Exhibit 10.04





 


ESCROW AGREEMENT


 


THIS ESCROW AGREEMENT
(this “Agreement”) is made as of September 30, 2014 by and among EC COMPANY, an Oregon corporation (the “Purchaser”),
WPCS International-Seattle, Inc., a Washington corporation (“WPCS-Seattle”), WPCS International Incorporated, a Delaware
corporation (“WPCS”), and Sichenzia Ross Friedman Ference LLP, with an address at 61 Broadway, New York, NY 10006 (the
“Escrow Agent”). WPCS and WPCS Seattle are collectively referred to as the “Sellers”. All capitalized terms
contained herein and not otherwise defined shall have the meaning ascribed to them in the Purchase Agreement (as hereinafter defined).


 


RECITALS


 


WHEREAS, the Purchaser
and the Sellers are parties to that certain asset purchase agreement dated as of March 31, 2014 (the “Purchase Agreement”);


 


WHEREAS, pursuant to
Section 2.4(b) of the Purchase Agreement, the Purchaser has agreed to place in escrow under the terms of the Purchase Agreement
an aggregate amount equal to the Payroll Liabilities calculated as of the last day of the calendar month prior to the Closing Date
plus Two Hundred Fifty Thousand Dollars ($250,000) (collectively, the “Escrow Funds”) to secure the payment of the
Payroll Liabilities and satisfy any other obligations of the Sellers or claims of the Purchaser under Section 9.1 of the Purchase
Agreement provided that such claims exceed the Basket (collectively, “Other Obligations of Sellers”). The Other Obligations
of Sellers specifically excludes the obligations of the Sellers to pay the Purchaser the Post Closing Adjustment Amount, if any,
required under Section 2.5(d) of the Purchase Agreement.


 


WHEREAS, the Purchaser
and the Sellers have requested that the Escrow Agent hold the Escrowed Funds in escrow and distribute the Escrowed Funds upon the
terms set forth herein; and


 


WHEREAS, the Purchaser
and the Sellers desire to appoint the Escrow Agent as escrow agent and the Escrow Agent is willing to accept such appointment and
be bound as set forth herein, subject to the terms and conditions of this Agreement.


 


AGREEMENT


 


NOW, THEREFORE, in consideration
of the covenants and mutual promises contained herein and other good and valuable consideration, the receipt and legal sufficiency
of which are hereby acknowledged and intending to be legally bound hereby, the parties agree as follows:


 




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ARTICLE I


 


TERMS OF THE ESCROW


 


1.1           The parties
hereby agree to establish the escrow account with the Escrow Agent whereby the Escrow Agent shall hold the Escrowed Funds. Notwithstanding
anything else to the foregoing, the parties agree that the Escrow Agent may hold the Escrowed Funds in one or more sub-accounts
under a master attorney escrow account.


 


1.2           Upon the Escrow
Agent’s receipt of the Escrowed Funds into the escrow account, it shall advise the Purchaser and the Sellers, or each of
their designated attorneys or agents, in writing, of the amount of Escrowed Funds it has received into the escrow accounts.


 


1.3           Wire transfers
to the Escrow Agent shall be made as follows:


 


Citibank


153 East 53rd Street


23rd Floor


New York, NY 10022


 


A/C of Sichenzia Ross Friedman Ference
LLP


61 Broadway, 32nd Floor


New York, NY  10006


A/C#:             
49206659


ABA#:            
021000089


SWIFT Code:  CITIUS33


 


 


1.4           The duties and
responsibilities of the Escrow Agent are as set forth below:


 


(A)            Out of the Escrowed Funds, the
Parties intend, for a period of 120 days from the Closing Date (subject to extension as provided under Section 2.15 below, the
“Escrow Termination Date”), to set aside $250,000 to satisfy the Other Obligations of Sellers. In the event that any
Other Obligations of Sellers have not been satisfied by the Sellers as required under the Purchase Agreement prior to the Escrow
Termination Date, either Party (the “Requesting Party”) is entitled to a distribution of all or a part of the Escrowed
Funds by delivering an instruction to the Escrow Agent to distribute to such Requesting Party the applicable portion of the Escrowed
Funds (each, a “Distribution Request”). Upon receipt of a Distribution Request, the Escrow Agent shall send a copy
of such Distribution Request to the other party (the “Recipient Party”). Additionally, the Requesting Party agrees
that upon the delivery of a Distribution Request to the Escrow Agent, the Requesting Party will simultaneously deliver a copy of
such Distribution Request to the Recipient Party in the manner for notices provided in Section 2.2 hereof. Such Recipient Party
shall have seven (7) Business Days (as defined in this Agreement) following receipt of such Distribution Request within which to
notify the Escrow Agent of its objection to such Distribution Request (the “Objection Period”). If such Recipient Party
objects to such Distribution Request within such seven (7) Business Day period, then there will be deemed to be a conflict (a “Conflict”)
between the Requesting Party and the Recipient Party, and the Escrow Agent shall proceed in accordance with the terms and conditions
of Section 2.15 of this Agreement. If the Recipient Party fails to timely deliver an objection to the Escrow Agent pursuant to
this Section 1.4(A), the Escrow Agent shall pay to the Requesting Party a portion of the Escrowed Funds equal to the amount requested
in the Distribution Request, not to exceed $250,000 (less the amount of any distributions previously made under this Section 1.4(A)).
Any such payment shall be made within two (2) Business Days following the expiration of the Objection Period. The Purchaser, as
the Recipient Party, is entitled to require that any distribution to the Sellers, as the Requesting Party, under this Section 1.4(A)
be made directly to any third-party to satisfy any Other Obligations of Sellers.




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(B)            Out of the Escrowed Funds, the
Parties intend to set aside sufficient funds to satisfy the Payroll Liabilities. Within thirty (30) days of the Closing Date, the
Sellers shall deliver a calculation of the Payroll Liabilities on the Closing Date to Purchaser who shall have five (5) days from
receipt of such calculation to object to such calculation of the Payroll Liabilities. If the Purchaser does not object to such
calculation within such 5-day period, the Sellers may direct the Escrow Agent to make payments out of the Escrowed Funds to satisfy
the Payroll Liabilities; provided, that not less than $250,000 of the Escrowed Funds (less the amount of any distributions previously
made under Section 1.4(A) above) shall remain in the Escrow Account until the Escrow Termination Date to satisfy any Other Obligations
of Sellers under Section 1.4(A) above. The Purchaser is entitled to require that any distribution to the Sellers under this Section
1.4(B) be made directly to any third-party to satisfy any Payroll Obligations of Sellers.


 


In the event that the
amount necessary to satisfy the Payroll Liabilities exceeds the amount deposited into Escrow to pay such liabilities, the Sellers
shall pay such amount directly so that not less than $250,000 remains in Escrow (less the amount of any distribution made pursuant
to a Distribution Request under Section 1.4(A) above).


 


(C)            The Escrow Agent shall continue
to hold any remaining Escrowed Funds following the payment of any Distribution Request in accordance with the terms of this Agreement.


 


(D)            The balance of any Escrowed
Funds remaining after the delivery of payments required pursuant to Section 1.4(A) and Section 1.4(B), respectively, which are
not subject to a Conflict or dispute, shall be delivered to the Sellers or their designee, in proportions as shall be determined
by the Sellers, within two (2) Business Days following the later of (i) the expiration of the final Objection Period; (ii)
the Escrow Termination Date; (iii) the date that the Sellers have provided sufficient evidence to the Purchaser to allow the Purchaser
to determine that the Payroll Liabilities have been paid in full; or (iv) the date that the Post Closing Adjustment Amount, if
any, due and payable by the Sellers to the Purchaser has been paid.


 


(E)            The Escrow Agent may also disburse
the Escrowed Funds pursuant to the joint written instruction of the Purchaser and the Sellers.


 




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ARTICLE II


 


MISCELLANEOUS


 


2.1            No waiver or
any breach of any covenant or provision herein contained shall be deemed a waiver of any preceding or succeeding breach thereof,
or of any other covenant or provision herein contained. No extension of time for performance of any obligation or act shall be
deemed an extension of the time for performance of any other obligation or act.


 


2.2            Unless otherwise
provided in this Agreement, any agreement, notice, request, instruction or other communication to be given hereunder by any party
to another must be in writing and (a) delivered personally (such delivered notice to be effective on the date it is delivered),
(b) mailed by certified mail, postage prepaid (such mailed notice to be effective three (3) Business Days after the date it
is mailed), (c) deposited with a reputable overnight courier service (such couriered notice to be effective one (1) Business
Day after the date it is sent by courier) or (d) sent by electronically confirmed facsimile or email transmission (such facsimile
or email transmission notice to be effective on the date that confirmation of such facsimile or email transmission is received),
as follows:


 


If to the Sellers or
WPCS, addressed to:


 


Sebastian Giordano


c/o WPCS International Incorporated


600 Eagleview Boulevard, Suite 300


Exton, Pennsylvania 19341


Telephone: (484) 359-7229


Facsimile: (484) 359- 7215


Email: Giordano.sebastian@gmail.com


 


With a copy to:


 


Sichenzia Ross Friedman
Ference LLP


61 Broadway, 32nd
Floor


New York, New York
10006


Attention: Harvey Kesner


Telephone: (212) 930-9700


Facsimile: (212) 930-9725


Email: hkesner@srff.com


 


If to the Purchasers,
addressed to:


 


EC COMPANY


2121 NW Thurman Street


Portland, Oregon 97201


Attention: Joel Scroggy,
CFO


Telephone: (503) 220-3525 


Facsimile:


Email: JOELS@e-c-co.com


 






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With a copy to:


 


Ball Janik LLP


15 SW Colorado Avenue,
Suite 3


Bend, Oregon 97702


Attn: Kyle D. Wuepper


Telephone: (541) 693-0062


Facsimile: (541) 617-8824


Email: kwuepper@balljanik.com


 


If to Escrow Agent:


 


Sichenzia Ross Friedman Ference LLP


61 Broadway, 32nd Floor


New York, NY 10006


Attention: Harvey Kesner, Esq.


Telephone: (212) 930-9700


Facsimile: (212) 930-9725


Email: hkesner@srff.com


 


Any party may designate
in a writing to any other party any other address, facsimile number or email address to which, and any other Person to whom or
which, a copy of any such notice, request, instruction or other communication should be sent.


 


 


2.3            This Agreement
shall be binding upon and shall inure to the benefit of the respective successors and assigns of the parties hereto.


 


2.4            This Agreement
is the final expression of, and contains the entire agreement between, the parties with respect to the subject matter hereof and
supersedes all prior understandings with respect thereto. This Agreement may not be modified, changed, supplemented or terminated,
nor may any obligations hereunder be waived, except by written instrument signed by the parties to be charged or by its agent duly
authorized in writing or as otherwise expressly permitted herein; provided, however, that nothing herein shall be construed to
alter the obligations of the Purchaser and the Sellers under the Purchase Agreement.


 


2.5            Whenever required
by the context of this Agreement, the singular shall include the plural and masculine shall include the feminine. This Agreement
shall not be construed as if it had been prepared by one of the parties, but rather as if all parties had prepared the same.




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2.6            The parties
hereto expressly agree that this Agreement shall be governed by, interpreted under and construed and enforced in accordance with
the laws of the State of Washington. Each party to this Agreement hereby (i) consents to submit himself, herself or itself to the
personal jurisdiction of the Federal courts of the United States located in the Western District of Washington or, if such courts
do not have jurisdiction over such matter, to the applicable courts of the State of Washington located in King County, (ii) irrevocably
agrees that all actions or proceedings arising out of or relating to this Agreement will be litigated in such courts and (iii)
irrevocably agrees that he, she or it will not institute any Proceeding relating to this Agreement or any of the transactions contemplated
hereby in any court other than such courts. Each party to this Agreement accepts for himself, herself or itself and in connection
with his, her or its properties, generally and unconditionally, the exclusive jurisdiction and venue of the aforesaid courts and
waives any defense of lack of personal jurisdiction or inconvenient forum or any similar defense, and irrevocably agrees to be
bound by any non-appealable judgment rendered thereby in connection with this Agreement.


 


2.7            The Escrow Agent’s
duties hereunder may be altered, amended, modified or revoked only by a writing signed by the Purchaser, the Sellers and the Escrow
Agent.


 


2.8            The Escrow Agent
shall act as such without compensation.


 


2.9            The Escrow Agent
shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected
in relying or refraining from acting on any instrument reasonably believed by the Escrow Agent to be genuine and to have been signed
or presented by the proper party or parties. The Escrow Agent shall not be personally liable for any act the Escrow Agent may do
or omit to do hereunder as the Escrow Agent while acting in good faith and in the absence of gross negligence, fraud and willful
misconduct, and any act done or omitted by the Escrow Agent pursuant to the advice of the Escrow Agent’s attorneys-at-law
shall be conclusive evidence of such good faith, in the absence of gross negligence, fraud and willful misconduct.


 


2.10            The Escrow
Agent is hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case the Escrow Agent
obeys or complies with any such order, judgment or decree, the Escrow Agent shall not be liable to any of the parties hereto or
to any other person, firm or corporation by reason of such decree being subsequently reversed, modified, annulled, set aside, vacated
or found to have been entered without jurisdiction.


 


2.11            The Escrow
Agent shall not be liable in any respect on account of the identity, authorization or rights of the parties executing or delivering
or purporting to execute or deliver any documents or papers deposited or called for thereunder in the absence of gross negligence,
fraud and willful misconduct.


 


2.12            The Escrow
Agent shall be entitled to employ such legal counsel and other experts as the Escrow Agent may deem necessary to advise the Escrow
Agent in connection with the Escrow Agent’s duties hereunder, may rely upon the advice of such counsel, and may pay such
counsel reasonable compensation; provided that the costs of such compensation shall be borne by the Escrow Agent.


 






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2.13            It is understood
that the Escrow Agent reserves the right to resign as Escrow Agent at any time by giving written notice of its resignation, specifying
the effective date thereof, to each other party hereto. Within thirty (30) days after receiving the aforesaid notice, the other
party or parties hereto shall appoint a successor escrow agent to which the Escrow Agent may distribute the Escrowed Funds then
held hereunder. If a successor escrow agent has not been appointed and has not accepted such appointment by the end of such thirty
(30) day period, the Escrow Agent may apply to a court of competent jurisdiction for the appointment of a successor escrow agent
and the fees, costs and expenses (including counsel fees and expenses) which it incurs in connection with such a proceeding shall
be borne equally by the Purchaser, on the one hand, and the Sellers, on the other hand.


 


2.14            If the Escrow
Agent reasonably requires other or further instruments in connection with this Agreement or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.


 


2.15            It is understood
and agreed that should any dispute arise with respect to the delivery and/or payment of the Escrowed Funds held by the Escrow Agent
hereunder, the Escrow Agent is authorized and directed to deliver the Escrowed Funds and any other property and documents held
by the Escrow Agent hereunder to the Independent Accounting Firm for final determination as provided for in Section 2.5(c) of the
Purchase Agreement and the Escrow Termination Date shall be extended until such dispute has been resolved. Following such resolution
by the Independent Account Firm, the Independent Account Firm shall disburse such remaining Escrow Funds in accordance with such
determination.


 


2.16            The Purchaser
and the Sellers agree jointly and severally to indemnify and hold harmless the Escrow Agent and its partners, employees, agents
and representatives from any and all claims, liabilities, costs or expenses in any way arising from or relating to the duties or
performance of the Escrow Agent hereunder or the transactions contemplated hereby other than any such claim, liability, cost or
expense to the extent the same shall have been determined by final, unappealable judgment of a court of competent jurisdiction
to have resulted from the gross negligence, fraud or willful misconduct of the Escrow Agent.


 


2.17            The Escrow
Agent shall be permitted to act as counsel for the Sellers in any transaction and/or dispute including any dispute between Purchasers,
on one hand, and the Sellers, on the other, whether or not the Escrow Agent is then holding the escrow funds held by the Escrow
Agent hereunder.


 


2.18            This Agreement
may be executed in one or more counterparts (including by facsimile or emailed scanned signature), each of which will be deemed
to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.


 


2.19            Any provision
of this Agreement which 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 provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.


 


2.20            This Agreement
shall terminate upon: (i) the distribution by the Escrow Agent of all of the Escrowed Funds as provided herein, (ii) in accordance
with Section 2.15 above, or (iii) upon the expiration of all periods of time for which a claim can be made against the Escrowed
Funds pursuant to the Purchase Agreement.


 




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2.21            “Business
Day” shall mean a day on which commercial banks in the State of Washington are open for the general transaction of business.
If any action or time for performance pursuant to this Agreement is to occur on any Saturday, Sunday or holiday, such time for
action or performance shall be extended to the next Business Day.


 


[SIGNATURE PAGE FOLLOWS]


 




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IN WITNESS WHEREOF,
the parties hereto have executed this Agreement as of date first written above.


 


	EC COMPANY	 
	 	 	 
	By:		 
	 	Name: Joel Scroggy	 
	 	Title: Chief Financial Officer	 
	 	 	 
	WPCS INTERNATIONAL-SEATTLE, INC.	 
	 	 	 
	By:	 	 
	 	Name: Sebastian Giordano	 
	 	Title:  Chairman	 
	 	 	 
	WPCS INTERNATIONAL INCORPORATED	 
	 	 	 
	By:	 	 
	 	Name: David Horin	 
	 	Title: Chief Financial Officer	 
	 	 	 
	ESCROW AGENT:
	 
	SICHENZIA ROSS FRIEDMAN FERENCE LLP
	 	 	 
	By:	 	 
	 	Name:	 
	 	Title: