agent has filed financing statements and
otherwise fully perfected its Liens thereon, or (iii) at such other locations in
the United States, provided that within 20 days following the relocation of
Equipment or Inventory to such other location or the acquisition of Equipment or
Inventory, Grantor shall deliver to the Collateral Agent a new Schedule III
indicating such new locations.

 

(c)               Condition of Equipment. Each Grantor will maintain or cause
the Equipment (necessary or useful to its business) to be maintained and
preserved in good condition, repair and working order, ordinary wear and tear
excepted, and will forthwith, or in the case of any loss or damage to any
Equipment of any Grantor within a commercially reasonable time after the
occurrence thereof, make or cause to be made all repairs, replacements and other
improvements in connection therewith which are necessary or desirable,
consistent with past practice, or which the Collateral Agent may reasonably
request to such end. Any Grantor will promptly furnish to the Collateral Agent a
statement describing in reasonable detail any such loss or damage in excess of
$25,000 per occurrence to any Equipment.

 

(d)               Taxes, Etc. Each Grantor agrees to pay promptly when due all
property and other taxes, assessments and governmental charges or levies imposed
upon, and all claims (including claims for labor, materials and supplies)
against, the Equipment and Inventory, except to the extent the validity thereof
is being contested in good faith by proper proceedings which stay the imposition
of any penalty, fine or Lien resulting from the non-payment thereof and with
respect to which adequate reserves in accordance with GAAP have been set aside
for the payment thereof.

 

(e)                Insurance.

 

(i)                 Each Grantor will, at its own expense, maintain insurance
(including, without limitation, commercial general liability and property
insurance) with respect to the Equipment and Inventory in such amounts, against
such risks, in such form and with responsible and reputable insurance companies
or associations as is required by any Governmental Authority having jurisdiction
with respect thereto or as is carried generally in accordance with sound
business practice by companies in similar businesses similarly situated and in
any event, in amount, adequacy and scope reasonably satisfactory to the
Collateral Agent. To the extent requested by the Collateral Agent at any time
and from time to time, each such policy for liability insurance shall provide
for all losses to be paid on behalf of the Collateral Agent and any Grantor as
their respective interests may appear, and each policy for property damage
insurance shall provide for all losses to be adjusted with, and paid directly
to, the Collateral Agent. In addition to and without limiting the foregoing, to
the extent requested by the Collateral Agent at any time and from time to time,
each such policy shall in addition (A) name the Collateral Agent as an
additional insured party and/or loss payee, as applicable, thereunder (without
any representation or warranty by or obligation upon the Collateral Agent) as
its interests may appear, (B) contain an agreement by the insurer that any loss
thereunder shall be payable to the Collateral Agent on its own account
notwithstanding any action, inaction or breach of representation or warranty by
any Grantor, (C) provide that there shall be no recourse against the Collateral
Agent for payment of premiums or other amounts with respect thereto, and (D)
provide that at least 30 days’ prior written notice of cancellation, lapse,
expiration or other adverse change shall be given to the Collateral Agent by the
insurer. Any Grantor will, if so requested by the Collateral Agent, deliver to
the Collateral Agent original or duplicate policies of such insurance and, as
often as the Collateral Agent may reasonably request, a report of a reputable
insurance broker with respect to such insurance. Any Grantor will also, at the
request of the Collateral Agent, execute and deliver instruments of assignment
of such insurance policies and cause the respective insurers to acknowledge
notice of such assignment.

 

 

 

 

(ii)               Reimbursement under any liability insurance maintained by any
Grantor pursuant to this Section 5(e) may be paid directly to the Person who
shall have incurred liability covered by such insurance. In the case of any loss
involving damage to Equipment or Inventory, to the extent paragraph (iii) of
this Section 5(e) is not applicable, any proceeds of insurance maintained by any
Grantor pursuant to this Section 5(e) shall be paid to the Collateral Agent, any
Grantor will make or cause to be made the necessary repairs to or replacements
of such Equipment or Inventory, and any proceeds of insurance maintained by any
Grantor pursuant to this Section 5(e) (except as otherwise provided in paragraph
(iii) in this Section 5(e)) shall be paid by the Collateral Agent to any Grantor
as reimbursement for the costs of such repairs or replacements.

 

(iii)             Notwithstanding anything to the contrary in subsection
5(e)(ii) above, following and during the continuance of an Event of Default, all
insurance payments in respect of such Equipment or Inventory shall be paid to
the Collateral Agent and applied as specified in Section 7(b) hereof.

 

(f)                Provisions Concerning the Accounts and the Licenses.

 

(i)                 Each Grantor will (A) give the Collateral Agent at least 30
days’ prior written notice of any change in such Grantor’s name, identity or
organizational structure, (B) maintain its jurisdiction of incorporation,
organization or formation as set forth in Schedule I hereto, (C) immediately
notify the Collateral Agent upon obtaining an organizational identification
number, if on the date hereof such Grantor did not have such identification
number, and (D) keep adequate records concerning the Accounts and Chattel Paper
and permit representatives of the Collateral Agent during normal business hours
on reasonable notice to such Grantor, to inspect and make abstracts from such
Records and Chattel Paper.

 

(ii)               Each Grantor will (except as otherwise provided in this
subsection (f)), in accordance with Section 13(m) of each Note, continue to
collect, at its own expense, all amounts due or to become due under the
Accounts. In connection with such collections, any Grantor may (and, at the
Collateral Agent’s direction, will) take such action as any Grantor or the
Collateral Agent may deem necessary or advisable to enforce collection or
performance of the Accounts; provided, however, that the Collateral Agent shall
have the right at any time following the occurrence and during the continuance
of an Event of Default to notify the account debtors or obligors under any
Accounts of the assignment of such Accounts to the Collateral Agent and to
direct such account debtors or obligors to make payment of all amounts due or to
become due to any Grantor thereunder directly to the Collateral Agent or its
designated agent and, upon such notification and at the expense of any Grantor
and to the extent permitted by applicable law, to enforce collection of any such
Accounts and to adjust, settle or compromise the amount or payment thereof, in
the same manner and to the same extent as any Grantor might have done. After
receipt by any Grantor of a notice from the Collateral Agent that the Collateral
Agent has notified, intends to notify, or has enforced or intends to enforce any
Grantor’s rights against the account debtors or obligors under any Accounts as
referred to in the proviso to the immediately preceding sentence, (A) all
amounts and proceeds (including Instruments) received by any Grantor in respect
of the Accounts shall be received in trust for the benefit of the Collateral
Agent hereunder, shall be segregated from other funds of any Grantor and shall
be forthwith paid over to the Collateral Agent in the same form as so received
(with any necessary endorsement) to be applied as specified in Section 7(b)
hereof, and (B) no Grantor will adjust, settle or compromise the amount or
payment of any Account or release wholly or partly any account debtor or obligor
thereof or allow any credit or discount thereon. In addition, upon the
occurrence and during the continuance of an Event of Default, the Collateral
Agent may (in its sole and absolute discretion) direct any or all of the banks
and financial institutions with which any Grantor either maintains a Deposit
Account or a lockbox or deposits the proceeds of any Accounts to send
immediately to the Collateral Agent by wire transfer (to such account as the
Collateral Agent shall specify, or in such other manner as the Collateral Agent
shall direct) all or a portion of such securities, cash, investments and other
items held by such institution. Any such securities, cash, investments and other
items so received by the Collateral Agent shall be applied as specified in
accordance with Section 7(b) hereof.

 

 

 

 

(iii)             Upon the occurrence and during the continuance of any breach
or default under any material License referred to in Schedule II hereto by any
party thereto other than any Grantor, each Grantor party thereto will, promptly
after obtaining knowledge thereof, give the Collateral Agent written notice of
the nature and duration thereof, specifying what action, if any, it has taken
and proposes to take with respect thereto and thereafter will take reasonable
steps to protect and preserve its rights and remedies in respect of such breach
or default, or will obtain or acquire an appropriate substitute License.

 

(iv)             Each Grantor will, at its expense, promptly deliver to the
Collateral Agent a copy of each notice or other communication received by it by
which any other party to any material License referred to in Schedule II hereto
purports to exercise any of its rights or affect any of its obligations
thereunder, together with a copy of any reply by such Grantor thereto.

 

(v)               Each Grantor will exercise promptly and diligently each and
every right which it may have under each material License (other than any right
of termination) and will duly perform and observe in all respects all of its
obligations under each material License and will take all action reasonably
necessary to maintain such Licenses in full force and effect. No Grantor will,
without the prior written consent of the Collateral Agent, cancel, terminate,
amend or otherwise modify in any respect, or waive any provision of, any
material License referred to in Schedule II hereto.

 

(g)               Transfers and Other Liens.

 

(i)                 Except as expressly permitted in Section 13(f) of the Notes,
no Grantor will sell, assign (by operation of law or otherwise), lease, license,
exchange or otherwise transfer or dispose of any of the Collateral, except
(A) Inventory in the ordinary course of business, and (B) worn out or obsolete
assets, not necessary to the business.

 

(ii)               No Grantor will create, suffer to exist or grant any Lien
upon or with respect to any Collateral other than a Permitted Lien.

 

(h)               Intellectual Property.

 

(i)                 If applicable, each Grantor shall duly execute and deliver
the applicable Assignment for Security in the form attached hereto as Exhibit A.
Each Grantor (either itself or through licensees) will, and will cause each
licensee thereof to, take all action necessary to maintain all of the
Intellectual Property in full force and effect, including, without limitation,
using the proper statutory notices and markings and using the Trademarks on each
applicable trademark class of goods in order to so maintain the Trademarks in
full force and free from any claim of abandonment for non-use, and each Grantor
will not (nor permit any licensee thereof to) do any act or knowingly omit to do
any act whereby any Intellectual Property may become invalidated; provided,
however, that so long as no Event of Default has occurred and is continuing, no
Grantor shall have an obligation to use or to maintain any Intellectual Property
(A) that relates solely to any product or work, that has been, or is in the
process of being, discontinued, abandoned or terminated, (B) that is being
replaced with Intellectual Property substantially similar to the Intellectual
Property that may be abandoned or otherwise become invalid, so long as the
failure to use or maintain such Intellectual Property does not materially
adversely affect the validity of such replacement Intellectual Property and so
long as such replacement Intellectual Property is subject to the Lien created by
this Agreement or (C) that is substantially the same as another Intellectual
Property that is in full force, so long the failure to use or maintain such
Intellectual Property does not materially adversely affect the validity of such
replacement Intellectual Property and so long as such other Intellectual
Property is subject to the Lien and security interest created by this Agreement.
Each Grantor will cause to be taken all necessary steps in any proceeding before
the United States Patent and Trademark Office and the United States Copyright
Office or any similar office or agency in any other country or political
subdivision thereof to maintain each registration of the Intellectual Property
(other than the Intellectual Property described in the proviso to the
immediately preceding sentence), including, without limitation, filing of
renewals, affidavits of use, affidavits of incontestability and opposition,
interference and cancellation proceedings and payment of maintenance fees,
filing fees, taxes or other governmental fees. If any Intellectual Property
(other than Intellectual Property described in the proviso to the second
sentence of subsection (i) of this clause (h)) is infringed, misappropriated,
diluted or otherwise violated in any material respect by a third party, each
Grantor shall (x) upon learning of such infringement, misappropriation, dilution
or other violation, promptly notify the Collateral Agent and (y) promptly sue
for infringement, misappropriation, dilution or other violation, seek injunctive
relief where appropriate and recover any and all damages for such infringement,
misappropriation, dilution or other violation, or take such other actions as
such Grantor shall deem appropriate under the circumstances to protect such
Intellectual Property. Each Grantor shall furnish to the Collateral Agent from
time to time upon its request statements and schedules further identifying and
describing the Intellectual Property and Licenses and such other reports in
connection with the Intellectual Property and Licenses as the Collateral Agent
may reasonably request, all in reasonable detail and promptly upon request of
the Collateral Agent, following receipt by the Collateral Agent of any such
statements, schedules or reports, each Grantor shall modify this Agreement by
amending Schedule II hereto, as the case may be, to include any Intellectual
Property and License, as the case may be, which becomes part of the Collateral
under this Agreement and shall execute and authenticate such documents and do
such acts as shall be necessary or, in the reasonable judgment of the Collateral
Agent, desirable to subject such Intellectual Property and Licenses to the Lien
and security interest created by this Agreement. Notwithstanding anything herein
to the contrary, upon the occurrence and during the continuance of an Event of
Default, no Grantor may abandon or otherwise permit any Intellectual Property to
become invalid without the prior written consent of the Collateral Agent, and if
any Intellectual Property is infringed, misappropriated, diluted or otherwise
violated in any material respect by a third party, each Grantor will take such
action as the Collateral Agent shall deem appropriate under the circumstances to
protect such Intellectual Property.

 

 

 

 

(ii)               In no event shall any Grantor, either itself or through any
agent, employee, licensee or designee, file an application for the registration
of any Trademark or Copyright or the issuance of any Patent with the United
States Patent and Trademark Office or the United States Copyright Office, as
applicable, or in any similar office or agency of the United States or any
country or any political subdivision thereof unless it gives the Collateral
Agent prior written notice thereof. Upon request of the Collateral Agent, any
Grantor shall execute, authenticate and deliver any and all assignments,
agreements, instruments, documents and papers as the Collateral Agent may
reasonably request to evidence the Collateral Agent’s security interest
hereunder in such Intellectual Property and the General Intangibles of any
Grantor relating thereto or represented thereby, and each Grantor hereby
appoints the Collateral Agent its attorney-in-fact to execute and/or
authenticate and file all such writings for the foregoing purposes, all acts of
such attorney being hereby ratified and confirmed, and such power (being coupled
with an interest) shall be irrevocable until the indefeasible payment in full in
cash of all of the Obligations in full.

 

(i)              Deposit, Commodities and Securities Accounts. (A) Each Grantor
shall cause each bank and other financial institution with an account referred
to in Schedule IV hereto (each such account, a “Controlled Account”) other than
the Foreign Currency Controlled Accounts of WPCS Australia and WPCS China, to
execute and deliver to the Collateral Agent a Controlled Account Agreement, in
form and substance satisfactory to the Collateral Agent (which, as of the date
hereof, shall be (x) in the form of Exhibit B-1 for the Operating Accounts, (y)
in the form of Exhibit B-2 for the Sweep Accounts and (z) in the form of Exhibit
B-3 for the Master Collection Account), duly executed by each Grantor and such
bank or financial institution, or enter into other arrangements in form and
substance satisfactory to the Collateral Agent, pursuant to which such
institution shall irrevocably agree, inter alia, subject to Section 15(m) of
each Note, with respect to each Deposit Account, that (i) it will comply at any
time with the instructions originated by the Collateral Agent to such bank or
financial institution directing the disposition of cash, Commodity Contracts,
securities, Investment Property and other items from time to time credited to
such account, without further consent of each Grantor, (ii) all Commodity
Contracts, securities, Investment Property and other items of each Grantor
deposited with such institution shall be subject to a perfected, first priority
security interest in favor of the Collateral Agent, (iii) any right of set off
(other than recoupment of standard fees), banker’s Lien or other similar Lien,
security interest or encumbrance shall be fully waived as against the Collateral
Agent, and (iv) upon receipt of written notice from the Collateral Agent during
the continuance of an Event of Default, such bank or financial institution shall
immediately send to the Collateral Agent by wire transfer (to such account as
the Collateral Agent shall specify, or in such other manner as the Collateral
Agent shall direct) all such cash, the value of any Commodity Contracts,
securities, Investment Property and other items held by it. Without the prior
written consent of the Collateral Agent, no Grantor shall create or maintain any
Deposit Account, Commodity Account or Securities Account except for the accounts
set forth in Schedule IV hereto. So long as any Notes remain outstanding, (i)
the Company shall cause all cash or cash equivalents received from any Person
with respect to any Accounts Receivable (as defined in the Notes) (other than
with respect to WPCS Australia or WPCS China) to be initially deposited into
either (x) a Sweep Account or (y) the Master Collection Account and (ii) the
Company and the Collateral Agent agree that any cash or cash equivalents held in
any Sweep Account on any Business Day shall be transferred into the Master
Collection Account at the end of such Business Day (each, a “Sweep”) and the
parties hereto shall take all actions necessary to ensure that each such Sweep
occurs each Business Day any Notes remain outstanding. Notwithstanding anything
herein to the contrary, neither the Company nor any of its Subsidiaries
(excluding the Accounts of WPCS Australia and WPCS China) shall open or
otherwise permit to exist any Accounts other than Controlled Accounts without
the prior written consent of the Collateral Agent.

 

 

 

 

(B) Upon receipt of each Cash and Receivables Report from Company, Collateral
Agent shall, so long as no Event of Default has occurred and is continuing or
could reasonably be expected to result therefrom, promptly instruct the
Collection Account Bank to, at Company’s expense, transfer an amount equal to
the Cash Release Amount (if any) set forth on such Cash and Receivables Report
from the Master Collection Account solely to the extent of cash available
therein, to one of the Operating Accounts (or to such other Deposit Account
subject to a Controlled Account Agreement as directed by Company in writing);
provided that, after giving effect to each such transfer, the Lockbox, Cash &
Receivables Balance shall exceed the Adjusted Note Obligations (as defined in
the Notes and as reported to Collateral Agent by Company) as of such date.

 

(C) If on the last day of each calendar month, the aggregate available balance
in the Foreign Currency Controlled Accounts (other than the Foreign Currency
Controlled Accounts of WPCS Australia and WPCS China) exceeds the US Dollar
Equivalent of $50,000, the Company shall, within three (3) Business Days, cause
an amount equal to such excess to be transferred from such Foreign Currency
Controlled Accounts and deposited into the Master Collection Account; provided,
that except in accordance with Section 5(i)(D) below, so long as the Notes
remain outstanding neither the Company nor any of its Subsidiaries shall
transfer (directly or indirectly, whether in connection with an intercompany
loan, a capital contribution, or otherwise) more than an aggregate of the US
Dollar Equivalent of $25,000 to any non-United States Subsidiary.

 

 

 

 

(D) If on the last day of each calendar month, the aggregate available balance
in the Foreign Currency Controlled Accounts of WPCS Australia exceeds the US
Dollar Equivalent of $400,000 (the “Australia Transfer Cap”), the Company shall,
within three (3) Business Days, cause an amount equal to such excess to be
transferred from such Foreign Currency Controlled Accounts and deposited into
the Master Collection Account (the “Australia Overage Amounts”); provided, that
so long as the Notes remain outstanding neither the Company nor any of its
Subsidiaries (other than WPCS Australia) shall transfer (directly or indirectly,
whether in connection with an intercompany loan, a capital contribution, or
otherwise) more than an aggregate of the US Dollar Equivalent of (A) $200,000
plus the Australia Overage Amounts minus (B) any amounts previously transferred
to WPCS Australia by the Company or any of its Subsidiaries (other than WPCS
Australia) from the Issuance Date to immediately prior to such transfer (an
“Australia Transfer”), provided further that, notwithstanding the foregoing,
neither the Company nor any of its Subsidiaries (other than WPCS Australia)
shall consummate an Australia Transfer if after giving effect to such Australia
Transfer the aggregate available balance in the Foreign Currency Controlled
Accounts of WPCS Australia exceeds the Australia Transfer Cap.

 

(E) During the period commencing on the Subscription Date through the date no
Notes remain outstanding, neither the Company nor any of its Subsidiaries (other
than WPCS China) shall transfer (directly or indirectly, whether in connection
with an intercompany loan, a capital contribution, or otherwise) any cash or
cash equivalents to WPCS China.

 

(j)                 Motor Vehicles.

 

(i)                 Upon the Collateral Agent’s written request, each Grantor
shall deliver to the Collateral Agent originals of the certificates of title or
ownership for all motor vehicles with a value in excess of $10,000, owned by it
with the Collateral Agent listed as lienholder, for the benefit of the Buyers.

 

(ii)               Each Grantor hereby appoints the Collateral Agent as its
attorney-in-fact, effective the date hereof and terminating upon the termination
of this Agreement, for the purpose of (A) executing on behalf of such Grantor
title or ownership applications for filing with appropriate state agencies to
enable motor vehicles now owned or hereafter acquired by such Grantor to be
retitled and the Collateral Agent listed as lienholder thereof, (B) filing such
applications with such state agencies, and (C) executing such other documents
and instruments on behalf of, and taking such other action in the name of, such
Grantor as the Collateral Agent may deem necessary or advisable to accomplish
the purposes hereof (including, without limitation, for the purpose of creating
in favor of the Collateral Agent a perfected Lien on the motor vehicles and
exercising the rights and remedies of the Collateral Agent hereunder). This
appointment as attorney-in-fact is coupled with an interest and is irrevocable
until all of the Obligations are indefeasibly paid in full in cash.

 

(iii)             Any certificates of title or ownership delivered pursuant to
the terms hereof shall be accompanied by odometer statements for each motor
vehicle covered thereby.

 

 

 

 

(iv)             So long as no Event of Default shall have occurred and be
continuing, upon the request of any Grantor, the Collateral Agent shall execute
and deliver to any Grantor such instruments as such Grantor shall reasonably
request to remove the notation of the Collateral Agent as lienholder on any
certificate of title for any motor vehicle; provided, however, that any such
instruments shall be delivered, and the release effective, only upon receipt by
the Collateral Agent of a certificate from any Grantor stating that such motor
vehicle is to be sold or has suffered a casualty loss (with title thereto in
such case passing to the casualty insurance company therefor in settlement of
the claim for such loss) and the amount that any Grantor will receive as sale
proceeds or insurance proceeds. Any proceeds of such sale or casualty loss shall
be paid to the Collateral Agent hereunder immediately upon receipt, to be
applied to the Obligations then outstanding.

 

(k)               Control. Each Grantor hereby agrees to take any or all action
that may be necessary or that the Collateral Agent may reasonably request in
order for the Collateral Agent to obtain control in accordance with Sections
9-105 – 9-107 of the Code with respect to the following Collateral:
(i) Electronic Chattel Paper, (ii) Investment Property, and (iii)
Letter-of-Credit Rights.

 

(l)                 Inspection and Reporting. Each Grantor shall permit the
Collateral Agent, or any agent or representatives thereof or such professionals
or other Persons as the Collateral Agent may designate (at Grantors’ sole cost
and expense) (i) to examine and make copies of and abstracts from any Grantor’s
records and books of account, (ii) to visit and inspect its properties, (iii) to
verify materials, leases, Instruments, Accounts, Inventory and other assets of
any Grantor from time to time, (iii) to conduct audits, physical counts,
appraisals and/or valuations, examinations at the locations of any Grantor. Each
Grantor shall also permit the Collateral Agent, or any agent or representatives
thereof or such professionals or other Persons as the Collateral Agent may
designate to discuss such Grantor’s affairs, finances and accounts with any of
its directors, officers, managerial employees, independent accountants or any of
its other representatives. Without limiting the foregoing, the Collateral Agent
may, at any time, in the Collateral Agent’s own name, in the name of a nominee
of the Collateral Agent, or in the name of any Grantor communicate (by mail,
telephone, facsimile or otherwise) with the Account Debtors of such Grantor,
parties to contracts with such Grantor and/or obligors in respect of Instruments
of such Grantor to verify with such Persons, to the Collateral Agent’s
reasonable satisfaction, the existence, amount, terms of, and any other matter
relating to, Accounts, Instruments, Chattel Paper, payment intangibles and/or
other receivables.

 

(m)             Future Subsidiaries. If any Grantor hereafter creates or
acquires any Subsidiary, simultaneously with the creation or acquisition of such
Subsidiary, such Grantor shall (i) cause such Subsidiary to become a party to
this Agreement as an additional “Grantor” hereunder, (ii) deliver to Collateral
Agent revised Schedules to this Agreement, as appropriate (including, without
limitation, a revised Schedule IV to reflect the grant by such Grantor of a lien
on all Pledged Equity now or hereafter owned by such Grantor), (iii) cause such
Subsidiary to duly execute and deliver a guaranty of the Obligations in favor of
the Collateral Agent in form and substance acceptable to the Collateral Agent,
and (iv) duly execute and/or cause to be delivered such opinions of counsel and
other documents, in form and substance acceptable to the Collateral Agent, as
the Collateral Agent shall reasonably request with respect thereto; provided,
however, that no Grantor shall pledge Capital Stock in excess of shares
representing 100% of the nonvoting Capital Stock and 66% of the total combined
voting power of all classes of Capital Stock entitled to vote of any and all
Persons now or hereafter existing which would constitute a Foreign Subsidiary
thereof if such action would result in material adverse, incremental tax
liabilities to such Grantor under Section 956 of the IRC. Each Grantor hereby
authorizes Collateral Agent to attach such revised Schedules to this Agreement
and agrees that all Pledged Equity listed on any revised Schedule delivered to
Collateral Agent shall for all purposes hereunder be considered Collateral. The
Grantors agree that the pledge of the shares of Capital Stock acquired by a
Grantor of Foreign Subsidiary may be supplemented by one or more separate pledge
agreements, deeds of pledge, share charges, or other similar agreements or
instruments, executed and delivered by the relevant Grantor in favor of the
Collateral Agent, which pledge agreements will provide for the pledge of such
shares of Capital Stock in accordance with the laws of the applicable foreign
jurisdiction. With respect to such shares of Capital Stock, the Collateral Agent
may, at any time and from time to time, in its sole discretion, take actions in
such foreign jurisdictions that will result in the perfection of the Lien
created in such shares of Capital Stock.

 

 

 

  

Section 6.      Additional Provisions Concerning the Collateral.

 

(a)                To the maximum extent permitted by applicable law, and for
the purpose of taking any action that the Collateral Agent may deem necessary or
advisable to accomplish the purposes of this Agreement, each Grantor hereby (i)
authorizes the Collateral Agent to execute any such agreements, instruments or
other documents in such Grantor’s name and to file such agreements, instruments
or other documents in such Grantor’s name and in any appropriate filing office,
(ii) authorizes the Collateral Agent at any time and from time to time to file,
one or more financing or continuation statements, and amendments thereto,
relating to the Collateral (including, without limitation, any such financing
statements that (A) describe the Collateral as “all assets” or “all personal
property” (or words of similar effect) or that describe or identify the
Collateral by type or in any other manner as the Collateral Agent may determine
regardless of whether any particular asset of such Grantor falls within the
scope of Article 9 of the Uniform Commercial Code or whether any particular
asset of such Grantor constitutes part of the Collateral, and (B) contain any
other information required by Part 5 of Article 9 of the Code for the
sufficiency or filing office acceptance of any financing statement, continuation
statement or amendment, including, without limitation, whether such Grantor is
an organization, the type of organization and any organizational identification
number issued to such Grantor) and (iii) ratifies such authorization to the
extent that the Collateral Agent has filed any such financing or continuation
statements, or amendments thereto, prior to the date hereof. A photocopy or
other reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.

 

(b)               Each Grantor hereby irrevocably appoints the Collateral Agent
as its attorney-in-fact and proxy, with full authority in the place and stead of
such Grantor and in the name of such Grantor or otherwise, from time to time in
the Collateral Agent’s discretion, to take any action and to execute any
instrument which the Collateral Agent may reasonably deem necessary or advisable
to accomplish the purposes of this Agreement, including, without limitation, (i)
to obtain and adjust insurance required to be paid to the Collateral Agent
pursuant to Section 5(e) hereof, (ii) to ask, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for moneys due and to become
due under or in respect of any Collateral, (iii) to receive, endorse, and
collect any drafts or other instruments, documents and chattel paper in
connection with clause (i) or (ii) above, (iv) to file any claims or take any
action or institute any proceedings which the Collateral Agent may deem
necessary or desirable for the collection of any Collateral or otherwise to
enforce the rights of the Collateral Agent and the Buyers with respect to any
Collateral, (v) to execute assignments, licenses and other documents to enforce
the rights of the Collateral Agent and the Buyers with respect to any Collateral
and (vi) to verify any and all information with respect to any and all Accounts.
This power is coupled with an interest and is irrevocable until all of the
Obligations are indefeasibly paid in full in cash.

 

 

 

 

(c)                For the purpose of enabling the Collateral Agent to exercise
rights and remedies hereunder, at such time as the Collateral Agent shall be
lawfully entitled to exercise such rights and remedies, and for no other
purpose, each Grantor hereby grants to the Collateral Agent, to the extent
assignable, an irrevocable, non-exclusive license (exercisable without payment
of royalty or other compensation to any Grantor) to use, assign, license or
sublicense any Intellectual Property now owned or hereafter acquired by such
Grantor, wherever the same may be located, including in such license reasonable
access to all media in which any of the licensed items may be recorded or stored
and to all computer programs used for the compilation or printout thereof.
Notwithstanding anything contained herein to the contrary, but subject to the
provisions of the Securities Purchase Agreement that limit the right of any
Grantor to dispose of its property, and Section 5(g) and Section 5(h) hereof, so
long as no Event of Default shall have occurred and be continuing, any Grantor
may exploit, use, enjoy, protect, license, sublicense, assign, sell, dispose of
or take other actions with respect to the Intellectual Property in the ordinary
course of its business. In furtherance of the foregoing, unless an Event of
Default shall have occurred and be continuing, the Collateral Agent shall from
time to time, upon the request of any Grantor, execute and deliver any
instruments, certificates or other documents, in the form so requested, which
such Grantor shall have certified are appropriate (in such Grantor’s judgment)
to allow it to take any action permitted above (including relinquishment of the
license provided pursuant to this clause (c) as to any Intellectual Property).
Further, upon the indefeasible payment in full in cash of all of the
Obligations, the Collateral Agent (subject to Section 10(e) hereof) shall
release and reassign to any Grantor all of the Collateral Agent’s right, title
and interest in and to the Intellectual Property, and the Licenses, all without
recourse, representation or warranty whatsoever. The exercise of rights and
remedies hereunder by the Collateral Agent shall not terminate the rights of the
holders of any licenses or sublicenses theretofore granted by each Grantor in
accordance with the second sentence of this clause (c). Each Grantor hereby
releases the Collateral Agent from any claims, causes of action and demands at
any time arising out of or with respect to any actions taken or omitted to be
taken by the Collateral Agent under the powers of attorney granted herein other
than actions taken or omitted to be taken through the Collateral Agent’s gross
negligence or willful misconduct, as determined by a final determination of a
court of competent jurisdiction.

 

(d)               If any Grantor fails to perform any agreement or obligation
contained herein, the Collateral Agent may itself perform, or cause performance
of, such agreement or obligation, in the name of such Grantor or the Collateral
Agent, and the expenses of the Collateral Agent incurred in connection therewith
shall be payable by such Grantor pursuant to Section 8 hereof and shall be
secured by the Collateral.

 

 

 

 

(e)                The powers conferred on the Collateral Agent hereunder are
solely to protect its interest in the Collateral and shall not impose any duty
upon it to exercise any such powers. Except for the safe custody of any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, the Collateral Agent shall have no duty as to any Collateral or as
to the taking of any necessary steps to preserve rights against prior parties or
any other rights pertaining to any Collateral.

 

(f)                Anything herein to the contrary notwithstanding (i) each
Grantor shall remain liable under the Licenses and otherwise with respect to any
of the Collateral to the extent set forth therein to perform all of its
obligations thereunder to the same extent as if this Agreement had not been
executed, (ii) the exercise by the Collateral Agent of any of its rights
hereunder shall not release any Grantor from any of its obligations under the
Licenses or otherwise in respect of the Collateral, and (iii) the Collateral
Agent shall not have any obligation or liability by reason of this Agreement
under the Licenses or with respect to any of the other Collateral, nor shall the
Collateral Agent be obligated to perform any of the obligations or duties of any
Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.

 

(g)               As long as no Event of Default shall have occurred and be
continuing and until written notice shall be given to the applicable Grantor:

 

(i)                 Each Grantor shall have the right, from time to time, to
vote and give consents with respect to the Pledged Equity, or any part thereof
for all purposes not inconsistent with the provisions of this Agreement, the
Securities Purchase Agreement or any other Transaction Document; provided,
however, that no vote shall be cast, and no consent shall be given or action
taken, which would have the effect of impairing the position or interest of
Collateral Agent in respect of the Pledged Equity or which would authorize,
effect or consent to (unless and to the extent expressly permitted by the
Securities Purchase Agreement):

 

(A) the dissolution or liquidation, in whole or in part, of a Pledged Entity;

 

(B) the consolidation or merger of a Pledged Entity with any other Person;

 

(C) the sale, disposition or encumbrance of all or substantially all of the
assets of a Pledged Entity, except for Liens in favor of Collateral Agent;

 

(D) any change in the authorized number of shares, the stated capital or the
authorized share capital of a Pledged Entity or the issuance of any additional
shares of its Capital Stock; or

 

(E) the alteration of the voting rights with respect to the Capital Stock of a
Pledged Entity.

 

(h)               (i) Each Grantor shall be entitled, from time to time, to
collect and receive for its own use all cash dividends and interest paid in
respect of the Pledged Equity to the extent not in violation of the Securities
Purchase Agreement other than any and all: (A) dividends and interest paid or
payable other than in cash in respect of any Pledged Equity, and instruments and
other property received, receivable or otherwise distributed in respect of, or
in exchange for, any Pledged Equity; (B) dividends and other distributions paid
or payable in cash in respect of any Pledged Equity in connection with a partial
or total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in capital of a Pledged Entity; and (C) cash
paid, payable or otherwise distributed, in respect of principal of, or in
redemption of, or in exchange for, any Pledged Equity; provided, however, that
until actually paid all rights to such distributions shall remain subject to the
Lien created by this Agreement; and

 

 

 

 

(ii) all dividends and interest (other than such cash dividends and interest as
are permitted to be paid to any Grantor in accordance with clause (i) above) and
all other distributions in respect of any of the Pledged Equity, whenever paid
or made, shall be delivered to Collateral Agent to hold as Pledged Equity and
shall, if received by any Grantor, be received in trust for the benefit of
Collateral Agent, be segregated from the other property or funds of such
Grantor, and be forthwith delivered to Collateral Agent as Pledged Equity in the
same form as so received (with any necessary endorsement).

 

SECTIOn 7.      Remedies Upon Event of Default. If any Event of Default shall
have occurred and be continuing:

 

(a)                The Collateral Agent may exercise in respect of the
Collateral, in addition to any other rights and remedies provided for herein or
otherwise available to it, all of the rights and remedies of a secured party
upon default under the Code (whether or not the Code applies to the affected
Collateral), and also may (i) take absolute control of the Collateral,
including, without limitation, transfer into the Collateral Agent’s name or into
the name of its nominee or nominees (to the extent the Collateral Agent has not
theretofore done so) and thereafter receive, for the benefit of the Buyers, all
payments made thereon, give all consents, waivers and ratifications in respect
thereof and otherwise act with respect thereto as though it were the outright
owner thereof, (ii) require each Grantor to, and each Grantor hereby agrees that
it will at its expense and upon request of the Collateral Agent forthwith,
assemble all or part of its respective Collateral as directed by the Collateral
Agent and make it available to the Collateral Agent at a place or places to be
designated by the Collateral Agent that is reasonably convenient to both
parties, and the Collateral Agent may enter into and occupy any premises owned
or leased by any Grantor where the Collateral or any part thereof is located or
assembled for a reasonable period in order to effectuate the Collateral Agent’s
rights and remedies hereunder or under law, without obligation to any Grantor in
respect of such occupation, and (iii) without notice except as specified below
and without any obligation to prepare or process the Collateral for sale,
(A) sell the Collateral or any part thereof in one or more parcels at public or
private sale (including, without limitation, by credit bid), at any of the
Collateral Agent’s offices or elsewhere, for cash, on credit or for future
delivery, and at such price or prices and upon such other terms as the
Collateral Agent may deem commercially reasonable and/or (B) lease, license or
dispose of the Collateral or any part thereof upon such terms as the Collateral
Agent may deem commercially reasonable. Each Grantor agrees that, to the extent
notice of sale or any other disposition of its respective Collateral shall be
required by law, at least ten (10) days’ notice to any Grantor of the time and
place of any public sale or the time after which any private sale or other
disposition of its respective Collateral is to be made shall constitute
reasonable notification. The Collateral Agent shall not be obligated to make any
sale or other disposition of any Collateral regardless of notice of sale having
been given. The Collateral Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. Each Grantor hereby waives any claims against the Collateral Agent
and the Buyers arising by reason of the fact that the price at which its
respective Collateral may have been sold at a private sale was less than the
price which might have been obtained at a public sale or was less than the
aggregate amount of the Obligations, even if the Collateral Agent accepts the
first offer received and does not offer such Collateral to more than one
offeree, and waives all rights that any Grantor may have to require that all or
any part of such Collateral be marshaled upon any sale (public or private)
thereof. Each Grantor hereby acknowledges that (i) any such sale of its
respective Collateral by the Collateral Agent shall be made without warranty,
(ii) the Collateral Agent may specifically disclaim any warranties of title,
possession, quiet enjoyment or the like, and (iii) such actions set forth in
clauses (i) and (ii) above shall not adversely affect the commercial
reasonableness of any such sale of Collateral. In addition to the foregoing,
(1) upon written notice to any Grantor from the Collateral Agent after and
during the continuance of an Event of Default, such Grantor shall cease any use
of the Intellectual Property or any trademark, patent or copyright similar
thereto for any purpose described in such notice; (2) the Collateral Agent may,
at any time and from time to time after and during the continuance of an Event
of Default, upon 10 days’ prior notice to such Grantor, license, whether
general, special or otherwise, and whether on an exclusive or non-exclusive
basis, any of the Intellectual Property, throughout the universe for such term
or terms, on such conditions, and in such manner, as the Collateral Agent shall
in its sole discretion determine; and (3) the Collateral Agent may, at any time,
pursuant to the authority granted in Section 6 hereof or otherwise (such
authority being effective upon the occurrence and during the continuance of an
Event of Default), execute and deliver on behalf of such Grantor, one or more
instruments of assignment of the Intellectual Property (or any application or
registration thereof), in form suitable for filing, recording or registration in
any country.

 

 

 

 

(b)               Any cash held by the Collateral Agent as Collateral and all
Cash Proceeds received by the Collateral Agent in respect of any sale of or
collection from, or other realization upon, all or any part of the Collateral
shall be applied (after payment of any amounts payable to the Collateral Agent
pursuant to Section 8 hereof) by the Collateral Agent against, all or any part
of the Obligations in such order as the Collateral Agent shall elect, consistent
with the provisions of the Collateral Agency Agreement. Any surplus of such cash
or Cash Proceeds held by the Collateral Agent and remaining after the
indefeasible payment in full in cash of all of the Obligations shall be paid
over to whomsoever shall be lawfully entitled to receive the same or as a court
of competent jurisdiction shall direct.

 

(c)                In the event that the proceeds of any such sale, collection
or realization are insufficient to pay all amounts to which the Collateral Agent
and the Buyers are legally entitled, each Grantor shall be liable for the
deficiency, together with interest thereon at the highest rate specified in the
Notes for interest on overdue principal thereof or such other rate as shall be
fixed by applicable law, together with the costs of collection and the
reasonable fees, costs, expenses and other client charges of any attorneys
employed by the Collateral Agent to collect such deficiency.

 

 

 

 

(d)               To the extent that applicable law imposes duties on the
Collateral Agent to exercise remedies in a commercially reasonable manner, each
Grantor acknowledges and agrees that it is commercially reasonable for the
Collateral Agent (i) to fail to incur expenses deemed significant by the
Collateral Agent to prepare Collateral for disposition or otherwise to transform
raw material or work in process into finished goods or other finished products
for disposition, (ii) to fail to obtain third party consents for access to
Collateral to be disposed of, or to obtain or, if not required by other law, to
fail to obtain governmental or third party consents for the collection or
disposition of Collateral to be collected or disposed of, (iii) to fail to
exercise collection remedies against account debtors or other persons obligated
on Collateral or to remove Liens on or any adverse claims against Collateral,
(iv) to exercise collection remedies against account debtors and other Persons
obligated on Collateral directly or through the use of collection agencies and
other collection specialists, (v) to advertise dispositions of Collateral
through publications or media of general circulation, whether or not the
Collateral is of a specialized nature, (vi) to contact other Persons, whether or
not in the same business as any Grantor, for expressions of interest in
acquiring all or any portion of such Collateral, (vii) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the Collateral is of a specialized nature, (viii) to dispose of Collateral
by utilizing internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capacity of doing so, or
that match buyers and sellers of assets, (ix) to dispose of assets in wholesale
rather than retail markets, (x) to disclaim disposition warranties, such as
title, possession or quiet enjoyment, (xi) to purchase insurance or credit
enhancements to insure the Collateral Agent against risks of loss, collection or
disposition of Collateral or to provide to the Collateral Agent a guaranteed
return from the collection or disposition of Collateral, or (xii) to the extent
deemed appropriate by the Collateral Agent, to obtain the services of brokers,
investment bankers, consultants, attorneys and other professionals to assist the
Collateral Agent in the collection or disposition of any of the Collateral. Each
Grantor acknowledges that the purpose of this section is to provide
non-exhaustive indications of what actions or omissions by the Collateral Agent
would be commercially reasonable in the Collateral Agent’s exercise of remedies
against the Collateral and that other actions or omissions by the Collateral
Agent shall not be deemed commercially unreasonable solely on account of not
being indicated in this section. Without limitation upon the foregoing, nothing
contained in this section shall be construed to grant any rights to any Grantor
or to impose any duties on the Collateral Agent that would not have been granted
or imposed by this Agreement or by applicable law in the absence of this
section.

 

(e)                The Collateral Agent shall not be required to marshal any
present or future collateral security (including, but not limited to, this
Agreement and the Collateral) for, or other assurances of payment of, the
Obligations or any of them or to resort to such collateral security or other
assurances of payment in any particular order, and all of the Collateral Agent’s
rights hereunder and in respect of such collateral security and other assurances
of payment shall be cumulative and in addition to all other rights, however
existing or arising. To the extent that any Grantor lawfully may, each Grantor
hereby agrees that it will not invoke any law relating to the marshaling of
collateral which might cause delay in or impede the enforcement of the
Collateral Agent’s rights under this Agreement or under any other instrument
creating or evidencing any of the Obligations or under which any of the
Obligations is outstanding or by which any of the Obligations is secured or
payment thereof is otherwise assured, and, to the extent that it lawfully may,
each Grantor hereby irrevocably waives the benefits of all such laws.

 

 

 

 

 

Section 8.      Indemnity and Expenses.

 

(a)                Each Grantor agrees, jointly and severally, to defend,
protect, indemnify and hold the Collateral Agent and each of the Buyers, jointly
and severally, harmless from and against any and all claims, damages, losses,
liabilities, obligations, penalties, fees, costs and expenses (including,
without limitation, reasonable legal fees, costs, expenses, and disbursements of
such Person’s counsel) to the extent that they arise out of or otherwise result
from this Agreement (including, without limitation, enforcement of this
Agreement), except to the extent resulting from such Person’s gross negligence
or willful misconduct, as determined by a final judgment of a court of competent
jurisdiction.

 

(b)               Each Grantor agrees, jointly and severally, to pay to the
Collateral Agent upon demand the amount of any and all costs and expenses,
including the reasonable fees, costs, expenses and disbursements of counsel for
the Collateral Agent and of any experts and agents (including, without
limitation, any collateral trustee which may act as agent of the Collateral
Agent), which the Collateral Agent may incur in connection with (i) the
preparation, negotiation, execution, delivery, recordation, administration,
amendment, waiver or other modification or termination of this Agreement,
(ii) the custody, preservation, use or operation of, or the sale of, collection
from, or other realization upon, any Collateral, (iii) the exercise or
enforcement of any of the rights of the Collateral Agent hereunder, or (iv) the
failure by any Grantor to perform or observe any of the provisions hereof.

 

SECTION 9.      Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and shall be mailed (by certified mail, postage
prepaid and return receipt requested), telecopied, e-mailed or delivered, if to
any Grantor that is a Foreign Subsidiary at the address of the Company, if to
any Grantor that is not a Foreign Subsidiary at its address specified on the
signature pages below and if to the Collateral Agent to it, at its address
specified on the signature pages below; or as to any such Person, at such other
address as shall be designated by such Person in a written notice to all other
parties hereto complying as to delivery with the terms of this Section 9. All
such notices and other communications shall be effective (a) if sent by
certified mail, return receipt requested, when received or three days after
deposited in the mails, whichever occurs first, (b) if telecopied or e-mailed,
when transmitted (during normal business hours) and confirmation is received,
and otherwise, the day after the notice or communication was transmitted and
confirmation is received, or (c) if delivered in person, upon delivery. For the
avoidance of doubt, the Foreign Subsidiaries, as Grantors, hereby appoint the
Company as its agent for receipt of service of process and all notices and other
communications in the United States at the address specified below.

 

Section 10.      Miscellaneous.

 

(a)                No amendment of any provision of this Agreement shall be
effective unless it is in writing and signed by each Grantor and the Collateral
Agent, and no waiver of any provision of this Agreement, and no consent to any
departure by each Grantor therefrom, shall be effective unless it is in writing
and signed by each Grantor and the Collateral Agent, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.

 

 

 

 

(b)               No failure on the part of the Collateral Agent to exercise,
and no delay in exercising, any right hereunder or under any of the other
Transaction Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right. The rights and remedies of the
Collateral Agent or any Buyer provided herein and in the other Transaction
Documents are cumulative and are in addition to, and not exclusive of, any
rights or remedies provided by law. The rights of the Collateral Agent or any
Buyer under any of the other Transaction Documents against any party thereto are
not conditional or contingent on any attempt by such Person to exercise any of
its rights under any of the other Transaction Documents against such party or
against any other Person, including but not limited to, any Grantor.

 

(c)                Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.

 

(d)               This Agreement shall create a continuing security interest in
the Collateral and shall (i) remain in full force and effect until the
indefeasible payment in full in cash of the Obligations, and (ii) be binding on
each Grantor and all other Persons who become bound as debtor to this Agreement
in accordance with Section 9-203(d) of the Code and shall inure, together with
all rights and remedies of the Collateral Agent and the Buyers hereunder, to the
benefit of the Collateral Agent and the Buyers and their respective permitted
successors, transferees and assigns. Without limiting the generality of clause
(ii) of the immediately preceding sentence, without notice to any Grantor, the
Collateral Agent and the Buyers may assign or otherwise transfer their rights
and obligations under this Agreement and any of the other Transaction Documents,
to any other Person and such other Person shall thereupon become vested with all
of the benefits in respect thereof granted to the Collateral Agent and the
Buyers herein or otherwise. Upon any such assignment or transfer, all references
in this Agreement to the Collateral Agent or any such Buyer shall mean the
assignee of the Collateral Agent or such Buyer. None of the rights or
obligations of any Grantor hereunder may be assigned or otherwise transferred
without the prior written consent of the Collateral Agent, and any such
assignment or transfer without the consent of the Collateral Agent shall be null
and void.

 

(e)                Upon the indefeasible payment in full in cash of the
Obligations, (i) this Agreement and the security interests created hereby shall
terminate and all rights to the Collateral shall revert to the respective
Grantor that granted such security interests hereunder, and (ii) the Collateral
Agent will, upon any Grantor’s request and at such Grantor’s expense, (A) return
to such Grantor such of the Collateral as shall not have been sold or otherwise
disposed of or applied pursuant to the terms hereof, and (B) execute and deliver
to such Grantor such documents as such Grantor shall reasonably request to
evidence such termination, all without any representation, warranty or recourse
whatsoever.

 

(f)                THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE
AND TO BE PERFORMED THEREIN WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES (EXCEPT
5-1401 OF THE NEW YORK GENERAL OBLIGATION LAW). FURTHER, THE LAW OF THE STATE OF
NEW YORK SHALL APPLY TO ALL DISPUTES OR CONTROVERSIES ARISING OUT OF OR
CONNECTED TO OR WITH THIS AGREEMENT WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES
(EXCEPT 5-1401 OF THE NEW YORK GENERAL OBLIGATION LAW).

 

 

 

 

(g)               CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE. ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER DOCUMENT
RELATED HERETO SHALL BE BROUGHT EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW
YORK IN THE COUNTY OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
EACH GRANTOR HEREBY IRREVOCABLY ACCEPTS IN RESPECT OF ITS PROPERTY, GENERALLY
AND UNCONDITIONALLY, THE JURISDICTION OF THE FOREGOING COURTS. EACH GRANTOR
HEREBY IRREVOCABLY APPOINTS THE SECRETARY OF STATE OF THE STATE OF NEW YORK AS
ITS AGENT FOR SERVICE OF PROCESS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING AND
FURTHER IRREVOCABLY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF
AS DEEMED APPROPRIATE BY ANY OF THE FOREGOING COURTS. EACH GRANTOR IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE FOREGOING COURTS AND IN ANY
SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, AT ITS ADDRESS FOR NOTICES AS SET FORTH ON THE
SIGNATURE PAGE HERETO AND TO THE SECRETARY OF STATE OF THE STATE OF NEW YORK,
SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH MAILING. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF THE COLLATERAL AGENT TO SERVE OF PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST EACH GRANTOR IN ANY OTHER JURISDICTION. ANY GRANTOR HEREBY
EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE JURISDICTION OR LAYING OF
VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY OF THE FOREGOING COURTS REFERRED TO
ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. TO THE EXTENT THAT ANY GRANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY
FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH
SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION
OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, EACH GRANTOR HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS.

 

(h)               WAIVER OF JURY TRIAL, ETC. EACH GRANTOR HEREBY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING
ANY RIGHTS UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS, OR UNDER ANY
AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR
WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH, OR
ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH THIS
AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS, AND AGREES THAT ANY SUCH ACTION,
PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
EACH GRANTOR CERTIFIES THAT NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF THE
COLLATERAL AGENT OR ANY BUYER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
COLLATERAL AGENT OR ANY BUYER WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING
OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING WAIVERS. EACH GRANTOR HEREBY
ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE COLLATERAL
AGENT ENTERING INTO THIS AGREEMENT.

 

 

 

 

(i)                 Each Grantor irrevocably consents to the service of process
of any of the aforesaid courts in any such action, suit or proceeding by the
mailing of copies thereof by registered or certified mail (or any substantially
similar form of mail), postage prepaid, to any Grantor at its address provided
herein, such service to become effective 10 days after such mailing.

 

(j)                 Nothing contained herein shall affect the right of the
Collateral Agent to serve process in any other manner permitted by law or
commence legal proceedings or otherwise proceed against any Grantor or any
property of any Grantor in any other jurisdiction.

 

(k)               Each Grantor irrevocably and unconditionally waives any right
it may have to claim or recover in any legal action, suit or proceeding referred
to in this Section any special, exemplary, punitive or consequential damages.

 

(l)                 Section headings herein are included for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose.

 

(m)             This Agreement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which shall be
deemed to be an original, but all of which taken together constitute one and the
same Agreement. Delivery of any executed counterpart of a signature page of this
Agreement by pdf, facsimile or other electronic transmission shall be effective
as delivery of a manually executed counterpart of this Agreement.

 

(n)               This Agreement shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the
Obligations is rescinded or must otherwise be returned by Collateral Agent, any
Buyer or any other Person (upon (i) the occurrence of any Insolvency Proceeding
of any of the Company or any Grantor or (ii) otherwise, in all cases as though
such payment had not been made.

 

 

 

 

SECTION 11.      Material Non-Public Information. Upon the delivery of any
notices, documents, information or materials to Collateral Agent by Company
and/or any of its subsidiaries or any of its or their respective officers,
directors, employees and/or agents in accordance with or pursuant to this
Agreement or any other Transaction Document, the Company shall certify or cause
to be certified in writing to Collateral Agent whether such notices, documents,
information or materials contain any material non-public information. If
Collateral Agent receives any such notices, documents, information or materials
with such certification that such notices, documents, information or materials
contain material non-public information and the Collateral Agent reasonably
determines, in its sole discretion, the Buyers should receive such notices,
documents, information or materials, (x) Collateral Agent shall deliver a
written notice to the Company that Collateral Agent intends to promptly deliver
such notice, documents or other information or materials to the Buyers, (y) the
Company shall within one (1) Business Day after any receipt of such written
notice from Collateral Agent (A) publicly disclose such material, non-public
information on a Current Report on Form 8-K or otherwise and (B) deliver written
notice to Collateral Agent certifying that such notice, documents, information
or materials no longer contain any material, non-public information (a
“Non-Public Certification”) and (z) promptly following the receipt of such
Non-Public Certification, Collateral Agent shall delivery such notice,
documents, information or materials to each Buyer. Any delivery by Collateral
Agent of any notice, documents or other information or materials to any Buyer
shall be deemed to be a delivery by the Company to such Buyer for all purposes
hereunder and pursuant to any other Transaction Documents. To the extent
Collateral Agent receives any notices, documents, information or materials from
Company and/or any of its subsidiaries or any of its or their respective
officers, directors, employees and agents without concurrent certification by
Company that such notices, documents, information or materials do not contain
any non-public information or the Company fails to deliver a Non-Public
Certification as required hereunder, Collateral Agent shall retain such items or
information and shall not deliver any such items or information to any Buyer,
but shall deliver written notice to each Buyer that it has received items or
information that may or may not contain material non-public information without
a certification by Company as to the contents thereof (but without otherwise
describing in any detail such items or information). Upon receipt of such
notice, each Buyer may provide further instruction to Collateral Agent with
respect to distribution of such notices, documents, information or materials to
such Buyer (and not to any other Buyer) and Collateral Agent shall have no
further duty with respect thereto until receipt of such instruction from any
such Buyer. Notwithstanding anything herein or in any Transaction Document to
the contrary, the Collateral Agent shall not deliver to any Buyer any documents
or other information or materials without prior certification by Company that
such notices, documents, information or materials do not contain material
non-public information, without the prior written consent of such Buyer (other
than notices of the occurrence of an Event of Default).

 

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

 

 

 

 

IN WITNESS WHEREOF, each Grantor has caused this Agreement to be executed and
delivered by its officer thereunto duly authorized, as of the date first above
written.

  

  COMPANY:       WPCS INTERNATIONAL INCORPORATED       By:        Name: Joseph
Heater
Title: Chief Financial Officer           Address: One East Uwchlan Avenue, Suite
301, Exton, PA 19341           Facsimile: (610) 903-0401

 

  GRANTORS:       WPCS INTERNATIONAL – PORTLAND, INC.       By:        Name:
Joseph Heater
Title: Authorized Signatory           Address: 15241 NE 90th Street, Redmond, WA
98072           Facsimile: (610) 903-0401

 

  WPCS INTERNATIONAL – SEATTLE, INC.       By:        Name: Joseph Heater
Title: Authorized Signatory           Address: 15241 NE 90th Street, Redmond, WA
98072           Facsimile: (610) 903-0401

 

 

 

 

  WPCS INTERNATIONAL – SUISUN CITY, INC.       By:        Name: Joseph Heater
Title: Authorized Signatory           Address: 521 Railroad Avenue, Suisun City,
CA 94585           Facsimile: (610) 903-0401

 

 

  WPCS INTERNATIONAL – TRENTON, INC.       By:        Name: Joseph Heater
Title: Authorized Signatory           Address: 1095 Cranbury South River Road,
Suite 5, Monroe Township, NJ 08831           Facsimile: (610) 903-0401

 

 

  WPCS INTERNATIONAL – HARTFORD, INC.       By:        Name: Joseph Heater
Title: Authorized Signatory           Address: One East Uwchlan Avenue, Suite
301, Exton, PA 19341           Facsimile: (610) 903-0401

 

  WPCS INTERNATIONAL – LAKEWOOD, INC.       By:        Name: Joseph Heater
Title: Authorized Signatory           Address: One East Uwchlan Avenue, Suite
301, Exton, PA 19341           Facsimile: (610) 903-0401

 

 

ACCEPTED BY:   WORLDWIDE STOCK TRANSFER LLC, as Collateral Agent     By:
                                                               Name:   Title:  
     

 

Address: Worldwide Stock Transfer LLC
433 Hackensack Avenue
Level L
Hackensack, NJ 07601
Attn: Jonathan Gellis     Facsimile:  201-820-2010
Email:  jgellis@wwstr.com

 

 

 

SCHEDULE I

 

Legal Names; Organizational Identification Numbers;
States or Jurisdiction of Organization

 

Grantor’s Name State of Organization Federal
Employer I.D. Organizational I.D.

 

 

 

 

SCHEDULE II

 

Intellectual Property

 

Trademarks

 

Grantor Country Trademark Application or
Registration No. Filing Date Registration
Date Assignees                                                                  
                               

 

Patents

 

Grantor Country Patent Patent  No. Filing Date Issue Date Assignees            
                                                                               
                                                                               
                                                                               
                                                       

 

 

 

 

Grantor Country Patent Patent  No. Filing Date Issue Date Assignees            
                                                                               
                                               

 

 

Design Patents

 

Grantor Country Patent Patent  No. Filing Date Issue Date Assignees            
                                                                               
                                               

 

 

 

 

Patent Applications Pending

 

Grantor Country Application Application  No. Filing Date Status Assignees      
                                                               

 

Copyrights

 

Notice of Potential Patent Claim

 

 

 

 

SCHEDULE III

 

Locations

 

Grantor’s Name Chief Executive Office Chief Place of Business Books and Records
Inventory,
Equipment, Etc.          

 

 

 

SCHEDULE IV

 

Promissory Notes, Securities, Deposit Accounts,
Securities Accounts and Commodities Accounts

 

Securities

 

Grantor Name of Issuer / Pledged Entity Number
of Shares Class Certificate
No.(s)          

 

 

Deposit Accounts, Securities Accounts and Commodities Accounts

 

Grantor Name and Address of Institution Purpose of the Account Account No.      
                                                         

 

Foreign Currency Controlled Accounts

 

Entity Name and Address of Institution Amount Held in Account                  
                             

 

 

 

 

SCHEDULE V

 

Financing Statements

 

Grantors Jurisdictions For Filing Financing Statements WPCS International
Incorporated State of Delaware

 

 

 

 

 

SCHEDULE VI

 

Commercial Tort Claims

 

 

 

 

EXHIBIT A

 

Assignment For Security
[Trademarks] [Patents] [Copyrights]

 

WHEREAS, ______________________________ (the “Assignor”) [has adopted, used and
is using, and holds all right, title and interest in and to, the trademarks and
service marks listed on the annexed Schedule 1A, which trademarks and service
marks are registered or applied for in the United States Patent and Trademark
Office (the “Trademarks”)] [holds all right, title and interest in the letter
patents, design patents and utility patents listed on the annexed Schedule 1A,
which patents are issued or applied for in the United States Patent and
Trademark Office (the “Patents”)] [holds all right, title and interest in the
copyrights listed on the annexed Schedule 1A, which copyrights are registered in
the United States Copyright Office (the “Copyrights”)];

 

WHEREAS, the Assignor has entered into a Security and Pledge Agreement, dated as
of December __, 2012 (as amended, restated or otherwise modified from time to
time the “Security Agreement”), in favor of _____________, as collateral agent
for certain purchasers (the “Assignee”);

 

WHEREAS, pursuant to the Security Agreement, the Assignor has assigned to the
Assignee and granted to the Assignee for the benefit of the Buyers (as defined
in the Security Agreement) a continuing security interest in all right, title
and interest of the Assignor in, to and under the [Trademarks, together with,
among other things, the good-will of the business symbolized by the Trademarks]
[Patents] [Copyrights] and the applications and registrations thereof, and all
proceeds thereof, including, without limitation, any and all causes of action
which may exist by reason of infringement thereof and any and all damages
arising from past, present and future violations thereof (the “Collateral”), to
secure the payment, performance and observance of the “Obligations” (as defined
in the Security Agreement);

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Assignor does hereby pledge, convey, sell,
assign, transfer and set over unto the Assignee and grants to the Assignee for
the benefit of the Buyers a continuing security interest in the Collateral to
secure the prompt payment, performance and for the benefit of the Buyers
observance of the Obligations.

 

The Assignor does hereby further acknowledge and affirm that the rights and
remedies of the Assignee with respect to the Collateral are more fully set forth
in the Security Agreement, the terms and provisions of which are hereby
incorporated herein by reference as if fully set forth herein.

 

 

 

 

IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly executed
by its officer thereunto duly authorized as of _____________, 2012

 

  [GRANTORS]       By:      Name:
Title:

 

 

 

STATE OF ____________
                                                ss.:
COUNTY OF __________

 

On this ____ day of _______________, 2012, before me personally came
________________, to me known to be the person who executed the foregoing
instrument, and who, being duly sworn by me, did depose and say that s/he is the
________________ of _______________________________________, a
____________________, and that s/he executed the foregoing instrument in the
firm name of _______________________________________, and that s/he had
authority to sign the same, and s/he acknowledged to me that he executed the
same as the act and deed of said firm for the uses and purposes therein
mentioned.

 

                                                           

 

 

 

 

SCHEDULE 1A TO ASSIGNMENT FOR SECURITY

 

[Trademarks and Trademark Applications]
[Patent and Patent Applications]
[Copyright and Copyright Applications]
Owned by ______________________________

 

 

 

 

SCHEDULE 4(g)

 

Effective Financing Statements