Exhibit 10.1

Exhibit
    10.1
     

     

     

     

     

     

     

     

     

    LOAN
      AGREEMENT

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    TABLE
      OF CONTENTS

     

     

    
      
        	 	 	Page
	1.	FACILITY:
                LINE OF CREDIT AMOUNT AND TERMS	
                5

              
	 	
                1.1

              	
                Line
                  of Credit Amount

              	
                5

              
	 	
                1.2

              	
                Availability
                  Period

              	
                5

              
	 	
                1.3

              	
                Repayment
                  Terms

              	
                5

              
	 	
                1.4

              	
                Interest
                  Rate

              	
                5

              
	 	
                1.5

              	
                Optional
                  Interest Rates

              	
                5

              
	 	
                1.6

              	
                Letters
                  of Credit

              	
                6

              
	2.	
                OPTIONAL
                  INTEREST RATES

              	
                6

              
	 	
                2.1

              	
                Optional
                  Rates

              	
                6

              
	 	
                2.2

              	
                LIBOR
                  Rate

              	
                7

              
	3.	
                FEES
                  AND EXPENSES

              	
                7

              
	 	
                3.1

              	
                Fees

              	
                7

              
	 	
                3.2

              	
                Expenses

              	
                8

              
	 	
                3.3

              	
                Reimbursement
                  Costs

              	
                8

              
	4.	COLLATERAL	
                8

              
	 	
                4.1

              	
                Personal
                  Property

              	
                8

              
	5.	DISBURSEMENTS,
                PAYMENTS AND COSTS	
                9

              
	 	
                5.1

              	
                Disbursements
                  and Payments

              	
                9

              
	 	
                5.2

              	
                Requests
                  for Credit; Equal Access by all Borrowers

              	
                9

              
	 	
                5.3

              	
                Telephone
                  and Telefax Authorization

              	
                9

              
	 	
                5.4

              	
                Direct
                  Debit (Pre-Billing)

              	
                9

              
	 	
                5.5

              	
                Banking
                  Days

              	
                10

              
	 	
                5.6

              	
                Interest
                  Calculation

              	
                10

              
	 	
                5.7

              	
                Default
                  Rate

              	
                10

              
	6.	CONDITIONS	
                11

              
	 	
                6.1

              	
                Authorizations

              	
                11

              
	 	
                6.2

              	
                Governing
                  Documents

              	
                11

              
	 	
                6.3

              	
                Security
                  Agreements

              	
                11

              
	 	
                6.4

              	
                Perfection
                  and Evidence of Priority

              	
                11

              
	 	
                6.5

              	
                Payment
                  of Fees

              	
                11

              
	 	
                6.6

              	
                Repayment
                  of Other Credit Agreement

              	
                11

              
	 	
                6.7

              	
                Good
                  Standing

              	
                11

              
	 	
                6.8

              	
                Legal
                  Opinion

              	
                11

              
	 	
                6.9

              	
                Landlord
                  Agreement

              	
                11

              
	 	
                6.10

              	
                Insurance

              	
                11

              
	7.	REPRESENTATIONS
                AND WARRANTIES	
                11

              
	 	
                7.1

              	
                Formation

              	
                11

              
	 	
                7.2

              	
                Authorization

              	
                12

              


      

       

       

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

       

      
        	 	
                7.3

              	
                Enforceable
                  Agreement

              	
                12

              
	 	
                7.4

              	
                Good
                  Standing

              	
                12

              
	 	
                7.5

              	
                No
                  Conflicts

              	
                12

              
	 	
                7.6

              	
                Financial
                  Information

              	
                12

              
	 	
                7.7

              	
                Lawsuits

              	
                12

              
	 	
                7.8

              	
                Collateral

              	
                12

              
	 	
                7.9

              	
                Permits,
                  Franchises

              	
                12

              
	 	
                7.10

              	
                Other
                  Obligations

              	
                12

              
	 	
                7.11

              	
                Tax
                  Matters

              	
                12

              
	 	
                7.12

              	
                No
                  Event of Default

              	
                12

              
	 	
                7.13

              	
                Insurance

              	
                13

              
	 	
                7.14

              	
                ERISA
                  Plans

              	
                13

              
	 	
                7.15

              	
                Location
                  of Borrowers

              	
                13

              
	8.	COVENANTS	
                13

              
	 	
                8.1

              	
                Use
                  of Proceeds

              	
                13

              
	 	
                8.2

              	
                Financial
                  Information

              	
                14

              
	 	
                8.3

              	
                Intentionally
                  Left Blank

              	
                14

              
	 	
                8.4

              	
                Total
                  Liabilities to Tangible Net Worth Ratio

              	
                15

              
	 	
                8.5

              	
                Interest
                  Coverage Ratio

              	
                15

              
	 	
                8.6

              	
                Bank
                  as Principal Depository

              	
                15

              
	 	
                8.7

              	
                Other
                  Debts

              	
                15

              
	 	
                8.8

              	
                Other
                  Liens

              	
                15

              
	 	
                8.9

              	
                Maintenance
                  of Assets

              	
                16

              
	 	
                8.10

              	
                Investments

              	
                16

              
	 	
                8.11

              	
                Loans

              	
                16

              
	 	
                8.12

              	
                Change
                  of Management

              	
                16

              
	 	
                8.13

              	
                Change
                  of Ownership

              	
                16

              
	 	
                8.14

              	
                Additional
                  Negative Covenants

              	
                16

              
	 	
                8.15

              	
                Additional
                  Borrowers

              	
                17

              
	 	
                8.16

              	
                Notices
                  to Bank

              	
                17

              
	 	
                8.17

              	
                Insurance

              	
                18

              
	 	
                8.18

              	
                Compliance
                  with Laws

              	
                18

              
	 	
                8.19

              	
                ERISA
                  Plans

              	
                18

              
	 	
                8.20

              	
                ERISA
                  Plans - Notices

              	
                19

              
	 	
                8.21

              	
                Books
                  and Records

              	
                19

              
	 	
                8.22

              	
                Audits

              	
                19

              
	 	
                8.23

              	
                Perfection
                  of Liens

              	
                19

              
	 	
                8.24

              	
                Cooperation

              	
                19

              
	9.	
                HAZARDOUS
                  SUBSTANCES

              	
                19

              
	 	
                9.1

              	
                Indemnity
                  Regarding Hazardous Substances

              	
                19

              
	 	
                9.2

              	
                Compliance
                  Regarding Hazardous Substances

              	
                19

              
	 	
                9.3

              	
                Notices
                  Regarding Hazardous Substances

              	
                19

              
	 	
                9.4

              	
                Site
                  Visits, Observations and Testing

              	
                20

              
	 	
                9.5

              	
                Definition
                  of Hazardous Substances

              	
                20

              
	 	
                9.6

              	
                Continuing
                  Obligation

              	
                20

              


      

       

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

       

      
        	10.	DEFAULT
                AND REMEDIES	
                20

              
	 	
                10.1

              	
                Failure
                  to Pay

              	
                21

              
	 	
                10.2

              	
                Other
                  Bank Agreements

              	
                21

              
	 	
                10.3

              	
                Cross-default

              	
                21

              
	 	
                10.4

              	
                False
                  Information

              	
                21

              
	 	
                10.5

              	
                Bankruptcy

              	
                21

              
	 	
                10.6

              	
                Receivers

              	
                21

              
	 	
                10.7

              	
                Lien
                  Priority

              	
                21

              
	 	
                10.8

              	
                Lawsuits

              	
                21

              
	 	
                10.9

              	
                Judgments

              	
                21

              
	 	
                10.10

              	
                Death

              	
                21

              
	 	
                10.11

              	
                Material
                  Adverse Change

              	
                21

              
	 	
                10.12

              	
                Government
                  Action

              	
                21

              
	 	
                10.13

              	
                Default
                  under Related Documents

              	
                22

              
	 	
                10.14

              	
                ERISA
                  Plans.

              	
                22

              
	 	
                10.15

              	
                Other
                  Breach Under Agreement.

              	
                22

              
	11.	ENFORCING
                THIS AGREEMENT; MISCELLANEOUS	
                22

              
	 	
                11.1

              	
                GAAP

              	
                22

              
	 	
                11.2

              	
                Governing
                  Law

              	
                22

              
	 	
                11.3

              	
                Successors
                  and Assigns

              	
                22

              
	 	
                11.4

              	
                Waiver
                  of Jury Trial

              	
                22

              
	 	
                11.5

              	
                Severability;
                  Waivers

              	
                23

              
	 	
                11.6

              	
                Attorneys’
                  Fees

              	
                23

              
	 	
                11.7

              	
                Joint
                  and Several Liability

              	
                23

              
	 	
                11.8

              	
                Individual
                  Liability

              	
                23

              
	 	
                11.9

              	
                One
                  Agreement

              	
                24

              
	 	
                11.10

              	
                Indemnification

              	
                24

              
	 	
                11.11

              	
                Notices

              	
                24

              
	 	
                11.12

              	
                Headings

              	
                24

              
	 	
                11.13

              	
                Waiver
                  of Immunity

              	
                24

              
	 	
                11.14

              	
                Venue;
                  Service of Process

              	
                24

              
	 	
                11.15

              	
                Counterparts

              	
                24

              
	 	
                11.16

              	
                Commitment
                  Expiration

              	
                24

              
	 	
                11.17

              	
                Limitation
                  of Interest and Other Charges

              	
                24

              
	 	
                11.18

              	
                USA
                  Patriot Act Notice

              	
                24

              
	 	
                11.19

              	
                Right
                  to Setoff

              	
                24

              


      




    
      
        
        

        
        

      

      
        4

        
          

        

      

      
        
        

        
          


        

      

    



    LOAN
      AGREEMENT

     

    This
      Agreement dated as of April 10, 2007, is among Bank of America, N.A. (the
“Bank”) and WPCS International Incorporated, a Delaware corporation (“WPCS”),
      Clayborn Contracting Group, Inc., a California corporation (“Clayborn), Heinz
      Corporation, a Missouri corporation (“Heinz”), New England Communications
      Systems, Inc., a Connecticut corporation (“New England”), Quality Communications
& Alarm Company., Inc., a New Jersey corporation (“Quality”), Southeastern
      Communication Service, Inc., a Florida corporation (“Southeastern”), Walker
      Comm, Inc., a California corporation (“Walker”) (WPCS, Clayborn, Heinz, New
      England, Quality, Southeastern and Walker are sometimes referred to collectively
      as the “Borrowers” and individually as a “Borrower”).

     

    
      	1.  	
              FACILITY:
                LINE OF CREDIT AMOUNT AND TERMS

            


    

    
      	1.1  	
              Line
                of Credit Amount

            


    

     

    
      	(a)  	
              During
                the availability period described below, the Bank will provide a
                line of
                credit to the Borrowers. The amount of the line of credit (the “Facility
                Commitment”) is Twelve Million Dollars
                ($12,000,000).

            


    

    
      	(b)  	
              This
                is a revolving line of credit. During the availability period, the
                Borrowers may repay principal amounts and reborrow
                them.

            


    

    
      	(c)  	
              The
                Borrowers agree not to permit the principal balance outstanding to
                exceed
                the Facility Commitment. If the Borrowers exceed this limit, the
                Borrowers
                will immediately pay the excess to the Bank upon the Bank’s
                demand.

            


    

    
      	1.2  	
              Availability
                Period

            


    

     

    The
      line
      of credit is available between the date of this Agreement and April 10, 2010,
      or
      such earlier date as the availability may terminate as provided in this
      Agreement (the “Facility

    Expiration
      Date”).

     

    
      	1.3  	
              Repayment
                Terms

            


    

     

    
      	(a)  	
              The
                Borrowers will pay interest on May 1, 2007, and then on the same
                day of
                each month thereafter until payment in full of any principal outstanding
                under this facility.

            


    

    
      	(b)  	
              The
                Borrowers will repay in full any principal, interest or other charges
                outstanding under this facility no later than the Facility Expiration
                Date. Any interest period for an optional interest rate (as described
                below) shall expire no later than the Facility Expiration
                Date.

            


    

    
      	1.4  	
              Interest
                Rate

            


    

     

    
      	(a)  	
              The
                interest rate is a rate per year equal to the Bank’s Prime Rate
                minus
                one percentage point(s).

            


    

    
      	(b)  	
              The
                Prime Rate is the rate of interest publicly announced from time to
                time by
                the Bank as its Prime Rate. The Prime Rate is set by the Bank based
                on
                various factors, including the Bank’s costs and desired return, general
                economic conditions and other factors, and is used as a reference
                point
                for pricing some loans. The Bank may price loans to its customers
                at,
                above, or below the Prime Rate. Any change in the Prime Rate shall
                take
                effect at the opening of business on the day specified in the public
                announcement of a change in the Bank’s Prime
                Rate.

            


    

    
      	1.5  	
              Optional
                Interest Rates

            


    

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    Instead
      of the interest rate based on the rate stated in the paragraph entitled
“Interest Rate” above, the Borrowers may elect the optional interest rate listed
      below for this Facility during interest periods agreed to by the Bank and the
      Borrowers. The optional interest rate shall be subject to the terms and
      conditions described later in this Agreement. Any principal amount bearing
      interest at an optional rate under this Agreement is referred to as a “Portion.”
The following optional interest rate is available:

     

    
      	(a)  	
              The
                LIBOR Rate plus
                one hundred seventy-five percentage
                point(s).

            


    

    
      	1.6  	
              Letters
                of Credit

            


    

     

    
      	(a)  	
              During
                the availability period, at the request of the Borrowers, the Bank
                will
                issue:

            


    

    
      	(i)  	
              Standby
                letters of credit with a maximum maturity of 365 days but not to
                extend
                more than 180 days beyond the Facility Expiration Date. 

            


    

    
      	(ii)  	
              The
                amount of the letters of credit outstanding at any one time (including
                the
                drawn and unreimbursed amounts of the letters of credit) may not
                exceed
                Two Million Dollars ($2,000,000).

            


    

    
      	(b)  	
              In
                calculating the principal amount outstanding under the Facility
                Commitment, the calculation shall include the amount of any
                letters of credit outstanding, including amounts drawn on any letters
                of
                credit and not yet reimbursed.

            


    

    
      	(c)  	
              The
                Borrowers agree:

            


    

    
      	(i)  	
              Any
                sum drawn under a letter of credit may, at the option of the Bank,
                be
                added to the principal amount outstanding under this Agreement. The
                amount
                will bear interest and be due as described elsewhere in this
                Agreement.

            


    

    
      	(ii)  	
              If
                there is a default under this Agreement, to immediately prepay and
                make
                the Bank whole for any outstanding letters of
                credit.

            


    

    
      	(iii)  	
              The
                issuance of any letter of credit and any amendment to a letter of
                credit
                is subject to the Bank’s written approval and must be in form and content
                satisfactory to the Bank and in favor of a beneficiary acceptable
                to the
                Bank.

            


    

    
      	(iv)  	
              To
                sign the Bank’s form Application and Agreement for Standby Letter of
                Credit.

            


    

    
      	(v)  	
              To
                pay any issuance and/or other fees that the Bank notifies the Borrowers
                will be charged for issuing and processing letters of credit for
                the
                Borrowers.

            


    

    
      	(vi)  	
              To
                allow the Bank to automatically charge its checking account for applicable
                fees, discounts, and other charges.

            


    

    
      	(vii)  	
              To
                pay the Bank a non-refundable fee equal to 1.25% per annum of the
                outstanding undrawn amount of each standby letter of credit, payable
                quarterly in advance, calculated on the basis of the face amount
                outstanding on the day the fee is calculated. If there is a default
                under
                this Agreement, at the Bank’s option, the amount of the fee shall be
                increased to 6% per annum, effective starting on the day the Bank
                provides
                notice of the increase to the
                Borrowers.

            


    

    
      	2.  	
              OPTIONAL
                INTEREST RATES

            


    

    
      	2.1  	
              Optional
                Rates

            


    

    Each
      optional interest rate is a rate per year. Interest will be paid on May 1,
      2007,
      and then on the same day of each month thereafter
      until payment in full of any principal outstanding under this Agreement. No
      Portion will be converted to a different interest rate during the applicable
      interest period. Upon the occurrence of an event of default under this
      Agreement, the Bank may terminate the availability of optional interest rates
      for interest periods commencing after the default occurs. At the end of any
      interest period, the interest rate will revert to the rate stated in the
      paragraph(s) entitled “Interest Rate” above, unless the Borrowers have
      designated another optional interest rate for the Portion.

     

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    
      	2.2  	
              LIBOR
                Rate

            


    

     The
      election of LIBOR Rates shall be subject to the following terms and
      requirements:

     

    
      	(a)  	
              The
                interest period during which the LIBOR Rate will be in effect will
                be one
                or two weeks, or one, two, three, four or six months. The first day
                of the
                interest period must be a day other than a Saturday or a Sunday on
                which
                banks are open for business in New York and London and dealing in
                offshore
                dollars (a “LIBOR Banking Day”). The last day of the interest period and
                the actual number of days during the interest period will be determined
                by
                the Bank using the practices of the London inter-bank
                market.

            


    

    
      	(b)  	
              Each
                LIBOR Rate Portion will be for an amount not less than One Hundred
                Thousand Dollars ($100,000).

            


    

    
      	(c)  	
              The
                “LIBOR Rate” means the interest rate determined by the following formula.
                (All amounts in the calculation will be determined by the Bank as
                of the
                first day of the interest period.)

            


    

    
      	 	 


    

    
      	 	 


    

    
      	
                                              LIBOR
                Rate =

            	
              London
                Inter-Bank Offered Rate

            
	 	
              (1.00
                - Reserve Percentage)

            


    

    Where,

    
      	(i)  	
              “London
                Inter-Bank Offered Rate” means, for any applicable interest period, the
                rate per annum equal to the British Bankers Association LIBOR Rate
                (“BBA
                LIBOR”), as published by Reuters (or other commercially available source
                providing quotations of BBA LIBOR as selected by the Bank from time
                to
                time) at approximately 11:00 a.m. London time two (2) London Banking
                Days
                before the commencement of the interest period, for U.S. Dollar deposits
                (for delivery on the first day of such interest period) with a term
                equivalent to such interest period. If such rate is not available
                at such
                time for any reason, then the rate for that interest period will
                be
                determined by such alternate method as reasonably selected by the
                Bank. A
                “London Banking Day” is a day on which banks in London are open for
                business and dealing in offshore
                dollars.

            


    

    
      	(ii)  	
              “Reserve
                Percentage” means the total of the maximum reserve percentages for
                determining the reserves to be maintained by member banks of the
                Federal
                Reserve System for Eurocurrency Liabilities, as defined in Federal
                Reserve
                Board Regulation D, rounded upward to the nearest 1/100 of one percent.
                The percentage will be expressed as a decimal, and will include,
                but not
                be limited to, marginal, emergency, supplemental, special, and other
                reserve percentages.

            


    

    
      	(d)  	
              The
                Borrowers shall irrevocably request a LIBOR Rate Portion no later
                than
                12:00 noon Philadelphia time on the LIBOR Banking Day preceding the
                day on
                which the London Inter-Bank Offered Rate will be set, as specified
                above.
                For example, if there are no intervening holidays or weekend days
                in any
                of the relevant locations, the request must be made at least three
                days
                before the LIBOR Rate takes effect.

            


    

    
      	(e)  	
              The
                Bank will have no obligation to accept an election for a LIBOR Rate
                Portion if any of the following described events has occurred and
                is
                continuing:

            


    

    
      	(i)  	
              Dollar
                deposits in the principal amount, and for periods equal to the interest
                period, of a LIBOR Rate Portion are not available in the London inter-bank
                market; or

            


    

    
      	(ii)  	
              the
                LIBOR Rate does not accurately reflect the cost of a LIBOR Rate
                Portion.

            


    

    
      	(f)  	
              Each
                prepayment of a LIBOR Rate Portion, whether voluntary, by reason
                of
                acceleration or otherwise, will be accompanied by the amount of accrued
                interest on the amount prepaid and a prepayment fee as described
                below. A
                “prepayment” is a payment of an amount on a date earlier than the
                scheduled payment date for such amount as required by this
                Agreement.

            


    

    
      	 	 


    

    
      	(g)  	
              The
                prepayment fee shall be in an amount sufficient to compensate the
                Bank for
                any loss, cost or expense incurred by it as a result of the prepayment,
                including any loss of anticipated profits
                and any loss or expense arising from the liquidation or reemployment
                of
                funds obtained by it to maintain such Portion or from fees payable
                to
                terminate the deposits from which such funds were obtained.
                The Borrowers shall also pay any customary administrative fees charged
                by
                the Bank in connection with the foregoing. For
                purposes of this paragraph, the
                Bank
                shall be deemed to have funded each Portion by a matching deposit
                or other
                borrowing in the applicable interbank market, whether or not such
                Portion
                was in fact so funded.

            


    

    
      	3.  	
              FEES
                AND EXPENSES

            


    

    
      	3.1  	
              Fees

            


    

     

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    
      	(a)  	
              Unused
                Commitment Fee.
                The Borrowers agree to pay a fee on any difference between the Facility
                Commitment and the amount of credit it actually uses, determined
                by the
                average of the daily amount of credit outstanding during the specified
                period. The fee will be calculated at 0.25% per year. The calculation
                of
                credit outstanding shall include the undrawn amount of letters of
                credit.

            


    

    Of
      this
      fee, 0.0625% is due on April 30, 2007, and on each subsequent July 31, October
      31, January 31 and April 30 until the expiration of the availability period.
      

    
      	(b)  	
              Waiver
                Fee.
                If the Bank, at its discretion, agrees to waive or amend any terms
                of this
                Agreement, the Borrowers will, at the Bank’s option, pay the Bank a fee
                for each waiver or amendment in an amount advised by the Bank at
                the time
                the Borrowers request the waiver or amendment. Nothing in this paragraph
                shall imply that the Bank is obligated to agree to any waiver or
                amendment
                requested by the Borrowers. The Bank may impose additional requirements
                as
                a condition to any waiver or
                amendment.

            


    

    
      	(c)  	
              Late
                Fee.
                To the extent permitted by law, the Borrowers agree to pay a late
                fee in
                an amount not to exceed two percent (2%) of any payment that is more
                than
                fifteen (15) days late. The imposition and payment of a late fee
                shall not
                constitute a waiver of the Bank’s rights with respect to the
                default.

            


    

    
      	3.2  	
              Expenses

            


    

    The
      Borrowers agree to immediately repay the Bank for expenses that include, but
      are
      not limited to, filing, recording and search fees, appraisal fees, title report
      fees, and documentation fees.

     

    
      	3.3  	
              Reimbursement
                Costs

            


    

     

    
      	(a)  	
              The
                Borrowers agree to reimburse the Bank for any expenses it incurs
                in the
                preparation of this Agreement and any agreement or instrument required
                by
                this Agreement. Expenses include, but are not limited to, reasonable
                attorneys’ fees, including any allocated costs of the Bank’s in-house
                counsel to the extent permitted by applicable
                law.

            


    

    
      	(b)  	
              The
                Borrowers agree to reimburse the Bank for the cost of periodic field
                examinations of any Borrower’s books, records and collateral, and
                appraisals of the collateral, at such intervals as the Bank may reasonably
                require. The actions described in this paragraph may be performed
                by
                employees of the Bank or by independent appraisers. The Bank reserves
                the
                right to conduct field examinations, the cost of which will be borne
                by
                the Borrowers. Unless the Borrowers are in default, field examinations
                will be conducted no more frequently than once per fiscal
                year.

            


    

    
      	4.  	
              COLLATERAL

            


    

    
      	4.1  	
              Personal
                Property

            


    

     

     

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    The
      personal property listed below now owned or owned in the future by any Borrower
      will secure the Borrowers’ obligations to the Bank under this Agreement. The
      collateral is further defined in security agreement(s) executed by the owners
      of
      the collateral. In addition, all personal property collateral owned by the
      Borrowers securing this Agreement shall also secure all other present and future
      obligations of any Borrower to the Bank (excluding any consumer credit covered
      by the federal Truth in Lending law, unless the Borrowers have otherwise agreed
      in writing or received written notice thereof). All personal property collateral
      securing any other present or future obligations of any Borrower to the Bank
      shall also secure this Agreement. 

     

    
      	(a)  	
              Equipment;

            


    

    
      	(b)  	
              Inventory;

            


    

    
      	(c)  	
              Receivables;

            


    

    
      	(d)  	
              General
                Intangibles.

            


    

    
      	5.  	
              DISBURSEMENTS,
                PAYMENTS AND COSTS

            


    

    
      	5.1  	
              Disbursements
                and Payments

            


    

     

    
      	(a)  	
              Each
                payment by the Borrowers will be made in U.S. Dollars and immediately
                available funds by direct debit to a deposit account as specified
                below
                or, for payments not required to be made by direct debit, by mail
                to the
                address shown on the Borrowers’ statement or at one of the Bank’s banking
                centers in the United States.

            


    

    
      	(b)  	
              Each
                disbursement by the Bank and each payment by the Borrowers will be
                evidenced by records kept by the Bank. In addition, the Bank may,
                at its
                discretion, require the Borrowers to sign one or more promissory
                notes.

            


    

    
      	5.2  	
              Requests
                for Credit; Equal Access by all
                Borrowers

            


    

    Any
      Borrower (or a person or persons authorized by any one of the Borrowers), acting
      alone, can borrow up to the full amount of credit provided under this Agreement.
      Each Borrower will be liable for all extensions of credit made under this
      Agreement to any other Borrower.

     

    
      	5.3  	
              Telephone
                and Telefax Authorization

            


    

     

    
      	(a)  	
              The
                Bank may honor telephone or telefax instructions for advances or
                repayments or for the designation of optional interest rates and
                telefax
                requests for the issuance of letters of credit given, or purported
                to be
                given, by any one of the individuals authorized to sign loan agreements
                on
                behalf of the Borrowers, or any other individual designated by any
                one of
                such authorized signers.

            


    

    
      	(b)  	
              Advances
                will be deposited in and repayments will be withdrawn from account
                number
                __________ owned by ______________, or such other of any Borrower’s
                accounts with the Bank as designated in writing by the
                Borrowers.

            


    

    
      	(c)  	
              The
                Borrowers will indemnify and hold the Bank harmless from all liability,
                loss, and costs in connection with any act resulting from telephone
                or
                telefax instructions the Bank reasonably believes are made by any
                individual authorized by the Borrowers to give such instructions.
                This
                paragraph will survive this Agreement’s termination, and will benefit the
                Bank and its officers, employees, and
                agents.

            


    

    
      	5.4  	
              Direct
                Debit (Pre-Billing)

            


    

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    
      	(a)  	
              The
                Borrowers agree that the Bank will debit deposit account number
                ____________ owned by ___________, or such other of the Borrowers’
                accounts with the Bank as designated in writing by the Borrowers
                (the
                “Designated Account”) on the date each payment of principal and interest
                and any fees from the Borrowers becomes due (the “Due
                Date”).

            


    

    
      	(b)  	
              Prior
                to each Due Date, the Bank will mail to the Borrowers a statement
                of the
                amounts that will be due on that Due Date (the “Billed Amount”). The bill
                will be mailed a specified number of calendar days prior to the Due
                Date,
                which number of days will be mutually agreed from time to time by
                the Bank
                and the Borrowers. The calculations in the bill will be made on the
                assumption that no new extensions of credit or payments will be made
                between the date of the billing statement and the Due Date, and that
                there
                will be no changes in the applicable interest
                rate.

            


    

    
      	(c)  	
              The
                Bank will debit the Designated Account for the Billed Amount, regardless
                of the actual amount due on that date (the “Accrued Amount”). If the
                Billed Amount debited to the Designated Account differs from the
                Accrued
                Amount, the discrepancy will be treated as
                follows:

            


    

    
      	(i)  	
              If
                the Billed Amount is less than the Accrued Amount, the Billed Amount
                for
                the following Due Date will be increased by the amount of the discrepancy.
                The Borrowers will not be in default by reason of any such
                discrepancy.

            


    

    
      	(ii)  	
              If
                the Billed Amount is more than the Accrued Amount, the Billed Amount
                for
                the following Due Date will be decreased by the amount of the
                discrepancy.

            


    

    Regardless
      of any such discrepancy, interest will continue to accrue based on the actual
      amount of principal outstanding without compounding. The Bank will not pay
      the
      Borrowers interest on any overpayment.

    
      	(d)  	
              The
                Borrowers will maintain sufficient funds in the Designated Account
                to
                cover each debit. If there are insufficient funds in the Designated
                Account on the date the Bank enters any debit authorized by this
                Agreement, the Bank may reverse the
                debit.

            


    

    
      	5.5  	
              Banking
                Days

            


    

    Unless
      otherwise provided in this Agreement, a banking day is a day other than a
      Saturday, Sunday or other day on which commercial banks are authorized to close,
      or are in fact closed, in the state where the Bank’s lending office is located,
      and, if such day relates to amounts bearing interest at an offshore rate (if
      any), means any such day on which dealings in dollar deposits are conducted
      among banks in the offshore dollar interbank market. All payments and
      disbursements which would be due on a day which is not a banking day will be
      due
      on the next banking day. All payments received on a day which is not a banking
      day will be applied to the credit on the next banking day.

     

    
      	5.6  	
              Interest
                Calculation

            


    

    Except
      as
      otherwise stated in this Agreement, all interest and fees, if any, will be
      computed on the basis of a 360-day year and the actual number of days elapsed.
      This results in more interest or a higher fee than if a 365-day year is used.
      Installments of principal which are not paid when due under this Agreement
      shall
      continue to bear interest until paid.

     

    
      	5.7  	
              Default
                Rate

            


    

    Upon
      the
      occurrence of any default or after maturity or after judgment has been rendered
      on any obligation under this Agreement, all amounts outstanding under this
      Agreement, including any interest, fees, or costs which are not paid when due,
      will at the option of the Bank bear interest at a rate which is 6.0 percentage
      point(s) higher than the rate of interest otherwise provided under this
      Agreement. This may result in compounding of interest. This will not constitute
      a waiver of any default.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    
      	6.  	
              CONDITIONS

            


    

    Before
      the Bank is required to extend any credit to the Borrowers under this Agreement,
      it must receive any documents and other items it may reasonably require, in
      form
      and content acceptable to the Bank, including any items specifically listed
      below.

    
      	6.1  	
              Authorizations

            


    

    Evidence
      that the execution, delivery and performance by the Borrowers of this Agreement
      and any instrument or agreement required under this Agreement have been duly
      authorized.

     

    
      	6.2  	
              Governing
                Documents

            


    

    A
      copy of
      each Borrower’s organizational documents.

     

    
      	6.3  	
              Security
                Agreements

            


    

    Signed
      original security agreements covering the personal property collateral which
      the
      Bank requires.

     

    
      	6.4  	
              Perfection
                and Evidence of Priority

            


    

    Evidence
      that the security interests and liens in favor of the Bank are valid,
      enforceable, properly perfected in a manner acceptable to the Bank and prior
      to
      all others’ rights and interests, except those the Bank consents to in writing.
      All title documents for motor vehicles which are part of the collateral must
      show the Bank’s interest.

     

    
      	6.5  	
              Payment
                of Fees

            


    

    Payment
      of all fees and other amounts due and owing to the Bank, including without
      limitation payment of all accrued and unpaid expenses incurred by the Bank
      as
      required by the paragraph entitled “Reimbursement Costs.”

     

    
      	6.6  	
              Repayment
                of Other Credit Agreement

            


    

    Evidence
      that the existing revolving line of credit in the amount of $5,000,000 with
      Bank
      Leumi USA has been or will be repaid and cancelled on or before the first
      disbursement under this Agreement.

     

    
      	6.7  	
              Good
                Standing

            


    

    Certificates
      of good standing for each Borrower from its state of formation and from any
      other state in which any Borrower is required to qualify to conduct its
      business.

     

    
      	6.8  	
              Legal
                Opinion

            


    

     

    A
      written
      opinion from the Borrowers’ legal counsel, covering such matters as the Bank may
      require. The legal counsel and the terms of the opinion must be acceptable
      to
      the Bank.

    
      	6.9  	
              Landlord
                Agreement

            


    

    For
      any
      personal property collateral located on real property which is subject to a
      mortgage or deed of trust or which is not owned by a Borrower (or the grantor
      of
      the security interest), an agreement from the owner of the real property and
      the
      holder of any such mortgage or deed of trust.

     

    
      	6.10  	
              Insurance

            


    

    Evidence
      of insurance coverage, as required in the “Covenants” section of this
      Agreement.

     

    
      	7.  	
              REPRESENTATIONS
                AND WARRANTIES

            


    

    When
      the
      Borrowers sign this Agreement, and until the Bank is repaid in full, each
      Borrower makes the following representations and warranties. Each request for
      an
      extension of credit constitutes a renewal of these representations and
      warranties as of the date of the request:

     

    
      	7.1  	
              Formation

            


    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    Each
      Borrower is duly formed and existing under the laws of the state or other
      jurisdiction where organized.

    
      	7.2  	
              Authorization

            


    

    This
      Agreement, and any instrument or agreement required hereunder, are within each
      Borrower’s powers, have been duly authorized, and do not conflict with any of
      its organizational papers.

     

    
      	7.3  	
              Enforceable
                Agreement

            


    

    This
      Agreement is a legal, valid and binding agreement of each Borrower, enforceable
      against each Borrower in accordance with its terms, and any instrument or
      agreement required hereunder, when executed and delivered, will be similarly
      legal, valid, binding and enforceable.

     

    
      	7.4  	
              Good
                Standing

            


    

    In
      each
      state in which any Borrower does business, it is properly licensed, in good
      standing, and, where required, in compliance with fictitious name
      statutes.

     

    
      	7.5  	
              No
                Conflicts

            


    

    This
      Agreement does not conflict with any law, agreement, or obligation by which
      any
      Borrower is bound.

     

    
      	7.6  	
              Financial
                Information

            


    

    All
      financial and other information that has been or will be supplied to the Bank
      is
      sufficiently complete to give the Bank accurate knowledge of each Borrower’s
      (and any guarantor’s) financial condition, including all material contingent
      liabilities. Since the date of the most recent financial statement provided
      to
      the Bank, there has been no material adverse change in the business condition
      (financial or otherwise), operations, properties or prospects of any Borrower
      (or any guarantor). 

     

    
      	7.7  	
              Lawsuits

            


    

     There
      is
      no lawsuit, tax claim or other dispute pending or threatened against any
      Borrower which, if lost, would impair any Borrower’s financial condition or
      ability to repay the loan, except as have been disclosed in writing to the
      Bank.

     

    
      	7.8  	
              Collateral

            


    

    All
      collateral required in this Agreement is owned by the grantor of the security
      interest free of any title defects or any liens or interests of others, except
      those which have been

    approved
      by the Bank in writing.

     

    
      	7.9  	
              Permits,
                Franchises

            


    

    Each
      Borrower possesses all permits, memberships, franchises, contracts and licenses
      required and all trademark rights, trade name rights, patent rights, copyrights,
      and fictitious name rights necessary to enable it to conduct the business in
      which it is now engaged.

     

    
      	7.10  	
              Other
                Obligations

            


    

    No
      Borrower is in default on any obligation for borrowed money, any purchase money
      obligation or any other material lease, commitment, contract, instrument or
      obligation, except as

    have
      been
      disclosed in writing to the Bank.

     

    
      	7.11  	
              Tax
                Matters

            


    

    No
      Borrower has any knowledge of any pending assessments or adjustments of its
      income tax for any year and all taxes due have been paid, except as have been
      disclosed in writing to

    the
      Bank.

     

    
      	7.12  	
              No
                Event of Default

            


    

     

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    There
      is
      no event which is, or with notice or lapse of time or both would be, a default
      under this Agreement.

    
      	7.13  	
              Insurance

            


    

     

    Each
      Borrower has obtained, and maintained in effect, the insurance coverage required
      in the “Covenants” section of this Agreement.

    
      	7.14  	
              ERISA
                Plans

            


    

     

    
      	(a)  	
              Each
                Plan (other than a multiemployer plan) is in compliance in all material
                respects with the applicable provisions of ERISA, the Code and other
                federal or state law. Each Plan has received a favorable determination
                letter from the IRS and to the best knowledge of each Borrower, nothing
                has occurred which would cause the loss of such qualification. Each
                Borrower has fulfilled its obligations, if any, under the minimum
                funding
                standards of ERISA and the Code with respect to each Plan, and has
                not
                incurred any liability with respect to any Plan under Title IV of
                ERISA.

            


    

    
      	(b)  	
              There
                are no claims, lawsuits or actions (including by any governmental
                authority), and there has been no prohibited transaction or violation
                of
                the fiduciary responsibility rules, with respect to any Plan which
                has
                resulted or could reasonably be expected to result in a material
                adverse
                effect.

            


    

    
      	(c)  	
              With
                respect to any Plan subject to Title IV of
                ERISA:

            


    

    
      	(i)  	
              No
                reportable event has occurred under Section 4043(c) of ERISA for
                which the
                PBGC requires 30-day notice.

            


    

    
      	(ii)  	
              No
                action by any Borrower or any ERISA Affiliate to terminate or withdraw
                from any Plan has been taken and no notice of intent to terminate
                a Plan
                has been filed under Section 4041 of
                ERISA.

            


    

    
      	(iii)  	
              No
                termination proceeding has been commenced with respect to a Plan
                under
                Section 4042 of ERISA, and no event has occurred or condition exists
                which
                might constitute grounds for the commencement of such a
                proceeding.

            


    

    
      	(d)  	
              The
                following terms have the meanings indicated for purposes of this
                Agreement:

            


    

    
      	(i)  	
              “Code”
                means the Internal Revenue Code of 1986, as amended from time to
                time.

            


    

    
      	(ii)  	
              “ERISA”
                means the Employee Retirement Income Security Act of 1974, as amended
                from
                time to time.

            


    

    
      	(iii)  	
              “ERISA
                Affiliate” means any trade or business (whether or not incorporated) under
                common control with any Borrower within the meaning of Section 414(b)
                or (c) of the Code.

            


    

    
      	(iv)  	
              “PBGC”
                means the Pension Benefit Guaranty
                Corporation.

            


    

    
      	(v)  	
              “Plan”
                means a pension, profit-sharing, or stock bonus plan intended to
                qualify
                under Section 401(a) of the Code, maintained or contributed to by
                any
                Borrower or any ERISA Affiliate, including any multiemployer plan
                within
                the meaning of Section 4001(a)(3) of
                ERISA.

            


    

    
      	7.15  	
              Location
                of Borrowers

            


    

    The
      place
      of business of each Borrower (or, if the Borrower has more than one place of
      business, its chief executive office) is located at the address listed on the
      signature page of this Agreement.

     

    
      	8.  	
              COVENANTS

            


    

    Each
      Borrower agrees, so long as credit is available under this Agreement and until
      the Bank is repaid in full:

     

    
      	8.1  	
              Use
                of Proceeds

            


    

     

    (a) To
      use
      the proceeds of Facility only for general corporation purposes including working
       capital
      and permitted acquisitions. 

     

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    
      	
              (b)

            	
              The
                proceeds of the credit extended under this Loan Agreement may not
                be used
                directly or indirectly to purchase or carry any “margin stock” as that
                term is defined in Regulation U of the Board of Governors of the
                Federal
                Reserve System, or extend credit to or invest in other parties for
                the
                purpose of purchasing or carrying any such “margin stock,” or to reduce or
                retire any indebtedness incurred for such
                purpose.

            


    

     

    
      	8.2  	
              Financial
                Information

            


    

    To
      provide the following financial information and statements in form and content
      acceptable to the Bank, and such additional information as requested by the
      Bank
      from time to time. The Bank reserves the right, upon written notice to the
      Borrowers, to require the Borrowers to deliver financial information and
      statements to the Bank more frequently than otherwise provided below, and to
      use
      such additional information and statements to measure any applicable financial
      covenants in this Agreement.

     

    
      	(a)  	
              Within
                120 days of the fiscal year end, the annual financial statements
                of the
                Borrowers. These financial statements must be audited (with an opinion
                satisfactory to the Bank) by a Certified Public Accountant acceptable
                to
                the Bank, which includes J.H. Cohn LLP. The statements shall be prepared
                on a consolidated basis.

            


    

    
      	(b)  	
              Within
                50 days of the period’s end (not including the last period in each fiscal
                year), quarterly financial statements of the Borrowers, certified
                and
                dated by an authorized financial officer.


            


    

    
      	(c)  	
              Promptly,
                upon sending or receipt, copies of any management letters and
                correspondence relating to management letters, sent or received by
                the
                Borrowers to or from the Borrowers’ auditor. If no management letter is
                prepared, the Bank may, in its discretion, request a letter from
                such
                auditor stating that no deficiencies were noted that would otherwise
                be
                addressed in a management letter.

            


    

    
      	(d)  	
              Copies
                of the Form 10-K Annual Report, Form 10-Q Quarterly Report and Form
                8-K
                Current Report within two business days of the date of filing with
                the
                Securities and Exchange Commission.

            


    

    
      	(e)  	
              Financial
                projections covering a time period acceptable to the Bank and specifying
                the assumptions used in creating the projections. The projections
                shall be
                provided to the Bank no less often than 60 days after the end of
                each
                fiscal year.

            


    

    
      	(f)  	
              Within
                120 days of the end of each fiscal year and within 50 days of the
                end of
                each quarter, a
                compliance certificate of the Borrowers, signed by an authorized
                financial
                officer and setting forth (i) the information and computations (in
                sufficient detail) to establish that the Borrowers are in compliance
                with
                all financial covenants at the end of the period covered by the financial
                statements then being furnished and (ii) whether there existed as
                of the
                date of such financial statements and whether there exists as of
                the date
                of the certificate, any default under this Agreement and, if any
                such
                default exists, specifying the nature thereof and the action the
                Borrowers
                are taking and proposes to take with respect
                thereto.

            


    

    
      	
               (g)

            	
              Promptly
                upon the Bank’s request, such other books, records, statements, lists of
                property and accounts, budgets, accounts receivable agings, backlog
                reports, work-in-process, forecasts or reports as to the Borrowers
                and as
                to each guarantor of the Borrowers’ obligations to the Bank as the Bank
                may request.

            


    

    
      	8.3  	
              Intentionally
                Left Blank

            


    

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    
      	8.4  	
              Funded
                Debt to Tangible Net Worth
                Ratio

            


    

    To
      maintain on a consolidated basis a Funded Debt to Tangible Net Worth Ratio
      of
      not more than 1.0:1.0. 

    “Funded
      Debt” means all outstanding liabilities for borrowed money and other
      interest-bearing liabilities, including current and long term debt and
      capitalized leases, less the non-current portion of Subordinated
      Liabilities.

    “Subordinated
      Liabilities” means liabilities subordinated to the Borrowers’ obligations to the
      Bank in a manner acceptable to the Bank in its sole discretion.

    “Tangible
      Net Worth” means the value of total assets (including leaseholds and leasehold
      improvements and reserves against assets but excluding goodwill, patents,
      trademarks, trade names, organization expense, unamortized debt discount and
      expense, capitalized or deferred research and development costs, deferred
      marketing expenses, and other like intangibles, and monies due from affiliates,
      officers, directors, employees, shareholders, members or managers) less total
      liabilities, including but not limited to accrued and deferred income taxes,
      but
      excluding the non-current portion of Subordinated Liabilities.

    
      	8.5  	
              Interest
                Coverage Ratio

            


    

     

    To
      maintain on a consolidated basis an Interest Coverage Ratio of at least 3.0:1.0,
      on a rolling four quarter basis. 

    “Interest
      Coverage Ratio” means the ratio of EBIT to interest expense.

    “EBIT”
      means net income, less income or plus loss from discontinued operations and
      extraordinary items, plus income taxes, plus interest expense. This ratio will
      be calculated at the end of each reporting period for which the Bank requires
      financial statements, using the results of the twelve-month period ending with
      that reporting period.

     

    
      	8.6  	
              Bank
                as Principal Depository

            


    

    To
      maintain the Bank as its principal depository bank, including for the
      maintenance of business, cash management, operating and collection/lockbox
      services and other administrative deposit accounts.

     

    
      	8.7  	
              Other
                Debts

            


    

    Not
      to
      have outstanding or incur any direct or contingent liabilities or lease
      obligations (other than those to the Bank), or become liable for the liabilities
      of others, without the Bank’s written consent. This does not
      prohibit:

    
      	(a)  	
              Acquiring
                goods, supplies, or merchandise on normal trade
                credit.

            


    

    
      	(b)  	
              Endorsing
                negotiable instruments received in the usual course of
                business.

            


    

    
      	(c)  	
              Obtaining
                surety bonds in the usual course of
                business.

            


    

    
      	(d)  	
              Liabilities,
                lines of credit and leases in existence on the date of this Agreement
                disclosed in writing to the Bank.

            


    

    
      	(e)  	
              Additional
                purchase money and lease obligations for business purposes which
                do not
                exceed a total principal amount of One Million Dollars ($1,000,000)
                in the
                aggregate for the Borrowers outstanding at any one
                time.

            


    

    
      	8.8  	
              Other
                Liens

            


    

     

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    Not
      to
      create, assume, or allow any security interest or lien (including judicial
      liens) on property any Borrower now or later owns, except:

    
      	(a)  	
              Liens
                and security interests in favor of the
                Bank.

            


    

    
      	(b)  	
              Liens
                for taxes not yet due.

            


    

    
      	(c)  	
              Liens
                outstanding on the date of this Agreement disclosed in writing to
                the
                Bank.

            


    

    
      	(d)  	
              Additional
                purchase money security interests in assets acquired after the date
                of
                this Agreement, if the total principal amount of debts secured by
                such
                liens does not exceed Five Hundred Thousand Dollars ($500,000) in
                the
                aggregate for the Borrowers at any one
                time.

            


    

    
      	8.9  	
              Maintenance
                of Assets

            


    

     

    
      	(a)  	
              Not
                to sell, assign, lease, transfer or otherwise dispose of any part
                of any
                Borrower’s business or any Borrower’s assets except for inventory in the
                ordinary course of the Borrower’s business and in an aggregate amount for
                all of the Borrowers not exceeding Five Hundred Thousand Dollars
                ($500,000) in any fiscal year.

            


    

    
      	(b)  	
              Not
                to sell, assign, lease, transfer or otherwise dispose of any assets
                for
                less than fair market value, or enter into any agreement to do
                so.

            


    

    
      	(c)  	
              Not
                to enter into any sale and leaseback agreement covering any of its
                fixed
                assets.

            


    

    
      	(d)  	
              To
                maintain and preserve all rights, privileges, and franchises any
                Borrower
                now has.

            


    

    
      	(e)  	
              To
                make any repairs, renewals, or replacements to keep each Borrower’s
                properties in good working
                condition.

            


    

    
      	8.10  	
              Investments

            


    

     

    Except
      as
      permitted by Section 8.14, not to have any existing, or make any new,
      investments in any individual or entity, or make any capital contributions
      or
      other transfers of assets to any individual or entity, except for:

     

    
      	(a)  	
              Existing
                investments disclosed to the Bank in
                writing.

            


    

    
      	(b)  	
              Investments
                in each Borrower’s current
                subsidiaries.

            


    

    
      	(c)  	
              Investments
                in any of the following:

            


    

    
      	(i)  	
              certificates
                of deposit;

            


    

    
      	(ii)  	
              U.S.
                treasury bills and other obligations of the federal
                government;

            


    

    
      	(iii)  	
              readily
                marketable securities (including commercial paper, but excluding
                restricted stock and stock subject to the provisions of Rule 144
                of the
                Securities and Exchange
                Commission).

            


    

    
      	 	 


    

    
      	8.11  	
              Loans

            


    

    Not
      to
      make any loans, advances or other extensions of credit to any individual or
      entity, except for:

    
      	(a)  	
              Existing
                extensions of credit disclosed to the Bank in
                writing.

            


    

    
      	(b)  	
              Extensions
                of credit to the Borrowers’ current subsidiaries or newly acquired
                subsidiaries which become parties to this
                Agreement.

            


    

    
      	(c)  	
              Extensions
                of credit in the nature of accounts receivable or notes receivable
                arising
                from the sale or lease of goods or services in the ordinary course
                of
                business to non-affiliated
                entities.

            


    

    
      	 	 


    

    
      	8.12  	
              Change
                of Management

            


    

    Not
      to
      permit during any period of six (6) consecutive calendar months, individuals
      who
      were directors of any Borrower on the first day of such period to cease to
      constitute a majority of the board of directors of the Borrower.

     

    
      	8.13  	
              Change
                of Ownership

            


    

    . 

    Not
      to
      cause, permit, or suffer any change in capital ownership such that there is
      a
      change of more than fifty-one percent (51%) in the direct or indirect capital
      ownership of any Borrower, except as permitted by Section 8.14(a).

    
      	8.14  	
              Additional
                Negative Covenants

            


    

     

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    Not
      to,
      without the Bank’s written consent:

    
      	(a)  	
              Enter
                into any consolidation, merger, or other combination, or become a
                partner
                in a partnership, a member of a joint venture, or a member of a limited
                liability company, except that any Borrower may merge into
                WPCS.

            


    

    
      	(b)  	
              Have
                any subsidiary, unless such subsidiary has joined in this Agreement
                as an
                additional Borrower pursuant to Section 8.15.


            


    

    
      	(c)  	
              Acquire
                or purchase a business or its assets, unless (i) such acquisition
                is
                entered into by a Borrower and for a controlling interest of the
                capital
                stock or a substantial part of the assets or business of any person
                or
                entity, (ii) the business to be acquired is in the same line of business
                as that of the Borrowers; (iii) the Borrower entering into such
                acquisition delivers to the Bank all documentation to grant the Bank
                a
                security interest in the acquired assets; (iv) if a subsidiary is
                created
                to effect such acquisition, such subsidiary joins in this Agreement
                as an
                additional Borrower pursuant to Section 8.15 and delivers to the
                Bank all
                the documentation required by Section 8.15; (v) the Borrowers deliver
                to
                the Bank the acquisition agreement satisfactory to the Bank within
                five
                (5) Business Days prior to any acquisition; (vi) the Borrowers deliver
                to
                the Bank in connection with any such acquisition, a certificate
                demonstrating the Borrowers’ compliance with the financial covenants under
                this Agreement on an historical and projected basis on updated financial
                projections; (vii) no default or event of default shall exist under
                this
                Agreement or would occur as a result of such acquisition; and (viii)
                the
                Borrowers shall deliver to the Bank appropriate UCC-1 financing
                statements, organizational documents and opinions, all in form, content
                and scope reasonably satisfactory to the Bank. Notwithstanding the
                above,
                if the total consideration for any single acquisition exceeds $10,000,000
                the Borrowers shall obtain the prior written approval of the Bank
                and
                demonstrate to the Bank that the Borrowers will have at least $2,000,000
                of availability under the Facility after giving effect to the
                acquisition.

            


    

    
      	(d)  	
              Engage
                in any business activities substantially different from any Borrower’s
                present business.

            


    

    
      	(e)  	
              Liquidate
                or dissolve any Borrower’s business, except as permitted by Section
                8.14(a).

            


    

    
      	(f)  	
              Voluntarily
                suspend its business for more than ten (10) days in any three hundred
                sixty-five (365) day period.

            


    

    
      	 	 


    

    
      	8.15  	
              Additional
                Borrowers

            


    

    Upon
      any
      entity becoming a direct or indirect subsidiary of any Borrower, the Borrowers
      will provide the Bank with written notice thereof setting forth information
      in
      reasonable detail describing all of the assets of such entity and shall (a)
      if
      required by the Bank, cause such entity to execute a joinder agreement to the
      Agreement, (b) cause such entity to pledge all of its assets to the Bank
      pursuant to a security agreement in substantially the form of the Security
      Agreement and otherwise in a form acceptable to the Bank, (c) cause such entity
      to execute a promissory notes in favor of the Bank, if required, and (d) deliver
      such other documentation as the Bank may reasonably request in connection with
      the foregoing, including, without limitation, appropriate UCC-1 financing
      statements, certified resolutions and other organizational and authorizing
      documents of such entity and favorable opinions of counsel to such entity (which
      shall cover, among other things, the legality, validity, binding effect and
      enforceability of the documentation referred to above), all in form, content
      and
      scope reasonably satisfactory to the Bank. 

     

    
      	8.16  	
              Notices
                to Bank

            


    

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    To
      promptly notify the Bank in writing of:

    
      	(a)  	
              Any
                lawsuit(s) over Five Hundred Thousand Dollars ($500,000) in the aggregate
                against the Borrowers.

            


    

    
      	(b)  	
              Any
                substantial dispute between any governmental authority and any
                Borrower.

            


    

    
      	(c)  	
              Any
                event of default under this Agreement, or any event which, with notice
                or
                lapse of time or both, would constitute an event of
                default.

            


    

    
      	(d)  	
              Any
                material adverse change in any Borrower’s business condition (financial or
                otherwise), operations, properties or prospects, or ability to repay
                the
                credit.

            


    

    
      	(e)  	
              Any
                change in any Borrower’s name, legal structure, place of business, or
                chief executive office if any Borrower has more than one place of
                business.

            


    

    
      	(f)  	
              Any
                actual contingent liabilities of any Borrower, and any such contingent
                liabilities which are reasonably foreseeable, where such liabilities
                are
                in excess of Five Hundred Thousand Dollars ($500,000) in the aggregate
                for
                all of the Borrowers.

            


    

    
      	 	 


    

    
      	8.17  	
              Insurance

            


    

     

    
      	(a)  	
              General
                Business Insurance.
                      To maintain insurance satisfactory to the Bank as to amount,
                nature and
                carrier covering property damage (including loss of use and occupancy)
                to
                any Borrower’s properties, business interruption insurance, public
                liability insurance including coverage for contractual liability,
                product
                liability and workers’ compensation, and any other insurance which is
                usual for any Borrower’s business. Each policy shall provide for at least
                thirty (30) days prior notice to the Bank of any cancellation
                thereof.

            


    

    
      	(b)  	
              Insurance
                Covering Collateral.
                To maintain all risk property damage insurance policies covering
                the
                tangible property comprising the collateral. Each insurance policy
                must be
                for the full replacement cost of the collateral and include a replacement
                cost endorsement in an amount acceptable to the Bank. The insurance
                must
                be issued by an insurance company acceptable to the Bank and must
                include
                a lender’s loss payable endorsement in favor of the Bank in a form
                acceptable to the Bank.

            


    

    
      	(c)  	
              Evidence
                of Insurance.
                Upon the request of the Bank, to deliver to the Bank a copy of each
                insurance policy, or, if permitted by the Bank, a certificate of
                insurance
                listing all insurance in force.

            


    

    
      	8.18  	
              Compliance
                with Laws

            


    

    To
      comply
      with the laws (including any fictitious or trade name statute), regulations,
      and
      orders of any government body with authority over any Borrower’s business. The
      Bank shall have no obligation to make any advance to the Borrowers except in
      compliance with all applicable laws and regulations and each Borrower shall
      fully cooperate with the Bank in complying with all such applicable laws and
      regulations.

     

    
      	8.19  	
              ERISA
                Plans

            


    

     

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    Promptly
      during each year, to pay and cause any subsidiaries to pay contributions
      adequate to meet at least the minimum funding standards under ERISA with respect
      to each and every Plan; file each annual report required to be filed pursuant
      to
      ERISA in connection with each Plan for each year; and notify the Bank within
      ten
      (10) days of the occurrence of any Reportable Event that might constitute
      grounds for termination of any capital Plan by the Pension Benefit Guaranty
      Corporation or for the appointment by the appropriate United States District
      Court of a trustee to administer any Plan. “ERISA” means the Employee Retirement
      Income Security Act of 1974, as amended from time to time. Capitalized terms
      in
      this paragraph shall have the meanings defined within ERISA.

     

    
      	8.20  	
              ERISA
                Plans - Notices

            


    

    With
      respect to a Plan subject to Title IV of ERISA, to give prompt written notice
      to
      the Bank of:

     

    
      	(a)  	
              The
                occurrence of any reportable event under Section 4043(c) of ERISA
                for
                which the PBGC requires 30-day
                notice.

            


    

    
      	(b)  	
              Any
                action by any Borrower or any ERISA Affiliate to terminate or withdraw
                from a Plan or the filing of any notice of intent to terminate under
                Section 4041 of ERISA.

            


    

    
      	(c)  	
              The
                commencement of any proceeding with respect to a Plan under Section
                4042
                of ERISA.

            


    

    
      	8.21  	
              Books
                and Records

            


    

    To
      maintain adequate books and records.

     

    
      	8.22  	
              Audits

            


    

    To
      allow
      the Bank and its agents to inspect any Borrower’s properties and examine, audit,
      and make copies of books and records at any reasonable time. If any Borrower’s
      properties, books or records are in the possession of a third party, each
      Borrower authorizes that third party to permit the Bank or its agents to have
      access to perform inspections or audits and to respond to the Bank’s requests
      for information concerning such properties, books and records.

     

    
      	8.23  	
              Perfection
                of Liens

            


    

    To
      help
      the Bank perfect and protect its security interests and liens, and reimburse
      it
      for related costs it incurs to protect its security interests and
      liens.

     

    
      	8.24  	
              Cooperation

            


    

    To
      take
      any action reasonably requested by the Bank to carry out the intent of this
      Agreement.

     

    
      	9.  	
              HAZARDOUS
                SUBSTANCES

            


    

    
      	9.1  	
              Indemnity
                Regarding Hazardous Substances

            


    

    The
      Borrowers will indemnify and hold harmless the Bank from any loss or liability
      the Bank incurs in connection with or as a result of this Agreement, which
      directly or indirectly arises out of the use, generation, manufacture,
      production, storage, release, threatened release, discharge, disposal or
      presence of a hazardous substance. This indemnity will apply whether the
      hazardous substance is on, under or about any Borrower’s property or operations
      or property leased to any Borrower. The indemnity includes but is not limited
      to
      attorneys’ fees (including the reasonable estimate of the allocated cost of
      in-house counsel and staff). The indemnity extends to the Bank, its parent,
      subsidiaries and all of their directors, officers, employees, agents,
      successors, attorneys and assigns.

     

    
      	9.2  	
              Compliance
                Regarding Hazardous Substances

            


    

    Each
      Borrower represents and warrants that the Borrower has complied with all current
      and future laws, regulations and ordinances or other requirements of any
      governmental authority relating to or imposing liability or standards of conduct
      concerning protection of health or the environment or hazardous
      substances.

     

    
      	9.3  	
              Notices
                Regarding Hazardous Substances

            


    

    Until
      full repayment of the loan, each Borrower will promptly notify the Bank in
      writing of any threatened or pending investigation of the Borrower or its
      operations by any governmental agency under any current or future law,
      regulation or ordinance pertaining to any hazardous substance.

     

     

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    
      	9.4  	
              Site
                Visits, Observations and
                Testing

            


    

    The
      Bank
      and its agents and representatives will have the right at any reasonable time,
      after giving reasonable notice to the Borrowers, to enter and visit any
      locations where the collateral securing this Agreement (the “Collateral”) is
      located for the purposes of observing the Collateral, taking and removing
      environmental samples, and conducting tests. The Borrowers shall reimburse
      the
      Bank on demand for the costs of any such environmental investigation and
      testing. The Bank will make reasonable efforts during any site visit,
      observation or testing conducted pursuant this paragraph to avoid interfering
      with any Borrower’s use of the Collateral. The Bank is under no duty to observe
      the Collateral or to conduct tests, and any such acts by the Bank will be solely
      for the purposes of protecting the Bank’s security and preserving the Bank’s
      rights under this Agreement. No site visit, observation or testing or any report
      or findings made as a result thereof (“Environmental Report”) (i) will result in
      a waiver of any default of the Borrowers; (ii) impose any liability on the
      Bank;
      or (iii) be a representation or warranty of any kind regarding the Collateral
      (including its condition or value or compliance with any laws) or the
      Environmental Report (including its accuracy or completeness). In the event
      the
      Bank has a duty or obligation under applicable laws, regulations or other
      requirements to disclose an Environmental Report to the Borrowers or any other
      party, the Borrowers authorize the Bank to make such a disclosure. The Bank
      may
      also disclose an Environmental Report to any regulatory authority, and to any
      other parties as necessary or appropriate in the Bank’s judgment. The Borrowers
      further understand and agree that any Environmental Report or other information
      regarding a site visit, observation or testing that is disclosed to the
      Borrowers by the Bank or its agents and representatives is to be evaluated
      (including any reporting or other disclosure obligations of the Borrowers)
      by
      the Borrowers without advice or assistance from the Bank.

     

    
      	9.5  	
              Definition
                of Hazardous Substances

            


    

    “Hazardous
      substances” means any substance, material or waste that is or becomes designated
      or regulated as “toxic,” “hazardous,” “pollutant,” or “contaminant” or a similar
      designation or regulation under any current or future federal, state or local
      law (whether under common law, statute, regulation or otherwise) or judicial
      or
      administrative interpretation of such, including without limitation petroleum
      or
      natural gas.

     

    
      	9.6  	
              Continuing
                Obligation

            


    

    The
      Borrowers’ obligations to the Bank under this Article, except the obligation to
      give notices to the Bank, shall survive termination of this Agreement and
      repayment of the Borrowers’ obligations to the Bank under this
      Agreement.

     

    
      	10.  	
              DEFAULT
                AND REMEDIES

            


    

    If
      any of
      the following events of default occurs, the Bank may do one or more of the
      following: declare the Borrowers in default, stop making any additional credit
      available to the Borrowers, and require the Borrowers to repay their entire
      debt
      immediately and without prior notice. If an event which, with notice or the
      passage of time, will constitute an event of default has occurred and is
      continuing, the Bank has no obligation to make advances or extend additional
      credit under this Agreement. In addition, if any event of default occurs, the
      Bank shall have all rights, powers and remedies available under any instruments
      and agreements required by or executed in connection with this Agreement, as
      well as all rights and remedies available at law or in equity. If an event
      of
      default occurs under the paragraph entitled “Bankruptcy,” below, with respect to
      the Borrowers, then the entire debt outstanding under this Agreement will
      automatically be due immediately.

     

     

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    
      	10.1  	
              Failure
                to Pay

            


    

    The
      Borrowers fail to make a payment under this Agreement when due.

     

    
      	10.2  	
              Other
                Bank Agreements

            


    

    Any
      default occurs under any other agreement any Borrower (or any Obligor) or any
      of
      any Borrower’s related entities or affiliates has with the Bank or any affiliate
      of the Bank. For purposes of this Agreement, “Obligor” shall mean any guarantor,
      any party pledging collateral to the Bank. 

     

    
      	10.3  	
              Cross-default

            


    

    Any
      default occurs under any agreement in connection with any credit any Borrower
      (or any Obligor) or any Borrower’s related entities or affiliates has obtained
      from anyone else or which any Borrower (or any Obligor) or any Borrower’s
      related entities or affiliates has guaranteed.

     

    
      	10.4  	
              False
                Information

            


    

    Any
      Borrower or any Obligor has given the Bank false or misleading information
      or
      representations.

     

    
      	10.5  	
              Bankruptcy

            


    

    Any
      Borrower, any Obligor, or any general partner of any Borrower or of any Obligor
      files a bankruptcy petition, a bankruptcy petition is filed against any of
      the
      foregoing parties, or any Borrower, any Obligor, or any general partner of
      the
      Borrower or of any Obligor makes a general assignment for the benefit of
      creditors.

     

    
      	10.6  	
              Receivers

            


    

    A
      receiver or similar official is appointed for a substantial portion of any
      Borrower’s or any Obligor’s business, or the business is terminated, or, if any
      Obligor is anything other than a natural person, such Obligor is liquidated
      or
      dissolved.

     

    
      	10.7  	
              Lien
                Priority

            


    

    The
      Bank
      fails to have an enforceable first lien (except for any prior liens to which
      the
      Bank has consented in writing) on or security interest in any property given
      as
      security for this Agreement (or any guaranty).

     

    
      	10.8  	
              Lawsuits

            


    

    Any
      lawsuit or lawsuits are filed on behalf of one or more trade creditors against
      any Borrower or any Obligor in an aggregate amount for all of the Borrowers
      of
      Two Hundred Fifty Thousand Dollars ($250,000) or more in excess of any insurance
      coverage.

     

    
      	10.9  	
              Judgments

            


    

    Any
      judgments or arbitration awards are entered against any Borrower or any Obligor,
      or any Borrower or any Obligor enters into any settlement agreements with
      respect to any litigation or arbitration, in an aggregate amount for all of
      the
      Borrowers of Two Hundred Fifty Thousand Dollars ($250,000) or more in excess
      of
      any insurance coverage.

     

    
      	10.10  	
              Death

            


    

    .If
      the
      Borrower or any Obligor is a partnership, any general partner dies or becomes
      legally incompetent.

     

    
      	10.11  	
              Material
                Adverse Change

            


    

    A
      material adverse change occurs, or is reasonably likely to occur, in any
      Borrower’s (or any Obligor’s) business condition (financial or otherwise),
      operations, properties or prospects, or ability to repay the credit; or the
      Bank
      determines that it is insecure for any other reason.

     

    
      	10.12  	
              Government
                Action

            


    

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    Any
      government authority takes action that the Bank believes materially adversely
      affects any Borrower’s or any Obligor’s financial condition or ability to
      repay.

     

    
      	10.13  	
              Default
                under Related Documents

            


    

    Any
      default occurs under any guaranty, subordination agreement, security agreement,
      deed of trust, mortgage, or other document required by or delivered in
      connection with this Agreement or any such document is no longer in effect,
      or
      any guarantor purports to revoke or disavow the guaranty.

     

    
      	10.14  	
              ERISA
                Plans.

            


    

    Any
      one
      or more of the following events occurs with respect to a Plan of any Borrower
      subject to Title IV of ERISA, provided such event or events could reasonably
      be
      expected, in the judgment of the Bank, to subject any Borrower to any tax,
      penalty or liability (or any combination of the foregoing) which, in the
      aggregate, could have a material adverse effect on the financial condition
      of
      any Borrower:

    
      	(a)  	
              A
                reportable event shall occur under Section 4043(c) of ERISA with
                respect
                to a Plan.

            


    

    
      	(b)  	
              Any
                Plan termination (or commencement of proceedings to terminate a Plan)
                or
                the full or partial withdrawal from a Plan by any Borrower or any
                ERISA
                Affiliate.

               

            


    

    
      	10.15  	
              Other
                Breach Under Agreement.

            


    

    A
      default
      occurs under any other term or condition of this Agreement not specifically
      referred to in this Article. This includes any failure or anticipated failure
      by
      any Borrower (or any other party named in the Covenants section) to comply
      with
      any financial covenants set forth in this Agreement, whether such failure is
      evidenced by financial statements delivered to the Bank or is otherwise known
      to
      any Borrower or the Bank.

     

    
      	11.  	
              ENFORCING
                THIS AGREEMENT; MISCELLANEOUS

            


    

    
      	11.1  	
              GAAP

            


    

    Except
      as
      otherwise stated in this Agreement, all financial information provided to the
      Bank and all financial covenants will be made under generally accepted
      accounting principles, consistently applied.

     

    
      	11.2  	
              Governing
                Law

            


    

    This
      Agreement is governed by the laws of the State of New York.

     

    
      	11.3  	
              Successors
                and Assigns

            


    

    This
      Agreement is binding on each Borrower’s and the Bank’s successors and assignees.
      Each Borrower agrees that it may not assign this Agreement without the Bank’s
      prior consent. The Bank may sell participations in or assign this loan, and
      may
      exchange information about any Borrower (including, without limitation, any
      information regarding any hazardous substances) with actual or potential
      participants or assignees. If a participation is sold or the loan is assigned,
      the purchaser will have the right of set-off against each Borrower.

     

    
      	11.4  	
              Waiver
                of Jury Trial

            


    

    THE
      PARTIES TO THIS AGREEMENT WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
      WHICH THEY MAY BE PARTIES, ARISING OUT OF, IN CONNECTION WITH OR IN ANY WAY
      PERTAINING TO, THIS AGREEMENT. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER
      CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO
      SUCH
      ACTION OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES
      TO
      THIS AGREEMENT. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY
      MADE.

     

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

     

    
      	11.5  	
              Severability;
                Waivers

            


    

    If
      any
      part of this Agreement is not enforceable, the rest of the Agreement may be
      enforced. The Bank retains all rights, even if it makes a loan after default.
      If
      the Bank waives a default, it may enforce a later default. Any consent or waiver
      under this Agreement must be in writing.

     

    
      	11.6  	
              Attorneys’
                Fees

            


    

    Each
      Borrower shall reimburse the Bank for any reasonable costs and attorneys’ fees
      incurred by the Bank in connection with the enforcement or preservation of
      any
      rights or remedies under this Agreement and any other documents executed in
      connection with this Agreement, and in connection with any amendment, waiver,
“workout” or restructuring under this Agreement. In the event of a lawsuit or
      arbitration proceeding, the prevailing party is entitled to recover costs and
      reasonable attorneys’ fees incurred in connection with the lawsuit or
      arbitration proceeding, as determined by the court or arbitrator. In the event
      that any case is commenced by or against any Borrower under the Bankruptcy
      Code
      (Title 11, United States Code) or any similar or successor statute, the Bank
      is
      entitled to recover costs and reasonable attorneys’ fees incurred by the Bank
      related to the preservation, protection, or enforcement of any rights of the
      Bank in such a case. As used in this paragraph, “attorneys’ fees” includes the
      allocated costs of the Bank’s in-house counsel.

     

    
      	11.7  	
              Joint
                and Several Liability

            


    

    . 

    
      	(a)  	
              Each
                Borrower agrees that it is jointly and severally liable to the Bank
                for
                the payment of all obligations arising under this Agreement, and
                that such
                liability is independent of the obligations of the other Borrower(s).
                Each
                obligation, promise, covenant, representation and warranty in this
                Agreement shall be deemed to have been made by, and be binding upon,
                each
                Borrower, unless this Agreement expressly provides otherwise. The
                Bank may
                bring an action against any Borrower, whether an action is brought
                against
                the other Borrower(s).

            


    

    
      	(b)  	
              Each
                Borrower agrees that any release which may be given by the Bank to
                the
                other Borrower(s) or any guarantor will not release such Borrower
                from its
                obligations under this Agreement.

            


    

    
      	(c)  	
              Each
                Borrower waives any right to assert against the Bank any defense,
                setoff,
                counterclaim, or claims which such Borrower may have against the
                other
                Borrower(s) or any other party liable to the Bank for the obligations
                of
                the Borrowers under this Agreement.

            


    

    
      	(d)  	
              Each
                Borrower waives any defense by reason of any other Borrowers’ or any other
                person’s defense, disability, or release from liability. The Bank can
                exercise its rights against each Borrower even if any other Borrower
                or
                any other person no longer is liable because of a statute of limitations
                or for other reasons.

            


    

    
      	(e)  	
              Each
                Borrower agrees that it is solely responsible for keeping itself
                informed
                as to the financial condition of the other Borrower(s) and of all
                circumstances which bear upon the risk of nonpayment. Each Borrower
                waives
                any right it may have to require the Bank to disclose to such Borrower
                any
                information which the Bank may now or hereafter acquire concerning
                the
                financial condition of the other
                Borrower(s).

            


    

    
      	(f)  	
              Each
                Borrower waives all rights to notices of default or nonperformance
                by any
                other Borrower under this Agreement. Each Borrower further waives
                all
                rights to notices of the existence or the creation of new indebtedness
                by
                any other Borrower and all rights to any other notices to any party
                liable
                on any of the credit extended under this
                Agreement.

            


    

    
      	(g)  	
              The
                Borrowers represent and warrant to the Bank that each will derive
                benefit,
                directly and indirectly, from the collective administration and
                availability of credit under this Agreement. The Borrowers agree
                that the
                Bank will not be required to inquire as to the disposition by any
                Borrower
                of funds disbursed in accordance with the terms of this
                Agreement.

            


    

    
      	(h)  	
              Until
                all obligations of the Borrowers to the Bank under this Agreement
                have
                been paid in full and any commitments of the Bank or facilities provided
                by the Bank under this Agreement have been terminated, each Borrower
                (a)
                waives any right of subrogation, reimbursement, indemnification and
                contribution (contractual, statutory or otherwise), including without
                limitation, any claim or right of subrogation under the Bankruptcy
                Code
                (Title 11, United States Code) or any successor statute, which such
                Borrower may now or hereafter have against any other Borrower with
                respect
                to the indebtedness incurred under this Agreement; (b) waives any
                right to
                enforce any remedy which the Bank now has or may hereafter have against
                any other Borrower, and waives any benefit of, and any right to
                participate in, any security now or hereafter held by the
                Bank.

            


    

    
      	(i)  	
              Each
                Borrower waives any right to require the Bank to proceed against
                any other
                Borrower or any other person; proceed against or exhaust any security;
                or
                pursue any other remedy. Further, each Borrower consents to the taking
                of,
                or failure to take, any action which might in any manner or to any
                extent
                vary the risks of the Borrowers under this Agreement or which, but
                for
                this provision, might operate as a discharge of the
                Borrowers.

            


    

    
      	11.8  	
              Individual
                Liability

            


    

     

    If
      the
      Borrower is a partnership, the Bank may proceed against the business and
      non-business property of each general partner of the Borrower in enforcing
      this
      and other agreements

    relating
      to this loan.

     

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

     

    
      	11.9  	
              One
                Agreement

            


    

    This
      Agreement and any related security or other agreements required by this
      Agreement, collectively:

     

    
      	(a)  	
              represent
                the sum of the understandings and agreements between the Bank and
                the
                Borrowers concerning this credit;

            


    

    
      	(b)  	
              replace
                any prior oral or written agreements between the Bank and the Borrowers
                concerning this credit; and

            


    

    
      	(c)  	
              are
                intended by the Bank and the Borrowers as the final, complete and
                exclusive statement of the terms agreed to by
                them.

            


    

    In
      the
      event of any conflict between this Agreement and any other agreements required
      by this Agreement, this Agreement will prevail. Any reference in any related
      document to a “promissory note” or a “note” executed by the Borrowers and dated
      as of the date of this Agreement shall be deemed to refer to this Agreement,
      as
      now in effect or as hereafter amended, renewed, or restated.

     

    
      	11.10  	
              Indemnification

            


    

    The
      Borrowers will indemnify and hold the Bank harmless from any loss, liability,
      damages, judgments, and costs of any kind relating to or arising directly or
      indirectly out of (a) this Agreement or any document required hereunder, (b)
      any
      credit extended or committed by the Bank to the Borrowers hereunder, and (c)
      any
      litigation or proceeding related to or arising out of this Agreement, any such
      document, or any such credit. This indemnity includes but is not limited to
      attorneys’ fees (including the allocated cost of in-house counsel). This
      indemnity extends to the Bank, its parent, subsidiaries and all of their
      directors, officers, employees, agents, successors, attorneys, and assigns.
      This
      indemnity will survive repayment of the Borrowers’ obligations to the Bank. All
      sums due to the Bank hereunder shall be obligations of the Borrowers, due and
      payable immediately without demand.

     

    
      	11.11  	
              Notices

            


    

    Unless
      otherwise provided in this Agreement or in another agreement between the Bank
      and the Borrowers, all notices required under this Agreement shall be personally
      delivered or sent by first class mail, postage prepaid, or by overnight courier,
      to the addresses on the signature page of this Agreement, or sent by facsimile
      to the fax numbers listed on the signature page, or to such other addresses
      as
      the Bank and the Borrowers may specify from time to time in writing. Notices
      and
      other communications shall
      be
      effective (i) if mailed, upon the earlier of receipt or five (5) days after
      deposit in the U.S. mail, first class, postage prepaid, (ii) if telecopied,
      when
      transmitted, or (iii) if hand-delivered, by courier or otherwise (including
      telegram, lettergram or mailgram), when delivered.

     

    
      	11.12  	
              Headings

            


    

    Article
      and paragraph headings are for reference only and shall not affect the
      interpretation or meaning of any provisions of this Agreement.

     

    
      	11.13  	
              Waiver
                of Immunity

            


    

    To
      the
      extent that any Borrower has acquired or hereafter may acquire any immunity
      (sovereign or otherwise) from any legal action, suit, arbitration or other
      proceeding, from jurisdiction of any court or arbitration panel or from set-off
      or any legal process (whether through service or notice, attachment prior to
      judgment, attachment in aid of execution of judgment, execution of judgment
      or
      otherwise) with respect to itself or any of its property, the Borrower hereby
      irrevocably and unconditionally waives and agrees not to plead or claim such
      immunity in respect of its obligations under this Agreement or any document
      or
      agreement required hereunder.

     

    
      	11.14  	
              Venue;
                Service of Process

            


    

    If
      there
      is a lawsuit, each Borrower hereby irrevocably submits to the jurisdiction
      of
      any State or U. S. Federal Court in the state specified in the governing law
      section of this Agreement. Each Borrower hereby irrevocably (a) consents to
      the
      service of process out of any courts to which it has submitted to the
      jurisdiction of in this Agreement by the mailing by prepaid mail or other
      delivery of a copy or notice thereof to the address of the Borrower for the
      time
      being applying under the Notices section of this Agreement and confirms that
      failure by any Borrower to receive such copy or notice shall not prejudice
      due
      service; (b) waives: (i) any objection it may have to the laying of venue of
      any
      such legal proceedings in any of the said courts; and (ii) any claim that it
      may
      have that any such legal proceedings have been brought in an inconvenient forum;
      and (c) agrees that nothing in this Agreement shall affect the right to service
      of process in any other manner permitted by law or preclude the right to bring
      legal proceedings in any other court or courts of competent jurisdiction as
      Bank
      may elect and that legal proceedings in any one or more jurisdictions shall
      not
      preclude legal proceedings in any other jurisdiction. Each Borrower agrees
      that
      a final judgment in any such legal proceeding shall be conclusive and binding
      upon each Borrower.

     

    
      	11.15  	
              Counterparts

            


    

    This
      Agreement may be executed in as many counterparts as necessary or convenient,
      and by the different parties on separate counterparts each of which, when so
      executed, shall be deemed an original but all such counterparts shall constitute
      but one and the same agreement.

     

    
      	11.16  	
              Commitment
                Expiration

            


    

    The
      Bank’s commitment to extend credit under this Agreement will expire on April 30,
      2007, unless this Agreement and any documents required by this Agreement have
      been signed and returned to the Bank on or before that date.

     

    
      	11.17  	
              Limitation
                of Interest and Other Charges

            


    

    .
      

    If,
      at
      any time, the rate of interest, together with all amounts which constitute
      interest and which are reserved, charged or taken by the Bank as compensation
      for fees, services or expenses incidental to the making, negotiating or
      collection of the loan evidenced hereby, shall be deemed by any competent court
      of law, governmental agency or tribunal to exceed the maximum rate of interest
      permitted to be charged by the Bank to the Borrowers under applicable law,
      then,
      during such time as such rate of interest would be deemed excessive, that
      portion of each sum paid attributable to that portion of such interest rate
      that
      exceeds the maximum rate of interest so permitted shall be deemed a voluntary
      prepayment of principal. As used herein, the term “applicable law” shall mean
      the law in effect as of the date hereof; provided, however, that in the event
      there is a change in the law which results in a higher permissible rate of
      interest, then this Agreement shall be governed by such new law as of its
      effective date.

     

    
      	11.18  	
              USA
                Patriot Act Notice

            


    

    Federal
      law requires all financial institutions to obtain, verify and record information
      that identifies each person who opens an account or obtains a loan. The Bank
      will ask for each Borrower’s legal name, address, tax ID number or social
      security number and other identifying information. The Bank may also ask for
      additional information or documentation or take other actions reasonably
      necessary to verify the identity of each Borrower, guarantors or other related
      persons.

     

    
      	11.19  	
              Right
                to Setoff

            


    

    In
      addition to and not in limitation of all rights of offset that the Bank may
      have
      under applicable law, the Bank shall, if any event of default has occurred
      and
      is continuing and whether or not the Bank has made any demand or the obligations
      of any Borrower are matured, have the right to appropriate and apply to the
      payment of the obligations of such Borrower all deposits (general or special,
      time or demand, provisional or final) then or thereafter held by and other
      indebtedness or property then or thereafter owing by the Bank. 


    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    


    The
      Borrowers executed this Agreement as of the date stated at the top of the first
      page, intending to be legally bound. 

    

      
        	
                BANK
                  OF AMERICA, N.A.

              	
                WPCS
                  INTERNATIONAL INCORPORATED, a Delaware corporation

                 

              
	
                By:

                 

                 

              	
                /s/
                  CHARLES W. GREENBERG

                
                  

                

                
                  Name:
                    Charles W. Greenberg

                  
                    Title:
                      Senior
                      Vice President

                  

                

              	
                By:

                 

                 

              	
                /s/
                  JOSEPH A HEATER

                
                  
                    

                  

                  
                    Name:
                      Joseph A. Heater 
                      
                        Title:
Chief
                          Financial
                          Officer

                      

                    

                  

                

              
	
                 

              	
                 

              	
                 

              	
                 

              
	
                Address
                  where notices to the Bank are
                  to be sent:

                 

              	
                Address
                  where notices to the Borrower are to be sent:

                 

              
	
                CT2-515-02-12

                70
                  Batterson Park Road

                Farmington,
                  CT 06032

                Farmington
                  - Attn: Notice Desk

              	
                 

                One
                  East Uwchlan Avenue

                Suite
                  301

                Exton,
                  Pennsylvania 19341

              
	
                Facsimile:

              	
                (860)
                  409-5486

              	
                Facsimile:

              	
                 

                (610)
                  903-0401

              
	 	 	 	 
	 	
                CLAYBORN
                  CONTRACTING GROUP, INC., a California corporation

                 

              
	 	 	
                By:

                 

                 

                 

              	
                /s/
                  JOSEPH A HEATER

                
                  
                    

                  

                  
                    Name:
                      Joseph A. Heater 
                      
                        Title:
Chief
                          Financial Officer

                         

                      

                    

                  

                

              
	 	
                Address
                  where notices to the Borrower are to be sent: Same as
                  above

                 

              
	 	
                HEINZ
                  CORPORATION, a Missouri corporation

                 

              
	 	 	
                By:

                 

                 

                 

              	
                /s/
                  JOSEPH A HEATER

                
                  
                    

                  

                  
                    Name:
                      Joseph A. Heater 
                      
                        Title:
Chief
                          Financial Officer

                         

                      

                    

                  

                

              
	 	
                Address
                  where notices to the Borrower are to be sent: Same as
                  above

              


      

    


    
 

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    
      


      
        	 	
                NEW
                  ENGLAND COMMUNICATIONS SYSTEMS, INC., a Connecticut
                  corporation

                 

              
	 	 	
                By:

                 

              	
                /s/
                  JOSEPH A HEATER

                
                  

                

                
                  Name:
                    Joseph A. Heater

                    
                      Title:
                        Chief Financial Officer

                    

                  

                

              
	 	 	
                 

              	
                 

              
	 	
                Address
                  where notices to the Borrower are to be sent: Same as
                  above

                 

              
	 	
                QUALITY
                  COMMUNICATIONS & ALARM COMPANY, INC., a New Jersey
                  corporation

                 

              
	 	 	
                By:

                 

                 

                 

              	
                /s/
                  JOSEPH A HEATER

                
                  

                

                Name:
                  Joseph A. Heater 
                  
                    Title:
Chief
                      Financial Officer

                     

                  

                

              
	 	
                Address
                  where notices to the Borrower are to be sent: Same as
                  above

                 

              
	 	
                SOUTHEASTERN
                  COMMUNICATION SERVICE, INC., a Florida corporation

                 

              
	 	 	
                By:

                 

                 

              	
                /s/
                  JOSEPH A HEATER

                
                  

                

                
                  Name:
                    Joseph A. Heater 
                    
                      Title:
Chief
                        Financial Officer

                       

                    

                  

                

              
	 	
                Address
                  where notices to the Borrower are to be sent: Same as
                  above

                 

              
	 	
                WALKER
                  COMM, INC., a California corporation

                 

              
	 	 	
                By:

                 

                 

                 

              	
                /s/
                  JOSEPH A HEATER

                
                  
                    

                  

                  
                    Name:
                      Joseph A. Heater 
                      
                        Title:
Chief
                          Financial Officer

                         

                      

                    

                  

                

              
	 	
                Address
                  where notices to the Borrower are to be sent: Same as
                  above

              


      

    

     

     

     

    26