Document:

Exhibit 4.4

	
  

 
	

 

 
	
  

 
	
  

 
	
  

 
	
 COSTAMARE INC.

 
	
  

 
	
  

 
	
 and

 
	
  

 
	
 [               ],

 
	
 as Trustee

 
	
  

 
	
  

 
	
 FORM OF INDENTURE

 
	
  

 
	
  

 
	
 Dated as of _____________, _____

 
	
  

 
	
  

 
	
  

 
	

 

 

TABLE OF CONTENTS

	
  
 	
  
 	
  
 	
 Page
 
	
  
 
	
 ARTICLE 1
 
	
  
 	
  
 
	
 Definitions
 
	
  
 	
  
 
	
 SECTION
 1.01.
 	 	 Certain Terms Defined	 	
 1
 
	
  
 	
  
 
	
 ARTICLE 2
 
	
  
 	
  
 
	
 Securities
 
	
  
 	
  
 	
  
 	
  
 
	
 SECTION
 2.01.
 	
  
 	
 Forms
 Generally
 	
 5
 
	
 SECTION
 2.02.
 	
  
 	
 Form of
 Trustee’s Certification of Authentication
 	
 5
 
	
 SECTION
 2.03.
 	
  
 	
 Amount
 Unlimited; Issuable in Series
 	
 5
 
	
 SECTION
 2.04.
 	
  
 	
 Authentication
 and Delivery of Securities
 	
 8
 
	
 SECTION
 2.05.
 	
  
 	
 Execution of
 Securities
 	
 9
 
	
 SECTION
 2.06.
 	
  
 	
 Certificate
 of Authorization
 	
 10
 
	
 SECTION
 2.07.
 	
  
 	
 Denomination
 and Date of Securities; Payments of Interest
 	
 10
 
	
 SECTION
 2.08.
 	
  
 	
 Regulation,
 Transfer and Exchange
 	
 10
 
	
 SECTION
 2.09.
 	
  
 	
 Mutilated,
 Defaced, Destroyed, Lost and Stolen Securities
 	
 11
 
	
 SECTION
 2.10.
 	
  
 	
 Cancellation
 of Securities
 	
 12
 
	
 SECTION
 2.11.
 	
  
 	
 Temporary
 Securities
 	
 13
 
	
 SECTION
 2.12.
 	
  
 	
 CUSIP
 Numbers
 	
 13
 
	
 ARTICLE 3
 
	
  
 
	
 Covenants of the Issuer and the Trustee
 
	
  
 
	
 SECTION
 3.01.
 	
  
 	
 Payment of
 Principal and Interest
 	
 13
 
	
 SECTION
 3.02.
 	
  
 	
 Offices for
 Payments, etc
 	
 14
 
	
 SECTION
 3.03.
 	
  
 	
 Appointment
 to Fill a Vacancy in Office of Trustee
 	
 14
 
	
 SECTION
 3.04.
 	
  
 	
 Paying
 Agents
 	
 14
 
	
 SECTION
 3.05.
 	
  
 	
 Certificate
 of the Issuer
 	
 15
 
	
 SECTION
 3.06.
 	
  
 	
 Securityholders
 Lists
 	
 15
 
	
 SECTION
 3.07.
 	
  
 	
 Reports by
 the Issuer
 	
 16
 
	
 SECTION
 3.08.
 	
  
 	
 Reports by
 the Trustee
 	
 16
 
	
 ARTICLE 4
 
	
  
 
	
 Remedies of the Trustee and Securityholders on Event of Default
 
	
  
 
	
 SECTION
 4.01.
 	
  
 	
 Event of
 Default; Acceleration of Maturity, Waiver of Default
 	
 16
 

i

	
  

 	
  

 	
  

 	
  

 
	
 SECTION
 4.02.

 	
  

 	
 Collection
 of Indebtedness by Trustee; Trustee May Prove Debt

 	
 19

 
	
 SECTION
 4.03.

 	
  

 	
 Application
 of Proceeds

 	
 21

 
	
 SECTION
 4.04.

 	
  

 	
 Suits for
 Enforcement

 	
 22

 
	
 SECTION
 4.05.

 	
  

 	
 Restoration
 of Rights on Abandonment of Proceeding

 	
 22

 
	
 SECTION
 4.06.

 	
  

 	
 Limitations on
 Suits by Securityholder

 	
 22

 
	
 SECTION
 4.07.

 	
  

 	
 Unconditional
 Right of Securityholders to Institute Certain Suits

 	
 23

 
	
 SECTION
 4.08.

 	
  

 	
 Powers and
 Remedies Cumulative; Delay or Omission Not Waiver of Default

 	
 23

 
	
 SECTION
 4.09.

 	
  

 	
 Control by
 Securityholders

 	
 23

 
	
 SECTION
 4.10.

 	
  

 	
 Waiver of
 Past Defaults

 	
 24

 
	
 SECTION
 4.11.

 	
  

 	
 Trustee to Give
 Notice of Default, But May Withhold in Certain Circumstances

 	
 24

 
	
 SECTION
 4.12.

 	
  

 	
 Right of Court to
 Require Filing of Undertaking to Pay Costs

 	
 24

 
	
  

 
	
 ARTICLE 5

 
	
  

 	
  

 
	
 Concerning the Trustee

 
	
  

 	
  

 
	
 SECTION 5.01.

 	
  

 	
 Duties and
 Responsibilities of the Trustee; During Default; Prior to Default

 	
 25

 
	
 SECTION
 5.02.

 	
  

 	
 Certain
 Rights of the Trustee

 	
 26

 
	
 SECTION
 5.03.

 	
  

 	
 Trustee Not
 Responsible for Recitals, Disposition of Securities or Application of
 Proceeds Thereof

 	
 28

 
	
 SECTION
 5.04.

 	
  

 	
 Trustee and
 Agents May Hold Securities; Collections, etc

 	
 28

 
	
 SECTION
 5.05.

 	
  

 	
 Moneys Held
 by Trustee

 	
 28

 
	
 SECTION
 5.06.

 	
  

 	
 Compensation
 and Indemnification of Trustee and its Prior Claim

 	
 28

 
	
 SECTION
 5.07.

 	
  

 	
 Right of
 Trustee to Rely on Officers’ Certificate, etc

 	
 29

 
	
 SECTION
 5.08.

 	
  

 	
 Persons
 Eligible for Appointment as Trustee

 	
 29

 
	
 SECTION
 5.09.

 	
  

 	
 Resignation
 and Removal; Appointment of Successor Trustee

 	
 30

 
	
 SECTION
 5.10.

 	
  

 	
 Acceptance
 of Appointment By Successor Trustee

 	
 31

 
	
 SECTION
 5.11.

 	
  

 	
 Merger,
 Conversion, Consolidation or Succession to Business of Trustee

 	
 32

 
	
  

 
	
 ARTICLE 6

 
	
  

 
	
 Concerning the Securityholders

 
	
  

 
	
 SECTION
 6.01.

 	
  

 	
 Evidence of
 Action Taken by Securityholders

 	
 32

 
	
 SECTION
 6.02.

 	
  

 	
 Proof of
 Execution of Instruments and of Holding of Securities; Record Date

 	
 33

 
	
 SECTION
 6.03.

 	
  

 	
 Holders to
 be Treated as Owners

 	
 33

 
	
 SECTION
 6.04.

 	
  

 	
 Securities
 Owned by Issuer Deemed Not Outstanding

 	
 33

 
	
 SECTION
 6.05.

 	
  

 	
 Right of
 Revocation of Action Taken

 	
 34

 

ii

	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE 7

 
	
  

 	
  

 	
  

 	
  

 
	
 Supplemental Indentures

 
	
  

 	
  

 	
  

 	
  

 
	
 SECTION
 7.01.

 	
  

 	
 Supplemental
 Indentures Without Consent of Securityholders

 	
 34

 
	
 SECTION
 7.02.

 	
  

 	
 Supplemental
 Indentures With Consent of Securityholders

 	
 35

 
	
 SECTION
 7.03.

 	
  

 	
 Effect of
 Supplemental Indenture

 	
 37

 
	
 SECTION
 7.04.

 	
  

 	
 Documents to
 Be Given to Trustee

 	
 37

 
	
 SECTION
 7.05.

 	
  

 	
 Notation On
 Securities In Respect Of Supplemental Indentures

 	
 37

 
	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE 8

 
	
  

 	
  

 	
  

 	
  

 
	
 Consolidation, Merger, Sale or Conveyance

 
	
  

 	
  

 	
  

 	
  

 
	
 SECTION
 8.01.

 	
  

 	
 Issuer May
 Consolidate, etc., on Certain Terms

 	
 38

 
	
 SECTION
 8.02.

 	
  

 	
 Successor
 Substituted

 	
 38

 
	
 SECTION
 8.03.

 	
  

 	
 Opinion of
 Counsel to Trustee

 	
 38

 
	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE 9

 
	
  

 	
  

 	
  

 	
  

 
	
 Satisfaction and Discharge of Indenture; Unclaimed Moneys

 
	
  

 	
  

 	
  

 	
  

 
	
 SECTION
 9.01.

 	
  

 	
 Satisfaction
 and Discharge of Indenture

 	
 39

 
	
 SECTION
 9.02.

 	
  

 	
 Application
 by Trustee of Funds Deposited for Payment of Securities

 	
 42

 
	
 SECTION
 9.03.

 	
  

 	
 Repayment of
 Moneys Held by Paying Agent

 	
 43

 
	
 SECTION
 9.04.

 	
  

 	
 Return of
 Moneys Held by Trustee and Paying Agent Unclaimed for Two Years

 	
 43

 
	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE 10

 
	
  

 	
  

 	
  

 	
  

 
	
 Miscellaneous Provisions

 
	
  

 	
  

 	
  

 	
  

 
	
 SECTION
 10.01.

 	
  

 	
 Incorporators,
 Stockholders, Members, Officers and Directors of Issuer Exempt from
 Individual Liability

 	
 43

 
	
 SECTION
 10.02.

 	
  

 	
 Provisions
 of Indenture for the Sole Benefit of Parties and Securityholders

 	
 43

 
	
 SECTION
 10.03.

 	
  

 	
 Successors
 and Assigns of Issuer Bound by Indenture

 	
 44

 
	
 SECTION
 10.04.

 	
  

 	
 Notices and
 Demands on Issuer, Trustee and Securityholders

 	
 44

 
	
 SECTION
 10.05.

 	
  

 	
 Communication
 by Securityholders with Other Securityholders.

 	
 45

 
	
 SECTION
 10.06.

 	
  

 	
 Officers’
 Certificates and Opinions of Counsel; Statements to be Contained Therein

 	
 45

 
	
 SECTION
 10.07.

 	
  

 	
 Payments Due
 on Saturdays, Sundays and Holidays

 	
 46

 

iii

	
  

 	
  

 	
  

 	
  

 
	
 SECTION
 10.08.

 	
  

 	
 Conflict of
 any Provision of Indenture with Trust Indenture Act of 1939

 	
 46

 
	
 SECTION
 10.09.

 	
  

 	
 New York Law
 to Govern

 	
 46

 
	
 SECTION
 10.10.

 	
  

 	
 Counterparts

 	
 47

 
	
 SECTION
 10.11.

 	
  

 	
 Effect of
 Headings

 	
 47

 
	
 SECTION
 10.12.

 	
  

 	
 Securities
 in a Non-U.S. Currency

 	
 47

 
	
 SECTION
 10.13.

 	
  

 	
 Submission
 to Jurisdiction

 	
 47

 
	
 SECTION
 10.14.

 	
  

 	
 Judgment
 Currency

 	
 48

 
	
 SECTION
 10.15.

 	
  

 	
 Waiver of
 Jury Trial

 	
 48

 
	
 SECTION
 10.16.

 	
  

 	
 Force
 Majeure

 	
 48

 
	
  

 	
  

 	
  

 	
  

 
	
 ARTICLE 11

 
	
  

 	
  

 	
  

 	
  

 
	
 Redemption of Securities

 
	
  

 	
  

 	
  

 	
  

 
	
 SECTION
 11.01.

 	
  

 	
 Applicability
 Of Article

 	
 49

 
	
 SECTION
 11.02.

 	
  

 	
 Notice Of
 Redemption; Partial Redemptions

 	
 49

 
	
 SECTION
 11.03.

 	
  

 	
 Payment of
 Securities Called for Redemption

 	
 50

 
	
 SECTION
 11.04.

 	
  

 	
 Exclusion of
 Certain Securities from Eligibility for Selection for Redemption

 	
 51

 

iv

CROSS-REFERENCE
TABLE*

	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
 Trust Indenture Act
 Section

 	
  

 	
  

 	
 Indenture Section

 
	

 

 	
  

 	
  

 	

 

 
	
 310

 	
  

 	
 (a)(1)

 	
  

 	
 5.08

 
	
  

 	
  

 	
 (a)(2)

 	
  

 	
 5.08

 
	
  

 	
  

 	
 (a)(3)

 	
  

 	
 Not
 Applicable

 
	
  

 	
  

 	
 (a)(4)

 	
  

 	
 Not
 Applicable

 
	
  

 	
  

 	
 (a)(5)

 	
  

 	
 5.08

 
	
  

 	
  

 	
 (b)

 	
  

 	
 5.09(b)

 
	
  

 	
  

 	
 (c)

 	
  

 	
 Not
 Applicable

 
	
 311

 	
  

 	
  (a)

 	
  

 	
 5.04

 
	
  

 	
  

 	
 (b)

 	
  

 	
 5.04

 
	
  

 	
  

 	
 (c)

 	
  

 	
 Not
 Applicable

 
	
 312

 	
  

 	
  (a)

 	
  

 	
 3.06

 
	
  

 	
  

 	
 (b)

 	
  

 	
 10.05

 
	
  

 	
  

 	
 (c)

 	
  

 	
 10.05

 
	
 313

 	
  

 	
  (a)

 	
  

 	
 3.08

 
	
  

 	
  

 	
 (b)(1)

 	
  

 	
 Not
 Applicable

 
	
  

 	
  

 	
 (b)(2)

 	
  

 	
 3.08

 
	
  

 	
  

 	
 (c)

 	
  

 	
 3.08;
 10.02

 
	
  

 	
  

 	
 (d)

 	
  

 	
 3.08

 
	
 314

 	
  

 	
  (a)

 	
  

 	
 3.05;
 3.07

 
	
  

 	
  

 	
 (b)

 	
  

 	
 Not
 Applicable

 
	
  

 	
  

 	
 (c)(1)

 	
  

 	
 10.06

 
	
  

 	
  

 	
 (c)(2)

 	
  

 	
 10.06

 
	
  

 	
  

 	
 (c)(3)

 	
  

 	
 10.06

 
	
  

 	
  

 	
 (d)

 	
  

 	
 Not
 Applicable

 
	
  

 	
  

 	
 (e)

 	
  

 	
 10.06

 
	
  

 	
  

 	
 (f)

 	
  

 	
 Not
 Applicable

 
	
 315

 	
  

 	
 (a)

 	
  

 	
 5.01

 
	
  

 	
  

 	
 (b)

 	
  

 	
 4.11

 
	
  

 	
  

 	
 (c)

 	
  

 	
 5.01

 
	
  

 	
  

 	
 (d)

 	
  

 	
 5.01

 
	
  

 	
  

 	
 (e)

 	
  

 	
 4.12

 
	
 316

 	
  

 	
 (a) (last sentence)

 	
  

 	
 6.04

 
	
  

 	
  

 	
 (a)(1)(A)

 	
  

 	
 4.09

 
	
  

 	
  

 	
 (a)(1)(B)

 	
  

 	
 4.10

 
	
  

 	
  

 	
 (a)(2)

 	
  

 	
 Not
 Applicable

 
	
  

 	
  

 	
 (b)

 	
  

 	
 4.07

 
	
  

 	
  

 	
 (c)

 	
  

 	
 6.02

 
	
  

 	
  

 	
 317 (a)(1)

 	
  

 	
 4.02

 
	
  

 	
  

 	
 (a)(2)

 	
  

 	
 4.02

 
	
  

 	
  

 	
 (b)

 	
  

 	
 3.04

 
	
  

 	
  

 	
 318 (a)

 	
  

 	
 10.08

 
	
  

 	
  

 	
 (b)

 	
  

 	
 Not
 Applicable

 
	
  

 	
  

 	
 (c)

 	
  

 	
 10.08

 

*This Cross-Reference Table
does not constitute part of the Indenture and shall not have any bearing on the
interpretation of any of its terms or provisions.

v

	
  

 	
  

 
	
  

 	
           THIS
INDENTURE, dated as of _____________, _____ between Costamare Inc., a
Marshall Islands corporation (the “Issuer”), and
[                    ],
as trustee (the “Trustee”),  

 

                    In
consideration of the premises and the purchases of the debentures, notes or
other evidences of indebtedness of the Issuer to be issued in one or more
series (the “Securities”) by the holders thereof, the Issuer and the
Trustee mutually covenant and agree for the equal and proportionate benefit of
the respective holders from time to time of the Securities as follows: 

ARTICLE 1

Definitions

                    SECTION
1.01. Certain Terms Defined. The following terms (except as otherwise
expressly provided herein or in any indenture supplemental hereto, or unless
the context otherwise clearly requires) for all purposes of this Indenture and
of any indenture supplemental hereto shall have the respective meanings
specified in this Section. All other terms used in this Indenture that are
defined in the Trust Indenture Act of 1939 or the definitions of which in the
Securities Act of 1933, as amended, are referred to in the Trust Indenture Act
of 1939, including terms defined therein by reference to the Securities Act of
1933, as amended (except as herein otherwise expressly provided or unless the
context otherwise clearly requires), shall have the meanings assigned to such
terms in said Trust Indenture Act and in said Securities Act as in force at the
date of this Indenture. All accounting terms used herein and not expressly
defined shall have the meanings assigned to such terms in accordance with
generally accepted accounting principles, and the term “generally accepted
accounting principles” means such accounting principles as are generally
accepted at the time of any computation. The words “herein”, “hereof” and
“hereunder” and other words of similar import refer to this Indenture as a
whole and not to any particular Article, Section or other subdivision. The
terms defined in this Article have the meanings assigned to them in this
Article and include the plural as well as the singular. The words “including,”
“includes” and similar words shall be deemed to be followed by “without
limitation”. 

                    “Authorized
Agent” shall have the meaning set forth in Section 10.13. 

                    “Bearer
Security” means any Security other than a Registered Security. 

                    “Board”
means either the board of directors of the Issuer or any committee of such
board of directors duly authorized to act hereunder. 

                    “Board
Resolution” means one or more resolutions, certified by the secretary of
the Board to have been duly adopted or consented to by the Board and to be in
full force and effect, and delivered to the Trustee. 

                    “Business
Day” means, with respect to any Security, a day that in the city (or in any
of the cities, if more than one) in which amounts are payable, as specified in
the form of such Security, is not a day on which banking institutions are authorized
by law or regulation to close. 

                    “Commission”
means the Securities and Exchange Commission, as from time to time constituted,
created under the Securities Exchange Act of 1934, or if at any time after the
execution and delivery of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties on such date. 

                    “Corporate
Trust Office” means the office of the Trustee located in The City of New
York at which at any particular time its corporate trust business shall be
administered. 

                    “Depositary”
means, with respect to the Securities of any series issuable or issued in the
form of one or more Registered Global Securities, the Person designated as
Depositary by the Issuer pursuant to Section 2.03 until a successor Depositary
shall have become such pursuant to the applicable provisions of this Indenture,
and thereafter “Depositary” shall mean or include each Person who is then a
Depositary hereunder, and if at any time there is more than one such Person,
“Depositary” as used with respect to the Securities of any such series shall
mean the Depositary with respect to the Registered Global Securities of that
series. 

                    “Dollar”
means the coin or currency of the United States of America as at the time of
payment is legal tender for the payment of public and private debts. 

                    “Event
of Default” means any event or condition specified as such in Section 4.01.

                    “Holder”,
“Holder of Securities”, “Securityholder” or other similar terms
mean the registered holder of any Security. 

                    “Indenture”
means this instrument as originally executed and delivered or, if amended or
supplemented as herein provided, as so amended or supplemented or both, and
shall include the forms and terms of particular series of Securities
established as contemplated hereunder. 

                    “Interest”
means, when used with respect to non-interest bearing Securities, interest
payable after maturity. 

                    “Issuer”
means (except as otherwise provided in Article 5) Costamare Inc., a Marshall
Islands corporation, and, subject to Article 8, its successors and assigns. 

                    “Judgment
Currency” shall have the meaning set forth in Section 10.14. 

                    “New
York Banking Day” shall have the meaning set forth in Section 10.14. 

2

                    “Non-U.S.
Currency” means a currency issued by the government of a country other than
the United States (or any currency unit comprised of any such currencies). 

                    “Officers’
Certificate” means a certificate (i) signed by any officer of the Issuer
authorized by the Board to execute any such certificate and (ii) delivered to
the Trustee. Each such certificate shall comply with Section 314 of the Trust
Indenture Act of 1939. 

                    “Opinion
of Counsel” means an opinion reasonably satisfactory to the Trustee in
writing signed by legal counsel who may be an employee of or counsel to the
Issuer. Each such opinion shall comply with Section 314 of the Trust Indenture
Act of 1939 and include the statements provided for in Section 10.06, if and to
the extent required hereby. 

                    “Original
Issue Date” of any Security (or portion thereof) means the earlier of (a)
the date of such Security or (b) the date of any Security (or portion thereof)
for which such Security was issued (directly or indirectly) on registration of
transfer, exchange or substitution. 

                    “Original
Issue Discount Security” means any Security that provides for an amount
less than the principal amount thereof to be due and payable upon a declaration
of acceleration of the maturity thereof pursuant to Section 4.01. 

                    “Outstanding”,
when used with reference to Securities, shall, subject to the provisions of
Section 6.04, mean, as of any particular time, all Securities authenticated and
delivered by the Trustee under this Indenture, except: 

	
  

 	
  

 
	
  

 	
           (a)
 Securities theretofore cancelled by the Trustee or delivered to the Trustee
 for cancellation; 

 
	
  

 	
  

 
	
  

 	
           (b)
 Securities, or portions thereof, for the payment or redemption of which
 moneys in the necessary amount shall have been deposited in trust with the
 Trustee or with any paying agent (other than the Issuer) or shall have been
 set aside, segregated and held in trust by the Issuer for the holders of such
 Securities (if the Issuer shall act as its own paying agent), provided that
 if such Securities, or portions thereof, are to be redeemed prior to the
 maturity thereof, notice of such redemption shall have been given as herein
 provided, or provision satisfactory to the Trustee shall have been made for
 giving such notice; and 

 
	
  

 	
  

 
	
  

 	
           (c)
 Securities in substitution for which other Securities shall have been
 authenticated and delivered, or which shall have been paid, pursuant to the
 terms of Section 2.09 (except with respect to any such Security as to which
 proof satisfactory to the Trustee is presented that such Security is held by
 a person in whose hands such Security is a legal, valid and binding
 obligation of the Issuer). 

 

                    In
determining whether the holders of the requisite principal amount of
Outstanding Securities of any or all series have given any request, demand,
authorization, 

3

direction,
notice, consent or waiver hereunder, the principal amount of an Original Issue
Discount Security that shall be deemed to be Outstanding for such purposes
shall be the amount of the principal thereof that would be due and payable as
of the date of such determination upon a declaration of acceleration of the
maturity thereof pursuant to Section 4.01. 

                    “Person”
means any individual, corporation, partnership, joint venture, association,
joint stock company, trust, unincorporated organization or government or any
agency or political subdivision thereof. 

                    “Principal”
whenever used with reference to the Securities or any Security or any portion
thereof, shall be deemed to include “and premium, if any”. 

                    “Registered
Global Security”, means a Security evidencing all or a part of a series of
Registered Securities, issued to the Depositary for such series in accordance
with Section 2.03, and bearing the legend prescribed by the applicable
supplemental indenture. 

                    “Registered
Security” means any Security registered on the Security register of the
Issuer. 

                    “Required
Currency” shall have the meaning set forth in Section 10.14. 

                    “Responsible
Officer” when used with respect to the Trustee means any officer of the
Trustee, including any vice president, assistant vice president, secretary,
assistant secretary, any assistant treasurer, any trust officer, or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter
is referred because of such officer’s knowledge of and familiarity with that
particular subject and who shall have direct responsibility for the
administration of this Indenture. 

                    “Security”
or “Securities” has the meaning stated in the first recital of this
Indenture, or, as the case may be, Securities that have been authenticated and
delivered under this Indenture. 

                    “Trustee”
means the Person identified as “Trustee” in the first paragraph hereof and,
subject to the provisions of Article 5, shall also include any successor
trustee. 

                    “Trust
Indenture Act of 1939” (except as otherwise provided in Sections 5.01 and
5.02) means the Trust Indenture Act of 1939 as in force at the date as of which
this Indenture was originally executed. 

                    “U.S.
Government Obligations” shall have the meaning set forth in Section 9.01. 

                    “Yield
to Maturity” means the yield to maturity on a series of securities,
calculated at the time of issuance of such series, or, if applicable, at the
most recent 

4

redetermination
of interest on such series, and calculated in accordance with accepted
financial practice. 

ARTICLE 2

Securities

                    SECTION
2.01. Forms Generally. The Securities of each series shall be
substantially in such form (not inconsistent with this Indenture) as shall be
established by or pursuant to a resolution of the Board or in one or more
indentures supplemental hereto, in each case with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture and may have imprinted or otherwise reproduced thereon such
legend or legends, not inconsistent with the provisions of this Indenture, as
may be required to comply with any law or with any rules or regulations
pursuant thereto, or with any rules of any securities exchange or to conform to
general usage, all as may be determined by the officers executing such
Securities, as evidenced by their execution of the Securities. 

                    The
definitive Securities shall be printed or lithographed on security printed
paper or may be produced in any other manner, all as determined by the officers
executing such Securities, as evidenced by their execution of such Securities. 

                    SECTION
2.02. Form of Trustee’s Certification of Authentication. The Trustee’s
certificate of authentication on all Securities shall be in substantially the
following form: 

                    This
is one of the Securities of the series designated herein and referred to in the
within-mentioned Indenture. 

[                    ],

AS TRUSTEE, 

	
  

 	
  

 	
  

 
	
  

 	
 by

 	
  

 
	
  

 	
  

 	

 

 
	
  

 	
  

 	
 Authorized
 Signatory 

 

	
  

 	
  

 
	
 Dated:

 	
  

 
	
  

 	

 

 

                    SECTION
2.03. Amount Unlimited; Issuable in Series. The aggregate principal
amount of Securities which may be authenticated and delivered under this
Indenture is unlimited. 

                    The
Securities may be issued in one or more series and unless provided for
otherwise in an indenture supplemental hereto, each such series shall rank
equally and pari passu with all other unsecured and unsubordinated debt of the
Issuer. There shall be established in or pursuant to a resolution of the Board
and set forth in an Officers’ 

5

Certificate,
or established in one or more indentures supplemental hereto, prior to the
issuance of Securities of any series, 

	
  

 	
  

 
	
  

 	
           (a)
 the designation of the Securities of the series (which shall distinguish the
 Securities of the series from all other Securities); 

 
	
  

 	
  

 
	
  

 	
           (b)
 any limit upon the aggregate principal amount of the Securities of the series
 that may be authenticated and delivered under this Indenture (except for
 Securities authenticated and delivered upon registration of transfer of, or
 in exchange for, or in lieu of, other Securities of the series pursuant to
 Section 2.08, 2.09, 2.11 or 11.03); 

 
	
  

 	
  

 
	
  

 	
           (c)
 if other than Dollars, the coin or currency in which the Securities of that
 series are denominated (including any Non-U.S. Currency); 

 
	
  

 	
  

 
	
  

 	
           (d)
 the date or dates on which the principal of the Securities of the series is
 payable; 

 
	
  

 	
  

 
	
  

 	
           (e)
 the rate or rates at which the Securities of the series shall bear interest,
 if any, or the method by which such rate shall be determined, the date or
 dates from which such interest shall accrue, the interest payment dates on
 which such interest shall be payable and the record dates for the
 determination of Holders to whom interest is payable and/or the method by
 which such rate or rates or date or dates shall be determined; 

 
	
  

 	
  

 
	
  

 	
           (f)
 the place or places where the principal of and any interest on Securities of
 the series shall be payable (if other than as provided in Section 3.02); 

 
	
  

 	
  

 
	
  

 	
           (g)
 the price or prices at which, the period or periods within which and the
 terms and conditions upon which Securities of the series may be redeemed, in
 whole or in part, at the option of the Issuer, pursuant to any sinking fund
 or otherwise; 

 
	
  

 	
  

 
	
  

 	
           (h)
 the obligation, if any, of the Issuer to redeem, purchase or repay Securities
 of the series pursuant to any mandatory redemption sinking fund or analogous
 provisions or at the option of a Holder thereof and the price or prices at
 which and the period or periods within which and the terms and conditions
 upon which Securities of the series shall be redeemed, purchased or repaid,
 in whole or in part, pursuant to such obligation; 

 
	
  

 	
  

 
	
  

 	
           (i)
 if other than denominations of $2,000 and integral multiples of $1,000 in
 excess thereof, the denominations in which Securities of the series shall be
 issuable; 

 
	
  

 	
  

 
	
  

 	
           (j)
 if other than the principal amount thereof, the portion of the principal
 amount of Securities of the series which shall be payable upon declaration of
 acceleration of the maturity thereof pursuant to Section 4.01 or provable in
 bankruptcy pursuant to Section 4.02; 

 

6

	
  

 	
  

 
	
  

 	
           (k)
 if other than the coin or currency in which the Securities of that series are
 denominated, the coin or currency in which payment of the principal of or
 interest on the Securities of such series shall be payable; 

 
	
  

 	
  

 
	
  

 	
           (l)
 if the principal of or interest on the Securities of such series are to be
 payable, at the election of the Issuer or a Holder thereof, in a coin or
 currency other than that in which the Securities are denominated, the period
 or periods within which, and the terms and conditions upon which, such
 election may be made; 

 
	
  

 	
  

 
	
  

 	
           (m)
 if the amount of payments of principal of and interest on the Securities of
 the series may be determined with reference to an index based on a coin or
 currency other than that in which the Securities of the series are
 denominated, or with reference to any currencies, securities or baskets of
 securities, commodities or indices, the manner in which such amounts shall be
 determined; 

 
	
  

 	
  

 
	
  

 	
           (n)
 if the Holders of the Securities of the series may convert or exchange the
 Securities of the series into or for securities of the Issuer or of other
 entities or other property (or the cash value thereof), the specific terms of
 and period during which such conversion or exchange may be made; 

 
	
  

 	
  

 
	
  

 	
           (o)
 whether the Securities of the series will be issuable as Registered Securities
 (and if so, whether such Securities will be issuable as Registered Global
 Securities) or Bearer Securities (with or without Coupons), or any
 combination of the foregoing, any restrictions applicable to the offer, sale,
 transfer, exchange or delivery of Bearer Securities or Registered Securities
 or the payment of interest thereon and, if other than as provided herein, the
 terms upon which Bearer Securities of any series may be exchanged for
 Registered Securities of such series and vice versa; 

 
	
  

 	
  

 
	
  

 	
           (p)
 whether and under what circumstances the Issuer will pay additional amounts
 on the Securities of the series held by a Person who is not a U.S. Person in
 respect of any tax, assessment or governmental charge withheld or deducted
 and, if so, whether the Issuer will have the option to redeem such Securities
 rather than pay such additional amounts; 

 
	
  

 	
  

 
	
  

 	
           (q)
 if the Securities of such series are to be issuable in definitive form
 (whether upon original issue or upon exchange of a temporary Security of such
 series) only upon receipt of certain certificates or other documents or
 satisfaction of other conditions, the form and terms of such certificates,
 documents or conditions; 

 
	
  

 	
  

 
	
  

 	
           (r)
 any trustees, depositaries, authenticating or paying agents, transfer agents
 or registrars or any other agents with respect to the Securities of such
 series; 

 

7

	
  

 	
  

 
	
  

 	
           (s)
 any applicable United States federal income tax and other income tax
 provisions, including: whether and under what circumstances the Issuer will
 pay additional amounts on Securities for any tax, assessment or governmental
 charge withheld or deducted and, if so, whether it will have the option to
 redeem those Securities rather than pay the additional amounts; tax considerations
 applicable to any discounted Securities or to Securities issued at par that
 are treated as having been issued at a discount for United States federal
 income tax purposes; and tax considerations applicable to any Securities
 denominated and payable in foreign currencies; 

 
	
  

 	
  

 
	
  

 	
           (t)
 whether certain payments on the Securities will be guaranteed under a
 financial insurance guaranty policy and the terms of that guaranty; 

 
	
  

 	
  

 
	
  

 	
           (u)
 any applicable selling restrictions; 

 
	
  

 	
  

 
	
  

 	
           (v)
 any other events of default, modifications or elimination of any acceleration
 rights, or covenants with respect to the Securities of such series and any
 terms required by or advisable under applicable laws or regulations,
 including laws and regulations relating attributes required for the
 Securities to be afforded certain capital treatment for bank regulatory or
 other purposes; and 

 
	
  

 	
  

 
	
  

 	
           (w)
 any other terms of the series. 

 

                    All
Securities of any one series shall be substantially identical except as to
denomination and except as may otherwise be provided in or pursuant to such
resolution of the Board or in any such indenture supplemental hereto. All
Securities of any one series need not be issued at the same time and may be
issued from time to time, consistent with the terms of this Indenture, if so
provided by or pursuant to such Board Resolution or in any such indenture
supplemental hereto. 

                    SECTION
2.04. Authentication and Delivery of Securities. At any time and from
time to time after the execution and delivery of this Indenture, the Issuer may
deliver Securities of any series executed by the Issuer to the Trustee for
authentication, and the Trustee shall thereupon authenticate and deliver such
Securities to or upon the written order of the Issuer, signed by any officer of
the Issuer authorized by the Board to execute any such order, without any
further action by the Issuer. In authenticating such Securities and accepting
the additional responsibilities under this Indenture in relation to such
Securities the Trustee shall be provided with, and (subject to Section 5.01)
shall be fully protected in relying upon: 

	
  

 	
  

 
	
  

 	
           (a)
 a certified copy of any resolution or resolutions of the Board authorizing
 the action taken pursuant to the resolution or resolutions delivered under
 clause 2.04(b) below; 

 
	
  

 	
  

 
	
  

 	
           (b)
 a copy of any resolution or resolutions of the Board relating to such series,
 in each case certified by the Secretary or an Assistant Secretary of the
 Issuer; 

 

8

	
  

 	
  

 	
  

 
	
  

 	
           (c)
 an executed supplemental indenture, if any; 

 
	
  

 	
  

 	
  

 
	
  

 	
           (d)
 an Officers’ Certificate setting forth the form and terms of the Securities
 as required pursuant to Section 2.01 and 2.03, respectively and prepared in
 accordance with Section 10.06; 

 
	
  

 	
  

 	
  

 
	
  

 	
           (e)
 an Opinion of Counsel, prepared in accordance with Section 10.06, to the
 effect that 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (i)
 that the form or forms and terms of such Securities have been established by
 or pursuant to a resolution of the Board or by a supplemental indenture as
 permitted by Section 2.01 and 2.03 in conformity with the provisions of this
 Indenture; 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (ii)
 that such Securities, when authenticated and delivered by the Trustee and
 issued by the Issuer in the manner and subject to any conditions specified in
 such Opinion of Counsel, will constitute valid and binding obligations of the
 Issuer; 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (iii)
 that all laws and requirements in respect of the execution and delivery by
 the Issuer of the Securities have been complied with; and 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (iv)
 covering such other matters as the Trustee may reasonably request. 

 

                    The
Trustee shall have the right to decline to authenticate and deliver any
Securities under this Section if the Trustee, being advised by counsel,
determines that such action may not lawfully be taken by the Issuer or if the
Trustee in good faith by its board of directors or board of trustees, executive
committee, or a trust committee of directors or trustees or Responsible
Officers shall determine that such action would expose the Trustee to personal
liability to existing Holders. 

                    SECTION
2.05. Execution of Securities. The Securities shall be signed on behalf
of the Issuer by any officer of the Issuer authorized by the Board to execute
such Securities, which Securities may, but need not, be attested. Such
signatures may be the manual or facsimile signatures of the present or any
future such officers. Typographical and other minor errors or defects in any
such reproduction of the seal or any such signature shall not affect the
validity or enforceability of any Security that has been duly authenticated and
delivered by the Trustee. 

                    In
case any officer of the Issuer who shall have signed any of the Securities
shall cease to be such officer before the Security so signed shall be
authenticated and delivered by the Trustee or disposed of by the Issuer, such
Security nevertheless may be authenticated and delivered or disposed of as
though the person who signed such Security had not ceased to be such officer of
the Issuer; and any Security may be signed on behalf of the Issuer by such
person as, at the actual date of the execution of such Security, shall be a
proper officer of the Issuer, although at the date of the execution and
delivery of this Indenture any such person was not such an officer. 

9

                    SECTION
2.06. Certificate of Authorization. Only such Securities as shall bear
thereon a certificate of authentication substantially in the form hereinbefore
recited, executed by the Trustee by the manual signature of one of its
authorized officers, shall be entitled to the benefits of this Indenture or be
valid or obligatory for any purpose. Such certificate by the Trustee upon any
Security executed by the Issuer shall be conclusive evidence that the Security
so authenticated has been duly authenticated and delivered hereunder and that
the holder is entitled to the benefits of this Indenture. 

                    SECTION
2.07. Denomination and Date of Securities; Payments of Interest. The
Securities shall be issuable as registered securities without coupons and in
denominations as shall be specified as contemplated by Section 2.03. In the
absence of any such specification with respect to the Securities of any series,
the Securities of such series shall be issuable in denominations of $2,000 and
integral multiples of $1,000 in excess thereof. The Securities shall be
numbered, lettered, or otherwise distinguished in such manner or in accordance
with such plan as the officers of the Issuer executing the same may determine
with the approval of the Trustee as evidenced by the execution and
authentication thereof. 

                    Each
Security shall be dated the date of its authentication, shall bear interest, if
any, from the date and shall be payable on the dates, in each case, which shall
be specified as contemplated by Section 2.03. 

                    The
person in whose name any Security of any series is registered at the close of
business on any record date applicable to a particular series with respect to
any interest payment date for such series shall be entitled to receive the
interest, if any, payable on such interest payment date notwithstanding any transfer
or exchange of such Security subsequent to the record date and prior to such
interest payment date, except if and to the extent the Issuer shall default in
the payment of the interest due on such interest payment date for such series,
in which case such defaulted interest shall be paid to the persons in whose
names Outstanding Securities for such series are registered at the close of
business on a subsequent record date (which shall be not less than five
Business Days prior to the date of payment of such defaulted interest)
established by notice given by mail by or on behalf of the Issuer to the
holders of Securities not less than 15 days preceding such subsequent record
date. The term “record date” as used with respect to any interest
payment date (except a date for payment of defaulted interest) shall mean the
date specified as such in the terms of the Securities of any particular series,
or, if no such date is so specified, if such interest payment date is the first
day of a calendar month, the fifteenth day of the next preceding calendar month
or, if such interest payment date is the fifteenth day of a calendar month, the
first day of such calendar month, whether or not such record date is a Business
Day. 

                    SECTION
2.08. Regulation, Transfer and Exchange. The Issuer will keep or cause
to be kept at each office or agency to be maintained for the purpose as
provided in Section 3.02 a register or registers in which, subject to such
reasonable regulations as it may prescribe, it will register, and will register
the transfer of, Securities as in this Article provided. Such register shall be
in written form in the English language or in any other 

10

form capable
of being converted into such form within a reasonable time. At all reasonable
times such register or registers shall be open for inspection by the Trustee.

                    Upon
due presentation for registration of transfer of any Security of any series at
any such office or agency to be maintained for the purpose as provided in
Section 3.02, the Issuer shall execute and the Trustee shall authenticate and
deliver in the name of the transferee or transferees a new Security or
Securities of the same series in authorized denominations for a like aggregate
principal amount.

                    Any
Security or Securities of any series may be exchanged for a Security or
Securities of the same series in other authorized denominations, in an equal aggregate
principal amount. Securities of any series to be exchanged shall be surrendered
at any office or agency to be maintained by the Issuer for the purpose as
provided in Section 3.02, and the Issuer shall execute and the Trustee shall
authenticate and deliver in exchange therefor the Security or Securities of the
same series which the Securityholder making the exchange shall be entitled to
receive, bearing numbers not contemporaneously outstanding.

                    All
Securities presented for registration of transfer, exchange, redemption or
payment shall (if so required by the Issuer or the Trustee) be duly endorsed
by, or be accompanied by a written instrument or instruments of transfer in
form satisfactory to the Issuer and the Trustee duly executed by, the holder or
his attorney duly authorized in writing.

                    The
Issuer may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any exchange or
registration of transfer of Securities. No service charge shall be made for any
such transaction.

                    The
Issuer shall not be required to exchange or register a transfer of (a) any
Securities of any series for a period of 15 days next preceding the first
mailing of notice of redemption of Securities of such series to be redeemed, or
(b) any Securities selected, called or being called for redemption except, in
the case of any Security where notice has been given that such Security is to
be redeemed in part, the portion thereof not so to be redeemed.

                    All
Securities issued upon any transfer or exchange of Securities shall be valid
obligations of the Issuer, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Securities surrendered upon such transfer
or exchange.

                    SECTION
2.09. Mutilated, Defaced, Destroyed, Lost and Stolen Securities. In case
any temporary or definitive Security shall become mutilated, defaced or be
destroyed, lost or stolen, the Issuer in its discretion may execute, and upon
the written request of any officer of the Issuer, the Trustee shall
authenticate and deliver, a new Security of the same series, bearing a number
not contemporaneously outstanding, in exchange and substitution for the
mutilated or defaced Security, or in lieu of and substitution for the Security
so destroyed, lost or stolen. In every case the applicant for a

11

substitute
Security shall furnish to the Issuer and to the Trustee and any agent of the
Issuer or the Trustee such security or indemnity as may be required by them to
indemnify and defend and to save each of them harmless and, in every case of
destruction, loss or theft, evidence to their satisfaction of the destruction,
loss or theft of such Security and of the ownership thereof in the case of
mutilation or defacement shall surrender the Security to the Trustee or such
agent.

                    Upon
the issuance of any substitute Security, the Issuer may require the payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including the fees and
expenses of the Trustee or its agent) connected therewith. In case any Security
which has matured or is about to mature or has been called for redemption in
full shall become mutilated or defaced or be destroyed, lost or stolen, the
Issuer may instead of issuing a substitute Security, pay or authorize the
payment of the same (without surrender thereof except in the case of a mutilated
or defaced Security), if the applicant for such payment shall furnish to the
Issuer and the Trustee and any agent of the Issuer or the Trustee such security
or indemnity as any of them may require to save each of them harmless, and, in
every case of destruction, loss or theft, the applicant shall also furnish to
the Issuer and the Trustee and any agent of the Issuer or the Trustee evidence
to their satisfaction of the destruction, loss or theft of such Security and of
the ownership thereof.

                    Every
substitute Security of any series issued pursuant to the provisions of this
section by virtue of the fact that any such Security is destroyed, lost or
stolen shall constitute an additional contractual obligation of the Issuer,
whether or not the destroyed, lost or stolen Security shall be at any time
enforceable by anyone and shall be entitled to all the benefits of (but shall
be subject to all the limitations of rights set forth in) this Indenture
equally and proportionately with any and all other Securities of such series
duly authenticated and delivered hereunder. All Securities shall be held and
owned upon the express condition that, to the extent permitted by law, the
foregoing provisions are exclusive with respect to the replacement or payment
of mutilated, defaced or destroyed, lost or stolen Securities and shall
preclude any and all other rights or remedies notwithstanding any law or
statute existing or hereafter enacted to the contrary with respect to the
replacement or payment of negotiable instruments or other securities without
their surrender.

                    SECTION
2.10. Cancellation of Securities. All Securities surrendered for
payment, redemption, registration of transfer or exchange, or for credit
against any payment in respect of a sinking or analogous fund, if surrendered
to the Issuer or any agent of the Issuer or the Trustee, shall be delivered to
the Trustee for cancellation or, if surrendered to the Trustee, shall be
cancelled by it; and no Securities shall be issued in lieu thereof except as
expressly permitted by any of the provisions of this Indenture. The Trustee
shall dispose of cancelled Securities held by it in accordance with its
procedures for the disposition of cancelled Securities and deliver a
certificate of disposition to the Issuer upon its request therefor. If the
Issuer shall acquire any of the Securities, such acquisition shall not operate
as a redemption or satisfaction of the indebtedness represented by such
Securities unless and until the same are delivered to the Trustee for
cancellation.

12

                    SECTION
2.11. Temporary Securities. Pending the preparation of definitive
Securities for any series, the Issuer may execute and the Trustee shall
authenticate and deliver temporary Securities for such series (printed,
lithographed, typewritten or otherwise reproduced, in each case in form
satisfactory to the Trustee). Temporary Securities of any series shall be
issuable as registered Securities without coupons, of any authorized
denomination, and substantially in the form of the definitive Securities of
such series but with such omissions, insertions and variations as may be
appropriate for temporary Securities, all as may be determined by the Issuer
with the concurrence of the Trustee. Temporary Securities may contain such
reference to any provisions of this Indenture as may be appropriate. Every
temporary Security shall be executed by the Issuer and be authenticated by the
Trustee upon the same conditions and in substantially the same manner, and with
like effect, as the definitive Securities. Without unreasonable delay the
Issuer shall execute and shall furnish definitive Securities of such series and
thereupon temporary Securities of such series may be surrendered in exchange
therefor without charge at each office or agency to be maintained by the Issuer
for that purpose pursuant to Section 3.02, and the Trustee shall authenticate
and deliver in exchange for such temporary Securities of such series a like
aggregate principal amount of definitive Securities of the same series of
authorized denominations. Until so exchanged, the temporary Securities of any
series shall be entitled to the same benefits under this Indenture as
definitive Securities of such series unless otherwise established pursuant to
Section 2.03.

                    SECTION
2.12. CUSIP Numbers. The Issuer in issuing the Securities may use
“CUSIP” numbers (if then generally in use), and, if so, the Trustee shall use
“CUSIP” numbers in notices of redemption as a convenience to Holders; provided
that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers. The Issuer will
promptly notify the Trustee in writing of any change in the “CUSIP” numbers.

ARTICLE 3

Covenants of the Issuer and the Trustee 

                    SECTION
3.01. Payment of Principal and Interest. The Issuer covenants and agrees
for the benefit of each series of Securities that it will duly and punctually
pay or cause to be paid the principal of, and interest on, each of the
Securities of such series (together with any additional amounts payable
pursuant to the terms of such Securities) at the place or places, at the
respective times and in the manner provided in such Securities. Subject to any
other provisions that may be established pursuant to Section 2.03, the interest
on Securities (together with any additional amounts payable pursuant to the
terms of such Securities) shall be payable only to or upon the written order of
the Holders thereof and, at the option of the Issuer, may be paid by wire
transfer or by mailing checks for such interest payable to or upon the written
order of such Holders at their last addresses as they appear on the registry
books of the Issuer.

13

                    SECTION
3.02. Offices for Payments, etc. So long as any of the Securities remain
outstanding, the Issuer will maintain in the Borough of Manhattan, The City of
New York, the following for each series: an office or agency (a) where the
Securities may be presented for payment, (b) where the Securities may be
presented for registration of transfer and for exchange as in this Indenture
provided and (c) where notices and demands to or upon the Issuer in respect of
the Securities or of this Indenture may be served. The Issuer will give to the
Trustee written notice of the location of any such office or agency and of any
change of location thereof. Unless otherwise specified in accordance with
Section 2.03, the Issuer hereby initially designates the Corporate Trust Office
of the Trustee, as the office to be maintained by it for each such purpose. In
case the Issuer shall fail to so designate or maintain any such office or
agency or shall fail to give such notice of the location or of any change in
the location thereof, presentations and demands may be made and notices may be
served at the Corporate Trust Office.

                    The
Issuer may from time to time designate one or more additional offices or
agencies where the Securities of a series may be presented for payment, where the
Securities of that series may be presented for exchange as provided in this
Indenture and pursuant to Section 2.03 and where the Securities of that series
may be presented for registration of transfer as provided in this Indenture,
and the Issuer may from time to time rescind any such designation, as the
Issuer may deem desirable or expedient; provided, however, that no such
designation or rescission shall in any manner relieve the Issuer of its
obligation to maintain the agencies provided for in this Section. The Issuer
will give to the Trustee prompt written notice of any such designation or
rescission thereof.

                    SECTION
3.03. Appointment to Fill a Vacancy in Office of Trustee. The Issuer,
whenever necessary to avoid or fill a vacancy in the office of Trustee, will
appoint, in the manner provided in Section 5.09, a Trustee, so that there shall
at all times be a Trustee with respect to each series of Securities hereunder.

                    SECTION
3.04. Paying Agents. Whenever the Issuer shall appoint a paying agent
other than the Trustee with respect to the Securities of any series, it will
cause such paying agent to execute and deliver to the Trustee an instrument in
which such agent shall agree with the Trustee, subject to the provisions of
this Section,

	
  

 	
  

 
	
  

 	
           (a)
 that it will hold all sums received by it as such agent for the payment of
 the principal of or interest on the Securities of such series (whether such
 sums have been paid to it by the Issuer or by any other obligor on the
 Securities of such series) in trust for the benefit of the holders of the
 Securities of such series or of the Trustee,

 
	
  

 	
  

 
	
  

 	
           (b)
 that it will give the Trustee notice of any failure by the Issuer (or by any
 other obligor on the Securities of such series) to make any payment of the
 principal of or interest on the Securities of such series when the same shall
 be due and payable, and

 

14

	
  

 	
  

 
	
  

 	
           (c)
 that it will pay any such sums so held in trust by it to the Trustee upon the
 Trustee’s written request at any time during the continuance of the failure
 referred to in clause 3.04(b) above.

 

                    The
Issuer will, on or prior to 10:00 a.m. New York City time on each due date of
the principal of or interest on the Securities of such series, deposit with the
paying agent a sum sufficient to pay such principal or interest so becoming
due, and (unless such paying agent is the Trustee) the Issuer will promptly
notify the Trustee of any failure to take such action.

                    If
the Issuer shall act as its own paying agent with respect to the Securities of
any Series, it will, on or before each due date of the principal of or interest
on the Securities of such series, set aside, segregate and hold in trust for
the benefit of the holders of the Securities of such series a sum sufficient to
pay such principal or interest so becoming due. The Issuer will promptly notify
the Trustee of any failure to take such action.

                    Anything
in this section to the contrary notwithstanding, the Issuer may at any time,
for the purpose of obtaining a satisfaction and discharge with respect to one
or more or all series of Securities hereunder, or for any other reason, pay or
cause to be paid to the Trustee all sums held in trust for any such series by
the Issuer or any paying agent hereunder, as required by this Section, such
sums to be held by the Trustee upon the trusts herein contained.

                    Anything
in this section to the contrary notwithstanding, the agreement to hold sums in
trust as provided in this section is subject to the provisions of Section 9.03
and 9.04.

                    SECTION
3.05. Certificate of the Issuer. The Issuer will furnish to the Trustee
on or before [    ] in each year (beginning with [    ]) an Officers’ Certificate
of the Issuer as to the signers’ knowledge of the Issuer’s compliance with all
conditions and covenants under the Indenture (such compliance to be determined
without regard to any period of grace or requirement of notice provided under
the Indenture). In the event an Officer of the Issuer comes to have actual
knowledge of an Event of Default or an event which, with notice or the lapse of
time or both, would constitute an Event of Default, regardless of the date, the
Issuer shall deliver an Officers’ Certificate to the Trustee specifying such
Default and the nature and status thereof.

                    SECTION
3.06. Securityholders Lists. If and so long as the Trustee shall not be
the Security registrar for the Securities of any series, the Issuer will
furnish or cause to be furnished to the Trustee a list in such form as the
Trustee may reasonably require of the names and addresses of the holders of the
Securities of such series pursuant to Section 312 of the Trust Indenture Act of
1939 (a) semi-annually not more than 15 days after each record date for the
payment of interest on such Securities, as hereinabove specified, as of such
record date and on dates to be determined pursuant to Section 2.03 for
non-interest bearing securities in each year, and (b) at such other times as
the Trustee

15

may request in
writing, within thirty days after receipt by the Issuer of any such request as
of a date not more than 15 days prior to the time such information is
furnished.

                    SECTION
3.07. Reports by the Issuer. The Issuer covenants to file with the
Trustee, within 15 days after the Issuer files the same with the Commission,
copies of the annual reports and of the information, documents, and other
reports that the Issuer may be required to file with the Commission pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934. Delivery of
such reports, information and documents to the Trustee is for informational
purposes only and the Trustee’s receipt of such shall not constitute
constructive notice of any information contained therein or determinable from
information contained therein, including the Issuer’s compliance with any of
its covenants hereunder (as to which the Trustee is entitled to rely
exclusively on Officers’ Certificates).

                    SECTION
3.08. Reports by the Trustee. Any Trustee’s report required under
Section 313(a) of the Trust Indenture Act of 1939 shall be transmitted on or
before [          ] in each year following the date hereof,
so long as any Securities are outstanding hereunder, and shall be dated as of a
date convenient to the Trustee no more than 60 nor less than 45 days prior
thereto. The Trustee shall also comply with Section 313(b) of the Trust
Indenture Act of 1939.

ARTICLE 4

Remedies of the Trustee and Securityholders
on Event of Default

                    SECTION
4.01. Event of Default; Acceleration of Maturity, Waiver of Default.
Unless otherwise established in accordance with Section 2.03 or by any
applicable supplemental indenture, “Event of Default” with respect to
Securities of any series wherever used herein, means each one of the following
events which shall have occurred and be continuing (whatever the reason for
such Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body):

	
  

 	
  

 	
  

 
	
  

 	
           (a)
 default for more than 30 days in the payment of interest, premium or
 principal in respect of the Securities; or

 
	
  

 	
  

 	
  

 
	
  

 	
           (b)
 the failure to perform or observe any other obligations under the Securities
 which failure continues for the period of 60 days next following service on
 the Issuer of notice requiring the same to be remedied; or

 
	
  

 	
  

 	
  

 
	
  

 	
           (c)
 the entry by a court having jurisdiction in the premises of:

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (i)
 a decree or order for relief in respect of the Issuer in an involuntary case
 or proceeding under any applicable U.S. federal, state or non-U.S.
 bankruptcy, insolvency, reorganization or other similar law; or

 

16

	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (ii)
 a decree or order adjudging the Issuer a bankrupt or insolvent, or approving
 as properly filed a petition seeking reorganization, arrangement, adjustment
 or composition of or in respect of the Issuer under any applicable U.S.
 federal, state or non-U.S. law, or appointing a custodian, receiver,
 liquidator, assignee, trustee, sequestrator or other similar official of the
 Issuer or of any substantial part of its property, or ordering the winding up
 or liquidation of its affairs, and the continuance of any such decree or
 order for relief or any such other decree or order unstayed and in effect for
 a period of 60 consecutive days; or

 
	
  

 	
  

 	
  

 
	
  

 	
           (d)
 the commencement by the Issuer of a voluntary case or proceeding under any
 applicable U.S. federal, state or non-U.S. bankruptcy, insolvency,
 reorganization or other similar law or of any other case or proceeding to be
 adjudicated a bankrupt or insolvent, or the consent by the Issuer to the
 entry of a decree or order for relief in respect of the Issuer in an
 involuntary case or proceeding under any applicable U.S. federal, state or
 non-U.S. bankruptcy, insolvency, reorganization or other similar law or to
 the commencement of any bankruptcy or insolvency case or proceeding against
 the Issuer, or the filing by the Issuer of a petition or answer or consent
 seeking reorganization or relief under any applicable U.S. federal, state or
 non-U.S. law, or the consent by the Issuer to the filing of such petition or
 to the appointment of or the taking possession by a custodian, receiver,
 liquidator, assignee, trustee, sequestrator or other similar official of the
 Issuer or of any substantial part of its property, or the making by the
 Issuer of an assignment for the benefit of creditors, or the admission by the
 Issuer in writing of its inability to pay its debts generally as they become
 due, or the taking of corporate action by the Issuer expressly in furtherance
 of any such action; or

 
	
  

 	
  

 	
  

 
	
  

 	
           (e)
 any other Event of Default provided in the supplemental indenture or
 resolution of the Board under which such series of Securities is issued or in
 the form of Security for such series.

 

                    Unless
otherwise set forth in any applicable supplemental indenture, if an Event of
Default described in clauses 4.01(a), 4.01(b), or 4.01(e) above (if the Event
of Default under clauses 4.01(b) or 4.01(e) is with respect to less than all
series of Securities then Outstanding) occurs and is continuing, then, and in
each and every such case, except for any series the principal of which shall
have already become due and payable, either the Trustee or the holders of not
less than 25% in aggregate principal amount of the Securities of all series
affected thereby then Outstanding hereunder (treated as one class) by notice in
writing to the Issuer (and to the Trustee if given by Securityholders), may
declare the entire principal (or, if the Securities of any such affected series
are Original Issue Discount Securities, such portion of the principal amount as
may be specified in the terms of such series) of all Securities of such
affected series and the interest accrued thereon, if any, to be due and payable
immediately, and upon any such declaration the same shall become immediately
due and payable. Unless otherwise set forth in any applicable supplemental
indenture, if an Event of Default described in clauses 4.01(b) or 4.01(e) (if
the Event of Default under clauses 4.01(b) or 4.01(e) is with respect to all

17

series of
Securities at the time Outstanding) occurs and is continuing, then and in each
and every such case, unless the principal of all the Securities shall have
already become due and payable, either the Trustee or the holders of not less
than 25% in aggregate principal amount of all the then Outstanding Securities
hereunder (treated as one class) for which any applicable supplemental
indenture does not prevent acceleration under the relevant circumstances, by notice
in writing to the Issuer (and to the Trustee if given by Securityholders), may
declare the entire principal (or, if any Securities are Original Issue Discount
Securities, such portion of the principal as may be specified in the terms
thereof) of all the Securities then Outstanding and interest accrued thereon,
if any, to be due and payable immediately, and upon any such declaration the
same shall become immediately due and payable. Unless otherwise set forth in
any applicable supplemental indenture, if an Event of Default described in
clauses 4.01(c) or 4.01(d), then the principal and accrued and unpaid interest,
and premium of any, with respect to any Securities then Outstanding shall ipso
facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder.

                    The
foregoing provisions, however, are subject to the condition that if, at any
time after the principal (or, if the Securities are Original Issue Discount
Securities, such portion of the principal as may be specified in the terms
thereof) of the Securities of any series (or of all the Securities, as the case
may be) shall have been so declared due and payable, and before any judgment or
decree for the payment of the moneys due shall have been obtained or entered as
hereinafter provided, the Issuer shall pay or shall deposit with the Trustee a
sum sufficient to pay all matured installments of interest upon all the
Securities of such series (or of all the Securities, as the case may be) and
the principal of any and all Securities of such series (or of all the
Securities, as the case may be) which shall have become due otherwise than by
acceleration (with interest upon such principal and, to the extent that payment
of such interest is enforceable under applicable law, on overdue installments
of interest, at the same rate as the rate of interest or Yield to Maturity (in
the case of Original Issue Discount Securities) specified in the Securities of
such series (or at the respective rates of interest or Yields to Maturity of
all the Securities, as the case may be) to the date of such payment or deposit)
and such amount as shall be sufficient to cover reasonable compensation to the
Trustee, its agents, attorneys and counsel, and all other expenses and
liabilities incurred, and all advances made, by the Trustee except as a result
of negligence or bad faith, and if any and all Events of Default under the
Indenture, other than the non-payment of the principal of Securities which
shall have become due by acceleration, shall have been cured, waived or
otherwise remedied as provided herein--then and in every such case the holders
of a majority in aggregate principal amount of all the Securities of each such
series (or of all the Securities, as the case may be), then Outstanding (in
each case treated as one class), by written notice to the Issuer and to the
Trustee, may waive all defaults with respect to each such series (or with
respect to all the Securities, as the case may be) and rescind and annul such
declaration and its consequences, but no such waiver or rescission and
annulment shall extend to or shall affect any subsequent default or shall
impair any right consequent thereon.

                    For
all purposes under this Indenture, if a portion of the principal of any
Original Issue Discount Securities shall have been accelerated and declared due
and

18

payable
pursuant to the provisions hereof, then, from and after such declaration,
unless such declaration has been rescinded and annulled, the principal amount
of such Original Issue Discount Securities shall be deemed, for all purposes
hereunder, to be such portion of the principal thereof as shall be due and
payable as a result of such acceleration, and payment of such portion of the principal
thereof as shall be due and payable as a result of such acceleration, together
with interest, if any, thereon and all other amounts owing thereunder, shall
constitute payment in full of such Original Issue Discount Securities.

                    SECTION
4.02. Collection of Indebtedness by Trustee; Trustee May Prove Debt. The
Issuer covenants that (a) in case default shall be made in the payment of any
installment of interest on any of the Securities of any series when such
interest shall have become due and payable, and such default shall have
continued for a period of 30 days or (b) in case default shall be made in the
payment of all or any part of the principal of any of the Securities of any
series when the same shall have become due and payable, whether upon maturity
of the Securities of such series or upon any redemption or by declaration or
otherwise--then upon demand of the Trustee, the Issuer will pay to the Trustee
for the benefit of the Holders of the Securities of such series the whole amount
that then shall have become due and payable on all Securities of such series
for principal or interest, as the case may be (with interest to the date of
such payment upon the overdue principal and, to the extent that payment of such
interest is enforceable under applicable law, on overdue installments of
interest at the same rate as the rate of interest or Yield to Maturity (in the
case of Original Issue Discount Securities) specified in the Securities of such
series); and in addition thereto, such further amount as shall be sufficient to
cover the costs and expenses of collection, including reasonable compensation
to the Trustee and each predecessor Trustee, their respective agents, attorneys
and counsel, and any expenses and liabilities incurred, and all advances made,
by the Trustee and each predecessor Trustee except as a result of its
negligence or bad faith.

                    Until
such demand is made by the Trustee, the Issuer may pay the principal of and
interest on the Securities of any series to the registered holders, whether or
not the principal of and interest on the Securities of such series be overdue.

                    In
case the Issuer shall fail forthwith to pay such amounts upon such demand, the
Trustee, in its own name and as trustee of an express trust, shall be entitled
and empowered to institute any action or proceedings at law or in equity for
the collection of the sums so due and unpaid, and may prosecute any such action
or proceedings to judgment or final decree, and may enforce any such judgment
or final decree against the Issuer or other obligor upon such Securities and
collect in the manner provided by law out of the property of the Issuer or
other obligor upon such Securities, wherever situated, the moneys adjudged or decreed
to be payable.

                    In
case there shall be pending proceedings relative to the Issuer or any other
obligor upon the Securities under Title 11 of the United States Code or any
other applicable federal, state or non-U.S. bankruptcy, insolvency or other
similar law, or in case a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Issuer or its property or such other
obligor, or in case of any other comparable judicial

19

proceedings
relative to the Issuer or other obligor upon the Securities of any series, or
to the creditors or property of the Issuer or such other obligor, the Trustee,
irrespective of whether the principal of any Securities shall then be due and
payable as therein expressed or by declaration or otherwise and irrespective of
whether the Trustee shall have made any demand pursuant to the provisions of
this Section, shall be entitled and empowered, by intervention in such
proceedings or otherwise:

	
  

 	
  

 
	
  

 	
           (a)
 to file and prove a claim or claims for the whole amount of principal and
 interest (or, if the Securities of any series are Original Issue Discount
 Securities, such portion of the principal amount as may be specified in the
 terms of such series) owing and unpaid in respect of the Securities of any
 series, and to file such other papers or documents as may be necessary or
 advisable in order to have the claims of the Trustee (including any claim for
 reasonable compensation to the Trustee and each predecessor Trustee, and
 their respective agents, attorneys and counsel, and for reimbursement of all
 expenses and liabilities incurred, and all advances made, by the Trustee and
 each predecessor Trustee, except as a result of negligence or bad faith) and
 of the Securityholders allowed in any judicial proceedings relative to the
 Issuer or other obligor upon the Securities of any series, or to the
 creditors or property of the Issuer or such other obligor,

 
	
  

 	
  

 
	
  

 	
           (b)
 unless prohibited by applicable law and regulations, to vote on behalf of the
 holders of the Securities of any series in any election of a trustee or a
 standby trustee in arrangement, reorganization, liquidation or other
 bankruptcy or insolvency proceedings or person performing similar functions
 in comparable proceedings, and

 
	
  

 	
  

 
	
  

 	
           (c)
 to collect and receive any moneys or other property payable or deliverable on
 any such claims, and to distribute all amounts received with respect to the
 claims of the Securityholders and of the Trustee on their behalf; and any
 trustee, receiver, or liquidator, custodian or other similar official is
 hereby authorized by each of the Securityholders to make payments to the
 Trustee, and, in the event that the Trustee shall consent to the making of
 payments directly to the Securityholders, to pay to the Trustee such amounts
 as shall be sufficient to cover reasonable compensation to the Trustee, each
 predecessor Trustee and their respective agents, attorneys and counsel, and
 all other expenses and liabilities incurred, and all advances made, by the
 Trustee and each predecessor Trustee except as a result of negligence or bad
 faith.

 

                    Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or vote for or accept or adopt on behalf of any Securityholder any
plan or reorganization, arrangement, adjustment or composition affecting the
Securities of any series or the rights of any Holder thereof, or to authorize
the Trustee to vote in respect of the claim of any Securityholder in any such
proceeding except, as aforesaid, to vote for the election of a trustee in
bankruptcy or similar person.

                    All
rights of action and of asserting claims under this Indenture, or under any of
the Securities, may be enforced by the Trustee without the possession of any of
the

20

Securities or
the production thereof on any trial or other proceedings relative thereto, and
any such action or proceedings instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment,
subject to the payment of the expenses, disbursements and compensation of the
Trustee, each predecessor Trustee and their respective agents and attorneys, shall
be for the ratable benefit of the holders of the Securities in respect of which
such action was taken.

                    In
any proceedings brought by the Trustee (and also any proceedings involving the
interpretation of any provision of this Indenture to which the Trustee shall be
a party) the Trustee shall be held to represent all the holders of the
Securities in respect to which such action was taken, and it shall not be
necessary to make any holders of such Securities parties to any such proceedings.

                    SECTION
4.03. Application of Proceeds. Any moneys collected by the Trustee
pursuant to this Article in respect of any series shall be applied in the
following order at the date or dates fixed by the Trustee and, in case of the
distribution of such moneys on account of principal or interest, upon
presentation of the several Securities in respect of which monies have been
collected and stamping (or otherwise noting) thereon the payment, or issuing
Securities of such series in reduced principal amounts in exchange for the
presented Securities of like series if only partially paid, or upon surrender
thereof if fully paid:

	
  

 	
  

 
	
  

 	
           FIRST:
 To the payment of costs and expenses applicable to such series in respect of
 which monies have been collected, including reasonable compensation to the
 Trustee and each predecessor Trustee and their respective agents and
 attorneys and of all expenses and liabilities incurred, and all advances
 made, by the Trustee and each predecessor Trustee except as a result of
 negligence or bad faith;

 
	
  

 	
  

 
	
  

 	
           SECOND:
 In case the principal of the Securities of such series in respect of which
 moneys have been collected shall not have become and be then due and payable,
 to the payment of interest on the Securities of such series in default in the
 order of the maturity of the installments of such interest, with interest (to
 the extent that such interest has been collected by the Trustee) upon the
 overdue installments of interest at the same rate as the rate of interest or
 Yield to Maturity (in the case of Original Issue Discount Securities)
 specified in such Securities, such payments to be made ratably to the persons
 entitled thereto, without discrimination or preference;

 
	
  

 	
  

 
	
  

 	
           THIRD:
 In case the principal of the Securities of such series in respect of which
 moneys have been collected shall have become and shall be then due and
 payable, to the payment of the whole amount then owing and unpaid upon all
 the Securities of such series for principal and interest, with interest upon
 the overdue principal, and (to the extent that such interest has been
 collected by the Trustee) upon overdue installments of interest at the same
 rate as the rate of interest or Yield to Maturity (in the case of Original
 Issue Discount Securities) specified in the Securities of such series; and in
 case such moneys shall be insufficient to pay 

 

21

	
  

 	
  

 
	
  

 	
 in full the
 whole amount so due and unpaid upon the Securities of such series, then to
 the payment of such principal and interest or Yield to Maturity, without
 preference or priority of principal over interest or Yield to Maturity, or of
 interest or Yield to Maturity over principal, or of any installment of
 interest over any other installment of interest, or of any Security of such
 series over any other Security of such series, ratably to the aggregate of
 such principal and accrued and unpaid interest or Yield to Maturity; and

 
	
  

 	
  

 
	
  

 	
           FOURTH:
 To the payment of the remainder, if any, to the Issuer or as a court of
 competent jurisdiction shall direct in writing.

 

                    SECTION
4.04. Suits for Enforcement. In case an Event of Default has occurred,
has not been waived and is continuing, the Trustee may in its discretion
proceed to protect and enforce the rights vested in it by this Indenture by
such appropriate judicial proceedings as the Trustee shall deem necessary to
protect and enforce any of such rights, either at law or in equity or in
bankruptcy or otherwise, whether for the specific enforcement of any covenant
or agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law.

                    SECTION
4.05. Restoration of Rights on Abandonment of Proceeding. In case the
Trustee shall have proceeded to enforce any right under this Indenture and such
proceedings shall have been discontinued or abandoned for any reason, or shall
have been determined adversely to the Trustee, then and in every such case the
Issuer and the Trustee shall be restored respectively to their former positions
and rights hereunder, and all rights, remedies and powers of the Issuer, the
Trustee and the Securityholders shall continue as though no such proceedings had
been taken.

                    SECTION
4.06. Limitations on Suits by Securityholder. No holder of any Security
of any series shall have any right by virtue or by availing of any provision of
this Indenture to institute any action or proceeding at law or in equity or in
bankruptcy or otherwise upon or under or with respect to this Indenture, or for
the appointment of a trustee, receiver, liquidator, custodian or other similar
official or for any other remedy hereunder, unless such Holder previously shall
have given to the Trustee written notice of default and of the continuance
thereof, as hereinbefore provided, and unless also the Holders of not less than
25% in aggregate principal amount of the Securities of each affected series
then Outstanding (treated as a single class) shall have made written request
upon the Trustee to institute such action or proceedings in its own name as
trustee hereunder and shall have offered to the Trustee such indemnity as it
may require against the costs, expenses and liabilities to be incurred therein
or thereby and the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity shall have failed to institute any such action
or proceeding and no direction inconsistent with such written request shall
have been given to the Trustee pursuant to Section 4.09; it being understood
and intended, and being expressly covenanted by the taker and Holder of every
Security with every other taker and Holder and the Trustee, that no one or more
Holders of Securities of any series shall have any right in any manner whatever
by virtue or by availing of any provision of this Indenture to affect, disturb
or prejudice the rights of any

22

other such
Holder of Securities, or to obtain or seek to obtain priority over or preference
to any other such Holder or to enforce any right under this Indenture, except
in the manner herein provided and for the equal, ratable and common benefit of
all Holders of Securities of the applicable series. For the protection and
enforcement of the provisions of this Section, each and every Securityholder
and the Trustee shall be entitled to such relief as can be given either at law
or in equity.

                    SECTION
4.07. Unconditional Right of Securityholders to Institute Certain Suits.
Notwithstanding any other provision in this Indenture and any provision of any
Security, the right of any Holder of any Security to receive payment of the
principal of and interest on such Security on or after the respective due dates
expressed in such Security, or to institute suit for the enforcement of any
such payment on or after such respective dates, shall not be impaired or
affected without the consent of such Holder.

                    SECTION
4.08. Powers and Remedies Cumulative; Delay or Omission Not Waiver of
Default. Except as provided in Section 4.06, no right or remedy herein
conferred upon or reserved to the Trustee or to the Securityholders is intended
to be exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.

                    No
delay or omission of the Trustee or of any Securityholder to exercise any right
or power accruing upon any Event of Default occurring and continuing as
aforesaid shall impair any such right or power or shall be construed to be a
waiver of any such Event of Default or an acquiescence therein; and, subject to
Section 4.06, every power and remedy given by this Indenture or by law to the
Trustee or to the Securityholders may be exercised from time to time, and as
often as shall be deemed expedient, by the Trustee or by the Securityholders.

                    SECTION
4.09. Control by Securityholders. The Holders of a majority in aggregate
principal amount of the Securities of each series affected (with all such
series voting as a single class) at the time Outstanding shall have the right
to direct the time, method, and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee with respect to the Securities of such series by this Indenture;
provided that such direction shall not be otherwise than in accordance with law
and the provisions of this Indenture and provided further that (subject to the
provisions of Section 5.01) the Trustee shall have the right to decline to
follow any such direction if the Trustee shall determine that the action or
proceeding so directed may not lawfully be taken or if the Trustee in good
faith by its board of directors, the executive committee, or a trust committee
of directors or Responsible Officers of the Trustee shall determine that the
action or proceedings so directed would involve the Trustee in personal
liability or if the Trustee in good faith shall so determine that the actions
or forebearances specified in or pursuant to such direction would be unduly
prejudicial to the interests of Holders of the Securities of all series so
affected not joining in the giving of said direction, it being understood that
(subject to Section 5.01) the

23

Trustee shall
have no duty to ascertain whether or not such actions or forebearances are
unduly prejudicial to such Holders.

                    Nothing
in this Indenture shall impair the right of the Trustee in its discretion to
take any action deemed proper by the Trustee and which is not inconsistent with
such direction or directions by Securityholders.

                    SECTION
4.10. Waiver of Past Defaults. Prior to the acceleration of the maturity
of any Securities as provided in Section 4.01, the Holders of a majority in
aggregate principal amount of the Securities of all series at the time
Outstanding with respect to which an Event of Default shall have occurred and
be continuing (voting as a single class) may on behalf of the Holders of all
such Securities waive any past default or Event of Default described in Section
4.01 and its consequences, except a default in respect of a covenant or
provision hereof which cannot be modified or amended without the consent of the
Holder of each Security affected. In the case of any such waiver, the Issuer,
the Trustee and the Holders of all such Securities shall be restored to their
former positions and rights hereunder, respectively; but no such waiver shall
extend to any subsequent or other default or impair any right consequent
thereon.

                    Upon
any such waiver, such default shall cease to exist and be deemed to have been
cured and not to have occurred, and any Event of Default arising therefrom
shall be deemed to have been cured, and not to have occurred for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.

                    SECTION
4.11. Trustee to Give Notice of Default, But May Withhold in Certain
Circumstances. The Trustee shall give to the Securityholders of any series,
as the names and addresses of such Holders appear on the registry books, notice
by mail of all defaults known to the Trustee which have occurred with respect
to such series, such notice to be transmitted within 90 days after the
occurrence thereof, unless such defaults shall have been cured before the
giving of such notice (the term “default” or “defaults” for the purposes of
this section being hereby defined to mean any event or condition which is, or
with notice or lapse of time or both would become, an Event of Default);
provided that, except in the case of default in the payment of the principal of
or interest on any of the Securities of such series, or in the payment of any
sinking or purchase fund installment with respect to the Securities of such
series, the Trustee shall be protected in withholding such notice if and so
long as the board of directors, the executive committee, or a trust committee
of directors or trustees and/or Responsible Officers of the Trustee in good
faith determines that the withholding of such notice is in the interests of the
Securityholders of such series.

                    SECTION
4.12. Right of Court to Require Filing of Undertaking to Pay Costs. All
parties to this Indenture agree, and each Holder of any Security by his
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy
under this Indenture or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and

24

that such
court may in its discretion assess reasonable costs, including reasonable
attorneys’ fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party
litigant; but the provisions of this section shall not apply to any suit
instituted by the Trustee, to any suit instituted by any Securityholder or
group of Securityholders of any series holding in the aggregate more than 10%
in aggregate principal amount of the Securities of such series, or, in the case
of any suit relating to or arising under clauses 4.01(b) or 4.01(e) (if the
suit relates to Securities of more than one but less than all series), 10% in
aggregate principal amount of Securities Outstanding affected thereby, or in the
case of any suit relating to or arising under clauses 4.01(b) or 4.01(e) (if
the suit relates to all the Securities then Outstanding), 4.01(c) or 4.01(d),
10% in aggregate principal amount of all Securities Outstanding, or to any suit
instituted by any Securityholder for the enforcement of the payment of the
principal of or interest on any Security on or after the due date expressed in
such Security.

ARTICLE 5

Concerning the Trustee 

                    SECTION
5.01. Duties and Responsibilities of the Trustee; During Default; Prior to
Default. With respect to the Holders of any series of Securities issued
hereunder, the Trustee, prior to the occurrence of an Event of Default with
respect to the Securities of a particular series and after the curing or
waiving of all Events of Default which may have occurred with respect to such
series, undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture. In case an Event of Default with
respect to the Securities of a series has occurred (which has not been cured or
waived) the Trustee shall exercise with respect to such series of Securities
such of the rights and powers vested in it by this Indenture, and use the same
degree of care and skill in their exercise, as a prudent person would exercise
or use under the circumstances in the conduct of his or her own affairs.

                    No
provision of this Indenture shall be construed to relieve the Trustee from
liability for its own negligent action, its own negligent failure to act or its
own willful misconduct, except that

	
  

 	
  

 	
  

 
	
  

 	
           (a)
 prior to the occurrence of an Event of Default with respect to the Securities
 of any series and after the curing or waiving of all such Events of Default
 with respect to such series which may have occurred:

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (i)
 the duties and obligations of the Trustee with respect to the Securities of
 any Series shall be determined solely by the express provisions of this
 Indenture, and the Trustee shall not be liable except for the performance of
 such duties and obligations as are specifically set forth in this Indenture,
 and no implied covenants or obligations shall be read into this Indenture
 against the Trustee; and

 

25

	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (ii)
 in the absence of bad faith on the part of the Trustee, the Trustee may
 conclusively rely, as to the truth of the statements and the correctness of
 the opinions expressed therein, upon any statements, certificates or opinions
 furnished to the Trustee and conforming to the requirements of this Indenture;
 but in the case of any such statements, certificates or opinions which by any
 provision hereof are specifically required to be furnished to the Trustee,
 the Trustee shall be under a duty to examine the same to determine whether or
 not they conform to the requirements of this Indenture (but need not confirm
 or investigate the accuracy of mathematical calculations or other facts
 stated therein);

 
	
  

 	
  

 	
  

 
	
  

 	
           (b)
 the Trustee shall not be liable for any error of judgment made in good faith
 by a Responsible Officer or Responsible Officers of the Trustee, unless it
 shall be proved that the Trustee was negligent in ascertaining the pertinent
 facts; and 

 
	
  

 	
  

 	
  

 
	
  

 	
           (c)
 the Trustee shall not be liable with respect to any action taken or omitted
 to be taken by it in good faith in accordance with the direction of the
 holders pursuant to Section 4.09 relating to the time, method and place of
 conducting any proceeding for any remedy available to the Trustee, or
 exercising any trust or power conferred upon the Trustee, under this
 Indenture.

 

                    None
of the provisions contained in this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur personal financial liability in
the performance of any of its duties or in the exercise of any of its rights or
powers, if there shall be reasonable ground for believing that the repayment of
such funds or adequate indemnity against such liability is not reasonably
assured to it.

                    The
provisions of this Section 5.01 are in furtherance of and subject to Sections
315 and 316 of the Trust Indenture Act of 1939.

                    SECTION
5.02. Certain Rights of the Trustee. In furtherance of and subject to
the Trust Indenture Act of 1939, and subject to Section 5.01:

	
  

 	
  

 
	
  

 	
           (a)
 the Trustee may conclusively rely and shall be protected in acting or
 refraining from acting upon any resolution, Officers’ Certificate or any
 other certificate, statement, instrument, opinion, report, notice, request,
 consent, order, bond, debenture, note, coupon, security or other paper or
 document believed by it to be genuine and to have been signed or presented by
 the proper party or parties;

 
	
  

 	
  

 
	
  

 	
           (b)
 any request, direction, order or demand of the Issuer mentioned herein shall
 be sufficiently evidenced by an Officers’ Certificate (unless other evidence
 in respect thereof be herein specifically prescribed); and any resolution of
 the Board may be evidenced to the Trustee by a copy thereof certified by the
 secretary or an assistant secretary of the Issuer;

 
	
  

 	
  

 
	
  

 	
           (c)
 the Trustee may consult with counsel of its selection and any advice or
 Opinion of Counsel shall be full and complete authorization and protection in
 

 

26

	
  

 	
  

 
	
  

 	
 respect of
 any action taken, suffered or omitted to be taken by it hereunder in good
 faith and in accordance with such advice or Opinion of Counsel;

 
	
  

 	
  

 
	
  

 	
           (d)
 the Trustee shall be under no obligation to exercise any of the trusts or
 powers vested in it by this Indenture at the request, order or direction of
 any of the Securityholders pursuant to the provisions of this Indenture,
 unless such Securityholders shall have offered to the Trustee security or
 indemnity satisfactory to it against the costs, expenses and liabilities
 which might be incurred therein or thereby;

 
	
  

 	
  

 
	
  

 	
           (e)
 the Trustee shall not be liable for any action taken or omitted by it in good
 faith and believed by it to be authorized or within the discretion, rights or
 powers conferred upon it by this Indenture;

 
	
  

 	
  

 
	
  

 	
           (f)
 prior to the occurrence of an Event of Default hereunder and after the curing
 or waiving of all Events of Default, the Trustee shall not be bound to make
 any investigation into the facts or matters stated in any resolution,
 certificate, statement, instrument, opinion, report, notice, request,
 consent, order, approval, appraisal, bond, debenture, note, coupon, security,
 or other paper or document unless requested in writing so to do by the
 holders of not less than a majority in aggregate principal amount of the
 Securities of all series affected then outstanding; provided that, if the
 payment within a reasonable time to the Trustee of the costs, expenses or
 liabilities likely to be incurred by it in the making of such investigation
 is, in the opinion of the Trustee, not reasonably assured to the Trustee by
 the security afforded to it by the terms of this Indenture, the Trustee may
 require indemnity satisfactory to it against such expenses or liabilities as
 a condition to proceeding; the reasonable expenses of every such
 investigation shall be paid by the Issuer or, if paid by the Trustee or any
 predecessor trustee, shall be repaid by the Issuer upon demand;

 
	
  

 	
  

 
	
  

 	
           (g)
 the Trustee may execute any of the trusts or powers hereunder or perform any
 duties hereunder either directly or by or through agents or attorneys not
 regularly in its employ and the Trustee shall not be responsible for any
 misconduct or negligence on the part of any such agent or attorney appointed
 with due care by it hereunder;

 
	
  

 	
  

 
	
  

 	
           (h)
 whenever in the administration of this Indenture the Trustee shall deem it
 desirable that a matter be proved or established prior to taking, suffering
 or omitting any action hereunder, the Trustee (unless other evidence be
 herein specifically prescribed) may, in the absence of bad faith on its part,
 conclusively rely upon an Officers’ Certificate;

 
	
  

 	
  

 
	
  

 	
           (i)
 the Trustee shall not be deemed to have notice of any Event of Default or an
 event which, with notice or lapse of time or both, would constitute an Event
 of Default unless a Responsible Officer of the Trustee has actual knowledge
 thereof or unless written notice of any event which is in fact such a default
 is 

 

27

	
  

 	
  

 
	
  

 	
 received by
 the Trustee at the Corporate Trust Office of the Trustee, and such notice
 references the Securities and this Indenture;

 
	
  

 	
  

 
	
  

 	
           (j)
 the rights, privileges, protections, immunities and benefits given to the
 Trustee, including its right to be indemnified, are extended to, and shall be
 enforceable by, the Trustee in each of its capacities hereunder, and each
 agent, custodian and other Person employed to act hereunder;

 
	
  

 	
  

 
	
  

 	
           (k)
 the Trustee may request that the Issuer deliver an Officers’ Certificate
 setting forth the names of individuals and/or titles of officers authorized
 at such time to take specified actions pursuant to this Indenture, which
 Officers’ Certificate may be signed by any person authorized to sign an
 Officers’ Certificate, including any person specified as so authorized in any
 such certificate previously delivered and not superseded; and

 
	
  

 	
  

 
	
  

 	
           (l)
 in no event shall the Trustee be responsible or liable for special, indirect,
 or consequential loss or damage of any kind whatsoever (including, but not
 limited to, loss of profit) irrespective of whether the Trustee has been
 advised of the likelihood of such loss or damage and regardless of the form
 of action.

 

                    SECTION
5.03. Trustee Not Responsible for Recitals, Disposition of Securities or
Application of Proceeds Thereof. The recitals contained herein and in the
Securities, except the Trustee’s certificates of authentication, shall be taken
as the statements of the Issuer, and the Trustee assumes no responsibility for
the correctness of the same. The Trustee makes no representation as to the
validity or sufficiency of this Indenture or of the Securities. The Trustee
shall not be accountable for the use or application by the Issuer of any of the
Securities or of the proceeds thereof.

                    SECTION
5.04. Trustee and Agents May Hold Securities; Collections, etc. Subject
to Section 311 of the Trust Indenture Act of 1939, the Trustee or any agent of
the Issuer or the Trustee, in its individual or any other capacity, may become
the owner or pledgee of Securities with the same rights it would have if it
were not the Trustee or such agent and may otherwise deal with the Issuer and
receive, collect, hold and retain collections from the Issuer with the same
rights it would have if it were not the Trustee or such agent.

                    SECTION
5.05. Moneys Held by Trustee. Subject to the provisions of Section 9.04
hereof, all moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were
received, but need not be segregated from other funds except to the extent
required by mandatory provisions of law. Neither the Trustee nor any agent of
the Issuer or the Trustee shall be under any liability for interest on any
moneys received by it hereunder.

                    SECTION
5.06. Compensation and Indemnification of Trustee and its Prior Claim.
The Issuer covenants and agrees to pay to the Trustee from time to time, and
the Trustee shall be entitled to, compensation as the Issuer and the Trustee
shall from time to time agree in writing (which shall not be limited by any
provision of law in regard

28

to the
compensation of a trustee of an express trust) and the Issuer covenants and
agrees to pay or reimburse the Trustee and each predecessor Trustee upon its
request for all expenses, disbursements and advances incurred or made by or on
behalf of it in accordance with any of the provisions of this Indenture
(including the reasonable compensation and the expenses and disbursements of
its counsel and of all agents and other persons not regularly in its employ)
except to the extent any such expense, disbursement or advance is caused by its
own negligence, willful misconduct or bad faith. The Issuer also covenants to
indemnify the Trustee and each predecessor Trustee and their agents for, and to
hold it harmless against, any loss, liability or expense arising out of or in
connection with the acceptance or administration of this Indenture or the
trusts hereunder and the performance of its duties hereunder, including the
costs and expenses of defending itself against or investigating any claim of
liability in the premises, except to the extent such loss liability or expense
is caused by the negligence, willful misconduct or bad faith of the Trustee, its
agents or employees or such predecessor Trustee. The obligations of the Issuer
under this section to compensate and indemnify the Trustee and each predecessor
Trustee and to pay or reimburse the Trustee and each predecessor Trustee for
expenses, disbursements and advances shall constitute additional indebtedness
hereunder and shall survive the satisfaction and discharge of this Indenture.
Such additional indebtedness shall be a senior claim to that of the Securities
upon all property and funds held or collected by the Trustee as such, except
funds held in trust for the benefit of the holders of particular Securities,
and the Securities are hereby subordinated to such senior claim.

                    When
the Trustee incurs expenses or renders services in connection with an Event of
Default specified in Section 4.01(c) or Section 4.01(d), the expenses
(including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable federal, state or non-U.S. bankruptcy,
insolvency or other similar law.

                    SECTION
5.07. Right of Trustee to Rely on Officers’ Certificate, etc. Subject to
Sections 5.01 and 5.02, whenever in the administration of the trusts of this
Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of negligence or bad faith on the
part of the Trustee, be deemed to be conclusively proved and established by an
Officers’ Certificate delivered to the Trustee, and such certificate, in the
absence of negligence or bad faith on the part of the Trustee, shall be full
warrant to the Trustee for any action taken, suffered or omitted by it under
the provisions of this Indenture upon the faith thereof.

                    SECTION
5.08. Persons Eligible for Appointment as Trustee. The Trustee for each
series of Securities hereunder shall at all times be a corporation organized
and doing business under the laws of the United States of America or the
District of Columbia having a combined capital and surplus of at least
$25,000,000, and which is eligible in accordance with the provisions of Section
310(a) of the Trust Indenture Act of 1939. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of a federal, state or District of Columbia

29

supervising or
examining authority, then for the purposes of this Section, the combined
capital and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published.

                    SECTION
5.09. Resignation and Removal; Appointment of Successor Trustee. (a) The
Trustee, or any trustee or trustees hereafter appointed, may at any time resign
with respect to one or more or all series of Securities by giving written notice
of resignation to the Issuer and by mailing notice thereof by first class mail
to Holders of the applicable series of Securities at their last addresses as
they shall appear on the Security register. Upon receiving such notice of
resignation, the Issuer shall promptly appoint a successor trustee or trustees
with respect to the applicable series by written instrument in duplicate,
executed by authority of the Board, one copy of which instrument shall be
delivered to the resigning Trustee and one copy to the successor trustee or
trustees. If no successor trustee shall have been so appointed with respect to
any series and have accepted appointment within 30 days after the mailing of
such notice of resignation, the resigning trustee at the Issuer’s expense may
petition any court of competent jurisdiction for the appointment of a successor
trustee, or any Securityholder who has been a bona fide Holder of a Security or
Securities of the applicable series for at least six months may, subject to the
provisions of Section 4.12, on behalf of himself and all others similarly
situated, petition any such court for the appointment of a successor trustee.
Such court may thereupon, after such notice, if any, as it may deem proper and
prescribe, appoint a successor trustee.

	
  

 	
  

 	
  

 
	
  

 	
           (b)
 In case at any time any of the following shall occur:

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (i)
 the Trustee shall fail to comply with the provisions of Section 310(b) of the
 Trust Indenture Act of 1939 with respect to any series of Securities after
 written request therefor by the Issuer or by any Securityholder who has been
 a bona fide Holder of a Security or Securities of such series for at least
 six months; or

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (ii)
 the Trustee shall cease to be eligible in accordance with the provisions of
 Section 310(a) of the Trust Indenture Act of 1939 and shall fail to resign
 after written request therefor by the Issuer or by any Securityholder; or

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (iii)
 the Trustee shall become incapable of acting with respect to any series of
 Securities, or shall be adjudged a bankrupt or insolvent, or a receiver or
 liquidator of the Trustee or of its property shall be appointed, or any
 public officer shall take charge or control of the Trustee or of its property
 or affairs for the purpose of rehabilitation, conservation or liquidation;

 

then, in any
such case, the Issuer may remove the Trustee with respect to the applicable
series of Securities and appoint a successor trustee for such series by written
instrument, in duplicate, executed by order of the Board of the Issuer, one
copy of which instrument shall be delivered to the Trustee so removed and one
copy to the successor trustee, or,

30

subject to
Section 315(e) of the Trust Indenture Act of 1939, any Securityholder who has
been a bona fide Holder of a Security or Securities of such series for at least
six months may on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor trustee with respect to such series. Such court may
thereupon, after such notice, if any, as it may deem proper and prescribe,
remove the Trustee and appoint a successor trustee.

	
  

 	
  

 
	
  

 	
           (c)
 The Holders of a majority in aggregate principal amount of the Securities of
 each series at the time outstanding may at any time remove the Trustee with
 respect to Securities of such series and appoint a successor trustee with
 respect to the Securities of such series by delivering to the Trustee so
 removed, to the successor trustee so appointed and to the Issuer the evidence
 provided for in Section 6.01 of the action in that regard taken by the
 Securityholders.

 
	
  

 	
  

 
	
  

 	
           (d)
 Any resignation or removal of the Trustee with respect to any series and any
 appointment of a successor trustee with respect to such series pursuant to
 any of the provisions of this Section 5.09 shall become effective upon
 acceptance of appointment by the successor trustee as provided in Section
 5.10.

 

                    SECTION
5.10. Acceptance of Appointment By Successor Trustee. Any successor
trustee appointed as provided in Section 5.09 shall execute and deliver to the
Issuer and to its predecessor trustee an instrument accepting such appointment
hereunder, and thereupon the resignation or removal of the predecessor trustee
with respect to all or any applicable series shall become effective and such
successor trustee, without any further act, deed or conveyance, shall become
vested with all rights, powers, duties and obligations with respect to such series
of its predecessor hereunder, with like effect as if originally named as
trustee for such series hereunder; but, nevertheless, on the written request of
the Issuer or of the successor trustee, upon payment of its charges then
unpaid, the trustee ceasing to act shall, subject to Section 9.04, pay over to
the successor trustee all moneys at the time held by it hereunder and shall
execute and deliver an instrument transferring to such successor trustee all
such rights, powers, duties and obligations. Upon request of any such successor
trustee, the Issuer shall execute any and all instruments in writing for more
fully and certainly vesting in and confirming to such successor trustee all
such rights and powers. Any trustee ceasing to act shall, nevertheless, retain
a prior claim upon all property or funds held or collected by such trustee to
secure any amounts then due it pursuant to the provisions of Section 5.06.

                    If
a successor trustee is appointed with respect to the Securities of one or more
(but not all) series, the Issuer, the predecessor Trustee and each successor
trustee with respect to the Securities of any applicable series shall execute
and deliver an indenture supplemental hereto which shall contain such
provisions as shall be deemed necessary or desirable to confirm that all the
rights, powers, trusts and duties of the predecessor Trustee with respect to
the Securities of any series as to which the predecessor Trustee is not
retiring shall continue to be vested in the predecessor Trustee, and shall add
to or change any of the provisions of this Indenture as shall be necessary to
provide for or facilitate the administration of the trusts hereunder by more
than one

31

trustee, it
being understood that nothing herein or in such supplemental indenture shall
constitute such trustees co-trustees of the same trust and that each such
trustee shall be trustee of a trust or trusts under separate indentures. 

                    Upon
acceptance of appointment by any successor trustee as provided in this Section
5.10, the Issuer shall mail notice thereof by first-class mail to the Holders
of Securities of any series for which such successor trustee is acting as
trustee at their last addresses as they shall appear in the Security register.
If the acceptance of appointment is substantially contemporaneous with the
resignation, then the notice called for by the preceding sentence may be
combined with the notice called for by Section 5.09. If the Issuer fails to
mail such notice within ten days after acceptance of appointment by the
successor trustee, the successor trustee shall cause such notice to be mailed
at the expense of the Issuer. 

                    SECTION
5.11. Merger, Conversion, Consolidation or Succession to Business of
Trustee. Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided that such corporation shall be eligible under the provisions of Section
5.08, without the execution or filing of any paper or any further act on the
part of any of the parties hereto, anything herein to the contrary
notwithstanding. 

                    In
case at the time such successor to the Trustee shall succeed to the trusts
created by this Indenture any of the Securities of any series shall have been
authenticated but not delivered, any such successor to the Trustee may adopt
the certificate of authentication of any predecessor Trustee and deliver such
Securities so authenticated; and, in case at that time any of the Securities of
any series shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor hereunder or
in the name of the successor Trustee; and in all such cases such certificate
shall have the full force which it is anywhere in the Securities of such series
or in this Indenture provided that the certificate of the Trustee shall have;
provided, that the right to adopt the certificate of authentication of any
predecessor Trustee or to authenticate Securities of any series in the name of
any predecessor Trustee shall apply only to its successor or successors by
merger, conversion or consolidation. 

ARTICLE 6

Concerning the Securityholders

                    SECTION
6.01. Evidence of Action Taken by Securityholders. Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by a specified percentage in principal
amount of the Securityholders of any or all series may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such specified percentage of Securityholders in person or by agent duly
appointed in writing; and, except as herein 

32

otherwise
expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee. Proof of execution of any instrument
or of a writing appointing any such agent shall be sufficient for any purpose of
this Indenture and (subject to Sections 5.01 and 5.02) conclusive in favor of
the Trustee and the Issuer, if made in the manner provided in this Article. 

                    SECTION
6.02. Proof of Execution of Instruments and of Holding of Securities; Record
Date. Subject to Sections 5.01 and 5.02, the execution of any instrument by
a Securityholder or his agent or proxy may be proved in accordance with such
reasonable rules and regulations as may be prescribed by the Trustee or in such
manner as shall be satisfactory to the Trustee. The holding of Securities shall
be proved by the Security register or by a certificate of the registrar
thereof. The Issuer may set a record date for purposes of determining the
identity of holders of Securities of any series entitled to vote or consent to
any action referred to in Section 6.01, which record date may be set at any
time or from time to time by notice to the Trustee, for any date or dates (in
the case of any adjournment or reconsideration) not more than 60 days nor less
than five days prior to the proposed date of such vote or consent, and
thereafter, notwithstanding any other provisions hereof, only holders of
Securities of such series of record on such record date shall be entitled to so
vote or give such consent or revoke such vote or consent. 

                    SECTION
6.03. Holders to be Treated as Owners. The Issuer, the Trustee and any
agent of the Issuer or the Trustee may deem and treat the person in whose name
any Security shall be registered upon the Security register for such series as
the absolute owner of such Security (whether or not such Security shall be
overdue and notwithstanding any notation of ownership or other writing thereon)
for the purpose of receiving payment of or on account of the principal of and,
subject to the provisions of this Indenture, interest on such Security and for
all other purposes; and neither the Issuer nor the Trustee nor any agent of the
Issuer or the Trustee shall be affected by any notice to the contrary. All such
payments so made to any such person, or upon his order, shall be valid, and, to
the extent of the sum or sums so paid, effectual to satisfy and discharge the
liability for moneys payable upon any such Security. 

                    SECTION
6.04. Securities Owned by Issuer Deemed Not Outstanding. In determining
whether the Holders of the requisite aggregate principal amount of Outstanding
Securities of any or all series have concurred in any direction, consent or
waiver under this Indenture, Securities which are owned by the Issuer or any
other obligor on the Securities with respect to which such determination is
being made or by any person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Issuer or any other obligor
on the Securities with respect to which such determination is being made shall
be disregarded and deemed not to be Outstanding for the purpose of any such
determination, except that for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, consent or waiver only
Securities which a Responsible Officer of the Trustee actually knows are so
owned shall be so disregarded. Securities so owned which have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee’s right so to act with respect to such
Securities and 

33

that the
pledgee is not the Issuer or any other obligor upon the Securities or any
person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Issuer or any other obligor on the Securities.
In case of a dispute as to such right, the advice of counsel shall be full
protection in respect of any decision made by the Trustee in accordance with
such advice. Upon request of the Trustee, the Issuer shall furnish to the
Trustee promptly an Officers’ Certificate listing and identifying all
Securities, if any, known by the Issuer to be owned or held by or for the
account of any of the above-described persons; and, subject to Sections 5.01
and 5.02, the Trustee shall be entitled to accept such Officers’ Certificate as
conclusive evidence of the facts therein set forth and of the fact that all
Securities not listed therein are Outstanding for the purpose of any such
determination. 

                    SECTION
6.05. Right of Revocation of Action Taken. At any time prior to (but not
after) the evidencing to the Trustee, as provided in Section 6.01, of the
taking of any action by the Holders of the percentage in aggregate principal
amount of the Securities of any or all series, as the case may be, specified in
this Indenture in connection with such action, any Holder of a Security the
serial number of which is shown by the evidence to be included among the serial
numbers of the Securities the Holders of which have consented to such action
may, by filing written notice at the Corporate Trust Office and upon proof of
holding as provided in this Article, revoke such action so far as concerns such
Security. Except as aforesaid any such action taken by the Holder of any
Security shall be conclusive and binding upon such Holder and upon all future
Holders and owners of such Security and of any Securities issued in exchange or
substitution therefor or on registration of transfer thereof, irrespective of
whether or not any notation in regard thereto is made upon any such Security.
Any action taken by the Holders of the percentage in aggregate principal amount
of the Securities of any or all series, as the case may be, specified in this
Indenture in connection with such action shall be conclusively binding upon the
Issuer, the Trustee and the Holders of all the Securities affected by such
action. 

ARTICLE 7

Supplemental Indentures

                    SECTION
7.01. Supplemental Indentures Without Consent of Securityholders. The
Issuer, when authorized by a resolution of its Board (which resolutions may
provide general authorization for such action and may provide that the specific
terms of such action may be determined by officers of the Issuer authorized
thereby), and the Trustee may from time to time and at any time enter into an
indenture or indentures supplemental hereto for one or more of the following
purposes: 

	
  

 	
  

 
	
  

 	
           (a)
 to convey, transfer, assign, mortgage or pledge to the Trustee as security
 for the Securities of one or more series any property or assets; 

 
	
  

 	
  

 
	
  

 	
           (b)
 to evidence the succession of another legal entity to the Issuer, or
 successive successions, and the assumption by the successor legal entity of
 the covenants, agreements and obligations of the Issuer pursuant to Article
 8; 

 

34

	
  

 	
  

 
	
  

 	
           (c)
 to add to the covenants of the Issuer such further covenants, restrictions,
 conditions or provisions as the Issuer and the Trustee shall consider to be
 for the protection of the Holders of Securities, and to make the occurrence,
 or the occurrence and continuance, of a default in any such additional
 covenants, restrictions, conditions or provisions an Event of Default permitting
 the enforcement of all or any of the several remedies provided in this
 Indenture as herein set forth; provided, that in respect of any such
 additional covenant, restriction, condition or provision such supplemental
 indenture may provide for a particular period of grace after default (which
 period may be shorter or longer than that allowed in the case of other
 defaults) or may provide for an immediate enforcement upon such an Event of
 Default or may limit the remedies available to the Trustee upon such an Event
 of Default or may limit the right of the Holders of a majority in aggregate
 principal amount of the Securities of such series to waive such an Event of
 Default; 

 
	
  

 	
  

 
	
  

 	
           (d)
 to cure any ambiguity or to correct or supplement any provision contained
 herein or in any supplemental indenture which may be defective or
 inconsistent with any other provision contained herein or in any supplemental
 indenture; or to make such other provisions in regard to matters or questions
 arising under this Indenture or under any supplemental indenture as the Board
 may deem necessary or desirable and which shall not adversely affect the
 interests of the Holders of the Securities in any material respect; 

 
	
  

 	
  

 
	
  

 	
           (e)
 to establish the form or terms of Securities of any series as permitted by
 Sections 2.01 and 2.03; and 

 
	
  

 	
  

 
	
  

 	
           (f)
 to evidence and provide for the acceptance of appointment hereunder by a
 successor trustee with respect to the Securities of one or more series and to
 add to or change any of the provisions of this Indenture as shall be
 necessary to provide for or facilitate the administration of the trusts
 hereunder by more than one trustee, pursuant to the requirements of Section
 5.10. 

 

                    The
Trustee is hereby authorized to join with the Issuer in the execution of any
such supplemental indenture, to make any further appropriate agreements and
stipulations which may be therein contained and to accept the conveyance,
transfer, assignment, mortgage or pledge of any property thereunder, but the
Trustee shall not be obligated to enter into any such supplemental indenture
which affects the Trustee’s own rights, duties or immunities under this
Indenture or otherwise. 

                    Any
supplemental indenture authorized by the provisions of this section may be
executed without the consent of the Holders of any of the Securities at the
time outstanding, notwithstanding any of the provisions of Section 7.02. 

                    SECTION
7.02. Supplemental Indentures With Consent of Securityholders. With the
consent (evidenced as provided in Article 6) of the Holders of not less than a
majority in aggregate principal amount of the Securities at the time
Outstanding of all series affected by such supplemental indenture (voting as
one class), 

35

the Issuer,
when authorized by a resolution of its Board (which resolutions may provide
general authorization for such action and may provide that the specific terms
of such action may be determined by officers of the Issuer authorized thereby),
and the Trustee may, from time to time and at any time, enter into an indenture
or indentures supplemental hereto for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of this
Indenture or of any supplemental indenture or of modifying in any manner the
rights of the Holders of the Securities of each such series; provided, that no
such supplemental indenture shall (a) (i) extend the final maturity of any
Security, (ii) reduce the principal amount thereof, (iii) reduce the rate or
extend the time of payment of interest thereon, (iv) reduce any amount payable
on redemption thereof, (v) make the principal thereof (including any amount in
respect of original issue discount), or interest thereon payable in any coin or
currency other than that provided in the Securities or in accordance with the
terms thereof, (vi) modify or amend any provisions for converting any currency
into any other currency as provided in the Securities or in accordance with the
terms thereof, (vii) reduce the amount of the principal of an Original Issue
Discount Security that would be due and payable upon an acceleration of the
maturity thereof pursuant to Section 4.01 or the amount thereof provable in
bankruptcy pursuant to Section 4.02, (viii) modify or amend any provisions
relating to the conversion or exchange of the Securities for securities of the
Issuer or of other entities or other property (or the cash value thereof),
including the determination of the amount of securities or other property (or
cash) into which the Securities shall be converted or exchanged, other than as
provided in the antidilution provisions or other similar adjustment provisions
of the Securities or otherwise in accordance with the terms thereof, (ix) alter
the provisions of Section 10.12 or Section 10.14 or impair or affect the right
of any Securityholder to institute suit for the payment thereof or, if the
Securities provide therefor, any right of repayment at the option of the
Securityholder, in each case without the consent of the Holder of each Security
so affected, or (b) reduce the aforesaid percentage of Securities of any
series, the consent of the Holders of which is required for any such
supplemental indenture, without the consent of the Holders of each Security so
affected. 

                    A
supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of holders of Securities of such series, with respect to such covenant
or provision, shall be deemed not to affect the rights under this Indenture of
the holders of Securities of any other series. 

                    Upon
the request of the Issuer, accompanied by a copy of a resolution of the Board
(which resolutions may provide general authorization for such action and may
provide that the specific terms of such action may be determined by officers of
the Issuer authorized thereby) certified by the secretary or an assistant
secretary of the Issuer authorizing the execution of any such supplemental
indenture, and upon the filing with the Trustee of evidence of the consent of
Securityholders as aforesaid and other documents, if any, required by Section
6.01, the Trustee shall join with the Issuer in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee’s
own rights, duties or immunities under this Indenture or otherwise, in which 

36

case the
Trustee may in its discretion, but shall not be obligated to, enter into such
supplemental indenture. 

                    It
shall not be necessary for the consent of the Securityholders under this
section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such consent shall approve the substance thereof.

                    Promptly
after the execution by the Issuer and the Trustee of any supplemental indenture
pursuant to the provisions of this Section, the Trustee shall give notice
thereof by (a) first class mail to the Holders of Securities of each series
affected thereby at their addresses as they shall appear on the registry books
of the Issuer or (b) by any other means set forth in such supplemental
indenture, setting forth in general terms the substance of such supplemental
indenture. Any failure of the Trustee to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such supplemental indenture. 

                    SECTION
7.03. Effect of Supplemental Indenture. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and be deemed to be modified and amended in accordance therewith and the respective
rights, limitations of rights, obligations, duties and immunities under this
Indenture of the Trustee, the Issuer and the Holders of Securities of each
series affected thereby shall thereafter be determined, exercised and enforced
hereunder subject in all respects to such modifications and amendments, and all
the terms and conditions of any such supplemental indenture shall be and be
deemed to be part of the terms and conditions of this Indenture for any and all
purposes. 

                    SECTION
7.04. Documents to Be Given to Trustee. In executing, or accepting the
additional trusts created by, any supplemental indenture permitted by this
Article or the modification thereby of the trusts created by this Indenture,
the Trustee shall be provided with, and shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Trustee may, but
shall not be obligated to, enter into any such supplemental indenture which
adversely affects the Trustee’s own rights, duties or immunities under this
Indenture or otherwise. 

                    SECTION
7.05. Notation On Securities In Respect Of Supplemental Indentures. Securities
of any series authenticated and delivered after the execution of any
supplemental indenture pursuant to the provisions of this Article may bear a
notation in form approved by the Trustee for such series as to any matter
provided for by such supplemental indenture or as to any action taken by
Securityholders. If the Issuer or the Trustee shall so determine, new
Securities of any series so modified as to conform, in the opinion of the
Trustee and the Board, to any modification of this Indenture contained in any
such supplemental indenture may be prepared by the Issuer, authenticated by the
Trustee and delivered in exchange for the Securities of such series then
Outstanding. 

37

ARTICLE 8

Consolidation, Merger, Sale or Conveyance

                    SECTION
8.01. Issuer May Consolidate, etc., on Certain Terms. The Issuer
covenants that it will not merge or consolidate with any other Person or sell
or convey all or substantially all of its assets to any Person, unless (i)
either the Issuer shall be the continuing legal entity, or the successor legal
entity or the Person which acquires by sale or conveyance substantially all the
assets of the Issuer (if other than the Issuer) shall expressly assume the due
and punctual payment of the principal of and interest on all the Securities,
according to their tenor, and the due and punctual performance and observance
of all of the covenants and conditions of this Indenture to be performed or
observed by the Issuer, by supplemental indenture satisfactory to the Trustee,
executed and delivered to the Trustee by such successor legal entity, and (ii)
the Issuer or such successor legal entity, as the case may be, shall not,
immediately after such merger or consolidation, or such sale or conveyance, be
in default in the performance of any such covenant or condition. 

                    SECTION
8.02. Successor Substituted. In case of any such consolidation, merger,
sale or conveyance, and following such an assumption by the successor legal
entity, all in the manner described in Section 8.01, such successor legal
entity shall succeed to and be substituted for the Issuer, with the same effect
as if it had been named herein. Such successor legal entity may cause to be
signed, and may issue either in its own name or in the name of the Issuer prior
to such succession any or all of the Securities issuable hereunder which
theretofore shall not have been signed by the Issuer and delivered to the
Trustee; and, upon the order of such successor legal entity instead of the
Issuer and subject to all the terms, conditions and limitations in this
Indenture prescribed, the Trustee shall authenticate and shall deliver any
Securities which previously shall have been signed and delivered by the
officers of the Issuer to the Trustee for authentication, and any Securities
which such successor legal entity thereafter shall cause to be signed and
delivered to the Trustee for that purpose. All of the Securities so issued
shall in all respects have the same legal rank and benefit under this Indenture
as the Securities theretofore or thereafter issued in accordance with the terms
of this Indenture as though all of such Securities had been issued at the date
of the execution hereof. 

                    In
case of any such consolidation, merger, sale, lease or conveyance such changes
in phrasing and form (but not in substance) may be made in the Securities
thereafter to be issued as may be appropriate. 

                    In
the event of any such sale or conveyance (other than a conveyance by way of
lease) the Issuer or any successor legal entity which shall theretofore have
become such in the manner described in this Article shall be discharged from
all obligations and covenants under this Indenture and the Securities and may
be liquidated and dissolved. 

                    SECTION
8.03. Opinion of Counsel to Trustee. The Trustee, subject to the
provisions of Sections 5.01 and 5.02, shall receive an Opinion of Counsel,
prepared in accordance with Section 10.06, as conclusive evidence that any such
consolidation, 

38

merger, sale,
lease or conveyance, and any such assumption, and any such liquidation or
dissolution, complies with the applicable provisions of this Indenture. 

ARTICLE 9

Satisfaction and Discharge of Indenture;
Unclaimed Moneys

                    SECTION
9.01. Satisfaction and Discharge of Indenture. (a) If at any time (i)
the Issuer shall have paid or caused to be paid the principal of and interest
on all the Securities of any series outstanding hereunder (other than
Securities of such series which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 2.09) as and when the same
shall have become due and payable, or (ii) the Issuer shall have delivered to
the Trustee for cancellation all Securities of any series theretofore
authenticated (other than any Securities of such series which shall have been
destroyed, lost or stolen and which shall have been replaced or paid as
provided in Section 2.09) or (iii) (A) all the securities of such series not
theretofore delivered to the Trustee for cancellation shall have become due and
payable, or are by their terms to become due and payable within one year or are
to be called for redemption within one year under arrangements satisfactory to
the Trustee for the giving of notice of redemption, and (B) the Issuer shall
have irrevocably deposited or caused to be deposited with the Trustee as trust
funds the entire amount in cash (other than moneys repaid by the Trustee or any
paying agent to the Issuer in accordance with Section 9.04) in the case of any
series of Securities the payments on which may only be made in United States
dollars, direct obligations of the United States of America, backed by its full
faith and credit (“U.S. Government Obligations”), maturing as to
principal and interest at such times and in such amounts as will insure the
availability of cash, or a combination thereof, sufficient to pay at maturity
or upon redemption all Securities of such series (other than any Securities of
such series which shall have been destroyed, lost or stolen and which shall
have been replaced or paid as provided in Section 2.09) not theretofore
delivered to the Trustee for cancellation, including principal and interest due
or to become due on or prior to such date of maturity as the case may be, and
if, in any such case, the Issuer shall also pay or cause to be paid all other
sums payable hereunder by the Issuer with respect to Securities of such series,
then this Indenture shall cease to be of further effect with respect to
Securities of such series (except as to (i) rights of registration of transfer
and exchange of securities of such series, and the Issuer’s right of optional
redemption, if any, (ii) substitution of mutilated, defaced, destroyed, lost or
stolen Securities, (iii) rights of holders to receive payments of principal
thereof and interest thereon upon the original stated due date therefor (but no
upon acceleration), and remaining rights of the holders to receive mandatory
sinking fund payments, if any, (iv) the rights, obligations and immunities of
the Trustee hereunder and (v) the rights of the Securityholders of such series
as beneficiaries hereof with respect to the property so deposited with the
Trustee payable to all or any of them), and the Trustee, on demand of the
Issuer accompanied by an Officers’ Certificate and an Opinion of Counsel and at
the cost and expense of the Issuer, shall execute proper instruments
acknowledging such satisfaction of and discharging this Indenture with respect
to such series; provided, that the rights of Holders of the Securities to
receive amounts in respect of principal of and interest on the Securities held
by them shall not be delayed longer than required by then-

39

applicable
mandatory rules or policies of any securities exchange upon which the
Securities are listed. The Issuer agrees to reimburse the Trustee for any costs
or expenses thereafter reasonably and properly incurred and to compensate the
Trustee for any services thereafter reasonably and properly rendered by the
Trustee in connection with this Indenture or the Securities of such series. 

	
  

 	
  

 	
  

 
	
  

 	
           (b)
 The following provisions shall apply to the Securities of each series unless
 specifically otherwise provided in a Board Resolution, Officers’ Certificate
 or indenture supplemental hereto provided pursuant to Section 2.03. In
 addition to discharge of the Indenture pursuant to the next preceding
 paragraph, in the case of any series of Securities the exact amounts
 (including the currency of payment) of principal of and interest due on which
 can be determined at the time of making the deposit referred to in clause
 9.01(b)(i) below, the Issuer shall be deemed to have paid and discharged the
 entire indebtedness on all the Securities of such a series on the 91st day
 after the date of the deposit referred to in clause 9.01(b)(i) below, and the
 provisions of this Indenture with respect to the Securities of such series
 thereto shall no longer be in effect (except as to (1) rights of registration
 of transfer and exchange of Securities of such series and the Issuer’s right
 of optional redemption, if any, (2) substitution of mutilated, defaced,
 destroyed, lost or stolen Securities, (3) rights of Holders of Securities to
 receive payments of principal thereof and interest thereon, upon the original
 stated due dates therefor (but not upon acceleration), and remaining rights
 of the Holders to receive mandatory sinking fund payments, if any, (4) the
 rights, obligations, duties and immunities of the Trustee hereunder, (5) the
 rights of the Holders of Securities of such series as beneficiaries hereof
 with respect to the property so deposited with the Trustee payable to all or
 any of them and (6) the obligations of the Issuer under Section 3.02) and the
 Trustee, at the expense of the Issuer, shall at the Issuer’s request, execute
 proper instruments acknowledging the same, if

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (i)
 with reference to this provision the Issuer has irrevocably deposited or
 caused to be irrevocably deposited with the Trustee as trust funds in trust,
 specifically pledged as security for, and dedicated solely to, the benefit of
 the Holders of the Securities of such series (A) cash in an amount, or (B) in
 the case of any series of Securities the payments on which may only be made
 in Dollars, U.S. Government Obligations, maturing as to principal and
 interest at such times and in such amounts as will insure the availability of
 cash or (C) a combination thereof, sufficient, in the opinion of a nationally
 recognized firm of independent public accountants expressed in a written
 certification thereof delivered to the Trustee, to pay (1) the principal and
 interest on all Securities of such series and Coupons appertaining thereto on
 each date that such principal or interest is due and payable and (2) any
 mandatory sinking fund payments on the dates on which such payments are due
 and payable in accordance with the terms of the Indenture and the Securities
 of such series; 

 

40

	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (ii)
 such deposit will not result in a breach or violation of, or constitute a
 default under, any agreement or instrument to which the Issuer is a party or
 by which it is bound; 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (iii)
 the Issuer has delivered to the Trustee an Opinion of Counsel based on the
 fact that (x) the Issuer has received from, or there has been published by,
 the Internal Revenue Service a ruling or (y) since the date hereof, there has
 been a change in the applicable federal income tax law, in either case to the
 effect that, and such opinion shall confirm that, the Holders of the
 Securities of such series and Coupons appertaining thereto will not recognize
 income, gain or loss for federal income tax purposes as a result of such
 deposit, defeasance and discharge and will be subject to federal income tax
 on the same amount and in the same manner and at the same times, as would
 have been the case if such deposit, defeasance and discharge had not
 occurred; and 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (iv)
 the Issuer has delivered to the Trustee an Officers’ Certificate and an
 Opinion of Counsel, each stating that all conditions precedent provided for
 relating to the defeasance contemplated by this provision have been complied
 with. 

 
	
  

 	
  

 	
  

 
	
  

 	
           (c)
 The Issuer shall be released from its obligations under Section 9.01 with
 respect to the Securities of any Series, Outstanding, on and after the date
 the conditions set forth below are satisfied (hereinafter, “covenant
 defeasance”). For this purpose, such covenant defeasance means that, with
 respect to the Outstanding Securities of any Series, the Issuer may omit to
 comply with and shall have no liability in respect of any term, condition or
 limitation set forth in such Sections, whether directly or indirectly by
 reason of any reference elsewhere herein to such Sections or by reason of any
 reference in such Sections to any other provision herein or in any other
 document and such omission to comply shall not constitute an Event of Default
 under Section 4.01, but the remainder of this Indenture and such Securities
 and Coupons shall be unaffected thereby. The following shall be the
 conditions to application of this subsection (c) of this Section 9.01: 

 
	
  

 	
  

 
	
  

 	
  

 	
           (i)
 The Issuer has irrevocably deposited or caused to be deposited with the
 Trustee as trust funds in trust for the purpose of making the following
 payments, specifically pledged as security for, and dedicated solely to, the
 benefit of the holders of the Securities of such series, (A) cash in an
 amount, or (B) in the case of any series of Securities the payments on which
 may only be made in Dollars, U.S. Government Obligations maturing as to
 principal and interest at such times and in such amounts as will insure the
 availability of cash or (C) a combination thereof, sufficient, in the opinion
 of a nationally recognized firm of independent public accountants expressed
 in a written certification thereof delivered to the Trustee, to pay (1) the
 principal and interest on all Securities of such series and Coupons
 appertaining thereto and (2) any 

 

41

	
  

 	
  

 	
  

 
	
  

 	
  

 	
 mandatory
 sinking fund payments on the day on which such payments are due and payable
 in accordance with the terms of the Indenture and the Securities of such
 series. 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (ii)
 No Event of Default or event which with notice or lapse of time or both would
 become an Event of Default with respect to the Securities shall have occurred
 and be continuing on the date of such deposit or, insofar as subsections
 4.01(c) and 4.01(d) are concerned, at any time during the period ending on
 the 91st day after the date of such deposit (it being understood that this
 condition shall not be deemed satisfied until the expiration of such period).
 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (iii)
 Such covenant defeasance shall not cause the Trustee to have a conflicting
 interest for purposes of the Trust Indenture Act of 1939 with respect to any
 securities of the Issuer. 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (iv)
 Such covenant defeasance shall not result in a breach or violation of, or
 constitute a default under, this Indenture or any other agreement or
 instrument to which the Issuer is a party or by which it is bound. 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (v)
 Such covenant defeasance shall not cause any Securities then listed on any
 registered national securities exchange under the Securities Exchange Act of
 1934, as amended, to be delisted. 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (vi)
 The Issuer shall have delivered to the Trustee an Officers’ Certificate and
 Opinion of Counsel to the effect that the Holders of the Securities of such
 series will not recognize income, gain or loss for federal income tax
 purposes as a result of such covenant defeasance and will be subject to
 federal income tax on the same amounts, in the same manner and at the same
 times as would have been the case if such covenant defeasance had not
 occurred. 

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	
           (vii)
 The Issuer shall have delivered to the Trustee an Officers’ Certificate and
 an Opinion of Counsel, each stating that all conditions precedent provided
 for relating to the covenant defeasance contemplated by this provision have
 been complied with. 

 

                    SECTION
9.02. Application by Trustee of Funds Deposited for Payment of Securities.
Subject to Section 9.04 and any subordination provisions applicable to the
Securities, all moneys deposited with the Trustee pursuant to Section 9.01
shall be held in trust and applied by it to the payment, either directly or
through any paying agent (including the Issuer acting as its own paying agent),
to the Holders of the particular Securities of such series for the payment or
redemption of which such moneys have been deposited with the Trustee, of all
sums due and to become due thereon for principal and interest; but such money
need not be segregated from other funds except to the extent required by law. 

42

                    SECTION
9.03. Repayment of Moneys Held by Paying Agent. In connection with the
satisfaction and discharge of this Indenture with respect to Securities of any
series, all moneys then held by any paying agent under the provisions of this Indenture
with respect to such series of Securities shall, upon demand of the Issuer, be
repaid to it or paid to the Trustee and thereupon such paying agent shall be
released from all further liability with respect to such moneys. 

                    SECTION
9.04. Return of Moneys Held by Trustee and Paying Agent Unclaimed for Two
Years. Any moneys deposited with or paid to the Trustee or any paying agent
for the payment of the principal of or interest on any Security of any series
and not applied but remaining unclaimed for two years after the date upon which
such principal or interest shall have become due and payable, shall, upon the
written request of the Issuer and unless otherwise required by mandatory
provisions of applicable escheat or abandoned or unclaimed property law, be
repaid to the Issuer by the Trustee for such series or such paying agent, and
the Holder of the Security of such series shall, unless otherwise required by
mandatory provisions of applicable escheat or abandoned or unclaimed property
laws, thereafter look only to the Issuer for any payment which such Holder may
be entitled to collect, and all liability of the Trustee or any paying agent
with respect to such moneys shall thereupon cease. 

                    The
Issuer shall pay and indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against the U.S. Government Obligations deposited
pursuant to Section 9.01 or the principal and interest received in respect
thereof other than any such tax, fee or other charge which by law is for the
account of the Holders of Outstanding Securities. 

ARTICLE 10

Miscellaneous Provisions

                    SECTION
10.01. Incorporators, Stockholders, Members, Officers and Directors of
Issuer Exempt from Individual Liability. No recourse under or upon any
obligation, covenant or agreement contained in this Indenture, or in any
Security, or because of any indebtedness evidenced thereby, shall be had
against any incorporator, as such or against any past, present or future stockholder,
member, officer or director, as such, of the Issuer or of any successor, either
directly or through the Issuer or any successor, under any rule of law, statute
or constitutional provision or by the enforcement of any assessment or by any
legal or equitable proceeding or otherwise, all such liability being expressly
waived and released by the acceptance of the Securities by the holders thereof
and as part of the consideration for the issue of the Securities. 

                    SECTION
10.02. Provisions of Indenture for the Sole Benefit of Parties and
Securityholders. Nothing in this Indenture or in the Securities, expressed
or implied, shall give or be construed to give to any person, firm or
corporation, other than the parties hereto and their successors and the Holders
of the Securities, any legal or equitable right, remedy or claim under this
Indenture or under any covenant or provision herein 

43

contained, all
such covenants and provisions being for the sole benefit of the parties hereto
and their successors and of the Holders of the Securities. 

                    SECTION
10.03. Successors and Assigns of Issuer Bound by Indenture. All the
covenants, stipulations, promises and agreements in this Indenture contained by
or in behalf of the Issuer shall bind its successors and assigns, whether so
expressed or not. 

                    SECTION
10.04. Notices and Demands on Issuer, Trustee and Securityholders. Any
notice or demand which by any provision of this Indenture is required or
permitted to be given or served by the Trustee or by the Holders of Securities
to or on the Issuer may be given or served by being deposited postage prepaid,
first-class mail (except as otherwise specifically provided herein) addressed
(until another address of the Issuer is filed by the Issuer with the Trustee)
to Costamare Inc. at the following address: 

Costamare Inc.

60 Zephyrou Street & Syngrou Avenue

17564, Athens, GREECE

Attention: Chief Financial Officer

Facsimile: 30-210-949-6454 

with copies
to: 

Cravath Swaine
& Moore

825 Eighth Avenue

New York, New York 10019 

Attention: William P. Rogers, Jr., Esq.

Facsimile: (212) 474-3700 

                    Any
notice, direction, request or demand by the Issuer or any Securityholder to or
upon the Trustee shall be deemed to have been sufficiently given or made, for
all purposes, if delivered in person or mailed by first-class mail to the
Trustee at
[                    ].

                    Where
this Indenture provides for notice to Holders, such notice shall be sufficiently
given (unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each Holder entitled thereto, at his last
address as it appears in the Security register. In any case where notice to
Holders is given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by
Holders shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver. 

44

                    In
case, by reason of the suspension of or irregularities in regular mail service,
it shall be impracticable to mail notice to the Issuer and Securityholders when
such notice is required to be given pursuant to any provision of this
Indenture, then any manner of giving such notice as shall be satisfactory to
the Trustee shall be deemed to be a sufficient giving of such notice. 

                    Notwithstanding
anything to the contrary, the Trustee agrees to accept and act upon
instructions or directions pursuant to this Indenture sent by unsecured e-mail,
pdf, facsimile transmission or other similar unsecured electronic methods;
provided, however, that (a) the party providing such written instructions,
subsequent to such transmission of written instructions, shall provide the
originally executed instructions or directions to the Trustee in a timely
manner, and (b) such originally executed instructions or directions shall be
signed by an authorized representative of the party providing such instructions
or directions. If the party elects to give the Trustee e-mail or facsimile
instructions (or instructions by a similar electronic method) and the Trustee
in its discretion elects to act upon such instructions, the Trustee’s
understanding of such instructions shall be deemed controlling. The Trustee
shall not be liable for any losses, costs or expenses arising directly or
indirectly from the Trustee’s reliance upon and compliance with such
instructions notwithstanding such instructions conflict or are inconsistent
with a subsequent written instruction. The party providing electronic
instructions agrees to assume all risks arising out of the use of such electronic
methods to submit instructions and directions to the Trustee, including without
limitation the risk of the Trustee acting on unauthorized instructions, and the
risk or interception and misuse by third parties. 

                    SECTION
10.05. Communication by Securityholders with Other Securityholders.
Securityholders may communicate pursuant to Section 312(b) of the Trust
Indenture Act of 1939 with other Securityholders with respect to their rights
under this Indenture or the Securities. The Issuer, the Trustee, any registrar
and anyone else shall have the protection of Section 312(c) of the Trust
Indenture Act of 1939. 

                    SECTION
10.06. Officers’ Certificates and Opinions of Counsel; Statements to be
Contained Therein. Upon any application or demand by the Issuer to the
Trustee to take any action under any of the provisions of this Indenture, the
Issuer shall furnish to the Trustee an Officers’ Certificate stating that all
conditions precedent provided for in this Indenture relating to the proposed
action have been complied with and an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent have been complied with. 

                    Each
certificate or opinion provided for in this Indenture and delivered to the
Trustee with respect to compliance with a condition or covenant provided for in
this Indenture shall include (a) a statement that the person making such
certificate or opinion has read such covenant or condition, (b) a brief
statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such certificate or opinion are
based, (c) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with 

45 

and (d) a
statement as to whether or not, in the opinion of such person, such condition
or covenant has been complied with.

                    Any
certificate, statement or opinion of an officer of the Issuer may be based,
insofar as it relates to legal matters, upon a certificate or opinion of or
representations by counsel, unless such officer knows that the certificate or
opinion or representations with respect to the matters upon which his
certificate, statement or opinion may be based as aforesaid are erroneous, or
in the exercise of reasonable care should know that the same are erroneous. Any
certificate, statement or opinion of counsel may be based, insofar as it
relates to factual matters, information with respect to which is in the
possession of the Issuer, upon the certificate, statement or opinion of or
representations by an officer of officers of the Issuer, unless such counsel
knows that the certificate, statement or opinion or representations with
respect to the matters upon which his certificate, statement or opinion may be
based as aforesaid are erroneous, or in the exercise of reasonable care should
know that the same are erroneous. 

                    Any
certificate, statement or opinion of an officer of the Issuer or of counsel may
be based, insofar as it relates to accounting matters, upon a certificate or
opinion of or representations by an accountant or firm of accountants in the
employ of the Issuer, unless such officer or counsel, as the case may be, knows
that the certificate or opinion or representations with respect to the
accounting matters upon which his certificate, statement or opinion may be based
as aforesaid are erroneous, or in the exercise of reasonable care should know
that the same are erroneous. 

                    Any
certificate or opinion of any independent firm of public accountants filed with
the Trustee shall contain a statement that such firm is independent. 

                    SECTION
10.07. Payments Due on Saturdays, Sundays and Holidays. If the date of
maturity of interest on or principal of the Securities of any series or the
date fixed for redemption or repayment of any such Security shall not be a
Business Day, then payment of interest or principal need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the date of maturity or the date fixed for redemption,
and no interest shall accrue for the period after such date. 

                    SECTION
10.08. Conflict of any Provision of Indenture with Trust Indenture Act of
1939. If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with another provision included in this Indenture by
operation of Sections 310 to 317, inclusive, of the Trust Indenture Act of 1939
(an “incorporated provision”), such incorporated provision shall
control. 

                    SECTION
10.09. New York Law to Govern. This Indenture and each Security shall be
governed by, and construed in accordance with, the laws of the State of New
York, except as may otherwise be required by mandatory provisions of law. 

46

                    SECTION
10.10. Counterparts. This Indenture may be executed in any number of
counterparts, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument. 

                    SECTION
10.11. Effect of Headings. The Article and Section headings herein and
the Table of Contents are for convenience only and shall not affect the
construction hereof. 

                    SECTION
10.12. Securities in a Non-U.S. Currency. Unless otherwise specified in
an Officers’ Certificate delivered pursuant to Section 2.03 of this Indenture
with respect to a particular series of Securities, whenever for purposes of
this Indenture any action may be taken by the Holders of a specified percentage
in aggregate principal amount of Securities of all series or all series
affected by a particular action at the time Outstanding and, at such time,
there are Outstanding Securities of any series which are denominated in a coin
or currency other than Dollars, then the principal amount of Securities of such
series which shall be deemed to be Outstanding for the purpose of taking such
action shall be that amount of Dollars that could be obtained for such amount
at the Market Exchange Rate. For purposes of this Section 10.12, Market
Exchange Rate shall mean the noon Dollar buying rate in New York City for cable
transfers of that currency as published by the Federal Reserve Bank of New
York. If such Market Exchange Rate is not available for any reason with respect
to such currency, the Trustee shall use, in its sole discretion and without
liability on its part, such quotation of the Federal Reserve Bank of New York
as of the most recent available date, or quotations from one or more major
banks in The City of New York or in the country of issue of the currency in question,
or such other quotations as the Trustee shall deem appropriate. The provisions
of this paragraph shall apply in determining the equivalent principal amount in
respect of Securities of a series denominated in a currency other than Dollars
in connection with any action taken by Holders of Securities pursuant to the
terms of this Indenture. 

                    All
decisions and determinations of the Trustee regarding the Market Exchange Rate
or any alternative determination provided for in the preceding paragraph shall
be in its sole discretion and shall, in the absence of manifest error, be
conclusive to the extent permitted by law for all purposes and irrevocably
binding upon the Issuer and all Holders. 

                    SECTION
10.13. Submission to Jurisdiction. The Issuer agrees that any legal
suit, action or proceeding arising out of or based upon this Indenture may be
instituted in any federal or state court sitting in New York City, and, to the
fullest extent permitted by law, waives any objection which it may now or
hereafter have to the laying of venue of any such proceeding, and irrevocably
submits to the jurisdiction of such court in any suit, action or proceeding.
The Issuer, as long as any of the Securities remain Outstanding or the parties hereto
have any obligation under this Indenture, shall have an authorized agent (the “Authorized
Agent”) in the United States upon whom process may be served in any such
legal action or proceeding. Service of process upon such agent and written
notice of such service mailed or delivered to it shall to the extent permitted
by law be deemed in every respect effective service of process upon it in any
such legal action or 

47

proceeding
and, if it fails to maintain such agent, any such process or summons may be
served by mailing a copy thereof by registered mail, or a form of mail
substantially equivalent thereto, addressed to it at its address as provided
for notices hereunder. The Issuer hereby appoints
[                    ]
as its agent for such purposes, and covenants and agrees that service of
process in any legal action or proceeding may be made upon it at such office of
such agent. 

                    SECTION
10.14. Judgment Currency. The Issuer agrees, to the fullest extent that
it may effectively do so under applicable law, that (a) if for the purpose of
obtaining judgment in any court it is necessary to convert the sum due in
respect of the principal of or interest on the Securities of any series (the “Required
Currency”) into a currency in which a judgment will be rendered (the “Judgment
Currency”), the rate of exchange used shall be the rate at which in
accordance with normal banking procedures the Trustee could purchase in The
City of New York the Required Currency with the Judgment Currency on the day on
which final unappealable judgment is entered, unless such day is not a New York
Banking Day, then, to the extent permitted by applicable law, the rate of
exchange used shall be the rate at which in accordance with normal banking
procedures the Trustee could purchase in The City of New York the Required
Currency with the Judgment Currency on the New York Banking Day preceding the
day on which final unappealable judgment is entered and (b) its obligations
under this Indenture to make payments in the Required Currency (i) shall not be
discharged or satisfied by any tender, or any recovery pursuant to any judgment
(whether or not entered in accordance with subsection (a)), in any currency
other than the Required Currency, except to the extent that such tender or
recovery shall result in the actual receipt, by the payee, of the full amount
of the Required Currency expressed to be payable in respect of such payments,
(ii) shall be enforceable as an alternative or additional cause of action for
the purpose of recovering in the Required Currency the amount, if any, by which
such actual receipt shall fall short of the full amount of the Required
Currency so expressed to be payable and (iii) shall not be affected by judgment
being obtained for any other sum due under this Indenture. For purposes of the
foregoing, “New York Banking Day” means any day except a Saturday, Sunday or a
legal holiday in The City of New York or a day on which banking institutions in
The City of New York are authorized or required by law or executive order to
close. 

                    SECTION
10.15. Waiver of Jury Trial. EACH OF THE ISSUER AND THE TRUSTEE HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING
TO THIS INDENTURE, THE SECURITIES OR THE TRANSACTION CONTEMPLATED HEREBY. 

                    SECTION
10.16. Force Majeure. In no event shall the Trustee be responsible or
liable for any failure or delay in the performance of its obligations hereunder
arising out of or caused by, directly or indirectly, forces beyond its control,
including, without limitation, strikes, work stoppages, accidents, acts of war
or terrorism, civil or military disturbances, nuclear or natural catastrophes
or acts of God, and interruptions, loss or malfunctions of utilities,
communications or computer (software and 

48

hardware)
services; it being understood that the Trustee shall use reasonable efforts
which are consistent with accepted practices in the banking industry to resume
performance as soon as practicable under the circumstances. 

ARTICLE 11

Redemption of Securities

                    SECTION
11.01. Applicability Of Article. The provisions of this Article shall be
applicable to the Securities of any series which are redeemable before their
maturity except as otherwise specified as contemplated by Section 2.03 for
Securities of such series. 

                    SECTION
11.02. Notice Of Redemption; Partial Redemptions. Notice of redemption
to the Holders of Securities of any series to be redeemed as a whole or in part
at the option of the Issuer shall be given by mailing notice of such redemption
by first class mail, postage prepaid, at least 30 days and not more than 60
days prior to the date fixed for redemption to such Holders of Securities of
such series at their last addresses as they shall appear upon the registry
books. Any notice which is mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the Holder
receives the notice. Failure to give notice by mail, or any defect in the
notice to the Holder of any Security of a series designated for redemption as a
whole or in part shall not affect the validity of the proceedings for the
redemption of any other Security of such series. 

                    The
notice of redemption to each such Holder shall specify the principal amount of
each Security of such series held by such Holder to be redeemed, the date fixed
for redemption, the redemption price, the place or places of payment, that
payment will be made upon presentation and surrender of such Securities, that
such redemption is pursuant to the mandatory or optional sinking fund, or both,
if such be the case, that interest accrued to the date fixed for redemption
will be paid as specified in such notice and that on and after said date
interest thereon or on the portions thereof to be redeemed will cease to accrue.
In case any Security of a series is to be redeemed in part only the notice of
redemption shall state the portion of the principal amount thereof to be
redeemed and shall state that on and after the date fixed for redemption, upon
surrender of such Security, a new Security or Securities of such series in
principal amount equal to the unredeemed portion thereof will be issued. 

                    The
notice of redemption of Securities of any series to be redeemed at the option
of the Issuer shall be given by the Issuer or, at the Issuer’s request, by the
Trustee in the name and at the expense of the Issuer; provided, however,
in the latter case the Issuer shall give the Trustee at least ten (10) days
advance notice of the date upon which the notice is to be given (unless a
shorter notice period shall be agreed to by the Trustee in writing). 

                    A
notice of redemption may be conditioned and provide that it is subject to the
occurrence of any event described in the notice before the date fixed for the 

49

redemption. A
notice of conditional redemption will be of no effect unless all conditions to
the redemption have occurred before the redemption date or have been waived by
the Issuer. 

                    On
or before the redemption date specified in the notice of redemption given as
provided in this Section, the Issuer will deposit with the Trustee or with one
or more paying agents (or, if the Issuer is acting as its own paying agent, set
aside, segregate and hold in trust as provided in Section 3.04) an amount of
money or other property sufficient to redeem on the redemption date all the
Securities of such series so called for redemption at the appropriate
redemption price, together with accrued interest to the date fixed for
redemption. If less than all the outstanding Securities of a series are to be
redeemed, the Issuer will deliver to the Trustee at least 70 days prior to the
date fixed for redemption an Officers’ Certificate stating the aggregate
principal amount of Securities to be redeemed. 

                    If
less than all the Securities of a series are to be redeemed, the Trustee shall
select, in such manner as it shall deem appropriate and fair, Securities of
such Series to be redeemed in whole or in part. Securities may be redeemed in
part in multiples equal to the minimum authorized denomination for Securities
of such series or any multiple thereof. The Trustee shall promptly notify the
Issuer in writing of the Securities of such series selected for redemption and,
in the case of any Securities of such series selected for partial redemption,
the principal amount thereof to be redeemed. For all purposes of this
Indenture, unless the context otherwise requires, all provisions relating to
the redemption of Securities of any series shall relate, in the case of any
Security redeemed or to be redeemed only in part, to the portion of the
principal amount of such Security which has been or is to be redeemed. 

                    SECTION
11.03. Payment of Securities Called for Redemption. If notice of
redemption has been given as above provided, the Securities or portions of
Securities specified in such notice shall become due and payable on the date
and at the place stated in such notice at the applicable redemption price,
together with interest accrued to the date fixed for redemption, and on and
after said date (unless the Issuer shall default in the payment of such
Securities at the redemption price, together with interest accrued to said
date) interest on the Securities or portions of Securities so called for
redemption shall cease to accrue and, except as provided in Sections 5.05 and
9.04, such Securities shall cease from and after the date fixed for redemption
to be entitled to any benefit or security under this Indenture, and the Holders
thereof shall have no right in respect of such Securities except the right to
receive the redemption price thereof and unpaid interest to the date fixed for
redemption. On presentation and surrender of such Securities at a place of
payment specified in said notice, said Securities or the specified portions
thereof shall be paid and redeemed by the Issuer at the applicable redemption
price, together with interest accrued thereon to the date fixed for redemption;
provided that any semiannual payment of interest becoming due on the date fixed
for redemption shall be payable to the Holders of such Securities registered as
such on the relevant record date subject to the terms and provisions of
Sections 2.03 and 2.04 hereof. 

50

                    If
any Security called for redemption shall not be so paid upon surrender thereof
for redemption, the principal shall, until paid or duly provided for, bear
interest from the date fixed for redemption at the rate of interest or Yield to
Maturity (in the case of an Original Issue Discount Security) borne by such
Security. 

                    Upon
presentation of any Security redeemed in part only, the Issuer shall execute
and the Trustee shall authenticate and deliver to or on the order of the Holder
thereof, at the expense of the Issuer, a new Security or Securities of such
series, of authorized denominations, in principal amount equal to the
unredeemed portion of the Security so presented. 

                    SECTION
11.04. Exclusion of Certain Securities from Eligibility for Selection for
Redemption. Securities shall be excluded from eligibility for selection for
redemption if they are identified by registration and certificate number in a
written statement signed by an authorized officer of the Issuer and delivered
to the Trustee at least 40 days prior to the last date on which notice of
redemption may be given as being owned of record and beneficially by, and not
pledged or hypothecated by either (a) the Issuer or (b) an entity specifically
identified in such written statement as directly or indirectly controlling or
controlled by or under direct or indirect common control with the Issuer. 

 [Signature Page Follows]

51

                    IN
WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly
executed as of ____________, ________. 

	
  

 	
  

 	
  

 	
  

 
	
  

 	
 COSTAMARE
 INC.,

 
	
  

 	
  

 
	
  

 	
 by

 	
  

 	
  

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	

 

 
	
  

 	
  

 	
     Name:

 	
  

 
	
  

 	
  

 	
     Title:

 	
  

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 [                    ],

 
	
  

 	
 AS TRUSTEE,

 
	
  

 	
  

 
	
  

 	
 by

 	
  

 	
  

 
	
  

 	
  

 	
  

 
	
  

 	
  

 	

  

 
	
  

 	
  

 	
     Name:

 	
  

 
	
  

 	
  

 	
     Title:

 	
  

 

52ex1001.htm

Exhibit 10.01

 

 

 

 

 

LOAN AND SECURITY AGREEMENT

 

 

 

 

 

WPCS INTERNATIONAL INCORPORATED

 

WPCS INTERNATIONAL – SUISUN CITY, INC.

 

WPCS INTERNATIONAL – SEATTLE, INC.

 

WPCS INTERNATIONAL – PORTLAND, INC.

 

WPCS INTERNATIONAL – HARTFORD, INC.

 

WPCS INTERNATIONAL – LAKEWOOD, INC.

 

WPCS INTERNATIONAL – TRENTON, INC.

 

and

 

SOVEREIGN BANK, N.A.

 

Dated as of January 27, 2012

 

 

 

 

 

 

 

  

  

  

 

 

TABLE OF CONTENTS

 

	 	 	  	 
Page

	SECTION I.  DEFINITIONS AND INTERPRETATION	 
1

	 	
1.1

	
Terms Defined

	
1

	 	
1.2

	
Accounting Principles

	
13

	 	
1.3

	
Construction

	
13

	SECTION II.  THE LOANS	 
13

	 	
2.1

	
Revolving Credit – Description.

	
13

	 	
2.2

	
Letters of Credit.

	
14

	 	
2.3

	
Reserved.

	
17

	 	
2.4

	
Advances and Payments.

	
17

	 	
2.5

	
Interest

	
18

	 	
2.6

	
Additional Interest Provisions.

	
19

	 	
2.7

	
Fees and Charges.

	
19

	 	
2.8

	
Prepayments

	
20

	 	
2.9

	
Use of Proceeds

	
20

	 	
2.10

	
Capital Adequacy

	
20

	SECTION III.  COLLATERAL	 
21

	 	
3.1

	
Collateral

	
21

	 	
3.2

	
Lien Documents

	
22

	 	
3.3

	
Other Actions.

	
22

	 	
3.4

	
Searches, Certificates.

	
23

	 	
3.5

	
Landlord’s and Warehouseman’s Waivers

	
23

	 	
3.6

	
Filing Security Agreement

	
23

	 	
3.7

	
Accounts

	
23

	 	
3.8

	
Power of Attorney

	
24

	SECTION IV.  CLOSING AND CONDITIONS PRECEDENT TO ADVANCES	 
24

	 	
4.1

	
Resolutions, Opinions, and Other Documents

	
24

	 	
4.2

	
Due Diligence

	
25

	 	
4.3

	
Undrawn Availability

	
25

	 	
4.4

	
Absence of Certain Events

	
25

	 	
4.5

	
Warranties and Representations at Closing

	
25

	 	
4.6

	
Compliance with this Agreement

	
26

	 	
4.7

	
Officers' Certificate

	
26

	 	
4.8

	
Closing

	
26

	 	
4.9

	
Waiver of Rights

	
26

	 	
4.10

	
Conditions for Future Advances

	
26

 

 

 

 

i

 

 

 

	 	
 

	  	  
	SECTION V.  REPRESENTATIONS AND WARRANTIES	 
26

	 	
5.1

	
Corporate Organization and Validity.

	
27

	 	
5.2

	
Places of Business

	
27

	 	
5.3

	
Pending Litigation

	
27

	 	
5.4

	
Title to Properties

	
28

	 	
5.5

	
Governmental Consent

	
28

	 	
5.6

	
Taxes

	
28

	 	
5.7

	
Financial Statements

	
28

	 	
5.8

	
Full Disclosure

	
28

	 	
5.9

	
Subsidiaries

	
28

	 	
5.10

	
Investments, Guarantees, Contracts, etc.

	
28

	 	
5.11

	
Government Regulations, etc.

	
29

	 	
5.12

	
Business Interruptions

	
30

	 	
5.13

	
Names and Intellectual Property.

	
30

	 	
5.14

	
Other Associations

	
30

	 	
5.15

	
Environmental Matters

	
30

	 	
5.16

	
Regulation O

	
31

	 	
5.17

	
Capital Stock

	
31

	 	
5.18

	
Solvency

	
31

	 	
5.19

	
Perfection and Priority

	
31

	 	
5.20

	
Commercial Tort Claims

	
31

	 	
5.21

	
Letter of Credit Rights

	
31

	 	
5.22

	
Deposit Accounts

	
31

	 	
5.23

	
Inactive Subsidiary

	
31

	 	
5.24

	
Anti-Terrorism Laws.

	
31

	SECTION VI.  BORROWER'S AFFIRMATIVE COVENANTS	 
32

	 	
6.1

	
Payment of Taxes and Claims

	
32

	 	
6.2

	
Maintenance of Properties and Corporate Existence.

	
33

	 	
6.3

	
Business Conducted

	
33

	 	
6.4

	
Litigation

	
33

	 	
6.5

	
Issue Taxes

	
33

	 	
6.6

	
Bank Accounts

	
33

	 	
6.7

	
Employee Benefit Plans

	
33

	 	
6.8

	
Financial Covenants

	
33

	 	
6.9

	
Financial and Business Information

	
33

	 	
6.10

	
Officers' Certificates

	
34

	 	
6.11

	
Audits and Inspection

	
35

	 	
6.12

	
Tax Returns, Financial Statements and Other Reports

	
35

	 	
6.13

	
Information to Participant

	
35

	 	
6.14

	
Material Adverse Developments

	
35

	 	
6.15

	
Places of Business

	
35

	 	
6.16

	
Commercial Tort Claims

	
35

	 	
6.17

	
Letter of Credit Rights

	
35

	 	
6.18

	
Lost Documents

	
35

	 	
6.19

	
Additional Borrower

	
35

 

 

 

 

ii

 

 

	 	
6.20

	
Remote deposit

	
36

	 	
6.21

	
Post Closing Covenants.

	
36

	SECTION VII.  BORROWER'S NEGATIVE COVENANTS.	 
36

	 	
7.1

	
Merger, Consolidation, Dissolution or Liquidation.

	
36

	 	
7.2

	
Acquisitions

	
36

	 	
7.3

	
Liens and Encumbrances

	
36

	 	
7.4

	
Transactions With Affiliates or Subsidiaries.

	
36

	 	
7.5

	
Guarantees

	
37

	 	
7.6

	
Distributions, Bonuses and Other Indebtedness

	
37

	 	
7.7

	
Loans and Investments

	
37

	 	
7.8

	
Use of Lenders' Name

	
37

	 	
7.9

	
Miscellaneous Covenants.

	
37

	 	
7.10

	
Jurisdiction of Organization

	
37

	SECTION VIII.  DEFAULT	 
37

	 	
8.1

	
Events of Default

	
37

	 	
8.2

	
Cure

	
39

	 	
8.3

	
Rights and Remedies on Default.

	
39

	 	
8.4

	
Nature of Remedies

	
40

	 	
8.5

	
Set Off.

	
40

	SECTION IX.  MISCELLANEOUS	 
40

	 	
9.1

	
Governing Law

	
40

	 	
9.2

	
Integrated Agreement

	
40

	 	
9.3

	
Waiver

	
40

	 	
9.4

	
Indemnity.

	
40

	 	
9.5

	
Time

	
41

	 	
9.6

	
Expenses of Lender

	
41

	 	
9.7

	
Brokerage

	
41

	 	
9.8

	
Notices.

	
41

	 	
9.9

	
Headings

	
42

	 	
9.10

	
Survival

	
42

	 	
9.11

	
Successors and Assigns.

	
42

	 	
9.12

	
Duplicate Originals

	
43

	 	
9.13

	
Modification

	
43

	 	
9.14

	
Signatories

	
43

	 	
9.15

	
Third Parties

	
43

	 	
9.16

	
Discharge of Taxes, Borrower's Obligations, Etc

	
43

	 	
9.17

	
Withholding and Other Tax Liabilities

	
43

	 	
9.18

	
Consent to Jurisdiction

	
44

	 	
9.19

	
Additional Documentation

	
44

	 	
9.20

	
Advertisement.

	
44

	 	
9.21

	
Waiver of Jury Trial

	
44

	 	
9.22

	
Consequential Damages

	
44

 

 

  

iii

  

 

 

LOAN AND SECURITY AGREEMENT

 

This Loan and Security Agreement ("Agreement") is dated this 27th day of January, 2012, by and among WPCS International Incorporated, a Delaware corporation ("WPCS"), WPCS International – Suisun City, Inc., a California corporation (“WPCS Suisun City”),  WPCS International – Seattle, Inc., a Washington corporation (“WPCS Seattle”), WPCS International – Portland, Inc., an Oregon corporation (“WPCS Portland”), WPCS International – Hartford, Inc., a Connecticut corporation (“WPCS Hartford”), WPCS International – Lakewood, Inc., a New Jersey corporation (“WPCS Lakewood”), and WPCS International – Trenton, Inc., a New Jersey corporation (“WPCS Trenton,” and collectively with WPCS, WPCS Suisun City, WPCS Seattle, WPCS Portland, WPCS Hartford and WPCS Lakewood, the “Borrower”) and Sovereign Bank, N.A., a national banking association ("Lender").

 

BACKGROUND

 

A.           Borrower desires to establish financing arrangements with Lender and Lender is willing to make loans and extensions of credit to Borrower under the terms and provisions hereinafter set forth.

 

B.           The parties desire to define the terms and conditions of their relationship in writing.

 

NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:

 

SECTION I. DEFINITIONS AND INTERPRETATION

 

1.1 Terms Defined.  As used in this Agreement, the following terms have the following respective meanings:

 

Account – All of the "accounts" (as that term is defined in the UCC) of Borrower, whether now existing or hereafter arising.

 

Account Debtor – Any Person obligated on any Account owing to Borrower.

 

Advance(s) – Any monies advanced or credit extended to Borrower by Lender under the Revolving Credit, including without limitation, cash advances and the issuance of Letters of Credit.

 

Advance Request – Section 2.4(c)(iii).

 

Affiliate – With respect to any Person, (a) any Person which, directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such Person, or (b) any Person who is a director or officer (i) of such Person, (ii) of any Subsidiary of such Person, or (iii) any person described in clause (a) above.  For purposes of this definition, control of a Person shall mean the power, direct or indirect, (x) to vote 10% or more of the Capital Stock having ordinary voting power for the election of directors (or comparable equivalent) of such Person, or (y) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.  Control may be by ownership, contract, or otherwise.

 

 

 

  

1

  

 

Anti-Terrorism Laws – Any statute, treaty, law (including common law), ordinance, regulation, rule, order, opinion, release, injunction, writ, decree or award of any Governmental Authority relating to terrorism or money laundering, including Executive Order No. 13224 and the USA Patriot Act.

 

Asset Sale – The sale, transfer, lease, license or other disposition by Borrower, or by any Subsidiary of Borrower, to any Person other than Borrower, of any Property now owned, or hereafter acquired, of any nature whatsoever in any transaction or series of related transactions other than the sale of Inventory in the ordinary course of business.  An Asset Sale includes, but is not limited to, a merger, consolidation, division, conversion, dissolution or liquidation of Borrower and any sale, lease, license or transfer of a division of Borrower.

 

Assignment of Claims Act – The Federal Assignment of Claims Act, 31 U.S.C. § 3727 et seq., as amended from time to time.

 

Authorized Officer – Any officer (or comparable equivalent) of Borrower authorized by specific resolution of Borrower to request Advances or execute Quarterly Compliance Certificates as set forth in the authorization certificate delivered to Lender substantially in the form of Exhibit “A” attached hereto.

 

Bank Affiliate – Any bank that is controlled by Lender.  A bank shall be deemed  controlled by Lender if (i) Lender, directly or indirectly, or acting through one or more other Persons, owns, controls or has power to vote twenty-five percent (25%) or more of any class of voting securities of the bank; or (ii) Lender controls in any manner the election of a majority of the directors or trustees of the bank.

 

Billings in Excess of Cost - Any amounts billed to Account Debtors (including milestone payments) with respect to goods and/or services that have not yet been delivered or performed.

 

Blocked Person – Section 5.23.

 

Blue Chip Customer – Each of Verizon, Motorola, Johnson Controls, Genentech, Siemens, Simplex Grinnell, ATT, Honeywell and Sprint/Nextel.

 

Borrowing Base – As of the date of determination thereof, an amount equal to the lesser of (i) the Maximum Revolving Credit Amount less the Letter of Credit Amount, or (ii) the sum of (A) eighty percent (80%) of Eligible Accounts plus (B) the lesser of (1) Seven Hundred and Fifty Thousand Dollars ($750,000) or (2) forty percent (40%) of Eligible Inventory minus (C) the Letter of Credit Amount minus (D) such reserves, in such amounts and with respect to such matters, as Lender may deem reasonably proper and necessary from time to time at its own discretion (including, without limitation, (i) the Subcontractor Reserve, (ii) a reserve relating to the Tax and Judgment Liens in the aggregate amount of $54,946.44 and (iii) any amounts paid by Borrower in connection with any Hedging Agreements).

 

Borrowing Certificate – Section 6.9(a)(vi).

 

 

 

  

2

  

 

Business Day – A day other than Saturday or Sunday when Lender is open for business in Philadelphia, Pennsylvania.

 

Capitalized Lease Obligations – Any Indebtedness represented by obligations under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP, consistently applied.

 

Capital Expenditures – For any period, the aggregate of all expenditures (including that portion of Capitalized Lease Obligations attributable to that period) made in respect of the purchase, construction or other acquisition of fixed or capital assets, determined in accordance with GAAP.

 

Capital Stock – Any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all other ownership interests in a Person (other than a corporation), whether voting or non-voting, and any and all warrants, options or other rights to purchase any of the foregoing.

 

Cash Collateral Account – Section 2.4(b).

 

Change of Control – The occurrence of any of the following: (a) 100% of the Capital Stock of any Borrower (other than WPCS) is no longer owned or controlled by WPCS (including for the purposes of the calculation of percentage ownership, any Capital Stock into which any Capital Stock of any Borrower held by WPCS are convertible or for which any such Capital Stock of any Borrower or of any other Person may be exchanged and any Capital Stock issuable to WPCS upon exercise of any warrants, options or similar rights which may at the time of calculation be held by WPCS), (b) (i) any person or group of persons (within the meaning of Section 13(d) or 14(a) of the Exchange Act) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the United States Securities and Exchange Commission under the Exchange Act) of 20% or more of the voting Capital Stock of WPCS or (ii) from and after the date hereof, individuals who on the date hereof constitute the Board of Directors of WPCS (together with any new directors whose election by such Board of Directors or whose nomination for election by the shareholders of WPCS was approved by a vote of a majority of the directors then still in office who were either directors on the date hereof or whose election or nomination for election was previously approved) cease for any reason to constitute a majority of the board of directors of WPCS then in office; or (c) any merger, consolidation or sale of substantially all of the property or assets of any Borrower or any direct or indirect Subsidiary of any Borrower except as permitted by Section 7.1.

 

Closing – Section 4.8.

 

Closing Date – Section 4.8.

 

Collateral – All of the Property and interests in Property described in Section 3.1 of this Agreement and all other Property, and interests in Property that now or hereafter secure payment of the Obligations and satisfaction by Borrower of all covenants and undertakings contained in this Agreement and the other Loan Documents.

 

Collateral Pledge Agreement – That certain Collateral Pledge Agreement dated as of the date hereof, between WPCS, as Pledgor (as defined therein), and Lender, as Secured Party (as defined therein), as same may be amended, supplemented, restated, replaced or otherwise modified from time to time.

 

 

 

  

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Consolidated Amortization Expense – For any period, the aggregate consolidated amount of amortization expenses of Borrower and its Subsidiaries, as determined in accordance with GAAP.

 

Consolidated Cash Flow – For any period, the Consolidated Net Income (or deficit) of Borrower and its Subsidiaries plus (a) Consolidated Interest Expense, plus (b) Consolidated Depreciation Expense, plus (c) Consolidated Amortization Expense, plus (d) Consolidated Tax Expense, plus (e) extraordinary non-cash losses, minus (f) extraordinary gains, all as determined in accordance with GAAP.

 

Consolidated Depreciation Expense – For any period, the aggregate, consolidated amount of depreciation expenses of Borrower and its Subsidiaries, as determined in accordance with GAAP.

 

Consolidated Interest Expense – For any period (without duplication), the aggregate, consolidated amount of interest expense required to be paid or accrued during such period on all Indebtedness of Borrower and its Subsidiaries outstanding during all or any part of such period, as determined in accordance with GAAP.

 

Consolidated Net Income – For any period, consolidated net income after taxes of Borrower and its Subsidiaries as such would appear on the consolidated statement of income of Borrower and its Subsidiaries, prepared in accordance with GAAP.

 

Consolidated Tax Expense – For any period, the aggregate consolidated amount of income tax expenses of Borrower and its Subsidiaries, as determined in accordance with GAAP.

 

Default – Any event, act, condition or occurrence which with notice, or lapse of time or both, would constitute an Event of Default hereunder.

 

Disqualified Stock – Any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event (i) matures or is mandatorily redeemable for any reason, (ii) is convertible or exchangeable for Indebtedness or Capital Stock that meets the requirements of clauses (i) and (ii), or (iii) is redeemable at the option of the holder thereof, in whole or in part, in each case on or prior to the Revolving Credit Maturity Date.

 

Distribution –

 

a. Cash dividends or other cash distributions on any now or hereafter outstanding Capital Stock of Borrower;

 

b. The redemption, repurchase, defeasance or acquisition of such Capital Stock or of warrants, rights or other options to purchase such Capital Stock; and

 

c. Any loans or advances (other than salaries), to any shareholder(s), partner(s) or member(s) of Borrower.

 

 

  

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Eligible Accounts – All Accounts of Borrower meeting all of the following specifications: (i) the Account is lawfully and exclusively owned by Borrower and subject to a first priority Lien in favor of Lender and subject to no other Lien (other than Permitted Liens, if applicable, and Liens granted under this Agreement) and Borrower has the right of assignment thereof and the power to grant a security interest therein; (ii) the Account does not represent a rebilling and is valid and enforceable representing the undisputed indebtedness of an Account Debtor not more than ninety (90) days past the original invoice date (other than with respect to Accounts owing by any Blue Chip Customer, which shall not be more than one hundred and twenty (120) days past the original invoice date); (iii) not more than fifty percent (50%) of the aggregate balance of all Accounts owing from an Account Debtor obligated on the Account are outstanding more than sixty (60) days past their original due dates or ninety (90) days past their original invoice dates; (iv) the amount of the Account, when aggregated with all other Accounts of such Account Debtor, is less than fifteen percent (15%) of the face value of all Accounts of Borrower then outstanding; (v) the Account is not a contra Account and is not subject to any defense, set-off, or counterclaim, deduction, discount, credit, chargeback, freight claim, allowance or adjustment of any kind; (vi) the Account is net of any portion thereof attributable to the sale of goods that have been returned, rejected, lost or damaged; (vii) if the Account arises from the sale of goods by Borrower, such sale was an absolute sale and not on consignment or on approval or on a sale-or-return basis nor subject to any other repurchase or return agreement, and such goods have been shipped to the Account Debtor or its designee; (viii) if the Account arises from the performance of services, such services have actually been performed and have been approved by the Account Debtor; (ix) the Account arose in the ordinary course of Borrower's business; (x) no notice of the bankruptcy, receivership, reorganization, liquidation, dissolution, or insolvency of the Account Debtor has been received by Lender or Borrower; (xi) the Account is an Account for which Lender believes that the validity, enforceability or collection of the Account is not invalid or otherwise impaired; (xii) the Account Debtor is not a Subsidiary or Affiliate of Borrower; (xiii) the sale does not represent a sale pursuant to a government contract unless Borrower has complied, for the benefit of Lender, with the Assignment of Claims Act; (xiv) the Account is not an Account of an Account Debtor having its principal place of business or executive office outside the United States, unless the payment of such Account is guaranteed by an irrevocable letter of credit satisfactory to Lender or by credit insurance, satisfactory to Lender; (xv) the Account is not an Account on which the Account Debtor is obligated to Borrower under any Instrument; (xvi) the transaction which gave rise to the Account complies in all respects with all applicable laws, rules and regulations of any Governmental Authority; (xvii) the transaction which gave rise to the Account did not involve the issuance of a performance bond; and (xviii) the Account meets such other reasonable specifications and requirements which may from time to time be established by Lender.  Eligible Accounts shall not include that portion of an Account representing (i) interest or finance charges for past due balances or debit memos and (ii) Billings in Excess of Cost.

 

Eligible Inventory – Any and all raw material and finished goods Inventory of Borrower valued at the lower of cost (determined on a first-in/first-out basis) or market value located at Borrower's places of business shown on Schedule "5.2" attached hereto and made part hereof (and for which location Lender has received a landlord, warehouse or mortgagee waiver as determined by, and in form and substance satisfactory to, Lender), which (i) is not subject to any Lien (other than Liens granted under this Agreement and Permitted Liens, if applicable); (ii) is not slow moving, damaged, obsolete or unmerchantable, as determined by Lender in its sole discretion; (iii) meets all standards, if any, imposed by any Governmental Authority; (iv) is not Inventory held on consignment; (v) is not Inventory in-transit unless such Inventory (A) is in transit to one of Borrower's places of business shown on Schedule "5.2", (B) is owned by Borrower, (C) is insured to the full value thereof, and (D) is subject to negotiable bills of lading endorsed to, or non-negotiable bills of lading issued in the name of Lender, and covered by a Letter of Credit issued under the Revolving Credit; (vi) is situated at a location not owned by Borrower, provided that (x) the owner or occupier of such location has executed in favor of Lender a Lien Waiver Agreement or (y) Lender has instituted a reserve to the Borrowing Base in an amount equal to three (3) months’ rent under the lease for such location and (vii) meets such other reasonable specifications and requirements which may from time to time be established by Lender.

 

Environmental Laws – Any and all Federal, foreign, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees and any and all common law requirements, rules and bases of liability regulating, relating to or imposing liability or standards of conduct concerning pollution, protection of the environment, or the impact of pollutants, contaminants or toxic or hazardous substances on human health or the environment, as now or may at any time hereafter be in effect.

 

 

  

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ERISA – The Employee Retirement Income Security Act of 1974, as the same may be amended, from time to time.

 

Event of Default – Section 8.1.

 

Exchange Act – The Securities Exchange Act of 1934, as amended.

 

Executive Order No. 13224 – The Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.

 

Expenses – Section 9.6.

 

Fixed Charge Coverage Ratio – For any period, the ratio of (i) Consolidated Cash Flow minus unfunded Capital Expenditures minus Distributions minus Consolidated Tax Expenses paid in cash to (ii) principal payments on account of long term Indebtedness (excluding the Revolving Credit) plus Consolidated Interest Expense paid in cash, all as determined in accordance with GAAP.

 

GAAP – Generally accepted accounting principles as in effect on the Closing Date applied in a manner consistent with the most recent audited financial statements of Borrower furnished to Lender and described in Section 5.7 herein.

 

Government Acts – Section 2.2(f).

 

Governmental Authority – Any federal, state or local government or political subdivision, or any agency, authority, bureau, central bank, commission, department or instrumentality of either, or any court, tribunal, grand jury, or arbitration.

 

Guarantor – any Person who may hereafter guaranty, as surety, all of the Obligations.

 

Hazardous Substances – Any substances defined or designated as hazardous or toxic waste, hazardous or toxic material, hazardous or toxic substance or similar term, under any Environmental Law.

 

 

  

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Hedging Agreements – Any Interest Hedging Instrument or any other interest rate protection agreement, foreign currency exchange agreement, commodity purchase or option agreement, or any other interest rate hedging device or swap agreement (as defined in 11 U.S.C. § 101 et. seq.).

 

Inactive Subsidiary – WPCS Incorporated, a Delaware corporation.

 

Indebtedness – Of any Person at any date, without duplication, (i) all indebtedness of such Person for borrowed money (including with respect to Borrower, the Obligations) or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), (ii) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (iii) all Capitalized Lease Obligations of such Person, (iv) the face amount of all letters of credit issued for the account of such Person and all drafts drawn thereunder, (v) all obligations of other Persons which such Person has guaranteed, (vi) Disqualified Stock, (vii) all Obligations of such Person under Hedging Agreements, and (viii) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof.

 

Interest Hedging Instrument – Any documentation evidencing any interest rate swap, interest "cap" or "collar" or any other interest rate hedging device or swap agreement (as defined in 11 U.S.C. § 101 et. seq.) between Borrower and Lender (or any Affiliate of Lender).

 

Inventory – All of the "inventory" (as that term is defined in the UCC) of Borrower, whether now existing or hereafter acquired or created.

 

IRS – Internal Revenue Service.

 

L/C Commitment – The sum of Two Million Dollars ($2,000,000).

 

L/C Fees – Section 2.7(c).

 

Letters of Credit – Standby letters of credit issued or to be issued by Lender for the account of Borrower pursuant to Section 2.2 herein.

 

Letter of Credit Amount – The sum of (i) the aggregate undrawn amount of all Letters of Credit outstanding at any time plus (ii) the aggregate amount of all drawings under Letters of Credit for which Lender has not been reimbursed at such time.

 

Letter of Credit Documents – Any Letter of Credit, any amendment thereto, any documents delivered in connection therewith, any application therefor, or any other documents (all in form and substance satisfactory to Lender), governing or providing for (i) the rights and obligations on the parties concerned or at risk, or (ii) any collateral security for such obligations.

 

 

  

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Leverage Ratio – At any time, the ratio of Borrower's (i) Indebtedness to (ii) Tangible Net Worth.

 

LIBOR Applicable Margin – As of the Closing Date, two and three quarters percent (2.75%) per annum.  Thereafter, effective as of the first Business Day following receipt by the Lender of the annual financial statements required under Section 6.9(a)(iii) (each day of such delivery, an “Adjustment Date”), the LIBOR Applicable Margin shall be adjusted, if necessary, to the applicable percent per annum set forth in the pricing table set forth below corresponding to the Fixed Charge Coverage Ratio measured on a trailing twelve month basis as of the last day of the most recently completed fiscal year prior to the applicable Adjustment Date (each such period, a “Calculation Period”):

 

	
FIXED CHARGE COVERAGE RATIO

	
LIBOR APPLICABLE MARGIN

	
Greater than or equal to 1.20 to 1.00, but less than 1.50 to 1.00

	
2.75%

	
Greater than or equal to 1.50 to 1.00 but less than 1.75 to 1.00

	
2.50%

	
Greater than or equal to 1.75 to 1.00

	
2.25%

 

If the Borrower shall fail to deliver the financial statements, certificates and/or other information required under Section 6.9(a)(iii) by the dates required pursuant to such section, each LIBOR Applicable Margin shall be conclusively presumed to equal the highest LIBOR Applicable Margin specified in the pricing table set forth above until the date of delivery of such financial statements, certificates and/or other information, at which time the rate will be adjusted based upon the Fixed Charge Coverage Ratio reflected in such statements.

 

If, as a result of any restatement of, or other adjustment to, the foregoing financial statements or for any other reason, the Lender determines that (a) the Fixed Charge Coverage Ratio as previously calculated as of any applicable date was inaccurate, and (b) a proper calculation of the Fixed Charge Coverage Ratio would have resulted in different pricing for any period, then (i) if the proper calculation of the Fixed Charge Coverage Ratio would have resulted in higher pricing for such period, the Borrower shall automatically and retroactively be obligated to pay to the Lender, promptly upon demand by the Lender, an amount equal to the excess of the amount of interest that should have been paid for such period over the amount of interest actually paid for such period; and (ii) if the proper calculation of the Fixed Charge Coverage Ratio would have resulted in lower pricing for such period, Lender shall have no obligation to repay interest to the Borrower; provided, that, if as a result of any restatement or other event a proper calculation of the Fixed Charge Coverage Ratio would have resulted in higher pricing for one or more periods and lower pricing for one or more other periods (due to the shifting of income or expenses from one period to another period or any similar reason), then the amount payable by the Borrower pursuant to clause (i) above shall be based upon the excess, if any, of the amount of interest  that should have been paid for all applicable periods over the amounts of interest actually paid for such periods.

 

 

 

  

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Notwithstanding the foregoing, at all times after the occurrence and during the continuance of a Default or Event of Default, the LIBOR Applicable Margin shall be two and three quarters percent (2.75%).

 

LIBOR Based Rate – The LIBOR Rate plus the LIBOR Applicable Margin.

 

LIBOR Interest Period – A period of one month duration during which the LIBOR Based Rate is applicable.

 

LIBOR Rate – The London Interbank Offered Rate (LIBOR) for a one-month period as published in the "Money Rates" Section of The Wall Street Journal on the applicable date as such rate may change from time to time.  If The Wall Street Journal ceases to be published or goes on strike or is otherwise not published, Lender may use a similar published one-month LIBOR Rate.

 

Lien – Any interest of any kind or nature in property securing an obligation owed to, or a claim of any kind or nature in property by, a Person other than the owner of the Property, whether such interest is based on the common law, statute, regulation or contract, and including, but not limited to, a security interest or lien arising from a mortgage, encumbrance, pledge, conditional sale or trust receipt, a lease, consignment or bailment for security purposes, a trust, or an assignment.  For the purposes of this Agreement, Borrower shall be deemed to be the owner of any Property which it has acquired or holds subject to a conditional sale agreement or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person for security purposes.

 

Lien Waiver Agreement – Section 3.5.

 

Loans – The unpaid balance of Advances under the Revolving Credit.

 

Loan Documents – Collectively, this Agreement, the Note(s), the Surety and Guaranty Agreement, the Collateral Pledge Agreement, the Motorola Subordination Agreement, the Letter of Credit Documents, the Perfection Certificate, and all agreements, instruments and documents executed and/or delivered in connection therewith, all as may be supplemented, restated, superseded, amended or replaced from time to time.

 

Lockbox – Section 2.3(b).

 

Material Adverse Effect – A material adverse effect with respect to (a) the business, assets, properties, financial condition, stockholders' equity, contingent liabilities, prospects, material agreements or results of operations of Borrower, taken as a whole, or (b) Borrower's ability to pay the Obligations in accordance with the terms hereof, or (c) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights and remedies of Lender hereunder or thereunder.

 

Maximum Revolving Credit Amount – The sum of Twelve Million Dollars ($12,000,000).

 

 

  

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Motorola Subordination Agreement – A duly executed subordination agreement between Motorola Solutions, Inc. (formerly known as Motorola, Inc.) and Lender, which subordination agreement shall be in form and substance satisfactory to Lender in its sole discretion.

 

Note(s) – The Revolving Credit Note.

 

Obligations – All existing and future debts, liabilities and obligations of every kind or nature at any time owing by Borrower to Lender or any other subsidiary or Affiliate of Lender, whether under this Agreement, or any other existing or future instrument, document or agreement, between Borrower or Lender or any other subsidiary or Affiliate of Lender, whether joint or several, related or unrelated, primary or secondary, matured or contingent, due or to become due (including debts, liabilities and obligations obtained by assignment), and whether principal, interest, fees, indemnification obligations hereunder or Expenses (specifically including interest accruing after the commencement of any bankruptcy, insolvency or similar proceeding with respect to Borrower, whether or not a claim for such post-commencement interest is allowed), including, without limitation, debts, liabilities and obligations in respect of the Revolving Credit, Reimbursement Obligations and any extensions, modifications, substitutions, increases and renewals thereof; any amount payable by Borrower or any Subsidiary of Borrower pursuant to an Interest Hedging Instrument; the payment of all amounts advanced by Lender or any other subsidiary or Affiliate of Lender to preserve, protect and enforce rights hereunder and in the Collateral; and all Expenses incurred by Lender or any other subsidiary or Affiliate of Lender.  Without limiting the generality of the foregoing, Obligations shall include any other debts, liabilities or obligations owing to Lender or any other subsidiary or Affiliate of Lender in connection with any Lockbox, cash management, or other services (including electronic funds transfers or automated clearing house transactions) provided by Lender or any other subsidiary or Affiliate of Lender to Borrower, as well as any other loan, advances or extension of credit, under any existing or future loan agreement, promissory note, or other instrument, document or agreement between Borrower and Lender or any other subsidiary or Affiliate of Lender.

 

Overadvance – Section 2.1(a)(i).

 

PBGC – The Pension Benefit Guaranty Corporation.

 

Perfection Certificate – The Perfection Certificate provided by Borrower to Lender on or prior to the Closing Date in form and substance satisfactory to Lender.

 

Permitted Acquisitions - shall mean acquisitions of the assets or Capital Stock of another Person so long as: (a) the total costs and liabilities (including without limitation, all assumed liabilities, all earn-out payments, deferred payments and the value of any other stock or assets transferred, assigned or encumbered with respect to such acquisitions) of all such acquisitions do not exceed (i) $1,000,000 in the aggregate for any individual transaction and (ii) $2,500,000 in the aggregate during any fiscal year; (c) with respect to the acquisition of Capital Stock, such acquired company shall (i) have a positive EBITDA and tangible net worth, calculated in accordance with GAAP immediately prior to such acquisition, (ii) such acquired company shall be added as a Borrower to this Agreement pursuant to Section 6.19 hereof and be jointly and severally liable for all Obligations, and (iii) Lender shall be granted a first priority lien in all assets of such acquired company; (d) the acquired company or property is used or useful in the same or a similar line of business as Borrower was engaged in on the Closing Date (or any reasonable extensions or expansions thereof); (e) Lender shall have received a first-priority security interest in all acquired assets or Capital Stock, subject to documentation satisfactory to Lender; (f) the board of directors (or other comparable governing body) of such company shall have duly approved the transaction; (g) Borrower shall have delivered to Lender (i) a pro forma balance sheet and pro forma financial statements and a Quarterly Compliance Certificate demonstrating that, upon giving effect to such acquisition on a pro forma basis, Borrower would be in compliance with the financial covenants set forth in Section 6.8 as of the most recent fiscal quarter end and (ii)  financial statements of the acquired entity for the two most recent fiscal years then ended, in form and substance reasonably acceptable to Lender; (h) if such acquisition includes general partnership interests or any other Capital Stock that does not have a corporate (or similar) limitation on liability of the owners thereof, then such acquisition shall be effected by having such Capital Stock acquired by a corporate holding company directly or indirectly wholly-owned by a Borrower and newly formed for the sole purpose of effecting such acquisition; (i) no assets acquired in any such transaction(s) shall be included in the Borrowing Base until Lender has received a field examination and/or appraisal of such assets, in form and substance acceptable to Lender; and (j) no Default or Event of Default shall have occurred or will occur after giving pro forma effect to such acquisition.

 

 

  

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Permitted Indebtedness – (a) Indebtedness to Lender in connection with the Revolving Credit and Letters of Credit or otherwise pursuant to the Loan Documents; (b) trade payables incurred in the ordinary course of Borrower's business; (c) purchase money Indebtedness (including Capitalized Lease Obligations) hereafter incurred by Borrower to finance the purchase of fixed assets; provided that, (i) such Indebtedness incurred in any fiscal year shall not exceed $500,000, (ii) such Indebtedness shall not exceed the purchase price of the assets funded and (iii) no such Indebtedness may be refinanced for a principal amount in excess of the principal amount outstanding at the time of such refinancing and (d) Indebtedness existing on the Closing Date that is identified and described on Schedule "1.1(a)" attached hereto and made part hereof.

 

Permitted Investments – (a) investments and advances existing on the Closing Date that are disclosed on Schedule "5.10(a)" and (b) (i) obligations issued or guaranteed by the United States of America or any agency thereof, (ii) commercial paper with maturities of not more than 180 days and a published rating of not less than A-1 or P-1 (or the equivalent rating) by a nationally recognized investment rating agency, (iii) certificates of time deposit and bankers’ acceptances having maturities of not more than 180 days and repurchase agreements backed by United States government securities of a commercial bank if (A) such bank has a combined capital and surplus of at least $500,000,000, or (B) its debt obligations, or those of a holding company of which it is a Subsidiary, are rated not less than A (or the equivalent rating) by a nationally recognized investment rating agency, (iv) U.S. money market funds that invest solely in obligations issued or guaranteed by the United States of America or an agency thereof and (v) loans to WPCS Australia in an aggregate amount not to exceed $1,000,000, which loan(s) shall be evidenced by a promissory note, the original of which shall, upon the request of Lender, be delivered to Lender, together with a collateral assignment of such promissory note executed by Borrower in favor of Lender.

 

Permitted Liens – (a)  Liens securing taxes, assessments or governmental charges or levies or the claims or demands of materialmen, mechanics, carriers, warehousemen, and other like persons not yet due; (b) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance, social security and other like laws; (c) Liens on fixed assets security purchase money Indebtedness permitted under Section 7.6; provided that, (i) such Lien attached to such assets concurrently, or within 20 days of the acquisition thereof, and only to the assets so acquired, and (ii) a description of the asset acquired is furnished to Lender; (d) Liens existing on the Closing Date and shown on Schedule "1.1(b)" attached hereto and made part hereof; and (e) Liens in favor of Lender.

 

Person – An individual, partnership, corporation, trust, limited liability company, limited liability partnership, unincorporated association or organization, joint venture or any other entity.

 

Property – Any interest of Borrower in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.

 

Quarterly Compliance Certificate – Section 6.10.

 

 

  

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Regulation D – Regulation D of the Board of Governors of the Federal Reserve System comprising Part 204 of Title 12, Code of Federal Regulations, as amended, and any successor thereto.

 

Reimbursement Obligations – Section 2.2(c).

 

Revolving Credit – Section 2.1(a).

 

Revolving Credit Closing Fee – Section 2.7(a).

 

Revolving Credit Maturity Date – January 26, 2015, or such later date as Lender may, in its sole and absolute discretion, designate in writing to Borrower.

 

Revolving Credit Note – Section 2.1(b).

 

Subcontractor Reserve – A reserve to the Borrowing Base in an amount equal to the aggregate amount owing by the Borrower to all of its subcontractors.

 

Subsidiary – With respect to any Person at any time, (i) any corporation more than fifty percent (50%) of whose voting stock is legally and beneficially owned by such Person or owned by a corporation more than fifty percent (50%) of whose voting stock is legally and beneficially owned by such Person; (ii) any trust of which a majority of the beneficial interest is at such time owned directly or indirectly, beneficially or of record, by such Person or one or more Subsidiaries of such Person; and (iii) any partnership, joint venture, limited liability company or other entity of which ownership interests having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions are at such time owned directly or indirectly, beneficially or of record, by, or which is otherwise controlled directly, indirectly or through one or more intermediaries by, such Person or one or more Subsidiaries of such Person.

 

Subsidiary Stock – All of the issued and outstanding Capital Stock of any Subsidiary owned by any Borrower.

 

Surety and Guaranty Agreement – Any surety and guaranty agreement to be executed by any Guarantor in favor of Lender, in form and substance satisfactory to Lender, after the Closing Date.

 

 

  

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Tangible Net Worth – At any time, the amount by which all of Borrower's consolidated assets (less (i) trademarks, copyrights, goodwill, covenants not to compete, and all other assets which would be classified as intangible assets under GAAP; and (ii) assets owing from Affiliates, officers, directors, shareholders and employees), exceed all of Borrower's consolidated liabilities, all as would be shown on Borrower's consolidated balance sheet prepared in accordance with GAAP.

 

Tax and Judgment Liens – Collectively, that certain (i) state tax lien filed against Walker Communications, Inc. in Solano County, California on December 23, 2011 with respect to unpaid taxes in the amount of $6,164.03, (ii) state tax lien filed against Clayborn Contracting Group, Inc. in Placer County, California on March 30, 2011 with respect to unpaid taxes in the amount of $1,046.54 and (iii) judgment lien filed in the New Jersey Central Database on July 8, 2010 against Voacolo Electric Incorporated in favor of Dennis M. Doyle in the amount of $47,735.87.

 

UCC – The Uniform Commercial Code as adopted in the Commonwealth of Pennsylvania, as the same may be amended from time to time.

 

Undrawn Availability – At a particular date, an amount equal to (a) the Borrowing Base minus (b) the sum of (i) the outstanding amount of Advances plus (ii) all amounts due and owing to Borrower’s trade creditors which are outstanding more than sixty (60) days past their due date, plus (iii) fees and expenses for which Borrower is liable to Lender but which have not been paid by Borrower.

 

WPCS Australia – WPCS Australia Pty Ltd., an entity organized under the laws of Australia.

 

Other Capitalized Terms – Any other capitalized terms used without further definition herein shall have the respective meaning set forth in the UCC.

 

1.2 Accounting Principles.  Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, this shall be done in accordance with GAAP, consistently applied, to the extent applicable, except as otherwise expressly provided in this Agreement.

 

1.3 Construction.  No doctrine of construction of ambiguities in agreements or instruments against the interests of the party controlling the drafting shall apply to any Loan Documents.  A Default or Event of Default shall be deemed to exist and be “continuing” at all times during the period commencing on the date that such Default or Event of Default occurs to the date on which such Default or Event of Default is waived in writing by Lender pursuant to this Agreement or, in the case of a Default, is cured within any period of cure expressly provided for in this Agreement.

 

SECTION II. THE LOANS

 

2.1 Revolving Credit – Description.

 

 

  

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a. i.           Subject to the terms and conditions of this Agreement, Lender hereby establishes for the benefit of Borrower a revolving credit facility (collectively, the "Revolving Credit") which shall include cash Advances extended by Lender to or for the benefit of Borrower as well as Letters of Credit issued for the account of Borrower from time to time hereunder.  The aggregate principal amount of unpaid cash Advances, plus the Letter of Credit Amounts, shall not at any time exceed the Borrowing Base.  Subject to such limitation, the outstanding balance of Advances under the Revolving Credit may fluctuate from time to time, to be reduced by repayments made by Borrower, to be increased by future Advances which may be made by Lender, to or for the benefit of Borrower, and, subject to the provisions of Section 8 below, shall be due and payable on the Revolving Credit Maturity Date.  If the aggregate principal amount of unpaid cash Advances, plus the Letter of Credit Amounts at any time exceeds the Borrowing Base (such excess referred to as "Overadvance"), Borrower shall immediately repay the Overadvance in full.

 

ii. Lender may, at all times, be entitled to reduce or increase the advance rates and standards of eligibility under this Agreement.

 

b. At Closing, Borrower shall execute and deliver a promissory note to Lender for the Maximum Revolving Credit Amount ("Revolving Credit Note").  The Revolving Credit Note shall evidence Borrower's unconditional obligation to repay Lender for all Advances made under the Revolving Credit, with interest as herein provided.  Each Advance under the Revolving Credit shall be deemed evidenced by the Revolving Credit Note, which is deemed incorporated herein by reference and made part hereof.  The Revolving Credit Note shall be in form and substance satisfactory to Lender.

 

c. The term of the Revolving Credit shall expire on the Revolving Credit Maturity Date.  On such date, unless having been sooner accelerated by Lender pursuant to the terms hereof, and without impairing any rights under Section 3.1, all sums owing under the Revolving Credit shall be due and payable in full, and as of and after such date Borrower shall not request and Lender shall not make any further Advances under the Revolving Credit.

 

2.2 Letters of Credit.

 

a. As a part of the Revolving Credit and subject to its terms and conditions (including, without limitation, the Borrowing Base), Lender shall make available to Borrower Letters of Credit which shall not exceed, in the aggregate at any one time outstanding, the L/C Commitment. Notwithstanding the foregoing, all Letters of Credit shall be in form and substance reasonably satisfactory to Lender.  No Letter of Credit shall be issued with an expiry date later than the earlier of (i) three hundred sixty five (365) days from the date of issuance for a stand-by letter of credit or (ii) ten (10) Business Days prior to the Revolving Credit Maturity Date.  Borrower shall execute and deliver to Issuer all Letter of Credit Documents required by Lender for such purposes.  Each Letter of Credit shall comply with the Letter of Credit Documents.

 

b. Each Letter of Credit issued from time to time under the Revolving Credit which remains undrawn (and the amounts of draws on Letters of Credit prior to payment as hereinafter set forth) shall reduce, dollar for dollar, the amount available to be borrowed by Borrower under the Revolving Credit.

 

 

  

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c. In the event of any request for drawing under any Letter of Credit by the beneficiary thereof, Lender shall promptly notify Borrower and Borrower shall immediately reimburse Lender on the day when such drawing is honored, by either a cash payment by Borrower or, so long as no Event of Default has occurred and is continuing, in the absence of such payment by Borrower, and at Lender's option, by Lender automatically making or having been deemed to have made (without further request or approval of Borrower) a cash Advance under the Revolving Credit on such date to reimburse Lender.  Borrower's reimbursement obligation for draws under Letters of Credit along with the obligation to pay L/C Fees shall herein be referred to collectively as Borrower's "Reimbursement Obligations."  All of Borrower's Reimbursement Obligations hereunder with respect to Letters of Credit shall apply unconditionally and absolutely to Letters of Credit issued hereunder on behalf of Borrower.

 

d. The obligation of Borrower to reimburse Lender for drawings made (or for cash Advances made to cover drawings made) under the Letters of Credit shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances including, without limitation, the following circumstances:

 

i. any lack of validity or enforceability of any Letter of Credit;

 

ii. the existence of any claim, setoff, defense or other right that Borrower or any other Person may have at any time against a beneficiary or any transferee of any Letter of Credit (or any persons or entities for whom any such beneficiary or transferee may be acting), Lender or any other Person, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction;

 

iii. any draft, demand, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;

 

iv. payment by Lender under any Letter of Credit against presentation of a demand, draft or certificate or other document that does not comply with the terms of such Letter of Credit unless Lender shall have acted with willful misconduct or gross negligence in issuing such payment;

 

v. any other circumstances or happening whatsoever that is similar to any of the foregoing; or

 

vi. the fact that a Default or Event of Default shall have occurred and be continuing.

 

e. If by reason of (i) any change after the Closing Date in applicable law, regulation, rule, decree or regulatory requirement or any change in the interpretation or application by any judicial or regulatory authority of any law, regulation, rule, decree or regulatory requirement or (ii) compliance by Lender with any direction, reasonable request or requirement (whether or not having the force of law) of any governmental or monetary authority including, without limitation, Regulation D:

 

 

  

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i. Lender shall be subject to any tax or other levy or charge of any nature or to any variation thereof (except for changes in the rate of any tax on the net income of Lender or its applicable lending office) or to any penalty with respect to the maintenance or fulfillment of its obligations under this Section 2.2, whether directly or by such being imposed on or suffered by Lender;

 

ii. any reserve, deposit or similar requirement is or shall be applicable, imposed or modified in respect of any Letter of Credit issued by Lender; or

 

iii. there shall be imposed on Lender any other condition regarding this Section 2.2 or any Letter of Credit; and the result of the foregoing is to directly or indirectly increase the cost to Lender of issuing, creating, making or maintaining any Letter of Credit or to reduce the amount receivable in respect thereof by Lender, then and in any such case, Lender shall, after the additional cost is incurred or the amount received is reduced, notify Borrower and Borrower shall pay on demand such amounts as may be necessary to compensate Lender for such additional cost or reduced receipt, together with interest on such amount from the date demanded until payment in full thereof at a rate per annum equal at all times to the applicable interest rate under the Revolving Credit.  A certificate signed by an officer of Lender as to the amount of such increased cost or reduced receipt showing in reasonable detail the basis for the calculation thereof, submitted to Borrower by Lender shall, except for manifest error and absent written notice from Borrower to Lender within ten (10) days from submission, be final, conclusive and binding for all purposes.

 

f. i.           In addition to amounts payable as elsewhere provided in this Section 2.2, without duplication, Borrower hereby agrees to protect, indemnify, pay and save Lender harmless from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys' fees) which Lender may incur or be subject to as a consequence, direct or indirect, of (A) the issuance of the Letters of Credit or (b) the failure of Lender to honor a drawing under any Letter of Credit as a result of any such act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Governmental Authority (all such acts or omissions herein called "Government Acts") in each case except for claims, demands, liabilities, damages, losses, costs, charges and expenses arising solely from acts or conduct of Lender constituting gross negligence or willful misconduct.

 

ii. As between Borrower and Lender, Borrower assumes all risks of the acts and omissions of or misuse of the Letters of Credit issued by Lender by the respective beneficiaries of such Letters of Credit.  In furtherance and not in limitation of the foregoing, Lender shall not be responsible: (A) for the form, validity, sufficiency, accuracy, genuineness or legal effects of any document submitted by any party in connection with the application for and issuance if such Letters of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (B) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, that may prove to be invalid or ineffective for any reason; (C) for failure of the beneficiary of any such Letter of Credit to comply fully with conditions required in order to draw upon such Letter of Credit; (D) for errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they are in cipher, unless any of the foregoing are caused by Lender's gross negligence or willful misconduct; (E) for errors in interpretation of technical terms; (F) for any loss or delay in the transmission of any document or required in order to make a drawing under such Letter of Credit or of the proceeds thereof, unless caused by Lender's gross negligence or willful misconduct; (G) for the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; and (H) for any consequences arising from causes beyond the control of Issuer, including, without limitation, any Government Acts.  None of the above shall affect, impair or prevent the vesting of any of Lender's rights or powers hereunder

 

 

 

  

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iii. In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by Lender in connection with the Letters of Credit issued by it or the related certificates, if taken or omitted in good faith, shall not create any liability on the part of Lender to Borrower.

 

2.3 Reserved.

 

2.4 Advances and Payments.

 

a. Except to the extent otherwise set forth in this Agreement (or in the case of an Interest Hedging Instrument under the applicable agreements), all payments of principal and of interest on the Revolving Credit, Reimbursement Obligations and all Expenses, fees, indemnification obligations and all other charges and any other Obligations of Borrower, shall be made to Lender at its main banking office, 1500 Market Street, 25th floor, Centre Square West, Philadelphia, Pennsylvania 19102, in United States dollars, in immediately available funds.  Lender shall have the unconditional right and discretion (and Borrower hereby authorizes Lender) to charge Borrower's checking, operating and/or deposit account(s) for all of Borrower's Obligations as they become due from time to time under this Agreement including, without limitation, interest, principal, fees, indemnification obligations and reimbursement of Expenses. Alternatively, Lender may in its discretion (and Borrower hereby authorizes Lender to) make a cash Advance under the Revolving Credit in a sum sufficient to pay all interest accrued and payable on the Obligations and to pay all costs, fees and Expenses owing hereunder.  Borrower acknowledges that Borrower’s failure to maintain sufficient funds in any checking, operating or deposit account for payment of any of the Obligations, or Lender’s failure to charge any such account shall not relieve Borrower of any payment obligation under this Agreement or any other Loan Document.  Any payments received prior to 3:00 p.m. Eastern time on any Business Day shall be deemed received on such Business Day.  Any payments (including any payment in full of the Obligations), received after 3:00 p.m. Eastern time on any Business Day shall be deemed received on the immediately following Business Day.

 

b. Borrower shall establish and maintain a lockbox account ("Lockbox") with Lender (on terms and conditions satisfactory to Lender) and a depository account(s) ("Cash Collateral Account") subject to the provisions of this subparagraph.  Borrower shall instruct all Account Debtors to make all payments on Accounts through the Lockbox.  Borrower shall then cause (and Lender is hereby irrevocably authorized to cause) the transfer of such collections from the Lockbox into the Cash Collateral Account.  Deposits into the Cash Collateral Account shall be applied by Lender daily, subject to Lender's standard clearing procedures and clearing periods for deposited funds, to reduce the outstanding principal amount under the Revolving Credit.  All collections of Accounts and proceeds of other Collateral to the extent received by Borrower shall be held in trust for the benefit of Lender and remitted, in specie, to Lender for deposit in the Cash Collateral Account immediately upon receipt by Borrower.  Borrower shall have no right of access to or withdrawal from the Cash Collateral Account; provided that if there are no outstanding Advances and no Default or Event of Default has occurred and is continuing, then all collections of Accounts shall be, subject to Lender's standard clearing procedures and clearing periods for deposited funds, transferred to Borrower's operating account with Lender.  All funds deposited into the Lock Box Account and Cash Collateral Account shall immediately become the property of Lender.

 

c. i.           Cash Advances which may be made by Lender from time to time under the Revolving Credit shall be made available by crediting such proceeds to Borrower's operating account with Lender.

 

 

  

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ii. All cash Advances under the Revolving Credit must be requested by 2:00 p.m. Eastern time, on the date such cash Advance is to be made.

 

iii. All requests for an Advance are to be in writing pursuant to a written request executed by an Authorized Officer in the form of Exhibit “B” (“Advance Request”) attached hereto and made part hereof.  Such request may be sent by telecopy, facsimile transmission or attachment to e-mail, provided that Lender shall have the right to require that receipt of such request not be effective unless confirmed via telephone with Lender.

 

iv. Upon receiving a request for an Advance in accordance with subparagraph (ii) above, and subject to the conditions set forth in this Agreement, Lender shall make the requested Advance available to Borrower as soon as is reasonably practicable thereafter on the day the requested Advance is to be made.

 

d. The balance of the Advances and availability under the Revolving Credit will be determined as follows:

 

i. Domestic checks received by Lender on or before 3:00 p.m. Eastern time of any Business Day are to be deemed received by Lender on such Business Day;

 

ii. Domestic checks received by Lender after 3:00 p.m. Eastern time of any Business Day are to be deemed received by Lender on the following Business Day;

 

iii. Any other form of proceeds received by Lender is to be deemed received by Lender when the Lender has received notification of collection (if notice of collection is received on or before 3:00 p.m. Eastern time of any such Business Day, such proceeds are to be deemed to have been received by the Lender on such Business Day; if notice of collection is received after 3:00 p.m. Eastern time of any such Business Day, such proceeds are to be deemed to have been received by the Lender on the following Business Day);

 

iv. Any credit(s) to the account of Borrower are conditioned upon final payment to Lender at its office in cash or solvent credits;

 

v. Any item(s) not collected or not paid are to be charged as a debit against the Advances or any account of Borrower maintained with Lender.

 

e. Interest will continue to accrue on the amount of any funds or other proceeds received by Lender for a period of one (1) Business Day after receipt thereof.

 

 

 

  

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2.5 Interest.  The unpaid principal balance of cash Advances under the Revolving Credit shall bear interest, subject to the terms hereof, at the per annum rate equal to the LIBOR Based Rate.  Changes in the interest rate applicable to the Revolving Credit shall become effective on the same day that there is a change in the LIBOR Rate.  Interest on the Revolving Credit shall be payable monthly, in arrears, on the first day of each calendar month, beginning on the first day of the first full calendar month after the Closing Date.

 

2.6 Additional Interest Provisions.

 

a. Interest on the Loans shall be calculated on the basis of a year of three hundred sixty (360) days but charged for the actual number of days elapsed.

 

b. After the occurrence and during the continuance of an Event of Default hereunder, the per annum effective rate of interest on all outstanding principal under the Loans, shall be increased by four hundred (400) basis points.  All such increases may be applied retroactively to the date of the occurrence of the Event of Default.  Borrower agrees that the default rate payable to Lender is a reasonable estimate of Lender's damages and is not a penalty.

 

c. All contractual rates of interest chargeable on outstanding principal under the Loans shall continue to accrue and be paid even after Default, an Event of Default, maturity, acceleration, judgment, bankruptcy, insolvency proceedings of any kind or the happening of any event or occurrence similar or dissimilar.

 

d. In no contingency or event whatsoever shall the aggregate of all amounts deemed interest hereunder and charged or collected pursuant to the terms of this Agreement exceed the highest rate permissible under any law which a court of competent jurisdiction shall, in a final determination, deem applicable hereto.  In the event that such court determines Lender has charged or received interest hereunder in excess of the highest applicable rate, Lender shall apply, in its sole discretion, and set off such excess interest received by Lender against other Obligations due or to become due and such rate shall automatically be reduced to the maximum rate permitted by such law.

 

e. Borrower hereby authorizes Lender to automatically deduct from any deposit account of Borrower the amount of any applicable loan payment including all payments of interest, principal and other sums due (“Automatic Payment”), from time to time, under this Agreement and/or any Note.  If the funds in the account are insufficient to cover any payment due, Lender is not obligated to advance funds to cover the payment; however, Lender has the sole and absolute discretion to make such an advance to cover the payment and may charge Borrower's loan account for such advance.  The failure of Lender so to charge any account or to give any such notice does not affect the obligation of Borrower or Guarantor to pay interest, principal or other sums as provided herein, in any Note or in any Guaranty executed by a Guarantor. At any time and for any reason, the Lender may terminate the Automatic Payment.

 

2.7 Fees and Charges.

 

a. At Closing, Lender shall have fully earned and Borrower shall unconditionally pay to Lender, a non-refundable fee with respect to the Revolving Credit ("Revolving Credit Closing Fee") of Sixty Thousand Dollars ($60,000), less amounts previously paid thereon.

 

 

 

  

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b. Borrower shall pay to Lender a fee in the amount of two and one quarter percent (2.25%) per annum of the face amount of each Letter of Credit issued by Lender.  Such fee shall be payable quarterly in arrears on the first day of each calendar quarter and at the expiration or termination of the Letter of Credit.  In addition, Borrower shall pay to Lender, upon billing therefor, all of Lender's standard commissions for the issuance of banker's acceptances and standard charges for issuance, amendment, extension and cancellation of the Letter of Credit.  All such fees and charges are referred to herein collectively as the "L/C Fees."

 

c. If, for any calendar month during the term of this Agreement, the average daily unpaid balance of the Advances for each day of such calendar month does not equal the Maximum Revolving Credit Amount, then Borrower shall pay to Lender a fee at a rate equal to .375% per annum on the amount by which the Maximum Revolving Credit Amount exceeds such average daily unpaid balance.  Such fee shall be payable to Lender in arrears on the first day of each calendar month with respect to the previous calendar month.

 

d. Borrower shall unconditionally pay to Lender a collateral monitoring fee equal to $1,000 per month commencing on the first day of the calendar month following the Closing Date and on the first day of each calendar month thereafter.  The collateral monitoring fee shall be deemed earned in full on the date when same is due and payable hereunder and shall not be subject to rebate or proration upon termination of this Agreement for any reason.

 

e. Borrower shall unconditionally pay to Lender, on demand, a field examination fee in an amount equal to $900 per day for each person employed to perform such examination, plus all costs and disbursements incurred by Lender in the performance of such examination or analysis, relating to any field examination, collateral analysis or other business analysis, the need for which is to be determined by Lender and which evaluation is undertaken by Lender or for Lender’s benefit.

 

f. Borrower shall unconditionally pay to Lender a late charge equal to the greater of (i) three percent (3%) of any and all payments of principal or interest on the Loans that are not paid or (ii) $25.00 within fifteen (15) days of the due date.  Such late charge shall be due and payable regardless of whether Lender has accelerated the Obligations.  Borrower agrees that any late fee payable to Lender is a reasonable estimate of Lender's damages and is not a penalty.

 

2.8 Prepayments.  Borrower may prepay the Revolving Credit in whole or in part at any time or from time to time, and may terminate this Agreement at any time upon ninety (90) days’ prior written notice upon payment in full of the Obligations.  In the event the Obligations are prepaid in full and this Agreement is terminated in accordance with the foregoing sentence prior to the Revolving Credit Maturity Date (the date of such prepayment hereinafter referred to as the “Early Termination Date”), Borrower shall pay to Lender an early termination fee in an amount equal to (i) three percent (3%) of the Maximum Revolving Credit Amount if the Early Termination Date occurs on or after the Closing Date to and including the date immediately preceding the first anniversary of the Closing Date, (ii) one percent (1%) of the Maximum Revolving Credit Amount if the Early Termination Date occurs on or after the first anniversary of the Closing Date to and including the date immediately preceding the third anniversary of the Closing Date and (iii) zero dollars ($0.00) at all times thereafter.

 

 

  

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2.9 Use of Proceeds.  The extensions of credit under and proceeds of the Revolving Credit shall be used to refinance certain existing Indebtedness owing to Bank of America, for working capital and for general corporate purposes.

 

2.10 Capital Adequacy.  If Lender reasonably determines that (i) the adoption of or change in any law, rule, regulation or guideline regarding capital requirements for banks or bank holding companies which occurs after the date hereof, or any change in the interpretation or application thereof by any governmental authority charged with the administration thereof, which occurs after the date hereof, or (ii) compliance by Lender or its parent bank holding company with any guideline, request, or directive of any such entity regarding capital adequacy generally (whether or not having the force of law) issued after the date hereof, has the effect of reducing the return on  Lender’s or such holding company's capital as a consequence of the Lender’s obligations hereunder to a level below that which Lender or such holding company could have achieved but for such adoption, change, or compliance (taking into consideration Lender’s or such holding company's then existing policies with respect to capital adequacy and assuming the full utilization of such entity's capital) by any amount reasonably deemed by Lender to be material, then  Lender may notify Borrower thereof.  Following receipt of such notice, Borrower agrees to pay Lender on demand the amount of such reduction of return of capital as and when such reduction is determined, payable within ninety (90) days after presentation by Lender of a statement in the amount and setting forth in reasonable detail Lender’s calculation thereof and the assumptions upon which such calculation was based (which statement is to be deemed true and correct absent manifest error). In determining such amount, Lender may use any reasonable averaging and attribution methods.

 

SECTION III. COLLATERAL

 

3.1 Collateral.  As security for the payment of the Obligations, and satisfaction by Borrower of all covenants and undertakings contained in this Agreement and the other Loan Documents:

 

a. Personal Property.  Borrower hereby assigns and grants to Lender, a continuing Lien on and security interest in, upon and to all assets of Borrower, including but not limited to the following Property, all whether now owned or hereafter acquired, created or arising and wherever located:

 

i. Accounts – All Accounts;

 

ii. Chattel Paper – All Chattel Paper;

 

iii. Documents – All Documents;

 

iv. Instruments – All Instruments;

 

v. Inventory – All Inventory;

 

vi. General Intangibles – All General Intangibles;

 

 

  

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vii. Equipment – All Equipment,

 

viii. Fixtures – All Fixtures;

 

 ix. Deposit Accounts – All Deposit Accounts (including any Permitted Investments that constitute Deposit Accounts);

 

 x. Goods – All Goods;

 

xi. Letter of Credit Rights – All Letter of Credit Rights;

 

xii. Supporting Obligations – All Supporting Obligations;

 

xiii. Investment Property – All Investment Property (including any Permitted Investments that constitute Investment Property, and excluding any Subsidiary Stock in excess of 65% of the Capital Stock of any such Subsidiary that is not organized or incorporated in the United States or any State or territory thereof);

 

xiv. Commercial Tort Claims – All Commercial Tort Claims identified and described on Schedule "5.20" (as amended or supplemented from time to time);

 

xv. Property in Lender's Possession – All Property of Borrower, now or hereafter in Lender's possession; and

 

xvi. Proceeds – The Proceeds (including, without limitation, insurance proceeds), whether cash or non-cash, of all of the foregoing property described in clauses (i) through (xv).

 

3.2 Lien Documents.  At Closing and thereafter as Lender deems necessary, Borrower shall execute and/or deliver to Lender, or have executed and delivered (all in form and substance satisfactory to Lender and its counsel):

 

a. Financing statements pursuant to the UCC, which Lender may file in the jurisdiction where Borrower is organized and in any other jurisdiction that Lender deems appropriate;

 

b. Any other agreements, documents, instruments and writings, including, without limitation, intellectual property security agreements, required by Lender to evidence, perfect or protect the Liens and security interests in the Collateral or as Lender may reasonably request from time to time.

 

3.3 Other Actions.

 

a. In addition to the foregoing,  Borrower shall do anything further that may be reasonably required by Lender to secure Lender and effectuate the intentions and objects of this Agreement, including, without limitation, the execution and delivery of security agreements, contracts and any other documents required hereunder and the delivery of motor titles with Lender’s lien noted thereon.  At Lender's reasonable request, Borrower shall also immediately deliver (with execution by Borrower of all necessary documents or forms to reflect, implement or enforce the Liens described herein), or cause to be delivered to Lender all items for which Lender must receive possession to obtain a perfected security interest, including without limitation, all notes, stock powers, letters of credit, certificates and documents of title, Chattel Paper, Warehouse Receipts, Instruments, and any other similar instruments constituting Collateral.

 

 

  

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b. Lender is hereby authorized to file financing statements and amendments to financing statements without Borrower's signature, in accordance with the UCC.  Borrower hereby authorizes Lender to file all such financing statements and amendments to financing statements describing the Collateral in any filing office as Lender, in its sole discretion may determine, including financing statements listing "All Assets" in the collateral description therein.  Borrower agrees to comply with the requests of Lender in order for Lender to have and maintain a valid and perfected first security interest in the Collateral including, without limitation, immediately discharging all Liens other than Permitted Liens, executing and causing any other Person to execute such documents as Lender may require to obtain Control (as defined in the UCC) over all Deposit Accounts, Letter of Credit Rights and Investment Property.

 

3.4 Searches, Certificates.

 

a. Lender shall, prior to or at Closing, and thereafter as Lender may determine from time to time, at Borrower's expense, obtain the following searches (the results of which are to be consistent with the warranties made by Borrower in this Agreement):

 

i. UCC searches with the Secretary of State and local filing office of each state where Borrower is organized, maintains its executive office, a place of business, or assets; and

 

ii. Judgment, state and federal tax lien and corporate tax lien searches, in all applicable filing offices of each state searched under subparagraph (i) above.

 

b. Borrower shall, prior to or at Closing and at its expense, obtain and deliver to Lender good standing certificates showing Borrower to be in good standing in its state of organization and in each other state in which it is doing and presently intends to do business for which qualification is required.

 

3.5 Landlord’s and Warehouseman’s Waivers.  Upon request by Lender, Borrower will cause each owner of any premises occupied by Borrower or to be occupied by Borrower and each warehouseman of any warehouse, where, in either event Collateral is held, to execute and deliver to Lender an instrument, in form and substance satisfactory to Lender, under which such owner(s) or warehouseman subordinates its/his/their interests in and waives its/his/their right to distrain on or foreclose against the Collateral and agrees to allow Lender to remain on such premises to dispose of or deal with any Collateral located thereon (a “Lien Waiver Agreement”).

 

3.6 Filing Security Agreement.  A carbon, photographic or other reproduction or other copy of this Agreement or of a financing statement is sufficient as and may be filed in lieu of a financing statement.

 

3.7 Accounts.  Each of the Accounts shall be a bona fide and valid Account representing a bona fide indebtedness incurred by the Account Debtor therein named, for a fixed sum as set forth in the invoice relating thereto with respect to an absolute sale or lease and delivery of goods upon stated terms of Borrower, or work, labor or services theretofore rendered by Borrower as of the date each Account is created.  Same shall be due and owing in accordance with the Borrower’s standard terms of sale without dispute, setoff or counterclaim except as may be stated on the accounts receivable schedules delivered by Borrower to Lender.  Each Account Debtor, to the best of Borrower’s knowledge, as of the date each Account is created, is and will be solvent and able to pay all Accounts on which the Account Debtor is obligated in full when due or with respect to such Account Debtors of Borrower who are not solvent such Borrower has set up on its books and in its financial records bad debt reserves adequate to cover such Accounts.  Borrower will not, without Lender’s consent, compromise or adjust any material amount of the Accounts (or extend the time for payment thereof) or accept any material returns of merchandise or grant any additional discounts, allowances or credits thereon except for those compromises, adjustments, returns, discounts, credits and allowances as have been heretofore customary in the business of Borrower.

 

 

 

  

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3.8 Power of Attorney.  Each of the officers of Lender is hereby irrevocably made, constituted and appointed the true and lawful attorney for Borrower (without requiring any of them to act as such) with full power of substitution to do the following:  (i) at any time (a) endorse the name of Borrower upon any and all checks, drafts, money orders and other instruments for the payment of monies that are payable to Borrower and constitute collections on Borrower's Accounts or proceeds of other Collateral; (b) execute and/or file in the name of Borrower any financing statements, schedules, assignments, instruments, documents and statements that Borrower is obligated to give Lender hereunder or is necessary to perfect (or continue or evidence the perfection of such security interest or Lien) Lender's security interest or Lien in the Collateral; (c) send verifications of Accounts to any Account Debtor; and (d) notify Account Debtors of Lender’s security interest in the Collateral; and (ii) at any time following the occurrence of an Event of Default: (1) demand payment of the Accounts; (2) enforce payment of the Accounts by legal proceedings or otherwise; (3) exercise all of Borrower’s rights and remedies with respect to the collection of the Accounts and any other Collateral; (4) settle, adjust, compromise, extend or renew the Accounts; (5) settle, adjust or compromise any legal proceedings brought to collect Accounts; (6) prepare, file and sign Borrower’s name on a proof of claim in bankruptcy or similar document against any Account Debtor; (7) prepare, file and sign Borrower’s name on any notice of Lien, assignment or satisfaction of Lien or similar document in connection with the Accounts; (8) receive, open and dispose of all mail addressed to Borrower and (9) do such other and further acts and deeds in the name of Borrower that Lender may reasonably deem necessary or desirable to enforce any Account or other Collateral.  All acts of said attorney or designee are hereby ratified and approved, and said attorney or designee shall not be liable for any acts of omission or commission nor for any error of judgment or mistake of fact or of law, unless done maliciously or with gross (not mere) negligence (as determined by a court of competent jurisdiction in a final non-appealable judgment); this power being coupled with an interest is irrevocable while any of the Obligations remain unpaid.  Lender shall have the right at any time during the continuance of an Event of Default to change the address for delivery of mail addressed to Borrower.

 

SECTION IV. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES

 

Closing under this Agreement is subject to the following conditions precedent (all instruments, documents and agreements to be in form and substance satisfactory to Lender and Lender's counsel):

 

4.1 Resolutions, Opinions, and Other Documents.  Borrower shall have delivered, or caused to be delivered to Lender the following:

 

a. this Agreement, the Notes and each of the other Loan Documents all properly executed;

 

  

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b. financing statements and each of the other documents to be executed and/or delivered by Borrower or any other Person pursuant to this Agreement;

 

c. certified copies of (i) resolutions of Borrower's board of directors' or managing members (as applicable) authorizing the execution, delivery and performance of this Agreement, the Notes to be issued hereunder and each of the other Loan Documents required to be delivered by any Section hereof and (ii) Borrower's articles or certificate of incorporation and by-laws or certificate of formation and operating agreement, as applicable;

 

d. an incumbency certificate for Borrower identifying all Authorized Officers, with specimen signatures;

 

e. a written opinion of Borrower's independent counsel addressed to Lender and opinions of such other counsel as Lender deems reasonably necessary;

 

f. a collateral audit of Borrower's assets, liabilities, books and records, satisfactory in all respects to Lender;

 

g. such financial statements, reports, certifications and other operational information as Lender may reasonably require, satisfactory in all respects to Lender;

 

h. certification by the Chief Financial Officer of Borrower that there has not occurred any material adverse change in the operations and condition (financial or otherwise) of Borrower since April 30, 2011;

 

i. payment by Borrower of all fees including, without limitation, Revolving Credit Closing Fee and Expenses associated with the Loans;

 

j. searches and certificates required under Section 3.4;

 

k. the Motorola Subordination Agreement;

 

l. an initial Borrowing Certificate dated the Closing Date (including, without limitation, a calculation of Borrower’s Undrawn Availability); and

 

m. such other documents reasonably required by Lender.

 

4.2 Due Diligence.  Lender and/or its agents or representatives shall have completed due diligence with respect to Borrower’s financial condition and operations, including, without limitation, credit and field examinations, appraisals of the Collateral, inspections of Borrower’s premises and personal background, business and credit history investigations on all members of senior management of Borrower, with all of the foregoing to be in form and substance satisfactory to Lender.

 

 

 

 

  

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4.3 Undrawn Availability.  At the Closing Date (after giving effect to the initial Advances), Borrower shall have Undrawn Availability of at least $2,000,000.

 

4.4 Absence of Certain Events.  At the Closing Date, no Default or Event of Default hereunder shall have occurred and be continuing.

 

4.5 Warranties and Representations at Closing.  The warranties and representations contained in Section 5 as well as any other Section of this Agreement shall be true and correct in all respects on the Closing Date with the same effect as though made on and as of that date.  Borrower shall not have taken any action or permitted any condition to exist which would have been prohibited by any Section hereof.

 

4.6 Compliance with this Agreement.  Borrower shall have performed and complied with all agreements, covenants and conditions contained herein including, without limitation, the provisions of Sections 6 and 7 hereof, which are required to be performed or complied with by Borrower before or at the Closing Date.

 

4.7 Officers' Certificate.  Lender shall have received a certificate dated the Closing Date and signed by the President or Chief Financial Officer of Borrower certifying that all of the conditions specified in this Section have been fulfilled.

 

4.8 Closing.  Subject to the conditions of this Section, the Loans shall be made available on such date (the "Closing Date") and at such time as may be mutually agreeable to the parties contemporaneously with the execution hereof ("Closing").

 

4.9 Waiver of Rights.  By completing the Closing hereunder, or by making Advances hereunder, Lender does not thereby waive a breach of any warranty or representation made by Borrower hereunder or under any agreement, document, or instrument delivered to Lender or otherwise referred to herein, and any claims and rights of Lender resulting from any breach or misrepresentation by Borrower are specifically reserved by Lender.

 

4.10 Conditions for Future Advances.  The making of Advances under the Revolving Credit in any form following the Closing Date is subject to the following conditions precedent (all instruments, documents and agreements to be in form and substance satisfactory to Lender and its counsel) following the Closing Date:

 

a. This Agreement and each of the other Loan Documents shall be effective;

 

b. No event or condition shall have occurred or become known to Borrower, or would result from the making of any requested Advance, which could have a Material Adverse Effect;

 

c. No Default or Event of Default then exists or after giving effect to the making of the Advance would exist;

 

d. Each Advance is within and complies with the terms and conditions of this Agreement including, without limitation, the notice provisions contained in Section 2.4 hereof;

 

e. No Lien (other than a Permitted Lien) has been imposed on Borrower; and

 

 

 

  

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f. Each representation and warranty set forth in Section 5 and any other Loan Document in effect at such time (as amended or modified from time to time) is then true and correct in all material respects as if made on and as of such date except to the extent such representations and warranties are made only as of a specific earlier date.

 

SECTION V. REPRESENTATIONS AND WARRANTIES

 

To induce Lender to complete the Closing and make the initial Advances under the Revolving Credit and Loans to Borrower, Borrower warrants and represents to Lender that:

 

5.1 Corporate Organization and Validity.

 

a. Each Borrower (i) is a corporation, duly organized and validly existing under the laws of (a) in the case of WPCS, the State of Delaware, (b) in the case of WPCS Suisun City, the State of California, (c) in the case of WPCS Seattle, the State of Washington, (d) in the case of WPCS Portland, the State of Oregon, (e) in the case of WPCS Hartford, the State of Connecticut, and (f) in the case of WPCS Lakewood and WPCS Trenton, the State of New Jersey, (ii) has the appropriate power and authority to operate its business and to own its Property and (iii) is duly qualified, is validly existing and in good standing and has lawful power and authority to engage in the business it conducts in each state where the nature and extent of its business requires qualification, except where the failure to so qualify does not and could not have a Material Adverse Effect.  A list of all states and other jurisdictions where Borrower is qualified to do business is shown on Schedule "5.1" attached hereto and made part hereof.

 

b. The making and performance of this Agreement and the other Loan Documents will not violate any law, government rule or regulation, court or administrative order or other such order, or the charter, minutes or bylaw provisions of Borrower, or of Borrower's operating agreement or partnership agreement, as applicable, or violate or result in a default (immediately or with the passage of time) under any contract, agreement or instrument to which Borrower is a party, or by which Borrower is bound.  Borrower is not in violation of any term of any agreement or instrument to which it is a party or by which it may be bound which violation has or could have a Material Adverse Effect, or of its charter, minutes or bylaw provisions, or of Borrower's operating agreement or partnership agreement, as applicable.

 

c. Borrower has all requisite power and authority to enter into and perform this Agreement and to incur the obligations herein provided for, and has taken all proper and necessary action to authorize the execution, delivery and performance of this Agreement, and the other Loan Documents as applicable.

 

d. This Agreement, the Notes to be issued hereunder, and all of the other Loan Documents, when delivered, will be valid and binding upon Borrower, and enforceable in accordance with their respective terms except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the enforcement of creditors' rights generally and by general equitable principles.

 

5.2 Places of Business.  The only places of business of  Borrower, and the places where Borrower keeps and intends to keep its Property, are at the addresses shown on Schedule "5.2" attached hereto and made part hereof.

 

 

 

  

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5.3 Pending Litigation.  There are no judgments or judicial or administrative orders or proceedings pending, or to the knowledge of Borrower, threatened in writing, against Borrower in any court or before any Governmental Authority except as shown on Schedule "5.3" attached hereto and made part hereof.  To the knowledge of Borrower, there are no investigations (civil or criminal) pending or threatened in writing against Borrower in any court or before any Governmental Authority.  Borrower is not in default with respect to any order of any Governmental Authority.  To the knowledge of Borrower, no director or executive officer of Borrower has been indicted in connection with or convicted of engaging in any criminal conduct, or is currently subject to any lawsuit or proceeding or under investigation in connection with any anti-racketeering or other conduct or activity which may result in the forfeiture of any property to any Governmental Authority.

 

5.4 Title to Properties.  Borrower has good and marketable title in fee simple (or its equivalent under applicable law) to all the Property it purports to own, free from Liens and free from the claims of any other Person, except for Permitted Liens.

 

5.5 Governmental Consent.  Neither the nature of Borrower or of its business or Property, nor any relationship between Borrower and any other Person, nor any circumstance affecting Borrower in connection with the issuance or delivery of this Agreement, the Notes or any other Loan Documents is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority on the part of Borrower.

 

5.6 Taxes.  All tax returns required to be filed by Borrower in any jurisdiction have been filed, and all taxes, assessments, fees and other governmental charges upon Borrower, or upon any of its Property, income or franchises, which are shown to be due and payable on such returns have been paid, except for those taxes being contested in good faith with due diligence by appropriate proceedings for which appropriate reserves have been maintained under GAAP and as to which no Lien has been entered. Borrower is not aware of any proposed additional tax assessment or tax to be assessed against or applicable to Borrower.

 

5.7 Financial Statements.  The annual audited consolidated and consolidating balance sheet of Borrower as of April 30, 2011, and the related statements of profit and loss, stockholder's equity and cash flow as of such date accompanied by reports thereon from Borrower's independent certified public accountants (complete copies of which have been delivered to Lender), and the interim consolidated and consolidating balance sheet of Borrower as of October 31, 2011, and the related statements of profit and loss, stockholder's equity and cash flow as of such date have been prepared in accordance with GAAP and present fairly the financial position of Borrower as of such dates and the results of its operations for such periods.  The fiscal year for Borrower currently ends on April 30.  Borrower's federal tax identification number and state organizational identification number for UCC purposes are as shown on Schedule "5.7" attached hereto and made part hereof.

 

5.8 Full Disclosure.  The financial statements referred to in Section 5.7 of this Agreement do not, nor does any other written statement of Borrower to Lender in connection with the negotiation of the Loans, contain any untrue statement of a material fact.  Such statements do not omit a material fact, the omission of which  would make the statements contained therein  misleading.  There is no fact known to Borrower which has not been disclosed in writing to Lender which has or could have a Material Adverse Effect.

 

 

  

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5.9 Subsidiaries.  Borrower does not have any Subsidiaries or Affiliates, except as shown on Schedule "5.9" attached hereto and made part hereof.

 

5.10 Investments, Guarantees, Contracts, etc.

 

a. Borrower does not own or hold equity or long term debt investments in, or have any outstanding advances to, any other Person, except as shown on  Schedule "5.10(a)," attached hereto and made part hereof.

 

b. Borrower has not entered into any leases for real or personal Property (whether as landlord or tenant or lessor or lessee), except as shown on Schedule "5.10(b)," attached hereto and made part hereof.

 

c. Borrower is not a party to any contract or agreement, or subject to any charter or other corporate restriction, which has or could have a Material Adverse Effect.

 

d. Except as otherwise specifically provided in this Agreement, Borrower has not agreed or consented to cause or permit any of its Property whether now owned or hereafter acquired to be subject in the future (upon the happening of a contingency or otherwise), to a Lien not permitted by this Agreement.

 

5.11 Government Regulations, etc.

 

a. The use of the proceeds of and Borrower's issuance of the Notes will not directly or indirectly violate or result in a violation of Section 7 of the Securities Exchange Act of 1934, as amended, or any regulations issued pursuant thereto, including, without limitation, Regulations U, T and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II.  Borrower does not own or intend to carry or purchase any "margin stock" within the meaning of said Regulation U.

 

b. Borrower has obtained all licenses, permits, franchises or other governmental authorizations necessary for the ownership of its Property and for the conduct of its business.

 

c. As of the date hereof, no employee benefit plan ("Pension Plan"), as defined in Section 3(2) of ERISA, maintained by Borrower or under which Borrower could have any liability under ERISA (i) has failed to meet the minimum funding standards established in Section 302 of ERISA, (ii) has failed to comply in a material respect with all applicable requirements of ERISA and of the Internal Revenue Code, including all applicable rulings and regulations thereunder, (iii) has engaged in or been involved in a prohibited transaction under Section 406 of ERISA or Section 4975 of the Internal Revenue Code which would subject Borrower to any material liability, or (iv) has been terminated if such termination would subject Borrower to any material liability.  Borrower has not assumed, or received notice of a claim asserted against Borrower for, withdrawal liability (as defined in Section 4207 of ERISA) with respect to any multi employer pension plan and is not a member of any Controlled Group (as defined in ERISA).  Borrower has timely made all contributions when due with respect to any multi employer pension plan in which it participates and no event has occurred triggering a claim against Borrower for withdrawal liability with respect to any multi employer pension plan in which Borrower participates.  All Employee Benefit Plans and multi employer pension plans in which Borrower participates are shown on Schedule "5.11(c)" attached hereto and made part hereof.

 

d. Borrower is not in violation of or receipt of written notice that it is in violation of any applicable statute, regulation or ordinance of the United States of America, or of any state, city, town, municipality, county or of any other jurisdiction, or of any agency, or department thereof, (including, without limitation, Environmental Laws or government procurement regulations), a violation of which causes or could cause a Material Adverse Effect.

 

e. Borrower is current with all reports and documents required to be filed with any state or federal securities commission or similar agency and is in full compliance in all material respects with all applicable rules and regulations of such commissions.

 

 

  

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5.12 Business Interruptions.  Within five (5) years prior to the date hereof, none of the business, Property or operations of Borrower have been materially and adversely affected in any way by any casualty, strike, lockout, combination of workers, order of the United States of America, or any state or local government, or any political subdivision or agency thereof, directed against Borrower.  There are no pending or, to Borrower's knowledge, threatened labor disputes, strikes, lockouts or similar occurrences or grievances affecting Borrower.  Except as shown on Schedule “5.12”, no labor contract of Borrower is scheduled to expire prior to the Revolving Credit Maturity Date.

 

5.13 Names and Intellectual Property.

 

a. Within five (5) years prior to the Closing Date, Borrower has not conducted business under or used any other name (whether corporate or assumed) except for the names shown on Schedule "5.13(a)" attached hereto and made part hereof.  Borrower is the sole owner of all names listed on such Schedule "5.13(a)" and any and all business done and all invoices issued in such trade names are Borrower's sales, business and invoices.  Each trade name of Borrower represents a division or trading style of Borrower and not a separate Subsidiary or Affiliate or independent entity.

 

b. All trademarks, service marks, patents or copyrights which Borrower uses, plans to use or has a right to use are shown on Schedule "5.13(b)" attached hereto and made part hereof and Borrower is the sole owner of such Property except to the extent any other Person has claims or rights in such Property, as such claims and rights are shown on Schedule “5.13(b)”.  Borrower is not in violation of any rights of any other Person with respect to such Property.

 

c. Except as shown on Schedule "5.13(c)" attached hereto and made part hereof, (i) Borrower does not require any copyrights, patents, trademarks or other intellectual property, or any license(s) to use any patents, trademarks or other intellectual property in order to provide services to its customers in the ordinary course of business; and (ii) Lender will not require any copyrights, patents, trademarks or other intellectual property or any licenses to use the same in order to provide such services after the occurrence of an Event of Default.

 

5.14 Other Associations.  Borrower is not engaged and has no interest in any joint venture or partnership with any other Person except as shown on Schedule "5.14," attached hereto and made part hereof.

 

5.15 Environmental Matters.  Except as shown on Schedule "5.15," attached hereto and made part hereof:

 

a. To the best of Borrower's knowledge, no Property presently owned, leased or operated by Borrower contains, or has previously contained, any Hazardous Substances in amounts or concentrations which (i) constitute or constituted a violation of, or (ii) could give rise to liability under, any Environmental Law.

 

b. To the best of Borrower's knowledge, Borrower is in compliance, and, for the duration of all applicable statutes of limitations periods, has been in compliance with all applicable Environmental Laws, and there is no contamination at, under or about any properties presently owned, leased, or operated by Borrower or violation of any Environmental Law with respect to such properties which could reasonably be expected to interfere with any of their continued operations.

 

c. Borrower has not received any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance assessment with Environmental Laws and Borrower has no knowledge that any such notice will be received or is being threatened.

 

d. Hazardous Substances have not been transported or disposed of by Borrower or, to the best of Borrower’s knowledge, by any other Person, in a manner or to a location which are reasonably likely to give rise to liability of Borrower under any Environmental Law.

 

e. No judicial proceeding or governmental or administrative action is pending , or to the knowledge of Borrower, threatened under any Environmental Law to which Borrower is, or to Borrower's knowledge will be, named as a party, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding, the implementation of which is reasonably likely to have a Material Adverse Effect on any natural resources or on Borrower's business, financial condition, Property or prospects under any Environmental Law.

 

 

  

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5.16 Regulation O.  No director, executive officer or principal shareholder of Borrower is a director, executive officer or principal shareholder of Lender.  For the purposes hereof the terms "director" "executive officer" and "principal shareholder" (when used with reference to Lender), have the respective meanings assigned thereto in Regulation O issued by the Board of Governors of the Federal Reserve System.

 

5.17 Capital Stock.  The authorized and outstanding Capital Stock of Borrower is as shown on Schedule "5.17" attached hereto and made part hereof.  All of the Capital Stock of Borrower has been duly and validly authorized and issued and is fully paid and non-assessable and has been sold and delivered to the holders thereof in compliance with, or under valid exemption from, all Federal and state laws and the rules and regulations of all Governmental Authorities governing the sale and delivery of securities.  Except for the rights and obligations shown on Schedule "5.17," there are no subscriptions, warrants, options, calls, commitments, rights or agreements by which Borrower or any of the shareholders of Borrower is bound relating to the issuance, transfer, voting or redemption of shares of its Capital Stock or any pre emptive rights held by any Person with respect to the shares of Capital Stock of Borrower.  Except as shown on Schedule "5.17," Borrower has not issued any securities convertible into or exchangeable for shares of its Capital Stock or any options, warrants or other rights to acquire such shares or securities convertible into or exchangeable for such shares.

 

5.18 Solvency.  After giving effect to the transactions contemplated under this Agreement, Borrower is solvent, is able to pay its debts as they become due, and has capital sufficient to carry on its business and all businesses in which it is about to engage, and now owns Property having a value both at fair valuation and at present fair salable value greater than the amount required to pay Borrower's debts.  Borrower will not be rendered insolvent by the execution and delivery of this Agreement or any of the other Loan Documents executed in connection with this Agreement or by the transactions contemplated hereunder or thereunder.

 

5.19 Perfection and Priority.  This Agreement and the other Loan Documents are effective to create in favor of Lender legal, valid and enforceable Liens in all right, title and interest of Borrower in the Collateral, and when financing statements have been filed in the offices of the jurisdictions shown on Schedule "5.19," attached hereto and made part hereof under Borrower's name, Borrower will have granted to Lender first priority Liens in the Collateral, superior in right to any and all other Liens, existing or future.

 

5.20 Commercial Tort Claims.  As of the Closing Date, Borrower is not a party to any Commercial Tort Claims, except as shown on Schedule "5.20" attached hereto and made part hereof.

 

5.21 Letter of Credit Rights.  As of the Closing Date, Borrower has no Letter of Credit Rights, except as shown on Schedule "5.21," attached hereto and made part hereof.

 

5.22 Deposit Accounts.  All Deposit Accounts of Borrower are shown on Schedule "5.22," attached hereto and made part hereof.

 

5.23 Inactive Subsidiary.  The Inactive Subsidiary does not conduct any business or maintain any assets, and does not have any Indebtedness owing to any Person except certain Indebtedness owing to WPCS in the aggregate amount of $295,410.

 

5.24 Anti-Terrorism Laws.

 

a. General.  Neither Borrower nor any Affiliate of Borrower is in violation of any Anti-Terrorism Law or engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

 

b. Executive Order No. 13224.  Neither Borrower nor any Affiliate of Borrower, or to Borrower’s knowledge, any of its respective agents acting or benefiting in any capacity in connection with the Loans, Letters of Credit or other transactions hereunder, is any of the following (each a “Blocked Person”):

 

i. a Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224;

 

ii. a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224;

 

iii. a Person with which Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;

 

 

  

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iv. a Person that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order No. 13224;

 

v. a Person that is named as a “specially designated national” on the most current list published by the U.S. Treasury Department Office of Foreign Asset Control at its official website or any replacement website or other replacement official publication of such list; or

 

vi. a Person who is affiliated with a Person listed above.

 

SECTION VI. BORROWER'S AFFIRMATIVE COVENANTS

 

Borrower covenants that until all of the Obligations are paid and satisfied in full and the Revolving Credit has been terminated, that:

 

6.1 Payment of Taxes and Claims.  Borrower shall pay, before they become delinquent, all taxes, assessments and governmental charges, or levies imposed upon it, or upon Borrower's Property, and all claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other Persons, entitled to the benefit of statutory or common law Liens which, in any case, if unpaid, would result in the imposition of a Lien upon its Property; provided however, that Borrower shall not be required to pay any such tax, assessment, charge, levy, claim or demand if the amount, applicability or validity thereof, shall at the time, be contested in good faith and by appropriate proceedings by Borrower, and if  Borrower shall have set aside on its books adequate reserves in respect thereof, if so required in accordance with GAAP; which deferment of payment is permissible so long as no Lien other than a Permitted Lien has been entered and Borrower's title to, and its right to use, its Property are not materially adversely affected thereby.

 

6.2 Maintenance of Properties and Corporate Existence.

 

a. Property – Borrower shall maintain its Property in good condition (normal wear and tear excepted) make all necessary renewals, replacements, additions, betterments and improvements thereto and will pay and discharge when due the cost of repairs and maintenance to its Property, and will pay all rentals when due for all real estate leased by Borrower.

 

b. Property Insurance, Public and Products Liability Insurance – Borrower shall maintain insurance (i) on all insurable tangible Property against fire, flood, casualty and such other hazards (including, without limitation, extended coverage, workmen's compensation, boiler and machinery, with inflation coverage by endorsement) and (ii) against public liability, product liability and business interruption, in each case in such amounts, with such deductibles and with such insurers as are customarily used by companies operating in the same industry as Borrower.  At or prior to Closing, Borrower shall furnish Lender with duplicate original policies of insurance or such other evidence of insurance as Lender may require, and any certificates of insurance shall be issued on Acord Form-27.  In the event Borrower fails to procure or cause to be procured any such insurance or to timely pay or cause to be paid the premium(s) on any such insurance, Lender may do so for Borrower, but Borrower shall continue to be liable for the same. The policies of all such casualty insurance shall contain standard Lender's Loss Payable Clauses (and, with respect to liability and interruption insurance, additional insured clauses) issued in favor of Lender under which all losses thereunder shall be paid to Lender as Lender's interest may appear.  Such policies shall expressly provide that the requisite insurance cannot be altered or canceled without thirty (30) days prior written notice to Lender and shall insure Lender notwithstanding the act or neglect of Borrower.  Borrower hereby appoints Lender as Borrower's attorney in-fact, exercisable at Lender's option to endorse any check  which may be payable to Borrower in order to collect the proceeds of such insurance and any amount or amounts collected by Lender pursuant to the provisions of this Section may be applied by Lender, in its sole discretion, to any Obligations or to repair, reconstruct or replace the loss of or damage to Collateral as Lender in its discretion may from time to time determine.  Borrower further covenants that all insurance premiums owing under its current policies have been paid.  Borrower shall notify Lender, immediately, upon Borrower's receipt of a notice of termination, cancellation, or non-renewal from its insurance company of any such policy.

 

c. Financial Records – Borrower shall keep current and accurate books of records and accounts in which full and correct entries will be made of all of its business transactions, and will reflect in its financial statements adequate accruals and appropriations to reserves, all in accordance with GAAP.  Borrower shall not change its fiscal year end date without the prior written consent of Lender, which consent shall not be unreasonably withheld (it being acknowledged and agreed by Borrower that such consent may be conditioned upon Lender’s receipt of a fully executed amendment to this Agreement modifying certain of the measurement dates, calculation periods and dates for delivery of financial statements so as to conform to the revised fiscal year end date, which amendment shall be in form and substance satisfactory to Lender in its reasonable discretion).

 

d. Corporate Existence and Rights – Borrower shall do (or cause to be done) all things necessary to preserve and keep in full force and effect its existence, good standing, rights and franchises.

 

e. Compliance with Laws – Borrower shall be in compliance with any and all laws, ordinances, governmental rules and regulations, and court or administrative orders or decrees to which it is subject, whether federal, state or local, (including, without limitation, Environmental Laws and government procurement regulations) and shall obtain any and all licenses, permits, franchises or other governmental authorizations necessary to the ownership of its Property or to the conduct of its businesses, which violation or failure to obtain causes or could cause a Material Adverse Effect.  Borrower shall timely satisfy all assessments, fines, costs and penalties imposed (after exhaustion of all appeals, provided a stay has been put in effect during such appeal) by any Governmental Authority against Borrower or any Property of Borrower.

 

 

  

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6.3 Business Conducted.  Borrower shall continue in the business presently operated by it using its best efforts to maintain its customers and goodwill.  Borrower shall not engage, directly or indirectly, in any material respect in any line of business substantially different from the businesses conducted by Borrower immediately prior to the Closing Date.

 

6.4 Litigation.  Borrower shall give prompt notice to Lender of any litigation claiming in excess of Two Hundred Fifty Thousand Dollars ($250,000) from Borrower, or which may otherwise have a Material Adverse Effect.

 

6.5 Issue Taxes.  Borrower shall pay all taxes (other than taxes based upon or measured by any Lender's income or revenues or any personal property tax), if any, in connection with the issuance of the Notes and the recording of any lien documents.  The obligations of Borrower hereunder shall survive the payment of Borrower's Obligations hereunder and the termination of this Agreement.

 

6.6 Bank Accounts.  Borrower shall maintain its major depository and disbursement account(s) with Lender.

 

6.7 Employee Benefit Plans.  Borrower shall (a) fund all of its Pension Plan(s) in a manner that will satisfy the minimum funding standards of Section 302 of ERISA, (b) furnish Lender, promptly upon Lender's request, with copies of all reports or other statements filed with the United States Department of Labor, the PBGC or the IRS with respect to all Pension Plan(s), or which Borrower, or any member of a Controlled Group, may receive from the United States Department of Labor, the IRS or the PBGC, with respect to all such Pension Plan(s), and (c) promptly advise Lender of the occurrence of any reportable event (as defined in Section 4043 of ERISA, other than a reportable event for which the thirty (30) day notice requirement has been waived by the PBGC) or prohibited transaction (under Section 406 of ERISA or Section 4975 of the Internal Revenue Code) with respect to any such Pension Plan(s) and the action which Borrower proposes to take with respect thereto.  Borrower will make all contributions when due with respect to any multi employer pension plan in which it participates and will promptly advise Lender upon (x) its receipt of notice of the assertion against Borrower of a claim for withdrawal liability, (y) the occurrence of any event which, to the best of Borrower's knowledge, would trigger the assertion of a claim for withdrawal liability against Borrower, and (z) upon the occurrence of any event which, to the best of Borrower's knowledge, would place Borrower in a Controlled Group as a result of which any member (including Borrower) thereof may be subject to a claim for withdrawal liability, whether liquidated or contingent.

 

6.8 Financial Covenants.   Borrower shall maintain and comply with the following financial covenants:

 

a. Fixed Charge Coverage Ratio – Borrower shall maintain a Fixed Charge Coverage Ratio of not less than 1.2 to 1.0, measured as of April 30, 2012 and as of each fiscal quarter end thereafter, in each such case on a trailing two (2) quarter basis.

 

b. Leverage Ratio – Borrower shall maintain a Leverage Ratio of not more than 1.75 to 1.0, measured as of each fiscal quarter end.

 

6.9 Financial and Business Information.  Borrower shall deliver or cause to be delivered to Lender the following:

 

a. Financial Statements and Collateral Reports:  such data, reports, statements and information, financial or otherwise, as Lender may reasonably request, including, without limitation:

 

i. within forty (40) days after the end of each calendar month, the consolidated and consolidating income and cash flow statements of Borrower and its Subsidiaries for such month and for the expired portion of the fiscal year ending with the end of such month, setting forth in comparative form the corresponding figures for the corresponding periods of the previous fiscal year, and the consolidated and consolidating balance sheet of Borrower and its Subsidiaries as at the end of such month, setting forth in comparative form the corresponding figures as at the end of the corresponding periods of the previous fiscal year, all in reasonable detail and certified by Borrower's chief financial officer to have been prepared from the books and records of Borrower;

 

ii. within fifty (50) days after the end of each fiscal quarter, the consolidated and consolidating income and cash flow statements of Borrower and its Subsidiaries for such quarter and for the expired portion of the fiscal year ending with the end of such quarter, setting forth in comparative form the corresponding figures for the corresponding periods of the previous fiscal year, and the consolidated and consolidating balance sheet of Borrower and its Subsidiaries as at the end of such quarter, setting forth in comparative form the corresponding figures as at the end of the corresponding periods of the previous fiscal year, all in reasonable detail and certified by Borrower's chief financial officer to have been prepared from the books and records of Borrower;

 

 

  

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iii. within one hundred five (105) days after the end of each fiscal year of Borrower, the consolidated and consolidating income and cash flow statements of Borrower and its Subsidiaries for such year, and the consolidated and consolidating balance sheet of Borrower and its Subsidiaries as at the end of such fiscal year, setting forth in each case in comparative form the corresponding figures as at the end of and for the previous fiscal year, all in reasonable detail, including all supporting schedules, and audited by an independent public accounting firm acceptable to Lender, and unqualifiedly certified to have been prepared in accordance with GAAP, and such independent public accountants shall also unqualifiedly certify that in making the examinations necessary to their certification mentioned above they have reviewed the terms of this Agreement and the accounts and conditions of Borrower during the accounting period covered by the certificate and that such review did not disclose the existence of any condition or event which constitutes a Default or an Event of Default (or if such conditions or events existed, describing them) together with copies of any management letters provided by such accountants to management of Borrower;

 

iv. within twenty (20) days of the end of each calendar month, Borrower's accounts receivable aging report (including a detail of Billings in Excess of Cost), accounts payable aging report (including a specific line item for any amounts owing to Borrower’s subcontractors), inventory reports and such other reports as Lender reasonably deems necessary, certified by Borrower's chief financial officer as true and correct, all in form and substance satisfactory to Lender;

 

v. no later than the last calendar day of each fiscal year-end, Borrower's annual consolidated and consolidating financial statement projections for the upcoming fiscal year on a monthly basis, including income, cash flow statements and Undrawn Availability projections of Borrower and its Subsidiaries for each such month, and the consolidated and consolidating balance sheet of Borrower and its Subsidiaries as at the end of each such month, all in reasonable detail and certified by Borrower's chief financial officer to have been prepared on the basis of sound financial planning practice consistent with past budgets and financial statements and that such officer has no reason to question the reasonableness of any material assumptions on which such projections were prepared; and

 

vi. (A) at the time of each Advance and (B) on a monthly basis within twenty (20) days of each month-end, or more frequently if requested by Lender, a borrowing certificate prepared as of the close of business on the Business Day immediately preceding Borrower’s transmittal thereof, in the form of Exhibit "C" attached hereto and made part hereof ("Borrowing Certificate"), as such Exhibit may change from time to time at Lender’s discretion.  So long as any Borrowing Certificate shall be required to be delivered on a monthly basis in accordance with the foregoing sentence, the value of the Eligible Accounts and Eligible Inventory evidenced by such Borrowing Certificate shall not be reduced based on collections received until the delivery of a Borrowing Certificate in the immediately succeeding month.

 

b. Notice of Event of Default – promptly upon becoming aware of the existence of any condition or event which constitutes a Default or an Event of Default under this Agreement, a written notice specifying the nature and period of existence thereof and what action Borrower is taking (and proposes to take) with respect thereto;

 

c. Notice of Claimed Default – promptly upon receipt by Borrower, written notice of default, given to Borrower by any creditor for Indebtedness for borrowed money, otherwise holding long term Indebtedness of Borrower; and

 

d. Securities and Other Reports – all reports filed by the Borrower with the Securities and Exchange Commission pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, promptly upon its becoming available, one copy of each financial statement, report, notice or proxy statement sent by Borrower to stockholders generally, and, a copy of each regular or periodic report, and any registration statement, or prospectus in respect thereof, filed by Borrower with any securities exchange or with federal or state securities and exchange commissions or any successor agency.

 

6.10 Officers' Certificates.  Along with the set of financial statements delivered to Lender at the end of each fiscal quarter pursuant to Section 6.9(a)(ii) hereof and the annual financial statements delivered pursuant to Section 6.9(a)(iii) hereof, Borrower shall deliver to Lender a certificate ("Quarterly Compliance Certificate") (in the form of Exhibit "D," attached hereto and made part hereof) from the chief financial officer, chief executive officer or president of Borrower (and as to certificates accompanying the annual financial statements of Borrower, also certified by Borrower's independent certified public accountant) setting forth:

 

a. Event of Default – that the signer has reviewed the relevant terms of this Agreement, and has made (or caused to be made under his/her supervision) a review of the transactions and conditions of Borrower from the beginning of the accounting period covered by the financial statements being delivered therewith to the date of the certificate, and that such review has not disclosed the existence during such period of any condition or event which constitutes a Default or an Event of Default or, if any such condition or event exists, specifying the nature and period of existence thereof and what action Borrower has taken or proposes to take with respect thereto.

 

 

  

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b. Covenant Compliance – the information (including detailed calculations) required in order to establish that Borrower is in compliance with the requirements of Section 6.8 of this Agreement, as of the end of the period covered by the financial statements delivered.

 

6.11 Audits and Inspection.  Borrower shall permit any of Lender's officers or other representatives to visit and inspect upon reasonable notice during business hours any of the locations of Borrower (provided that, while an Event of Default exists, Lender may make such visits and inspections during business hours without prior notice), to examine and audit all of Borrower's books of account, records, reports and other papers, to make copies and extracts therefrom and to discuss its affairs, finances and accounts with its officers, employees and independent certified public accountants all at Borrower's expense at the standard rates charged by Lender for such activities, plus Lender's out-of-pocket expenses (including, without limitation, any amounts due under Section 2.7(f) of this Agreement, all of which amounts shall be Expenses).

 

6.12 Tax Returns, Financial Statements and Other Reports.  Promptly after each fiscal year of WPCS (but in any event no later than August 1, or February 1 if Borrower files an extension), Borrower shall promptly furnish, or shall cause to be furnished, to Lender copies of (a) the annual federal and state income tax returns of Borrower for the immediately preceding year, (b) the income tax return of Guarantor for the immediately preceding year and (c) personal financial statement (on Lender's form) for Guarantor, if an individual.  Borrower further agrees that, if requested by Lender, it shall promptly furnish Lender with copies of all reports filed with any federal, state or local Governmental Authority.

 

6.13 Information to Participant.  Lender may divulge to any participant, assignee or co-lender or prospective participant, assignee or co lender it may obtain in the Revolving Credit or any portion thereof, all information, and furnish to such Person copies of any reports, financial statements, certificates, and documents obtained under any provision of this Agreement, or related agreements and documents.

 

6.14 Material Adverse Developments.  Borrower agrees that immediately upon becoming aware of any development or other information outside the ordinary course of business and excluding matters of a general economic, financial or political nature which would reasonably be expected to have a Material Adverse Effect it shall give to Lender telephonic notice specifying the nature of such development or information and such anticipated effect.  In addition, such verbal communication shall be confirmed by written notice thereof to Lender on the same day such verbal communication is made or the next Business Day thereafter.

 

6.15 Places of Business.  Borrower shall give thirty (30) days prior written notice to Lender of any changes in the location of any of its respective places of business, of the places where records concerning its Accounts or where its Inventory are kept, or the establishment of any new places of business (and in connection therewith, deliver to Lender a fully executed waiver described and required by Section 3.5 hereof), or the discontinuance of any existing place of business; provided that Borrower may not establish any place of business outside of the United States except as exists on the Closing Date, and otherwise in the ordinary course of business so long as no Property of any Borrower is maintained at such location.

 

6.16 Commercial Tort Claims.  Borrower will immediately notify Lender in writing in the event that Borrower becomes a party to or obtains any rights with respect to any Commercial Tort Claim.  Such notification shall include information sufficient to describe such Commercial Tort Claim, including, but not limited to, the parties to the claim, the court in which the claim was commenced, the docket number assigned to such claim, if any, and a detailed explanation of the events that gave rise to the claim.  Borrower shall execute and deliver to Lender all documents and/or agreements necessary to grant Lender a security interest in such Commercial Tort Claim to secure the Obligations.  Borrower authorizes Lender to file (without Borrower's signature) initial financing statements or amendments, as Lender deems necessary to perfect its security interest in the Commercial Tort Claim.

 

6.17 Letter of Credit Rights.  Borrower shall provide Lender with written notice of any Letters of Credit for which Borrower is the beneficiary.  Borrower shall execute and deliver (or cause to be executed or delivered) to Lender, all documents and agreements as Lender may require in order to obtain and perfect its security interest in such Letter of Credit Rights.

 

6.18 Lost Documents.  Upon receipt of an affidavit of an officer of Lender as to the loss, theft, destruction or mutilation of the Note or any other security document(s) which is not of public record and, in the case of any such destruction or mutilation, upon surrender and cancellation of such Note or other document(s), Borrower will issue, in lieu thereof, a replacement Note or other document(s) in the same principal amount thereof and otherwise of like tenor.

 

6.19 Additional Borrower.  Upon any entity becoming a direct or indirect Subsidiary of Borrower, Borrower will provide Lender with written notice thereof setting forth information in reasonable detail describing all of the assets of such entity and shall (a) if required by Lender, cause such entity to execute a joinder agreement to this Agreement, (b) cause such entity to pledge all of its assets to Lender pursuant to this Agreement or otherwise in form and substance acceptable to Lender in its sole discretion, (c) cause such entity to execute a promissory note in favor of Lender, if required, and (d) deliver such other documentation as Lender may reasonably request in connection with the foregoing, including, without limitation, appropriate UCC-1 financing statements, certified resolutions and other organizational and authorizing documents of such entity and favorable opinions of counsel to such entity (which shall cover, among other things, the legality, validity, binding effect and enforceability of the documentation referred to above), all in form and substance reasonably satisfactory to Lender.  Nothing herein shall be deemed to permit the creation of a Subsidiary of Borrower otherwise prohibited under Section 7.4 hereof.

 

 

  

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6.20 Remote deposit.  Upon the installation of remote deposit systems at certain of the Borrower locations, (i) any Borrower that has a remote deposit system installed at its location shall irrevocably deposit all checks in a deposit account maintained with (and as determined by) Lender via remote deposit on the date of receipt thereof and (ii) any Borrower that does not have a remote deposit system installed at its location shall deposit all checks in a depository account maintained at a local retail branch of Lender on the date of receipt thereof.

 

6.21 Post Closing Covenants.

 

a. Bank of America Deposit Accounts.  On or before the 60th day following the Closing Date, Borrower shall deliver evidence to Lender that all of the deposit accounts of Borrower maintained at Bank of America, N.A. have been closed.

 

b. Tax and Judgment Liens.  On or before the 60th day following the Closing Date, Borrower shall deliver evidence of the payment in full of the obligations related to each of the Tax and Judgment Liens and (ii) the release of each of the Tax and Judgment Liens filed with the relevant Governmental Authorities, in each case which evidence shall be satisfactory to Lender in its sole discretion.

 

c. Daily Transfer of Funds.  Effective January 30, 2012 and until such time that all of the deposit accounts of Borrower maintained at Bank of America have been closed pursuant to Section 6.21(a) above, Borrower shall cause all funds held in all depository accounts maintained with Bank of America, N.A. in excess of $1,500,000 in the aggregate to be transferred on a daily basis to a deposit account maintained with (and as determined by) Lender.

 

d. WPCS Australia Certificate.  On or before the 5th Business Day following the Closing Date, Borrower shall deliver (i) a certificate evidencing 65% of the shares of Capital Stock of WPCS Australia and (ii) a transfer document relating thereto executed in blank, which shall be in form and substance satisfactory to Lender in its sole discretion.

 

SECTION VII. BORROWER'S NEGATIVE COVENANTS.

 

Borrower covenants that until all of the Obligations are paid and satisfied in full and the Revolving Credit has been terminated, that:

 

7.1 Merger, Consolidation, Dissolution or Liquidation.

 

a. Borrower shall not engage in any Asset Sale other than equipment that is replaced by other equipment of comparable or superior quality and value within ninety (90) days of such Asset Sale.

 

b. Borrower shall not merge or consolidate with any other Person, except for a merger or consolidation with or into any other Borrower, or commence a dissolution or liquidation.

 

7.2 Acquisitions.  Borrower shall not acquire all or a material portion of the Capital Stock or assets of any Person in any transaction or in any series of related transactions or enter into any sale and leaseback transaction, other than in connection with a Permitted Acquisition.

 

7.3 Liens and Encumbrances.  Borrower shall not: (i) execute a negative pledge agreement with any Person covering any of its Property, or (ii) cause or permit or agree or consent to cause or permit in the future (upon the happening of a contingency or otherwise), its Property (including, without limitation, the Collateral), whether now owned or hereafter acquired, to be subject to a Lien or be subject to any claim except for Permitted Liens.

 

7.4 Transactions With Affiliates or Subsidiaries.

 

 

  

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a. Borrower shall not enter into any transaction with any Subsidiary or other Affiliate, including, without limitation, the purchase, sale, or exchange of Property, or the loaning or giving of funds to any Affiliate or any Subsidiary unless:  (i) such Subsidiary or Affiliate is engaged in a business substantially related to the business conducted by Borrower, is a Borrower hereunder and the transaction is in the ordinary course of and pursuant to the reasonable requirements of Borrower's business and upon terms substantially the same and no less favorable to Borrower as it would obtain in a comparable arm's length transactions with any Person not an Affiliate or a Subsidiary, and so long as such transaction is not prohibited hereunder; or (ii) such transaction is intended for incidental administrative purposes.

 

b. Borrower shall not create or acquire any Subsidiary other than a Subsidiary that is organized or incorporated in the United States or any State or territory thereof and is joined as a Borrower hereto pursuant to Section 6.19 hereof.

 

c. Borrower shall not permit the Inactive Subsidiary to incur any Indebtedness, acquire any assets or conduct any business.

 

7.5 Guarantees.  Excepting the endorsement in the ordinary course of business of negotiable instruments for deposit or collection, Borrower shall not become or be liable, directly or indirectly, primary or secondary, matured or contingent, in any manner, whether as guarantor, surety, accommodation maker, or otherwise, for the existing or future Indebtedness of any kind of any Person.

 

7.6 Distributions, Bonuses and Other Indebtedness.  Borrower shall not:  (a) declare or pay or make any forms of Distribution to holders of Borrower's Capital Stock; except for Distributions payable in stock or other equity interest, as the case may be, as required pursuant to the Rights Agreement, dated February 24, 2010 by and between WPCS and Interwest Transfer Co., Inc., (b) declare or pay any bonus compensation to its officers if an Event of Default exists or would result from the payment thereof; (c) hereafter incur or become liable for any Indebtedness other than Permitted Indebtedness; or (d) make any prepayments on any existing or future Indebtedness (other than the Obligations).

 

7.7 Loans and Investments.  Borrower shall not make or have outstanding loans, advances, extensions of credit or capital contributions to, or investments in, any Person other than Permitted Investments.

 

7.8 Use of Lenders' Name.  Borrower shall not use Lender's name in connection with any of its business operations.  Nothing herein contained is intended to permit or authorize Borrower to make any contract on behalf of Lender.

 

7.9 Miscellaneous Covenants.

 

a. Borrower shall not become or be a party to any contract or agreement which at the time of becoming a party to such contract or agreement materially impairs Borrower's ability to perform under this Agreement, or under any other instrument, agreement or document to which Borrower is a party or by which it is or may be bound.

 

b. Borrower shall not carry or purchase any "margin stock" within the meaning of Regulations U, T or X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II.

 

7.10 Jurisdiction of Organization.  If a Registered Organization, Borrower shall not change its jurisdiction of organization.

 

SECTION VIII. DEFAULT

 

8.1 Events of Default.  Each of the following events shall constitute an event of default ("Event of Default"):

 

a. Payments – if Borrower fails to make any payment of principal or interest, including any Overadvance, under the Obligations on the date such payment is due and payable; or

 

b. Other Charges – if Borrower fails to pay any other charges, fees, Expenses or other monetary obligations owing to Lender arising out of or incurred in connection with this Agreement within five (5) Business Days of the date such payment is due and payable; or

 

c. Particular Covenant Defaults – if Borrower fails to perform, comply with or observe any covenant or undertaking contained in this Agreement and (other than with respect to the covenants contained in Section 6.2(b), 6.8, 6.9, 6.10, 6.11 and Section 7 for which no cure period shall exist), such failure continues for fifteen (15) days after the occurrence thereof; or

 

 

  

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d. Financial Information - if any statement, report, financial statement, or certificate made or delivered by Borrower or any of its officers, employees or agents, to Lender is not true and correct, in all material respects, when made; or

 

e. Uninsured Loss – if there shall occur any uninsured damage to or loss, theft, or destruction in excess of Five Hundred Thousand Dollars ($500,000) in the aggregate with respect to any portion of any Property of Borrower; or

 

f. Warranties or Representations – if any warranty, representation or other statement by or on behalf of Borrower contained in or pursuant to this Agreement, the other Loan Documents or in any document, agreement or instrument furnished in compliance with, relating to, or in reference to this Agreement, is false, erroneous, or misleading in any material respect when made; or

 

g. Agreements with Others – (i) if Borrower shall default beyond any grace period in the payment of principal or interest of any Indebtedness of Borrower in excess of One Hundred Thousand Dollars ($100,000) in the aggregate; or (ii) if Borrower otherwise defaults under the terms of any such Indebtedness if the effect of such default is to enable the holder of such Indebtedness to accelerate the payment of Borrower's obligations, which are the subject thereof, prior to the maturity date or prior to the regularly scheduled date of payment;

 

h. Other Agreements with Lender – if Borrower breaches or violates the terms of, or if a default (and expiration of any applicable cure period), or an Event of Default, occurs under, any Interest Hedging Instrument or any other existing or future agreement (related or unrelated) (including, without limitation, the other Loan Documents) between Borrower and Lender; or

 

i. Judgments – if any final judgment for the payment of money in excess of One Hundred Thousand Dollars ($100,000) in the aggregate (i) which is not fully and unconditionally covered by insurance or (ii) for which Borrower has not established a cash or cash equivalent reserve in the full amount of such judgment, shall be rendered by a court of record against Borrower and such judgment shall continue unsatisfied and in effect for a period of thirty (30) consecutive days without being vacated, discharged, satisfied or bonded pending appeal; or

 

j. Assignment for Benefit of Creditors, etc. – if Borrower makes or proposes in writing, an assignment for the benefit of creditors generally, offers a composition or extension to creditors, or makes or sends notice of an intended bulk sale of any business or assets now or hereafter owned or conducted by  Borrower; or

 

k. Bankruptcy, Dissolution, etc. – upon the commencement of any action for the dissolution or liquidation of Borrower, or the commencement of any proceeding to avoid any transaction entered into by Borrower, or the commencement of any case or proceeding for reorganization or liquidation of Borrower's debts under the Bankruptcy Code or any other state or federal law, now or hereafter enacted for the relief of debtors, whether instituted by or against Borrower; provided however, that Borrower shall have thirty (30) days to obtain the dismissal or discharge of involuntary proceedings filed against it, it being understood that during such thirty (30) day period, Lender shall not be obligated to make Advances hereunder and Lender may seek adequate protection in any bankruptcy proceeding; or

 

l. Receiver – upon the appointment of a receiver, liquidator, custodian, trustee or similar official or fiduciary for any Borrower or for Borrower's Property; or

 

m. Execution Process, etc. – the issuance of any execution or distraint process against any Property of Borrower; or

 

n. Termination of Business – if Borrower ceases any material portion of its business operations as presently conducted; or

 

o. Pension Benefits, etc. – if Borrower fails to comply with ERISA so that proceedings are commenced to appoint a trustee under ERISA to administer Borrower's employee plans or the PBGC institutes proceedings to appoint a trustee to administer such plan(s), or a Lien is entered to secure any deficiency or claim or a "reportable event" as defined under ERISA occurs; or

 

p. Investigations – any indication or evidence received by Lender that reasonably leads it to believe Borrower may have directly or indirectly been engaged in any type of activity which, would be reasonably likely to result in the forfeiture of any material property of Borrower to any governmental entity, federal, state or local; or

 

q. Change of Control – if there shall occur a Change of Control; or

 

r. Surety and Guaranty Agreement –  if any breach or default occurs under the Surety and Guaranty Agreement, if any Guarantor dies, or if any Surety and Guaranty Agreement, or any obligation to perform thereunder is terminated; or

 

s. Liens – if any Lien in favor of Lender shall cease to be valid, enforceable and perfected and prior to all other Liens other than Permitted Liens or if Borrower or any Governmental Authority shall assert any of the foregoing; or

 

 

 

  

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t. Material Adverse Effect – if there is any change in Borrower's financial condition which, in Lender's reasonable opinion, has or would be reasonably likely to have a Material Adverse Effect, or

 

u. Other Loan Documents – if any other Person (other than Lender) party to a Loan Document, breaches or violates any term, provision or condition of such Loan Document.

 

v. Management Changes – if (i) Andrew Hidalgo, as Chief Executive Officer of WPCS, or (ii) Joseph Heater, as Chief Financial Officer of WPCS, shall cease to be employed in either of such capacities.

 

w. WPCS Australia and Subsidiaries – (i) if WPCS Australia or any of its Subsidiaries fails to perform, comply with or observe any covenant or undertaking contained in Sections 6.1, 6.2, 6.3, 6.4, 6.5, 6.8 (it being understood that the financial covenants are calculated on a consolidated basis with Borrower), 6.13 or 6.14 of this Agreement as if each covenant contained in such Sections applied to WPCS Australia and each of its Subsidiaries individually and such failure continues for fifteen (15) days after the occurrence thereof (other than with respect to the covenants contained in Sections 6.2(b) and 6.8 for which no cure period shall exist); or (ii) any of the events listed in Sections 8.1(e), 8.1(g), 8.1(i), 8.1(j), 8.1(k), 8.1(l), 8.1(m), 8.1(n), 8.1(o), 8.1(p) or 8.1(t) occur with respect to WPCS Australia or any of its Subsidiaries, or any other Subsidiary hereafter formed or acquired with the prior written consent of Lender as herein provided.

 

8.2 Cure.  Nothing contained in this Agreement or the Loan Documents shall be deemed to compel Lender to accept a cure of any Event of Default hereunder.

 

8.3 Rights and Remedies on Default.

 

a. In addition to all other rights, options and remedies granted or available to Lender under this Agreement or the Loan Documents (each of which is also then exercisable by Lender), or otherwise available at law or in equity, upon or at any time after the occurrence and during the continuance of a Default or an Event of Default, Lender may, in its discretion, withhold or cease making Advances under the Revolving Credit.

 

b. In addition to all other rights, options and remedies granted or available to Lender under this Agreement or the Loan Documents (each of which is also then exercisable by Lender), or otherwise available at law or in equity, upon or at any time after the occurrence and during the continuance of an Event of Default Lender may, in its discretion, terminate the Revolving Credit and declare the Obligations immediately due and payable, all without demand, notice, presentment or protest or further action of any kind (it also being understood that the occurrence of any of the events or conditions set forth in Sections 8.1(j),(k) or (l) shall automatically cause an acceleration of the Obligations).

 

c. In addition to all other rights, options and remedies granted or available to Lender, under this Agreement or the Loan Documents (each of which is also then exercisable by Lender), upon or at any time after the occurrence and during the continuance of an Event of Default, Borrower shall be obligated to deliver and pledge to Lender, cash collateral in the amount of 110% of the aggregate undrawn amount of all Letters of Credit outstanding at any time.

 

d. In addition to all other rights, options and remedies granted or available to Lender under this Agreement or the Loan Documents (each of which is also then exercisable by Lender), or otherwise available at law or in equity, upon or at any time after the acceleration of the Obligations following the occurrence of an Event of Default (other than the rights with respect to clause (iv) below which Lender may exercise at any time after an Event of Default and regardless of whether there is an acceleration), Lender may, in its discretion, exercise all rights under the UCC and any other applicable law or in equity, and under all Loan Documents permitted to be exercised after the occurrence of an Event of Default, including the following rights and remedies (which list is given by way of example and is not intended to be an exhaustive list of all such rights and remedies):

 

i. The right to take possession of, send notices regarding and collect directly the Collateral, with or without judicial process (including without limitation the right to notify the United States postal authorities to redirect mail addressed to Borrower to an address designated by Lender); or

 

ii. By its own means or with judicial assistance, enter Borrower's premises and take possession of the Collateral, or render it unusable, or dispose of the Collateral on such premises in compliance with subsection (e) below, without any liability for rent, storage, utilities or other sums, and Borrower shall not resist or interfere with such action; or

 

iii. Require Borrower at Borrower's expense to assemble all or any part of the Collateral (other than real estate or fixtures) and make it available to Lender at any place designated by Lender; or

 

iv. The right to reduce or modify the Borrowing Base or to modify the terms and conditions upon which Lender may be willing to consider making Advances under the Revolving Credit or to take additional reserves against the Revolving Credit; or

 

v. The right to enjoin any violation of Section 7.1, it being agreed that Lender's remedies at law are inadequate.

 

 

  

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e. Borrower hereby agrees that a notice received by it at least seven (7) days before the time of any intended public sale or of the time after which any private sale or other disposition of the Collateral is to be made, shall be deemed to be reasonable notice of such sale or other disposition.  If permitted by applicable law, any perishable inventory or Collateral which threatens to speedily decline in value or which is sold on a recognized market may be sold immediately by Lender without prior notice to Borrower.  Borrower covenants and agrees not to interfere with or impose any obstacle to Lender's exercise of its rights and remedies with respect to the Collateral, after the occurrence of an Event of Default hereunder.  Lender shall have no obligation to clean up or prepare the Collateral for sale.  If Lender sells any of the Collateral upon credit, Borrower will only be credited with payments actually made by the purchaser thereof, that are received by Lender.  Lender may, in connection with any sale of the Collateral specifically disclaim any warranties of title or the like.

 

8.4 Nature of Remedies.  All rights and remedies granted Lender hereunder and under the Loan Documents, or otherwise available at law or in equity, shall be deemed concurrent and cumulative, and not alternative remedies, and Lender may proceed with any number of remedies at the same time until all Obligations are satisfied in full.  The exercise of any one right or remedy shall not be deemed a waiver or release of any other right or remedy, and Lender, upon or at any time after the occurrence of an Event of Default, may proceed against Borrower, at any time, under any agreement, with any available remedy and in any order.

 

8.5 Set Off.

 

a. Borrower and any Guarantor hereby grant to Lender a lien, security interest and a right of setoff as security for all liabilities and obligations to Lender, including, but not limited to, the Obligations, whether now existing or hereafter arising, upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Lender or any entity under the control of Lender, or in transit to any of them. At any time, without demand or notice, Lender may set off the same or any part thereof and apply the same to any liability or obligation of Borrower and any Guarantor even though unmatured and regardless of the adequacy of any other collateral securing the Loan

 

b. If any bank account of Borrower or Guarantor with Lender, any other subsidiary or Affiliate of Lender or any participant is attached or otherwise liened or levied upon by any third party, Lender (and such participant) shall have and be deemed to have, without notice to Borrower or Guarantor, the immediate right of set off and may apply the funds or amount thus set off against any of Borrower's Obligations hereunder.

 

c. Any and all rights to require Lender to exercise its rights or remedies with respect to any other Collateral which secures the Obligations, prior to exercising its right of setoff with respect to such deposits, credits or other property of Borrower or any Guarantor, are hereby knowingly, voluntarily and irrevocably waived.  Lender is not required to marshal any present or future security for, or guarantees of, the obligations or to resort to any such security or guarantee in any particular order and Borrower and any Guarantor waive, to the fullest extent that it lawfully can, (a) any right they might have to require Lender to pursue any particular remedy before proceeding against them and (b) any right to the benefit of, or to direct the application of the proceeds of any Collateral until the Obligations  are paid in full.

 

SECTION IX. MISCELLANEOUS

 

9.1 Governing Law.  THIS AGREEMENT, AND ALL MATERS ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND ALL RELATED AGREEMENTS AND DOCUMENTS, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA.  THE PROVISIONS OF THIS AGREEMENT AND ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED TO HEREIN ARE TO BE DEEMED SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION SHALL NOT AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL CONTINUE IN FULL FORCE AND EFFECT.

 

9.2 Integrated Agreement.  The Notes, the other Loan Documents, all related agreements, and this Agreement shall be construed as integrated and complementary of each other, and as augmenting and not restricting Lender's rights and remedies.  If, after applying the foregoing, an inconsistency still exists, the provisions of this Agreement shall constitute an amendment thereto and shall control.

 

9.3 Waiver.  No omission or delay by Lender in exercising any right or power under this Agreement or any related agreements and documents will impair such right or power or be construed to be a waiver of any Default, or Event of Default or an acquiescence therein, and any single or partial exercise of any such right or power will not preclude other or further exercise thereof or the exercise of any other right, and as to Borrower no waiver will be valid unless in writing and signed by Lender and then only to the extent specified.

 

9.4 Indemnity.

 

a. Borrower releases and shall indemnify, defend and hold harmless Lender and its respective officers, employees and agents, of and from any claims, demands, liabilities, obligations, judgments, injuries, losses, damages and costs and expenses (including, without limitation, reasonable legal fees) resulting from (i) acts or conduct of Borrower under, pursuant or related to this Agreement and the other Loan Documents, (ii) Borrower's breach or violation of any representation, warranty, covenant or undertaking contained in this Agreement or the other Loan Documents, (iii) Borrower's failure to comply with any or all laws, statutes, ordinances, governmental rules, regulations or standards, whether federal, state or local, or court or administrative orders or decrees, (including without limitation Environmental Laws, etc.), and (iv) any claim by any other creditor of Borrower against Lender arising out of any transaction whether hereunder or in any way related to  the Loan Documents and all costs, expenses, fines, penalties or other damages resulting therefrom, unless resulting solely from acts or conduct of Lender constituting willful misconduct or gross negligence.

 

b. Promptly after receipt by an indemnified party under subsection (a) above of notice of the commencement of any action by a third party, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof.  The omission so to notify the indemnifying party shall relieve the indemnifying party from any liability which it may have to any indemnified party under such subsection only if the indemnifying party is unable to defend such actions as a result of such failure to so notify.  In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnified party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation.

 

 

 

  

40

  

 

9.5 Time.  Whenever Borrower shall be required to make any payment, or perform any act, on a day which is not a Business Day, such payment may be made, or such act may be performed, on the next succeeding Business Day.  Time is of the essence in Borrower's performance under all provisions of this Agreement and all related agreements and documents.

 

9.6 Expenses of Lender.  At Closing and from time to time thereafter, Borrower will pay upon demand of Lender all reasonable costs, fees and expenses of Lender in connection with (i) the analysis, negotiation, preparation, execution, administration, delivery and termination of this Agreement, and other Loan Documents and the documents and instruments referred to herein and therein, and any amendment, amendment and restatement, supplement, waiver or consent relating hereto or thereto, whether or not any such amendment, amendment and restatement, supplement, waiver or consent is executed or becomes effective, search costs, the reasonable fees, expenses and disbursements of counsel for Lender, any fees or expenses incurred by Lender under Section 6.11 for which Borrower is obligated thereunder, and reasonable charges of any expert consultant to Lender, (ii) the enforcement of Lender’s rights hereunder, or the collection of any payments owing from, Borrower under this Agreement and/or the other Loan Documents or the protection, preservation or defense of the rights of Lender hereunder and under the other Loan Documents, and (iii) any refinancing or restructuring of the credit arrangements provided under this Agreement and other Loan Documents in the nature of a "work-out" or of any insolvency or bankruptcy proceedings, or otherwise (including the reasonable fees and disbursements of counsel for Lender and, with respect to clauses (ii) and (iii), reasonable allocated costs of internal counsel) (collectively, the "Expenses");

 

9.7 Brokerage.  This transaction was brought about and entered into by Lender and Borrower acting as principals and, except as disclosed on Schedule “9.7”, without any brokers, agents or finders being the effective procuring cause hereof.  Borrower represents that it has not committed Lender to the payment of any brokerage fee, commission or charge in connection with this transaction.  If any such claim is made on Lender by any broker, finder or agent or other person, Borrower hereby indemnifies, defends and saves such party harmless against such claim and further will defend, with counsel satisfactory to Lender, any action or actions to recover on such claim, at Borrower's own cost and expense, including such party's reasonable counsel fees.  Borrower further agrees that until any such claim or demand is adjudicated in such party's favor, the amount demanded shall be deemed an Obligation of Borrower under this Agreement.

 

9.8 Notices.

 

a. Any notices or consents required or permitted by this Agreement shall be in writing and shall be deemed given if delivered in person to the person listed below or if sent by telecopy or by nationally recognized overnight courier, as follows, unless such address is changed by written notice hereunder:

 

	
  

	
If to Lender to:

	
Sovereign Bank, N.A.

 

	
  

	
1500 Market Street, 25th floor

 

	
  

	
Centre Square West

 

	
  

	
Philadelphia, PA 19102

 

	
  

	
Attention: Robert Bushey, SVP

 

	
  

	
Telecopy No.: 215-568-9587

 

	
  

	
With copies to Bank Counsel:

	
Blank Rome LLP

 

	
  

	
130 N. 18th Street

 

	
  

	
Philadelphia, PA 19103

 

	
  

	
Attention: Michael C. Graziano, Esquire

 

	
  

	
Telecopy No.: 215-832-5387

 

	
  

	
If to Borrower to:

	
WPCS International Incorporated

 

	
  

	
One East Uwchlan Avenue, Suite 301

 

	
  

	
Exton, Pennsylvania 19341

 

	
  

	
Attention: Andrew Hidalgo, CEO

 

 

 

  

41

  

 

	
  

	
Telecopy No.: (610) 903-0401

 

	
  

	
With copies to Borrower's Counsel:

	
Sichenzia Ross Friedman Ference LLP

 

	
  

	
61 Broadway, 32nd Floor

 

	
  

	
New York, New York 10006

 

	
  

	
Attention: Thomas A. Rose, Esq.

 

	
  

	
Telecopy No.: (212) 930-9725

Borrower by any of the above methods shall be deemed to be given when so received.

 

c. Lender shall be fully entitled to rely upon any telecopy transmission or other writing purported to be sent by any Authorized Officer (whether requesting an Advance or otherwise) as being genuine and authorized.

 

9.9 Headings.  The headings of any paragraph or Section of this Agreement are for convenience only and shall not be used to interpret any provision of this Agreement.

 

9.10 Survival.  All warranties, representations, and covenants made by Borrower herein, or in any agreement referred to herein or on any certificate, document or other instrument delivered by it or on its behalf under this Agreement, shall be considered to have been relied upon by Lender, and shall survive the delivery to Lender of the Notes, regardless of any investigation made by Lender or on its behalf.  All statements in any such certificate or other instrument prepared and/or delivered for the benefit of Lender shall constitute warranties and representations by Borrower hereunder.  Except as otherwise expressly provided herein, all covenants made by Borrower hereunder or under any other agreement or instrument shall be deemed continuing until all Obligations are satisfied in full.  All indemnification obligations under this Agreement, including under Section 2.2, 6.5, 9.4, 9.6 and 9.7, shall survive the termination of this Agreement and payment of the Obligations for a period of one (1) year.

 

9.11 Successors and Assigns.

 

a. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties.  Borrower may not transfer, assign or delegate any of its duties or obligations hereunder.

 

b. Borrower and Guarantor agree to pay and perform, when due, all other debts, liabilities, duties, representations, covenants and warranties to any Affiliate or Participant of Lender, whether now or in the future existing, direct, indirect or acquired by negotiation, or the result of any derivative transaction, purchase, discount or assignment, primary or secondary, joint or several, fixed or contingent, (regardless of form, existence of collateral therefor, whether guaranteed, or subject to a participation agreement) secured or unsecured, whether arising from an extension of credit, funds transfers, letter of credit, deposit relationship, or otherwise, and any amendments, extensions or renewals thereof, together with all costs, taxes, expenses and attorneys' fees (whether or not charged by outside counsel) incurred in connection therewith.

 

c. Lender has the unrestricted right at any time and from time to time, and without the consent of or notice to Borrower (or any Guarantor), to grant to one or more institutions or other persons (each a “Participant”) participating interests in Lender’s obligations to lend hereunder and/or any or all of the loans held by Lender hereunder. In the event of any such grant by Lender of a participating interest to a Participant, whether or not upon notice to Borrower, Lender remains responsible for the performance of its obligations hereunder and Borrower is to continue to deal solely and directly with Lender in connection with Lender’s rights and obligations hereunder. Lender may furnish any information concerning Borrower or Guarantor in its possession from time to time to any prospective assignees and Participants, provided that Lender requires any such prospective assignee or Participant to maintain the confidentiality of such information.

 

d. Lender may at any time pledge, endorse, assign or transfer all or any portion of its rights under this Agreement or related Loan Documents including any portion thereof to any of the twelve (12) Federal Reserve Banks organized under Section 4 of the Federal Reserve Act. 12. U.S.C. Section 341.  No such pledge or enforcement thereof releases Lender 

b. Any notice sent by Lender, or from its obligations under any of the Loan Documents.  Such rights exist without the need for Borrower’s (or any Guarantor's) consent.

 

 

  

42

  

 

e. Lender has the unrestricted right at any time or from time to time, and without the Borrower’s (or Guarantor’s) consent, to sell, assign, endorse, or transfer all or any portion of its rights and obligations hereunder to one or more banks or other entities (each, an “Assignee”) and Borrower (and Guarantor) agrees that it will execute, or cause to be executed such documents including without limitation, amendments to this Agreement and to any other documents, instruments and agreements executed in connection herewith as Lender  deems necessary to effect the foregoing. In addition, at the request of Lender and any such Assignee, Borrower will issue one or more new promissory notes, as applicable, to any such Assignee and, if Lender has retained any of its rights and obligations hereunder following such assignment, to Lender, which new promissory notes are issued in replacement of, but not in discharge of, the liability evidenced by the Notes held by Lender prior to such assignment and is to reflect the amount of the respective commitments and loans held by such Assignee and Lender after giving effect to such assignment. Upon the execution and delivery of appropriate assignment documentation, amendments and any other documentation required by Lender in connection with such assignment, and the payment by Assignee of the purchase price agreed to by Lender and such Assignee, such Assignee is a party to this Agreement and has all of the rights and obligations of Lender hereunder (and under any and all other guaranties, documents, instruments and agreements executed in connection herewith) to the extent that such rights and obligations have been assigned by Lender pursuant to the assignment documentation between Lender and Assignee, and Lender is to be released from its obligations hereunder and thereunder to a corresponding extent.

 

9.12 Duplicate Originals.  Two or more duplicate originals of this Agreement may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument.

 

9.13 Modification.  No modification hereof or any agreement referred to herein shall be binding or enforceable unless in writing and signed by Borrower and Lender.

 

9.14 Signatories.  Each individual signatory hereto represents and warrants that he is duly authorized to execute this Agreement on behalf of his principal and that he executes the Agreement in such capacity and not as a party.

 

9.15 Third Parties.  No rights are intended to be created hereunder, or under any related agreements or documents for the benefit of any third party donee, creditor or incidental beneficiary of Borrower.  Nothing contained in this Agreement shall be construed as a delegation to Lender of Borrower's duty of performance, including, without limitation, Borrower's duties under any account or contract with any other Person.

 

9.16 Discharge of Taxes, Borrower's Obligations, Etc.  Lender, in its sole discretion, shall have the right at any time, and from time to time, with at least ten (10) days prior notice to Borrower if Borrower fail to do so, to: (a) pay for the performance of any of Borrower's obligations hereunder, and (b) discharge taxes or Liens, at any time levied or placed on Borrower's Property in violation of this Agreement unless Borrower is in good faith with due diligence by appropriate proceedings contesting such taxes or Liens and maintaining proper reserves therefor in accordance with GAAP.  Expenses and advances shall be added to the Revolving Credit, and bear interest at the rate applicable to the Revolving Credit, until reimbursed to Lender.  Such payments and advances made by Lender shall not be construed as a waiver by Lender of a Default or Event of Default under this Agreement.

 

9.17 Withholding and Other Tax Liabilities.  Lender shall have the right to refuse to make any Advances from time to time unless Borrower shall, at Lender's request, have given to Lender evidence, reasonably satisfactory to Lender, that Borrower has properly deposited or paid, as required by law, all withholding taxes and all federal, state, city, county or other taxes due up to and including the date of the requested Advance.   Copies of deposit slips showing payment shall constitute satisfactory evidence for such purpose.  In the event that any Lien, assessment or tax liability against Borrower shall arise in favor of any taxing authority, whether or not notice thereof shall be filed or recorded as may be required by law, Lender shall have the right (but shall not be obligated, nor shall Lender hereby assume the duty) to pay any such Lien, assessment or tax liability by virtue of which such charge shall have arisen; provided, however, that Lender shall not pay any such tax, assessment or Lien if the amount, applicability or validity thereof is being contested in good faith and by appropriate proceedings by Borrower.  In order to pay any such Lien, assessment or tax liability, Lender shall not be obliged to wait until such lien, assessment or tax liability is filed before taking such action as hereinabove set forth.  Any sum or sums which Lender shall have paid for the discharge of any such Lien shall be added to the Revolving Credit and shall be paid by Borrower to Lender with interest thereon at the rate applicable to the Revolving Credit, upon demand, and Lender shall be subrogated to all rights of such taxing authority against Borrower.

 

 

  

43

  

 

9.18 Consent to Jurisdiction.  Borrower and Lender each hereby irrevocably consent to the non-exclusive jurisdiction of the Courts of the Commonwealth of Pennsylvania or the United States District Court for the Eastern District of Pennsylvania in any and all actions and proceedings whether arising hereunder or under any other agreement or undertaking.  Borrower waives any objection which Borrower may have based upon lack of personal jurisdiction, improper venue or forum non conveniens.  Borrower irrevocably agrees to service of process by certified mail, return receipt requested to the address of the appropriate party set forth herein.

 

9.19 Additional Documentation.  Borrower shall execute and/or re-execute, and cause any Guarantor or other Person party to any Loan Document, to execute and/or re-execute and to deliver to Lender or Lender’s counsel, as may be deemed appropriate, any document or instrument signed in connection with this Agreement which was incorrectly drafted and/or signed, as well as any document or instrument which should have been signed at or prior to the Closing, but which was not so signed and delivered.  Borrower agrees to comply with any written request by Lender within ten (10) days after receipt by Borrower of such request.

 

9.20 Advertisement.

 

a. Lender, in its sole discretion, shall have the right to announce and publicize the financing established hereunder, as it deems appropriate, by means and media selected by Lender.  Such publication shall include all pertinent information relating to such financing, including without limitation, the term, purpose, pricing, loan amount, name of Borrower and location of any Real Property.

 

b. The form and content of the published information shall be in the sole discretion of Lender and shall be considered the sole and exclusive property of Lender.  All expenses related to publicizing the financing shall be the sole responsibility of Lender.

 

9.21 Waiver of Jury Trial.  BORROWER AND LENDER EACH HEREBY WAIVE ANY AND ALL RIGHTS IT MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION, PROCEEDING OR COUNTERCLAIM ARISING WITH RESPECT TO RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO OR UNDER THE LOAN DOCUMENTS OR WITH RESPECT TO ANY CLAIMS ARISING OUT OF ANY DISCUSSIONS, NEGOTIATIONS OR COMMUNICATIONS INVOLVING OR RELATED TO ANY PROPOSED RENEWAL, EXTENSION, AMENDMENT, MODIFICATION, RESTRUCTURE, FORBEARANCE, WORKOUT, OR ENFORCEMENT OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS.

 

9.22 Consequential Damages.  Neither Lender nor agent or attorney of Lender, shall be liable for any consequential damages arising from any breach of contract, tort or other wrong relating to the establishment, administration or collection of the Obligations.

 

[SIGNATURES TO FOLLOW ON SEPARATE PAGE]

 

 

 

  

44

  

 

 IN WITNESS WHEREOF, the undersigned parties have executed this Agreement the day and year first above written.

 

WPCS INTERNATIONAL INCORPORATED

 

By: /s/ JOSEPH HEATER

Name: Joseph Heater

Title: Chief Financial Officer

 

WPCS INTERNATIONAL – SUISUN CITY, INC.

 

By: /s/ JOSEPH HEATER

Name: Joseph Heater

Title: Authorized Signatory

 

WPCS INTERNATIONAL – SEATTLE, INC.

 

By: /s/ JOSEPH HEATER

Name: Joseph Heater

Title: Authorized Signatory

 

WPCS INTERNATIONAL – PORTLAND, INC.

 

By: /s/ JOSEPH HEATER

Name: Joseph Heater

Title: Authorized Signatory

 

WPCS INTERNATIONAL – HARTFORD, INC.

 

By: /s/ JOSEPH HEATER

Name: Joseph Heater

Title: Authorized Signatory

 

WPCS INTERNATIONAL – LAKEWOOD, INC.

 

By: /s/ JOSEPH HEATER

Name: Joseph Heater

Title: Authorized Signatory

 

WPCS INTERNATIONAL – TRENTON, INC.

 

By: /s/ JOSEPH HEATER

Name: Joseph Heater

Title: Authorized Signatory

 

SOVEREIGN BANK, N.A.

 

By: /s/ ROBERT BUSHEY

Name: Robert Bushey

Title: Senior Vice President

 

 

 

 

  

45

  

 

EXHIBIT “A”

 

FORM OF AUTHORIZATION CERTIFICATE

 

(Borrower Letterhead)

 

Date: _______________

 

Sovereign Bank, N.A.

 

1500 Market Street, 25th floor

 

Centre Square West

 

Philadelphia, PA 19102

 

Attention: Robert Bushey, SVP

 

Telecopy No.: 215-568-9587

 

Dear _____________:

 

The following individuals are authorized to request loan advances against (Borrower’s Name) (“Borrower”) line of credit and transfer funds from any of Borrower’s accounts per written instructions received via fax:

 

	
Authorized Person

	
Title

	
Signature

	
1.           _________________

	
_____________________

	
_______________________

	
2.           __________________

	
_____________________

	
_______________________

	
3.           __________________

	
_____________________

	
_______________________

	  	  	  

The following personnel are authorized to sign all Borrowing Base Certificates:

 

	
Authorized Person

	
Title

	
Signature

	
1.           _________________

	
_____________________

	
_______________________

	
2.           __________________

	
_____________________

	
_______________________

	
3.           __________________

	
_____________________

	
_______________________

	  	  	  

 

Acknowledged and approved:

 

By:   ______________________________

                                                                        

Name:  ____________________________

                                                                         

Title:   _____________________________                                                                        

 

 

 

  

46

  

 

EXHIBIT “B”

 

FORM OF REVOLVING CREDIT ADVANCE REQUEST

 

[BORROWER NAME]

 

[Address]

 

_______________________

 

_______________________

 

_______________________

 

(“Borrower”)

 

To:

 

Sovereign Bank, N.A.

 

1500 Market Street, 25th floor

 

Centre Square West

 

Philadelphia, PA 19102

 

Attention: Robert Bushey, SVP

 

Telecopy No.: 215-568-9587

 

(“Lender”)

 

Borrower hereby requests an Advance in the amount of $___________ pursuant to Section Section 2.1 of that certain Loan and Security agreement by and among Borrower and Lender dated January ___, 2012 (the “Loan Agreement”).

 

Borrower hereby represents and warrants to Lender as follows:

 

a. There exists no Default or Event of Default under the Loan Agreement.

 

b. All representations, warranties and covenants made in the Loan Agreement are true and correct as of the date hereof.

 

c. The aggregate principal amount of all Advances outstanding under the Revolving Credit are $_____________.

 

 

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

 

 

 

                                                             

  

47

  

 

                                                                        

 

                                                                                                                                     

 

EXHIBIT “C”

 

FORM OF BORROWING BASE CERTIFICATE

 

[To be provided by Lender]

 

 

 

 

 

 

  

48

  

 

EXHIBIT “D”

 

QUARTERLY COMPLIANCE CERTIFICATE

 

_____________, 200_

 

Sovereign Bank, N.A.

 

1500 Market Street, 25th floor

 

Centre Square West

 

Philadelphia, PA 19102

 

Attention: Robert Bushey, SVP

 

Telecopy No.: 215-568-9587

 

The undersigned, the President of Borrower (as defined in the Loan Agreement referenced below), gives this certificate to Sovereign Bank, N.A. ("Lender"), in accordance with the requirements of Section 6.10 of that certain Loan and Security Agreement dated January __, 2012, by and between Borrower and Lender ("Loan Agreement").  Capitalized terms used in this Certificate, unless otherwise defined herein, shall have the meanings ascribed to them in the Loan Agreement.

 

1.           Based upon my review of the consolidated balance sheets and statements of income of Borrower for the fiscal period ending __________________, 200_, copies of which are attached hereto, I hereby certify that:

 

a. The Fixed Charge Coverage Ratio of Borrower is ___________________; and

 

b. The Leverage Ratio of Borrower is ___________________.

 

Attached as Schedule "A" are the details underlying such financial covenant calculations.

 

2.           No Default exists on the date hereof, other than: ____________________  [if none, so state]; and

 

3.           No Event of Default exists on the date hereof, other than: __________________ [if none, so state].

 

 

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

 

 

 

 

 

 

 

49

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